EXHIBIT 1.1
DISTRIBUTION AGREEMENT
$20,000,000 SERIES C SECURED INVESTOR CERTIFICATES
AMERICAN CHURCH MORTGAGE COMPANY (THE "COMPANY")
AMERICAN INVESTORS GROUP, INC. (THE "UNDERWRITER")
___________ ____, 2009
TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS ......................................................... 1
Section 1.01. Defined Terms ............................................... 1
Section 1.02. Accounting Terms ............................................ 3
ARTICLE II. APPOINTMENT OF UNDERWRITER AND RELATED AGREEMENTS .................. 3
Section 2.01. Appointment; Exclusivity .................................... 3
Section 2.02. Compensation to Underwriter ................................. 3
Section 2.03. Brokers and Dealers ......................................... 4
Section 2.04. Underwriter's Unrelated Activities .......................... 4
Section 2.05. Best Efforts; Independent Contractor ........................ 4
ARTICLE III. SERVICES; STANDARD OF CARE ........................................ 5
Section 3.01. Services .................................................... 5
Section 3.02. Reports to the Company ...................................... 5
ARTICLE IV. REPRESENTATIONS AND COVENANTS OF THE COMPANY ....................... 6
Section 4.01. Representations, Warranties and Agreements of the Company ... 6
Section 4.02. Covenants of the Company .................................... 11
ARTICLE V. REPRESENTATIONS AND COVENANTS OF UNDERWRITER; CONDITIONS ............ 13
Section 5.01. Representations and Warranties of Underwriter ............... 13
Section 5.02. Covenants of Underwriter .................................... 14
ARTICLE VI. CONDITIONS ......................................................... 15
Section 6.01. Conditions of the Underwriter's Obligations ................. 15
ARTICLE VII. INDEMNIFICATION AND CONTRIBUTION .................................. 16
Section 7.01. Company's Indemnification of Underwriter .................... 16
Section 7.02. Underwriter's Indemnification of the Company ................ 17
Section 7.03. Notice of Indemnification Claim ............................. 18
Section 7.04. Contribution ................................................ 18
Section 7.05. Notice of Contribution Claim ................................ 19
Section 7.06. Reimbursement ............................................... 20
Section 7.07. Arbitration ................................................. 20
ARTICLE VIII. TERM AND TERMINATION ............................................. 20
Section 8.01. Effective Date of this Agreement ............................ 20
Section 8.02. Termination Prior to Effective Date ......................... 20
Section 8.03. Notice of Termination ....................................... 21
Section 8.04. Termination After Effective Date ............................ 21
ARTICLE IX. MISCELLANEOUS ...................................................... 22
Section 9.01. Survival .................................................... 22
Section 9.02. Notices ..................................................... 22
Section 9.03. Successors and Assigns; Transfer ............................ 22
Section 9.04. Cumulative Remedies ......................................... 23
Section 9.05. Attorneys' Fees ............................................. 23
Section 9.06. Entire Agreement ............................................ 23
Section 9.07. Choice of Law ............................................... 23
Section 9.08. Confidentiality ............................................. 23
Section 9.09. Rights to Investor Lists .................................... 23
Section 9.10. Waiver: Subsequent Modification ............................. 23
Section 9.11. Severability ................................................ 23
Section 9.12. Joint Preparation ........................................... 24
Section 9.13. Captions .................................................... 24
Section 9.14. Counterparts ................................................ 24
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DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is entered into as of this _____ day of
___________, 2009, by and between American Church Mortgage Company, a Minnesota
corporation (the "Company"), and American Investors Group, Inc., a Minnesota
corporation, as underwriter (the "Underwriter").
RECITALS
WHEREAS, the Company proposes to register and publicly offer and sell up
to $20,000,000 aggregate principal amount of Series C Secured Investor
Certificates of the Company (the "Certificates");
WHEREAS, the Company desires to appoint the Underwriter to act as the
Company's exclusive selling agent in connection with the offer, sale and renewal
of the Certificates on a best efforts basis, and the Underwriter desires to
accept such appointment, all as provided for by the terms of this Agreement.
NOW, THEREFORE, in consideration of the above and for other good and
valuable consideration, receipt of which is acknowledged, and in consideration
of the mutual promises, covenants, representations and warranties hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Defined Terms. Whenever used in this Agreement, the following
terms have the respective meanings set forth below. The definitions of such
terms are applicable to the singular as well as to the plural forms of such
terms.
(a) Advisor. Church Loan Advisors, Inc., or any successor or subsequent
advisor of the Company's business activities.
(b) Agreement. This Distribution Agreement, including any exhibits or
attachments hereto, as originally executed, and as amended or
supplemented from time to time in accordance with the terms hereof.
(c) Blue Sky laws. State laws and regulations governing the sale of
securities.
(d) Blue Sky Memorandum. Memorandum compiling the results of a review of
Blue Sky laws and the application of such laws in connection with
the Offering.
(e) Certificate Holder. The purchaser of any Certificate or any
subsequent transferee or other holder thereof.
(f) Certificates. Up to $20,000,000 aggregate principal amount of Series
C Secured Investor Certificates of the Company with substantially
the same terms as are
described in the Prospectus, and any additional principal amount of
Certificates as may be registered from time to time pursuant to the
Registration Statement.
(g) Commission or SEC. The Securities and Exchange Commission.
(h) Company. American Church Mortgage Company, or its successors in
interest.
(i) Effective Date. The date and time the Registration Statement is or
was declared effective by the Commission.
(j) Exchange Act. The Securities Exchange Act of 1934, as amended.
(k) FINRA. The Financial Industry Regulatory Agency.
(l) Governmental Rule. Any law, rule, regulation, ordinance, order,
code, interpretation, judgment, decree, policy, decision or
guideline by any governmental authority.
(m) Indenture. That certain Indenture dated on or about _______ __,
2009, by and between the Company and the Trustee with respect to the
Certificates.
(n) Offering. The offer and sale of the Certificates in accordance with
the terms and subject to the conditions set forth in the
Registration Statement.
(o) Preliminary Prospectus. Any preliminary prospectus included in the
Registration Statement prior to the time it becomes or became
effective under the Securities Act, including the respective copies
thereof filed with the Commission.
(p) Prospectus. The prospectus included in the Registration Statement at
the time it is or was declared effective by the Commission, except
that if any prospectus provided to the Underwriter by the Company
for use in connection with the offering of the Certificates differs
from the prospectus as filed with the Commission, the term
"Prospectus" shall refer to such differing prospectus from and after
the time such prospectus is first provided to the Underwriter by the
Company for such use, including the respective copies thereof filed
with the Commission.
(q) Registration Statement. That certain Registration Statement on Form
S-11 (File No. 333-154831) of the Company with respect to the
Certificates filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended and declared effective on the
date hereof, including the respective copies thereof filed with the
Commission.
(r) Rules and Regulations. The rules and regulations under the
Securities Act.
(s) Securities Act. The Securities Act of 1933, as amended.
(t) Trustee. ▇▇▇▇▇▇▇ Bank, or its successors or assigns.
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(u) Underwriter. American Investors Group, Inc., a Minnesota
corporation, or its successors in interest.
Section 1.02. Accounting Terms. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered by any person pursuant to this Agreement
shall be prepared, in accordance with generally accepted accounting principles
as in effect from time to time applied on a consistent basis. To the extent
generally accepted accounting practices do not apply to certain reports or
accounting practices of the Underwriter, the parties will mutually agree on the
accounting practices and assumptions.
ARTICLE II.
APPOINTMENT OF UNDERWRITER AND RELATED AGREEMENTS
Section 2.01. Appointment; Exclusivity. Subject to the terms and
conditions set forth herein, the Company appoints the Underwriter as its
exclusive agent to sell the Certificates upon the terms and conditions set forth
herein. The Underwriter agrees to use its best efforts as such agent to procure
purchasers for the Certificates until the later of the termination of the
Offering or the sale of all offered Certificates. It is understood and agreed
that there is no firm commitment on the part of the Underwriter to purchase any
of the Certificates. The Company agrees to direct to the Underwriter all
inquiries it receives with respect to the Certificates.
Section 2.02. Compensation to Underwriter.
(a) Underwriter's Commissions. In consideration of the agreement of the
Underwriter to provide its services of the Underwriter as set forth
in this Agreement, the Company will pay the Underwriter a commission
based on the gross proceeds received on the sale of each
Certificate, both in accordance with the schedule set forth as
Exhibit A hereto.
(b) Underwriter's Expenses. Whether or not this Agreement becomes
effective or is terminated or cancelled or the sale of the
Certificates 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:
(i) all expenses of the Underwriter incurred in connection with
the offer and sale of the Certificates, including, but not
limited to, designing, printing and mailing all offering and
advertising materials; advertisements in newspapers, on the
radio, on the internet and through direct mail; and operating
a toll-free telephone number;
(ii) all fees and expenses (including, without limitation, fees and
expenses of the Company's auditors and legal counsel) in
connection with the preparation, printing, filing, and
delivery 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;
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(iii) all fees and expenses incurred in connection with the
qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the states and other
jurisdictions which the Underwriter may designate;
(iv) all expenses in connection with the preparation, printing,
filing, and delivery of materials to be sent to Certificate
Holders;
(v) all fees and expenses of the Trustee in connection with the
Certificates; and
(vi) all costs and expenses incident to the performance of the
Company's obligations hereunder with respect to the Offering
that are not otherwise specifically described herein.
(c) Non-Accountable Expenses. To compensate the Underwriter for its
other expenses incurred in connection with the Offering, the Company
agrees to pay the Underwriter a non-accountable expense allowance of
up to $120,000, payable as follows:
(i) $10,000 is payable upon the sale of each $1,000,000 of
Certificates up to the sale of $10,000,000 of Certificates;
and
(ii) $2,000 is payable upon the sale of each additional $1,000,000
of Certificates up to completion of the sale of all
Certificates or the termination of this offering, whichever is
first.
Section 2.03. Brokers and Dealers. The Underwriter may, in its sole
discretion and at no additional obligation to the Company, use the services of
other brokers or dealers who are members of FINRA in connection with the offer
and sale of the Certificates. The Underwriter may enter into agreements with any
such broker or dealers to act as sub-agents for the sale of the Certificates and
pay any portion of the Underwriter's compensation hereunder to such brokers or
dealers.
Section 2.04. Underwriter's Unrelated Activities. The Underwriter may sell
other securities in offerings similar to the Offering for other issuers during
the course of the Offering. The Underwriter shall have the right to advertise or
otherwise disclose to unrelated prospective issuers, at its own expense, its
relationship with the Company, the services it provides in connection with the
Certificates and the amount of money that it raised through the Offering.
Section 2.05. Best Efforts; Independent Contractor. Anything in this
Agreement to the contrary notwithstanding, the Underwriter shall have no
obligation to sell any minimum principal amount of Certificates or to purchase
Certificates for its own account, for resale or for any other purpose. All
actions taken by the Underwriter pursuant to this Agreement shall be in the
capacity of an independent contractor, all sales of Certificates conducted by
the Underwriter shall be solely for the account and at the risk of the Company,
and in no event shall the Underwriter have any obligations with regard to or
under the Certificates.
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ARTICLE III.
SERVICES; STANDARD OF CARE
Section 3.01. Services. The services to be provided to the Company by the
Underwriter pursuant to this Agreement shall include the following:
(a) Corporate Finance. The Underwriter shall advise the Company
regarding the structure of the Certificates and provide sample
document forms. Throughout the Offering, the Underwriter shall
assist the Company in determining appropriate Certificate interest
rates based on current market conditions and the Company's capital
goals.
(b) Marketing. The Underwriter shall develop and execute a direct
response marketing strategy for the Certificates designed to meet
the Company's capital goals in a timely manner. The Underwriter
shall manage the process of creating, producing and placing any
newspaper, radio, Internet and direct mail advertisements. The
Underwriter shall also oversee designing and printing all marketing
materials, in accordance with applicable SEC and FINRA rules and
regulations.
(c) Company Logo, Etc. During the term of this Agreement, Company shall
allow the Underwriter to use the Company's logo, corporate colors,
trademarks, tradenames, fonts, and other aspects of corporate
identity in advertisements and marketing materials related to the
Certificates.
(d) Securities Issuance; Registrar; Transfer Agent. Upon delivery of
each completed subscription agreement for Certificates to the
Underwriter, the Underwriter shall deliver such subscription
agreement to the Advisor for acceptance or rejection. The
Underwriter shall return funds accompanying each rejected
subscription to the person submitting the subscription. The
Underwriter shall pay funds, net of commissions and expenses, to the
Company in connection with accepted subscriptions as received.
Certificates shall be issued by the Trustee on the Company's behalf
in book-entry form only and the Trustee shall deliver written book
entry receipts with respect to all accepted subscription agreements.
(e) Investor Relations. The Underwriter shall handle all inquiries from
prospective investors, mail investment kits, meet with prospective
investors, process subscription agreements and respond to all
written or telephonic questions by prospective investors relating to
the Certificates.
Section 3.02. Reports to the Company. From time to time as requested by
the Company, the Underwriter shall provide the Company with reports and analysis
regarding the status of the offering, the marketing efforts and the principal
amount of Certificates remaining available for sale under the Registration
Statement.
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ARTICLE IV.
REPRESENTATIONS AND COVENANTS OF THE COMPANY
Section 4.01. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to and agrees with the Underwriter as
follows, which representations and warranties shall be deemed to be made
continuously throughout the term of this Agreement:
(a) The Registration Statement on Form S-11 (File N 333-154831) with
respect to the Certificates, including the Prospectus subject to
completion, has been prepared by the Company in conformity with the
requirements of the Securities Act, and the Rules and Regulations of
the Commission thereunder and has been filed with the Commission
under the Securities Act.
(b) As of the Effective Date, and at all times subsequent thereto until
the termination of the Offering, 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 Commission
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 Certificates (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
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
Commission and at all times subsequent thereto until the termination
of the offering, the Prospectus (as amended or supplemented, if the
Company shall have filed with the Commission 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.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Minnesota, with full power and authority to own, lease and operate
its properties and conduct its business as described in the
Registration Statement and Prospectus. The Company is duly qualified
to do business 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
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any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or
qualification.
(d) The Company has operated 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
is conducting its business in substantial compliance with all
applicable laws, rules and regulations of the jurisdictions in which
it is conducting business, and the Company is not 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 over its properties.
(e) The Company is not in violation of its 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 properties are bound.
(f) 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. The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under:
(i) any indenture, mortgage, deed of trust loan agreement, bond,
debenture, note, agreement or other evidence of indebtedness,
any lease, contract, joint venture or other agreement or
instrument to which the Company is a party or by which the
Company or its properties may be bound;
(ii) the articles of incorporation or bylaws of the Company: or
(iii) 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 over its properties.
(g) 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 over its 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
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Exchange Act, or under state or other securities or Blue Sky laws,
all of which requirements have been satisfied.
(h) Except as is otherwise expressly described in the Registration
Statement or Prospectus, there is neither pending nor, to the best
of the Company's knowledge, threatened, any action, suit, claim or
proceeding against the Company or any of its officers or any of its
properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its officers or properties or
otherwise which (A) might result in any material adverse change in
the condition (financial or otherwise), earnings, operations or
business of the Company or might materially and adversely affect its
properties, assets or rights, or (B) might prevent consummation of
the transactions contemplated hereby.
(i) The Certificates to be sold hereunder by the Company have been duly
authorized for issuance and sale pursuant to this Agreement and,
when issued and delivered 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 exists with
respect to any of the Certificates to be sold hereunder by the
Company or the issuance and sale thereof. The Indenture has been
duly authorized, executed and delivered by the Company and the
Trustee and is a valid and binding agreement on the part of the
Company, enforceable against the Company in accordance with its
terms. The Certificates will comply as to form with all applicable
laws.
(j) Boulay, Heutmaker, ▇▇▇▇▇▇ and Company, P.L.L.P. which has expressed
its opinion with respect to certain of the financial statements
included as a part (whether filed or incorporated by reference) of
the Registration Statement, is an independent registered public
accounting firm within the meaning of the Securities Act, the Public
Company Accounting Oversight Board (PCAOB), and the Rules and
Regulations. The financial statements of the Company set forth in
the Registration Statement and Prospectus (or incorporated therein
by reference) 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; and the supporting schedules
included in the Registration Statement present fairly the
information required to be stated therein. The selected and summary
financial included in the Registration Statement (or incorporated
therein by reference) 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.
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(k) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, except as is otherwise
disclosed in the Registration Statement or Prospectus, there has not
been:
(i) 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;
(ii) 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,
shareholders' equity, results of operations or general
condition of the Company;
(iii) any transaction entered into by the Company that is material
to the Company;
(iv) any obligation, direct or contingent, incurred by the Company,
except obligations incurred in the ordinary course of business
that, in the aggregate, are not material; or
(v) any loss or damage (whether or not insured) to the property of
the Company which reasonably could be expected to have a
material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company.
(l) Except as is otherwise expressly disclosed in the Registration
Statement or Prospectus:
(i) the Company 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;
(ii) the agreements to which the Company is a party described in
the Registration Statement and Prospectus are valid
agreements, enforceable by the Company 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; and
(iii) the Company 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
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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.
(m) The Company was organized and has been operated to qualify as a real
estate investment trust under Section 856 of the Internal Revenue
Code and, to the knowledge of the Company, no event has occurred
that would cause the Company to fail to so qualify.
(n) The Company 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 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.
(o) 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. 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, trademarks, service
marks, trade names or copyrights that, 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.
(p) 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, members 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 Certificates. The Company has not
distributed and will not distribute prior to the completion of the
distribution of the Certificates, any offering material in
connection with the offering and sale of the Certificates other than
any Preliminary Prospectus, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Securities
Act.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that transactions are
executed in accordance with management's general or specific
authorizations and transactions are recorded as
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necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles. 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.
(r) Except as set forth in the Registration Statement and Prospectus:
(i) the Company and each entity that owns or possesses real
property in which the Company holds a security interest 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;
(ii) 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;
(iii) the Company will not be required to make any future material
capital expenditures to comply with Environmental Laws; and
(iv) no property which is owned, leased or occupied by the Company
or in which the Company holds a security interest has been
designated as a Superfund site pursuant to the Comprehensive
Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C. ss. 9601, et seq.), or otherwise designated as a
contaminated site under applicable state or local law.
(s) No person or entity other than the Underwriter is entitled to any
compensation or other payments from either the Company or the
Underwriter, as a finder, underwriter or agent in connection with
the Offering or any other proposed transaction between the Company
and the Underwriter. The Company agrees to promptly notify the
Underwriter of any such relationships, including consulting or prior
agency agreements entitling other parties to compensation for the
transaction described herein and agrees to provide the Underwriter
with a copy of such agreements.
(t) Any certificate signed by any officer of the Company and delivered
to the Underwriter or to the Underwriter's Counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to
the matters covered thereby.
Section 4.02. 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 Commission, the Company will use its best efforts
to cause the Registration
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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 Commission for any amendment or supplement
to the Registration Statement or Prospectus or additional
information. The Company will prepare and file with the Commission,
promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or Prospectus that, in the
Underwriter's opinion, may be necessary or advisable in connection
with the distribution of the Certificates by the Underwriter. 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.
(b) The Company will advise the Underwriter, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of
the Certificates for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose.
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
Certificates 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 Certificates as contemplated by the provisions hereof and the
Prospectus. If, during the longer of such period or the term of this
Agreement, any event or change occurs that could reasonably be
considered material to the Offering or that causes any of the
representations and warranties of the Company contained herein to be
untrue, or 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 Certificates 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
Certificates. In each jurisdiction in which the Certificates shall
have been qualified as herein
- 12 -
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, 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) At all times during the term of this Agreement, the Company shall
provide all information reasonably requested by the Underwriter in a
timely manner and shall use its best efforts to insure that such
information is complete and accurate.
(g) The Company will apply the net proceeds from the sale of the
Certificates substantially in the manner set forth under the caption
"Use of Proceeds" in the Prospectus.
ARTICLE V.
REPRESENTATIONS AND COVENANTS OF UNDERWRITER; CONDITIONS
Section 5.01. Representations and Warranties of Underwriter. The
Underwriter hereby represents and warrants to the Company as follows, which
representations and warranties shall be deemed to be made continuously
throughout the term of this Agreement.
(a) The Underwriter (i) has been duly organized, is validly existing and
in good standing as a Delaware corporation, (ii) has qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of
its activities makes such qualification necessary, and (iii) has
full power, authority and legal right to own its property, to carry
on its business as presently conducted, and to enter into and
perform its obligations under this Agreement.
(b) The execution and delivery by the Underwriter of this Agreement are
within the power of the Underwriter and have been duly authorized by
all necessary corporate action on the part of the Underwriter.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions herein contemplated, nor compliance
with the provisions hereof, will conflict with or result in a breach
of, or constitute a default under, any of the provisions of any
Governmental Rule binding on the Underwriter, the charter or by-laws
of the Underwriter, or any of the provisions of any indenture,
mortgage, contract or other instrument to which the Underwriter is a
party or by which it is bound; nor will they result in the creation
or imposition of any lien, charge or encumbrance upon any of the
Underwriter's property pursuant to the terms of any indenture,
mortgage, contract or other instrument.
(c) The Underwriter has all governmental consents, licenses, approvals
and authorizations, registrations and declarations which are
necessary for the
- 13 -
execution, delivery, performance, validity and enforceability of the
Underwriter's obligations under this Agreement.
(d) This Agreement has been duly executed and delivered by the
Underwriter and, constitutes a legal, valid and binding instrument
enforceable against the Underwriter in accordance with its terms.
(e) There are no actions, suits or proceedings pending or, to the
knowledge of the Underwriter, threatened against or affecting the
Underwriter, before or by any court, administrative agency,
arbitrator or governmental body with respect to any of the
transactions contemplated by this Agreement, or which will, if
determined adversely to the Underwriter, materially and adversely
affect it or its business, assets, operations or condition,
financial or otherwise, or adversely affect the Underwriter's
ability to perform its obligations under this Agreement. The
Underwriter is not in default with respect to any order of any
court, administrative agency, arbitrator or governmental body so as
to materially and adversely affect the transactions contemplated by
this Agreement.
Section 5.02. Covenants of Underwriter. The Underwriter hereby covenants
to the Company as follows, which covenants shall be deemed in force unless and
until this Agreement is terminated as provided herein:
(a) The Underwriter shall keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware
and retain and preserve its right to do business as a foreign
corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of the
Certificates and this Agreement and shall hold all licenses in all
jurisdictions which are necessary to perform its obligations under
this Agreement.
(b) The Underwriter shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(c) Except as provided in this Agreement, the Underwriter shall not take
any action, or permit any action to be taken by others, which would
excuse any person from any of its covenants or obligations under any
of the Certificates, or under any other instrument related to the
Certificates, or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity
or effectiveness of, any of the Securities or any such instrument or
any right in favor of the Company in any of the Certificates or such
instrument, without the written consent of the Company.
(d) The Underwriter shall not assign this Agreement or any of its
rights, powers, duties or obligations hereunder without the express
prior written consent of the Company, which shall not be
unreasonably withheld; provided that the Underwriter may assign its
rights, powers, duties or obligations hereunder to an affiliate of
the Underwriter or pursuant to a sale of all or substantially all of
the Underwriter's assets without the prior written consent of the
Company.
- 14 -
(e) The Underwriter shall take such additional action as is reasonably
requested by the Company in order to carry out the purposes of this
Agreement.
ARTICLE VI.
CONDITIONS
Section 6.01. Conditions of the Underwriter's Obligations. The obligation
of the Underwriter to sell the Certificates on a best efforts basis as provided
herein shall be subject to the accuracy of the representations and warranties of
the Company, to the performance by the Company of its obligations hereunder, and
to the satisfaction of the following additional conditions:
(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 the Underwriter (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
Commission or any state securities commission or similar regulatory
body. Any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Underwriter and the 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.
(c) Subsequent to the Effective Date and prior to termination of the
offering, 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 offering of the Certificates 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 Certificates shall have been reasonably satisfactory
to the Underwriter's counsel, and the Underwriter's counsel shall
have been furnished with such papers and information as it may
- 15 -
reasonably have requested to enable it to pass upon the matters
referred to in this Section.
(e) At the time of execution of this Agreement, the Underwriter shall
have received from Boulay, Heutmaker, ▇▇▇▇▇▇ and Company, P.L.L.P. a
letter dated the date of such execution, in form and substance
satisfactory to the Underwriter, to the effect that they are
independent registered public accountants with respect to the
Company within the meaning of the Securities Act, the PCAOB, and the
applicable published instructions, and the Rules and Regulations
thereunder, and further stating in effect that in their opinion, the
audited financial statements included (or incorporated by reference)
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 PCAOB, the
published instructions and the Rule and Regulations.
(f) Winthrop & Weinstine, P.A. shall have delivered to the Underwriter a
Blue Sky Memorandum reasonably satisfactory to the Underwriter
confirming that all requisite actions for the offer and sale of the
Certificates in all jurisdictions requested by the Underwriter have
been taken.
(g) The Company shall have furnished to the Underwriter 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 the 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 or extend the time for their
performance.
If any of the conditions specified in this Section 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 prior to, the Effective 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 Article VII hereof.
Notice of such cancellation shall be given to the Company as specified in
Section 8.03.
ARTICLE VII.
INDEMNIFICATION AND CONTRIBUTION
Section 7.01. Company's Indemnification of Underwriter. 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
- 16 -
may become subject under the Securities Act, the Exchange Act, 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), 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 Certificates under, or exempt the
Certificates 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 incurred by the
Underwriter or controlling person in connection with investigating or defending
against any such loss, claim, damage, liability or action. However, 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 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 Certificates
under, or exempt the Certificates or the sale thereof from qualification under,
the securities laws of such jurisdiction. This indemnity agreement is in
addition to any liability which the Company may otherwise have.
Section 7.02. Underwriter's Indemnification of the Company. 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, 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), or the omission or alleged omission to
- 17 -
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 Certificates under, or exempt the Certificates 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. 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.
Section 7.03. Notice of Indemnification Claim. Promptly after receipt by
an indemnified party under Section 7.01 or 7.02 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 Section 7.01 or 7.02, notify in
writing the indemnifying party of the commencement thereof. Failure to so notify
the indemnifying party will relieve it from any liability under Section 7.01 or
7.02 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, to assume the defense thereof, with counsel who shall
be reasonably satisfactory to such indemnified party. 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 Section 7.01 or 7.02 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 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 as 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
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.
Section 7.04. Contribution. 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
- 18 -
the Company within the meaning of Section 15 of the Securities Act) makes claim
for indemnification pursuant to Section 7.01 or 7.02 hereof, but such
indemnification is unavailable or insufficient to hold harmless and indemnify a
party under Section 7.01 or 7.02, as applicable, 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 7.01
or 7.02, as applicable, (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 Securities 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 Securities (before deducting expenses) received by the
Company bear to the total commissions received by the Underwriter. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the 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 7.04 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 7.04. 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 7.04 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 7.04.
Notwithstanding the provisions of this Section, the Underwriter shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Securities 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.
Section 7.05. Notice of Contribution Claim. 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 failure to so notify the
Contributing Party will not relieve the Contributing Party from any liability
which it may have to any party other than under Section 7.04. Any notice given
pursuant to Section 7.03 hereof shall be deemed to be like notice under this
Section 7.05. 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.
- 19 -
Section 7.06. Reimbursement. In addition to its other obligations under
Section 7.01 and 7.04 hereof, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 7.01, it will reimburse the Underwriter on a
monthly basis for all 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.
Section 7.07. Arbitration. It is agreed that any controversy arising out
of the operation of the interim reimbursement arrangements set forth in Section
7.06 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 FINRA. 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 7.06 hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is created by
the provisions of Section 7.01 and 7.02 hereof or the obligation to contribute
to expenses which is created by the provisions of Section 7.04 hereof.
ARTICLE VIII.
TERM AND TERMINATION
Section 8.01. Effective Date of this Agreement. This Agreement shall
become effective on the Effective Date immediately after the time at which the
Registration Statement shall become effective under the Securities Act.
Section 8.02. Termination Prior to Effective Date. This Agreement may be
terminated by the Underwriter, at its option, by giving notice to the Company,
if (i) the Company shall have failed, refused, or been unable, at or prior to
the Effective 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) a banking moratorium shall
have been declared by federal, New York or Minnesota authorities; (iv) 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 Certificates; (v) 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 (vi) there shall be a material
outbreak of hostilities or material escalation and deterioration in the
political and military
- 20 -
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 7.01, 7.02 and 7.04 hereof; provided, however, that the
Company shall remain obligated to pay costs and expenses of the Company and the
Underwriter (but only to the extent of actual accountable out-of-pocket
expenses) to the extent provided in Section 2.02 hereof.
Section 8.03. Notice of Termination. If the Underwriter elects to prevent
this Agreement from becoming effective or to terminate this Agreement as
provided in Section 8.02, it shall notify the Company and the Company's counsel
promptly by telephone or transmitted by any standard form of telecommunication,
confirmed by letter sent to the address specified in Section 9.02 hereof. If the
Company shall elect to prevent this Agreement from becoming effective, it shall
notify the Underwriter promptly by telephone or transmitted by any standard form
of telecommunication, confirmed by letter sent to the addresses specified in
Section 9.02 hereof.
Section 8.04. Termination After Effective Date. The Company or the
Underwriter may terminate this Agreement at any time subsequent to the Effective
Date as provided below, and in such case, the Underwriter will be paid fees and
commissions accrued up to the date of such termination plus its expenses accrued
as of such date within thirty (30) days of such termination:
(a) The Company will have the ability to terminate this Agreement by
notice to the Underwriter upon the occurrence of any of the
following:
(i) any of the circumstances described in clauses (iii) through
(vi) of Section 8.02;
(ii) the Company has given the Underwriter notice of the
Underwriter's default in any material term of this Agreement,
or material non-compliance with any representation or warranty
of the Underwriter contained herein, and such default or
non-compliance is not cured within 30 days of such notice; or
(iii) termination of the Offering by the Company.
(b) The Underwriter will have the ability to terminate this Agreement by
notice to the Company upon the occurrence of any of the following:
(i) any of the circumstances described in clauses (iii) through
(vi) of Section 8.02;
(ii) the Underwriter has given the Company notice of the Company's
default in any material term of this Agreement, or material
non-compliance with any representation or warranty of the
Underwriter contained herein, and such default or
non-compliance is not cured within thirty (30) days of such
notice; or
(iii) termination of the Offering by the Company.
- 21 -
ARTICLE IX.
MISCELLANEOUS
Section 9.01. Survival. The respective indemnity and contribution
agreements of the Company and the Underwriter contained in the representations,
warranties, covenants, and agreements of the Company set forth in Article IV
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 Article VII and
shall survive the sale of the Certificates. 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.
Section 9.02. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be mailed,
delivered or transmitted by any standard form of telecommunication, as follows:
If to the Underwriter, to: American Investors Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇ ▇ ▇▇▇
If to the Company, to: American Church Mortgage Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇ ▇ ▇▇▇
In either case
with a copy to: Winthrop & Weinstine, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.03. Successors and Assigns; Transfer. This Agreement shall inure
to the benefit of and be binding upon the Underwriter and the Company and their
respective successors and assigns, and the officers, directors and controlling
persons referred to in Article VII. 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 Article VII, 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
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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 Certificates shall be construed a successor, assignee or third party
beneficiary of this Agreement merely by reason of such purchase. Except as
provided in Section 5.02(d), neither party may assign its rights and obligations
under this Agreement without the written consent of the other party.
Section 9.04. Cumulative Remedies. Unless otherwise expressly provided
herein, the remedies of the parties provided for herein shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of the party for whose benefit such remedy is provided, and may be
exercised as often as occasion therefor shall arise.
Section 9.05. Attorneys' Fees. In the event of any action to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs, whether or not such action proceeds to
judgment.
Section 9.06. Entire Agreement. Except as otherwise expressly provided
herein, this Agreement constitutes the entire agreement of the parties hereto
with respect to the matters addressed herein and supersedes all prior or
contemporaneous contracts, promises, representations, warranties and statements,
whether written or oral, with respect to such matters.
Section 9.07. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without regard
to conflict of law principles.
Section 9.08. Confidentiality. The Company agrees to keep confidential all
non-public information concerning the marketing, selling and administration of
the Certificates, except as disclosure may be required by law. The Underwriter
agrees to keep confidential all non-public information supplied to it by the
Company, including without limitation, all non-public information obtained
during any due diligence investigation of the Company.
Section 9.09. Rights to Investor Lists. The Offering will produce a list
of investors that purchase Certificates, a list of prospects that respond to
advertisements but do not purchase any Certificates and a list of former
investors whose Certificates have been repaid by the Company. Both the Company
and the Underwriter shall be able to use these lists for their own business
purposes as long as doing so does not interfere with the marketing, sale or
administration of the Certificates.
Section 9.10. Waiver: Subsequent Modification. Except as expressly
provided herein, no delay or omission by any party in insisting upon the strict
observance or performance of any provision of this Agreement, or in exercising
any right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy, and no waiver by any party
or any failure or refusal of the other party to comply with its obligations
under this Agreement shall be deemed a waiver of any other or subsequent failure
or refusal to so comply by such other party. No waiver or modification of the
terms hereof shall be valid unless in writing and signed by the party to be
charged, and then only to the extent therein set forth.
Section 9.11. Severability. If any term or provision of this Agreement or
application thereof to any person or circumstance shall, to any extent, be found
by a court of competent
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jurisdiction to be invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term or provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
Section 9.12. Joint Preparation. The preparation of this Agreement has
been a joint effort of the parties and the resulting document shall not, solely
as a matter of judicial construction, be construed more severely against one of
the parties than the other.
Section 9.13. Captions. The title of this Agreement and the headings of
the various articles, section and subsections have been inserted only for the
purpose of convenience, are not part of this Agreement and shall not be deemed
in any manner to modify, explain, expand or restrict any of the provisions of
this Agreement.
Section 9.14. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Distribution Agreement is hereby entered into by
the undersigned parties as of the date first set forth above.
THE COMPANY: AMERICAN CHURCH MORTGAGE COMPANY
By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
THE UNDERWRITER: AMERICAN INVESTORS GROUP, INC.
By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
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EXHIBIT A
COMPENSATION TO THE UNDERWRITER
Compensation for Sale of Certificates: The Company shall pay the Underwriter a
commission and an underwriter's management fee upon each sale of a Certificate
based on the principal amount of the Certificates sold in the Offering as
follows:
o upon an original issuance, the commission shall be 2.75% plus an
additional 0.75% underwriter's management fee on the sale.