1,800,000 Shares*
XXXX INCORPORATED
Common Shares
UNDERWRITING AGREEMENT
Minneapolis, Minnesota
November ___, 1996
PRINCIPAL FINANCIAL SECURITIES, INC.
CRUTTENDEN XXXX INCORPORATED
As Representatives of
the several Underwriters
c/o Principal Financial Securities, Inc.
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Ladies and Gentlemen:
Xxxx Incorporated, a Minnesota corporation (the "Company"), confirms its
agreement with Principal Financial Securities, Inc. ("Principal") and
Cruttenden Xxxx Incorporated ("Cruttenden") and each of the other
underwriters, if any, named in Schedule A hereto (collectively the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Principal and Cruttenden are
acting as representatives (in such capacities, the "Representatives"), with
respect to (i) the proposed sale by the Company, and the proposed purchase by
the Underwriters, acting severally and not jointly, of an aggregate of
1,800,000 common shares (the "Firm Shares") no par value per share ("Common
Stock"), (ii) the grant by the Company to the Underwriters, acting severally
and not jointly, of the option described in Section 2(b) hereof to purchase
all or any part of 270,000 additional shares of Common Stock for the purpose
of covering over-allotments, if any, and (iii) the sale by the Company to the
Underwriters of a warrant to purchase up to 144,900 shares of Common Stock of
the Company as described in Section 2(c) hereof (the "Underwriters' Warrant").
Any and all shares of Common Stock to be purchased by the Underwriters
pursuant to the option described in Section 2(b) hereof are referred to
hereinafter as the "Option Shares," and the Firm Shares and the Option Shares,
if any, purchased by the Underwriters are hereinafter collectively referred to
as the "Shares." It is understood that the Underwriters propose to conduct a
public offering and sale of the Shares (the "Offering").
--------------------
*Plus an option to purchase up to 270,000 additional shares to cover
over-allotments.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with, each of the
several Underwriters as follows:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2 (No.
333-_________), including a prospectus subject to completion, for the
registration of the Shares and the Underwriters' Warrant under the
Securities Act of 1933, as amended (the "Act"), and may have filed with
the Commission one or more amendments thereto. After the execution of
this Agreement, the Company will file with the Commission either (A) if
such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act as of the time
of effectiveness of this Agreement, a prospectus in the form most
recently included in an amendment to such registration statement (or, if
no such amendment shall have been filed, in such registration statement),
with such changes or insertions as are required by Rule 430A under the
Act or permitted by Rule 424(b) under the Act and as have been provided
to and approved by the Representatives prior to the execution of this
Agreement, or (B) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under
the Act as of the time of effectiveness of this Agreement, an amendment
to such registration statement, including a form of prospectus, a copy of
which amendment has been furnished to and approved by the Representatives
prior to the execution of this Agreement. As used in this Agreement, the
term "Registration Statement" means such registration statement, as
amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as deemed below); the term "Preliminary Prospectus" means
each prospectus subject to completion filed with such registration
statement or any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement or any
amendment thereto at the time the Registration Statement was or is
declared effective); the term "Prospectus" means the prospectus first
filed with the Commission pursuant to Rule 424(b) under the Act or, if no
prospectus is required to be filed pursuant to said Rule 424(b), the
prospectus included in the Registration Statement; and the term "Rules
and Regulations" means the rules and regulations adopted by the
Commission under either the Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as applicable.
(ii) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or any part thereof and, to the
best knowledge of the Company, no proceedings for a stop order have been
instituted or are pending or threatened. When any Preliminary Prospectus
was filed with the Commission, it (A) contained all statements required
to be stated therein in accordance with, and complied in all material
respects with the requirements of, the Act and the Rules and Regulations
and (B) did not include any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light
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of the circumstances under which they were made, not misleading. When
the Registration Statement or any amendment thereto was or is declared
effective, it (A) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the Rules and
Regulations and (B) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any amendment
or supplement thereto is filed pursuant to Rule 424(b) under the Act (or,
if the Prospectus or such amendment or supplement is not required to be
so filed, when the Registration Statement or the amendment thereto
containing such amendment or supplement to the Prospectus was or is
declared effective) and on the Closing Date and the Option Closing Date,
if any (each as defined in Section 2 hereof), the Prospectus, as amended
or supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The foregoing
representations with regard to misstatements or omissions in the
Registration Statement and Prospectus do not apply to the statements with
respect to the public offering of the Shares set forth under the heading
"Underwriting" and the stabilization legend in any Preliminary Prospectus
and the Prospectus and the last paragraph on the outside front cover page
of the Prospectus which statements have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus
(the "Provided Information").
(iii) The Company and Xxxx Korea Corporation ("Subsidiary") are
corporations duly organized, validly existing and in good standing under
the laws of the State of Minnesota and the Republic of Korea,
respectively. The Company and Subsidiary are duly qualified to transact
business as a foreign corporation and are in good standing under the laws
of each jurisdiction in which their ownership or leasing of any
properties or the character or conduct of their operations requires such
qualification, except where failure to be so qualified, individually or
in the aggregate, would not result in a material adverse effect on the
condition, financial or otherwise, or on the earnings, business affairs,
financial position, prospects, value, operation, properties, results of
operation or business of the Company and its subsidiary taken as a whole
(each a "Material Adverse Effect"). All of the outstanding shares of
capital stock of Subsidiary have been duly authorized and validly issued,
are fully paid and non-assessable and (except as otherwise stated in the
Registration Statement), all of the outstanding shares of capital stock
of Subsidiary are owned beneficially by the Company free and clear of any
security interest, other encumbrance or adverse claim, subject to the
security interest granted to First Bank National Association (the "First
Bank") in the shares of Subsidiary pursuant to the Financing Agreement,
dated as of
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April 28, 1995, as amended, between First Bank and the Company. There
are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest in Subsidiary. Except for Subsidiary, the Company
does not own any stock of or other equity interest in, or otherwise
control directly or indirectly, any corporation, firm, partnership,
trust, joint venture or other business entity.
(iv) Each of the Company and Subsidiary has all requisite power and
authority (corporate and other), and has obtained and currently maintains
in full force and effect and is operating in compliance with any and all
authorizations approvals, orders, licenses, certificates, franchises and
permits of and from any and all governmental or regulatory officials and
bodies (including those having jurisdiction over environmental or similar
matters) necessary or required to own or lease its properties and conduct
its business as described in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) and any amendment
or supplement thereto, and is and has been doing business in compliance
with all applicable federal, state, local and foreign laws, rules and
regulations, except where failure to be in compliance therein
individually or in the aggregate, would not result in a Material Adverse
Effect. Neither the Company nor Subsidiary has received any notice or
notices of proceedings relating to the revocation or modification of any
such authorization, approval, order, license, certificate, franchise or
permit.
(v) The Company has all requisite power and authority (corporate and
other) to enter into this Agreement and to consummate the transactions
provided for herein; and this Agreement has been duly authorized,
executed and delivered by the Company. This Agreement, assuming due
authorization, execution and delivery by the Underwriters, constitutes
the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as enforceability
may be limited by the application of bankruptcy, insolvency, moratorium
or similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance. The Company's
execution and delivery of this Agreement, its performance of its
obligations hereunder, the consummation of the transactions contemplated
hereby, and its conduct of its business and those of Subsidiary as
described in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) and any amendment or supplement
thereto, do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of the Company's Restated
Articles of Incorporation or Bylaws, each as amended to date, or the
charter or bylaws of Subsidiary. The Company's execution and delivery of
this Agreement, its performance of its obligations hereunder and the
consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation
or imposition of any material liens, charges, claims, encumbrances,
pledges, security interests, defects or other like restrictions or
material
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equities of any kind whatsoever upon, any right, property or assets
(tangible or intangible) of the Company pursuant to the terms of (A) any
lease, license, contract, indenture, mortgage, deed of trust, voting
trust agreement, shareholders agreement, note, loan, credit agreement,
other indebtedness or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of
its properties or assets (tangible or intangible) is or may be subject,
or (B) any statute, judgment, decree, order, rule or regulation
applicable to the Company or Subsidiary or any of their activities or
properties adopted or issued by an arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including
those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or Subsidiary
or any of their activities or properties. The conduct of the business of
the Company and Subsidiary as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
and any amendment or supplement thereto does not and will not conflict
with or result in a material breach or violation of any of the terms or
provisions of, or constitute a material default under or result in the
creation or imposition of any material liens, charges, claims,
encumbrances, pledges, security interests, defects or other like
restrictions or material equities of any kind whatsoever, upon any right,
property or assets (tangible or intangible) of the Company or Subsidiary
pursuant to the terms of any agreement or instrument described in clause
(A) of the preceding sentence or any statute, judgment, decree, order,
rule or regulation described in clause (B) of the preceding sentence.
(vi) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required in connection
with the issuance of the Shares to be sold by the Company, the Company's
performance of its obligations hereunder, the Offering or the
consummation of the other transactions contemplated hereby, except (a)
such as may be required under the state securities or "Blue Sky" laws of
any jurisdiction or the bylaws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase and
distribution of the Shares by the Underwriters, (b) as of the date hereof
(but not the Closing Date or the Option Closing Date, if any), any filing
of the Prospectus pursuant to Rule 424(b) or 430A of the Rules and
Regulations and, if the Registration Statement is not effective as of the
time of effectiveness of this Agreement, an order of the Commission
declaring the Registration Statement to be effective under the Act, and
(c) such other approvals as have been obtained and remain in full force
and effect.
(vii) The authorized, issued and outstanding capital stock of the
Company is set forth in, and conforms to the description thereof contained
in, the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) and any amendment or supplement thereto.
All of the issued shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable; the
holders thereof have no rights of rescission with respect thereto
-5-
and are not subject to personal liabilities by reason of being such
holders; and none of such shares have been issued in violation of the
preemptive rights of any security holders of the Company. The shares of
Common Stock to be issued upon the exercise of the Underwriters' Warrant,
after payment therefore in accordance with the terms therewith, will be
validly issued, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Firm Shares and the Option
Shares have been duly authorized and at the Closing Date or the Option
Closing Date (as the case may be), after payment therefor in accordance
herewith, will be validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof. Upon the issuance
and delivery pursuant to this Agreement of the Shares to be sold by the
Company, the Underwriters will acquire good, record and marketable title
to such Shares free and clear of any liens, charges, claims,
encumbrances, pledges, security interests, defects or other like
restrictions or like material equities of any kind whatsoever. There are
no preemptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any Common Stock pursuant to
the Company's Restated Articles of Incorporation or Bylaws, each as
amended to date, and the Shares to be sold by the Company are not
otherwise subject to any preemptive or other similar rights of any
security holder. The Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for
this Agreement or as described in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). No holders
of any securities of the Company have the right to include any securities
issued by the Company in the Registration Statement or any registration
statement to be filed by the Company within 180 days after the Closing
Date or to require the Company to file a registration statement under the
Act during such 180-day period. The Shares have been approved for
listing upon notice of issuance on the National Market of the National
Association of Securities Dealers, Inc's Automated Quotations System (the
"Nasdaq National Market").
(viii) The historical financial statements and schedules of the
Company and Subsidiary included in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) and any
amendment or supplement thereto fairly present the financial position and
the results of operations of the Company as of the dates and for the
periods therein specified. Such financial statements and schedules have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and with the Rules
and Regulations, subject, in the case of unaudited quarterly financial
information, to normal year-end adjustments and to the fact that footnote
disclosure with respect thereto may not fully comply with generally
accepted accounting principles as applied to audited financial
statements. The selected financial data set forth under the caption
"Selected Consolidated Financial Data" in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
fairly present, on the basis stated therein, the information included
therein. Each of the Company and Subsidiary
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maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company's internal accounting controls
are sufficient to cause the Company to comply in all material respects
with the Foreign Corrupt Practices Act of 1977, as amended. McGladrey &
Xxxxxx, L.L.P., whose reports are filed with the Commission as a part of
the Registration Statement, are independent public accountants as
required by the Act and the Rules and Regulations and McGladrey & Xxxxxx
have been the only public accountants engaged by the Company since July
1, 1990. The Company has not had any "disagreement" (as used in Item 304
of Regulation S-K of the Rules and Regulations) with McGladrey & Xxxxxx
or its Subsidiary's independent public account and has not experienced
any "reportable event" (as used in such Item 304).
(ix) Each of the Company and Subsidiary has filed all federal, state
and local tax returns and all tax returns with foreign tax authorities that
are required to be filed by it or has duly requested extensions thereof.
The Company has paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any of
the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith.
(x) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with the issuance by the
Company or the purchase by the Underwriters of the Shares to be sold by
the Company.
(xi) Each of the Company and Subsidiary has (A) good, record and
marketable title to all of the properties and assets described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) as owned by the Company or Subsidiary, free and
clear of all liens, charges, encumbrances or restrictions, except such
liens, charges, encumbrances or restrictions as are described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) or such as do not materially affect the condition
(financial or other), business, results of operations or properties of
the Company and Subsidiary taken as a whole, (B) peaceful and undisturbed
possession under all leases to which the Company or Subsidiary is a party
as lessee, (C) all governmental licenses, certificates, permits,
authorizations, approvals, franchises or other rights necessary to engage
in the business currently conducted by the Company or Subsidiary, and (D)
no reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such license, certificate, permit,
authorization, approval,
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franchise or right. All leases to which the Company or Subsidiary is a
party are valid and binding and no default by the Company or Subsidiary
has occurred and is continuing thereunder except such as do not,
individually or in the aggregate, result in a Material Adverse Effect.
(xii) Each of the Company and Subsidiary owns or has a valid right to
use all Intellectual Property being used in or necessary to the conduct of
its business as now operated and as now proposed to be operated. Except
as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) or separately
disclosed in writing to Best & Xxxxxxxx, Professional Limited Liability
Partnership (hereinafter "Underwriters' Counsel") prior to the execution
and delivery hereof, no claim is pending or, to the best knowledge of the
Company, threatened against the Company or its officers to the effect
that any Intellectual Property right that is owned by or licensed to the
Company or Subsidiary or that the Company or Subsidiary otherwise has the
right to use is invalid or unenforceable by the Company or Subsidiary, as
the case may be, or infringes the right of a third party (including any
former employer of any of the Company's employees). Except as disclosed
in writing to Underwriters' Counsel prior to the execution and delivery
hereof, to the best of the Company's knowledge, the conduct of the
Company's and Subsidiary's business as now conducted and as now proposed
to be conducted does not and will not infringe (A) any copyright or
legally enforceable right with respect to trade secrets of any third
party or (B) any other Intellectual Property right of any third party.
As used herein "Intellectual Property" means all patents; all trademarks,
service marks, trade names and copyrights, and all registrations thereof;
all trade secrets; all rights in know-how (including all proprietary or
confidential information); all inventions (including all unpatentable
inventions and all unpatented inventions, regardless of whether a patent
application has been made therefor); all designs; all processes; all
works of authorship; all computer programs; all mask works; all technical
data and information; all licenses and rights in and to any of the
foregoing; and all other intellectual property.
(xiii) Each of the Company and Subsidiary is insured (including all
inventory held for others under "stocking" or similar arrangement) by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the business in
which it is engaged. Neither the Company nor Subsidiary has been refused
any insurance coverage sought or applied for or has any reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers.
(xiv) Neither the Company nor Subsidiary is in breach of, or in
default under, any material term, covenant or provision of any license,
contract, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreements, shareholders agreement, note, loan, credit
agreement or other indebtedness, or any
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other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company or
Subsidiary is a party or by which the Company or Subsidiary may be bound
or to which any of its property or assets (tangible or intangible) are
subject or affected, except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
and except as to defaults that have been and continue to be validly and
effectively waived. The Company and Subsidiary are not in violation of
any term or provision of their respective charter documents or bylaws,
each as amended to date.
(xv) Except as disclosed in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), there is not
pending or, to the best of the Company's knowledge, threatened against
the Company or Subsidiary, or involving the properties or business of the
Company or Subsidiary, any action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including those
having jurisdiction over environmental or similar matters), domestic or
foreign, that (A) is required to be disclosed in the Prospectus (or such
Preliminary Prospectus) and is not so disclosed, (B) questions the
validity of the capital stock of the Company or the validity or
enforceability of this Agreement, (C) questions the validity of any
action taken or to be taken by the Company pursuant to or in connection
with this Agreement, or (D) could adversely affect the present or
prospective ability of the Company to perform its obligations under this
Agreement. Any such proceedings summarized in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
are accurately summarized in all material respects.
(xvi) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
and except as may otherwise be indicated or contemplated herein or therein,
the Company has not (A) issued any securities other than the Shares to be
sold by the Company pursuant to this Agreement, except pursuant to
options outstanding as of such dates, (B) incurred any material liability
or obligation, direct or contingent, for borrowed money, (C) entered into
any transaction other than in the ordinary course of business, or (D)
declared or paid any dividend or made any other distribution on or in
respect of its capital stock.
(xvii) Each of the Company and Subsidiary has a reasonably
satisfactory employer-employee relationship with its employees and is in
compliance in all respects with all federal, state, local, and where
applicable, foreign, laws and regulations regarding employment and
employment practices, terms and conditions of employment and wages and
hours except where failure to so comply, individually or in the
aggregate, would not result in a Material Adverse Effect. No labor or
other dispute with the employees of the Company or Subsidiary exists, or,
to the best knowledge of the Company, is imminent; and the Company is not
aware of any existing or imminent labor disturbance by the employees of
any of the principal suppliers, manufacturers or contractors of the
Company or Subsidiary that might be
-9-
expected to result in an adverse effect upon the business of the Company
or Subsidiary.
(xviii) Except as disclosed in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), neither the
Company nor Subsidiary maintains, sponsors or contributes, or is under an
obligation to contribute, to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan"
(other than a Cafeteria Plan or any other standard group life, health or
disability plan) or a "multi-employer plan," as such terms are defined in
Sections 3(2), 3(1), and 3(37), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Neither the Company
nor Subsidiary has at any time since October 1, 1991 contributed to, or
been under any obligation to contribute to, any "defined benefit plan,"
as defined in Section 3(35) of ERISA. Neither the Company nor Subsidiary
has ever completely or partially withdrawn from a "multi-employer plan."
(xix) The minute books of the Company made available to Underwriters'
Counsel (A) contain all material minutes and consents from all meetings
and actions of the Company's stockholders, its board of directors, and
the committees of such board since the date of the Company's organization
and (B) reflect all transactions referred to in such minutes accurately
in all material respects.
(xx) All agreements filed as exhibits to the Registration Statement
to which the Company or Subsidiary is a party or by which the Company or
Subsidiary may be bound or to which any of its assets, properties or
businesses may be subject have been duly and validly authorized, executed
and delivered by the Company or Subsidiary, as the case may be, and
constitute the legal, valid and binding agreements of the Company or
Subsidiary, as the case may be, enforceable in accordance with their
respective terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, moratorium or similar laws
affecting the rights of creditors generally and by judicial limitations
on the right of specific performance. The descriptions in the
Registration Statement, the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and any amendment or
supplement thereto of agreements and other documents are accurate and
fairly present the information required to be shown with respect thereto
by Form S-2 under the Act. There are no agreements or other documents
that are required by the Act or the Rules and Regulations to be described
in the Registration Statement or the Prospectus or filed as exhibits to
the Registration Statement that are not described or filed as required.
(xxi) Neither the Company nor any of its officers, directors, or
affiliates (within the meaning of the Rules and Regulations) has taken or
will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be
-10-
expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of the Common Stock.
(xxii) There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's, broker's,
advisory or origination fee or otherwise, either with respect to the sale
of the Shares hereunder or with respect to the proceeds received by the
Company from the sale of the Shares hereunder. Other than as reflected
in this Agreement or described in the Prospectus (or if the Prospectus is
not in existence, any Preliminary Prospectus), there are no other
arrangements, agreements, understandings, payments or issuances with
respect to the Company or any of its officers, directors, or affiliates
that may affect the Underwriters' compensation, as determined by the
National Association of Securities Dealers, Inc. ("NASD").
(xxiii) Except as disclosed in writing to Underwriters' Counsel prior
to the execution and delivery hereof, the Company has delivered or caused
to be delivered to the Representatives agreements, acceptable in form and
substance to the Representatives, pursuant to which each of the Company's
officers and directors listed in the Prospectus or the Preliminary
Prospectus have agreed not to sell, transfer or otherwise dispose of any
shares of Common Stock for a period of 90 days following the Closing Date.
(xxiv) Neither the Company nor Subsidiary nor, to the best of the
Company's knowledge, their respective officers, employees, agents,
affiliates or any other person acting on behalf of any of the foregoing,
has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental
agency or instrumentality (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is,
or may be in a position to help or hinder the business of the Company or
Subsidiary (or assist it in connection with any actual or proposed
transaction) that (A) might subject the Company or Subsidiary or any
other such person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the past,
might have had a Material Adverse Effect, or (C) if not continued in the
future, might have a Material Adverse Effect.
(xxv) Since January 1, 1995, no (A) supplier of merchandise to the
Company or Subsidiary has ceased shipments of merchandise to the Company,
(B) sales representative or distributor has ceased selling products of
the Company, and (C) no customer who previously purchased more than
$500,000 of product from the Company has ceased buying product from the
Company other than in the nominal and ordinary course of business
consistent with past practices, which cessation would
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adversely affect the condition (financial or other), business, results of
operations or properties of the Company or Subsidiary.
(xxvi) The Company has provided Underwriters' Counsel with copies of
all correspondence between the Company and the Company's shareholders
relating to the subject matter of this Agreement and has provided
Underwriters' Counsel with all other information in its possession
related to such shareholders.
(xxvii) The Company has provided Underwriters' Counsel with copies of
all material documentation relating to the Company's patent(s).
(xxviii) The Restated Articles of Incorporation of the Company
previously filed with the Commission are currently effective and have not
been amended.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES; REPAYMENT OF CREDIT.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to the Underwriters an
aggregate of 1,800,000 Firm Shares. Each Underwriter, severally and not
jointly, agrees to purchase from the Company, at the price of $ per
Share, that number of Firm Shares set forth in Schedule A opposite such
Underwriter's name plus any additional number of Firm Shares that such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained and upon not less than two business
days' notice from the Representatives, for a period of 30 days from the
Effective Date, the Company agrees to sell to the Underwriters, severally and
not jointly, all or any part of the 270,000 Option Shares at a purchase price
per Share equal to that set forth in subsection 2(a) above. The Underwriters
may exercise their option to purchase all or any portion of the Option Shares
only one time. Delivery of Option Shares shall be made concurrently with
payment therefor. The time and date of delivery of any of the Option Shares
is herein called the "Option Closing Date." On the Option Closing Date (if
any), each of the Underwriters, acting severally and not jointly, shall
purchase that proportion of the total number of Option Shares that the
aggregate number of Firm Shares set forth in Schedule B hereto opposite the
name of such Underwriter bears to the total number of Firm Shares, subject in
each case to such adjustments as the Representatives in their discretion shall
make to eliminate any sales or purchases of fractional shares. Option Shares
may be purchased by the Underwriters only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Firm Shares. No Option Shares shall be delivered unless
the Firm Shares shall be simultaneously delivered or shall theretofore have
been delivered as herein provided.
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(c) In addition, the Company hereby agrees to sell to the Underwriters,
for $100.00, on the Closing Date, a warrant to purchase 126,000 shares of
Common Stock of the Company (and on the Option Closing Date, if any, a warrant
to purchase up to 18,900 shares (calculated at a rate of seven shares for each
100 Option Shares purchased) at an exercise price equal to 120% of the
Offering Price, exercisable for a period of five years after the effective
date of the Offering and beginning one year from completion of the Offering,
and the Company agrees to execute and deliver Warrants, share amounts
allocated among the Underwriters as directed by the Representatives, as of the
Closing Date, and the Option Closing Date respectively, as attached hereto as
Exhibit A.
(d) Payment of the respective aggregate purchase prices of the Firm
Shares purchased from the Company shall be made by the several Underwriters on
the Closing Date by wire transfer or by certified or official bank checks in
same day funds, payable to or upon the order of the Company or to such other
persons as the Company may designate in writing to the Representatives no
later than three business dates prior to the Closing Date, at the offices of
Principal or at such other place as shall be agreed upon by the
Representatives and the Company, upon delivery of certificates (in form and
substance satisfactory to the Representatives) representing the Firm Shares to
the Representatives. Delivery and payment for the Firm Shares shall be made
at a.m., Minneapolis time, on , 1996, or at such other time
on the same or such other date, not later than , 1996, as shall be
designated in writing by the Representatives. The time and date of payment
for and delivery of the Firm Shares is herein called the "Closing Date". In
addition, in the event that Option Shares are purchased by the Underwriters,
payment (in same day funds) of the purchase price for, and delivery of
certificates for, the Option Shares shall be made at the above-mentioned
office of the Representatives or at such other place as shall be agreed upon
by the Representatives and the Company, on the Option Closing Date as
specified in the notice from the Representatives to the Company, but not later
than 30 days from the Effective Date. Certificates for the Firm Shares and
the Option Shares, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Representatives may request in writing at
least two business days prior to the Closing Date or the Option Closing Date,
as the case may be. The certificates for the Firm Shares and the Option
Shares, if any, shall be made available to the Representatives at such office
or such other place as the Representatives may designate for inspection,
checking and packaging not later than _______ a.m., Minneapolis time, on the
last business day prior to the Closing Date or the Option Closing Date, as the
case may be.
(e) In addition, upon the completion of the closing contemplated by this
Section 2, Principal shall reimburse the Company for any amounts advanced to
Principal in payment of the Underwriters' out-of-pocket expenses, minus
outstanding amounts, if any, owed by the Company to the Underwriters or
Underwriters' Counsel on the Closing Date pursuant to Section 5.
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3. PUBLIC OFFERING OF THE FIRM SHARES.
As soon after the Registration Statement becomes effective as the
Representatives deem advisable, the several Underwriters propose to make a
public offering of their respective portions of the Firm Shares at the price
and upon the other terms set forth in the Prospectus.
4. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with each of the several
Underwriters as follows:
(i) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement,
and any amendments thereto to become effective as promptly as possible.
The Company will not file with the Commission the prospectus or amendment
referred to in the second sentence of Section l(a)(i) hereof, any
amendment or supplement to such prospectus or any amendment to the
Registration Statement, or any document under the Exchange Act before
termination of the offering of the Shares by the Underwriters of which
the Representatives shall not previously have been advised and furnished
with a copy, or to which the Representatives shall have reasonably
objected (unless required by law) by notice to the Company in writing
within five business days after having been provided a copy thereof (or
such shorter period as the Company reasonably requests, provided that
such period shall not in any event be less than three business days), or
which is not in compliance with the Act, the Exchange Act or the Rules
and Regulations. During the time when a prospectus relating to the
Shares is required to be delivered under the Act, the Company will comply
with all requirements imposed upon it by the Act and the Rules and
Regulations to the extent necessary to permit the continuance of sales of
or dealings in the Shares in accordance with the provisions hereof and of
the Prospectus, as amended or supplemented. The Company will prepare and
file with the Commission, promptly upon a request by the Representatives
or Underwriters' Counsel, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Shares by the
several Underwriters, and will use its best efforts to cause the same to
be filed with the Commission as promptly as possible.
(ii) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representatives, with a confirmation in
writing, of (A) the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the Prospectus or any
amendment or supplement thereto has been filed, (B) the issuance by the
Commission of any stop order, or of the initiation or threatening of any
proceeding, suspending the effectiveness of the Registration Statement or
any amendment thereto or any order preventing or suspending the use of
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any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, (C) the issuance by any state securities commission
of any notice of any proceedings for the suspension of the qualification
of the Shares for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (D)
the receipt of any comments from the Commission, and (E) any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information.
The Company will use its best efforts to prevent the issuance of any such
order or the imposition of any such suspension and, if any such order is
issued or suspension is imposed, to obtain the withdrawal thereof as
promptly as possible.
(iii) If required, the Company will file the Prospectus and any
amendment or supplement thereto with the Commission in the manner and
within such time period required by Rule 424(b) of the Rules and
Regulations.
(iv) To the extent reasonably required, the Company will arrange for
the qualification of the Shares for offering and sale under the securities
or "Blue Sky" laws of such jurisdictions as the Representatives may
reasonably designate and will continue such qualifications in effect for
as long as may be necessary to complete the distribution of the Shares,
provided, however, that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction.
(v) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which, in the opinion of the Company or counsel for the Company, the
Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, or if it is otherwise necessary at any time to amend or
supplement the Prospectus to comply with the Act or the Rules and
Regulations, the Company will promptly notify the Representatives thereof
and, subject to Section 4(a)(i) hereof, prepare and file with the
Commission, at the Company's expense, an amendment to the Registration
Statement or an amendment or supplement to the Prospectus that corrects
such statement or omissions or effects such compliance. If, at any time
when a prospectus relating to the Shares is required to be delivered under
the Act, any event occurs as a result of which, in the reasonable opinion
of the Representatives or Underwriters' Counsel, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the
Representatives will promptly notify the Company thereof and the Company
will, subject to section 4(a)(i) hereof, prepare and file with the
Commission, at the Company's expense, an amendment to the Registration
Statement or an amendment or supplement to the
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Prospectus that corrects such statement or omission or effects such
compliance. The Company will furnish to the Underwriters and dealers
(whose names and addresses shall be furnished to the Company by the
Representatives) to which Shares may have been sold by the
Representatives on behalf of the Underwriters and to any other dealers
upon request, a reasonable number of copies of any amendment or
supplement prepared pursuant to this paragraph (v).
(vi) The Company will furnish to each of the Representatives and
Underwriters' Counsel, without charge, a signed copy of the registration
statement originally filed with respect to the Shares and each amendment
thereto, in each case including exhibits thereto, and to each other
Underwriter, a conformed copy of such registration statement and each
amendment thereto, in each case without exhibits thereto. So long as any
Underwriter or dealer is required by the Act or the Rules and Regulations
to deliver a prospectus, the Company will also furnish as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Representatives may reasonably request. The
Company consents to the use of the Prospectus and any amendment or
supplement thereto by the Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering for sale of the Shares
and for such period of time thereafter as the Prospectus is required by
law to be delivered in connection therewith.
(vii) The Company will notify the Representatives promptly of any
material adverse change in the condition (financial or other), business,
results of operations or properties of the Company and Subsidiary taken
as a whole, occurring any time prior to payment being made to the Company
on the Closing Date or to the Company on the Option Closing Date, and
will take such steps as may be reasonably requested by you to remedy
and/or publicize the same.
(viii) After the "effective date of the registration statement" as
defined under Rule 158(c) of the Rules and Regulations, the Company will
make generally available to its security holders, within 45 days after
the end of each of its first term quarters of the Company, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the
Representatives, an earnings statement that will satisfy the provisions
of Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations.
(ix) For so long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the Company will furnish to its
shareholders and the Representatives, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings. During such
period, but in no event for more than five years after the Closing Date,
the Company also will deliver to the Representatives:
A. quarterly reports as furnished to the Commission on a concurrent
basis;
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B. annual reports as furnished to the Commission;
C. as soon as they are available, copies of all reports (financial or
other) mailed to shareholders;
D. as soon as they are available, copies of all reports, other than
preliminary proxy materials, and financial statements furnished to or
filed with the Commission, the NASD or the Nasdaq National Market;
E. every press release and every material news item or article of
interest sent to the financial community in respect of the Company or
its affairs that was released or prepared by the Company; and
F. any additional information of a public nature concerning the Company
that the Representatives may reasonably request from time to time.
(x) The Company will maintain a Transfer Agent and Registrar for the
Common Stock. Effective as of the Closing Date, the Company will cause
the Transfer Agent for the Common Stock to xxxx appropriate "stop
transfer" restrictions in its records relating to the certificates
representing all shares of Common Stock subject to restrictions under the
agreements described in Section l(a)(xxiii) hereof.
(xi) During the 180-day period commencing with the Closing Date, the
Company will not, without the prior written consent of the
Representatives, (A) offer, sell, offer to sell, contract to sell, grant
any option for the sale of, transfer or otherwise dispose (or announce
any offer, sale, contract to sell, grant any option for sale, transfer or
other disposition) of any shares of Common Stock (except pursuant to this
Agreement), or other securities convertible into, or exercisable or
exchangeable for, shares of Common Stock or (B) file any registration
statement relating to any such securities with the Commission or any
other authority, provided, however that the Company may grant or issue
such securities pursuant to any employee stock option plan (or its
successor), stock purchase plan or warrant agreement described in the
Prospectus and may file a registration statement on Form S-8 with respect
to any employee stock option plan or stock purchase plan.
(xii) The Company will apply the net proceeds from the sale of the
Shares sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus unless a different application of proceeds
is approved pursuant to a resolution of its Board of Directors and prior
written notice is given to the Representatives. During the 180-day period
commencing with the Closing Date, no portion of the net proceeds will be
used directly or indirectly to acquire any securities issued by the
Company.
(xiii) The Company will furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and the
Option Closing Date, if
-17-
any, but no later than two full business days prior thereto, a copy of
the latest available audited or unaudited interim financial statements of
the Company that have been read by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to
Section 6(h) hereof.
(xiv) The Company will use its best efforts to maintain its listing
on Nasdaq National Market.
(xv) The Company will apply the net proceeds from the sale of the
Shares sold by it and conduct its, and cause Subsidiary to conduct its,
operations in a manner that will not subject it to registration as an
investment company under the Investment Company Act of 1940, as amended.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay promptly all costs, expenses and
fees (collectively, the "Offering Expenses") incident to the performance of
the obligations of the Company under this Agreement, including all expenses
and fees incurred in connection with or by (i) the engagement of accountants,
counsel for the Company and the Transfer Agent and Registrar for the Common
Stock, (ii) the preparation, duplication, printing, filing and distribution of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
any amendments and supplements thereto (including, without limitation, the
registration fee payable to the Commission) and the duplication, printing, and
distribution of this Agreement, the Selected Dealer Agreements, Agreement
between Underwriters, and related documents used in connection with the
Offering, if any, including in each case the cost of all copies supplied to
the Underwriters in quantities as hereinabove stated, (iii) the printing,
engraving, issuance and delivery of certificates representing the Shares, (iv)
the qualification of the Shares under state securities or "Blue Sky" laws,
including filing fees, costs of printing and mailing of a "Preliminary Blue
Sky Memorandum" and "Final Blue Sky Memorandum" and disbursements and
reasonable fees of Underwriters' Counsel in connection therewith, (v) filings
and other actions incident to obtaining a review of the offering by the NASD,
and (vi) the travel and lodging expenses of the Company's officers in
connection with meetings with prospective investors in the Shares. Any such
fees or disbursements of Underwriters' Counsel referred to in the foregoing
clause (iv), or any filing or registration fees referred to in the foregoing
clauses (ii) and (v), if invoiced at least two days prior to the Closing Date
or the Option Closing Date, if any, shall be paid no later than the Closing
Date or the Option Closing Date, as the case may be, or if not invoiced at
least two days prior to the Closing Date, shall be paid within five days of
invoice.
(b) If this Agreement is terminated in accordance with the provisions of
Section 6, Section 10 or Section 12 of this Agreement, the Underwriters shall
be entitled to retain all amounts advanced by the Company to the Underwriters
to cover their out-of-pocket
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expenses, including, but not limited to, the fees and disbursements of
Underwriters' Counsel, that shall have been incurred by them in connection
with the proposed purchase and sale of the Shares, subject to a maximum of
$100,000, including the $25,000 previously paid to the Underwriters by the
Company (receipt of which is hereby acknowledged) for due diligence review.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters to purchase and pay for the
Firm Shares shall be subject, in their sole discretion, to the accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date, as if they had been made on and as of the Closing
Date, to the accuracy on and as of the Closing Date of the statements of the
officers of the Company individually made in certificates delivered pursuant
to the provisions hereof, to the performance by the Company on and as of the
Closing Date of their respective covenants and obligations hereunder, and to
the following further conditions:
(a) If the Registration Statement or any amendment thereto filed prior
to the Closing Date has not been declared effective as of the time of
execution hereof, the Registration Statement or such amendment shall have been
declared effective not later than a.m., Minneapolis time, on the date on
which the amendment to the Registration Statement originally filed with
respect to the Shares or to the Registration Statement, as the case may be,
containing information regarding the initial public offering price of the
Shares has been filed with the Commission, or such later date and time as
shall have been consented to in writing by the Representatives. If required,
the Prospectus and any amendment or supplement thereto shall have been filed
in accordance with Rule 424(b) under the Act. No stop order suspending the
effectiveness of the Registration Statement or any amendment thereto shall
have been issued and no proceedings for that purpose shall have been
instituted or, to the best knowledge of the Company or the Representatives
shall be contemplated by the Commission. The Company shall have complied, to
the reasonable satisfaction of the Representatives and Underwriters' Counsel,
with any request of the Commission for additional information (to be included
in the Registration Statement or the Prospectus or otherwise).
(b) The Representatives shall not have reasonably determined, with the
advice of Underwriters' Counsel, and advised the Company that (i) the
Registration Statement, or any amendment thereto, includes an untrue statement
of a material fact or omits to state a material fact necessary to make the
statements therein not misleading or (ii) the Prospectus, or any amendment or
supplement thereto, includes an untrue statement of a material fact or omits
to such a material fact necessary in order to make the Statements therein, in
the light of the circumstances under which they were made, not misleading.
(c) The Representatives shall have received from Underwriters' Counsel
an opinion dated the Closing Date, with respect to the issuance and sale of
the Shares, the
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Registration Statement, the Prospectus and such other related matters as the
Representatives reasonably may request. Underwriters' Counsel shall have
received from the Company such papers and information as they may reasonably
request to enable them to review or pass upon such matters or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or covenants of the Company contained herein.
(d) The Representatives shall have received from Xxxxxxxxx & Xxxxxx,
P.L.L.P., counsel to the Company, an opinion, dated the Closing Date and in
form and substance satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota. Each of
the Company and Subsidiary is duly qualified to transact business as a
foreign corporation and is in good standing in each United States
jurisdiction in which its ownership or leasing of any properties or the
character or conduct of its operations requires such qualification except
where failure to be so qualified or in good standing, individually or in
the aggregate, would not result in a Material Adverse Effect.
(ii) Each of the Company and Subsidiary has all requisite corporate
power and authority necessary or required to own or lease its properties
and conduct its business as described in the Prospectus. To such
counsel's actual knowledge, there is no material authorization, approval,
order, license, certificate, franchise or permit of or from any
governmental or regulatory official or body of any United States
jurisdiction (including any official or body having jurisdiction over
environmental or similar matters) necessary or required to own or lease
the property or to conduct the business of the Company and Subsidiary as
described in the Prospectus, except for such as have been obtained and
are in full force and effect.
(iii) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions provided for
herein; and this Agreement has been duly authorized, executed and
delivered by the Company. This Agreement, assuming due authorization,
execution and delivery by the Underwriters, constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, moratorium or similar laws
affecting the rights of creditors generally and by judicial limitations
on the right of specific performance, and except as the enforceability of
the indemnification or contribution provisions hereof may be limited by
federal or state securities laws. The Company's execution and delivery
of this Agreement, its performance of its obligations hereunder, the
consummation of the transactions contemplated hereby, and its conduct
of its business as described in the Prospectus, do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under the terms of the Company's
Restated Articles of Incorporation or Bylaws, each as amended to the date
of the opinion. The Company's execution and
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delivery of this Agreement, its performance of its obligations
hereunder and the consummation of the transactions contemplated
hereby do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or result in the
creation or imposition of any material liens, charges, claims,
encumbrances, pledges, security interests, defects or other like
restriction or material equities of any kind whatsoever upon, any
right, property or assets (tangible or intangible) of the Company
or Subsidiary pursuant to the terms of (A) any lease, license,
contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan, credit agreement,
other indebtedness or any other agreement or instrument, which such
counsel has reviewed and to which the Company or Subsidiary is a
party or by which it is or may be bound or to which any of their
respective properties or assets (tangible or intangible) is or may
be subject, or (B) any United States or Minnesota statute, rule or
regulation, or to the extent actually known to such counsel, any
other statute, rule or regulation or any judgment, decree or order
applicable to the Company or Subsidiary or any of their respective
activities or properties adopted or issued by any arbitrator,
court, regulatory body or administrative agency or other
governmental agency or body (including those having jurisdiction
over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or Subsidiary or any of their
respective activities or properties. To the best of such Counsel's
knowledge, the Company's and Subsidiary's conduct of their
respective businesses as described in the Prospectus does not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any material liens, charges, claims,
encumbrances, pledges, security interests, defects or other like
restrictions or material equities of any kind whatsoever upon, any
right, property or assets (tangible or intangible) of the Company
or Subsidiary pursuant to the terms of (A) any agreement or
instrument described in clause (A) of the preceding sentence or any
statute, judgment, decree, order, rule or regulation described in
clause (B) of the preceding sentence.
(iv) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or, to such counsel's knowledge,
any court is required in connection with the issuance of the Shares to be
sold by the Company, the Company's performance of its obligations
hereunder, the Offering or the consummation of the other transactions
contemplated hereby, except such as may be required under the state
securities or "Blue Sky" laws of any jurisdiction or as may be required
by the bylaws and rules of the NASD in connection with the purchase and
distribution of the Shares by the Underwriters and except such other
approvals as have been obtained and remain in full force and effect.
(v) Upon completion of the Offering, the authorized, issued and
outstanding capital stock of the Company will be as set forth in, and
will conform as to legal matters in all material respects to, the
description thereof contained in, the Prospectus under the caption
"Description of Capital Stock." Upon completion of the
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Offering, all of the issued shares of Common Stock of the Company will
have been duly authorized and validly issued and will be fully paid and
non-assessable; and none of such shares have been issued in violation of
the preemptive rights of any security holders of the Company. All shares
of Common Stock issuable upon the exercise of the Underwriters' Warrant
will be, after payment therefore in accordance with the terms therewith,
validly issued, fully paid and non-assessable. The Firm Shares to be
sold to the Company have been duly authorized and, when paid for in
accordance herewith, will be validly issued, fully paid and
non-assessable. The certificates which represent the Firm Shares are in
due and proper legal form. Upon the issuance and delivery pursuant to
this Agreement of the Shares to be sold by the Company, the Underwriters
will acquire good, record and marketable title to such Shares free and
clear of any liens, charges, claims, encumbrances, pledges, security
interests, defects or other like restrictions or like material equities
of any kind whatsoever. As of the Closing Date there are no preemptive
or other rights to subscribe for or to purchase, nor any restrictions
upon the voting or transfer of, any Common Stock pursuant to the
Company's Restated Articles of Incorporation or Bylaws, each as amended
to date, and to the best of such counsel's knowledge the Shares to be
sold by the Company are not otherwise subject to any preemptive or other
similar rights of any security holder. There are no shares of capital
stock of the Company outstanding other than Common Stock. To the best of
such counsel's knowledge, the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for
this Agreement or as described in the Prospectus. To the best of such
counsel's knowledge, no holders of any securities of the Company or of
any options, warrants or other convertible or exchangeable securities of
the Company exercisable for or convertible or exchangeable for securities
of the Company have the right (and have not waived the right) to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company within 180 days of the
date hereof or to require the Company to file a registration statement
under the Act during such 180-day period. The Shares have been approved
for listing upon notice of issuance on Nasdaq National Market. The
certificates representing the Shares are in due and proper form.
(vi) The Registration Statement has become effective under the Act.
Any required filing of the Prospectus pursuant to Rule 424(b) of the
Rules and Regulations has been made in accordance with the time period
required thereby. To such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued, and no
proceedings for that purpose have been instituted or are pending or
threatened, by the Commission.
(vii) At the time the Registration Statement was declared effective
by the Commission, the Registration Statement and the Prospectus and any
amendment or supplement thereto (other than the financial statements, and
notes thereto, the financial schedules, and the other financial and
statistical data included in the
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Registration Statement or the Prospectus, as to which such counsel
expresses no opinion) complied as to form in all material respects with
the requirements of the Act and the Rules and Regulations. The contracts
and other documents filed as exhibits to the Registration Statement and
summarized in the Prospectus are in all material respects accurately and
fairly summarized therein to the extent required, and such counsel does not
know or believe, after a reasonable investigation, of any contract or other
documents of a character required to be described in the Prospectus or
the Registration Statement or required to be filed as an exhibit to the
Registration Statement that are not filed or described as required.
(viii) All descriptions in the Prospectus of statutes,
regulations, and legal and governmental proceedings are correct in all
material respects and include the information required to be shown with
respect to such matters, except as to patent litigation and other patent
matters as to which such counsel need express no opinion.
(ix) Such counsel have reviewed all contracts and other documents
specifically referred to in the Registration Statement and the Prospectus
(other than documents pertaining only to the Subsidiary), and the
summaries of and other disclosures regarding such contracts and other
documents included in the Registration Statement and the Prospectus are
correct in all material respects and include the information required to
be shown with respect thereto. To such counsel's knowledge, there are no
contracts or other documents of a character required to be filed as
exhibits to the Registration Statement or required to be described in the
Registration Statement or the Prospectus that were not filed or disclosed
as required.
(x) To such counsel's knowledge, no transaction of the Company or
its Subsidiary would be considered "Certain Transactions" as defined in
Item 404 of Regulation S-K of the Commission.
(xi) To such counsel's knowledge, upon the conclusion of the
Offering, neither the Company nor Subsidiary was in breach of, or in
default under, any material term, covenants or provision of any material
license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, shareholders agreement,
note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrower money, or any other material
agreement or instrument to which the Company or Subsidiary is a party or
by which the Company or Subsidiary may be bound or to which any of their
respective property
-23-
or assets (tangible or intangible), are subject or affected except as
disclosed in the Prospectus and except as to such defaults which have
been and continue to be validly and effectively waived. The Company is
not in violation of any terms or provision of its Restated Articles of
Incorporation or Bylaws, each as amended to date.
(xii) Except as disclosed in the Prospectus, to such counsel's
knowledge, there is not pending or, to such counsel's knowledge,
threatened against the Company or Subsidiary (or any circumstances that
may give rise to the same), or involving the properties or business of
the Company or Subsidiary, any action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including those
having jurisdiction over environmental or similar matters), domestic or
foreign, that (A) is required to be disclosed in the Prospectus and is
not so disclosed, (B) questions the validity of the capital stock of the
Company or the validity or enforceability of this Agreement, (C)
questions the validity of any action taken or to be taken by the Company
pursuant to or in connection with this Agreement, or (D) could materially
adversely affect the present or prospective ability of the Company to
perform its obligations under this Agreement.
(xiii) To such counsel's knowledge, except as disclosed in the
Prospectus or to Underwriters' Counsel under Section l(a)(xii), no claim
is pending or threatened against the Company or Subsidiary or any of
their respective officers to the effect that any Intellectual Property
right that is owned by or licensed to or by the Company or Subsidiary or
that the Company or Subsidiary otherwise has the right to use or is using
is invalid or unenforceable by the Company or Subsidiary or infringes the
right of a third party (including any former employer of any of the
employees of the Company or Subsidiary).
In addition, such opinion shall contain a statement to the effect that,
in the course of the preparation by the Company and its counsel of the
Registration Statement and the Prospectus, such counsel participated in
certain meetings and telephone conferences with certain of the officers of
the Company and the independent public accountants for the Company, at which
the Registration Statement and the Prospectus were discussed and, in
connection with the preparation thereof, such counsel reviewed certain
documents furnished by the Company or otherwise in such counsel's possession.
Between the date of effectiveness of the Registration Statement and the
Closing Date, such counsel participated in certain additional meetings and/or
telephone conferences with certain officers of the Company at which the
contents of the Registration Statement and the Prospectus were discussed.
Based on the information so obtained and after conducting an investigation
which it considers reasonable, such counsel does not believe that the
Registration Statement or any amendment thereto at the time it became
effective contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that as of the date hereof, the
Prospectus or any amendment thereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
-24-
In rendering such opinion, such counsel may rely as to matters of fact,
to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel contemporaneously.
References to the Prospectus and Registration Statement in this Section
6(d) shall include any amendment or supplement thereto at the date of such
opinion.
(e) The Representatives shall have received from Merchant & Xxxxx,
patent counsel for the Company, an opinion, dated the Closing Date, to the
effect that:
(i) the statements in the Prospectus under the captions "Business -
Power Supplies - New High Density Switching Power Supplies," "Business -
Design Engineering and Product Development" and "Business - Patents" have
been reviewed by such counsel and are, to the best of such counsel's
knowledge, accurate in all material respects and fairly present the patent
information disclosed therein;
(ii) to the best of such counsel's knowledge, the Registration
Statement and the Prospectus do not contain any untrue statement of a
material fact with respect to the patent position of the Company or
Subsidiary, or omit to state any material fact relating to the patent
position of the Company or Subsidiary which is required to be stated in the
Registration Statement and the Prospectus or is necessary to make the
statements therein not misleading; and
(iii) except as disclosed in the Prospectus, to the best of such
counsel's knowledge, there is no claim, action or proceeding by any person
pending or threatened which challenges the rights of the Company or
Subsidiary with respect to such patents and licenses.
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(f) The Representatives shall have received a certificate, dated the
Closing Date, of the President and the Chief Financial Officer of the Company
to the effect that each of such officers have carefully examined the
Registration Statement, the Prospectus and this Agreement and, to the best of
their knowledge, that:
(i) Each of the representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing
Date, and the Company has complied in all material respects with all
agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to the
Closing Date.
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of such officer's knowledge,
are contemplated or threatened by the Commission.
(iii) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (A) there has
been no material adverse change, or development involving a prospective
material adverse change (including a change in management or control of
the Company), in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company or
Subsidiary, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto); (B)
neither the Company nor Subsidiary has entered into any transactions not
in the ordinary course of business; (C) neither the Company nor
Subsidiary has incurred any material liabilities or obligations, direct
or contingent, other than as disclosed in the Prospectus; (D) neither the
Company nor Subsidiary has sustained a loss material to the Company or
Subsidiary by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act, whether or not such loss
shall have been insured, or from any labor dispute or from any legal or
governmental proceeding; (E) except as set forth in the Prospectus, no
action, suit or proceeding, at law or in equity, is pending or, to the
knowledge of such officer, threatened against the Company or Subsidiary
or affecting any of the properties or business of the Company or
Subsidiary before or by any court or federal, state or foreign
commission, board or other administrative agency, which if adversely
decided would have a Material Adverse Effect; and (F) there has not
occurred any other event required to be set forth in the Prospectus that
has not been so set forth.
References to the Prospectus and Registration Statement in this Section
6(f) shall include any amendment or supplement thereto at the date of such
certificate.
(g) The Representatives shall have received a certificate dated the
Closing Date from an officer of the Company which shall list the debts of the
Company to be repaid out of the net proceeds of the Offering to the Company,
and a mutually agreed-upon escrow agent
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shall have been appointed by the Company and the Underwriters to receive into
escrow any amounts to be used to repay such debts.
(h) The Representatives shall have received from McGladrey & Xxxxxx,
L.L.P. letters dated the date hereof and the Closing Date, respectively, in
form and substance satisfactory to the Representatives and Underwriters'
Counsel, with respect to the matters set forth below;
(i) confirming that they are and were independent public
accountants with respect to the Company within the meaning of the Act and
the Rules and Regulations;
(ii) stating that it is their opinion that the audited financial
statements and schedules examined by them and indicated in the
Registration Statement and the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act
and the Rules and Regulations;
(iii) stating that, on the basis of certain procedures which
included a reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date of
the latest available unaudited interim consolidated financial
statements), a reading of the latest available minutes of meetings and
actions of the shareholders and board of directors and the various
committees of the board of directors of the Company, inquiries of
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquires, nothing
came to their attention that caused them to believe that (A) the
unaudited consolidated financial statements, if any, and schedules of the
Company included in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements of the Company included in the
Registration Statement and the Prospectus, (B) at a specified date not
more than five days prior to the date of such letter, there was any
change in the capital stock or long-term debt of the Company, or any
decrease in the stockholder's equity, net current assets or net assets of
the Company, in each case, as compared with amounts shown in the June 2,
1996 consolidated balance sheet included in the Registration Statement
and the Prospectus, except for changes set forth in such letter, and (C)
during the periods from June 2, 1996 to such specified date, there was
any decrease in revenues, gross profits, income before income taxes and
extraordinary items, or net income or any decrease in net income per
common share of the Company, in each case as compared with the
corresponding period beginning May 29, 1995, except for changes set forth
in such letter;
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(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(v) stating they have conducted a review of the consolidated
financial statements for the first quarter of this current fiscal year
and have been retained to conduct a similar review for the next two
quarters.
(vi) statements as to such other matters incident to the
transactions contemplated hereby as the Underwriters may reasonably
request.
In the event that any of the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letter shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery
of the Shares as contemplated by the Registration Statement originally filed
with respect to the Shares, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in this
Section 6(h) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(i) The Company shall have furnished the Representatives with a written
agreement of each of the directors and officers of the Company listed in the
Prospectus or any Preliminary Prospectus, that each of them will not, directly
or indirectly, offer, sell or otherwise dispose of any equity securities of
the Company, or of any security convertible into or exchangeable or
exercisable for any equity security of the Company, excluding the exercise of
outstanding stock options for Common Stock within 180 days after the Effective
Date without the prior consent of the Representatives.
(j) No order suspending the sale of the Shares in any jurisdiction
designated by the Representatives pursuant to Section 4(a)(iv) hereof shall be
in effect on the Closing Date and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Company or the Representatives,
shall be contemplated.
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(k) The Company shall have executed and delivered the Underwriters'
Warrant as directed by the Representatives.
(l) The Representatives shall have received such further certificates,
opinions, documents, financial statements and information as they shall have
reasonably requested all of which shall be in form and substance reasonably
satisfactory to them.
If any condition of the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, the
Representatives may terminate this Agreement or, if the Representatives so
elect, they may waive any such conditions that have not been fulfilled or
extend the time for their fulfillment. All opinions, certificates, letters
and documents delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in an material
respects to the Representatives and Underwriters' Counsel. The Company shall
furnish to the Representatives such conformed copies of such opinions,
certificates, letters and documents in such quantities as the Representatives
and Underwriters' Counsel shall reasonably request.
The respective obligations of the several Underwriters to purchase and
pay for the Option Shares, if any, shall be subject, in their discretion, to
each of the foregoing conditions of this Section 6 to purchase the Firm
Shares, with all references to the Firm Shares and the Closing Date being
deemed to refer to such Option Shares and the Option Closing Date,
respectively.
7. INDEMNIFICATION.
(a) The Company agrees to indemnity and hold harmless each of the
Underwriters (including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof) and each person, if any, who
controls any Underwriter (a "Controlling Person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and
all losses, claims, damages, expenses or liabilities, joint or several (and
actions in respect thereof), whatsoever (including any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever), as
such are incurred, (i) to which such Underwriter or such Controlling Person
may become subject under the Act, the Exchange Act or any other statute or at
common law or otherwise or under the laws of foreign countries, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement
or the Prospectus (as from time to time amended and supplemented) or (B) in
any application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon
written information furnished by the Company in any jurisdiction in order to
qualify the Common Stock under the securities laws thereof or filed with the
Commission, any state securities commissions or agency, the NASD, the Nasdaq
National Market or any other securities exchange, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not
-29-
misleading in light of the circumstances under which they were made, or (ii)
to which such Underwriter or such Controlling Person may become liable to any
party which relate to or arise out of such Underwriter's or such Controlling
Person's consummation of the transactions contemplated hereby or such
Underwriter's or such Controlling Person's role in connection herewith;
PROVIDED, HOWEVER, that the Company shall not be liable to the extent that any
such loss, claim, damage, expense or liability arises out of or is based upon
an untrue statement or omission made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application in reliance upon, and in strict conformity with,
the Provided Information. The Company shall not be liable to any Underwriter
or any person controlling such Underwriter under the indemnity agreement in
this subsection with respect to any Preliminary Prospectus to the extent that
any such loss, claim, damage or liability of such Underwriter results solely
from an untrue statement of a material fact contained in, or the omission of a
material fact from, such Preliminary Prospectus which untrue statement or
omission was corrected in the applicable Prospectus (as then amended or
supplemented) if the Company shall sustain the burden of proving that such
Underwriter sold Shares to the person alleging such loss, claim, damage or
liability without sending or giving, at or prior to the written confirmation
of such sale, a copy of the applicable Prospectus (as then amended or
supplemented) if the Company had previously furnished copies thereof to such
Underwriter.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against losses, claims, damages, expenses
or liabilities to the same extent as the foregoing indemnity from the Company
to the Underwriters, provided, however, that such Underwriter shall only be
liable to the extent that any such loss, claim, damage, expense or liability
arises out of or is based upon an untrue statement or omission made in any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any application in reliance
upon, and in strict conformity with, the Provided Information furnished by
such Underwriter with respect to such Underwriter.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against
one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
it from any liability that it may have under this Section 7 except to the
extent that it has been prejudiced in any material respect by such failure or
from any liability that it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies the indemnifying party
or parties of the commencement thereof, the indemnifying party or parties will
be entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such
-30-
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such actions within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
that are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have
the right to assume the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claims or action effected without its written consent,
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case
in which (i) an indemnified party makes claim for indemnification pursuant to
this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the
aggregate amount paid as a result of such losses, claims, damages, expenses or
liabilities (or action in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the Offering or (B) if the allocation provided by clause (A)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (A) above but
also the relative fault of each of the contributing parties, on the one hand,
and the party to be indemnified on the other hand in connection with the
statements or omission that resulted in such losses, claims, damages, expenses
or liabilities, as well as any other relevant equitable considerations. In
any case where the Company is the contributing party and the Underwriters are
the indemnified party, the relative benefits received by the Company on the
one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total proceeds from the offering of the Shares (net of
underwriting discounts and other commissions paid to the Underwriters but
before deducting the other expenses incurred by the Company in connection with
the sale of the Shares) bear to the total underwriting discounts and other
commissions received by the Underwriters hereunder, in each case as set
-31-
forth in the table on the cover page of the Prospectus. 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 related to information supplied by the
Company or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this Section 7(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d) the Underwriters shall not
be required to contribute any amount in excess of the underwriting discount
and other commissions applicable to the Shares purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7, each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who has signed the
Registration Statement, and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to this Section
7(d). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect to which a claim for contribution may be made against another party or
parties under this Section 7(d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have hereunder or otherwise than
under this Section 7(d), but only to the extent that such party or parties
were not adversely affected by such omission. The contribution agreement set
forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
(e) The obligations of the Company and the Underwriters under this
Section 7 shall be in addition to any liability that the Company or
Underwriters may have at common law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties, agreements and covenants contained in
this Agreement or contained in certificates of officers of the Company
submitted pursuant hereto, shall be deemed to be representations, warranties,
agreements and covenants at the Closing Date and the Option Closing Date, as
the case may be, and such representations, warranties, agreements and
covenants of the Company and the indemnity agreements contained in Section 7
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, the Company or any
Controlling Person, and shall survive termination of this Agreement or the
issuance and delivery of the Shares to the Underwriters, provided that to the
extent any such representations, warranties, agreements or covenants are
expressly waived in writing by the Representatives, the survival
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of the same shall be as set forth in such waiver or, if not so set forth, as
provided in this Section 8.
9. EFFECTIVE DATE.
This Agreement shall become effective at _____ a.m., Minneapolis time, on
the next full business day following the date hereof, or at such earlier time
after the Registration Statement becomes effective as the Representatives, in
their discretion, shall release the Shares for the sale to the public on a
when, as and if issued basis, provided, however, that the provisions of
Section 5, 7 and 10 of this Agreement shall at all times be effective. For
purposes of this Section 9, the Shares to be purchased hereunder shall be
deemed to have been so released upon the earlier to dispatch by the
Representatives of telegrams, telexes, facsimile transmissions or other
written forms of communication to securities dealers releasing such Shares for
offering or the release by the Representatives for publication of the first
newspaper advertisement that is subsequently published relating to the Shares.
10. TERMINATION.
(a) Subject to subsection (c) of this Section 10, the Representatives
shall have the right to terminate this Agreement (i) if any calamitous
domestic or international event or act or occurrence has materially disrupted,
or in the Representatives' reasonable opinion will in the immediate future
materially disrupt, general securities markets in the United States; (ii) if
trading in the Common Stock shall have been suspended by the Commission or the
Nasdaq National Market; (iii) if trading on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market or in the
over-the-counter market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on the over-the-counter market by the NASD
or by order of the Commission or any other government authority having
jurisdiction; (iv) if the United States shall have become involved in a war or
major hostilities; (v) if a banking moratorium has been declared by a New
York, Minnesota or federal authority; (vi) if a moratorium in foreign exchange
trading has been declared; (vii) if the Company or Subsidiary shall have
sustained a loss material to the Company and Subsidiary taken as a whole by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act, whether or not such loss shall have been insured,
or from any labor dispute or any legal or governmental proceeding; (viii) if
there shall have been such material adverse change, or any development
involving a prospective material adverse change (including a change in
management or control of the Company) in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and Subsidiary taken as a whole, except in each case as described in
or contemplated by the Prospectus (exclusive of any amendment or supplement
thereto); or (ix) if there shall be such material adverse general market
conditions as in the Underwriters' reasonable judgment would make it
inadvisable to proceed with the offering, sale or delivery of the Shares.
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(b) If the Representatives elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, they
shall so notify the Company on the same day as such election is made by
telephone or telegram, confirmed by letter.
(c) Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including
pursuant to Sections 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out
the terms of this Agreement or any part hereof.
11. SUBSTITUTION OF THE UNDERWRITERS.
If one or more of the Underwriters shall fail or refuse (otherwise than
for a reason sufficient to justify the termination of this Agreement under the
provisions of Section 6, Section 10 or Section 12 hereof) to purchase all or a
portion of the Shares that it or they are obligated to purchase on such date
under this Agreement (the "Defaulted Securities"), the Representatives, or if
either of the Representatives is the defaulting underwriter, the
non-defaulting Representative shall have the right, within 36 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth. If, however, the Representatives, or if
either of the Representatives is the defaulting underwriter, the
non-defaulting Representative shall not have completed such arrangements
within such 36-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Shares to be purchased on such date, the non-defaulting
Underwriter or Underwriters shall be obligated to purchase the full amount
thereof; in the case where there are more than one non-defaulting Underwriter,
then in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Shares, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriters or the Company unless otherwise agreed
by the Company and the Representatives, or if either of the Representatives is
the defaulting underwriter, the non-defaulting Representative.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect to any default by such Underwriter under
this Agreement.
In any event of any such default that does not result in a termination of
this Agreement, the Representatives, or if either of the Representatives is
the defaulting underwriter, the non-defaulting Representative shall have the
right to postpone the Closing
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Date for a period not exceeding seven business days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. DEFAULT BY THE COMPANY.
If the Company shall fail to sell and deliver to the Underwriters the
Firm Shares to be sold and delivered by the Company at the Closing Date or the
Option Shares to be sold and delivered by the Company at the Option Closing
Date, if any, under the terms of this Agreement, then the Underwriters may at
their option, by written notice from the Representatives to the Company,
either (a) terminate this Agreement without any liability on the part of any
non-defaulting party other than pursuant to this Section 12 or (b) purchase
the Shares which the Company has agreed to sell and deliver in accordance with
the terms hereof. No action taken pursuant to this Section 12 shall relieve
the Company from liability in respect of such default.
13. REPRESENTATION OF UNDERWRITERS.
The Representatives will act for the several Underwriters in connection
with the transactions contemplated by this Agreement and any action under this
Agreement taken by the Representatives jointly or by Principal individually
will be binding upon all of the Underwriters.
14. NOTICES.
All notices and communications hereunder may be mailed or transmitted by
any standard form of telecommunications and, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been
duly given when delivered to a notice party hereto at the address specified
herein or at the address subsequently communicated in writing by the notice
parties. Notices to the Underwriters shall be directed to the Representatives
in care of Principal Financial Securities, Inc., The Fountain Place, 0000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attn: Xxxxx Xxxxx, with a copy to
Best & Xxxxxxxx, Professional Limited Liability Partnership, 4000 First Bank
Place, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention:
Xxxxx X. Xxxxxxxx, Esq. Notices to the Company shall be directed to the
address of the Company as set forth on the facing page to the Registration
Statement, with a copy to Xxxxxxxxx & Xxxxxx, P.L.L.P., 0000 XXX Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx, Esq.
15. PARTIES.
This Agreement shall inure solely to the benefit of, and shall be binding
upon, the Underwriters, the Company and the Controlling Persons, directors and
officers referred to in Section 7 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained.
No
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purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase. In all dealings with the Company under this
Agreement, the Representatives shall act on behalf of each of the several
Underwriters.
16. CONSTRUCTION.
This Agreement shall be governed by the laws of the State of Minnesota
without giving effect to the choice of law or conflict of laws principles
thereof. The word "including" as used herein shall not be construed so as to
exclude any other thing not referred to or described.
17. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which taken together shall
be deemed to be one and the same instrument.
18. ENTIRE AGREEMENT.
This Agreement, including the schedules hereto, contains the entire
agreement between the parties hereto in connection with the subject matter
hereof.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly Yours,
XXXX INCORPORATED
By:_____________________________________
Name: Xxxxxxxxx X. Xxxxx
Title: President and CEO
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CONFIRMED AND ACCEPTED as of the date
first above written:
PRINCIPAL FINANCIAL SECURITIES, INC. and
CRUTTENDEN XXXX INCORPORATED,
as Representatives of the several Underwriters
PRINCIPAL FINANCIAL SECURITIES, INC.
By:___________________________________
Name:______________________________
Title:_______________________________
CRUTTENDEN XXXX INCORPORATED
By:___________________________________
Name:______________________________
Title:_______________________________
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SCHEDULE A
LIST OF UNDERWRITERS
NAME SHARES
PRINCIPAL FINANCIAL SECURITIES, INC. ________ shares
CRUTTENDEN XXXX INCORPORATED ________ shares
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