Underwriting Agreement
_____________, 1996
Tuschner & Company, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000, One Financial Xxxxx
Xxxxxxxxxxx, XX 00000
Gentlemen,
SAC Technologies, Inc., a Minnesota corporation (the "Company"), hereby
confirms its agreement with you (the "Underwriter") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company's authorized and outstanding capitalization when the
offering of the securities contemplated hereby is permitted to commence and at
the Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus included therein (hereinafter defined). The Company
proposes to issue and sell to the Underwriter in a public offering under the
Securities Act of 1933 an aggregate of 1,100,000 shares of its authorized $0.01
par value common Shares (the "Shares"), on the terms as hereinafter set forth.
The Underwriter shall also have an over-allotment option to purchase up to an
additional 110,000 shares as provided in Section 3.01 hereof.
The Company proposes to issue and sell to the Underwriter on the
Closing Date, for $0.01 each, warrants (the "Warrants") to purchase shares of
the Company's common Shares (the "Warrant Shares") as provided in Section 3.03
hereof.
SECTION 2
REPRESENTATIONS, AND WARRANTIES OF THE COMPANY
In order to induce the Underwriter to enter into this Agreement, the
Company hereby covenants, represents, and warrants to and agrees with the
Underwriter, as of the date hereof and as of each Closing Date, as if the
Closing Date were substituted for the date hereof, as follows:
2.01. REGISTRATION STATEMENT AND PROSPECTUS. A registration statement
on Form SB-2 File No. __, (the "Registration Statement") with respect to the
Shares, the related Prospectus, Copies of which have heretofore been delivered
by the Company to the Underwriter, has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and said Registration
Statement has been filed with the Commission under the Act; one or more
amendments to said Registration Statement, copies of which have heretofore been
delivered to the Underwriter, has or have heretofore been filed; and the Company
may file on or prior to the effective date additional amendments to said
Registration Statement, including the final Prospectus. Included in such
Registration Statement are an additional 110,000 shares of the Company's Common
Shares, which shares are reserved against exercise of the Underwriter's Warrants
to be granted by the Company, as more particularly described hereinafter.
As used in this Agreement, the term "Registration Statement" refers to
and means said Registration Statement on Form SB-2 and all amendments thereto,
including the Prospectus; any preliminary and any amended or supplementary
Prospectus; and all exhibits and financial statements. The term "Prospectus"
refers to and means the Prospectus included in the Registration Statement when
it becomes effective; and any "Preliminary Prospectus" which term refers to and
means any prospectus included in said Registration Statement before it becomes
effective. The terms "effective date" and "effective" refer to the date the
Commission declares the Registration Statement effective pursuant to Section 8
of the Act.
2.02. ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Shares, and the Registration Statement and each
Preliminary Prospectus and Prospectus has conformed in all material respects
with the requirements of the Act and the applicable Regulations thereunder and
has not included at the time of filing any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein not
misleading. When the Registration Statement becomes effective and on the Closing
Date (as hereinafter defined), the Registration Statement and Prospectus and any
further amendments or supplements thereto will contain all statements which are
required to be stated therein in accordance with the Act and the Regulations for
the purposes of the proposed public offering of the Shares, and all statements
of material fact contained in the Registration Statement and Prospectus are and
will be true and correct, and neither the Registration Statement nor the
Prospectus does or will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, the Company does not
make any representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus or Preliminary Prospectus in
reliance upon written information furnished on behalf of the Underwriter
specifically for use therein.
2.03. FINANCIAL STATEMENTS. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus present fairly the financial position of the Company
and the results of its operations and the changes in its financial position at
the respective dates and for the respective periods for which they apply; such
financial statements have been prepared in accordance with the Regulations and
generally accepted accounting principles consistently applied throughout the
periods concerned except as otherwise stated therein.
2.04. INDEPENDENT PUBLIC ACCOUNTANT. Divine, Xxxxxxxx & Xxxxx, Ltd.,
which has certified or shall certify certain of the financial statements filed
or to be filed with the Commission as part of the Registration Statement and
Prospectus, are independent certified public accountants within the meaning of
the Act and the Regulations.
2.05. NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, subsequent to the
dates as of which information is given in the Registration Statement and
Prospectus, (i) the Company has no contingent liabilities or cliams and has
received no threats of such claims or liabilities; (ii) there has not been any
material adverse change in the condition, financial or otherwise, of the Company
or in its business taken as a whole; (iii) there has not been any material
transaction entered into by the Company other than transactions in the ordinary
course of business which do not, in the aggregate, have a material adverse
effect in the condition, financial or otherwise, or business of the Company;
(iv) the Company has not incurred any material obligations, contingent or
otherwise; (vi) there shall not have been nor will there be any change in the
capital stock or long-term debt (except current payments) of the Company; and
(v) the Company has not and will not have paid or declared any dividends or
other distributions on its common shares; and (vi) the Company has not and will
not have committed to any of the foregoing.
2.06. NO DEFAULTS. The Company is not in any default in the performance
of any obligation, agreement, or condition contained in any debenture, note, or
other evidence of indebtedness, or any indenture or loan agreement of the
Company, or any other agreement or commitment to which the Company is a party or
by which it or its properties are bound. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated, and
compliance with the terms of this Agreement will not conflict with or result in
a breach of, or give any party the right to accumulate or terminate under, any
of the terms, conditions, or provisions of or constitute a breach, violation, or
default under: the articles of incorporation, as amended, or bylaws of the
Company; any note, indenture, mortgage, deed of trust, or other agreement or
instrument to which the Company is a party or by which it or any of its property
is bound; or any existing law, order, rule, regulation, writ, injunction, or
decree of any government, governmental instrumentality, agency or body,
arbitration tribunal or court, domestic or foreign, having jurisdiction over the
Company or its property. The consent, approval, authorization, or order of any
court or governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the blue sky or securities laws of any state or
jurisdiction.
2.07. INCORPORATION AND STANDING. The Company is duly incorporated and
validly existing in good standing as a corporation under the laws of Minnesota
with authorized and outstanding capital stock as set forth in the Registration
Statement and the Prospectus, and with full power and authority (corporate and
other) to own its property and conduct its business, present and proposed, as
described in the Registration Statement and Prospectus; the Company has full
power and authority to enter into this Agreement and has taken all necessary
corporate action to authorize the execution of this Agreement and the
Underwriter's Warrant and the issuance of the Shares and the Warrant Shares. The
Company is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which it owns or leases real property or transacts business
requiring such qualification except where failure to qualify as such would not
have a material adverse effect on the Company's business or financial or other
condition. The Company has no subsidiaries other than as shown in the
Registration Statement.
2.08. LEGALITY OF OUTSTANDING SHARES. The outstanding capital stock of
the Company has been duly and validly authorized and issued and is fully paid
and nonassessable, and conforms to all statements with regard thereto contained
in the Registration Statement and Prospectus. No sales of securities have been
made by the Company in violation of the registration and prospectus delivery
provisions of the Act.
2.09. LEGALITY OF SHARES, WARRANT SHARES AND WARRANTS. The Shares and
Warrant Shares have been duly and validly authorized and, when issued and
delivered against payment therefor as provided in this Agreement, will be
validly issued, fully paid, and nonassessable. The Shares and Warrant Shares,
upon issuance, will not be subject to the preemptive rights of any shareholders
of the Company; the Underwriter's Warrants, when sold and delivered, will
constitute valid and binding obligations of the Company enforceable in
accordance with the terms thereof, except as enforcement may be limited by
bankruptcy or similar laws of general application affecting cereditors' rights,
and except as the availability of equitable remedies requires the exercise of
judicial discretion, and except as enforcement of the indemnification provisions
therein may be limited by Federal and state securities laws. A sufficient number
of shares of Common Stock have been reserved for issuance upon exercise of the
Warrants. The Shares and Warrants will conform to all statements with regard
thereto in the Registration Statement and Prospectus.
2.10. PRIOR SALES. No securities of the Company, of an affiliate or of
a predecessor of the Company have been sold within one year prior to the date
hereof, except as set forth in Part II of the Registration Statement.
2.11. LITIGATION. Except as set forth in the Registration Statement and
Prospectus, there is no action, suit or proceeding before any court or
governmental agency, authority or body pending or to the knowledge of the
Company threatened which might result in judgments against the Company not
adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise), the business,
or the prospects of the Company, or would materially affect the properties or
assets of the Company.
2.12. WARRANTS. Upon delivery of and payment for the Warrants to be
sold by the Company as set forth in Section 3.03 of this Agreement, the
Underwriter and the Underwriter's designees will receive good and marketable
title thereto, free and clear of all liens, encumbrances, charges and claims
whatsoever; and the Company will have on the effective date of the Registration
Statement and at the time of delivery of such Warrants full legal right and
power and all authorization and approval required by law to sell, and deliver
such Warrants in the manner provided hereunder.
2.13. NO FINDERS. There is no outstanding claim (and no basis for any
claim) for services in the nature of a finder's fee or origination fee with
respect to the sale of the Shares hereunder.
2.14. EXHIBITS. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Regulations which have not been so filed and each contract to which the
Company is a party and to which reference is made in the Prospectus has been
duly and validly executed, is in full force and effect in all material respects
in accordance with their respective terms, none of such contracts have been
assigned by the Company; and the Company knows of no present situation or
condition or fact which would prevent compliance with the terms of such
contracts, as amended to date. Except for amendments or modifications of such
contracts in the ordinary course of business, the Company has no intention of
exercising any right which it may have to cancel any of its obligations under
any of such contracts, and has no knowledge that any other party to any of such
contracts has any intention not to render full performance under such contracts.
2.15. TAX RETURNS. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. All taxes with respect to which the Company is obligated have been
paid or adequate accruals have been set up to cover any such unpaid taxes.
2.16. PROPERTY. Except as otherwise set forth in or contemplated by the
Registration Statement and Prospectus, the Company has good title or a valid
leasehold interest, free and clear of all liens, encumbrances, and defects,
except liens for current taxes not due and payable, to all property and assets
which are described in the Registration Statement and the Prospectus as being
owned or leased by the Company, subject only to such exceptions which are not
material and which do not adversely affect the financial or other condition,
business, or prospects of the Company.
2.17. AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding, and legally enforceable obligation of the
Company, except as enforcement may be limited by bankruptcy or similar laws of
general application affecting creditors' rights, except as the availability of
equitable remedies requires the exercise of judicial discretion, and except as
enforcement of the indemnification provisions herein may be limited by Federal
or state securities laws.
SECTION 3
PURCHASE AND SALE OF THE SHARES
3.01. PURCHASE OF SHARES AND OVER-ALLOTMENT OPTION. The Company hereby
agrees to sell to the Underwriter and the Underwriter agrees to purchase from
the Company upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, the Shares at a
purchase price of $_____ per share.
The Company hereby grants to the Underwriter an option (the
"Over-Allotment Option") for a period of 30 days after Closing to purchase at a
purchase price of $_____ per share up to 110,000 additional shares of Shares
(the "Option Shares") in order to cover over- allotments.
3.02. PUBLIC OFFERING PRICE. After the Commission notifies the Company
that the Registration Statement has become effective, the Underwriters propose
to offer the Shares and the Option Shares (if the Over-Allotment Option is
exercised) to the public at a public offering price of $_______ per share, as
set forth in the Registration Statement. The Underwriters may allow such
concessions and discounts upon sales to selected dealers as may be determined
from time to time by the Underwriter.
3.03. PAYMENT FOR SHARES. Payment for the Shares (including Option
Shares) which the Underwriter agrees to purchase shall be made to the Company or
its order by certified or official bank check or checks, or by wire transfer in
the amount of the purchase price by or on behalf of the Underwriter at the
offices of the Underwriter set forth above in Minneapolis, Minnesota upon
delivery to the Underwriter of certificates for shares and Warrants in
definitive form in such numbers and registered in such names as the Underwriter
requests in writing at least one full business days prior to such delivery.
3.04. CLOSING. The time and date of delivery and payment hereunder is
herein called the "Closing Date" and shall take place at the office of the
Underwriter at the address set forth above at 2:00 P.M. on the third business
day following the effective date. Should the Underwriter elect to exercise any
part of the over-allotment option pursuant to Section 3.01 herein-above, the
time and date of delivery and payment for said over- allotment shares shall be
as mutually agreed, but not later than the 30th calendar day after the "Closing
Date." Said date is hereinafter referred to as the "Over-Allotment Closing
Date," and shall be a Closing Date for the purposes of Section 8 herein.
3.05. INSPECTION OF CERTIFICATES. For the purpose of expediting the
checking and packaging of the certificates for Shares and Warrants, the Company
agrees to make the certificates and Warrants available for inspection by the
Underwriter at the office of the Underwriter set forth above in Minneapolis,
Minnesota at least one full business day prior to the proposed delivery date.
3.06. SALE OF WARRANTS. The Company will sell and deliver to the
Underwriter at a purchase price of $0.01 per Warrant, Warrants, dated the date
of Closing, substantially in the form of Exhibit A, attached hereto and by this
reference incorporated herein, evidencing the right of the Underwriter to
purchase such number of Warrant Shares equal to ten percent (10%) of the number
of Shares purchased by the Underwriter (exclusive of the Option Shares) at the
price per share and upon the terms and conditions provided in the Warrants. The
Company shall not be obligated to sell and deliver the Warrants, and the
Underwriter will not be obligated to purchase and pay for the Warrants, except
upon payment for the shares pursuant to Subsection 3.03 hereof.
3.07. UNDERWRITER'S EXPENSE ALLOWANCE. It is understood that the
Company shall reimburse the Underwriter for its expenses on a nonaccountable
basis in the amount of 3% of the gross proceeds of the offering, including
proceeds from the sale of the Over-Allotment Shares. At the Closing and, if
applicable, on the Over-Allotment Closing Date, the Company shall pay to the
Underwriter the unpaid balance of such allowance to defray the expenses incurred
by the Underwriter in connection with the offering. The Underwriter shall be
solely responsible for all expenses incurred by it in connection with the
offering including, but not limited to, the expenses of its own counsel except
as set forth in subsection 5.07 hereof.
3.08. REPRESENTATIONS AS OF THE CLOSING DATE. The Company warrants,
covenants, and represents that as of the Closing Date the representations herein
contained and the statements contained in all the certificates theretofore or
simultaneously delivered by any party to another, pursuant to this Agreement,
shall in all material respects be true and correct.
3.09. POST-CLOSING INFORMATION. The Underwriter covenants that
reasonably promptly after the Closing Date, it will supply the Company with all
information required from the Underwriters for the completion of Form SR and
such additional information as the Company may reasonably request to be supplied
to the securities commissions of such states in which the Shares has been
qualified for sale.
3.10. RE-OFFERS BY SELECTED DEALERS. On each sale by the Underwriters
of any of the Shares to selected dealers, the Underwriter shall require the
selected dealer purchasing any such Shares to agree to re-offer the same on the
terms and conditions of the offering set forth in the Registration Statement and
Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.01. DELIVERY OF REGISTRATION STATEMENTS. The Company shall deliver to
the Underwriter without charge four signed copies of the Registration Statement,
including all financial statements and exhibits filed therewith and any
amendments or supplements thereto, and shall deliver without charge to the
Underwriter ten conformed copies of the Registration Statement and any amendment
or supplement thereto, including such financial statements and exhibits. The
signed copies of the Registration Statement so furnished to the Underwriter will
include signed copies of any and all consents and certificates of the
independent public accountant certifying to the financial statements included in
the Registration Statement and Prospectus and signed copies of any and all
consents and certificates of any other persons whose profession gives authority
to statements made by them and who are named in the Registration Statement or
Prospectus as having prepared, certified, or reviewed any part thereof.
4.02. DELIVERY OF PRELIMINARY PROSPECTUS. The Company will deliver to
the Underwriter, without charge, as many copies of each Preliminary Prospectus
filed with the Commission conforming to Item 501(a)(8) of Regulation S-B as may
be required by the Underwriters. The Company consents to the use of such
documents by the Underwriters and by dealers prior to the effective date of the
Registration Statement. The Company will deliver at its expense such copies of
the Preliminary Prospectus as the Underwriter may deem necessary in order to
recirculate the Preliminary Prospectus and/or to permit compliance with the
provisions of Rule 15c-2(8)(b) of the Commission. For purposes of the paragraph,
the term "Preliminary Prospectus" shall be deemed to include after the effective
date of the Registration Statement a Rule 430A subject to completion prospectus,
and the Company will deliver to the Underwriter, after the effective date at its
expense, such copies of the Rule 430A subject to completion prospectus the
underwriter deems necessary in connection with the offering.
4.03. DELIVERY OF PROSPECTUS. The Company will deliver at its expense
as many printed copies of the Prospectus as the Underwriter may require for the
purposes contemplated by this Agreement and shall deliver said printed copies of
the Prospectus to the Underwriter as soon as practicable on effectiveness of
this Agreement, but in no event more than one business day after the effective
date of this Agreement. The Company will deliver such additional copies at its
expense as may be necessary to permit dealers to comply with the requirements of
Rule 174. If the Underwriter determines to use a Term Sheet together with a
prospectus subject to completion in accordance with Rule 434 to satisfy the
prospectus delivery requirement, the Company shall furnish the Underwriter with
such number of copies of the Term Sheet meeting the requirements of Rule 434 and
will file such number of copies of the Commission as required by Rule 424(b) to
permit the Underwriter to deliver the final prospectus to purchasers in the
offering in this manner.
4.04. FURTHER AMENDMENTS AND SUPPLEMENTS. If during such period of time
as in the opinion of the Underwriter or its counsel, a Prospectus relating to
this offering is required to be delivered under the Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur as a
result of which the Registration Statement would include an untrue statement of
a material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time after the effective date of
the Registration Statement to amend or supplement the Registration Statement or
the Prospectus to comply with the Act, the Company will forthwith notify the
Underwriter thereof and prepare and file with the Commission such further
amendment to the Registration Statement or Prospectus as may be required, and
will furnish and deliver to the Underwriter and to others whose names and
addresses are designated by the Underwriter, all at the cost of the Company, a
reasonable number of copies of the amended Registration Statement or amended or
supplemented Prospectus which, as so amended or supplemented, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the Statements therein not misleading in the light of
the circumstances under which they were made when it is delivered to a purchaser
or prospective purchaser, and which will comply in all respects with the Act.
4.05. USE OF PROSPECTUS. The Company authorizes the Underwriters, in
connection with the distribution of the Shares, and all dealers to whom any of
the Shares may be sold by the Underwriters, to use the Prospectus as from time
to time amended or supplemented, in connection with the offering and sale of the
Shares and in accordance with the applicable provisions of the Act and the
applicable Regulations and applicable state blue sky or state securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriters that:
5.01. OBJECTION OF UNDERWRITER TO AMENDMENTS OR SUPPLEMENTS. After the
date hereof, the Company will not at any time, whether before or after the
effective date of the Registration Statement, file any Registration Statement or
amendment or supplement to the Registration Statement or Prospectus unless and
until a copy of such Registration Statement or amendment or supplement has been
previously furnished to the Underwriter within a reasonable time period prior to
the proposed filing thereof, or of which the Underwriter or counsel for the
Underwriter has reasonably objected to, in writing, on the ground that such
Registration Statement or amendment or supplement is not in compliance with the
Act or the Regulations.
5.02. COMPANY'S BEST-EFFORTS TO CAUSE REGISTRATION STATEMENT TO BECOME
EFFECTIVE. The Company will use its best efforts to cause the Registration
Statement and any post effective amendment subsequently filed to become
effective as promptly as reasonably practicable and will promptly advise the
Underwriter, and will confirm such advice in writing: (i) when the Registration
Statement shall have become effective and when any amendment thereto shall have
become effective and when any amendment of or supplement to the Prospectus shall
be filed with the Commission; (ii) when the Commission shall make a request or
suggestion for any amendment to the Registration Statement or the Prospectus or
for additional information and the nature and substance thereof; (iii) of the
issuance by the Commission of an order suspending the effectiveness of the
Registration Statement pursuant to Section 8 of the Act or of the initiation of
any proceedings for that purpose; (iv) of the happening of any event which in
the judgment of the Company makes any material statement in the Registration
Statement or Prospectus untrue or of the omission of any material fact which
makes the statements made therein misleading, or which requires the making of
any changes in the Registration Statement or Prospectus in order to make the
statements therein not misleading, and (v) of the refusal to qualify or the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such purposes.
The Company will use every reasonable effort to prevent the issuance of any such
order or of any order preventing or suspending such use, to prevent any such
refusal to qualify or any such suspension, and to obtain as soon as possible a
lifting of any such order, the reversal of any such refusal and the termination
of any such suspension.
5.03. PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
will prepare and file promptly with the Commission, upon request of the
Underwriter, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Underwriter and of counsel to the Company may be necessary in
connection with the offering or distribution of the Shares and will use its best
efforts to cause the same to become effective as promptly as possible.
5.04. PUBLICITY. The Company will issue no press releases or other form
of publicity, prior to the effective date, without the prior consent of the
Underwriter.
5.05. BLUE-SKY QUALIFICATION. The Company will, when and as requested
by the Underwriter, use reasonable efforts to qualify the Shares or such part
thereof as the Underwriter may determine for sale under the so-called blue sky
laws of the State of Minnesota, and of so many other states as the Underwriter
may reasonably request, and to continue such qualification in effect so long as
required for the purposes of the distribution of the Shares; provided, however,
the Company shall not be required to make a blue sky filing in any state which
would require that shares representing so-called "cheap stock" be escrowed for
more than two years.
5.06. FINANCIAL STATEMENTS. The Company will, at its own expense,
prepare and give, and will continue to give, such financial statements and other
information to and as may be required by the Commission or by the proper public
bodies of the states in which the Shares may be qualified.
5.07. ACCELERATION. The Company will not request acceleration of the
effectiveness of the Registration Statement without the Underwriter's prior
consent.
5.08. REPORTS AND FINANCIAL STATEMENTS TO THE UNDERWRITER. During the
period of five years from the Closing Date, the Company will deliver to the
Underwriter, copies of each annual report of the Company, and will deliver to
the Underwriter: (i) within 90 days after the close of each fiscal year of the
Company, a financial report of the Company and its subsidiaries, if any, on a
consolidated basis, and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as of the end
of the preceding fiscal year, an income statement, a statement of changes in
financial condition and an analysis of shareholders' equity covering such fiscal
year, and all to be in reasonable detail and certified by independent public
accountants for the Company; (ii) within 45 days after the end of each quarterly
fiscal period of the Company other than the last quarterly fiscal period in any
fiscal year, copies of the consolidated income statement and statement of
changes in financial condition for that period, and the balance sheet as of the
end of that period of the Company and its subsidiaries, if any, and the income
statement, statement of changes in financial condition, and the balance sheet of
each unconsolidated subsidiary, if any, of the Company for that period, all
subject to year-end adjustment, certified by the principal financial or
accounting officer of the Company; (iii) copies of all other statements,
documents, or other information which the Company shall mail or otherwise make
available to any class of its security holders, or shall file with Commission;
and (iv) upon request in writing from the Underwriter, furnish to the
Underwriter such other information as may reasonably be requested and which may
be properly disclosed to the Underwriter with reference to the property,
business, and affairs of the Company and its subsidiaries, if any.
5.09. EXPENSES PAID BY THE COMPANY. The Company will pay, whether or
not the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization of the Shares and their issue and
delivery to the Underwriter; any original issue taxes in connection therewith;
all transfer taxes, if any, incident to the initial sale of the Shares to the
public; the fees and expenses of the Company's counsel and accountants; the
costs and expenses incident to the preparation, printing and filing under the
Act and with the National Association of Securities Dealers, Inc. of the
Registration Statement, any Preliminary Prospectus, and the Prospectus and any
amendments or supplements thereto, the cost of printing, reproducing, and filing
all exhibits to the Registration Statement, the underwriting documents, and the
Selected Dealers Agreement; the cost of printing and furnishing to the
Underwriter copies of the Registration Statement and copies of the Prospectus as
herein provided; the cost of "tombstone" or other similar advertising permitted
under the Act; and the cost of qualifying the Shares under the state securities
or Blue Sky laws as provided in Section 5.04 herein, including expenses and
disbursements of the Underwriter incurred in connection with such qualification.
5.10. REPORTS TO SHAREHOLDERS. During the period of five years from the
Closing Date, the Company will, as promptly as possible, not to exceed 120 days,
after each annual fiscal period, render and distribute reports to its
shareholders which will include audited statements of its operations and changes
of financial position during such period and its balance sheet as of the end of
such period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion.
5.11. SECTION 11(a) FINANCIALS. The Company will make generally
available to its security holders and will deliver to the Underwriter, as soon
as practicable, but in no event later than the first day of the sixteenth full
calendar month following the effective date of the Registration Statement, an
earnings statement (as to which no opinion need be rendered but which will
satisfy the provisions of Section 11(a) of the Act) covering a period of at
least 12 months beginning after the effective date of the Registration
Statement.
5.12. POST-EFFECTIVE AVAILABILITY OF PROSPECTUS. Within the time during
which the Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed upon it by the Act, as
now or hereafter amended, by the Rules and Regulations, as from time to time may
be in force, and by any order of the Commission, so far as necessary to permit
the continuance of sales or dealings in the Shares.
5.13. APPLICATION OF PROCEEDS. The Company will apply the net proceeds
from the sale of the Shares substantially in the manner set forth in the
Registration Statement and Prospectus.
5.14. UNDERTAKINGS OF CERTAIN SHAREHOLDERS. The Company will deliver to
the Underwriter, prior to or simultaneously with the execution of this
Agreement, the undertaking of each officer, director, and each employee of the
Company who owns five percent (5%) or more of shares of the Company (based on
the number of shares to be outstanding prior to the completion of the offering)
that such person shall not directly or indirectly offer or sell to the public
any portion of the shares owned prior to the effective date of this Agreement or
hereafter acquired by exercise of an option for a period of twelve months from
the effective date of the Registration Statement without the Underwriter's prior
written consent.
5.15. DELIVERY OF DOCUMENTS. At the Closing, the Company will deliver
to the Underwriter true and correct copies of the articles of incorporation and
certificate of incorporation of the Company and all amendments thereto, all such
copies to be certified by the Secretary of State of the State of Minnesota; true
and correct copies of the bylaws of the Company and of the minutes of all
meetings of the directors and shareholders of the Company held prior to the
Closing Date which in any way relate to the subject matter of this Agreement,
certified by the Company's Secretary.
5.16. COOPERATION WITH UNDERWRITER'S DUE DILIGENCE. At all times prior
to any Closing Date, the Company will cooperate with the Underwriter and its
counsel in such investigation as the Underwriter may make or cause to be made of
all the properties, business, and operations of the Company in connection with
the purchase and public offering of the Shares, and the Company will make
available to the Underwriter in connection therewith such documents and
information in its possession as the Underwriter or its counsel may reasonably
request.
5.17. NO SALE PERIOD. No offering, sale, or other disposition of any
common Shares, equity, or long-term debt will be made within one year after the
effective date of the Prospectus, directly or indirectly, by the Company,
otherwise than hereunder or with the Underwriter's consent (not to be
unreasonably withheld).
5.18. APPOINTMENT OF TRANSFER AGENT. The Company has appointed the
American Stock Transfer and Trust Company as Transfer Agent for the Shares
subject to the Closing. The Company will not change or terminate such
appointment for a period of three years from the effective date without first
obtaining the written consent of the Underwriter, which consent shall not be
unreasonably withheld.
5.19. COMPLIANCE WITH CONDITIONS PRECEDENT. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
5.20. FILINGS OF FORM SR. The Company agrees to file with the
Commission all required reports on Form SR in accordance with the provisions of
Rule 463 promulgated under the Act and to provide a copy of such reports to the
Underwriter and its counsel.
5.21. REGISTRATION UNDER THE EXCHANGE ACT. The Company shall, as soon
as practicable, but not later than 90 days after the effective date, register
the class of equity securities which constitutes the Shares by filing with the
Securities and Exchange Commission a registration statement (and such copies
thereof as the Commission may require) with respect to such security, containing
such information and documents as the Commission may specify comparable to that
which is required in an application to register a security pursuant to
subsection (g) of Section 12 of the Securities Exchange Act of 1934, as amended.
5.22. APPLICATION TO XXXXX'X. The Company shall, within 60 days after
the effective date, apply for listing in Standard and Poor's or Xxxxx'x
Over-the-Counter Manual and shall use its best efforts to have the Company
listed in such manuals.
5.23. PUBLIC RELATIONS. After the effective date the Company will
engage a firm reasonably acceptable to the Underwriter for assistance in
conducting the Company's investor relations.
5.24. APPLICATION TO NASDAQ. The Company shall apply for entry of the
Company's common stock on the NASD automated quotation system ("small-cap"
listing) and shall in such event use its best efforts to have its common stock
continue to be quoted on that system.
5.25 ENGAGEMENT OF COMPTROLLER. Within ninety (90 ) days after the
Closing, engage a comptroller or similar employee, reasonably staisfactory to
the Underwriter, who is qualified and experienced in the financial reporting and
disclosure oblications of publicly-held companies.
SECTION 6
INDEMNIFICATION
6.01. INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and
hold harmless the Underwriter, and each person who controls the Underwriter
within the meaning of Section 15 of the Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act or any other statute or at common law and to
reimburse persons indemnified as above for any legal or other expenses
(including the cost of any investigation and preparation) incurred by them in
connection with any litigation, whether or not resulting in any liability, but
only insofar as such losses, claims, damages, liabilities and litigation arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereto
or any application or other document filed in order to qualify the Shares under
the Blue Sky or securities laws of the states where filings were made, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, all
as of the date when the Registration Statement or such amendment, as the case
may be, becomes effective, or any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or supplemented if
the Company shall have filed with the Commission any amendments thereof or
supplements thereto), or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the indemnity agreement contained in this subsection 6.01 shall not apply
to amounts paid in settlement of any such litigation if such settlements are
effected without the consent of the Company, nor shall it apply to the
Underwriter or any person controlling the Underwriter in respect of any such
losses, claims, damages, liabilities, or actions arising out of or based upon
any such untrue statements or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information peculiarly within the knowledge of the Underwriter and furnished in
writing to the Company by the Underwriter specifically for use in connection
with the preparation of the Registration Statement and Prospectus or any such
amendment or supplement thereto. This indemnity agreement is in addition to any
other liability which the Company may otherwise have to the Underwriters. The
Underwriter agrees within ten days after the receipt by it of written notice of
the commencement of any action against them or against any person controlling
them as aforesaid, in respect of which indemnity may be sought from the Company
on account of the indemnity agreement contained in this subsection 6.01 to
notify the Company in writing of the commencement thereof. The failure of the
Underwriter so to notify the Company of any such action shall relieve the
Company from any liability which it may have to the Underwriters or any person
controlling them as aforesaid on account of the indemnity agreement contained in
this subsection 6.01, but shall not relieve the Company from any other liability
which it may have to the Underwriters or such controlling person. In case any
such action shall be brought against the Underwriters or any such controlling
person and the Underwriters shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in (and, to the extent
that it shall wish, to direct) the defense thereof at its own expense, but such
defense shall be conducted by counsel of recognized standing and reasonably
satisfactory to the Underwriter or such controlling person or persons, defendant
or defendants in such litigation. The Company agrees to notify the Underwriter
promptly of commencement of any litigation or proceedings against it or any of
its officers or directors, of which it may be advised, in connection with the
issue and sale of any of its securities and to furnish to the Underwriter, at
its request, copies of all pleadings therein and permit the Underwriter to be an
observer therein and apprise the Underwriter of all developments therein, all at
the Company's expense. Provided, however, that in no event shall the
indemnification agreement contained in this Section 6.01 inure to the benefit of
any Underwriter (or any person controlling such Underwriter) on account of any
losses, claims, damages, liabilities or actions arising from the sale of the
Shares upon the public offering to any person by such Underwriter if such
losses, claims, damages, liabilities or actions arise out of, or are based upon,
an untrue statement or omission or alleged untrue statement or omission in a
Preliminary Prospectus and if the Prospectus shall correct the untrue statement
or omission, or the alleged untrue statement or omission, which is the basis of
the loss, claim, damage, liability or action for which indemnification is
sought, and a copy of the Prospectus had not been sent or given to such person
at or prior to the confirmation of such sale to him in any case where such
delivery is required by the Securities Act, unless such failure to deliver the
Prospectus was a result of non-compliance by the Company with Section 4.03
hereof.
6.02. INDEMNIFICATION BY UNDERWRITER. The Underwriter agrees, to the
extent of and in the same manner as set forth in subsection 6.01 above, to
indemnify and hold harmless the Company, the directors of the Company and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act with respect to any statement in or omission from the Registration Statement
or any amendment thereto, or the Prospectus (as amended or as supplemented, if
amended or supplemented as aforesaid) or any application or other document filed
in any state or jurisdiction in order to qualify the Shares under the blue sky
or securities laws thereof, or any information furnished pursuant to Section
3.09 hereof, if such statement or omission was made in reliance upon information
peculiarly within its knowledge and furnished in writing to the Company by the
Underwriter on its behalf specifically for use in connection with the
preparation thereof or supplement thereto. The Underwriter shall not be liable
for amounts paid in settlement of any such litigation if such settlement was
effected without the consent of the Underwriter. In case of commencement of any
action in respect of which indemnity may be sought from the Underwriter on
account of the indemnity agreement contained in this subsection 6.02, each
person agreed to be indemnified by the Underwriter shall have the same
obligation to notify the Underwriter as the Underwriter have toward the Company
in subsection 6.01 above, subject to the same loss of indemnity in the event
such notice is not given, and the Underwriter shall have the same right to
participate in (and, to the extent that it shall wish, to direct) the defense of
such action at its own expense, but such defense shall be conducted by counsel
of recognized standing and satisfactory to the Company. The Underwriter agrees
to notify the Company promptly of the commencement of any litigation or
proceeding against the Underwriter,, or against any such controlling person, of
which it may be advised, in connection with the issue and sale of any of the
securities of the Company, and to furnish to the Company at its request copies
of all pleadings therein and apprise it of all the developments therein, all at
the Underwriter's expense, and permit the Company to be an observer therein.
6.03 CONTRIBUTION. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, expenses or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall in lieu
of indemnifying such indemnified party contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages, expenses
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect not only (i) the relative benefits received by the
Company on the one hand and the Underwriter on the other from the offering of
the Shares, but also (ii) the relative fault of the Company and the Underwriter
in connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities (or action in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriter on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares (before deducting expenses other than the nonaccountable expense
allowance payable by the Company to the Underwriter) received by the Company
bear to the total underwriting commissions and expense allowance received by the
Underwriter in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriter, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriter agree that it would not
be just and equitable if contribution pursuant to this Section 6.03 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 6.03. 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 6.03 shall he deemed to include any
legal or other expenses to which such indemnified party would be entitled if
Section 6.01 and 6.02 were applied. Notwithstanding the provisions of this
Section 6.03, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price which the Shares underwritten by
it and distributed to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission plus the Underwriter's
proportionate share of such legal or other expenses; and any punitive or
exemplary damages if the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by or statements made by the Underwriter. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11 of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective upon release by the Underwriter
of the Shares for offering after the effective date. The time of the release by
the Underwriter of the Shares for offering, for the purposes of this Section 7,
shall mean the time of the release by the Underwriter of the Shares for public
sale pursuant to the Registration Statement. The Underwriter agrees to notify
the Company immediately after the Underwriter shall have released the Shares
that this Agreement has become effective. This Agreement shall, nevertheless,
become effective at such time earlier than the time specified above, after the
effective date, as the Underwriter may determine by notice to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The Underwriters' obligations hereunder to purchase the Shares and to
make payment to the Company hereunder on the Closing Date shall be subject to
the accuracy, as of the Closing Date, of the representations and warranties on
the part of the Company herein contained, to the performance by the Company of
all its agreements herein contained, to the fulfillment of or compliance by the
Company with all covenants and conditions hereof, and to the following
additional conditions:
8.01. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective on or prior to 12:00 Noon Minneapolis
time, on January 31, 1997, or such later date as the Underwriter may agree to.
On or prior to the Closing Date, no order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be included
in the Registration Statement or Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement or the Prospectus nor any amendment thereto shall have
been filed to which counsel to the Underwriter shall have reasonably objected in
writing or have not given their consent.
8.02. ACCURACY OF REGISTRATION STATEMENT. The Underwriter shall not
have disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Underwriter, is
material, or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein, or is necessary to make the
statements therein not misleading.
8.03. CASUALTY AND OTHER CALAMITY. Between the date hereof and the
Closing Date, the Company shall not have sustained any loss on account of fire,
explosion, flood, accident, calamity or any other cause, of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance and neither the
President nor any other officer of the Company shall have suffered any injury or
disability of a nature which would materially adversely affect his ability to
properly function as an officer and director of the Company.
8.04. LITIGATION AND OTHER PROCEEDINGS. Between the date hereof and the
Closing Date, there shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, patents, operations or financial condition or
income of the Company considered as an entity.
8.05. LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period subsequent
to the date of the last audited balance sheet included in the Registration
Statement and prior to the Closing Date, the Company: (a) shall have conducted
its business in the ordinary course as the same was being conducted on the date
of the last audited balance sheet included in the Registration Statement, (b)
except in the ordinary course of its business, the Company shall not have
incurred any liabilities or obligations (direct or contingent) or disposed of
any of its assets, or entered into any material transaction or suffered or
experienced any materially adverse change in its condition, financial or
otherwise, and (c) there shall have been no material adverse change in the
condition (financial or otherwise), business, or prospects of the Company. At
the Closing Date, the capital stock, and stockholder's equity of the Company
shall be substantially the same as at the date of the last audited balance sheet
included in the Registration Statement, without considering the proceeds from
the sale of the Shares, other than as may be set forth in the Prospectus, and
except as the stockholder's equity reflects the result of continued losses from
operations.
8.06. REVIEW BY AND OPINION OF UNDERWRITER'S COUNSEL. The authorization
of the Shares, the Warrants, the Warrant Shares, the Registration Statement, and
the Prospectus and all corporate proceedings and other legal matters incident
thereto and to this Agreement shall be reasonably satisfactory in all respects
to counsel to the Underwriter. The Underwriter shall have received an opinion
dated as of the Closing Date from its counsel, substantially in the form of the
opinion called for by Section 8.07(viii), qualified in such manner as the
Underwriter may deem acceptable.
8.07. OPINION OF COUNSEL. The Company (which term shall include any
subsidiaries of the Company) shall have furnished to the Underwriter the
opinion, dated the Closing Date, addressed to the Underwriter, from Xxxxxxx,
Rumble & Xxxxxx, counsel to the Company, to the effect that based upon a review
by them of the Registration Statement, the Prospectus, the Company's Articles of
incorporation, bylaws, and relevant corporate proceedings, an examination of
such statutes they deem necessary, and such other investigation by such counsel
as they deem necessary to express such opinion:
(i) The Company has been duly incorporated and is a validly existing
corporation ingood standing under the laws of Minnesota, with full
corporate power and authority to own and operate its properties and to
carry on its business as set forth in the Registration Statement and
Prospectus.
(ii) The Company is not required to qualify or register as a foreign
corporation in any state, and there are no jurisdictions in which the
Company's ownership of property or its conduct of business requires
such qualification or registration and where the failure to so qualify
would have a material adverse effect on its operations.
(iii) The Company has authorized and outstanding capital capital stock
as set forth in the Registration Statement and Prospectus; the
outstanding capital stock of the Company, the Shares, and the
Underwriter's Warrants conform to the statements concerning them in the
Registration Statement and Prospectus; the outstanding capital stock of
the Company has been duly and validly issued and is fully-paid and
nonassessable and contain no preemptive rights; the Shares have been,
and the Warrant Shares issuable upon due exercise of the Warrants will
be, when delivered against payment, duly and validly authorized and,
upon issuance thereof and payment therefor in accordance with this
Agreement and the Warrants, will be duly and validly issued, fully
paid, and nonassessable, and will not be subject to the preemptive
rights of any shareholder of the Company.
(iv) The Underwriter's Warrants have been duly and validly authorized
and issued and are valid and binding instruments enforceable against
the Company in accordance with their terms, except as enforcement may
be limited by bankruptcy or similar laws affecting creditors' rights
general application affecting creditors' rights, except as the
availability of equitable remedies requires the exercise of judicial
discretion, and except as enforcement of the indemnification provisions
therein may be limited by federal or state securities laws.
(v) A sufficient number of shares of the Company's common stock have
been duly reserved for issuance upon exercise of the Underwriter's
Warrants.
(vi) No consents, approvals, authorizations, or orders of agencies,
officers, or other regulatory authorities are known to such counsel
which are necessary for the valid authorization, issue, or sale of the
Shares and Warrant Shares hereunder, except as required under the Act
or blue sky or state securities laws.
(vii) The issuance and sale of the Shares, the Warrants, the Warrant
Shares, and the consummation of the transactions herein contemplated
and compliance with the terms of this Agreement will not conflict with
or result in a breach of any of the terms, conditions, or provisions of
or constitute a default under the articles of incorporation or bylaws
of the Company, or under any note, indenture, mortgage, deed of trust,
or other agreement or instrument known to such counsel after reasonable
investigation to which the Company is a party or by which the Company
or any of its property is bound, or under any existing law (provided
this paragraph shall not relate to federal or state securities laws),
order, rule, regulation, writ, injunction, or decree known to such
counsel of any government, governmental instrumentality, agency, body,
arbitration tribunal, or court, domestic or foreign, having
jurisdiction over the Company or its property.
(viii) The Registration Statement has become effective under the Act
and, to the best knowledge of such counsel after reasonable
investigation, no order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by the
Commission under the Act or by any authority acting under any state
securities or blue-sky law; and the Registration Statement and
Prospectus, and each amendment and supplement thereto, comply as to
form in all material respects with the requirements of the Act and the
Regulations thereunder, and such counsel is familiar with all contracts
referred to in the Registration Statement or Prospectus and such
contracts are sufficiently summarized or disclosed therein or filed as
exhibits thereto as required, and such counsel, after a reasonable
investigation, does not know of any contracts required to be summarized
or disclosed or filed, and such counsel, after a reasonable
investigation, does not know of any legal or governmental proceedings
pending or threatened to which the Company is the subject of such a
character required to be disclosed in the Registration Statement or the
Prospectus which are not disclosed and properly described therein.
(ix) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company and is
enforceable against the Company in accordance with its terms, (except
that no opinion need be expressed as to financial statements contained
in the Registration Statement or Prospectus); except as enforcement may
be limited by bankruptcy or similar laws affecting creditors' rights
general application affecting creditors' rights and except as the
availability of equitable remedies requires the exercise of judicial
discretion, and except as enforcement of the indemnification provisions
therein may be limited by federal or state securities laws.
(x) After a reasonable investigation such counsel has no reason to
believe that either the Registration Statement nor the Prospectus or
any such amendment or supplement contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which made.
As to routine factual matters such as the issuance of stock
certificates and receipt of payment therefor, the states in which the Company
transacts business, the adoption of resolutions reflected by the Company's
minute book and the like, such counsel may rely on the certificate of an
appropriate officer of the Company. Such opinion shall also cover such other
matters incident to the transactions contemplated by this Agreement as the
Underwriter shall reasonably request.
8.08.01. ACCOUNTANT'S COMFORT LETTER. The Underwriter shall have
received a letter addressed to it and dated the date of this Agreement and the
Closing Date, respectively, from Divine, Xxxxxxxx & Xxxxx, Ltd., independent
public accountants for the Company, stating that (i) with respect to the Company
they are independent public accountants within the meaning of the Act and the
applicable Regulations thereunder and the response to Item 509 of Regulation S-B
as reflected by the Registration Statement is correct insofar as it relates to
them; (ii) in their opinion, the financial statements of the Company examined by
them at all dates and for all periods referred to in their opinion and included
in the Registration Statement and Prospectus, comply in all material respects
with the applicable accounting requirements of the Act and the Regulations
thereunder with respect to registration statements on Form S-B2; (iii) on the
basis of certain indicated procedures (but not an examination in accordance with
generally accepted accounting principles), including examinations of the
instruments of the Company set forth under "Capitalization" in the Prospectus, a
reading of the latest available interim unaudited financial statements of the
Company, whether or not appearing in the Prospectus, inquiries of the officers
of the Company or other persons responsible for its financial and accounting
matters regarding the specific items for which representations are requested
below, and a reading of the minute books of the Company, nothing has come to
their attention which would cause them to believe that during the period from
the last audited balance sheet included in the Registration Statement to a
specified date not more than five days prior to the date of such letter (a)
there has been any change in the capital stock or other securities of the
Company or any payment or declaration of any dividend or other distribution in
respect thereof or exchange therefor from that shown on its audited balance
sheets or in the debt of the Company from that shown or contemplated under
"Capitalization" in the Registration Statement or Prospectus other than as set
forth in or contemplated by the Registration Statement or Prospectus; (b) there
have been any material decreases in net current assets, or net assets as
compared with amounts shown in the last audited balance sheet included in the
Prospectus so as to make said financial statements misleading; and (c) on the
basis of the indicated procedures and discussions referred to in clause (iii)
above, nothing has come to their attention which, in their judgment, would cause
them to believe or indicate that (1) the unaudited financial statements and
schedules set forth in the Registration Statement and Prospectus do not present
fairly the financial position and results of the Company for the periods
indicated, in conformity with the generally accepted accounting principles
applied on a consistent basis with the audited financial statements, and (2) the
dollar amounts, percentages and other financial information set forth in the
Registration Statement and Prospectus under the captions "Prospectus Summary,"
"Risk Factors," "Dilution," "Capitalization," "Executive Compensation," "1996
Stock Option Plan," "Principal Shareholders," and "Certain Transactions," are
not in agreement with the Company's general ledger, financial records, or
computations made by the Company therefrom.
8.08.02. CONFORMED COPIES OF ACCOUNTANT'S LETTER. The Underwriter shall
be furnished without charge, in addition to the original signed copies, such
number of signed or photostatic or conformed copies of such letters as the
Underwriter shall reasonably request.
8.09. OFFICERS' CERTIFICATE. The Company shall have furnished to the
Underwriter a certificate by the chief executive officer and chief financial
officer, dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in this Agreement
are true and correct at and as of the Closing Date, and the Company has
complied with all the agreements and has satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing
Date.
(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been
issued and to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission.
(iii) The respective signers have each carefully examined the
Registration Statement and Prospectus and any amendments and
supplements thereto, and the Registration Statement and the Prospectus
and any amendments and supplements thereto contain all statements
required to be stated therein, and all statements contained therein are
true and correct, and neither the Registration Statement nor Prospectus
nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or a
supplemented Prospectus which has not been so set forth.
(iv) Except as set forth in the Registration Statement and Prospectus
since the respective dates as of which the periods for which
information is given in the Registration Statement and Prospectus and
prior to the date of such certificate, (a) there has not been any
material adverse change, financial or otherwise, in the financial or
other condition, business, or prospects of the Company, and (b) the
Company has not incurred any liabilities, direct or contingent, or
entered into any transactions, otherwise than in the ordinary course of
business.
(v) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, no dividends or
distribution whatever have been declared and/or paid on or with respect
to the common Shares of the Company.
8.10. TENDER OF DELIVERY OF SHARES. All of the Shares being offered by
the Company and the Warrants being purchased from the Company by the Underwriter
shall be tendered for delivery in accordance with the terms and provisions of
this Agreement.
8.11. BLUE-SKY QUALIFICATION. The Shares shall be qualified in such
states as the Underwriter may reasonably request pursuant to Section 5.04, and
each such qualification shall be in effect and not subject to any stop order or
other proceeding on the Closing Date.
8.12. APPROVAL OF UNDERWRITER'S COUNSEL. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Underwriter, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Underwriter at least one business day before
the Closing Date. The Underwriter's counsel will provide a written memorandum
stating such closing documents which he deems necessary for their review. Such
memorandum shall be delivered five business days before the Closing Date to
counsel for the Company.
8.13. OFFICERS' CERTIFICATE AS A COMPANY REPRESENTATIVE. Any
certificate signed by an officer of the Company and delivered to the Underwriter
or to counsel for the Underwriter will be deemed a representation and warranty
by the Company to the Underwriter as to the statements made therein.
SECTION 9
TERMINATION
9.01. TERMINATION BECAUSE OF NON-COMPLIANCE. This Agreement may be
terminated by the Underwriter by notice to the Company in the event that the
Company shall have failed or been unable to comply with any of the terms,
conditions or provisions of this Agreement on the part of the Company to be
performed, complied with or fulfilled (including but not limited to those
specified in Sections 2, 3, 4, 5, and 8 hereof) within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Underwriter in writing.
9.02. MARKET OUT TERMINATION. This Agreement may be terminated by the
Underwriter by notice to the Company at any time if, in the judgment of the
Underwriter, payment for and delivery of the Shares is rendered impracticable or
inadvisable because (i) trading in securities generally on the New York Shares
Exchange, American Shares Exchange, or NASDAQ shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Colorado shall have been declared by either federal or state
authorities, or (iii) there shall have occurred a war or other national
calamity, or a crisis or change in political, financial, or economic conditions,
the effect of which on the financial markets of the United States is such as it
would be undesirable, impracticable or inadvisable in the judgment of the
Underwriter to proceed or continue with this Agreement or with the public
offering. Notice of such termination may be given to the Company by telegram,
telecopy or telephone and shall subsequently be confirmed by letter.
9.03. EFFECT OF TERMINATION HEREUNDER. Any termination of this
Agreement pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party thereto, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Section 5.07; and the Company and the Underwriter shall be obligated to pay,
respectively, all losses, claims, damages or liabilities, joint or several,
under Section 6.01 in the case of the Company and Section 6.02 in the case of
the Underwriter.
SECTION 10
UNDERWRITERS' REPRESENTATIONS AND WARRANTIES
The Underwriters represents and warrants to and agrees with the Company that:
10.01. REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. The
Underwriter is and each selected dealer will be (a) registered as a broker-
dealer with the Securities and Exchange Commission, (b) registered as a broker-
dealer in all states in which it conducts business, and (c) is a member in good
standing of the National Association of Securities Dealers, Inc.
10.02. NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Underwriter any action or proceeding of which it has been advised,
either in any court of competent jurisdiction, before the Securities and
Exchange Commission or any state securities commission concerning its activities
as a broker or dealer, nor has the Underwriter been named as a "cause" in any
such action or proceeding.
10.03. COMPANY'S RIGHT TO TERMINATE. In the event any action or
proceeding of the type referred to in subparagraph 10.02 above shall be
instituted or threatened against the Underwriter at any time prior to the
effective date hereunder, or in the event there shall be filed by or against it
in any court pursuant to any federal, state, local or municipal statute, a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if it makes an assignment
for the benefit of creditors, the Company shall have the right on three days'
written notice to the Underwriter to terminate this Agreement without any
liability to the Underwriter of any kind except for the payment of all expenses
as provided herein.
SECTION 11
RIGHT OF FIRST REFUSAL
11.01. CONSULTATION WITH UNDERWRITER. For a period of three years from
the date of the definitive prospectus, the Company and its officers and
directors agree to consult with Tuschner in respect of any prospective or actual
public or private offering of securities of the Company (as such term is defined
in this subsection I 1.01) for cash other than to employees.
For the purposes of this Section 11, the term, "securities of the
Company" shall be deemed to include any debt or equity securities of the Company
other than debt securities secured by chattel mortgages or equipment or property
of the Company, the maturity date of which is less than two years, and which are
offered by the Company for sale or sold by the Company only to commercial banks,
insurance companies, recognized finance companies or pension trusts. Also
specifically excluded are public offerings and/or private offerings of the
Company's shares in exchange for properties, assets or Shares of other
individuals or corporations. The Company shall not be required to consult with
the Underwriter concerning any borrowings from banks and institutional lenders
or concerning financing under any equipment leasing or similar arrangements.
11.02 UNDERWRITER'S RIGHT OF FIRST REFUSAL. For a period of three years
from the date of the definitive prospectus, the Company will not enter into an
agreement for any public or private offering for cash (other than to employees)
of any securities of the Company as defined above in Section 11.01 to or through
any person, firm or corporation other than the Underwriter unless and until the
Company shall have first negotiated for the sale of the Company's securities
with or offered to sell its securities to the Underwriter. The Company shall
notify the Underwriter in writing of the Company's intention to offer its
securities in a covered offering and the terms (including the price to the
Underwriter or other method of determining the underwriting discount or fee) and
conditions of the proposed offering. The Underwriter shall then have 30 days
from the date it receives such written notice from the Company to decide whether
it wishes to participate as Manager, Co-Manager, or otherwise, as determined by
the Underwriter, in the proposed offering. If the Underwriter determines that it
does not wish to participate in the proposed offering, then it shall so notify
the Company of its intention in writing within such 30-day period. The Company
may within a period of 30 days from the date of receipt of such notice then
enter into a letter of intent for the public sale or, as appropriate, a contract
for the private sale, of any of its securities through any other person, firm or
corporation on the same general terms and conditions as those which were
tendered to the Underwriter. Provided, however, as to a public offering, if a
definitive underwriting agreement with a firm commitment is not executed by the
Company with such third party within 90 days thereafter, all the rights of the
Underwriter hereunder shall be reinstated. Nothing in this Agreement shall be
construed as granting the continuation of such preferential right on the part of
the Underwriter beyond such three-year period. The Company shall not be required
to consult with the Underwriter concerning any borrowings from banks and
institutional lenders or concerning financing under any equipment leasing or
similar arrangements.
SECTION 12
NOTICE
Except as otherwise expressly provided in this Agreement:
12.01. NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:
Xxxxx Xxxxx
SAC Technologies, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000
with a copy to:
Xxxxxxx X. Xxxxx, Esq. or
Xxxxxx X Xxxxxxxxx Esq.
Doberty, Rumble & Xxxxxx
0000 Xxxxx Xxxxxx Towers
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
12.02. NOTICE TO THE UNDERWRITER. Whenever notice is required by the
provisions of this Agreement to be given to the Underwriters, such notice shall
be given in writing addressed to the Underwriter, Xxxx X. Xxxxxxxx, at the
address set out at the beginning of this Agreement, attention Xxxx X. Xxxxxxxx
with a copy to:
Xxxxxxx X. Xxxxx, Esq. or
Xxxxx X. Xxxxxx, Esq.
Merrith, Xxxxxx & Xxxxxx
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
SECTION 13
MISCELLANEOUS
13.01. BENEFIT. This Agreement is made solely for the benefit of the
Underwriter, the Company, their respective officers and directors and any
controlling person referred to in Section 15 of the Act, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successor" or the term
"successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Shares.
13.02. SURVIVAL. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers as set forth in or made pursuant to this Agreement and the
indemnity agreements of the Company and the Underwriter contained in Section 6
hereof shall survive and remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriter, (ii) delivery of or payment for the Shares, (iii) the Closing
Date, and (iv) any successor of the Company and the Underwriter or any
controlling person, officer or director thereof, as the case may be, shall be
entitled to the benefits hereof.
13.03. GOVERNING LAW. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the State
of Minnesota.
13.04. UNDERWRITER'S INFORMATION. The statements with respect to the
public offering of the Shares on the cover page of the Prospectus and under the
caption "Underwriting" in the Prospectus constitute the written information
furnished by or on behalf of the Underwriters referred to in subsection 2.02
hereof, in subsection 6.01 hereof and subsection 6.02 hereof.
13.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
SAC TECHNOLOGIES, INC.
ATTEST:
By_________________________________
___________________, President
_______________________________________
WE HEREBY CONFIRM AS OF THE DATE HEREOF
THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
___________________________________
TUSCHNER & COMPANY, INC.
By_________________________________
Its________________________________
Exhibit A
RESTRICTION ON TRANSFER
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE LAW AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF (1) A LAWFUL EXEMPTION FROM SUCH REGISTRATION OR (2) SUCH
REGISTRATION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF SAC TECHNOLOGIES, INC.
This Certifies that, for value received, Tuschner & Company, Inc., or
its permitted assigns (the "Holder"), is entitled, upon the terms and subject to
the conditions hereafter set forth, to subscribe for and purchase from SAC
Technologies, Inc., a Minnesota corporation (the "Company"), __________________
(______) fully paid and nonassessable shares of the Company's Common Stock,
$0.01 par value (the "Common Stock"). The number and exercise price of the
securities that may be purchased upon the exercise of this Stock Purchase
Warrant (the "Warrant") are subject to adjustment as provided herein.
Section 1 Exercise Period
The purchase rights represented by this Warrant are exercisable by the
Holder, in whole or in part, at any time or from time to time on or after the
first anniversary hereof and on or before the fifth anniversary hereof (the
"Exercise Period").
Section 2 Exercise Price
The price per share for purchase of the Common Stock upon exercise of
the Warrant shall initially be one hundred twenty percent (120%) per share of
the "Price to Public" of the shares sold pursuant to the Company's Registration
Statement No. _______ (the "Exercise Price"). Such initial Exercise Price shall
be subject to adjustment as provided in Section 8 hereof.
Section 3 Exercise of Warrant
During the Exercise Period, the Warrant shall be exercised, in whole or
in part and from time to time, by the surrender of this Warrant and the Notice
of Exercise annexed hereto duly executed at the office of the Company, in Edina,
Minnesota (or such other office or agency of the Company as it may designate)
and upon payment of the Exercise Price of the shares thereby purchased (payment
to be by check or bank draft payable to the order of the Company). Upon
exercise, the Holder shall be entitled to receive, within a reasonable time, one
or more certificates, issued in the Holder's name or in such name or names as
the Holder may direct, for the number of shares of Common Stock so purchased.
The shares so purchased shall be deemed to be issued as of the close of business
on the date on which this Warrant shall have been exercised.
The Company covenants that all shares of Common Stock that are issued
upon the exercise of rights represented by this Warrant will be fully paid,
nonassessable, and free from all taxes, liens, and changes in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
Section 4 No Fractional Shares or Scrip
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. In lieu thereof, a cash payment shall
be made equal to such fraction multiplied by the Exercise Price per share as
then in effect.
Section 5 Charges, Taxes, and Expenses
Issuance of certificates for shares of Common Stock upon the exercise
of this Warrant shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company.
Section 6 No Rights as Shareholders
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to exercise and payment of the
Exercise Price in accordance with Section 3 hereof.
Section 7 Registration Rights
7.1 Certain Definitions. As used in this Section 7, the following terms
shall have the following respective meanings:
1. "Commission" means the Securities and Exchange Commission,
or any other federal agency at the time administering the 1933 Act.
2. "1933 Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time,
be in effect.
3. "Registration Statement" means a registration statement
filed by the Company with the Commission for a public offering and sale
of securities of the Company.
4. "Registrable Shares" means the shares of Common Stock
issued or issuable upon exercise of the Warrant.
5. "Registration Expenses" means all expenses incurred by the
Company in compliance with Subsections 7.2 and 7.3 hereof, including,
without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, exchange listing fees, the expense of any special
audits incident to or required by any such registration, fees of the
custodian for the selling Stockholders, transfer agent fees, all
travel, lodging, and reasonable living expenses incurred by the Company
in marketing the shares registered in such registration, and the
expenses associated with the Company's obligations under Subsection 7.5
hereof.
6. "Selling Expenses" means all underwriting discounts and
selling commissions applicable to the sale of Registrable Shares and
all fees and disbursements of counsel, accountants, and experts for any
selling Stockholder.
7. "Stockholder" means the holder of (1) the Warrant or (2)
Common Stock obtained upon exercise of the Warrant.
7.2 Demand Registration.
(a) At any time during the Exercise Period (following the
Company's initial public offering of its securities under the 1933 Act
or Regulation A thereunder), a Stockholder or Stockholders holding more
than 50 percent of the Registrable Shares then outstanding may request
the Company, in writing, to effect the registration, under the 1933
Act, of Registrable Shares owned by such Stockholder or Stockholders,
pursuant to a public offering to be filed on a Form S-3 Registration
Statement (or, if such Registration Statement is not available, such
other form of Registration Statement as may be selected by the Company
in its sole discretion), and to be managed by an investment banking
firm to be selected by the Company pursuant to Subsection 7.8 hereof.
Such request shall indicate the number of Registrable Shares proposed
to be sold by the requesting Stockholder or Stockholders and indicate
that the requesting Stockholder or Stockholders propose to enter into a
"firm commitment" underwriting agreement with such investment banking
firm contemplating immediate resale to the public of such Registrable
Shares. Upon receipt of any such request, the Company shall promptly
give written notice of such proposed registration to all Stockholders.
Such Stockholders shall have the right, by giving written notice to the
Company within twenty days after the Company provided its notice, to
elect to have included in such registration such of their Registrable
Shares as such Stockholders may request in such notice of election,
subject to the limitations set forth in Subsection 7.2(f) hereof.
Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration of all Registrable Shares that
the Company has been requested to register.
(b) The Company shall be required to effect only one
registration pursuant to Subsection 7.2(a) hereof. In no event shall
the Company be required to effect such registration within three months
after the effective date of any other Registration Statement of the
Company (except a Registration Statement on Form S-8 or Form S-4 or any
successor forms thereto).
7.3. Incidental Registration.
(a) Whenever the Company proposes to file a Registration
Statement at any time and from time to time during the Exercise Period
(following the Company's initial public offering of its securities
under the 1933 Act or Regulation A thereunder), except on Forms S-4 or
S-8, it will, prior to such filing, on three occasions give written
notice to all Stockholders of its intention to do so and, upon the
written request of a Stockholder or Stockholders given within twenty
days after the Company provides such notice, the Company shall, subject
to Subsection 7.3(b) hereof, use its best efforts to cause all
Registrable Shares that the Company has been requested by such
Stockholder or Stockholders to register to be registered under the 1933
Act; provided that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this Subsection 7.3
without obligation to any Stockholder, except, in the case of a
registration that is withdrawn, to pay counsel fees and expenses
incurred by the Stockholders in connection with such withdrawn
registration.
(b) If the offering to which the proposed registration under
this Subsection 7.3 relates is to be distributed by or through an
underwriter or underwriters, and if in the opinion of the managing
underwriter the registration of all, or part, of the Registrable Shares
that the Stockholders have requested to be included would materially
and adversely affect such public offering, then the Company shall be
required to include in the underwriting only that number of Registrable
Shares, if any, that the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable
Shares to be included in the underwriting in accordance with the
foregoing is less than the number of shares that the Stockholders have
requested to be included, then the Stockholders who have requested
registration shall participate in the underwriting pro rata based on
their total ownership of Registrable Shares and if any Stockholder
would thus be entitled to include more shares than such Stockholder
requested to be registered, the excess shall be allocated among other
requesting Stockholders pro rata based on their total ownership of
Registrable Shares. By accepting this Warrant, the Holder agrees that
if requested by such underwriter, the Holder and/or its assigns will
sell any Registrable Shares that are subject to the Registration
Statement to or through such underwriters at the same price to be paid
to the Company or other selling stockholders if the Company or other
selling stockholders are offering Common Stock.
(c) In the event that the Company proceeds to register
Registrable Shares pursuant to a request made under this Subsection
7.3, the Holder, if a Stockholder who sells Registrable Shares in such
registered offering, agrees to sign such supplemental agreements as the
Company and/or the managing underwriter shall request, restricting such
Stockholder from selling or offering for sale any Registrable Shares
(other than those being sold pursuant to the Registration Statement)
for a period of up to ninety days after the effective date of such
Registration Statement, provided that all officers, directors, and
5-percent-or-greater shareholders also sign such agreements. The
Company may impose stop-transfer instructions with respect to the
Registrable Shares subject to the foregoing restriction until the end
of the required period.
7.4 Exemption From Registration.
Notwithstanding any provision in Subsections 7.2 and 7.3 of this
Warrant, the Company shall not be required to cause a Registration Statement to
be filed with respect to any Registrable Shares, if at the time of the Company's
receipt of a request to register Registrable Shares, the entire number of
Registrable Shares proposed to be sold by the requesting Stockholders may be
sold by them, in the manner proposed by them, pursuant to Rule 144 promulgated
under the 1933 Act (or any successor rule) (Rule 144) within not more than
ninety days from the date of such receipt (based on the number of shares of
Common Stock outstanding on the date of such opinion and the average weekly
trading volume for such Common Stock for the four weeks preceding the date of
such receipt, if applicable).
7.5 Registration Procedures.
If and whenever the Company is required by Subsection 7.2 or 7.3 of
this Warrant to use its best-efforts to effect the registration of any of the
Registrable Shares under the 1933 Act, the Company shall:
(a) File with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause
that Registration Statement to become and remain effective;
(b) As expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement
and the prospectus included in the Registration Statement as may be
necessary to keep the Registration Statement effective for a period
sufficient to effect the sale of the Registrable Securities, but in any
event not more than ninety days from the effective date;
(c) As expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the requirements
of the 1933 Act, and such other documents as the selling Stockholder
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by the selling Stockholder;
(d) As expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration
Statement under the securities or Blue Sky laws of such states or
jurisdictions as the managing underwriter deems appropriate, and do any
and all other acts and things that may be necessary or desirable to
enable the selling Stockholder to consummate the public sale or other
disposition in such jurisdictions of the Registrable Shares owned by
the selling Stockholder; provided, however, that the Company shall not
be required in connection with this Subsection 7.5 to qualify as a
foreign corporation or execute a general consent to service of process
in any jurisdiction; and
(e) Enter into an underwriting agreement with the underwriters
designated pursuant to Subsection 7.8 hereof containing customary terms
including representations, covenants, indemnification, and contribution
provisions.
If the Company has delivered preliminary or final prospectuses to a
selling Stockholder and, after having done so, the prospectus must be amended to
comply with the requirements of the 1933 Act, the Company shall promptly notify
the selling Stockholder and, by accepting this Warrant, the Holder agrees to
cease making offers of Registrable Shares immediately upon such request and to
return all prospectuses to the Company. The Company shall promptly provide the
selling Stockholder with revised prospectuses and, following receipt of the
revised prospectuses the selling Stockholder shall be free to resume making
offers of the Registrable Shares.
By accepting this Warrant, the Holder and/or its assigns agree not to
participate in a registration unless such Stockholder (a) completes and executes
all questionnaires, indemnities, underwriting agreements, and other documents
required under the terms of any underwriting arrangement relating to such
registration or under any applicable rules and regulations of the Commission and
(b) provides to the Company in writing such information as the Company may
reasonably require from such Stockholder (i) for inclusion in the Registration
Statement relating to such registration, (ii) describing the manner and
circumstances of the proposed sale or transfer of Registrable Shares by such
Holder, and (iii) to enable the Company to determine if an exemption provided
for in this Warrant from the Company's obligation to file a Registration
Statement may be applicable.
7.6 Allocation of Expenses.
All Registration Expenses incurred in connection with any registration
pursuant to this Section 7 shall be borne by the Company, and all Selling
Expenses shall be borne individually and pro rata by the selling Stockholder(s)
on the basis of the number of their shares so registered; provided, however,
that the Company shall not be required to pay the Registration Expenses of a
selling Stockholder if, as a result of the withdrawal of a request for
registration by such selling Stockholder, the registration statement does not
become effective, in which case such selling Stockholder shall bear his own
Registration Expenses pro rata on the basis of the number of shares so included
in the registration request (except for the fees of any counsel for the selling
Stockholders, which shall be borne only by the persons whom such counsel
represented, pro rata on the basis of the number of their shares so included in
the registration request).
7.7 Indemnification.
(a) In the event of any registration of any of the Registrable Shares
under the 1933 Act pursuant to this Warrant, the Company will indemnify and hold
harmless the seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such seller or
underwriter within the meaning of the 1933 Act against any losses, claims,
damages, or liabilities, joint or several, to which such seller, underwriter, or
controlling person may become subject under the 1933 Act, or otherwise, insofar
as such losses, claims, damages, or liabilities, or actions in respect thereof,
arise out of or are based on any untrue statement or alleged untrue statement of
any material fact contained in any Registration Statement under which such
Registrable Shares were registered under the 1933 Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based on the omission or alleged omission of a material fact or facts required
to be stated therein or necessary to make the statements therein not misleading;
and the Company will reimburse such seller, underwriter, and each such
controlling person for any legal or any other expenses reasonably incurred by
such seller, underwriter, or controlling person in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability, or action arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission made in
such Registration Statement, preliminary prospectus, or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by or
on behalf of such seller, underwriter, or controlling person specifically for
use in the preparation thereof.
(b) By accepting this Warrant, the Holder agrees that in the event of
any registration of any of the Holder's and/or its assigns' Registrable Shares
under the 1933 Act, such Stockholder will indemnify and hold harmless the
Company, each of its directors and officers, each legal counsel and independent
accountant of the Company, each underwriter (if any) of the Company's
Registrable Shares covered by any Registration Statement, and each person, if
any, who controls the Company or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages, or liabilities, joint or several,
to which the Company or any such director and officer, underwriter, or
controlling person may become subject under the 1933 Act, insofar as such
losses, claims, damages, liabilities, or actions in respect thereof arise out of
or are based on any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the 1933 Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based on any
omission or alleged omission of a material fact or facts required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, and each such director and officer, underwriter, and
controlling person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage,
liability, or action, in each case to the extent, but only to the extent, that
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such Holder,
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment, or supplement.
(c) Each party entitled to indemnification under this Subsection 7.7
(Indemnified Party) shall give notice to the party required to provide
indemnification (Indemnifying Party) promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense. The failure of any Indemnified
Party to give notice as provided herein shall relieve the Indemnifying Party of
its obligations under this Subsection 7.7 only if such failure is prejudicial to
the ability of the Indemnifying Party to defend such action, and such failure
shall in no event relieve the Indemnifying Party of any liability that it may
have to any Indemnified Party otherwise than under this Subsection 7.7. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d)(1) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 7.7 is
for any reason held, by a court of competent jurisdiction, to be unenforceable
as to any party entitled to indemnity, the Company shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted) to which
the holder hereof, or of the common stock purchased upon exercise hereof, or any
controlling person of the foregoing may be subject in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and
of such holders or controlling persons on the other, in connection with the
statements or omissions which resulted in such loss, claim, damage, liability or
expense, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and of the holder hereof or such holder's
controlling person on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by the holder or controlling person
on the other, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
(d)(2) The Company and the holder hereof agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
actually and reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act), or guilty of misstating or misrepresenting a material fact or failing to
state a material fact shall be entitled to contribution, as to any liability
arising from such fraudulent misrepresentation or omission from any person who
was not guilty of such fraudulent misrepresentation or omission.
7.8 Designation of Underwriter.
The Company shall have the right to designate the managing underwriter,
which underwriter shall be an investment banking firm having an established
reputation.
7.9 Amendments.
The provisions of this Section 7 may be modified or amended at any time
and from time to time by an agreement or consent in writing executed by the
Company and the holders of at least a majority of the Registrable Shares,
excluding any Registrable Shares than have been publicly sold prior thereto.
7.10 Rule 144 Requirements.
The Company shall undertake to make publicly available, pursuant to
Rule 144 of the Commission under the 1933 Act, such information as is necessary
to enable the Stockholders to make sales of Registrable Shares pursuant to that
Rule.
Section 8 Adjustments
8.1 Adjustment of the Exercise Price for Stock Splits, Reverse Stock
Splits, and Stock Dividends. In the event that the outstanding shares of Common
Stock shall be subdivided (split), combined (reverse split), by reclassification
or otherwise, or in the event of any dividend payable on the Common Stock in
shares of Common Stock, the applicable Exercise Price and the number of shares
of Common Stock available for purchase in effect immediately prior to such
subdivision, combination, or dividend shall be proportionately adjusted.
8.2 Adjustment for Capital Reorganizations, Dividends. If at any time
there shall be a capital reorganization of the Company's Common Stock or a
merger, exchange of shares, or consolidation of the Company with or into another
corporation, or the sale of the Company's properties and assets as, or
substantially as, an entirety to any other person, or if the Company shall
declare a dividend payable in securities or property (other than in cash or
Common Stock) then, as part of such reorganization, merger, exchange of shares,
consolidation, sale or dividend, lawful and adequate provision shall be made so
that the Holder of this Warrant shall thereafter be entitled to receive, on
exercise of this Warrant during the period specified in this Warrant and on
payment of the Exercise Price then in effect, the number of shares of stock or
other securities or property of the Company, or of the successor corporation
resulting from such merger, exchange of shares, or consolidation, to which a
holder of the Common Stock deliverable on exercise of this Warrant would have
been entitled on such capital reorganization, merger, exchange of shares,
consolidation, sale, or dividend if this Warrant had been exercised immediately
before that capital reorganization, merger, exchange of shares, consolidation,
sale, or dividend. In any such case, appropriate adjustment, as determined in
good faith by the Board, shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the Holder of this
Warrant after the reorganization, merger, exchange of shares, consolidation,
sale, or dividend to the end that provisions of this Warrant (including
adjustment of the Exercise Price then in effect and the number of shares
purchasable on exercise of this Warrant, but without any change in the aggregate
Exercise Price) shall be applicable after that event, as near as reasonably may
be, in relation to any shares or other securities or property deliverable after
that event on exercise of this Warrant.
8.3 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 8, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any Holder, furnish or cause to be furnished to such
Holder, a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares of Common Stock and the amount, if any, of other property that
at the time would be received upon the exercise of the Warrant.
8.4 Notices of Record Date. In the event of any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receiving any dividend
(other than a cash dividend that is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to each Holder at least
ten days prior to the date specified for the taking of a record, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
Section 9 Sale or Transfer of the Warrant; Legend
The Warrant, and any shares of Common Stock of the Company purchased
upon exercise of the Warrant, shall not be sold or transferred unless either (i)
they first shall have been registered under the 1933 Act, or (ii) the Company
first shall have been furnished with an opinion of legal counsel reasonably
satisfactory to the Company to the effect that such sale or transfer is exempt
from the registration requirements of the 1933 Act. Each certificate
representing any Warrant and any such share that has not been registered and
that has not been sold pursuant to an exemption that permits removal of the
legend shall bear a legend substantially in the form appearing on the first page
of this Warrant. For twelve months from date, this warrant is not transferable
except to officers of the Holder.
Upon the request of a holder of a certificate representing any Warrant
or any such share, the Company shall remove the foregoing legend from the
certificate or issue to such holder a new certificate therefor free of any
transfer legend, if, with such request, the Company shall have received either
(i) an opinion of counsel reasonably satisfactory to the Company to the effect
that such legend may be removed from such certificate or (ii) if the present
Paragraph (k) of Rule 144 or a substantially similar successor rule remains in
force and effect, representations from the holder that such holder is not then,
and has not been during the preceding three months, an affiliate of the Company
and that such holder has beneficially owned the security (within the meaning of
Rule 144) for three years or more.
Such Warrant and shares may be subject to additional restrictions on
transfer imposed under applicable state and federal securities law.
Section 10 Additional Right to Convert Warrant
(a) The holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time it is
exercisable, but prior to its expiration, into shares of Common Stock as
provided for in this Section 10. Upon exercise of the Conversion Right, the
Company shall deliver to the holder (without payment by the holder of any
Warrant Exercise Price) that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the value of the Warrant at the time the
Conversion Right is exercised (determined by subtracting the aggregate Warrant
Exercise Price for the Warrant Shares in effect immediately prior to the
exercise of the Conversion Right from the aggregate Fair Market Value for the
Warrant Shares immediately prior to the exercise of the Conversion Right) by (y)
the Fair Market Value of one share of Company Common Stock immediately prior to
the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the holder, at any time or
from time to time, prior to its expiration, on any business day by delivering a
written notice in the form attached hereto (the "Conversion Notice") to the
Company at the offices of the Company exercising the Conversion Right and
specifying (i) the total number of shares of Stock the Holder will purchase
pursuant to such conversion and (ii) a place and date is not less than one or
more than 20 business days from the date of the Conversion Notice for the
closing of such purchase.
(c) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the warrant and (ii) the Company will deliver to the Holder a
certificate or certificates for the number of shares of Company Common stock
issuable upon such conversion, together with cash, in lieu of any fraction of a
share, and (iii) the Company will deliver to the Holder a new warrant
representing the number of shares, if any, with respect to which the warrant
shall not have been exercised.
(d) Fair Market Value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") or the NASDAQ National Market System,
then the average closing or last sale prices, respectively reported for
the ten (10) business days immediately preceding the Determination
Date, and
(ii) If the Company's Common Stock is not traded on an
exchange or is quoted on an exchange or on NASDAQ or the NASDAQ
National Market System but is traded on the over-the counter market,
then the average closing bid and asked prices reported for the ten (10)
business days immediately preceding the Determination Date, and
(iii) If the Company's Common Stock is not traded on the
over-the-counter market, then the Fair Market Value as determined
reasonably and in good faith by the Company's Board of Directors.
Section 11 Loss, Theft, Destruction, or Mutilation of Warrant
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction, or mutilation of this Warrant, and in case of
loss, theft, or destruction of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation in lieu of this Warrant.
Section 12 Saturdays, Sundays, Holidays, Etc.
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday or a
Sunday or shall be a legal holiday, then such action may be taken or such right
may be exercised on the next succeeding day that is not a legal holiday.
Section 13 Authorized Shares
The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
exercise of any purchase rights under this Warrant.
Section 14 Issue Date
The provisions of this Warrant shall be construed and shall be given
effect in all respects as if it had been issued and delivered by the Company on
the date hereof. This Warrant shall be binding upon any successors or assigns of
the Company.
Section 15 Governing Law
This Warrant shall constitute a contract under the laws of the state of
Minnesota and for all purposes shall be construed in accordance with and
governed by the laws of said state.
IN WITNESS WHEREOF, SAC Technologies, Inc. has caused this Warrant to
be executed by its duly authorized officer.
Dated as of ___________________, 199_
SAC TECHNOLOGIES, INC.
By: _____________________________
Chief Executive Officer
NOTICE OF EXERCISE
To: SAC Technologies, Inc.
1. Pursuant to the terms of the attached Warrant, the undersigned hereby elects
to purchase ______________ shares of Common Stock of SAC Technologies, Inc. (the
"Company"), and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares o
Common Stock, in the name of the undersigned or in such other name(s) as
is/are specified immediately below or, if necessary, on an attachment
hereto: [List names and addresses.]
3. In the event of partial exercise, please reissue an appropriate Warrant
exercisable into the remaining shares to the undersigned.
4. The undersigned represents that such shares shall not be sold or transferred
unless either (a) they first shall have been registered under the Securities Xxx
0000 and applicable state law or (b) the Company first shall have been furnished
with an opinion of legal counsel reasonably satisfactory to the Company to the
effect that such sale or transfer is exempt from the foregoing registration
requirements. The undersigned consents to a legend imprinted on certificates
representing the shares purchased hereby noting the foregoing restrictions.
Date: ___________________
______________________________________
Signature of Warrant Holder
______________________________________
Name of Warrant Holder
NOTICE OF ASSIGNMENT
To: SAC Technologies, Inc.
1. The undersigned hereby assigns the right to purchase the common
stock of SAC Technologies, Inc. represented by the attached Warrant:
[ ] in whole, or
[ ] for ________________ shares,
to:
________________________________________
Name
________________________________________
Street Address
________________________________________
City, State, Zip Code
________________________________________
Social Security or Tax ID Number
(attach additional sheets for further assignees)
2. In the event of partial assignment, please reissue an appropriate
Warrant exercisable into the remaining shares to the undersigned.
Date: ___________________
________________________________________
Signature of Warrant Holder
________________________________________
Name of Warrant Holder
LOCKUP AGREEMENT
TUSCHNER & COMPANY, INC.
One Financial Plaza
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Re: SAC Technologies, Inc.
Ladies and Gentlemen:
The undersigned, a beneficial owner of common stock par value $.01 per
share (the "Common Stock") of SAC Technologies, Inc. (the "Company"),
understands that the Company intends to file or has filed with the Securities
and Exchange Commission a registration statement on Form SB-2 (the "Registration
Statement") for the registration of 1,100,000 shares, (plus up to an additional
110,000 share subject to the Underwriter's over-allotment option) (the
"Shares"). The undersigned further understands that the Company, as issuer, and
Tuschner & Company, Inc. (the "Underwriter") contemplates entering into an
underwriting agreement in connection with the public offering of the Shares by
the Underwriter.
In order to induce the Underwriter to proceed with the public offering,
the undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated, the undersigned will not, without
the prior written consent of the Underwriter, during the (1) year period
commencing on the effective date of the Registration Statement:
(i) sell, pledge, hypothecate, transfer or otherwise dispose of, or
agree to sell, pledge, hypothecate, transfer or otherwise dispose of
any shares of Common Stock of the Company beneficially held by the
undersigned, whether such shares are held on such effective date or
thereafter acquired;
(ii) sell, pledge, hypothecate, transfer or otherwise dispose of, or
agree to sell, pledge, hypothecate, transfer or otherwise dispose of
any options, rights or warrants to purchase shares of Common Stock of
the Company beneficially held by the undersigned, whether such options,
rights or warrants are held on such effective date or thereafter
acquired; or
(iii) sell or grant, or agree to sell or grant, options, rights or
warrants with respect to any such shares of Common Stock;
other than by gifts to donees who agree in writing to be bound by the same
restriction, or by will or the laws of descent.
Dated: Very truly yours,
Print Name:_____________________________
