AGENCY AGREEMENT
September___, 2002
U.S. Bancorp Xxxxx Xxxxxxx Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Ladies and Gentlemen:
Illinois River Energy, LLC, a Delaware limited liability company (the
"COMPANY") hereby confirms its agreement with you with respect to the Company's
offer and sale of up to an aggregate of 45,000,000 of the Company's Class A
units and Class B units (collectively, the "UNITS"). The Company desires to
increase the capital of the Company in the minimum amount of $25,000,000 and a
maximum amount of $45,000,000 by the sale of the Units (the "OFFERING"). The
subscribers therefor, each of whom will be named in a subscription agreement
substantially similar to the form of subscription agreement attached as an
exhibit to the Prospectus hereinafter referred to (the "SUBSCRIPTION
AGREEMENT"), and by which all such subscribers will be bound, will, at the
election of and sole discretion of the Company, become unitholders
("UNITHOLDERS") of the Company. Pursuant to the terms and conditions hereof, the
Company desires to appoint you as the exclusive third-party selling agent (the
"AGENT") of the Offering. Agent understands and agrees that certain of the
officers and directors of the Company will also offer and sell the Units in
accordance with the terms and conditions hereof.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with, you as of
the date hereof as follows:
(i) A registration statement on Form SB-2 (File No.
333-96977) and a related preliminary prospectus with respect to the
Units have been prepared and filed with the Securities and Exchange
Commission ("COMMISSION") by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "ACT"), and
the rules and regulations of the Commission thereunder (the
"REGULATIONS"), and the Company has so prepared and has filed such
amendments thereto, if any, and such amended preliminary prospectuses
as may have been required to the date hereof and will file such
additional amendments thereto and such amended prospectuses as may
hereafter be required. There have been or will promptly be delivered to
you a conformed copy of such registration statement and amendments and
a copy of each exhibit filed therewith.
Such registration statement (as amended, if applicable) at the
time it becomes effective and the prospectus constituting a part
thereof (including the information, if any, deemed to be part thereof
pursuant to Rule 430A(b)), as from time to time amended or
supplemented, are hereinafter referred to as the "REGISTRATION
STATEMENT," and the "PROSPECTUS," respectively, except that if any
revised prospectus shall be provided to the Agent by the Company for
use in connection with the offering of the Units which differs from the
Prospectus on file at the Commission at the time the Registration
Statement became or becomes effective shall be deemed to be part of the
"Registration Statement" as defined herein, and any prospectus
(including any amendment or supplement thereto or information which is
deemed part thereof) included in such registration statement shall be
deemed to be part of the "Prospectus," as defined herein, as
appropriate. The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder are hereinafter
collectively referred to as the "EXCHANGE ACT."
(ii) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus, and each preliminary
prospectus has conformed in all material respects with the requirements
of the Act and, as of its date, has not included any untrue statement
of a material fact or omitted to state a material fact necessary to
make the statements therein not misleading; and when the Registration
Statement became or becomes effective, and at all times subsequent
thereto, up to the Minimum Subscription Date (as defined in Section
2(e) hereof) and each Issuance Date (as defined in Section 2(f)
hereof), as the case may be, the Registration Statement, including the
information deemed to be part of the Registration Statement at the time
of effectiveness pursuant to Rule 430A(b), if applicable, and the
Prospectus and any amendments or supplements thereto, contained or will
contain all statements that are required to be stated therein in
accordance with the Act and in all material respects conformed or will
in all material respects conform to the requirements of the Act, and
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, included or will include any untrue
statement of a material fact or omitted or will omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(iii) The Company will not at any time hereafter file any
amendments to the Registration Statement or in accordance with Rule
424(b) of the Regulations of which the Agent shall not have been
previously advised in advance of filing or to which the Agent shall
reasonably object in writing.
(iv) The Company has not sustained since the date of the
latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any
material change in the capitalization or long-term debt of the Company
or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, unitholders' equity or results
of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus.
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(v) The Company is, and at the Minimum Subscription Date, and
each subsequent Issuance Date will be, duly formed and validly existing
as a limited liability company in good standing under the laws of
Delaware, with power and authority to own or lease its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign limited liability company for the transaction of
business and is and will be in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification (except where the
failure to be so licensed or qualified would not, individually or in
the aggregate, have a material adverse effect on the financial
condition, results of operations or business of the Company or subject
the Company, its unitholders or its members to any material liability
or disability (a "MATERIAL ADVERSE EFFECT"). The Company was organized
for the purpose of the transactions contemplated herein and in the
Prospectus. Except as described in the Prospectus, the Company has not
engaged in any business activities other than in connection with its
organization and the transactions contemplated herein. Complete and
correct copies of the Certificate of Formation and the First Amended
and Restated Limited Liability Company Agreement (the "LLC AGREEMENT")
of the Company have been delivered to the Agent and are each included
as an appendix to the Prospectus.
(vi) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued equity securities of the
Company have been duly and validly authorized and issued and are fully
paid and (except as required to the contrary by the Delaware Limited
Liability Company Act) non-assessable and conform in all material
respects to the descriptions thereof in the Prospectus.
(vii) The Units have been duly and validly authorized and, when
issued and delivered against payment therefore as provided in this
Agreement and the Prospectus, will be duly and validly issued and fully
paid and (except as non-assessability may be affected by the Delaware
Limited Liability Company Act) non-assessable and will conform to the
descriptions thereof contained in the Prospectus.
(viii) The issue and sale of the Units by the Company, the
execution of, and the compliance by the Company, with all of the
applicable provisions of this Agreement and the Financial Services
Agreement (all as described in the Prospectus) and the consummation of
the transactions contemplated herein, therein and in the Prospectus
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is
bound or to which any of the property or assets of the Company is
subject; nor will such action result in any violation of the provisions
of any of the formation or governing documents, including the LLC
Agreement, of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of the properties of the Company;
and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Units or the consummation of
the transactions contemplated by this Agreement or the Prospectus,
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except the registration under the Act as described in Section 1(a)
herein and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or "blue sky"
laws in connection with the offer and sale of the Units as contemplated
by this Agreement and the Prospectus.
(ix) The Company is not (A) in violation of its formation or
governing documents, including the LLC Agreement, or (B) in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound.
(x) The statements set forth in the Prospectus under the
captions "Description of Units and First Amended and Restated Limited
Liability Company Agreement," insofar as they purport to constitute a
summary of the terms of the Units, and under the captions "Description
of Units and First Amended and Restated Limited Liability Company
Agreement," "Federal Income Tax Consequences of Owning Our Units" and
"Plan of Distribution," insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair in all material respects.
(xi) Boulay, Heutmaker, Xxxxxx & Co. P.L.L.P., who have
certified certain financial statements and schedules of the Company
included in the Prospectus, are independent public accountants as
required by the Act and the Regulations.
(xii) The financial statements and schedules of the Company
included in the Registration Statement present fairly the financial
position of the Company as of the respective dates of such financial
statements, and the results of operations and cash flows of the Company
for the respective periods covered thereby, all in conformity with
accounting principles generally accepted in the United States of
America consistently applied throughout the periods involved; and the
supporting schedules included in the Registration Statement present
fairly the information required to be stated therein. The financial
information set forth in the Prospectus under "Selected Financial Data"
presents fairly on the basis stated in the Prospectus, the information
set forth therein.
(xiii) The projections disclosed under "Prospectus Summary,"
"Management's Plan of Operation" and "Business - Ethanol Industry" in
the Prospectus, with respect to both the Company's operations and the
ethanol industry, are based on the sources disclosed therein, are
properly summarized, if so summarized from the identified sources, and,
in the opinion of the Company, the assumptions used in the preparation
thereof are reasonable and appropriate; the PRO FORMA financial
information disclosed under "Selected Financial Data" in the Prospectus
have been properly complied on the PRO FORMA basis described therein
and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate under the circumstances.
(xiv) The Company (A) makes and keeps accurate books and
records and (B) maintains internal accounting controls which provide
reasonable assurance that
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(1) transactions are executed in accordance with management's
authorization, (2) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability
for its assets, (3) access to its assets is permitted only in
accordance with management's authorization, and (4) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(xv) The Company is a "small business issuer" as such term is
defined in Rule 405 under the Act.
(xvi) The Company has all of the necessary limited liability
company power and authority to enter into this Agreement and consummate
the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company. This Agreement
constitutes a valid and binding agreement of the Company.
(xvii) The Company maintains insurance (issued by insurers of
recognized financial responsibility) of the types and in the amounts
generally deemed adequate for its businesses and, to the knowledge of
the Company, consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by it
against theft, damage, destruction, acts of vandalism, environmental
violations or liabilities and all other risks customarily insured
against, all of which insurance is in full force and effect.
(xviii) To the Company's knowledge, with limited inquiry, there
has been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, medical wastes,
hazardous wastes or hazardous substances by the Company (or, to the
knowledge of the Company, its predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the
Company in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any regulation, order, judgment, decree or
permit; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or
into the environment surrounding such property of any toxic wastes,
medical wastes, solid wastes, hazardous wastes or hazardous substances
due to or caused by the Company or with respect to which the Company
has knowledge; the terms "hazardous wastes," "toxic wastes," "hazardous
substances," and "medical wastes" shall have the meanings specified in
any applicable local, state, federal and foreign laws or regulations
with respect to environmental protection.
(xix) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
and prior to the Minimum Subscription Closing Date, and each subsequent
Issuance Date, except as otherwise may be specifically described,
indicated or contemplated therein, the Company will not have (A) issued
any securities or incurred any material liability or obligation, direct
or contingent, or borrowed money, except borrowings in the ordinary
course of business from the same or similar sources and in similar
amounts as indicated in the Prospectus, or
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(B) entered into any transaction or series of transactions which is
material in light of the business of the Company.
(xx) The Company is not involved in any labor dispute and, to
the knowledge of the Company, no such dispute has been threatened,
except for such disputes as would not have a Material Adverse Effect.
(xxi) To the Company's knowledge, the Company is not in
violation or default of any statute, law, rule, regulation, judgment,
order or decree of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or any of its properties, as applicable.
(xxii) The Company has or will seek to obtain all licenses,
permits, franchises, or other governmental authorization necessary for
the ownership and operation of an ethanol plant and to the conduct of
its business generally.
(xxiii) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against or affecting
the Company which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might result in
any material adverse change in the financial condition, results of
operations or business affairs of the Company; all pending legal or
governmental proceedings to which the Company is a party or of which
any of its respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to its business, are considered in the aggregate
not material; and there are no contracts or documents of the Company
which are required to be described in or filed as exhibits to the
Registration Statement which have not been so described or filed.
(xxiv) The Company has not received a determination from the
Internal Revenue Service, but to its knowledge is qualified and at all
times through the Offering Termination Date, as defined in Section 2
hereof, will qualify for treatment as a partnership for Federal income
tax purposes under current interpretations of the Internal Revenue Code
of 1986, as amended, and regulations thereunder.
(xxv) On the date hereof, and at all times through the Offering
Termination Date, defined in Section 2 hereof, the Company is not, and
does not intend to conduct its business in a manner in which it would
become, an "investment company" as defined in Section 3(a) of the
Investment Company Act of 1940, as amended.
(xxvi) The Company has filed all federal income and state and
local franchise tax returns required to be filed and have made timely
payments of all taxes shown as due and payable in respect of such
returns, and no deficiency has been asserted with respect thereto by
any taxing authority.
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(b) Any certificate signed by any officer of the Company and delivered
to you or your counsel shall be deemed a representation and warranty by the
Company to you as to the matters covered thereby.
SECTION 2. OFFERING AND SALE OF UNITS.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, you
are hereby appointed the selling agent of the Company during the term herein
specified (the "OFFERING PERIOD") for the purpose of finding subscribers for the
Units for the account and risk of the Company through a public offering, and
subject to the performance by the Company of all of its obligations to be
performed hereunder and to the completeness and accuracy of all the
representations and warranties contained herein, you hereby accept such agency
and agree on the terms and conditions herein set forth to use commercially
reasonable efforts during the Offering Period to find subscribers for the Units
at a public offering price of $1.00 per Unit, each investor being required to
subscribe for at least 5,000 Class A Units or, if purchasing Class B Units, each
investor being required to be an Accredited Investor (as defined in the
Subscription Agreement) and being required to subscribe for at least 1,000,000
Class B Units.
The Offering Period will terminate on December 15, 2002, unless
extended to March 31, 2003 by the board of managers of the Company (either
December 15, 2002 or such later date, as applicable, the "OFFERING TERMINATION
DATE"). At all times during the Offering Period you shall follow the procedures
set forth in this Section 2.
(b) Signature pages to the Subscription Agreement and the LLC Agreement
(the Subscription Agreement together with the LLC Agreement are hereinafter
referred to as the "SUBSCRIPTION DOCUMENTS") must be completed by or on behalf
of each person desiring to purchase Units in form and substance satisfactory to
the Company. You shall ascertain that the signature pages to the Subscription
Documents sent in by or on behalf of a prospective purchaser of Units have been
properly completed and executed. You shall return the Subscription Documents
together with a check (in the amount or amounts required by paragraph (a) above)
payable to First Midwest Bank (the "BANK") with respect to the Company at
Illinois River Energy, LLC, 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxx, 00000.
You will comply with the requirements of Rule l5c2-4 of the Securities
Exchange Act of 1934, as amended and any applicable state law or regulation
applicable to your efforts in the Offering.
(c) You agree to retain in your records and make available to us, for a
period of at least four years after the Offering Termination Date, information
establishing that each purchaser of the Units pursuant to a Subscription
Agreement solicited by you is within the permitted class of investors under the
requirements, if any, of the jurisdiction in which such purchaser is a resident,
and that investment in the Company is appropriate for each such purchaser's
investment objectives and financial situation. In addition, you agree that you
shall be responsible for determining that each purchaser of Units pursuant to a
Subscription Agreement solicited by you
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meets the suitability requirement for investors contained in the Prospectus and
you agree to retain records evidencing such compliance with the suitability
requirement for each investor.
(d) The Company, upon receipt of the aforementioned signature pages to
the Subscription Documents, will determine as soon as practicable (but in no
event more than 30 days after receipt) whether it expects to accept the proposed
purchaser as a Unitholder in the Company, it being understood that the Company
reserves the right to reject the tender of any signature pages to the
Subscription Documents and to reject all tenders after all of the Units have
been sold. The Company, at its sole discretion, will determine if such
Subscription Documents have been properly completed and executed. Should the
Company determine to accept the tender of the signature pages to the
Subscription Documents, the Company will promptly advise you of such action.
Should the Company determine to reject the tender of the signature pages to the
Subscription Documents, it will promptly notify you in writing (and, if the
Company elects, the prospective purchaser), of such determination, and will
promptly cause the return of the tendered signature pages to the Subscription
Documents and payment of the purchase price of the Units directly to you or to
the prospective purchaser.
(e) "MINIMUM SUBSCRIPTION DATE" as used herein shall mean the date, no
later than December 15, 2002 (unless extended to March 31, 2003 by the board of
managers of the Company, then no later than March 31, 2003), on which the
Company and the Bank shall notify you in writing that subscriptions and payments
for an aggregate of at least 25,000,000 Units shall have been received and
accepted by the Company. "MINIMUM SUBSCRIPTION CLOSING DATE" as used herein
shall mean the first full business day following the Minimum Subscription Date
or such day thereafter as shall be mutually agreed upon by you and the Company.
(f) In the event the offering is commenced and subscriptions for at
least 25,000,000 Units shall not have been received by the Offering Termination
Date, all funds received from subscribers (if any) shall be returned by the Bank
to the subscribers in full, without deduction of any escrow or other fees and
expenses but with any interest earned thereon being delivered to the Company. If
at least 25,000,000 Units have been subscribed and paid for and accepted by the
Company no later than the Offering Termination Date, then on the Minimum
Subscription Closing Date, the Bank shall make payment to the Company of 10% of
the purchase price for each Unit subscribed and paid for and accepted by the
Company, and the Company shall issue 10% of the Units subscribed and paid for
and accepted by the Company to each purchaser. At periodic intervals thereafter,
to be mutually agreed upon by you and the Company during the Offering Period,
dates shall be established on which the Bank shall make additional payments to
the Company of 10% of the purchase price for each Unit subscribed and paid for
and accepted by the Company after the Minimum Subscription Date (or after a
prior Issuance Date, if applicable), and the Company shall issue 10% of the
Units subscribed and paid for and accepted by the Company to each additional
purchaser (each, an "ISSUANCE DATE"). On or following the Minimum Subscription
Closing Date, if the Company receives an executed commitment letter from a bank
or suitable financial institution for the amount of debt financing that the
Company needs (the "FINANCING COMMITMENT"), then the Bank shall make payment to
the Company of the remaining 90% of the purchase price for each Unit subscribed
and paid for and accepted by the Company, and the Company shall issue 90% of the
Units subscribed and paid for and accepted by the Company to each purchaser (an
"ISSUANCE DATE"). If the Company has not received the
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Financing Commitment prior to the Offering Termination Date, then 90% of each
subscriber's purchase price shall be returned by the Bank to the subscribers,
with any interest earned thereon being delivered to the Company.
(g) As consideration for your services, your compensation will be
paid to you as follows:
(i) If at least 25,000,000 of the Units are subscribed for and
the required payments and Unit issuances are made at the Minimum
Subscription Closing Date and all conditions precedent hereunder to
the obligations of you and the Company are satisfied on the Minimum
Subscription Closing Date, you will be paid a commission of 1.50% of
the purchase price of a Unit on each Unit issued on the Minimum
Subscription Closing Date, which commission is due and payable on such
date;
(ii) After the Minimum Subscription Closing Date, you will be
paid at each subsequent Issuance Date a commission of 1.50% of the
purchase price of a Unit on each Unit issued on such Issuance Date,
which commission is due and payable on such date;
(iii) At the time of the "FINANCIAL CLOSE," as such term is
defined in the Financial Services Agreement dated July 23, 2002
between the Company and U.S. Bancorp Xxxxx Xxxxxxx, you will be paid a
commission of 1.75% of the purchase price of a Unit on each Unit
issued in the Offering; and
(iv) In addition to the compensation set forth above, upon
Successful Commissioning of the Ethanol Plant you will be paid a
commission of .25% of the aggregate purchase price of all Units issued
during the Offering Period, which commission is due and payable in
nine monthly installments on the first day of each month beginning on
the first day of the first month following the Successful
Commissioning of the Ethanol Plant. "SUCCESSFUL COMMISSIONING" shall
mean production of ethanol meeting design specifications on a daily
basis of nameplate production and all production meets guarantees
provided by engineers and contractors.
Such commissions and expense allowance shall be paid to you by a
Company check.
(h) Subscriptions for Units may be solicited by one or more dealers
(the "SOLICITING DEALERS") and sales by Soliciting Dealers shall be made under a
Soliciting Dealer Agreement in the form agreed to by you and the Soliciting
Dealer. Pursuant to any Soliciting Dealer Agreements, you will reallow each
Soliciting Dealer a concession in an amount agreed upon by you and the
Soliciting Dealer with respect to each Unit sold by the Company pursuant to a
Subscription Agreement solicited by such Soliciting Dealer, subject to the terms
and conditions set forth in Section 2(g).
(i) Except as disclosed in the Prospectus and the finders' arrangements
specifically described therein, neither you, the Company, nor any dealer
participating in the offering of the Units shall, directly or indirectly, pay or
award any finder's fees, commissions or other compensation to any person engaged
by a potential investor for investment advice as an
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inducement to such advisor to the purchase of Units; PROVIDED, HOWEVER, that
normal sales commissions or payments pursuant to any sales, incentive program
referred to in the Prospectus payable to a registered broker-dealer or other
properly licensed person for selling Units shall not be prohibited hereby.
(j) You agree that you will not disseminate or publish any
advertisement relating to your solicitation of subscribers for the Units
(including, without limitation, any advertisement relating to seminars) (i) the
form of which has not been submitted to the NASD by you and (ii) that has not
been approved by the Company.
SECTION 3. COVENANTS OF THE COMPANY.
The Company covenants with you as follows:
(a) It will notify you immediately and confirm the notice in
writing (i) when the Registration Statement and any amendment thereto
shall have become effective, (ii) of the receipt of any comments from
the Commission with respect to the Registration Statement, (iii) of any
request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information relating thereto, and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any proceedings for that purpose. The
Company will make every reasonable effort to prevent the issuance by
the Commission of any stop order and, if any such stop order shall at
any time be issued, to obtain the lifting thereof at the earliest
possible moment.
(b) It will give you notice of its intention to file or
prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes
for use by the Agent in connection with the offering of the Units which
differs from the prospectus on file at the Commission at the time the
Registration Statement became or becomes effective, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b)) and
will furnish you with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the
case may be, and will not file any such amendment or supplement or use
any such prospectus to which you shall reasonably object in writing.
(c) It will deliver to you, as soon as available, one signed
copy of the Registration Statement as originally filed and of each
amendment thereto and one set of exhibits thereto.
(d) It will deliver to you from time to time, before the
Registration Statement becomes effective, such number of copies of the
Registration Statement as originally filed and any amendments thereto
and as soon as the Registration Statement initially becomes effective
and thereafter from time to time during the period when the Prospectus
is required to be delivered under the Act, such number of copies of the
Prospectus (as amended or supplemented) as you may reasonably request
for the purposes contemplated
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by the Act or the Regulations, and such number of copies of the
Subscription Agreement and the LLC Agreement as you may reasonably
request.
(e) During the period when the Prospectus is required to be
delivered pursuant to the Act, the Company will comply, so far as it is
able and at its own expense, with all requirements imposed upon it by
the Act, as now and hereafter amended, and by the Regulations, as from
time to time in force, so far as necessary to permit the continuance of
sales of or dealings in, the Units during such period in accordance
with the provisions herein and as set forth in the Prospectus.
(f) If any event relating to or affecting the Company shall
occur as a result of which it is necessary, in your view, to amend or
supplement the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a subscriber, the Company will forthwith prepare and
furnish to you, without expense to you, a reasonable number of copies
of an amendment or amendments of, or a supplement or supplements to,
the Prospectus (in form and substance satisfactory to you) which amend
or supplement the Prospectus so that as amended or supplemented it will
not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time the Prospectus is
delivered to a subscriber, not misleading. For the purposes of this
Section 3(f), the Company will furnish such information with respect to
themselves as you may from time to time reasonably request.
(g) It will comply with all applicable registration, filing
and reporting requirements of the Exchange Act.
(h) It will endeavor in good faith, in cooperation with you,
to qualify the Units for offering and sale under the applicable
securities or "blue sky" laws of such jurisdictions as you may
designate; PROVIDED, HOWEVER, that the Company shall not be obligated
to file any general consent to service of process or to qualify to do
business or to qualify as a dealer in securities in any jurisdiction in
which it is not so qualified. It will give you notice of any
correspondence received from any state securities commission regarding
the Offering and will give you notice of its intention to file, or
prepare for filing, any materials related to the Offering with any
state securities commission; it will furnish you copies of any of the
foregoing promptly upon receipt or prior to filing, as applicable, and
will not file any such materials to which you shall reasonably object
in writing. In each jurisdiction where the Units shall have been
qualified as above provided, the Company will make and file such
statements and reports in each year as are or may be required by the
laws of such jurisdiction.
(i) It will make generally available to the Company's
security holders (i.e., the holders of Units) as soon as practicable,
but not later than 120 days after the close of the period covered
thereby, an earnings statement of the Company (in form complying with
the provisions of Section 11(a) of the Act and Rule 158 promulgated
thereunder, which need not be certified by independent public
accountants unless required by the Act or the Regulations) covering the
twelve-month period, or such earlier period since the
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Company's inception, beginning not later than the first day of the
Company's fiscal quarter following the effective date of the
Registration Statement. As used in this subsection, the terms
"earnings statement" and "made generally available to the Company's
security holders" shall have the meanings contained in Rule 158
promulgated under the Act.
(j) It will, so long as any Units remain outstanding, furnish
directly to you the following:
(i) as soon as practicable after the end of each
fiscal year, one copy of the Company's annual report,
including therein the accountants' report, the balance sheet,
the related statements of profit and loss and cash flows for
the Company, together with such accountants' comments and
notations with respect thereto in such detail as the Company
may customarily receive from such accountants;
(ii) as soon as practicable after the end of each
fiscal quarterly period, one copy of a balance sheet of the
Company as at the end of such period, setting forth in
reasonable detail its financial position, together with
related statements of profit and loss and cash flows, none of
which statements need be audited, but shall be certified as
correct by the Company;
(iii) copies of any report, application or document
which the Company shall file with the Commission; and
(iv) as soon as the same shall be sent to holders of
Units, each communication which shall be sent to the holders
of Units, including any other annual or interim report of the
Company.
(k) It will deliver to you, from time to time, all
supplemental sales material (whether designated solely for
broker-dealer use or otherwise) proposed to be used or delivered by the
Company in connection with the offering of Units.
(l) It intends to source funds and to use funds in the manner
specified in the Prospectus.
(m) It will use the net proceeds received by it from the
sale of the Units being sold by it in the manner specified
in the Prospectus.
(n) It will maintain adequate books and records setting forth
a true and accurate account of all business transactions arising out of
and in connection with the conduct of the Company. You or your
designated representative shall have the right, at any reasonable time,
to have access to and inspect and copy the contents of such books and
records.
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SECTION 4. COVENANTS OF U.S. BANCORP XXXXX XXXXXXX.
You covenant with the Company as follows:
(a) You agree to manage the distribution of the Units and to
sell the Units according to all of the terms and conditions of the
Registration Statement, the Rules of Fair Practice of the NASD, all
applicable state and federal laws, including the Act, as amended, and
any and all regulations related thereto. You shall not have any
authority to give any information or make any representations in
connection with any offer or sale of the Units other than as contained
in the Prospectus or as is otherwise expressly authorized in writing by
the Company, PROVIDED, HOWEVER, that you shall use only such sales
literature and/or advertising in connection with the sale of the Units
as shall be approved by the Company.
(b) The Units shall be offered and sold only where the Units
may be legally offered and sold, and only to such persons in such
states who shall be legally qualified to purchase the Units. The
Company shall give you written notice at the time of effectiveness of
the Registration Statement of those states in which the offering and
sale of the Units may be made, and shall amend such notice thereafter
as additional states are added. No Units shall be offered or sold in
any other states.
(c) Neither you nor any person associated with you shall give
any information, written or oral, or make any representation, written
or oral, in connection with the offering other than those contained in
the Prospectus or such other material as may be provided or approved by
the Company.
SECTION 5. PAYMENT OF EXPENSES AND FEES.
The Company will pay all expenses incident to the performance of the
obligations of the Company under this Agreement, including (i) the printing and
delivery to you in quantities as hereinabove stated of copies of the
Registration Statement and all amendments thereto and of the Prospectus and any
supplements or amendments thereto, and of the Subscription Agreement; (ii) the
printing, execution, filing and delivery to you in quantities as hereinabove
stated of copies of any supplemental sales material to be used in connection
with the offering approved by the Company and utilized in sales of the Units
directly to the public; (iii) the qualification of the Units under the
securities or "blue sky" laws of the jurisdictions designated by you in
accordance with the provisions of Section 3(h), including filing fees and the
fees and disbursements of any counsel incurred in connection therewith; (iv) the
fees and disbursements of counsel and accountants for the Company; (v) the
filing fee of the NASD and the fees and disbursements of counsel incurred in
connection with the obtaining of NASD approval of the compensation arrangements
relating to the offering of the Units; and (vi) delivery to you of such number
of copies as you may reasonably request of the Blue Sky Survey to be prepared by
Xxxxxxxxx & Xxxxxx P.L.L.P. which shall be delivered to you and the Company.
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SECTION 6. CONDITIONS OF YOUR OBLIGATIONS.
Your obligations hereunder are subject to the accuracy of and
compliance with the representations and warranties of the Company, to the
performance by the Company of its obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall become effective not
later than 5:30 P.M., Eastern time, on the date hereof, or, with your
consent, at a later time and date not later, however, than 5:30 P.M.,
Eastern time, on the business day following the date hereof; and at the
Minimum Subscription Closing Date and Issuance Date no stop order
suspending the effectiveness thereof shall have been issued under the
Act or proceeding therefor initiated or threatened by the Commission
and not rescinded.
(b) At the Minimum Subscription Closing Date and on each
Issuance Date thereafter, you shall receive the opinion of Xxxxxxxxx &
Xxxxxx P.L.L.P., as counsel for the Company, to the effect that:
(i) the Company has been duly organized and is
validly existing as a limited liability company in good
standing under the laws of the State of Delaware with power
and authority to own its properties and conduct its business
as described in the Prospectus; and the Company has been duly
qualified to do business as a foreign limited liability
company under the limited liability company law of, and is in
good standing as such in, every jurisdiction where the
ownership or leasing of property, or the conduct of its
business requires such qualification except where the failure
so to qualify would not have a Material Adverse Effect;
(ii) the authorized equity of the Company, of which
there is outstanding the amount set forth in the Registration
Statement and Prospectus, conforms as to legal matters in all
material respects to the description thereof in the
Registration Statement and Prospectus;
(iii) the issued and outstanding equity of the Company
has been duly authorized and validly issued and is fully
paid and non-assessable;
(iv) the certificates for the Units to be delivered
hereunder are in due and proper form, and when duly
countersigned by the Company's transfer agent and delivered to
you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of
this Agreement, the Units represented thereby will be duly
authorized and validly issued, fully paid and non-assessable;
(v) the Registration Statement has become effective
under the Act, and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the
Act, and the
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Registration Statement (including the information deemed to
be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), the
Prospectus and each amendment or supplement thereto (except
for the financial statements, schedules and other historical
or prospective statistical or financial data included
therein as to which such counsel need express no opinion)
comply as to form in all material respects with the
requirements of the Act; although such counsel cannot
guarantee the accuracy or completeness of the statements
contained in the Registration Statement or Prospectus,
nothing has come to such counsel's attention that has led
counsel to believe that either the Registration Statement
(including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant
to Rule 430A(b), if applicable) or the Prospectus, or the
Registration Statement or the Prospectus as amended or
supplemented (except as aforesaid), as of their respective
effective or issue dates, contained any untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus (except as
aforesaid) as amended or supplemented, if applicable, as of
the Minimum Subscription Date, and each Issuance Date, will
be, as the case may be, contained any untrue statement of a
material fact or omitted to state any material fact
necessary to make the statements therein not misleading in
light of the circumstances under which they were made; the
statements in the Registration Statement and the Prospectus
summarizing statutes, rules and regulations are accurate and
fairly and correctly present the information required to be
presented by the Act or the Regulations, in all material
respects and such counsel does not know of any statutes,
rules and regulations required to be described or referred
to in the Registration Statement or the Prospectus that are
not described or referred to therein as required; and such
counsel does not know of any legal or governmental
proceedings pending or threatened required to be described
in the Prospectus which are not described as required, nor
of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to
be filed as exhibits to the Registration Statement which are
not described or filed, as required;
(vi) the statements under the captions "Description
of Units and First Amended and Restated Limited Liability
Company Agreement," "Federal Income Tax Consequences of Owning
Our Units" and "Plan of Distribution," in the Prospectus,
insofar as such statements constitute a summary of documents
referred to therein or matters of law, are accurate summaries
and fairly and correctly present, in all material respects,
the information called for with respect to such documents and
matters;
(vii) this Agreement and the performance of the
Company's obligations hereunder have been duly authorized by
all necessary limited liability company action and this
Agreement have been duly executed and delivered by and on
behalf of the Company, and are legal, valid, and binding
agreements of the Company, enforceable in accordance with
their respective terms; and no approval, authorization or
consent of any public board, agency, or instrumentality of the
-15-
United States or of any state or other jurisdiction is
necessary in connection with the issue or sale of the Units
pursuant to this Agreement (other than under the Act,
applicable "blue sky" laws and the rules of the NASD) or the
consummation by the Company of any other transactions
contemplated hereby;
(viii) the execution and performance of this Agreement
will not contravene any of the provisions of, or result in a
default under, any agreement, franchise, license, indenture,
mortgage, deed of trust, or other instrument known to such
counsel of the Company; or by which its property is bound and
which contravention or default would be material to the
Company; or violate any of the provisions of the Certificate
of Formation or LLC Agreement of the Company or, so far as is
known to such counsel, violate any statute, order, rule or
regulation of any regulatory or governmental body having
jurisdiction over the Company;
(ix) to such counsel's knowledge, all offers and
sales of the Company's units since the Company's inception
were at all relevant times exempt from the registration
requirements of the Act and were duly registered or the
subject of an available exemption from the registration
requirements of the applicable state securities or "blue sky"
laws;
(x) the Company is not an "investment company" or a
person "controlled by" an "investment company" within
the meaning of the Investment Company Act; and
(xi) the Company has not received a determination
from the Internal Revenue Service, but to such counsel's
knowledge the Company qualifies for treatment as a partnership
for Federal income tax purposes under current interpretations
of the Internal Revenue Code of 1986, as amended, and
regulations thereunder.
In rendering such opinion, such counsel may state that insofar
as their opinion under clause (v) above relates to the accuracy and
completeness of the Prospectus and Registration Statement, it is based
upon a general review with the Company's representatives and
independent accountants of the information contained therein, without
independent verification by such counsel of the accuracy or
completeness of such information.
(c) At the Minimum Subscription Closing Date and on each
Issuance Date thereafter you shall receive a certificate signed by the
principal executive officer and principal financial officer of the
Company to the effect that (i) the signer has carefully examined the
LLC Agreement, the Registration Statement and the Prospectus and, in
the signer's opinion, at the time the Registration Statement became
effective and at the Minimum Subscription Closing Date and Issuance
Date, as the case may be, the Registration Statement did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, as of its issue date and as
of such date, did not
-16-
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; (ii) since the effective date of the Registration
Statement, no event has occurred which should have been set forth in
an amendment of, or supplement to, the Prospectus but which has not
been so set forth; (iii) no stop order suspending the effectiveness of
the Registration Statement, has been issued and no proceedings
therefor have been instituted or threatened by the Commission and not
rescinded; (iv) the representations, warranties and agreements
contained in Section 1(a) are true and correct in all material
respects with the same effect as though expressly made at the Minimum
Subscription Closing Date and Issuance Date as the case may be; (v)
since the effective date of the Registration Statement, no material
adverse change in circumstance has occurred with regard to the
transactions described in the Prospectus which should have been set
forth in an amendment of, or supplement to, the Prospectus, but which
has not been so set forth; (vi) subsequent to the respective dates as
of which information is given in the Registration Statement and the
Prospectus, no material and unfavorable change, financial or
otherwise, in the business, condition or prospects of the Company has
occurred or become known; no transaction which is material and
unfavorable to the Company has been entered into by the Company; and
there has not been any obligation, contingent or otherwise, directly
or indirectly incurred by the Company, which is material to the
Company, other than such obligations that are incurred in the ordinary
course of the Company's business; and (vii) subsequent to the
execution and delivery of this Agreement, there has been no change, or
any development involving a prospective change, in or affecting
particularly the business or properties of the Company, whether or not
arising in the ordinary course of business, which is material and
adverse to the current or prospective financial condition or results
of operations of the Company.
(d) At the time the Registration Statement initially becomes
effective, you shall have received from Boulay, Heutmaker, Xxxxxx & Co.
P.L.L.P. a letter, in form and substance satisfactory to you and your
counsel, advising that (i) they are independent public accountants as
required by the Act and the Regulations, (ii) it is their opinion that
the financial statements of the Company included in the Prospectus, and
covered by their opinions therein, comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations relating to financial statements in registration statements
on Form SB-2, (iii) based on procedures set forth in such letter
nothing has come to their attention which would indicate that the
unaudited financial statements and supporting schedules, if any, of the
Company included in the Registration Statement do not comply as to form
in all material respects with the applicable accounting requirements of
the Act and the Regulations, or are not presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the respective audited financial
statements of the Company, (iv) based on procedures set forth in such
letter nothing has come to their attention which would indicate that
during the period from April 30, 2002 to a specified date not more than
five business days prior to the date the Registration Statement becomes
effective there has been any change in the equity, capital accounts, or
short-term or long-term indebtedness of the Company or any decrease in
net assets as compared with the amounts shown in their respective
balance sheets as of April 30, 2002 included in the Registration
-17-
Statement, except for changes or decreases that the Registration
Statement discloses have occurred or may occur; (v) they have carried
out certain procedures, as specified in a draft of such letter approved
by you, performed for the purpose of comparing certain financial
information and percentages appearing in the Registration Statement, as
specified in such draft letter, with indicated amounts in the financial
statements or accounting records of the Company and certain of its
affiliates and have found such information and percentages to be in
agreement with the relevant accounting and financial information of the
Company and certain of its affiliates.
At the Minimum Subscription Closing Date and each Issuance
Date you shall receive from Boulay, Heutmaker, Xxxxxx & Co. P.L.L.P. a
letter dated as of the Minimum Subscription Closing Date or Issuance
Date to the effect that they reaffirm, as of such date and as though
made at such date, the statements made in the letter furnished by such
accountants pursuant to Section 6(d), except that the specified date
referred to in such subsection will be a date not more than five days
prior to the Minimum Subscription Closing Date or such Issuance Date.
(e) At the Minimum Subscription Closing Date and at all times
through the Offering Termination Date, Xxxxxxxxx & Xxxxxx P.L.L.P.
shall have been furnished with such additional information, opinions
and documents, including supporting documents relating to parties
described in the Prospectus and certificates signed by such parties
with regard to information relating to them and included in the
Prospectus as they may reasonably require for the purpose of enabling
them to pass upon the sale of the Units as herein contemplated and
related proceedings, in order to evidence the accuracy or completeness
of any of the representations or warranties or the fulfillment of any
of the conditions herein contained and in order to qualify the Units
under the securities or "blue sky" laws of the jurisdictions designated
by you in accordance with the provisions of Section 3(h); and all
actions taken by the Company in connection with the sale of the Units
as herein contemplated shall be reasonably satisfactory in form and
substance to you.
(g) At the Minimum Subscription Closing Date and on each
Issuance Date, the qualification of the Units under the specified "blue
sky" jurisdictions remain valid.
(h) At the Minimum Subscription Closing Date and on each
Issuance Date the Company shall be in compliance with all reporting
requirements under the Exchange Act.
(i) If any of the conditions specified in this Section 6
shall not have been fulfilled when and as required by this Agreement to
be fulfilled, this Agreement and all your obligations hereunder may be
cancelled by you by notifying the Company of such cancellation in
writing at any time at or prior to the Minimum Subscription Closing
Date, or at any time after the Minimum Subscription Closing Date, all
your obligations hereunder may be cancelled or terminated by you by
notifying the Company of such cancellation or termination in writing at
any time at or prior to the Offering Termination Date and any such
cancellation or termination shall be without liability of any party to
-18-
any other party (except for the expenses to be paid or reimbursed
pursuant to Section 5 hereof and except to the extent provided in
Section 7 hereof).
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you which
approval shall not be unreasonably withheld. The Company shall furnish you with
such manually signed or conformed copies of such opinions, certificates, letters
and documents as you request.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless you and each
person, if any, who controls you within the meaning of the Act or the Exchange
Act against any losses, claims, damages or liabilities to which you or such
controlling person may become subject under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise
(including in settlement of any litigation if such settlement is effected with
the written consent of the Company, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, if
applicable, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon 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; and will reimburse you
and each such controlling person for any legal or other expenses reasonably
incurred by you or such 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 (i) any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by you, specifically for use therein, which
such information is limited to the third paragraph under the subsection "Selling
Agent" under the section "Plan of Distribution" in the Prospectus; or (ii) if
such statement or omission was contained or made in any preliminary prospectus
and corrected in the Prospectus and (A) any such loss, claim, damage or
liability suffered or incurred by you (or any person who controls you) resulted
from an action, claim or suit by any person who purchased Units which are the
subject thereof from you in the offering and (B) you failed to deliver or
provide a copy of the Prospectus to such person at or prior to the confirmation
of the sale of such Units in any case where such delivery is required by the
Act. In addition to its other obligations under this Section 7(a), the Company
agrees that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 7(a), it will reimburse you on a monthly basis for all reasonable legal
and other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Company's obligation to reimburse you for such expenses and the
possibility that such payments might later be held to
-19-
have been improper by a court of competent jurisdiction. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) You will indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act or the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company, or any such director, officer or controlling person may become subject
under the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with your written consent), insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon 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, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any preliminary prospectus, the
Prospectus, or any amendment or supplement thereto in reliance upon and in
conformity with any written information furnished to the Company by you
specifically for use in the preparation thereof, which such information is
limited to the third paragraph under the subsection "Selling Agent" under the
section "Plan of Distribution" in the Prospectus; and will reimburse any legal
or other expenses reasonably incurred by the Company, or any such director,
officer or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. In addition to their other
obligations under this Section 7(b), you agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 7(b), you will
reimburse the Company on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of your
obligation to reimburse the Company for such expenses and the possibility that
such payments might later be held to have been improper by a court of competent
jurisdiction. This indemnity agreement will be in addition to any liability
which you may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 7, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; PROVIDED, HOWEVER,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or
-20-
other indemnified parties which are different from or additional to those
available to the indemnifying party, or the indemnified and indemnifying parties
may have conflicting interests which would make it inappropriate for the same
counsel to represent both of them, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defense and otherwise
to participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defense in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by you in the case of paragraph (a) representing all
indemnified parties not having different or additional defenses or potential
conflicting interest among themselves who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability arising out of such proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and you from the offering of the Units or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and you in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company and you
shall be deemed to be in the same proportion in the case of the Company as the
total price paid to the Company for the Units by you (net of commission but
before deducting expenses), and in your case, as the commission received by you
bears to the total of such amounts paid to the Company and received by you as
commission in each case as contemplated by the Prospectus. The relative fault of
the Company and you shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or by you and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or
-21-
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
Notwithstanding the provisions of this Section 7, you shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Units sold by it and distributed to the public were offered
to the public exceeds the amount of any damages which you have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The provisions of this Section 7 shall survive any termination of
this Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this
Agreement (including your covenants provided in Section 4 hereof) or contained
in a certificate of the Company submitted pursuant hereto shall remain operative
and in full force and effect, regardless of any investigation made by, or on
behalf of, you or any person who controls you, or by or on behalf of the Company
and shall survive the Offering Termination Date.
SECTION 9. EFFECTIVE DATE OF THIS AGREEMENT.
This Agreement shall become effective (i) at 11:30 A.M., Eastern time,
on the first full business day following the day on which the Registration
Statement initially becomes effective or (ii) at the time of the initial public
offering by you, after the Registration Statement initially becomes effective,
of the Units, whichever shall first occur. The time of the initial public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement, which is subsequently published, relating to the
Units or the time at which the Units are first generally offered by you to
subscribers, whichever shall first occur. You or the Company may prevent this
Agreement from becoming effective by giving the notice indicated in Section 10
prior to the time when this Agreement would otherwise become effective as herein
provided.
SECTION 10. TERMINATION.
Without limiting the right to terminate this Agreement pursuant to any
other provision hereof:
(a) Either the Company or you may terminate this Agreement if
at least 10,000,000 of the Units have not been sold by December 15,
2002.
(b) In the event the offering is commenced and subscriptions
for at least 25,000,000 Units shall not have been received by the
Minimum Subscription Date, this Agreement shall terminate without
obligation on your part or on the part of the Company,
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except as provided in Section 5 hereof and except that the
indemnification or contribution, as the case may be, provided in
Section 7 hereof shall continue after such termination of this
Agreement.
(c) This Agreement may be terminated by the Company by notice
to you or by you by notice to the Company at any time prior to the time
this Agreement shall become effective as to all its provisions, and any
such termination shall be without liability on the part of the Company
to you (except for the expenses to be paid or reimbursed pursuant to
Section 5 hereof and except to the extent provided in Section 7
hereof).
(d) This Agreement may also be terminated by you prior to the
Minimum Subscription Closing Date if (i) trading in securities on the
New York Stock Exchange shall have been suspended or minimum prices
shall have been established on such exchange, or (ii) a banking
moratorium shall have been declared by Minnesota, New York, or United
States authorities, or (iii) there shall have been any change in
financial markets or in political, economic or financial conditions
which, in your opinion, either renders it impracticable or inadvisable
to proceed with the offering and sale of the Units on the terms set
forth in the Prospectus or materially and adversely affects the market
for the Units, or (iv) if there shall have occurred any outbreak or
escalation of major hostilities in which the United States is involved,
any declaration of a national emergency or war by the United States, an
act of terrorism shall have been committed against the United States or
any of its nationals or properties; or (v) there shall have occurred
such a calamity or crisis or such a material adverse change in general
domestic or international economic, political or financial conditions,
including without limitation as a result of terrorist activities (or
the effect of international conditions on the financial markets in the
United States shall be such), that in your judgment makes it
impracticable or inadvisable to proceed with the solicitation of offers
to purchase Units. Any termination pursuant to this paragraph (b) shall
be without liability on your part to the Company or on the part of the
Company to you (except for expenses to be paid or reimbursed pursuant
to Section 5 hereof and except to the extent provided in Section 7
hereof).
SECTION 11. POST-EFFECTIVE AMENDMENT.
The Company represents, warrants and covenants to you that if as of
December 15, 2002 (unless extended to March 31, 2003 by the board of managers of
the Company, then March 31, 2003), subscriptions for at least 25,000,000 Units
shall not have been received, it will file a post-effective amendment to the
Registration Statement de-registering all of the Units and if at the Offering
Termination Date subscriptions for all the Units shall not have been received it
will file a post-effective amendment to the Registration Statement
de-registering the unsold Units and, in either case, will terminate any
additional offerings of Units pursuant to such Registration Statement. In
addition, the Company represents and warrants to you that it will file all
reports required by the regulations with regard to sales of the Units and use of
the proceeds therefrom.
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SECTION 12. NOTICES AND AUTHORITY TO ACT.
All communications hereunder shall be in writing and, if sent to you,
shall be mailed, delivered or faxed and confirmed to you at U.S. Bancorp Xxxxx
Xxxxxxx Inc., 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX, 00000, Attention:
Xxxx Xxxxxx, with a copy to Xxxxx Xxxxxxx, Esq., Internal Counsel, U.S. Bancorp
Xxxxx Xxxxxxx Inc., 000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, XX 00000, or, if sent to the
Company, shall be delivered or faxed and confirmed at Illinois River Energy,
LLC, 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx, 00000 Attention:
President, with a copy to Xxxxxxxxx & Xxxxxx, 4200 IDS Center, 00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention Xxxxxxx Xxxxxx.
SECTION 13. PARTIES.
This Agreement shall inure to the benefit of and be binding upon each
of you and the Company and your and the Company's respective successors, this
Agreement and the conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective successors and controlling persons, and for the benefit of no other
person, firm or corporation, except as otherwise specifically provided herein.
Section 14. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
State of Minnesota.
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If the foregoing is accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement among you
and the Company in accordance with its terms.
Very truly yours,
ILLINOIS RIVER ENERGY, LLC
By _________________________________________
Title:________________________________
CONFIRMED AND ACCEPTED as of the date
first above written:
U.S. BANCORP XXXXX XXXXXXX INC.
By___________________________________________________
Title:__________________________________________
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