Exhibit 1
DISTRIBUTION AGREEMENT
1,500,000 SHARES OF COMMON STOCK
AND
$15,000,000 SERIES A SECURED INVESTOR CERTIFICATES
AMERICAN CHURCH MORTGAGE COMPANY (THE "COMPANY")
AMERICAN INVESTORS GROUP, INC. (THE "UNDERWRITER")
APRIL 26, 2002
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS 1
Section 1.01 Defined Terms 1
Section 1.02 Accounting Terms 3
ARTICLE II. APPOINTMENT OF UNDERWRITER AND RELATED AGREEMENTS 3
Section 2.01 Appointment; Exclusivity 3
Section 2.02 Compensation to Underwriter 3
Section 2.03 Brokers and Dealers 4
Section 2.05 Best Efforts; Independent Contractor 4
ARTICLE III. SERVICES; STANDARD OF CARE 5
Section 3.01 Services 5
Section 3.02 Reports to the Company 5
ARTICLE IV. REPRESENTATIONS AND COVENANTS OF THE COMPANY 6
Section 4.01 Representations, Warranties and Agreements of the Company 6
Section 4.02 Covenants of the Company 11
ARTICLE V. REPRESENTATIONS AND COVENANTS OF UNDERWRITER; CONDITIONS 13
Section 5.01 Representations and Warranties of Underwriter 13
Section 5.02 Covenants of Underwriter 14
ARTICLE VI. CONDITIONS 14
Section 6.01 Conditions of The Underwriter's Obligations 14
ARTICLE VII. INDEMNIFICATION AND CONTRIBUTION 16
Section 7.01 Company's Indemnification of Underwriter 16
Section 7.02 Underwriter's Indemnification of the Company 17
Section 7.03 Notice of Indemnification Claim 17
Section 7.04 Contribution 18
Section 7.06 Reimbursement 19
Section 7.07 Arbitration 19
ARTICLE VIII. TERM AND TERMINATION 20
Section 8.01 Effective Date of this Agreement 20
Section 8.02 Termination Prior to Initial Closing Date 20
Section 8.03 Notice of Termination 20
Section 8.04 Termination After Effective Date 20
ARTICLE IX. MISCELLANEOUS 21
Section 9.01 Survival 21
Section 9.02 Notices 21
Section 9.03 Successors and Assigns; Transfer 22
Section 9.04 Cumulative Remedies 22
Section 9.05 Attorneys' Fees 22
Section 9.06 Entire Agreement 22
Section 9.07 Choice of Law 22
Section 9.08 Confidentiality 22
Section 9.09 Rights to Investor Lists 23
Section 9.10 Waiver: Subsequent Modification 23
Section 9.11 Severability 23
Section 9.13 Captions 23
Section 9.14 Counterparts 23
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DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is entered into as of this 26th day of April,
2002 by and between American Church Mortgage Company, a Minnesota corporation
(the "Company"), and American Investors Group, Inc., a Minnesota corporation, as
underwriter (the "Underwriter").
RECITALS
WHEREAS, the Company proposes to register and publicly offer and sell up to
1,500,000 shares of its common stock, par value $.01 per share (the "Shares") at
an offering price of $10.00 per Share;
WHEREAS, the Company proposes to register and publicly offer and sell up to
$15,000,000 aggregate principal amount of Series A Secured Investor Certificates
of the Company (the "Certificates", and with the Shares, the "Securities");
WHEREAS, the Company desires to appoint the Underwriter to act as the
Company's exclusive selling agent in connection with the offer, sale and renewal
of the Securities on a best effort basis, and the Underwriter desires to accept
such appointment, all as provided for by the terms of this Agreement.
NOW, THEREFORE, in consideration of the above and for other good and
valuable consideration, receipt of which is acknowledged, and in consideration
of the mutual promises, covenants, representations and warranties hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01 Defined Terms. Whenever used in this Agreement, the following
terms have the respective meanings set forth below. The definitions of such
terms are applicable to the singular as well as to the plural forms of such
terms.
(a) Advisor. Church Loan Advisors, Inc., or any successor or subsequent advisor
of the Company's business activities.
(b) Agreement. This Distribution Agreement, including any exhibits or
attachments hereto, as originally executed, and as amended or supplemented
from time to time in accordance with the terms hereof.
(c) Certificate Holder. The purchaser of any Certificate or any subsequent
transferee or other holder thereof.
(d) Certificates. Up to $15,000,000 aggregate principal amount of Series A
Secured Investor Certificates of the Company with substantially the same
terms as are described in the Prospectus, and any additional principal
amount of Certificates as may be registered from time to time pursuant to
the Registration Statement.
(e) Commission or SEC. The Securities and Exchange Commission.
(f) Company. American Church Mortgage Company, or its successors in interest.
(g) Effective Date. The date and time the Registration Statement is or was
declared effective by the Commission.
(h) Exchange Act. The Securities Exchange Act of 1934, as amended.
(i) Governmental Rule. Any law, rule, regulation, ordinance, order, code,
interpretation, judgment, decree, policy, decision or guideline by any
governmental authority.
(j) Indenture. That certain Indenture dated on or about April 26, 2002, by and
between the Company and the Trustee with respect to the Certificates.
(k) NASD. The National Association of Securities Dealers, Inc.
(l) Offering. The offer and sale of the Securities in accordance with the terms
and subject to the conditions set forth in the Registration Statement.
(m) Preliminary Prospectus. Any preliminary prospectus included in the
Registration Statement prior to the time it becomes or became effective
under the Securities Act, including the respective copies thereof filed
with the Commission.
(n) Prospectus. The prospectus included in the Registration Statement at the
time it is or was declared effective by the Commission, except that if any
prospectus provided to the Underwriter by the Company for use in connection
with the offering of the Securities differs from the prospectus as filed
with the Commission, the term "Prospectus" shall refer to such differing
prospectus from and after the time such prospectus is first provided to the
Underwriter by the Company for such use, including the respective copies
thereof filed with the Commission.
(o) Registration Statement. That certain Registration Statement on Form S-3
(File No. 333-75836) of the Company with respect to the Securities filed
with the Securities and Exchange Commission under the Securities Act of
1933, as amended and declared effective on the date hereof, including the
respective copies thereof filed with the Commission.
(p) Rules and Regulations. The rules and regulations under the Securities Act.
(q) Securities. The Certificates and the Shares, both individually and
together.
(r) Securities Act. The Securities Act of 1933, as amended.
(s) Shares. Up to 1,500,000 shares to the Company's common stock, par value
$.01 per share, and any additional Shares as may be registered from time to
time pursuant to the Registration Statement.
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(t) Trustee. The Xxxxxxx National Bank, or its successors or assigns.
(r) Underwriter. American Investors Group, Inc., a Minnesota corporation, or
its successors in interest.
Section 1.02 Accounting Terms. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered by any person pursuant to this Agreement
shall be prepared, in accordance with generally accepted accounting principles
as in effect from time to time applied on a consistent basis. To the extent
generally accepted accounting practices do not apply to certain reports or
accounting practices of the Underwriter, the parties will mutually agree on the
accounting practices and assumptions.
ARTICLE II. APPOINTMENT OF UNDERWRITER AND RELATED AGREEMENTS
Section 2.01 Appointment; Exclusivity. Subject to the terms and conditions
set forth herein, the Company appoints the Underwriter as its exclusive agent to
sell the Securities upon the terms and conditions set forth herein. The
Underwriter agrees to use its best efforts as such agent to procure purchasers
for the Securities until the later of the termination of the Offering or the
sale of all offered Securities. The Company agrees to direct to the Underwriter
all inquiries it receives with respect to the Securities.
Section 2.02 Compensation to Underwriter.
(a) Underwriter's Commissions. In consideration of the agreement of the
Underwriter to provide its services of the Underwriter as set forth in this
Agreement, the Company will pay the Underwriter a commission based on (i)
the number of Shares sold and (ii) the gross proceeds received on the sale
and renewal of each Certificate, both in accordance with the schedule set
forth as Exhibit A hereto.
(b) Underwriter's Expenses. Whether or not this Agreement becomes effective or
is terminated or cancelled or the sale of the Securities hereunder is
consummated, and regardless of the reason for or cause of any such
termination, cancellation, or failure to consummate, the Company will pay
or cause to be paid:
(i) all expenses of the Underwriter incurred in connection with the offer
and sale of the Securities, including, but not limited to, designing,
printing and mailing all offering and advertising materials;
advertisements in newspapers, on the radio, on the internet and
through direct mail; operating a toll-free telephone number, and
assisting the Company with creating a web site, including any costs of
a web developer or other third party consultants;
(ii) all fees and expenses (including, without limitation, fees and
expenses of the Company's auditors and legal counsel) in connection
with the preparation, printing, filing, and delivery of the
Registration Statement (including the financial statements therein and
all amendments, schedules, and exhibits thereto), each Preliminary
Prospectus, the Prospectus, and any amendment thereof or supplement
thereto;
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(iii)all fees and expenses incurred in connection with the qualification
of the Securities for offer and sale under the securities or Blue Sky
laws of the states and other jurisdictions which the Underwriter may
designate;
(iv) all expenses in connection with the preparation, printing, filing, and
delivery of materials to be sent to Holders; (v) all fees and expenses
of the Trustee in connection with the Certificates; and
(vi) all costs and expenses incident to the performance of the Company's
obligations hereunder with respect to the Offering that are not
otherwise specifically described herein.
(c) Non-Accountable Expenses. To compensate the Underwriter for its other
expenses incurred in connection with the Offering, the Company agrees to
pay the Underwriter a non-accountable expense allowance of up to $233,000,
payable as follows;
(i) $30,000 upon the sale of the first 100,000 Shares;
(ii) $103,000, ratably, as and if the remaining 1,400,000 Shares are sold;
(iii) $20,000 upon the sale of $1,000,000 of Certificates; and
(iv) $80,000, ratably, as and if the remaining $14,000,000 of Certificates
is sold.
Section 2.03 Brokers and Dealers. The Underwriter may, in its sole
discretion and at no additional obligation to the Company, use the services of
other brokers or dealers who are members of the NASD in connection with the
offer and sale of the Securities. The Underwriter may enter into agreements with
any such broker or dealers to act as sub-agents for the sale of the Securities
and pay any portion of the Underwriter's compensation hereunder to such brokers
or dealers.
Section 2.04 Underwriter's Unrelated Activities. The Underwriter may sell
other securities in offerings similar to the Offering for other issuers during
the course of the Offering. The Underwriter shall have the right to advertise or
otherwise disclose to unrelated prospective issuers, at its own expense, its
relationship with the Company, the services it provides in connection with the
Securities and the amount of money that it raised through the Offering.
Section 2.05 Best Efforts; Independent Contractor. Anything in this
Agreement to the contrary notwithstanding, the Underwriter shall have no
obligation to sell any minimum number of Shares or minimum principal amount of
Certificates or to purchase Securities for its own account, for resale or for
any other purpose. All actions taken by the Underwriter pursuant to this
Agreement shall be in the capacity of an independent contractor, all sales of
Securities conducted by the Underwriter shall be solely for the account and at
the risk of the Company, and in no event shall the Underwriter have any
obligations with regard to or under the Securities.
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ARTICLE III. SERVICES; STANDARD OF CARE
Section 3.01 Services. The services to be provided to the Company by the
Underwriter pursuant to this Agreement shall include the following:
(a) Corporate Finance. The Underwriter shall advise the Company regarding the
offering price of the Shares. The Underwriter shall advise the Company
regarding the structure of the Certificates and provide sample document
forms. Throughout the Offering, the Underwriter shall assist the Company in
determining appropriate Certificate interest rates based on current market
conditions and the Company's capital goals.
(b) Marketing. The Underwriter shall develop and execute a direct response
marketing strategy for the Securities designed to meet the Company's
capital goals in a timely manner. The Underwriter shall manage the process
of creating, producing and placing any newspaper, radio, Internet and
direct mail advertisements. The Underwriter shall also oversee designing
and printing all marketing materials, in accordance with applicable SEC and
NASD rules and regulations.
(c) Company Logo, Etc. During the term of this Agreement, Company shall allow
the Underwriter to use the Company's logo, corporate colors, trademarks,
tradenames, fonts, and other aspects of corporate identity in
advertisements and marketing materials related to the Securities.
(d) Securities Issuance; Registrar; Transfer Agent. Upon delivery of each
completed subscription agreement for Securities to the Underwriter, the
Underwriter shall deliver such subscription agreement to the Advisor for
acceptance or rejection. The Underwriter shall return funds accompanying
each rejected subscription to the person submitting the subscription. The
Underwriter shall pay funds, net of commissions and expenses, to the
Company in connection with accepted subscriptions as received. Shares shall
be issued by the Company's registrar and transfer agent in accordance with
customary industry practices. Certificates shall be issued by the Trustee
on the Company's behalf in book-entry form only and the Trustee shall
deliver written book entry receipts with respect to all accepted
subscription agreements.
(e) Investor Relations. The Underwriter shall handle all inquiries from
prospective investors, mail investment kits, meet with prospective
investors, process subscription agreements and respond to all written or
telephonic questions by prospective investors relating to the Securities.
Section 3.02 Reports to the Company From time to time as requested by the
Company, the Underwriter shall provide the Company with reports and analysis
regarding the status of the offering, the marketing efforts and the number of
Shares and principal amount of Certificates remaining available for sale under
the Registration Statement.
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ARTICLE IV. REPRESENTATIONS AND COVENANTS OF THE COMPANY
Section 4.01 Representations, Warranties and Agreements of the Company. The
Company represents and warrants to and agrees with the Underwriter as follows,
which representations and warranties shall be deemed to be made continuously
throughout the term of this Agreement:
(a) The Registration Statement on Form S-11 (File No. 333-75836) with respect
to the Securities, including the Prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the
Securities Act, and the Rules and Regulations of the Commission thereunder
and has been filed with the Commission under the Securities Act.
(b) As of the Effective Date, and at all times subsequent thereto until the
termination of the Offering, the Registration Statement and Prospectus, and
all amendments thereof and supplements thereto, will comply or complied
with the provisions and requirements of the Securities Act and the Rules
and Regulations. Neither the Commission nor any state securities authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus or requiring the recirculation of a Preliminary Prospectus, or
issued a stop order with respect to the offering of the Securities (if the
Registration Statement has been declared effective), or instituted or, to
the Company's knowledge, threatened the institution of, proceedings for any
of such purposes. When the Registration Statement shall become effective
and when any post-effective amendment thereto shall become effective, the
Registration Statement will not or did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. When the
Registration Statement is or was declared effective by the Commission and
at all times subsequent thereto until the termination of the offering, the
Prospectus (as amended or supplemented, if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) will not
or did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were
made, not misleading.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Minnesota, with
full power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and
Prospectus. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership or lease of its
properties or the conduct of its business requires such qualification and
in which the failure to be qualified or in good standing would have a
material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company, and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification.
(d) The Company has operated and is operating in material compliance with all
authorizations, licenses, certificates, consents, permits, approvals and
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orders of and from all state, federal and other governmental regulatory
officials and bodies necessary to own its properties and to conduct its
business as described in the Registration Statement and Prospectus, all of
which are, to the Company's knowledge, valid and in full force and effect.
The Company is conducting its business in substantial compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, and the Company is not in material violation of any
applicable law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its properties.
(e) The Company is not in violation of its articles of incorporation or bylaws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture, note or
other evidence of indebtedness or in any contract, lease, indenture,
mortgage, loan agreement, joint venture or other agreement or instrument to
which it is a party or by which it or its properties are bound.
(f) The Company has full requisite power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and is a
valid and binding agreement on the part of the Company, enforceable against
the Company in accordance with its terms. The performance of this Agreement
and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under:
(i) any indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note, agreement or other evidence of indebtedness, any
lease, contract, joint venture or other agreement or instrument to
which the Company is a party or by which the Company or its properties
may be bound;
(ii) the articles of incorporation or bylaws of the Company: or
(iii)any applicable law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or
over its properties.
(g) No consent, approval, authorization or order of or qualification with any
court, governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties is required for the
execution and delivery of this Agreement and the consummation by the
Company of the transactions herein contemplated, except such as may be
required under the Securities Act, the Exchange Act, or under state or
other securities or Blue Sky laws, all of which requirements have been
satisfied.
(h) Except as is otherwise expressly described in the Registration Statement or
Prospectus, there is neither pending nor, to the best of the Company's
knowledge, threatened, any action, suit, claim or proceeding against the
Company or any of its officers or any of its properties, assets or rights
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its officers or
properties or otherwise which (A) might result in any material adverse
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change in the condition (financial or otherwise), earnings, operations or
business of the Company or might materially and adversely affect its
properties, assets or rights, or (B) might prevent consummation of the
transactions contemplated hereby.
(i) All outstanding shares of capital stock of the Company are duly authorized
and validly issued, fully paid and non-assessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the authorized and outstanding
capital stock of the Company conforms in all material respects with the
statements relating thereto contained in the Registration Statement and the
Prospectus. The Securities to be sold hereunder by the Company have been
duly authorized for issuance and sale pursuant to this Agreement and, when
issued and delivered against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
non-assessable and will be sold free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first refusal
or other similar right of shareholders exists with respect to any of the
Securities to be sold hereunder by the Company or the issuance and sale
thereof. The Indenture has been duly authorized, executed and delivered by
the Company and the Trustee and is a valid and binding agreement on the
part of the Company, enforceable against the Company in accordance with its
terms. Except as disclosed in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations. The Securities will comply as to form with all applicable
laws.
(j) Boulay, Heutmaker, Xxxxxx and Company, P.L.L.P., which has expressed its
opinion with respect to certain of the financial statements filed as part
of the Registration Statement, is an independent accounting firm within the
meaning of the Securities Act and the Rules and Regulations. The financial
statements of the Company set forth in the Registration Statement and
Prospectus comply in all material respects with the requirements of the
Securities Act and fairly present the financial position and the results of
operations of the Company at the respective dates and for the respective
periods to which they apply in accordance with generally accepted
accounting principles consistently applied throughout the periods involved;
and the supporting schedules included in the Registration Statement present
fairly the information required to be stated therein. The selected and
summary financial included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis consistent with
the audited financial statements presented therein. No other financial
statements or schedules are required by the Securities Act or the Rules and
Regulations to be included in the Registration Statement.
(k) Subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, except as is otherwise disclosed in
the Registration Statement or Prospectus, there has not been:
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(i) any change in the capital stock or long-term debt (including any
capitalized lease obligation) or material increase in the short-term
debt of the Company;
(ii) any issuance of options, warrants, convertible securities or other
rights to purchase the capital stock of the Company;
(iii)any material adverse change, or any development involving a material
adverse change, in or affecting the condition (financial or
otherwise), earnings, operations, business or business prospects,
management, financial position, stockholders' equity, results of
operations or general condition of the Company;
(iv) any transaction entered into by the Company that is material to the
Company;
(v) any obligation, direct or contingent, incurred by the Company, except
obligations incurred in the ordinary course of business that, in the
aggregate, are not material; or
(vi) any loss or damage (whether or not insured) to the property of the
Company which reasonably could be expected to have a material adverse
effect on the condition (financial or otherwise), earnings, operations
or business of the Company.
(l) Except as is otherwise expressly disclosed in the Registration Statement or
Prospectus:
(i) the Company has good and marketable title to all of the property, real
and personal, and assets described in the Registration Statement or
Prospectus as being owned by it, free and clear of any and all
pledges, liens, security interests, encumbrances, equities, charges or
claims, other than such as would not have a material adverse effect on
the condition (financial or otherwise), earnings, operations or
business of the Company;
(ii) the agreements to which the Company is a party described in the
Registration Statement and Prospectus are valid agreements,
enforceable by the Company except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by judicial limitations on the right of specific
performance; and
(iii)the Company has valid and enforceable leases for all properties
described in the Registration Statement and Prospectus as leased by
it, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by
judicial limitations on the right of specific performance. Except as
set forth in the Registration Statement and Prospectus, the Company
owns or leases all such properties as are necessary to its operations
as now conducted.
(m) The Company was organized and has been operated to qualify as a real estate
investment trust under Section 856 of the Internal Revenue Code and, to the
knowledge of the Company, no event has occurred that would cause the
Company to fail to so qualify.
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(n) The Company has timely filed (or has timely requested an extension of time
to file) all necessary federal and state income and franchise tax returns
and has paid all taxes shown thereon as due; there is no tax deficiency
that has been or, to the best of the Company's knowledge, could be asserted
against the Company that might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
properties of the Company, and all tax liabilities are adequately provided
for in the books of the Company.
(o) The Company owns, or possesses adequate rights to use, all patents, patent
rights, inventions, trade secrets, know-how, technology, service marks,
trade names, copyrights, trademarks and proprietary rights or information
which are necessary for the conduct of its present or intended business as
described in the Registration Statement or Prospectus. The expiration of
any patents, patent rights, trade secrets, trademarks, service marks, trade
names or copyrights would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with the asserted rights of
others with respect to any patent, patent rights, inventions, trade
secrets, know-how, technology, trademarks, service marks, trade names or
copyrights that, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(p) The Company has not taken and will not take, directly or indirectly, any
action (and does not know of any action by its directors, officers, members
or others) which has constituted or is designed to, or which might
reasonably be expected to, cause or result in stabilization or
manipulation, as defined in the Exchange Act or otherwise, of the price of
any security of the Company to facilitate the sale or resale of the
Securities. The Company has not distributed and will not distribute prior
to the completion of the distribution of the Securities, any offering
material in connection with the offering and sale of the Securities other
than any Preliminary Prospectus, the Prospectus, the Registration Statement
and other materials, if any, permitted by the Securities Act.
(q) The Company maintains a system of internal accounting controls sufficient
to provide reasonable assurance that transactions are executed in
accordance with management's general or specific authorizations and
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles. To
maintain accountability for assets, access to assets is permitted only in
accordance with management's general or specific authorization, and the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) Except as set forth in the Registration Statement and Prospectus:
(i) the Company and each entity that owns or possesses real property in
which the Company holds a security interest is in material compliance
with all material rules, laws and regulations relating to the use,
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treatment, storage and disposal of toxic substances and protection of
health or the environment (the "Environmental Laws") which are
applicable to its business;
(ii) the Company has received no notice from any governmental authority or
third party of an asserted claim under Environmental Laws, which claim
is required to be disclosed in the Registration Statement and the
Prospectus;
(iii)the Company will not be required to make any future material capital
expenditures to comply with Environmental Laws: and
(iv) no property which is owned, leased or occupied by the Company or in
which the Company holds a security interest has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation
and Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.),
or otherwise designated as a contaminated site under applicable state
or local law.
(s) No person or entity other than the Underwriter is entitled to any
compensation or other payments from either the Company or the Underwriter,
as a finder, underwriter or agent in connection with the Offering or any
other proposed transaction between the Company and the Underwriter. The
Company agrees to promptly notify the Underwriter of any such
relationships, including consulting or prior agency agreements entitling
other parties to compensation for the transaction described herein and
agrees to provide the Underwriter with a copy of such agreements.
(t) Any certificate signed by any officer of the Company and delivered to the
Underwriter or to the Underwriter's Counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
Section 4.02 Covenants of the Company. The Company hereby covenants and agrees
with the Underwriter as follows:
(a) If the Registration Statement has not already been declared effective by
the Commission, the Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to become
effective as promptly as possible. The Company will notify the Underwriter
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed and of any request by the
Commission for any amendment or supplement to the Registration Statement or
Prospectus or additional information. The Company will prepare and file
with the Commission, promptly upon the Underwriter's request, any
amendments or supplements to the Registration Statement or Prospectus that,
in the Underwriter's opinion, may be necessary or advisable in connection
with the distribution of the Securities by the Underwriter. The Company
will not file any amendment or supplement to the Registration Statement or
Prospectus to which the Underwriter shall reasonably object by notice to
the Company after having been furnished a copy a reasonable time prior to
the filing.
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(b) The Company will advise the Underwriter, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement,
of the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose. The Company will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued.
(c) Within the time during which a prospectus relating to the Securities is
required to be delivered under the Securities Act, the Company will comply
as far as it is able with all requirements imposed upon it by the
Securities Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Securities as contemplated
by the provisions hereof and the Prospectus. If, during the longer of such
period or the term of this Agreement, any event or change occurs that could
reasonably be considered material to the Offering or that causes any of the
representations and warranties of the Company contained herein to be
untrue, or as a result of which the Prospectus would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading, or if, during such period, it is necessary to
amend the Registration Statement or supplement the Prospectus to comply
with the Securities Act, the Company will promptly notify the Underwriter,
and will amend the Registration Statement or supplement the Prospectus (at
the expense of the Company) so as to correct such statement or omission or
effect such compliance.
(d) The Company will use its best efforts to arrange for the qualification of
the Securities for offering and sale under the securities laws of such
jurisdictions as the Underwriter may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Securities. In each jurisdiction in which the
Securities shall have been qualified as herein provided, the Company will
make and file such statements and reports in each year as are or may be
reasonably required by the laws of such jurisdiction.
(e) The Company will furnish to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, and all amendments
and supplements to such documents, in each case as soon as available and in
such quantities as the Underwriter may from time to time reasonably
request.
(f) At all times during the term of this Agreement, the Company shall provide
all information reasonably requested by the Underwriter in a timely manner
and shall use its best efforts to insure that such information is complete
and accurate.
(g) The Company will apply the net proceeds from the sale of the Securities
substantially in the manner set forth under the caption "Use of Proceeds"
in the Prospectus.
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ARTICLE V. REPRESENTATIONS AND COVENANTS OF UNDERWRITER; CONDITIONS
Section 5.01 Representations and Warranties of Underwriter. The Underwriter
hereby represents and warrants to the Company as follows, which representations
and warranties shall be deemed to be made continuously throughout the term of
this Agreement.
(a) The Underwriter (i) has been duly organized, is validly existing and in
good standing as a Delaware corporation, (ii) has qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where
the character of its properties or the nature of its activities makes such
qualification necessary, and (iii) has full power, authority and legal
right to own its property, to carry on its business as presently conducted,
and to enter into and perform its obligations under this Agreement.
(b) The execution and delivery by the Underwriter of this Agreement are within
the power of the Underwriter and have been duly authorized by all necessary
corporate action on the part of the Underwriter. Neither the execution and
delivery of this Agreement nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof, will conflict with
or result in a breach of, or constitute a default under, any of the
provisions of any Governmental Rule binding on the Underwriter, the charter
or by-laws of the Underwriter, or any of the provisions of any indenture,
mortgage, contract or other instrument to which the Underwriter is a party
or by which it is bound; nor will they result in the creation or imposition
of any lien, charge or encumbrance upon any of the Underwriter's property
pursuant to the terms of any indenture, mortgage, contract or other
instrument.
(c) The Underwriter has all governmental consents, licenses, approvals and
authorizations, registrations and declarations which are necessary for the
execution, delivery, performance, validity and enforceability of the
Underwriter's obligations under this Agreement.
(d) This Agreement has been duly executed and delivered by the Underwriter and,
constitutes a legal, valid and binding instrument enforceable against the
Underwriter in accordance with its terms.
(e) There are no actions, suits or proceedings pending or, to the knowledge of
the Underwriter, threatened against or affecting the Underwriter, before or
by any court, administrative agency, arbitrator or governmental body with
respect to any of the transactions contemplated by this Agreement, or which
will, if determined adversely to the Underwriter, materially and adversely
affect it or its business, assets, operations or condition, financial or
otherwise, or adversely affect the Underwriter's ability to perform its
obligations under this Agreement. The Underwriter is not in default with
respect to any order of any court, administrative agency, arbitrator or
governmental body so as to materially and adversely affect the transactions
contemplated by this Agreement.
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Section 5.02 Covenants of Underwriter. The Underwriter hereby covenants to
the Company as follows, which covenants shall be deemed in force unless and
until this Agreement is terminated as provided herein:
(a) The Underwriter shall keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware and
retain and preserve its right to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Securities and this
Agreement and shall hold all licenses in all jurisdictions which are
necessary to perform its obligations under this Agreement.
(b) The Underwriter shall punctually perform and observe all of its obligations
and agreements contained in this Agreement. (c) Except as provided in this
Agreement, the Underwriter shall not take any action, or permit any action
to be taken by others, which would excuse any person from any of its
covenants or obligations under any of the Securities, or under any other
instrument related to the Securities, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any of the Securities or any such
instrument or any right in favor of the Company in any of the Securities or
such instrument, without the written consent of the Company.
(d) The Underwriter shall not assign this Agreement or any of its rights,
powers, duties or obligations hereunder without the express prior written
consent of the Company, which shall not be unreasonably withheld; provided
that the Underwriter may assign its rights, powers, duties or obligations
hereunder to an affiliate of the Underwriter or pursuant to a sale of all
or substantially all of the Underwriter's assets without the prior written
consent of the Company.
(e) The Underwriter shall take such additional action as is reasonably
requested by the Company in order to carry out the purposes of this
Agreement.
ARTICLE VI. CONDITIONS
Section 6.01 Conditions of the Underwriter's Obligations. The obligation of
the Underwriter to sell the Securities on a best efforts basis as provided
herein shall be subject to the accuracy of the representations and warranties of
the Company, to the performance by the Company of its obligations hereunder, and
to the satisfaction of the following additional conditions:
(a) The Registration Statement shall have become effective not later than 4:00
p.m. Minneapolis, Minnesota time on the date of this Agreement, or such
later date or time as shall be consented to in writing by the Underwriter
(the "Effective Date"), and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose shall
have been initiated or, to the knowledge of the Company, or the
Underwriter, threatened by the Commission or any state securities
commission or similar regulatory body. Any request of the Commission for
14
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction
of the Underwriter and the Underwriter's counsel.
(b) The Underwriter shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or supplement
thereto, contains any untrue statement of a fact which is material or omits to
state a fact which is material and is required to be stated therein or is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(c) Subsequent to the Effective Date and prior to termination of the
offering, there shall not have occurred any change, or any development involving
a prospective change, which materially and adversely affects the Company's
condition (financial or otherwise), earnings, operations, properties, business
or business prospects from that set forth in the Registration Statement or
Prospectus, and which, in the Underwriter's sole judgment, is material and
adverse and that makes it, in the Underwriter's sole judgment, impracticable or
inadvisable to proceed with the offering of the Securities as contemplated by
the Prospectus and this Agreement.
(d) All corporate proceedings and other legal matters in connection with
this Agreement, the form of Registration Statement and the Prospectus, and the
registration, authorization, issue, sale and delivery of the Securities shall
have been reasonably satisfactory to the Underwriter's counsel, and the
Underwriter's counsel shall have been furnished with such papers and information
as it may reasonably have requested to enable it to pass upon the matters
referred to in this Section.
(e) At the time of execution of this Agreement, the Underwriter shall have
received from Boulay, Heutmaker, Xxxxxx and Company, P.L.L.P. a letter dated the
date of such execution, in form and substance satisfactory to the Underwriter,
to the effect that they are independent accountants with respect to the Company
within the meaning of the Securities Act and the applicable published
instructions, and the Rules and Regulations thereunder, and further stating in
effect that in their opinion, the audited financial statements included in the
Registration Statement and Prospectus covered by their report included therein
comply as to form in all material respects with the applicable requirements of
the Securities Act, the published instructions and the Rule and Regulations.
(f) Xxxxxxx, Street and Deinard Professional Association shall have
delivered to the Underwriter a Blue Sky Memorandum reasonably satisfactory to
the Underwriter confirming that all requisite actions for the offer and sale of
the Securities in all jurisdictions requested by the Underwriter have been
taken.
(g) The Company shall have furnished to the Underwriter such additional
certificates, documents and evidence as the Underwriter shall reasonably
request.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Underwriter and the Underwriter's counsel. All statements contained in
15
any certificate, letter or other document delivered pursuant hereto by, or on
behalf of, the Company shall be deemed to constitute representations and
warranties of the Company.
The Underwriter may waive in writing the performance of any one or more of
the conditions specified in this Section or extend the time for their
performance.
If any of the conditions specified in this Section shall not have been
fulfilled when and as required by this Agreement to be fulfilled and if the
fulfillment of said condition has not been waived by the Underwriter, this
Agreement and all obligations of the Underwriter hereunder may be canceled at,
or at any time prior to, the Effective Date by the Underwriter. Any such
cancellation shall be without liability of the Underwriter to the Company and
shall not relieve the Company of its obligations under Article VII hereof.
Notice of such cancellation shall be given to the Company as specified in
Section 8.03.
ARTICLE VII. INDEMNIFICATION AND CONTRIBUTION
Section 7.01 Company's Indemnification of Underwriter. The Company hereby
agrees to indemnify and hold harmless the Underwriter, and each person, if any,
who controls the Underwriter within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Underwriter or each such controlling person may become subject under
the Securities Act, the Exchange Act, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of, or are based upon, (i) any breach of any representation, warranty, agreement
or covenant of the Company contained in this Agreement; (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof or supplement thereto, or the
omission or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (iii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, if used prior to the
Effective Date of the Registration Statement, or in the Prospectus (as amended
or as supplemented), or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (iv) any untrue
statement or alleged untrue statement of a material fact contained in any
application or other statement executed by the Company or based upon written
information furnished by the Company filed in any jurisdiction in order to
qualify the Securities under, or exempt the Securities or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the omission
or alleged omission to state in such application or statement a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company will reimburse the Underwriter and each such controlling person for any
legal or other expenses incurred by the Underwriter or controlling person in
connection with investigating or defending against any such loss, claim, damage,
liability or action. However, the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Underwriter specifically for use in
the preparation of the Registration Statement or any such post-effective
amendment thereof, any such Preliminary Prospectus, or the Prospectus, or any
16
such amendment thereof or supplement thereto, or in any application or other
statement executed by the Company or the Underwriter filed in any jurisdiction
in order to qualify the Securities under, or exempt the Securities or the sale
thereof from qualification under, the securities laws of such jurisdiction. This
indemnity agreement is in addition to any liability which the Company may
otherwise have.
Section 7.02 Underwriter's Indemnification of the Company. The Underwriter
agrees to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each person who
controls the Company within the meaning of Section 15 of the Securities Act
against any losses, claims, damages or liabilities to which the Company or any
such director, officer or controlling person may become subject under the
Securities Act, the Exchange Act, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of, or are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof
or supplement thereto, or the omission or alleged omission to state in the
Registration Statement or any amendment thereof or supplement thereto, a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) any untrue statement or alleged untrue statement of
a material fact contained in any Preliminary Prospectus, if used prior to the
Effective Date of the Registration Statement, or in the Prospectus (as amended
or as supplemented), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement executed by the
Company or by the Underwriter and filed in any jurisdiction in order to qualify
the Securities under, or exempt the Securities or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the omission
or alleged omission to state in such application or statement a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by, or
on behalf of, the Underwriter specifically for use in the preparation of the
Registration Statement or any such post-effective amendment thereof, any such
Preliminary Prospectus, or the Prospectus or any such amendment thereof or
supplement thereto, or in any application or other statement executed by the
Company or by the Underwriter and filed in any jurisdiction. The Underwriter
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending against any such loss, claim, damage, liability or
action. This indemnity agreement is in addition to any liability which the
Underwriter may otherwise have.
Section 7.03 Notice of Indemnification Claim. Promptly after receipt by an
indemnified party under Section 7.01 or 7.02 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under Section 7.01 or 7.02, notify in
writing the indemnifying party of the commencement thereof. Failure to so notify
the indemnifying party will relieve it from any liability under Section 7.01 or
7.02 as to the particular item for which indemnification is then being sought,
but not from any other liability which it may have to any indemnified party. In
17
case any such action is brought against any indemnified party, and the
indemnified party notifies an indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, to assume the defense thereof, with counsel who shall
be reasonably satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under Section 7.01 or 7.02 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party, and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select as separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties, in which event the fees and expenses of such separate counsel shall be
borne by the indemnifying party. Any such indemnifying party shall not be liable
to any such indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party.
Section 7.04 Contribution. In order to provide for just and equitable
contribution in any action in which the Underwriter or the Company (or any
person who controls the Underwriter or the Company within the meaning of Section
15 of the Securities Act) makes claim for indemnification pursuant to Section
7.01 or 7.02 hereof, but such indemnification is unavailable or insufficient to
hold harmless and indemnify a party under Section 7.01 or 7.02, as applicable,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages or liabilities
referred to in Section 7.01 or 7.02, as applicable, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriter on the other from the offering of the Securities
hereunder or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in such clause (i) but also the relative
fault of the Company on the one hand and the Underwriter on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriter on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities (before deducting
expenses) received by the Company bear to the total commissions received by the
Underwriter. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if contributions pursuant to this Section 7.04
were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the first sentence of this Section 7.04. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 7.04 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this Section 7.04. Notwithstanding the provisions of
18
this Section, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities
distributed to the public were offered to the public exceeds the amount of any
damages that the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
Section 7.05 Notice of Contribution Claim. Promptly after receipt by a
party to this Agreement of notice of the commencement of any action, suit or
proceeding, such person will, if a claim for contribution in respect thereof is
to be made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the failure to so notify the
Contributing Party will not relieve the Contributing Party from any liability
which it may have to any party other than under Section 7.04. Any notice given
pursuant to Section 7.03 hereof shall be deemed to be like notice under this
Section 7.05. In case any such action, suit or proceeding is brought against any
party, and such person notifies a Contributing Party of the commencement
thereof, the Contributing Party will be entitled to participate therein with the
notifying party and any other Contributing Party similarly notified.
Section 7.06 Reimbursement. In addition to its other obligations under
Section 7.01 and 7.04 hereof, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 7.01, it will reimburse the Underwriter on a
monthly basis for all legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligation to reimburse the
Underwriter for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriter shall promptly return such payment to the Company.
Section 7.07 Arbitration. It is agreed that any controversy rising out of
the operation of the interim reimbursement arrangements set forth in Section
7.06 hereof, including the amounts of any requested reimbursement payments and
the method of determining such amounts, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. If the party demanding arbitration does not make such designation of
an arbitration tribunal in such demand or notice, then the party responding to
said demand or notice is authorized to do so. Any such arbitration will be
limited to the operation of the interim reimbursement provisions contained in
Section 7.06 hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is created by
the provisions of Section 7.01 and 7.02 hereof or the obligation to contribute
to expenses which is created by the provisions of Section 7.04 hereof.
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ARTICLE VIII. TERM AND TERMINATION
Section 8.01 Effective Date of this Agreement. This Agreement shall become
effective on the Effective Date immediately after the time at which the
Registration Statement shall become effective under the Securities Act.
Section 8.02 Termination Prior to Effective Date. This Agreement may be
terminated by the Underwriter, at its option, by giving notice to the Company,
if (i) the Company shall have failed, refused, or been unable, at or prior to
the Effective Date, to perform any agreement on its part to be performed
hereunder; (ii) any other condition of the Underwriter's obligations hereunder
is not fulfilled or waived by the Underwriter; (iii) a banking moratorium shall
have been declared by federal, New York or Minnesota authorities; (iv) there
shall have been such a serious, unusual and material change in general economic,
monetary, political or financial conditions, or the effect of international
conditions on the financial markets in the United States shall be such as, in
the judgment of the Underwriter, makes it inadvisable to proceed with the
delivery of the Securities; (v) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which, in the judgment of the Underwriter,
materially and adversely affects or will materially and adversely affect the
business or operations of the Company; or (vi) there shall be a material
outbreak of hostilities or material escalation and deterioration in the
political and military situation between the United States and any foreign
power, or a formal declaration of war by the United States of America shall have
occurred. Any such termination shall be without liability of any party to any
other party, except as provided in Section 7.01, 7.02 and 7.04 hereof; provided,
however, that the Company shall remain obligated to pay costs and expenses of
the Company and the Agent (but only to the extent of actual accountable
out-of-pocket expenses) to the extent provided in Section 2.02 hereof.
Section 8.03 Notice of Termination. If the Underwriter elects to prevent
this Agreement from becoming effective or to terminate this Agreement as
provided in Section 8.02, it shall notify the Company and the Company's counsel
promptly by telephone or transmitted by any standard form of telecommunication,
confirmed by letter sent to the address specified in Section 9.02 hereof. If the
Company shall elect to prevent this Agreement from becoming effective, it shall
notify the Underwriter promptly by telephone or transmitted by any standard form
of telecommunication, confirmed by letter sent to the addresses specified in
Section 9.02 hereof.
Section 8.04 Termination After Effective Date. The Company or the
Underwriter may terminate this Agreement at any time subsequent to the Effective
Date as provided below, and in such case, the Underwriter will be paid fees and
commissions accrued up to the date of such termination plus its expenses accrued
as of such date within thirty (30) days of such termination:
(a) The Company will have the ability to terminate this Agreement by notice to
the Underwriter upon the occurrence of any of the following:
(i) any of the circumstances described in clauses (iii) through (vi) of
Section 8.02;
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(ii) the Company has given the Underwriter notice of the Underwriter's
default in any material term of this Agreement, or material
non-compliance with any representation or warranty of the Underwriter
contained herein, and such default or non-compliance is not cured
within 30 days of such notice; or
(iii) termination of the Offering by the Company.
(b) The Underwriter will have the ability to terminate this Agreement by notice
to the Company upon the occurrence of any of the following:
(i) any of the circumstances described in clauses (iii) through (vi) of
Section 8.02;
(ii) the Underwriter has given the Company notice of the Company's default
in any material term of this Agreement, or material non-compliance
with any representation or warranty of the Underwriter contained
herein, and such default or non-compliance is not cured within 30 days
of such notice; or
(iii) termination of the Offering by the Company.
ARTICLE IX. MISCELLANEOUS
Section 9.01 Survival. The respective indemnity and contribution agreements
of the Company and the Underwriter contained in the representations, warranties,
covenants, and agreements of the Company set forth in Article IV hereof, shall
remain operative and in full force and effect, regardless of any investigation
made by, or on behalf of, the Underwriter, the Company, any of its officers and
directors, or any controlling person referred to in Article VII and shall
survive the sale of the Securities. The aforesaid indemnity and contribution
agreements shall also survive any termination or cancellation of this Agreement.
Any successor of any party or of any such controlling person, or any legal
representative of such controlling person, as the case may be, shall be entitled
to the benefit of the respective indemnity and contribution agreements.
Section 9.02 Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be mailed,
delivered or transmitted by any standard form of telecommunication, as follows:
If to the Underwriter, to:
American Investors Group, Inc. 00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000 Attention: Xxxxxx Xxxxx
Tel. (000) 000-0000 x 000
If to the Company, to:
American Church Mortgage Company 00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000 Attention: Xxxxxx Xxxxx
Tel. (000) 000-0000 x 000
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In either case with a copy to: Xxxxxxx, Street and Deinard
Professional Association 000 Xxxxx Xxxxx Xxxxxx Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000 Attention: Xxxxxx X. Xxxxxxxx Tel.
(000) 000-0000
Section 9.03 Successors and Assigns; Transfer. This Agreement shall inure
to the benefit of and be binding upon the Underwriter and the Company and their
respective successors and assigns, and the officers, directors and controlling
persons referred to in article VII. Nothing expressed in this Agreement is
intended or shall be construed to give any person or corporation, other than the
parties hereto, their respective successors and assigns, and the controlling
persons, officers and directors referred to in Article VII, any legal or
equitable right, remedy or claim under, or in respect of, this Agreement or any
provision herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective executors, administrators, successors,
assigns and such controlling persons, officers and directors, and for the
benefit of no other person or corporation. No purchaser of any Securities shall
be construed a successor, assign or third party beneficiary of this Agreement
merely by reason of such purchase. Except as provided in Section 5.02(d),
neither party may assign its rights and obligations under this Agreement without
the written consent of the other party.
Section 9.04 Cumulative Remedies. Unless otherwise expressly provided
herein, the remedies of the parties provided for herein shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of the party for whose benefit such remedy is provided, and may be
exercised as often as occasion therefor shall arise
Section 9.05 Attorneys' Fees. In the event of any action to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs, whether or not such action proceeds to
judgment.
Section 9.06 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement constitutes the entire agreement of the parties hereto
with respect to the matters addressed herein and supersedes all prior or
contemporaneous contracts, promises, representations, warranties and statements,
whether written or oral, with respect to such matters.
Section 9.07 Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without regard
to conflict of law principles.
Section 9.08 Confidentiality. The Company agrees to keep confidential all
non-public information concerning the marketing, selling and administration of
the Securities, except as disclosure may be required by law. The Underwriter
agrees to keep confidential all non-public information supplied to it by the
Company, including without limitation, all non-public information obtained
during any due diligence investigation of the Company.
22
Section 9.09 Rights to Investor Lists. The Offering will produce a list of
investors that purchase Securities, a list of prospects that respond to
advertisements but do not purchase any Securities and a list of former investors
whose Certificates have been repaid by the Company. Both the Company and the
Underwriter shall be able to use these lists for their own business purposes as
long as doing so does not interfere with the marketing, sale or administration
of the Securities.
Section 9.10 Waiver: Subsequent Modification. Except as expressly provided
herein, no delay or omission by any party in insisting upon the strict
observance or performance of any provision of this Agreement, or in exercising
any right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy, and no waiver by any party
or any failure or refusal of the other party to comply with its obligations
under this Agreement shall be deemed a waiver of any other or subsequent failure
or refusal to so comply by such other party. No waiver or modification of the
terms hereof shall be valid unless in writing and signed by the party to be
charged, and then only to the extent therein set forth.
Section 9.11 Severability. If any term or provision of this Agreement or
application thereof to any person or circumstance shall, to any extent, be found
by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term or provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
Section 9.12 Joint Preparation. The preparation of this Agreement has been
a joint effort of the parties and the resulting document shall not, solely as a
matter of judicial construction, be construed more severely against one of the
parties than the other.
Section 9.13 Captions. The title of this Agreement and the headings of the
various articles, section and subsections have been inserted only for the
purpose of convenience, are not part of this Agreement and shall not be deemed
in any manner to modify, explain, expand or restrict any of the provisions of
this Agreement.
Section 9.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, this Distribution Agreement is hereby entered into
by the undersigned parties as of the date first set forth above.
THE COMPANY: AMERICAN CHURCH MORTGAGE COMPANY
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, President
THE UNDERWRITER: AMERICAN INVESTORS GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, President
24
EXHIBIT A
COMPENSATION TO THE UNDERWRITER
Compensation for Sale of Shares: The Company shall pay the Underwriter a
commission of 5.95% of the sale price of each share sold in the Offering.
Compensation for Sale of Certificates: The Company shall pay the
Underwriter a commission and an underwriter's management fee upon each sale of a
Certificate, and a commission upon each renewal of a Certificate, based on the
principal amount of the Certificates sold or renewed in the Offering as follows:
=================== ============= =============== =============== ================ ===============
Maturity: 2 Years 3 Years 4 Years 5 Years 7 Years
------------------- ------------- --------------- --------------- ---------------- ---------------
------------------- ------------- --------------- --------------- ---------------- ---------------
Commission: 2.50% 2.75% 3.25% 3.50% 4.125%
------------------- ------------- --------------- --------------- ---------------- ---------------
------------------- ------------- --------------- --------------- ---------------- ---------------
Underwriter's 0.50% 0.50% 0.50% 0.50% 0.50%
Management Fee on
Sale (1)
------------------- ------------- --------------- --------------- ---------------- ---------------
------------------- ------------- --------------- --------------- ---------------- ---------------
Commission on 1.25% 1.75% 2.25% 2.75% 3.75%
Renewal
=================== ============= =============== =============== ================ ===============
(1) The Company shall not pay the Selling Agent an Underwriter's Management
Fee on renewals of Certificates.
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