MANDATORY REDEMPTION DEBENTURES
MINIMUM: $3,050 Debentures
MAXIMUM: $6,091 Debentures
UNDERWRITING AGREEMENT
November ___, 1997
Xxxxxx & Xxxxxxxxx Financial, Inc.
Pillsbury Center
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000-0000
Ladies and Gentlemen:
1. INTRODUCTION. United Homes, Inc., an Illinois corporation (the
"Company") proposes to issue and sell to the public a minimum of 3,050 (the
"Minimum") and up to 6,091 (the "Maximum") of its $1,000 denomination
Mandatory Redemption Debentures, as described in the Registration Statement
referred to below. Such Minimum and Maximum number of its Mandatory
Debentures are collectively referred to in this Agreement as the "Original
Debentures." The Company also proposes to issue and sell to the public up to
an additional 1,015 of such Mandatory Redemption Debentures. Such
additional number of its Mandatory Redemption Debentures are referred to in
this Agreement as the "Option Debentures." The Original Debentures and
Option Debentures are referred to in this Agreement as the "Debentures."
The Debentures are to be issued under an indenture, dated as of
November ___, 1997, (the "Indenture") between the Company and National City
Bank of Minneapolis as trustee (the "Trustee"). The Company hereby confirms
its agreement with Xxxxxx & Xxxxxxxxx Financial, Inc., as underwriter
(referred to as "you" or as the "Underwriter"), to offer the Debentures on a
"best efforts" basis, upon the terms and conditions herein. The Debentures
are more fully described in the Registration Statement and Prospectus
hereinafter described.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to, and agrees with, the Underwriter that:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-1
(Commission File No. 333-33965) with respect to the Debentures including
one or more forms of Preliminary Prospectus in conformity with the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively referred to as the
"Act") in the form heretofore delivered to you; one or more amendments to
such Registration Statement have been prepared and filed and the Company
may prepare and file additional amendments. If the Company has elected
not to rely on Rule 430A, the Company has prepared and will promptly file
an amendment to the Registration Statement and an amended prospectus
(provided the Underwriter has consented to such filing). If the Company
has elected to rely on Rule 430A, it will prepare and timely file a
prospectus pursuant to Rule 424(b) that discloses the information
previously omitted from the prospectus in reliance upon Rule 430A.
Copies of such Registration Statement and each pre-effective amendment
thereto, and each related preliminary
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prospectus have been delivered by the Company to the Underwriter. Such
Registration Statement, as amended, or supplemented, including all
prospectuses included as a part thereof, financial schedules, exhibits,
the information (if any) deemed to be a part thereof pursuant to Rules
430A and 434 under the Act and any Registration Statement filed pursuant
to Rule 462 under the Act, is herein referred to as the "Registration
Statement." The term "Prospectus" as used herein shall mean the final
prospectus, as amended or supplemented, included as part of the
Registration Statement filed with the Commission when it becomes
effective; provided, however, that if a prospectus is filed by the
Company pursuant to Rule 434 under the Act, the term "Prospectus" as used
herein shall mean the prospectus so filed pursuant to Rules 424(b) and
430A and the term sheet so filed pursuant to Rule 434. The term
"Preliminary Prospectus" as used herein means any prospectus, amended or
supplemented; used prior to the Effective Date (as defined herein) and
included as part of the Registration Statement, including any prospectus
filed with the Commission pursuant to Rule 424(b).
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus nor have any proceedings been
instituted for that purpose nor are any such proceedings threatened.
Each Preliminary Prospectus, at the time of filing or use, complied with
the requirements of the Act.
(c) As of the Effective Date or as of the filing date (or delivery to
the Underwriters) of any subsequent amendment or supplement, as the case
may be, and at all times subsequent thereto up to and including the Final
Closing Date (as hereinafter defined): (i) the Registration Statement and
Prospectus contain and will contain all statements which are required to
be stated therein by the Act and will comply in all respects with the
Act; and (ii) neither the Registration Statement nor the
Prospectus includes or will, at any time up to and including the Final
Closing Date, include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, provided however, that none of the
representations and warranties contained in this subsection 1(c) shall
apply to statements in, or omissions from, the Registration Statement,
Preliminary Prospectus, Prospectus, or any amendment thereof, or
supplement thereto, which are based upon and conform to written
information furnished to the Company by the Underwriter, as identified in
Section 13 herein, specifically for use in the preparation of the
Registration Statement, Preliminary Prospectus or the Prospectus, or any
amendments or supplements thereto.
(d) On or promptly after the Effective Date, the Company will prepare
and file a final Prospectus pursuant to Rule 424(b) that discloses the
information previously omitted in reliance upon Rule 430A. The
Prospectus, as amended or supplemented from time to time, shall comply in
all material respects with the requirements of the Act and with the Trust
Indenture Act.
(e) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission.
(f) The consolidated financial statements of the Company, including the
related notes, included in the Registration Statement and in the
Prospectus fairly present, on the basis stated
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therein, the consolidated financial position, results of operations, cash
flows and changes in shareholders' equity of the Company and its
consolidated Subsidiaries at the dates and for the periods to which they
relate. Such financial statements and related notes have been prepared
in accordance with generally accepted accounting principles consistently
applied, except as otherwise stated therein, throughout the periods
involved and comply in all respects with the requirements of the Act.
The selected financial information set forth in the Prospectus is fairly
presented and prepared on a basis consistent with such audited
consolidated financial statements and the books of the Company included
in the Registration Statement. The supporting schedules included in the
Registration Statement present fairly the information required to be
stated therein. No other financial statements or schedules are required
to be included in the Registration Statement or Prospectus.
(g) Ernst & Young, LLP, who have examined the financial statements and
who have expressed their opinions with respect to the audited
consolidated financial statements and schedules included in the
Registration Statement and filed with the Commission as part of the
Registration Statement and the Prospectus, are independent public
accountants as required by the Act.
(h) The Company and its wholly-owned subsidiaries, United Homes of
Illinois, Inc., an Illinois corporation, United Homes, Inc., an Arizona
corporation, and United Homes of Michigan, Inc., a Michigan corporation
(individually a "Subsidiary" and collectively the "Subsidiaries") are,
and at each Closing Date will be, duly organized and validly existing and
in good standing under the laws of their respective states of
incorporation, with full power and authority (corporate and other) to
own, lease and operate their properties and conduct their business as
currently carried on and contemplated and described in the Registration
Statement and Prospectus. No proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
or curtail such qualification. The Company and Subsidiaries are
conducting their respective businesses so as to comply in all respects
with applicable federal, state and local statute, ordinances, rules and
regulations except for such matters which either individually or in
the aggregate do not have a material adverse effect on the Company's
condition (financial, loss of key personnel or otherwise), business,
properties, assets, results of operations (present or prospective) or
net worth. The Company and Subsidiaries hold all licenses, franchises,
grants, authorizations, approvals, easements, consents, orders,
certificates and permits from state, federal and other regulatory
authorities necessary for the conduct of their business as
described in the Registration Statement except for such licenses,
franchises, grants, approvals, easements, consents, orders, certificates
and permits that the Company or any Subsidiary may fail to possess that
individually or in the aggregate do not have a material adverse effect on
the Company's or any Subsidiary's business or financial condition, or
has obtained waivers from any such applicable requirements from the
appropriate state, federal or other regulatory authority. No proceeding
has been instituted (or to the Company's knowledge threatened) in any
such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification.
(i) The Company and its Subsidiaries, are, and will be on each Closing
Date, duly qualified to do business as a foreign corporation in good
standing in each jurisdiction in which the character and location of its
assets or its business (existing or as contemplated by the
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Prospectus) requires such qualification, other than in jurisdictions in
which the failure to so qualify would not have a material adverse effect
on the business of the Company or any Subsidiary. No proceeding has
been instituted in any such jurisdiction revoking, limiting or curtailing
or seeking to revoke, limit or curtail such qualification.
(j) Copies of the Company's and Subsidiaries' Articles of Incorporation
and bylaws, as amended to date, have been provided to Underwriter's
counsel, and since July 1, 1997 neither has been subsequently amended or
restated as of the date of this Agreement. There has not been and at
each Closing Date shall not have been any change in the Company's
Articles of Incorporation or bylaws from those filed as exhibits to
the Registration Statement. Neither the Company nor any
Subsidiary is in violation of its Articles of Incorporation, bylaws or
other governing instruments; or in default (nor with the giving of notice
or the passage of time or both would be in default) under the A&D Lines,
the Xxxxxx Line or Residential Line I (as such lines are defined in the
Prospectus, collectively herein, the "Lines" and individually, a "Line").
Neither the Company nor any Subsidiary is in default (nor with the
giving of notice or the passage of time or both would be in default)
in the performance of any obligation, agreement or condition contained
in any contract or any bond, debenture, note, indentured loan agreement
or other evidence of indebtedness or any loan agreement, contract or
joint venture agreement of the Company and Subsidiaries or other
instrument, other than the Lines, to which they are subject or by
which any of their property or assets are subject, except for defaults
that individually or in the aggregate do not have a material adverse
effect on the Company's or any Subsidiary's business or financial
condition.
(k) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus and, except in each case as
described in or contemplated by the Registration Statement and
Prospectus, prior to the Final Closing Date: (i) the Company and its
Subsidiaries have not incurred, and will not have incurred, any
liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business; (ii) the Company
and its Subsidiaries have not and will not have paid or declared any
dividends or other distributions on its capital stock; (iii) there has
not been and will not have been any material change in the capital stock
or outstanding short term or long term debt, including any capitalized
lease obligation, of the Company and its Subsidiaries (except for change
resulting from draws on the Lines in the ordinary course of business
and as set forth in the Prospectus), or any issuance of options,
warrants, convertible securities, or other rights to purchase the
capital stock of the Company and its Subsidiaries or any material
adverse change or a development involving a change in or affecting the
condition (financial or otherwise), business, key personnel, properties,
assets, results of operations (present or prospective), or net worth of
the Company and its Subsidiaries; (iv) the Company and its Subsidiaries
have not sustained any material loss or damage to their properties or
material interference with their businesses, whether or not insured; and
(v) there has not been and will not have been any event which constitutes
an "Event of Default" under the provisions of the Indenture without
regard to any notice requirements with respect thereto contained in the
Indenture.
(l) Except as accurately described in the Prospectus, there is no
action, suit or proceeding to which the Company and its Subsidiaries are
a party, or of which any property of the Company and its Subsidiaries are
subject pending before or brought by any court or governmental agency or
body or any arbitrator (domestic or foreign) which might adversely affect
the consummation of the transactions contemplated by this Agreement or
repayment of the Debentures; nor to the knowledge of the Company or
any Subsidiary is any such action, suit or proceeding threatened which,
if adversely determined, would, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise),
business, properties, assets, results of operations (present or
prospective) of the Company or any Subsidiary.
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(m) There are no contracts or other documents of the Company and its
Subsidiaries are required to be described or referred to in the
Registration Statement or Prospectus or required by the Act to be filed
as exhibits to the Registration Statement which have not been described
or referred to therein or filed or incorporated by reference as required.
All contracts described in the Registration Statement or Prospectus or
filed as exhibits thereto are in full force and effect as of the date of
the Prospectus and through the Final Closing Date. All descriptions of
such contracts and documents in the Prospectus, required to be described,
are correct in all material respects. The Company and its Subsidiaries
are not in breach of or default under any of such contracts nor is the
Company and its Subsidiaries in default with respect to any provision of
any lease, loan agreement, franchise, license, permit or other
contractual obligation to which it is a party or by which it may be bound
or to which any of the property or assets of the Company and its
Subsidiaries are subject, except for defaults that individually or in
the aggregate do not have a material adverse effect on the Company's or
any Subsidiary's business or financial condition. There does not exist
any fact which constitutes an event of default as defined in such
documents or which, with giving of notice or lapse of time or both,
would constitute such an event of default.
(n) The Company has full power and authority to execute and deliver
this Agreement, the Indenture and the Debentures and to perform its
obligations hereunder and thereunder. This Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes
a valid, legal and binding obligation of the Company enforceable in
accordance with its terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws or
equitable principals affecting the enforcement of creditors' rights
generally and except as rights to indemnify hereunder may be limited by
applicable securities laws, including the Act. No consent, approval,
authorization, order, registration, filing, qualification, license, or
permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or its properties or
assets, is required (i) for the execution, delivery and performance of
this Agreement, (ii) for the execution, delivery and performance by the
Company under the Indenture and the Debentures; or (iii) the consummation
of the transactions contemplated hereby and thereby, including the
issuance, sale and delivery of the Debentures except the registration
under the Act of the Debentures, the qualification of the Indenture under
the Trust Indenture Act (if necessary), and such consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses,
and permits as may be required under state securities or blue sky laws
or pursuant to the rules of the National Association of Securities
Dealers, Inc. in connection with the offer and sale of the Debentures
by the Underwriter.
(o) The Company has the power and authority to execute and deliver the
Indenture and to carry out the terms thereof, and has the power to
authorize, issue and sell the Debentures on the terms and conditions set
forth in this Agreement and the Indenture. The Indenture has been duly
and validly authorized, executed and delivered by the Company, is in
substantially the form filed as an exhibit to the Registration
Statement, complies with the Trust Indenture Act and constitutes a
valid and legally binding obligation of the Company enforceable against
the Company in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, moratorium or other
similar laws or equitable principals affecting the enforcement of
creditors' rights generally and except as rights to indemnify hereunder
may be limited by applicable securities laws, including the Act. The
Indenture conforms to the descriptions
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thereof contained in the Registration Statement and the Prospectus. The
Indenture is not required to be qualified under the Trust Indenture Act
of 1939, as amended.
(p) The Debentures have been duly and validly authorized and, when
authenticated by the Trustee and issued, delivered and sold in accordance
with this Agreement and the Indenture, will have been duly and validly
executed, authenticated, issued and delivered and will constitute valid
and legally binding obligations of the Company entitled to the benefits
provided by the Indenture and enforceable against the Company in
accordance with their terms. The Debentures will be issued free and
clear of all liens, encumbrances, claims, security interests,
restrictions on transfer and other defects of title. The Debentures
conform to the descriptions thereof contained in the Registration
Statement and the Prospectus. The Certificates for the Debentures are in
due and proper form as provided for in the Indenture.
(q) The execution, delivery and performance of this Agreement, the
Indenture and the Debentures, and the consummation of the transactions
contemplated herein and therein, will not conflict with, or constitute a
breach of, or default under or with the giving of notice or the passage
of time or both would so constitute a breach or default, or result in the
creation or imposition or acceleration of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary pursuant to:
(i) any bond, debenture, note, contract, lease, license, indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, joint
venture, or other agreement, evidence of indebtedness or instrument to
which the Company and Subsidiary are a party, or by which they may be
bound or to which any of the properties or assets of the Company and
Subsidiaries are subject; (ii) the Company's and any Subsidiaries'
Articles of Incorporation, bylaws, or other governing documents, as
amended; or (iii) any law, order, rule, regulation, writ, injunction or
decree of any government, governmental agency, court, or arbitrator
having jurisdiction over the Company's and its Subsidiaries' properties.
No event has occurred and condition exists which upon the passage of time
or the giving of notice, would constitute such an event of default under
any such instrument or agreement. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency, other
governmental body or any self-regulatory agency having jurisdiction over
the Company or any Subsidiary and their property or assets is required
for the execution and delivery and performance of this Agreement, the
Indenture or the Debentures or the consummation of the transactions and
performance contemplated herein or therein or in the Prospectus, except
such as will be or have been obtained under the Act and except as may be
required under applicable blue sky laws or the rules and regulations of
the National Association of Securities Dealers, Inc.
(r) All of the issued and outstanding shares of capital stock of the
Company and Subsidiaries are duly authorized and validly issued, full
paid and nonassessable; 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 holders thereof are not subject to personal liability
by reason of being such holders. All the issued and outstanding capital
stock of the Company is owned, free and clear of any security interests,
lien or restriction by United Development Management Company. Neither
the Company nor Subsidiaries have any outstanding options or warrants
for the issuance of capital stock. Except as provided on Schedule 2(r)
attached hereto, the
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Company owns, free and clear of any security interest, lien or
restriction, all the issued and outstanding capital stock of the
Subsidiaries. The authorized and issued indebtedness of the
Company and Subsidiaries is correctly set forth in the Prospectus, as of
the dates indicated. Except as described in the Prospectus, there are no
outstanding loans or advances or guarantees of Indebtedness by the
Company and Subsidiaries to or for the benefit of any of the officers,
directors or affiliates of the Company required to be described in the
Prospectus pursuant to the Act.
(s) The capitalization of the Company as set forth in the Prospectus
was as so described on the date as of which it is set forth therein; and
will be as so described on each Closing Date (except as it may change as
a result of draws on the Lines in the ordinary course of business and
as set forth in the Prospectus). There are no other classes of stock,
authorized or outstanding, except as described therein.
(t) The statistical information in the Prospectus which is derived from
the Company's financial or other records has been accurately derived
therefrom and, as set forth, is not in conflict with other information
known to the Company.
(u) All descriptions in the Registration Statement or Prospectus of
statutes, regulations, legal or governmental proceedings, the Indenture,
the Debentures, or other contracts or other documents are accurate in all
material respects and fairly present the information shown.
(v) The Company is not in violation of any law, order, rule,
regulation, writ, injunction, or decree of any governmental authority or
court, domestic or foreign, or arbitrator which violation would have a
material adverse effect on the condition (financial or otherwise),
business, properties, results of operations (present or
prospective), assets or net worth of the Company.
(w) The Company holds all, and is operating in compliance with all,
franchises, grants, authorizations, licenses, registrations, approvals,
permits, easements, consents, certificates and orders of any government
or self-regulatory body (domestic and foreign) required for the conduct
of its business or as described in the Prospectus (collectively the
"Licenses"), except for failures to obtain and non-compliances that
individually or in the aggregate do not have a material adverse effect
on the Company's or any Subsidiary's business or financial condition,
and all the Licenses are valid and in full force and effect and will be
valid and in full force and effect through the Final Closing Date.
(x) The Company and Subsidiaries have good and marketable title (in fee
simple as to real property) to all real and personal properties and
assets described in the Prospectus and the financial statements as owned
by them, free and clear of all security interests, liens, charges,
encumbrances, restrictions or defects except those arising in the
ordinary course of business in the development of lots and construction
of homes as reflected in the financial statements included in the
Prospectus or under the Lines and which do not have a material adverse
effect on the Company's and Subsidiaries' use of such property or the
conduct of their business.
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(y) Except as disclosed in the Prospectus, the Company holds valid and
enforceable leases for the properties (real and personal) described in
the Prospectus as leased by it; the Company is not in default (or with
the giving of notice or the passage of time or both would be in default)
in respect to any of such leases, and no claim of any sort has been
asserted by anyone adverse to the rights of the Company and Subsidiaries
as lessee under any such lease or questioning its right to continued use
and possession of any of the leased properties under any such lease.
(z) To the best of the Company's knowledge, the Company and
Subsidiaries own or possess adequate rights to use all patents, patent
applications, patent rights, licenses, inventions, technology,
proprietary rights, trademarks, trademark applications, service marks,
trade names, trademark registrations, service xxxx registrations,
copyrights, and other proprietary rights or information used in or
necessary for the conduct of its present or intended business to the
extent material to the Company's and Subsidiaries' business. Except as
stated in the Registration Statement and Prospectus, to the best of the
Company's knowledge, the Company and Subsidiaries are not in violation
of, nor has the Company received any notice of any claim of infringement
or violation of the rights of other with regard to any patents, patent
applications, patent rights, licenses, inventions, technology,
proprietary rights, trademarks, trademark applications, service marks,
trade names, trademark registrations, service xxxx registrations,
copyrights, and other proprietary rights or information.
(aa) All United States federal income tax returns required by law to be
filed by or on behalf of the Company and the Subsidiaries have been filed
and all taxes shown by such returns or otherwise assessed which are due
and payable as of or prior to the date hereof have been paid, except
taxes which are being contested in good faith and as to which adequate
reserves have been provided in order to comply with GAAP. All other tax
returns that are required to have been filed by or on behalf of the
Company and the Subsidiaries pursuant to applicable foreign, state, local
or other law have been filed, and the Company and the Subsidiaries have
paid all taxes due as of or prior to the date hereof pursuant to such
returns or pursuant to any assessment received by them, except for such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. The charges, accruals and
reserves on the books of the Company and the Subsidiaries,
consolidated, in respect of any income and corporation tax liability (or
for any payments to be made in respect of any tax sharing agreements or
arrangements) for any years not finally determined are adequate to meet
any assessments or reassessments for additional income tax for any years
not finally determined.
(bb) The Company has not distributed and will not distribute any
prospectus or any other offering material in connection with the offering
and sale of the Debentures other than the Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by
the Company and consented to by the Underwriter.
(cc) Other than the subsidiaries of the Company listed in Exhibit 21 to
the Registration Statement, the Company owns no capital stock or other
equity or ownership or proprietary interest in any corporation,
partnership, limited liability company, association, trust or other
entity and is not affiliated (as that term is defined under the Act) with
any other company or
8
business entity except as explicitly stated in the Prospectus. The
Company is not owned or controlled, directly or indirectly, by any
corporation, association or other entity.
(dd) The Company maintains a system of internal accounting controls
sufficient to provide that:
(i) transactions are executed in accordance with management's
general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(ee) The Company and Subsidiaries maintain insurance of the types and in
amounts which are adequate for their businesses.
(ff) No organized labor dispute with the employees of the Company or
any Subsidiary exists, or are imminent. To the best of Company's or
any Subsidiary's knowledge, no officer of the Company or any Subsidiary
presently intends to leave the Company or any Subsidiary.
(gg) The Company is not an "investment company" within the meaning of
such term as defined in the Investment Company Act of 1940, as amended,
and will conduct its business in such a manner as to not become an
investment company as so defined.
(hh) Neither the Company nor any employee or agent of the Company has
made any payment of funds of the Company or received or retained funds in
violation of any law, rule or regulation on behalf of the Company or
any Subsidiary.
(ii) The Company has not engaged any "finder" with respect to the
transactions contemplated by this Agreement and there is no outstanding
claim for services in the nature of a "finder's fee" with respect to such
financing; and the Company agrees to indemnify and hold
9
the Underwriters harmless from and against any claims, losses, judgments
or expenses resulting from any finder's fees payable in connection
herewith.
(jj) There are no outstanding loans or advances or guarantees of
indebtedness by the Company to or for the benefit of any of the officers
or directors of the Company or any of the members of the families of any
of them except as are described in the Prospectus.
(kk) The Company, after giving effect to the execution, delivery and
performance of this Agreement, the Indenture, and the Debentures and the
consummation of the transactions contemplated hereby and thereby will not
be:
(i) insolvent;
(ii) left with unreasonably small capital with which to engage in
its business; or
(iii) incurring debts beyond its ability to pay such debts as they
mature.
(ll) Neither the filing of the Registration Statement nor the offering
or sale of the Debentures by the Company as contemplated by this
Agreement gives rise to any rights, of or relating to the co-sale or
registration of any securities of the Company, nor do any security
holders of the Company have any right to demand that the Company register
their securities, in either case other than those which have been waived
or satisfied.
(mm) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in or which has
constituted or which constitute the stabilization or manipulation of the
price of any outstanding securities of the Company (including the
Debentures) to facilitate the sale or resale of the Debentures.
(nn) On each Closing Date all transfer or other taxes, if any (other
than income taxes), which are required to be paid in connection with the
sale or transfer of the Debentures will have been fully paid or provided
for by the Company and all laws imposing such taxes will have been fully
complied with.
(oo) Any certificate signed by any officer of the Company and delivered
to the Underwriter or to counsel for the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to
matters covered thereby.
(pp) Each acceptance by the Company of an offer for the purchase of
Debentures and each issuance of Debentures shall be deemed an affirmation
of the Company that the representations and warranties contained herein
are true and correct at the time of such acceptance or of such issuance,
in each case as though expressly made at that time.
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3. PURCHASE AND SALE:
(a) On the basis of representations, warranties and agreements herein
contained and subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the Underwriter at least the Minimum
number (approximately $3,000,000) and up to the Maximum number
(approximately, $6,000,000) of the Original Debentures at the Price to
Public set forth on the cover page of the Prospectus, less an
underwriting discount and commission equal to 7%, plus accrued interest.
Interest will accrue from the date of original issuance (the Closing
Date of the Minimum) or with respect to any Debentures purchased after
March 15, 1998, from March 15, 1998. The Underwriter will solicit
indications of interest from the public for the Original Debentures and
will purchase from the Company the approximate amount of Original
Debentures for which the Underwriter has accepted indications of
interest. The Underwriter is not obligated to purchase any of the
Original Debentures, but if the Underwriter does purchase any of the
Original Debentures it must purchase at least the Minimum. Even if the
Underwriter purchases the Minimum, it is not obligated to purchase any
additional Debentures. In the event the Underwriter, for whatever
reason, fails to purchase the Minimum within 60 days of the date hereof,
this Agreement will automatically terminate. The Company can only sell
Debentures to the Underwriter during the term of this Agreement.
(b) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriter to purchase the
Option Debentures at the same purchase price as the Original Debentures
for use in covering overallotments made by the Underwriter in the sale
and distribution of the Original Debentures. The Option granted
hereunder may be exercised at any time after the Effective Date (as
defined in Section 6(a) hereof) and prior to the Termination Date upon
notice (confirmed in writing) by the Underwriter to the Company setting
forth the aggregate amount of Option Debentures as to which the
Underwriter is exercising the option and the date on which such Option
Debentures are to be delivered. The option granted hereby may be
cancelled by the Underwriter as to the Option Debentures for which the
option is unexercised at any time prior to the Termination Date upon
notice to the Company.
(c) The Underwriter will offer and solicit indications of interest for
the Debentures, as soon as the Underwriter deems practicable after the
Registration Statement becomes effective, subject to the terms and
conditions of this Agreement and in accordance with the Prospectus. The
Underwriter will offer and sell directly to the public the Debentures
the Underwriter has purchased from the Company, if any, as soon as the
Underwriter deems practicable, subject to the terms and conditions of
this Agreement and in accordance with the Prospectus, at the Price to
Public set forth on the cover page of the Prospectus, plus accrued
interest from the original issuance date of the Debentures (the Closing
Date of the Minimum) or, with respect to Debentures sold after March 15,
1998, from March 15, 1998. The Underwriter may appoint dealers
("Selected Dealers") which are members in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") to offer
and sell the Debentures and, subject to compliance with applicable rules
and regulations of the NASD, may reallow concessions to such Selected
Dealers from the public offering price of the Debentures in such amount
as the Underwriter may deem appropriate. The Underwriter will furnish
the Company with such information about the distribution arrangements as
may be necessary for inclusion in the Registration Statement. It is
understood that the public offering price and concessions may vary
after the initial public offering. The Underwriter shall offer and sell
the Debentures only in jurisdictions in which the offering of Debentures
has been duly registered or qualified, or is exempt from registration or
qualification, and shall take reasonable measures to effect compliance
with applicable state and local securities laws.
(d) You shall be required to take and pay for only such Debentures as
you commit to purchase by written confirmation, subject in each case to
applicable closing conditions as herein set forth.
11
4. DELIVERY AND PAYMENT. On the basis of the representations,
warranties and agreements, but subject to the terms and conditions set forth
in this Agreement, payment of the purchase price for, and delivery of, the
Debentures sold as contemplated hereunder shall be made as follows:
(a) You shall promptly confirm to the Company the dollar amount of the
Debentures which you intend to purchase. The first closing shall be
held on the third full business day after the date of your confirmation
for purchase of the Minimum. Thereafter, monthly closings will be held
on such date on or after the second to last business day of each month
as agreed upon by the Underwriter and the Company, commencing the month
in which the first closing occurs and through month after month of the
Termination Date. Provided the Minimum has been sold, closings may be
held more often upon receipt by the Company of a confirmation from the
Underwriter of its intent to purchase the Debentures. The date of each
closing is referred to herein as a "Closing Date" and the last closing
hereunder is referred to herein as the "Final Closing Date". Unless
otherwise agreed by the Underwriter and the Company, each closing will
take place at the offices of Xxxxxxxxxx & Xxxxx, P.A., at 10:00 a.m.,
on the date of such closing.
(b) The certificates for the Debentures to be delivered at each
Closing Date will be in definitive form, in such denominations and
registered in such names as the Underwriter may request and will be made
available for inspection and packaging at the Underwriter's offices or
at such other place as designated by you at 10:00 a.m., Minneapolis
time, on the second full business day prior to each Closing Date.
(c) Upon closing of the sale by the Company of any Debentures, you
shall receive in addition to the 7% underwriting discount and commission
provided in Section 3(a): (i) a management fee equal to two percent
(2%) of the aggregate dollar amount sold; (ii) a non-accountable expense
allowance equal to one percent (1%) of the aggregate dollar amount sold;
and (iii) reimbursement for your accountable expenses referred to in
paragraph 5(q) (not to exceed two percent (2%) of the aggregate dollar
amount of Debentures sold).
(d) On each Closing Date, you shall remit to the Company against
delivery to you or your designated agent, the purchase price for the
Debentures you have purchased from the Company. Such purchase price may
be remitted to the Company net of the commissions referred to in
paragraph 3(a) and management fees and the accountable expenses and
non-accountable expense allowance referred to in paragraph 4(c).
Appropriate instructions for the registration of the Debentures and
authentication and delivery thereof pursuant to the Indenture, which
instructions shall include the names, addresses and social security or
tax identification numbers of the registered holders and the principal
amounts of the Debentures. The Company shall have instructed the Trustee
to accept instructions for the registration of the Debentures directly
from you, and copies of such instructions shall be given to the Company
at the same time they are furnished to the Trustee.
12
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective (if it has not already been declared
effective) as promptly as possible and will not at any time, whether
before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall
not previously have been advised and furnished with a copy a reasonable
time prior to the proposed filing or to which you or your counsel shall
object or which is not in compliance with the Act. If at any time prior
to the Termination Date, any event shall occur which in the professional
judgment of counsel to the Company or of counsel to the Underwriter would
cause the Registration
13
Statement or the Prospectus to include an untrue statement of a material
fact or omit to state a material fact required to make the statements
made, in light of the circumstances under which they were made, not
misleading or otherwise requires an amendment to the Registration
Statement or supplement to the Prospectus, the Company will prepare and
file with the Commission any amendments to the Registration Statement or
supplements to the Prospectus which may be necessary and will cause the
same to become effective as soon as practicable, subject to the
provisions of the prior sentence. The Company will make all filings of
the Prospectus required under the Act.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise you of any requests made by the Commission (or any
state securities or Blue Sky authority) for amending the Registration
Statement, (or any state securities or Blue Sky authority) of any stop
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or of the institution of any proceedings for that
purpose and will use its best efforts to prevent the issuance of any such
order and, if any such order is issued, will use its best efforts to
obtain the lifting thereof as promptly as possible. The Company will
also promptly comply with any requests for additional information.
(c) The Company will furnish to you copies of the Registration
Statement, including exhibits, all amendments thereto (including pre-
effective and post-effective), each Preliminary Prospectus, the
Prospectus and any supplements thereto, in each case as soon as available
and in such reasonable quantities as you may, from time to time, request.
(d) The Company consents to the use, in accordance with the provisions
of the Securities Act and of the securities or Blue Sky laws of the
jurisdictions in which the Debentures are offered by the Underwriter or
by Selected Dealers, prior to the Effective Date, of each Preliminary
Prospectus furnished by the Company
(e) The Company will continue to use its best efforts to register or
qualify the Debentures for sale by the Underwriter and any Selected
Dealers under the securities or Blue Sky laws of such jurisdictions as
you may request and will file such consents to service of process or
other documents as may be necessary in order to effect such registration
or qualification; provided, however, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to the
service of process in suits, other than those arising out of the offering
or sale of the Debentures or subject itself to taxation, in any
jurisdiction where it is not now so subject. In each jurisdiction where
any of the Debentures shall have been registered or qualified as provided
above, the Company will continue such registrations or qualifications in
effect for so long as may be required for purposes of the distribution of
the Debentures and shall file such statements and reports as are or may
be required by the laws of such jurisdiction to continue such
qualification in effect for so long as there are Debentures outstanding.
The Company will notify the Underwriter immediately of, and confirm in
writing, the suspension of qualification of the Debentures or threat of
such action in any jurisdiction. The Company will use its best efforts
to qualify or register the Debentures for sale in nonissuer transactions
under (or obtain exemptions from the application of) securities laws of
such states designated by the Underwriter (and thereby permit market and
making transactions and secondary trading of the Debentures in such
states); and will comply with such securities laws and will continue such
qualifications, registrations and exemptions in effect for so long as the
Debentures remain outstanding.
14
(f) If at any time during the period that the delivery of a Prospectus
relating to the Debentures is required under the Act, any event occurs as
a result of which the Prospectus, as then amended or supplemented, would
include any 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 under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply
with the Act, the Company promptly will notify you thereof and will
prepare and file with the Commission at its own expense an amendment or
supplement which will correct such statement or omission or effect such
compliance, subject to the requirements of advice and objection contained
in the first sentence of paragraph a.
(g) As soon as practicable (but in no event later than 90 days after
the Effective Date) the Company will make generally available to its
security holders, including Debenture holders, and furnish to
you, an earnings statement of the Company covering the period of 12
months beginning not later than the first day of the next fiscal quarter
following the Effective Date of the Registration Statement which will
satisfy the requirements of Section 11(a) or Rule 158 of the Act and
which need not be certified by independent public accountants.
(h) During a period of five years from the Effective Date, the Company
will, as soon as practicable, deliver to the Underwriter, without need
of request:
(i) Copies of each report (financial or other) or proxy
solicitation material mailed to security holders of the Company;
(ii) After the end of each of the first three fiscal quarters, a
copy of the statement of income of the Company for such quarter and
a copy of the balance sheet of the Company as of the end of such
quarter all in reasonable detail and certified by its principal
financial or accounting officer or, in the alternative, a report on
Form 10-Q or 10-QSB, as filed with the Commission;
(iii) After the end of each fiscal year, a balance sheet of the
Company as of the end of such fiscal year, together with statements
of income, changes in cash flows and stockholders' equity for such
fiscal year, in reasonable detail and accompanied by a copy of the
certificate or report thereon of the independent certified public
accountants or, in the alternative, a report on Form 10-K or
Form 10-KSB for such fiscal year; and
(iv) Copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange or
Nasdaq.
(i) The Company will file with the Commission in a timely manner all
reports on Form SR required by Rule 463 and will furnish to you copies of
any such reports as soon as practicable after the filing period.
15
(j) During the period that the Company is required to furnish reports
pursuant to paragraph h above, the Company will notify you promptly of
the commencement of any litigation or proceedings against the Company or
any of its officers.
(k) The Company will apply the net proceeds from the sale of the
Debentures in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(l) The Company shall cooperate with the Underwriter and its counsel in
connection with their investigation of the Company and related matters
and shall furnish to the Underwriter or its counsel all such information
and documents as may be requested.
(m) The Company agrees that from the date of its execution of this
Agreement to the Final Closing Date, it will issue press releases, make
public statements and respond to inquiries of the press and securities
analysts only (i) in accordance with its obligations under the Securities
Exchange Act of 1934, as amended, after conferring with its counsel or
(ii) after conferring with its counsel and with the consent of the
Underwriter.
(n) The Company will not claim the benefit of any usury laws against
any holders of the Debentures.
(o) The Company will provide the Underwriter with copies of
certificates and supporting documentation furnished to the Trustee
pursuant to the Indenture or otherwise.
(p) Continue to appoint its current auditors or any replacement firm of
auditors acceptable to you to audit its financial statements, provided
that you shall not unreasonably withhold your consent to a replacement.
(q) The Company will pay, in addition to the Underwriter commission
and discount referred to in paragraph 3(a) and management fee,
accountable expenses and non-accountable expense allowance (as described
in paragraph 4(c) hereof), upon the closing of the sale of any of the
Debentures, unless otherwise limited by this Agreement, all other
expenses related to the subject matter of this Agreement including: (i)
all expenses incident to the issuance and delivery of the Debentures;
(ii) the first $20,000 of the expenses charged by Xxxxxxx Corporation,
as financial printer, for services rendered in connection with the
offering described in the Prospectus and one-half of the expenses
charged for printing Preliminary Prospectuses; (iii) all expenses
incident to the preparation, filing, delivery and qualification of the
Indenture and any amendments, supplements or submissions related thereto;
(iv) all Commission, National Association of Securities Dealers, Inc.
("NASD") and state securities or Blue Sky filing fees and all fees and
expenses of legal counsel for the Underwriter incurred in registering
the Debentures for sale under the securities or blue sky laws of such
states as the Underwriter may designate; and (v) the cost of all
certificates representing the Debentures; (vi) the fees and expenses of
the Trustee and paying agent under the Indenture; (vii) the cost of
preparing two leather bound volumes of all documents (Closing Books)
related to the offering to be delivered to the Underwriter; (viii) the
fees and expenses of the Company's independent accounts, including the
cost of "cold comfort" review; and (ix) the fees and expenses of legal
counsel for the Company.
16
Whether or not the transactions contemplated hereunder are consummated,
the Company shall reimburse the Underwriter for all its costs, fees and
expenses incurred in connection with the performance of the Underwriter's
obligations hereunder, including, without limiting the generality of the
foregoing, (i) all fees and expenses of legal counsel for the Underwriter
incurred in preparing the Registration Statement, Indenture and this
Agreement and in connection with review of the Underwriter's compensation
by the NASD; (ii) all costs and expenses incurred by the Underwriter in
connection with the preparation, filing and distribution of the
Registration Statement, each preliminary prospectus and the Prospectus
(including all exhibits and financial statements) and all amendments and
supplements thereto; (iii) all advertising, marketing and sales expenses
incurred in connection with the sale of the Debentures; and (iv) any and
all expenses of the Underwriter in connection with this Agreement and the
sale of the Debentures, provided that the Company shall not be
obligated to reimburse the Underwriter for accountable expenses in excess
of $120,000 ($140,000 in the event all the Debentures are sold).
Notwithstanding the obligations of the Company to reimburse the
Underwriter for its expenses pursuant to the first paragraph of this
subsection 5(q), in the event that the Underwriter fails to perform
its obligations under this Agreement, through no fault of the Company or
any third party not affiliated with the Underwriter, the Company shall
only be obligated to reimburse the Underwriter for its expenses up to
$75,000. The Underwriter acknowledges that it has received $25,000 from
the Company as an advance against the Company's expense reimbursement
obligations.
(r) The Company and Subsidiaries will maintain through the Final
Closing Date insurance of the types and in amounts which are adequate
for their businesses.
6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of
the Underwriter and the closing and sale of the Debentures as contemplated
herein shall be subject to the accuracy of the representations and warranties of
the Company herein as of the date hereof, the Effective Date, and each Closing
Date, to the accuracy of the statements of the Company's officers made pursuant
to the provisions hereof, or otherwise, to the performance by the Company of its
covenants and agreements hereunder, and to the following additional conditions.
(a) The Registration Statement shall have become effective not later
than 4:30 p.m. Minneapolis, Minnesota time on the date of this Agreement
or such later time and date as shall have been consented to by you
(referred to herein as the "Effective Date") and all filings required by
Rule 424 and/or Rule 430A under the Act shall have been timely made; no
stop orders suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have
been instituted or threatened or shall be contemplated by the Commission
or by any blue sky or state securities authority; and all requests of the
Commission or blue sky or state securities authorities for additional
information (to be included in the Registration Statement or Prospectus
or a supplement thereto or otherwise) shall have been complied with to
your satisfaction.
(b) You shall not have advised the Company that the Registration
Statement or the Prospectus or any amendment or any supplement thereto
contains an untrue statement of material fact or omits to state a
material fact which is required to be stated therein or is necessary to
make the statements therein not misleading.
17
(c) You and your counsel shall have been furnished with such documents
and information as you or they may have requested.
(d) You shall have received the opinion of Xxxxxxx & Xxxxxxxx, Ltd.,
legal counsel for the Company, dated as of each Closing Date, in the form
attached hereto as Exhibit A.
(e) At the time of execution of this Agreement and also at each Closing
Date, you shall have received from Ernst & Young, LLP, a letter or
letters, dated the date of delivery thereof, stating that they are
independent public accountants with respect to the Company within the
meaning of the Act and that:
(i) In their opinion, the financial statements included in the
Registration Statement and Prospectus and reported on therein by
them comply as to form in all material respects with the applicable
accounting requirements of the Act;
(ii) On the basis of a limited review (but not an examination in
accordance with generally accepted auditing standards) consisting
of a reading of the unaudited financial statements included in the
Registration Statement and Prospectus (if any) and the latest
available interim financial statements of the Company subsequent
thereto; a reading of the minutes of the board of directors and
shareholders of the Company subsequent thereto; and inquiries of
officials of the Company responsible for financial and accounting
matters and such other inquiries and procedures as may be specified
in such letter and agreed upon by you, nothing has come to their
attention that causes them to believe that:
a) The unaudited financial statements included in the
Registration Statement and Prospectus, if any, do not
comply as to form in all material respects with the
applicable accounting requirements of the Act or that such
financial statements are not fairly presented in conformity
with generally accepted accounting principles applied on a
basis consistent with that of the audited financial
statements included in the Registration Statement and
Prospectus;
b) As of a specified date not more than five days prior
to the date of this Agreement or each Closing Date, as
applicable, there have been any changes in the capital
stock, increases in long term or short term debt, decreases
in total accounts receivable, or total inventories of the
Company or any increase in liabilities or decreases in net
current assets or stockholders' equity of the Company, in
each case, as compared with amounts shown in the most recent
balance sheet included in the Prospectus except, in each
case, for changes, decreases or increases, as appropriate,
which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
c) For the period from the date of the most recent
balance sheet included therein to such specified date, there
was any decrease, as compared with the corresponding period
of the previous year, in net revenues or any decrease in
income from operations or net income or in primary or fully-
diluted per share
18
amounts of net income except, in each case, for such
decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter.
(iii) In addition to the examination referred to in their report
included in the Prospectus and the limited procedures, inspection
of minute books, inquiries and other procedures referred to in
clause (ii) above, they have carried out certain specified
procedures requested by you, not constituting an audit in
accordance with generally accepted auditing standards with respect
to certain amounts, percentages and other financial information
which are derived from the accounting records and other financial
and statistical data of the Company which appear in the Prospectus
and which are specified by you and have compared certain of such
amounts, percentages and financial information with the accounting
records and other appropriate data of the Company and have found
them to be in agreement.
In the event that the letters to be delivered pursuant to
this subparagraph (e) shall set forth any changes, increases or
decreases, it shall be a further condition to the Underwriter's
obligation that you, in your sole discretion, shall have
determined, after discussion with officers of the Company
responsible for financial and accounting matters and with Ernst &
Young, LLP, that such changes, increases or decreases as set forth
in such letters do not reflect a material adverse change in the
capital stock, short-term or long-term debt, net assets, net
current assets, total accounts receivable, total inventories or
stockholders' equity of the Company as compared with the amount
shown in the most recent balance sheet of the Company included in
the Prospectus or material adverse change in revenues or the total
or per share amounts of net income (loss).
(f) On each Closing Date, you shall have received a certificate, dated
such date, of the President and the Chief Financial Officer of the
Company to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of such date
and the Company has performed all obligations and satisfied all
conditions on its part to be performed or satisfied at or prior to
such date;
(ii) The Commission has not issued any order suspending the
effectiveness of the Registration Statement and no proceedings for
that purpose have been instituted or are pending or threatened
under the Act;
(iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto contain all statements
and information required to be included therein and neither the
Registration Statement nor the Prospectus nor any amendment nor any
supplement thereto includes any untrue statement of a material fact
or misstates any material fact required to be stated therein or
necessary to make the statements therein not misleading and since
the Effective Date, there has occurred no event required to be set
forth in an amendment to the Registration Statement or supplement
to the Prospectus which has not been so set forth.
19
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and prior to
the date of such certificate, and except as set forth or
contemplated in the Registration Statement or the Prospectus:
(A) the Company has not incurred, except in the ordinary course of
business, any lease obligations or any direct or contingent
liabilities or commitments, (B) the Company has not entered into
any transaction other than in the ordinary course of business,
(C) the Company has not paid or declared any dividends or other
distributions on its capital stock, (D) there has not been any
change in the capital stock or any material adverse change,
increase or decrease in the short-term or long-term debt, total
accounts receivable, total inventories, net assets, net current
assets or stockholders' equity of the Company or any material
adverse change in or affecting the condition (financial or
otherwise), business, key personnel, properties, assets, results of
operations (present or prospective), or net worth of the Company
and (E) no legal or governmental proceeding affecting the Company
or the transactions contemplated hereby has been instituted or,
to the Company's knowledge, threatened;
(v) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the
conduct of the business and operations of the Company has not,
except as otherwise stated therein, been materially interfered with
by strike, fire, flood, hurricane, accident, or other calamity
(whether or not insured) or by any court, arbitrator or
governmental action, order or decree and, except as otherwise
expressly stated therein, the properties of the Company have not
sustained any material loss or damage (whether or not insured) as a
result of any such occurrence; and
(vi) Attachment A to the certificate is a complete and
accurate description of all transactions between the Company and
its Subsidiaries and their affiliates, and Attachment B to the
certificate is a complete and accurate description of all
outstanding indebtedness of the Company and its Subsidiaries as of
the date of this Agreement.
(vii) No Event of Default, as defined in the Indenture, has
occurred nor with the giving of notice or passage of time or both
will occur.
(g) The Company shall have filed a Form 8(a) with the Commission and
shall be registered under the Securities Exchange Act of 1934, as
amended.
(h) The Debentures shall have been qualified for sale under the Blue
Sky laws of such states and in such amounts as shall have been specified
by the Underwriter.
(i) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred:
(i) Any change or development involving a prospective change in
or affecting particularly the business or properties of the Company
which in the judgment of the Managing Underwriters materially
impairs the investment quality of the Debentures;
20
(ii) Any banking moratorium;
(iii) Any outbreak or escalation of major hostilities in which
the United States is involved, any declaration of war by Congress
or any other substantial national or international calamity or
emergency if, in the judgment of the Underwriter, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes
it impractical or inadvisable to proceed with completion of the
sale of and payment for the Debentures;
(iv) Any material adverse change in existing financial, political
or economic conditions in the United States or elsewhere which
change, in your opinion, has materially and adversely affected the
market for the Debentures or other securities of the Company or the
prospects for the Company, its business or its properties; or
(v) Any substantial loss to the Company by strike, fire, flood,
accident or other calamity of such a character as to interfere
materially with the conduct of the business and operations of the
Company regardless of whether such loss shall have been insured.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are
satisfactory in form and substance to you and to your counsel. If
any of the conditions specified in this section shall not have been
fulfilled when and as required by this Agreement, this Agreement
and all obligations of the Underwriter hereunder may be canceled
at, or at any time prior to, the applicable Closing Date by you.
Any such cancellation shall be without liability of the
Underwriter to the Company and shall be in writing or by telegraph
or telephone and confirmed in writing. The Managing Underwriters
may waive in writing the nonperformance by the Company of any one
or more of the foregoing conditions or extend the time for
performance of such conditions. Each such waiver shall be
applicable only to the item to which it relates and the closing to
which it relates and no waiver or series of waivers shall be deemed
to have waived any condition at any time other than the condition
at the time explicitly waived.
(j) You shall have received a lender's certificate, in form
satisfactory to Underwriter's counsel, from each lender of a Line.
7. INDEMNIFICATION.
The Company will indemnify and hold harmless the Underwriter, each
officer and director of the Underwriter and each person, if any, who controls
such Underwriter within the meaning of the Act, against any loss, claim, damage
or liability, joint or several, to which the Underwriter, such officer or
director of the Underwriter, or such controlling person may become subject under
the Act or otherwise, insofar as such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement
21
thereto, or arises out of or is 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 each Underwriter, each
officer and director of each Underwriter, and each such controlling person for
any legal or other expenses incurred by such Underwriter, such officer or
director of such Underwriter, or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
The Company shall reimburse the Underwriters for any legal or other reasonable
expenses incurred by the Underwriters in connection with investigating or
defending against or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action notwithstanding the possibility
that the payments for such expenses might later be held to be improper in which
case the person receiving them shall promptly refund them. Notwithstanding the
foregoing covenant of indemnity, the Company shall 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 any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the Preliminary Prospectus,
the Prospectus or such amendment or such supplement in reliance upon and in
conformity with written information furnished to the Company by you specifically
for use therein, or in any application or other statement executed by you filed
in any jurisdiction in order to qualify the Debentures under, or exempt the
Debentures or the sale thereof from qualification under, the securities or blue
sky laws of such jurisdiction (collectively, the Underwriter Information).
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(a) The Underwriters 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, against any loss, claim, damage or liability to which
the Company or any such director, officer, or controlling person may
become subject, under the Act or otherwise, insofar as such loss, claim,
damage or liability (or action in respect thereof) arises out of or is
based upon any untrue statement 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
arises out of or is based upon the omission or the 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 reliance
upon and in conformity with the Underwriter Information, 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. This indemnity agreement will be in addition to any
liability which the Underwriters may otherwise have.
(b) Promptly after receipt by any party under this Section 7 of notice
of the commencement of any action, such party will, if a claim for
indemnity in respect thereof is to be made against another party (the
"Indemnifying Party") under this Section 7, notify the Indemnifying Party
in writing of the commencement thereof and shall make available all
pleadings and all other documents served related thereto, upon request.
The omission so to notify the Indemnifying Party will not relieve it
from any liability under this Section 7 as to the particular item for
which indemnification is then being sought, unless such omission so to
notify prejudices the indemnifying party's ability to defend such action.
In case any such action is brought against any party, and such party
notifies the Indemnifying Party of the commencement thereof,
the Indemnifying Party will be entitled to participate therein with the
notifying party and any other Indemnifying
22
Party similarly notified, and, to the extent that it may wish, jointly
with any other Indemnifying Party similarly notified, to assume the
defense thereof, with counsel satisfactory to the notifying 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 defense(s)
available to it and/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 separate
counsel to assume the indemnified party's (or parties') defense and to
otherwise 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
accordance with the provisions of 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 representing all the
indemnified parties under this Section 7 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.
(c) An Indemnifying Party shall not be liable for settlement of any
such action effected without its written consent but if settled with the
written consent of the Indemnifying Party, or if there be a final
judgment for the plaintiff in any such action, the Indemnifying Party
agrees to indemnify and hold harmless each indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(d) The indemnity agreements contained in this Section 7 and the
representations, warranties, agreements, covenants, indemnities and the
statements of the Company and its officers set forth in or made pursuant
to this Agreement shall remain operative and in full force and effect,
regardless of: (i) any investigation made by or on behalf of the
Underwriters or any director or officer or person controlling the
Underwriters or by or on behalf of the Company or any director or officer
or person who controls the Company; (ii) acceptance of any Debentures and
payment therefor hereunder; and (iii) any termination of this Agreement.
A successor of an Underwriter or of the Company or any person controlling
an Underwriter or the Company, or any officer or director of the Company,
as the case may be, shall be entitled to the benefits of the indemnity
and reimbursement agreements contained in this Section 7.
8. CONTRIBUTION.
(a) If the indemnification provided for in Section 7 is unavailable to
or insufficient to hold harmless an indemnified party under subsections
(a) or (b) thereof, 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 subsections (a) or
(b) of Section 7 above, (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 hand from the offering of the Debentures, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, then in such
23
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 on the one hand and the Underwriter on the other hand 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 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 Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (a) were to be
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the first sentence of this subsection (a). 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 subsection (a)
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
subsection (a). 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 is not guilty of such fraudulent
misrepresentation.
(b) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer or director
of an Underwriter and each person, if any, who controls an Underwriter
within the meaning of the Act; and each Underwriter's obligations under
this Section 8 shall be in addition to any liability that the Underwriter
may otherwise have and shall extend upon the same terms and conditions to
each director of the Company, to each officer of the Company who has
signed the Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
(c) The obligations of the Company pursuant to this Section 8 shall
survive any termination of this Agreement.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE. The respective
indemnities, agreements, representations, warranties, covenants or other
statements of the Company as set forth in or made pursuant to this Agreement and
the indemnity and contribution agreements of the Compay and the Underwriter
contined in Sections 7 and 8, respectively, shall survive and remain in full
force and effect regardless of any (i) investigation made by or on behalf of any
party or any of its directors, officers, or controlling persons; (ii) delivery
of and payment for the Debentures; (iii) the Final Closing Date; and (iv) any
successor of the Company and the Underwriter or any controlling person, officer
or director thereof, as the case may be, shall be entitled to the benefits
thereof.
24
10. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at 10:00 a.m. Minneapolis
time, on the day which you shall commence selling the Original Debentures
to the public, or at such earlier time as the Underwriter shall release
the Debentures for sale to the public. You shall notify the Company
immediately after you have taken any action which causes this Agreement
to become effective. Until this Agreement is effective, it may be
withdrawn by the Company or by you by giving notice as hereinafter
provided, except that the provisions of 5(q) and Sections 6 and 7 shall
at all times be effective. For purposes of this Agreement, the
commencement of the sale of the Debentures shall mean the time of the
release by the Underwriter for publication of the first newspaper
advertisement which is subsequently published related to the Debentures,
or the time of the first mailing of copies of the Prospectus related to
the Debentures which are subsequently delivered, whichever shall first
occur. This Agreement shall, nevertheless become effective at such time
earlier than the time specified above, after the Effective Date; as the
Underwriter may determine by notice to the Company.
(b) Unless the Minimum has been purchased by the Underwriter, this
Agreement shall automatically terminate 60 days from the date hereof.
Otherwise, this Agreement shall automatically terminate at the expiration
of six months from the date hereof unless earlier terminated by the
Underwriter by notice to the Company in the event that the Company shall
have failed or been unable to comply with any of the terms, conditions,
or provisions of this Agreement on the part of the Company to be
performed, complied with or fulfilled (including but not limited to
those specified in Sections 2, 4, 5 and 6 hereof) within the respective
times provided for on each Closing Date, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by
the Underwriter in writing (the "Termination Date"), except that Sections
5, 7, 8 and 9 shall at all times be effective and bind all the Parties.
In addition, this Agreement may be terminated on or at any time prior to
the first Closing Date by agreement of the parties or by the Underwriter,
by written or telegraphic notice to the Company, if there shall have
occurred:
(i) Any change or development involving a prospective change in
or affecting particularly the business or properties of the Company
which in the judgment of the Underwriter materially impairs the
investment quality of the Debentures;
(ii) Any banking moratorium;
(iii) Any outbreak or escalation of major hostilities in which
the United States is involved, any declaration of war by Congress
or any other substantial national or international calamity or
emergency if, in the judgment of the Underwriter, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes
it impractical or inadvisable to proceed with completion of the
sale of and payment for the Debentures;
25
(iv) Any material adverse change in existing financial, political
or economic conditions in the United States or elsewhere which
change, in your opinion, has materially and adversely affected the
market for the Debentures or other securities of the Company or the
prospects for the Company, its business or its properties; or
(v) Any substantial loss to the Company by strike, fire, flood,
accident or other calamity of such a character as to interfere
materially with the conduct of the business and operations of the
Company regardless of whether such loss shall have been insured.
(c) Termination of this Agreement pursuant to this Section 10 shall be
without liability of any party to any other party other than as provided
in Sections 5(a), 7 and 8 hereof.
11. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriter, will be mailed, delivered or telegraphed and confirmed
to the Underwriter at Xxxxxx & Xxxxxxxxx Financial, Inc., 000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxxxxx X. Xxxxxxx,
Corporate Capital Group, with a copy to Xxxxxxxxxx & Xxxxx, P.A., 1100
International Centre, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, XX 00000, Attention
Xxxxxx Xxxxxx; or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at United Homes, Inc., 0000 Xxxx Xxxx, Xxxxx
000, Xxxxxxx Xxxxxxx, XX 00000-0000, Attention Xxxxx X. Xxxxxxx, with a copy
to Xxxxxxx & Xxxxxxxx Ltd., 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000,
attention Xxxxxxx Xxxxxx or to such other address of which a party hereto
shall notify the other party hereto pursuant to this paragraph.
12. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company, and their successors and legal
representatives, and nothing in this Agreement is intended or shall be construed
to give any other person 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 such persons and for the benefit of no other
person, except that the representations and warranties of the Company contained
in this Agreement shall also be for the benefit of any person or persons who
control the Underwriters within the meaning of Section 15 of the Act. No
purchaser of Units will be deemed a successor because of such purchase.
13. INFORMATION FURNISHED BY THE UNDERWRITER. The statements set forth
in the last paragraph on the cover page, the stabilization ledgered on the
inside front cover and the statements under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitute the only written
information furnished by, or on behalf of, the Underwriter specifically for use
with reference to the Underwriter referred to in Section 2(c) and Sections 7
and 8 hereof.
14. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with the substantive laws of the State of Minnesota without regard
to its choice of laws provisions.
15. COUNTERPARTS. This Agreement may be signed in any number of
counterparts and all such counterparts taken together shall constitute the
single Agreement of the parties.
16. AMENDMENT. This Agreement may be amended upon written agreement
between the Managing Underwriter and the Company.
26
17. MISCELLANEOUS. Your rights and obligations hereunder shall not be
assignable without the written consent of the Company.
18. TIME. The Company and the Underwriter agree that time shall be of
the essence with respect to this Agreement and the performance and completion of
the terms, conditions and provisions set forth and contemplated herein.
19. HEADINGS. The headings and captions used in this Agreement are for
convenience only and shall not affect the meaning of the provison thereof.
Very truly yours,
UNITED HOMES, INC.
By:
-------------------------
Its:
-------------------------
The foregoing is agreed to and accepted
this _____ day of ___________, 1997.
------------------------------------------
Xxxxxx & Xxxxxxxxx Financial, Inc.
