ILLUMINATED MEDIA, INC.
UNDERWRITING AGREEMENT
Minneapolis, Minnesota
June ____, 1996
Tuschner & Company, Inc.
Suite 1500, TCF Tower
121 South Eighth Street
Minneapolis, MN 55402
Gentlemen:
Illuminated Media, Inc. (the "Company"), a Minnesota corporation,
proposes to issue and sell exclusively through you (the "Underwriter"), pursuant
to this Underwriting Agreement (the "Agreement"), up to 1,500,000 Units (the
"Units" or a "Unit"), at a purchase price of $1.00 per Unit, each Unit
consisting of one share of the Company's common stock and one redeemable common
stock purchase warrant to purchase two shares of such common stock at $2.75 per
share (the "Warrants" or a "Warrant"). Each Warrant entitles the holder to
purchase two shares of common stock for $2.75 per share from the date hereof
until five years from the Effective Date, subject to adjustment in certain
instances, and is redeemable in certain instances commencing 60 days from the
date of this Agreement at $.10 per Warrant. The offering of the Units is further
described in the Registration Statement No. _________, filed on Form SB-2 with
the United States Securities and Exchange Commission (the "Commission" ).
The Units to be sold by the Company hereunder will be offered for the
Company by you on an "all or none" basis with respect to 650,000 Units and on a
"best efforts" with respect to an additional 850,000 Units. The shares of
common stock included in the Units and in the Stock Purchase Option (defined in
Section 6) which the Company agrees herein to sell to you are referred to herein
as the "Shares." The shares of common stock issuable on exercise of the Warrants
included in the Units and in the Warrants included in the Units subject to the
Stock Purchase Option are referred to herein as the "Warrant Shares." The
Warrants included in the Units subject to the Stock Purchase Option are referred
to herein as the "Underwriter's Warrants." All securities included in the Units
and in the Stock Purchase Option (and securities which may be acquired on
exercise thereof) are sometimes referred to herein as the "Underlying
Securities."
1. Covenants, Representations, and Warranties of the Company. In order
to induce the Underwriter to enter into this Agreement, the Company covenants,
represents, and warrants to you as follows, as of the date hereof and as of the
date of each Closing, as if made on such date:
(a) The Company has filed the Registration Statement relating to the
Units with the Commission pursuant to the Securities Act of 1933 ("Act"), as
amended, and pursuant to the Commission's rules and regulations promulgated
thereunder (the "Regulations"). The Company has furnished to the Underwriter and
to its legal counsel four signed and ten conformed copies of the Registration
Statement together with all amendments, and exhibits. As used in this Agreement,
the term "Registration Statement" means the Registration Statement, including
the Prospectus, the exhibits and financial statements included therein, and all
amendments including any amendments after the effective date of the Registration
Statement. The term "Prospectus" means the prospectus filed as a part of Part I
of the Registration Statement, including all pre-effective and post-effective
amendments and supplements thereto.
(b) The Registration Statement and all other documents previously filed
or filed after the date hereof with the Commission conform and will conform with
all of the requirements of the Act and the Regulations in all material respects.
Neither the Registration Statement, the Prospectus, nor the other material filed
or to be filed with the Commission contains or will contain any untrue
statements of material fact nor are there or will there be any omissions of
material facts required to be stated therein or that are necessary to make the
statements therein not misleading, except that this warranty does not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by and with respect to the
Underwriter, or any dealer through the Underwriter, expressly for use in the
Registration Statement or Prospectus or any amendment or supplement thereto.
(c) The Company has used its best efforts to qualify the Units for
offering in every state reasonably designated by the Underwriter. The
applications to register the Units and documents filed therewith, whether
previously filed or filed after the date hereof with any state do not and will
not contain any untrue statements of material fact nor are there or will there
be any omissions of material facts required to be stated therein or that are
necessary to make the statements therein not misleading.
(d) The outstanding capital stock of the Company has been duly and
validly authorized and issued, is fully paid and assessable, and conforms to all
statements made in Registration Statement and Prospectus with respect thereto.
The Units, and the Stock Purchase Option have been duly and validly authorized
by all necessary corporation by the Company. The Warrants, the Stock Purchase
Option, and Underwriter's Warrants, when sold and delivered by the Company as
provided herein and therein, will constitute valid and binding obligations of
the Company, enforceable in accordance with their terms. A sufficient number of
shares of common stock have been reserved for issuance upon exercise of the
Warrants, the Stock Purchase Option and the Underwriter's Warrants, and when
delivered upon due exercise, will be validly issued, fully paid and
nonassessable. The Units, Stock Purchase Option, and the Underlying Securities
conform to all statements respecting them in the Registration Statement and
Prospectus. Upon delivery of and payment for the Stock Purchase Option to be
sold by the Company as set forth in this Agreement, the Underwriter and its
designees will receive good and marketable title thereto, free and clear of all
liens, encumbrances, charges and claims except those created by, through, or
under the Underwriter and except restrictions on transfer arising under federal
and state securities laws. The Shares and Warrant Shares, upon issuance, will
not be subject to the preemptive rights of any shareholders of the Company.
(e) The Company has been legally incorporated and is a validly existing
corporation under the laws of the state of its incorporating jurisdiction, and
is lawfully qualified to conduct the business for which it was organized and
which it proposes to conduct. The Company is qualified to conduct business as
foreign corporation in each Jurisdiction where the nature of its business
requires such qualification except where failure to so qualify would not have a
material adverse effect on the Company.
(f) The Company's capitalization is as stated in the Registration
Statement. There are no outstanding options, warrants, or other rights to
purchase or require the issuance of (by conversion or otherwise) any securities
of the Company, however characterized, except as described in the Registration
Statement. With respect to the offer to sell, sale, offer to purchase, or
purchase of any of its securities, the Company has not committed any violations
of the of the federal securities laws; the Regulations; or the laws, rules, or
regulations of any jurisdiction wherein such securities transactions or
solicitations occurred. All prior sales of the Company's securities were exempt
from the registration and prospectus delivery requirements of the Act and
applicable state law.
(g) The Board of Directors of the Company and the shareholders of the
Company have adopted an Incentive Stock Option Plan designed to qualify under
Section 422A of the Internal Revenue Code. The Incentive Stock Option Plan and
all outstanding options thereunder are as described in the Registration
Statement.
(h) During the period of the offering of the Units and for one year
from the date the Commission declares the Registration Statement to be effective
(the "Effective Date"), the Company will not sell any securities (except:
options issued pursuant to the Company's Incentive Stock Option Plan; except any
shares issued upon the exercise of such options; any shares issued upon the
exercise of any other options or warrants outstanding on the Effective Date; and
the Warrants, Stock Purchase Option, and Underwriter's Warrants) without the
Underwriter's prior written consent, which will not be unreasonably withheld.
(i) The Company has caused each of its officers, directors, and each of
its other shareholders owning 5% or more of the Company's outstanding common
stock to enter into an agreement with the Underwriter pursuant to the terms of
which each such Person has agreed not to sell any shares owned directly or
indirectly by such person for a period of 12 months from the Effective Date
without the Underwriter's prior written consent, which will not be unreasonably
withheld.
(j) Except as described in the Registration Statement, the Company has
no subsidiaries nor contemplates acquiring subsidiaries or engaging in mergers
with or the acquisition of any companies. The Company owns all or a majority of
the outstanding capital stock of its subsidiaries, free of any liens,
encumbrances, or adverse claims of any kind.
(k) The financial statements, together with related schedules and
notes, included in the Registration Statement and Prospectus present fairly the
financial condition and results of operations of the Company as of the dates and
for the periods indicated, and are reported upon by independent public
accountants according to generally accepted accounting principles and as
required by the Regulations.
(1) Except as disclosed in the Registration Statement and the
Prospectus, the Company does not have any direct or contingent liabilities,
obligations, or claims pending, nor has it or they received threats of claims or
regulatory action by any government agency or other party. Further, except as
disclosed in the Registration Statement and the Prospectus, subsequent to the
date information is given in the Registration Statement and Prospectus: (a)
there has been no material adverse change in the management, condition
(financial or otherwise), or prospects of the Company or in its business taken
as a whole; (b) there has been no material transaction entered into by the
Company other than transactions in the ordinary course of business; (c) the
Company has not incurred any material obligations, contingent or otherwise,
which are not disclosed in the Registration Statement and the Prospectus (except
liabilities incurred in the ordinary course of business which do not in the
aggregate result in a material adverse change in the financial or other
condition, business, or prospects of the Company); (d) there has been no change
in the capital or long term debt (except current payments) of the Company or any
subsidiary; (e) the Company has not paid or declared any dividends or other
distributions on its common shares; and (f) the Company has not committed to any
of the foregoing.
(m) The Company's securities, however characterized, are not subject to
preemptive or registration rights. No shareholder of the Company has any
cumulative or extraordinary voting rights by agreement or otherwise.
(n) The Company has the legal right and authority and has taken all
necessary corporate action to enter into this Agreement, and, upon its
execution, to effect the proposed sale of the Units, to execute and deliver the
Stock Purchase Option and the Warrant Agreement, and to effect all other
transactions contemplated by this Agreement. This Agreement, the Stock Purchase
Option, the Impoundment Agreement, and the Warrant Agreement are valid and
binding agreements of the Company and are enforceable against the Company in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, moratorium, or similar laws governing creditors' rights generally;
except as the availability of equitable remedies is subject to the exercise of
judicial discretion; and except as provisions pertaining to indemnification may
be unenforceable under federal or state securities laws.
(o) The Company knows of no person who has rendered any services in
connection with the introduction of the Company to the Underwriter. No broker's
or other finder's fees are due and payable by the Company and none will be paid
by it.
(p) The Company is eligible to use Form SB-2 for offering the Units.
(q) The Company and its affiliates are not currently offering any
securities nor has the Company or its affiliates offered or sold any securities
except as required to be described (and as so described) in the Registration
Statement.
(r) The Company will not file any amendment or supplement to the
Registration Statement, Prospectus, or exhibits unless the Underwriter and its
counsel have been previously furnished a copy, and unless the Underwriter or its
counsel have consented in writing to the filing of the amendment or supplement,
nor will the Company request that the Registration Statement be declared
effective without the Underwriter's consent.
(s) The Company possesses adequate certificates or permits issued by
the appropriate federal, state, and local regulatory authorities necessary to
conduct its business and to retain possession of its properties. The Company has
not received any notice of any proceeding relating to the revocation or
modification of any of these certificates or permits.
(t) The Company filed all tax returns required to be filed and is not
in default in the payment of any taxes which have become due pursuant to any law
or any assessment. No tax return is the subject of any current or announced
examination by any taxing authority.
(u) The Company has marketable title or a valid leasehold interest to
all properties, including intellectual properties, described in the Registration
Statement as owned or used by it. The properties are free and clear of all
liens, charges, encumbrances, or restrictions, however characterized, except as
described in the Registration Statement. All of the contracts, leases,
subleases, patents, copyrights, licenses, and agreements, however characterized,
under which the Company holds properties as described in the Registration
Statement are in full force and effect. The Company is not in default under any
of the material terms or provisions of any contracts, leases, subleases,
patents, copyrights, licenses, or agreements under which the Company holds its
properties. There are no known claims against the Company concerning the
Company's under such leases, subleases, patents, copyrights, licenses, and
agreements and concerning its right to continued possession of its properties.
(v) All original documents (or genuine copies thereof) and other
information relating to the Company's affairs have and will continue to be made
available upon request to the Underwriter and to its counsel at the
Underwriter's office or at the office of the Underwriter's counsel and copies of
any such documents will be furnished upon request to the Underwriter and to its
counsel. Included within the documents made available have been at least the
Articles of Incorporation and any Amendments; minutes of all of the meetings of
the Incorporators, Directors and Shareholders; all financial statements; and
copies of all contracts, leases, patents, copyrights, licenses, or agreements to
which the Company is a party or in which the Company has an interest.
(w) The Company has appointed Norwest Bank Minnesota, N.A.,
Minneapolis, Minnesota, as the Company's transfer and warrant agent. The Company
will continue to retain a transfer agent reasonably satisfactory to the
Underwriter for so long as the Company is subject to the reporting requirements
under Section 12(a) or Section 15(d) of the Securities Exchange Act of 1934, or
so long as the Underwriter is a principal market-maker in shares of the
Company's common stock, and so long as the Warrants are outstanding. The Company
will make arrangements to have available at the office of the transfer agent
sufficient quantities of the Company's common stock and warrant certificates as
may be needed for the quick and efficient transfer of the Shares and exercise of
the Warrants.
(x) The Company will use the proceeds from the sale of the Units
substantially as set forth under "Use of Proceeds" in the Registration Statement
and Prospectus.
(y) There are no contracts or other documents required to he described
in the Registration Statement or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(z) The Company is not (with or without notice or lapse of time) in
material default under any of the contracts, leases, licenses commitments,
debentures, notes, or agreements to which it is a party or by which it or its
properties is bound. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and compliance with the
terms of this Agreement will not (with or without notice or lapse of time)
conflict with or result in a breach of or give any party the right to accelerate
or declare a default under any of the material terms, conditions or provisions
of, or constitute a material default under, the Articles of Incorporation or
Bylaws of the Company, or any note, indenture, mortgage, deed of trust, or other
agreement or instrument to which the Company is a party or by which it or any of
its property is bound, or result in a violation of any existing law, order,
rule, regulation, writ, injunction, or decree of any government, governmental
instrumentality, agency or body, arbitration tribunal or court, domestic or
foreign, having jurisdiction over the Company, or its property. The consent,
approval, authorization, or order of any court or governmental instrumentality,
agency, or body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act, under the Blue Sky or
securities laws of any state or jurisdiction, or the rules of the National
Association of Securities Dealers, Inc. (the "NASD").
(aa) Each contract to which the Company and its subsidiaries is a party
has been duly and validly executed, is in full force and effect in all material
respects in accordance with their respective terms, and no contracts have been
assigned by the Company, except as disclosed in the Registration Statement and
Prospectus. The Company knows of no present situation, condition, or fact which
would prevent compliance with the terms of such contracts. Except for amendments
or modifications of contracts in the ordinary course of business and except as
disclosed in the Registration Statement and Prospectus, the Company has no
intention of exercising any right which would cancel any of its obligations
under any contract, and has no knowledge that any other party to any contract in
which the Company has an interest has any intention not to render full
performance under such contract.
(bb) The Company has not made any representation, whether oral or in
writing, to anyone, whether an existing shareholder or not, that any of the
Shares will be reserved for or directed to them during the proposed public
offering.
(cc) The Company has caused each of its current shareholders to agree
in writing with respect to shares acquired by them prior to the Effective Date
that they have acquired the shares for investment purposes only and they
acknowledge that they hold "restricted securities" as defined in Rule 144 of the
Commission.
(dd) Except as disclosed in the Registration Statement and Prospectus,
there is no action, suit, or proceeding pending before any court or governmental
agency, authority or body or, to the knowledge of the Company, threatened which
might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change in
the condition (financial or otherwise), the business, or the prospects of the
Company, or which would materially affect the properties or assets of the
Company.
(ee) All of the above representations and warranties shall survive the
Closing performance, or termination of this Agreement.
2. Covenants, Representations, and Warranties of the Underwriter. The
Underwriter represents and warrants as follows as of the date hereof and as of
each closing date as if made on such date:
(a) It is registered as a broker-dealer with the Commission, in good
standing with the Minnesota Department of Commerce, and is registered, to the
extent registration is required, with the appropriate governmental agency in
each state in which it offers or sells the shares and is a member of the
National Association of Securities Dealers, Inc. ("NASD") and will use its best
efforts to maintain such registrations, qualifications, and memberships
throughout the term of the offering.
(b) To the knowledge of the Underwriter, no action or proceeding is
pending against the Underwriter or any of its officers or directors concerning
the Underwriter's activities as a broker or dealer that would affect the
Company's offering of the Shares.
(c) The Underwriter will offer the Units only in those states and in
the quantities that are identified in the Blue Sky Memoranda from the
Underwriter's counsel to the Underwriter that the offering of the Units has been
qualified for sale under the applicable state statutes and regulations. The
Underwriter, however, may offer the Units in other states if (i) the transaction
is exempt from the registration requirements in that state, (ii) the Company's
counsel has received notice ten days prior to the proposed sale, and (iii) the
Company's counsel does not object within said ten day period.
(d) The Underwriter knows of no person who rendered any services in
connection with the introduction of the Company to the Underwriter. No person
acting by, through or under the Underwriter will be entitled to receive from the
Underwriter or from the Company any finder's fees or similar payments.
(e) The written information provided by the Underwriter for inclusion
in the Registration Statement and Prospectus consists of certain information on
the front and back Prospectus cover pages, and that set forth under
"Underwriting" in the Prospectus. Such information contains no misstatement of a
material fact and does not omit any material fact necessary to make such
statements not misleading.
(f) The Underwriter will, reasonably promptly after the Closing date,
supply the Company with all information required from the Underwriter for the
completion of Form SR and such additional information as the Company may
reasonably request to be supplied to the securities commissions of such states
in which the Units have been qualified for sale.
(g) All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. Employment of the Underwriter In reliance upon the representations
and warranties and subject to the terms and conditions of this Agreement:
(a) The Company employs the Underwriter as its exclusive agent to sell
for the Company's account the Units, on a cash basis only, at a price of $1.00
per Unit. The Underwriter agrees to use its best efforts, as agent for the
Company, to sell the Units subject to the terms and conditions set forth in this
Agreement. It is understood between the parties that there is no firm commitment
by the Underwriter to purchase any or all of the Shares.
(b) The obligation of the Underwriter to offer the Units is subject to
receipt by it of written advice from the Commission that the Registration
Statement is effective, is subject to the Units being qualified for offering
under applicable laws in the states as may be reasonably designated by the
Underwriter, is subject to the absence of any prohibitory action by any
governmental body, agency or official, and is subject to the terms and
conditions contained in this Agreement and in the Registration Statement
covering the offering to which this Agreement relates.
(c) The Company and the Underwriter agree that the agency between the
Company and the Underwriter will terminate ninety (90) days from the Effective
Date (which period may be extended for an additional period not to exceed thirty
(30) days by mutual agreement between the Company and the Underwriter). If the
agency between the Company and the Underwriter terminates without at least
650,000 Units being sold, the full proceeds which have been paid for the Units
shall be returned to the purchasers. Prior to the sale of all of the Units to be
offered, all proceeds received from the sale of the Shares will be deposited in
an impoundment account entitled "BankWindsor-Illuminated Media, Inc." with
BankWindsor, Minneapolis, Minnesota.
(d) The Company, the Underwriter and BankWindsor, Minneapolis,
Minnesota, will, prior to offering the Units, enter into an Impoundment
Agreement in form satisfactory to the parties and approval by the Minnesota
Commissioner of Securities. The parties mutually agree to faithfully perform
their obligations under the an Impoundment Agreement. The Underwriter will
promptly deliver the funds into the impoundment account in accordance with Rule
15(c)2-4 of the Securities Exchange Act of 1934, as amended but in any event not
to exceed noon of the next business day after receipt of such funds.
(e) The Underwriter shall have the right to associate with other
dealers as it may determine and shall have the right to grant to such persons
such concessions out of the commissions to be received by the Underwriter as the
Underwriter may determine, under and pursuant to a Selected Dealer Agreement in
the form filed as an exhibit to the Registration Statement.
(f) Subject to the sale of at least 650,000 Units, the Company agrees
to pay to the Underwriter an underwriting commission computed at the rate of
$.10 (10% of the public offering price) for each of the Unit sold by the
Underwriter at the public offering price of $1.00 per Unit. This commission
shall be payable in certified funds upon the release of the funds which have
been deposited in the escrow account.
4. Expenses of the Underwriter.
(a) Subject to the sale of at least 650,000 Units, and subject to the
provisions of paragraph 14(e) hereof, the Company shall reimburse the
Underwriter for its expenses on a non-accountable basis in an amount of 2.75% of
the offering proceeds. The Underwriter acknowledges that it has received $5,000
cash of the non-accountable expense allowance. Subject to the provisions of
paragraph 14(e) hereof, the remaining non-accountable expense allowance is due
on the release of the funds in the impoundment account to the Company.
(b) Except as stated in subparagraph 14(e) of this Agreement, the
Underwriter agrees that out of its non-accountable expense allowance the
Underwriter will pay all costs incurred or to be incurred by the Underwriter or
by its personnel in connection with the offering of the Units, except those to
be paid by the Company as described in paragraph 5 hereof.
5. Expenses of the Company.
The Company will pay, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming effective
or is terminated, all costs and expenses incident to the performance of its
obligations under this Agreement, including (without limitation) (i) all
expenses incident to the authorization of the Units and their issue and delivery
to the Underwriter; (ii) any original issue taxes in connection therewith and
all transfer taxes, if any, incident to the initial sale of the Units to the
public; (iii) the costs and expenses incident to the preparing, printing, and
filing the Registration Statement and Prospectus under the Act and with the NASD
of the Registration Statement, any Preliminary Prospectus, and the definitive
Prospectus and any amendments or supplements thereto; (iv) the cost of printing,
reproducing, and filing all exhibits to the Registration Statement, the
underwriting documents, and the Selected Dealers Agreement; (v) the cost of
printing and furnishing to the Underwriter copies of the Registration Statement
and copies of the Prospectus as herein provided; (vi) the cost of "tombstone" or
other similar advertising permitted under the Act (subject to our mutual
agreement as to the amount); and (vii) the cost of qualifying the Units under
the state securities or Blue Sky laws as provided herein, including expenses and
disbursements of the Underwriter and the Underwriter's counsel fees incurred in
connection with such qualification if the Underwriter's counsel undertakes to
effect such qualification.
6. Stock Purchase Option.
Subject to the sale of all of the Shares, the Company agrees to sell to
the Underwriter (or its designees) an option (the "Stock Purchase Option"), in
form attached as Exhibit A hereto, for a purchase price of $100, entitling the
Underwriter to purchase that number of the Company's shares of Common Stock
equal to 10% of the Units sold in the offering.
7. Threat of Regulatory Action.
The Company and the Underwriter agree to advise each other immediately
and confirm in writing the receipt of any threat of or the initiation of any
steps or procedures which would impair or prevent the right to offer the Shares
or the issuance of any suspension or stop orders or other prohibitions
preventing or impairing the proposed offering of the Units. In the case of the
happening of any such event, neither the Company nor the Underwriter will
acquiesce in such steps, procedures, or suspension orders if such acquiescence
would adversely affect the other party or this offering and, in such event, each
party agrees to actively defend any such actions or orders unless both parties
agree in writing to acquiesce in such actions or orders or unless counsel for
each party advises the parties that the probability of successfully defending
against such actions or orders is remote.
8. Further Covenants of the Company. The Company further covenants and
agrees with the Underwriter as follows:
(a) The Company will advise the Underwriter as soon as the Company is
advised of any comments by the Commission, of any request made by the Commission
for an amendment to the Registration Statement or Prospectus or for supplemental
information, and of any order or of the institution of any adverse proceedings
with respect to the offering of the Units. The Company will immediately deliver
to the Underwriter copies of any letters or other documents containing such
comments, requests, or notice of such proceedings involved.
(b) The Company will use its best efforts to qualify the sale of the
Units in such states as shall be reasonably designated by the Underwriter. The
officers, directors, promoters, and shareholders of the Company will comply with
applicable state escrow requirements, including those pertaining to the escrow
of shares, provided that the period of escrow shall not exceed two years from
the Effective Date and provided that the period of escrow shall only be based
upon the passage of time.
(c) The Company will provide the Underwriter and its counsel with
copies of all applications for the registration or qualification of Units filed
with the various state authorities and will provide the Underwriter and its
counsel with copies of all comments and orders received from these authorities.
(d) The Company will deliver to the Underwriter and to other
broker-dealers as directed by the Underwriter as many copies of preliminary
Prospectuses as the Underwriter may reasonably request during the period
following filing the Registration Statement. The Company will deliver to the
Underwriter and to other broker-dealers as requested by the Underwriter as many
copies of the definitive Prospectus as the Underwriter may reasonably request
during the period of the offering and for 90 days after the Effective Date.
(e) The Company will furnish to the Underwriter for so long as the
Company's common stock is registered under the Securities Exchange Act of 1934
and for so long as the Warrants are outstanding with the following:
(1) Within 90 days after the close of each fiscal year of the
Company, a financial report of the Company and its subsidiaries, if
any, on a consolidated basis, such report to include such information
in such form as the Company shall be required to include in reports for
that fiscal year to be filed with the Commission and such report to be
certified by independent public accountants;
(2) Within 60 days after the end of each quarterly fiscal
period of the Company other than the last quarterly fiscal period in
any fiscal year, copies in printable form of the financial statements
of the Company and its subsidiaries, if any, on a consolidated basis,
for that period and as of the end of that period, which financial
statements shall include a narrative discussion of such financial
statements and of the business conducted by the Company and its
subsidiaries, if any, during such fiscal quarter and such information
in such form as the Company shall be required to include in reports for
that period to be filed with the Commission, all subject to year-end
adjustment, signed by the principal financial or accounting officer of
the Company;
(3) As soon as is available, a copy of each report of the
Company mails to shareholders or files with the Commission;
(4) Copies of all news, press, or public information releases
when made;
(5) Upon request in writing from the Underwriter, such other
information as may reasonably be requested concerning the properties,
business and affairs of the Company and its subsidiaries, if any.
(f) The Company agrees to notify the Underwriter immediately of any
event that materially affects the Company or its securities and that should be
set forth in an amendment or supplement to the Registration Statement or the
Prospectus in order to make the statements made therein not misleading.
Similarly, the Company agrees to prepare and furnish to the Underwriter as many
copies as the Underwriter may request of an amended Prospectus or a supplement
to the Prospectus in order that the Prospectus as amended or supplemented will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or that is necessary in order to
make the statements made therein not misleading.
(g) The Company will file with the Commission the required Reports on
Form SR and will file with the appropriate state securities commissioners any
sales and other reports required by the rules and regulations of such agencies
and will supply copies to the Underwriter.
(h) As soon as practicable after successful termination of the offering
of the Units, the Company will make a filing under Section 12(g) of the
Securities Exchange Act of 1934, as amended, on Form 8-A with respect to its
common stock, Units, and Warrants, and will use its best efforts to cause it to
become effective. The Company agrees to deliver a copy of the Form 8-A to the
Underwriter and to its counsel when filed.
(i) Except with the Underwriter's approval, the Company agrees that the
Company will not do the following until (a) the completion of the offering of
the Units, or (b) the termination of this Agreement, or (c) 90 days after the
Effective Date, whichever occurs later:
(1) Undertake or authorize any change in its capital structure or
authorize, issue, or permit any public or private offering of additional
securities;
(2) Authorize, create, issue, or sell any funded obligations, notes or
other evidences of indebtedness, except in the ordinary course of business and
within 12 months of their creation;
(3) Consolidate or merge with or into any other corporation; or
(4) Create any mortgage or any lien upon any of its properties or
assets except in the ordinary course of its business.
(j) For so long as the Company's Units, common stock or warrants are
registered under the Securities Exchange Act of 1934, as amended, the Company
will hold an annual meeting of shareholders for the election of directors within
180 days after the end of each of the Company's fiscal years and, within 180
days after the end of each of the Company's fiscal years, will provide the
Company shareholders with the audited financial statements of the Company as of
the end of the fiscal year just completed prior thereto. Such financial
statements shall be those required by Rule 14a-3 under the Securities Exchange
Act of 1934, as amended, and shall be included in an annual report meeting the
requirements of the Rule. Further, the Company agrees to make available to the
Underwriter and the Company's shareholders in printable form within 60 days
after the end of each fiscal quarter of the Company (other than the last fiscal
quarter in any fiscal year) reasonably itemized financial statements of the
Company and its subsidiaries, if any, for the fiscal quarter just ended and a
narrative discussion of such financial statements and the business conducted by
the Company and its subsidiaries, if any, during such quarter.
(k) As soon as practical, but in any event not later than fifteen
months after the Effective Date, the Company will make generally available to
its securities holders, according to Section ll(a) of the Act, an earnings
statement of the Company in reasonable detail covering a period of at least
twelve months beginning after the Effective Date and will advise the Underwriter
in writing that such statement has been made available.
(1) The Company agrees to have the Units and Underlying Securities
listed on NASDAQ on the first day of trading in the Units. The Company and the
Underwriter will agree upon the NASDAQ symbol to be used. The Company will
obtain a CUSIP number for its common stock, Units, and Warrants.
(m) Within 30 days after the successful termination of the offering of
the Shares, the Company agrees to submit information about the Company to be
included in various securities manuals, including Moody's Over-The-Counter
Manual and/or Standard & Poor's, Standard Corporation Records to facilitate
secondary trading in the Shares.
(n) The Company will qualify the Units for secondary trading in
California as soon as possible.
(o) The Company agrees to cause the stock certificates of all of the
current shareholders of the Company and of any future officers or directors of
the Company to be clearly legended as being restricted against transfer without
compliance with the Act and to cause the Company's transfer agent to put stop
transfer instructions against such stock certificates.
(p) The officers and directors of the Company at the time of the filing
of the Company's Registration Statement and at the effective date of the
Company's Registration Statement shall be reasonably acceptable to the
Underwriter.
(q) The Company shall keep the Registration Statement and qualification
under such Blue Sky laws as reasonably requested by the Underwriter effective
for so long as the Warrants are outstanding and shall distribute to the Warrant
holders supplemented or amended Prospectuses as required by the Act to permit
exercise thereof.
(r) Prior to the first Closing, the Company shall execute a warrant
agreement with the warrant agent satisfactory to the Underwriter.
(s) As soon as practicable, the Company shall deliver to the
Underwriter a cash budget and projections of cash flow, capital expenditures,
and profit or loss, all in form and containing such information as is reasonably
satisfactory to the Underwriter.
(t) Until this Agreement is terminated as provided herein, the Company
will not engage another underwriter or agent to offer the Units.
9. Indemnification By Company.
The Company agrees to indemnify and hold harmless the Underwriter and
each person who controls the Underwriter within the meaning of Section 15 of the
Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act or any
other statute or at common law and to reimburse persons indemnified as above for
any legal or other expenses (including the cost of any investigation and
preparation) incurred by them in connection with any litigation, whether or not
resulting in any liability, but only insofar as such losses, claims, damages,
liabilities and litigation arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereto or any application or other document filed in
order to qualify the Shares under the Blue Sky or securities laws of the states
where filings were made, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, all as of the date when the Registration Statement or
such amendment, as the case may be, becomes effective, or any untrue statement
or alleged untrue statement of a material fact contained in the Prospectus (as
amended or supplemented if the Company shall have filed with the Commission any
amendments thereof or supplements thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the indemnity agreement contained in this
Section 9 shall not apply to amounts paid in settlement of any such litigation
if such settlements are effected without the consent of the Company, nor shall
it apply to the Underwriter or any person controlling the Underwriter in respect
of any such losses, claims, damages, liabilities, or actions arising out of or
based upon any such untrue statements or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon information peculiarly within the knowledge of the Underwriter and
furnished in writing to the Company by the Underwriter specifically for use in
connection with the preparation of the Registration Statement and Prospectus or
any such amendment or supplement thereto. This indemnity agreement is in
addition to any other liability which the Company may otherwise have to the
Underwriters. The Underwriter agrees within ten days after the receipt by it of
written notice of the commencement of any action against them or against any
person controlling them as aforesaid, in respect of which indemnity may be
sought from the Company on account of the indemnity agreement contained in this
Section 9 to notify the Company in writing of the commencement thereof. The
failure of the Underwriter so to notify the Company of any such action shall
relieve the Company from any liability which it may have to the Underwriters or
any person controlling them as aforesaid on account of the indemnity agreement
contained in this Section 9, but shall not relieve the Company from any other
liability which it may have to the Underwriters or such controlling person. In
case any such action shall be brought against the Underwriters or any such
controlling person and the Underwriters shall notify the Company of the
commencement thereof, the Company shall be entitled to participate in (and, to
the extent that it shall wish, to direct) the defense thereof at its own
expense, but such defense shall be conducted by counsel of recognized standing
and reasonably satisfactory to the Underwriter or such controlling person or
persons, defendant or defendants in such litigation. The Company agrees to
notify the Underwriter promptly of commencement of any litigation or proceedings
against it or any of its officers or directors, of which it may be advised, in
connection with the issue and sale of any of its securities and to furnish to
the Underwriter, at its request, copies of all pleadings therein and permit the
Underwriter to be an observer therein and apprise the Underwriter of all
developments therein, all at the Company's expense. Provided, however, that in
no event shall the indemnification agreement contained in this Section 9 inure
to the benefit of any Underwriter (or any person controlling such Underwriter)
on account of any losses, claims, damages, liabilities or actions arising from
the sale of the Units based upon any misstatement of a material fact or omission
to state a material fact in any information included in the Registration
Statement furnished by the Underwriter and pertaining to the Underwriter.
10. Indemnification By Underwriter.
The Underwriter agrees, to the extent of and in the same manner as set
forth in Section 9 above, to indemnify and hold harmless the Company, the
directors of the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Act with respect to any statement in or
omission from the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or any application or other document filed in any state or
jurisdiction in order to qualify the Units under the blue sky or securities laws
thereof, if such statement or omission was made in reliance upon information
peculiarly within its knowledge and furnished in writing to the Company by the
Underwriter on its behalf specifically for use in connection with the
preparation thereof or supplement thereto. The Underwriter shall not be liable
for amounts paid in settlement of any such litigation if such settlement was
effected without the consent of the Underwriter. In case of commencement of any
action in respect of which indemnity may be sought from the Underwriter on
account of the indemnity agreement contained in this Section10, each person
agreed to be indemnified by the Underwriter shall have the same obligation to
notify the Underwriter as the Underwriter have toward the Company in Section 9
above, subject to the same loss of indemnity in the event such notice is not
given, and the Underwriter shall have the same right to participate in (and, to
the extent that it shall wish, to direct) the defense of such action at its own
expense, but such defense shall be conducted by counsel of recognized standing
and satisfactory to the Company. The Underwriter agrees to notify the Company
promptly of the commencement of any litigation or proceeding against the
Underwriter,, or against any such controlling person, of which it may be
advised, in connection with the issue and sale of any of the securities of the
Company, and to furnish to the Company at its request copies of all pleadings
therein and apprise it of all the developments therein, all at the Underwriter's
expense, and permit the Company to be an observer therein.
11. Contribution.
If the indemnification provided for in Sections 9 or 10 is unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall in lieu of indemnifying
such indemnified party contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect not only (i) the relative benefits received by the Company on the one
hand and the Underwriter on the other from the offering of the Shares, but also
(ii) the relative fault of the Company and the Underwriter in connection with
the statements or omissions which resulted in such losses, claims, damages,
expenses or liabilities (or action in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriter on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Shares
(before deducting expenses other than the non-accountable expense allowance
payable by the Company to the Underwriter) received by the Company bear to the
total underwriting commissions and expense allowance received by the Underwriter
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriter, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriter agree that it would not be just and equitable if
contribution pursuant to this Section 11 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 11. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to above in
this Section 11 shall he deemed to include any legal or other expenses to which
such indemnified party would be entitled if Section 9 and 10 were applied.
Notwithstanding the provisions of this Section 11, the Underwriter shall not be
required to contribute any amount in excess of the amount by which the total
price which the Shares underwritten by it and distributed to the public exceeds
the amount of any damages which the Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission plus the Underwriter's proportionate share of such legal or other
expenses; and any punitive or exemplary damages if the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by or statements made by the
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11 of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
12. Conditions Precedent to the Obligations of the Underwriter.
All obligations of the Underwriter under this Agreement, and
disbursement of the proceeds of this offering to the Company are subject to the
following conditions precedent:
(a) The Registration Statement shall have become effective on or prior
to 12:00 Noon Minneapolis time, on February 15, 1997, or such later date as the
Underwriter may agree to. On or prior to the Closing Date, no order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission or be pending; any request for additional information on the part of
the Commission (to be included in the Registration Statement or Prospectus or
otherwise) shall have been complied with to the satisfaction of the Commission;
and neither the Registration Statement or the Prospectus nor any amendment
thereto shall have been filed to which counsel to the Underwriter shall have
reasonably objected in writing or have not given their consent.
(b) The Underwriter shall not have disclosed in writing to the Company
that the Registration Statement or the Prospectus or any amendment thereof or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel to the Underwriter, is material, or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein,
or is necessary to make the statements therein not misleading.
(c) The Company's warranties and representations set forth herein shall
be true as of the Closing Date and the Company shall have kept and observed all
covenants required of it to such date.
(d) The authorization of the Units, the Warrants, the Stock Purchase
Option, and the Underlying Securities, the Registration Statement and the
Prospectus, and all corporate proceedings and other legal matters incident
thereto and to this Agreement shall be reasonably satisfactory in all respects
to counsel to the Underwriter. The Underwriter shall have received an opinion
dated as of the Closing Date from its counsel, substantially in the form of the
opinion called for by Section (d), qualified in such manner as the Underwriter
may deem acceptable.
(e) The Company (which term shall include any subsidiaries of the
Company) shall have furnished to the Underwriter the opinion, dated the Closing
Date, addressed to the Underwriter, from Keller & Lokken, P.A., counsel to the
Company, to the effect that based upon a review by them of the Registration
Statement; the Prospectus, and the Company's Articles of incorporation, bylaws,
and relevant corporate proceedings; an examination of such statutes they deem
necessary, and such other investigation by such counsel as they deem necessary
to express such opinion:
(i) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of Minnesota, with
full corporate power and authority to own and operate its properties
and to carry on its business as set forth in the Registration Statement
and Prospectus.
(ii) The Company is not required to qualify or register as a
foreign corporation in any state, and there are no jurisdictions in
which the Company's ownership of property or its conduct of business
requires such qualification or registration and where the failure to so
qualify would have a material adverse effect on its operations.
(iii) The Company has authorized and outstanding capital
capital stock as set forth in the Registration Statement and
Prospectus; the capitalization of the Company, the Units, the Warrants,
and the Stock Purchase Option conform to the statements concerning them
in the Registration Statement and Prospectus; the outstanding capital
stock of the Company has been duly and validly issued and is fully-paid
and nonassessable and contain no preemptive or other stock purchase
rights; the Shares have been, and the Shares and Warrant Shares
issuable upon due exercise of the Warrants will be, when delivered
against payment, duly and validly authorized and, upon issuance thereof
and payment therefor in accordance with this Agreement and the
Warrants, will be duly and validly issued, fully paid, and
nonassessable, and will not be subject to the preemptive rights of any
shareholder of the Company.
(iv) The Stock Purchase Option has been duly and validly
authorized and issued and is a valid and binding instrument enforceable
against the Company in accordance with its terms, except as enforcement
may be limited by bankruptcy or similar laws affecting creditors'
rights general application affecting creditors' rights, except as the
availability of equitable remedies requires the exercise of judicial
discretion, and except as enforcement of the indemnification provisions
therein may be limited by federal or state securities laws.
(v) A sufficient number of shares of the Company's common
stock have been duly reserved for issuance upon exercise of the
Warrants, the Stock Purchase Option and the Underwriter's Warrants. The
shares of Common Stock issuable on due exercise of the Stock Purchase
Option and the Warrants included therein will be validly issued fully
paid, and non-assessable.
(vi) No consents, approvals, authorizations, or orders of
agencies, officers, or other regulatory authorities are known to such
counsel which are necessary for the valid authorization, issue, or sale
of the Units and Warrant Shares hereunder, except as required under the
Act or blue sky or state securities laws.
(vii) The issuance and sale of the Units, the Shares, the
Warrants, the Warrant Shares, the Stock Purchase Option and the
Underwriter's Warrants Regulatory and the consummation of the
transactions herein contemplated, and compliance with the terms of this
Agreement and the transactions contemplated therein will not (with or
without notice or lapse of time) conflict with or result in a breach of
any of the terms, conditions, or provisions of or constitute a default
or give another party a right to accelerate under the articles of
incorporation or bylaws of the Company, or under any note, indenture,
mortgage, deed of trust, or other agreement or instrument known to such
counsel after reasonable investigation to which the Company is a party
or by which the Company or any of its property is bound, or under any
existing law (provided this paragraph shall not relate to federal or
state securities laws), order, rule, regulation, writ, injunction, or
decree known to such counsel of any government, governmental
instrumentality, agency, body, arbitration tribunal, or court, domestic
or foreign, having jurisdiction over the Company or its property.
(viii) The Registration Statement has become effective under
the Act and, to the best knowledge of such counsel after reasonable
investigation, no order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by the
Commission under the Act or by any authority acting under any state
securities or blue-sky law; and the Registration Statement and
Prospectus, and each amendment and supplement thereto, comply as to
form in all material respects with the requirements of the Act and the
Regulations thereunder.
(ix) Such counsel is familiar with all contracts referred to
in the Registration Statement or Prospectus and such contracts are
sufficiently summarized or disclosed therein or filed as exhibits
thereto as required, and such counsel, after a reasonable
investigation, does not know of any contracts required to be summarized
or disclosed or filed, and such counsel, after a reasonable
investigation, does not know of any legal or governmental proceedings
pending or threatened to which the Company is the subject of such a
character required to be disclosed in the Registration Statement or the
Prospectus which are not disclosed and properly described therein.
(x) This Agreement, the Warrant Agreement, the Impoundment
Agreement, and the Stock Purchase Option have been duly authorized and
executed by the Company and are valid and binding agreements of the
Company and are enforceable against the Company in accordance with
their terms,; except as enforcement may be limited by bankruptcy or
similar laws affecting creditors' rights except as the availability of
equitable remedies requires the exercise of judicial discretion, and
except as enforcement of the indemnification provisions therein may be
limited by federal or state securities laws.
(x) After a reasonable investigation such counsel has no
reason to believe that either the Registration Statement nor the
Prospectus or any such amendment or supplement contains any untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which made (except that
no opinion need be expressed as to financial statements contained in
the Registration Statement or Prospectus).
As to routine factual matters such as the issuance of stock
certificates and receipt of payment therefor, the states in which the Company
transacts business, the adoption of resolutions reflected by the Company's
minute book and the like, such counsel may rely on the certificate of an
appropriate officer of the Company. Such opinion shall also cover such other
matters incident to the transactions contemplated by this Agreement as the
Underwriter shall reasonably request.
(f) Intentionally omitted.
(h) Between the date hereof and the Closing Date, there shall be no
litigation instituted or threatened against the Company and there shall be no
proceeding instituted or threatened against the Company before or by any federal
or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the business, franchises, licenses,
patents, operations or financial condition or income of the Company considered
as an entity.
(i) The Company shall have furnished to the Underwriter a certificate
by the chief executive officer and chief financial officer, dated as of the
Closing Date, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Date, and the
Company has complied with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date.
(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement has
been issued and to the best of the knowledge of the respective signers,
no proceeding for that purpose has been initiated or is threatened by
the Commission.
(iii) The respective signers have each carefully examined the
Registration Statement and Prospectus and any amendments and
supplements thereto, and the Registration Statement and the Prospectus
and any amendments and supplements thereto contain all statements
required to be stated therein, and all statements contained therein are
true and correct, and neither the Registration Statement nor Prospectus
nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or a
supplemented Registration Statement or Prospectus which has not been so
set forth.
(j) All of the Units being offered by the Company and the Warrants
being purchased from the Company by the Underwriter shall be tendered for
delivery in accordance with the terms and provisions of this Agreement.
(k) The Units shall be qualified in such states as the Underwriter may
reasonably request pursuant to Section 5.04, and each such qualification shall
be in effect and not subject to any stop order or other proceeding on the
Closing Date.
(l) All opinions, letters, certificates, and evidence mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Underwriter, whose approval shall not be unreasonably withheld. The
suggested form of such documents shall be provided to the counsel for the
Underwriter at least one business day before the Closing Date. The Underwriter's
counsel will provide a written memorandum stating such closing documents which
he deems necessary for their review. Such memorandum shall be delivered five
business days before the Closing Date to counsel for the Company.
(m) Any certificate signed by an officer of the Company and delivered
to the Underwriter or to counsel for the Underwriter will be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein.
13. Delivery, Payment, and Closing.
"Closing", as referred to herein, shall mean each event at which
proceeds from the sale of the Units are delivered to or received by the Company.
A "Closing Date" shall be a date on which a closing is held. The Closing shall
occur at 10:00 a.m., Minneapolis time, on the fifth business day following the
date on which 650,000 Units have been sold, at the offices of the Underwriter,
unless some other time, date, and place is mutually agreed upon by the Company
and the Underwriter. Thereafter, one or more Closings will be held at monthly or
more frequent intervals as agreed upon until the Termination Date. The
provisions of Section 12 and this Section 13 shall apply to each such Closing.
At the Closing, certificates for the Units to be sold through the Underwriter
shall be registered in such names and denominations as the Underwriter shall
request at least two full business days prior to the Closing Date. Such
certificates shall be made available to the Underwriter in definitive form for
the purpose of inspection at least one day before the commencement of the
Closing.
14. Termination.
(a) This Agreement may be terminated by the Underwriter by notice to
the Company in the event that the Company shall have failed or been unable to
comply with any of the terms, conditions, or provisions of this Agreement on the
part of the Company to be performed, complied with or fulfilled within the
respective times herein provided for, unless compliance therewith or performance
or satisfaction thereof shall have been expressly waived by the Underwriter in
writing.
(b) This Agreement may be terminated by the Underwriter by notice to
the Company if the Underwriter believes in its sole judgment that any adverse
changes have occurred in the management of the Company; that material adverse
changes have occurred in the financial condition or obligations of the Company;
or if the Company shall have sustained a loss by strike, fire, flood, accident
or other calamity of such a character as, in the sole judgment of the
Underwriter, may interfere materially with the conduct of the Company's business
and operations regardless of whether or not such loss shall have been insured.
(c) This Agreement may be terminated by the Underwriter by notice to
the Company at any time if, in the sole judgment of the Underwriter, payment for
and delivery of the Shares is rendered impracticable or inadvisable because (i)
additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on the New York
or American Stock Exchange, or trading in securities generally on either such
Exchange shall have been suspended, or a general moratorium shall have been
established by federal or state authorities; or (ii) a war or other national
calamity shall have occurred; or (iii) substantial and material changes in the
condition of the market (either generally or with reference to the sale of the
Shares to be offered hereby) beyond normal fluctuations are such that it would
be undesirable, impracticable or inadvisable in the sole judgment of the
Underwriter to proceed with this Agreement or with the public offering; or (iv)
of any matter materially adversely affecting the Company.
(d) In the event any action or proceeding shall be instituted or
threatened against the Underwriter, either in any court of competent
jurisdiction, before the Commission or any state securities commission
concerning its activities as a broker or dealer that would prevent the
Underwriter from acting as such, at any time prior to the effective date
hereunder, or in any court pursuant to any federal, state, local or municipal
statute, a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of the Underwriter's assets or if the
Underwriter makes an assignment for the benefit of creditors, the Company shall
have the right on three days' written notice to the Underwriter to terminate
this Agreement without any liability to the Underwriter of any kind except for
the payment of expenses as provided in Section 4(a) and 5 herein.
(e) Any termination of this Agreement pursuant to this Section 14 shall
be without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that in such event (i) the Underwriter shall provide the Company with a
statement of its accountable expenses, which shall include but are not limited
to, the Underwriter's counsel fees, consultants' fees, entertainment expenses,
travel expenses, postage expenses, advertising costs, due diligence meeting
expenses, duplication expenses, long-distance telephone expenses, and other
expenses directly attributable to this offering (but not general office expenses
or overhead) incurred in connection with the proposed offering and (ii) if such
accountable expenses are more than $20,000 (including Underwriter's counsel
fees), the Underwriter shall bear such excess but the Company shall reimburse
the Underwriter for all such accountable expenses up to $20,000 or if such
accountable expenses are less than $20,000, the Underwriter shall refund any
excess payment it has received.
15. Notices. All notices shall he in writing and shall be delivered at
or mailed to the following addresses or sent by telegram to the following
addresses with written confirmation thereafter:
To the Company:
ILLUMINATED MEDIA, INC. .
15 South Fifth Street
Suite 715
Minneapolis, MN 55402
ATTN: President
With copy to
Richard P. Keller, Esq.
Keller & Lokken, P.A.
175 East Fifth Street
Suite 763
St. Paul, MN 55101
To the Underwriter:
TUSCHNER & COMPANY, INC.
Suite 1500, TCF Tower
121 South Eighth Street
Minneapolis, MN 55402
ATTN: President
With copy to
Michael L. Berde, Esq.
Furber Timmer Zahn, PLLP
2100 Metropolitan Centre
333 South Seventh Street
Minneapolis, MN 55402
16. Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
Company and the Underwriter (including the selected dealers as provided in
Sections 9 and 10) and their successors. Nothing expressed in this Agreement is
intended to give any Person other than the persons mentioned in the preceding
sentence any legal or equitable right, remedy or claim under this Agreement.
However, the representations, warranties and indemnity and defense obligations
of the Company included in this Agreement also inure to the benefit of any
person who controls the Underwriter and participating dealers within the meaning
of Section 15 of the Act and the representations, warranties, indemnities and
defense obligations of the Underwriter and participating dealers inure to the
benefit of each officer who signs the Registration Statement, each director of
the Company and each person who controls the Company within the meaning of
Section 15 of the Act.
17. Miscellaneous Provisions.
(a) Time shall be of the essence of this Agreement.
(b) This Agreement shall be construed according to the laws of the
state of Colorado.
(c) The representations and warranties made in this Agreement shall
survive the termination of this Agreement and shall continue in full force and
effect regardless of any investigation made by the party relying upon any such
representation or warranty.
(d) This Agreement is made solely for the benefit of the Company and
its officers, directors and controlling persons within the meaning of Section 15
of the Act and of the Underwriter and its officers, directors and controlling
persons within the meaning of Section 15 of the Act, and their respective
successors, heirs and Personal representatives, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successor" as used in this Agreement shall not include any purchaser, as such,
of the Units.
(e) The Underwriter will provide upon closing a list of all the names
and addresses of all participating dealers and shall provide the Company with
such changes of the address or name of such participating dealers as occur and
of which the Underwriter is notified. Further, the Underwriter shall use its
best efforts to maintain the current name and address of all participating
dealers during the terms of this Agreement.
If this Agreement correctly sets forth our understanding please
indicate your acceptance in the space provided below for that purpose.
Very truly yours,
ILLUMINATED MEDIA, INC.
By __________________________
President
Confirmed and accepted as of the date of this Agreement:
TUSCHNER & COMPANY, INC.
By___________________________
John M. Tuschner, President