EXHIBIT 1.1
ILLUMINATED MEDIA, INC.
UNDERWRITING AGREEMENT
Minneapolis, Minnesota
December ____, 1996
Tuschner & Company, Inc.
Suite 800, One Financial Plaza
120 South Sixth 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 $.01 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 550,000 Units and on a "best efforts" with respect
to
an additional 1,000,000 Units. The shares of common stock
included in the Units and in the Unit 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 Unit
Purchase Option are referred to herein as the "Warrant
Shares." The Warrants included in the Units subject to the
Unit Purchase Option are referred to herein as the
"Underwriter's Warrants." All securities included in the Units
and in the Unit 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 Unit Purchase Option have been duly and
validly authorized by all necessary corporation by the
Company. The Warrants, the Unit 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 Unit Purchase Option and the Underwriter's
Warrants, and when delivered upon due exercise, will be
validly issued, fully paid and nonassessable. The Units, Unit
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 Unit
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 subjec 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,
Unit 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 Comany); (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 Unit Purchase Option
and the Warrant Agreement, and to effect all other transactions
contemplated by this Agreement. This Agreement, the Unit
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
discrection; 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 comittments, 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 Assocation 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 550,000 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 550,000 Units, the
Company agrees to pay to the Underwriter an underwriting
commission computed at the rate of $1.00 (10% of the public
offering price) for each of the Unit sold by the Underwriter at
the public offering price of $.10 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 550,000 Units, and
subject to the provisions of paragraph 14(e) hereof, the
Company shall reimburse the Underwriter for its expenses on
a nonaccountable basis in an amount of 3% of the offering
proceeds. The Underwriter acknowledges that it has received
$5,000 cash of the nonaccountable expense allowance. Subject
to the provisions of paragraph 14(e) hereof, the remaining
nonaccountable 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
nonaccountable 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 Unitsunder 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. Unit 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 "Unit Purchase Option"), in form attached as Exhibit A
hereto, for a purchase price of $100 entitling the Underwriter
to purchase 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 1334, 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
nonaccountable expense allowance payable by the Company to
the Underwriter) received by the Company bear to the total
underwriting commissions and expense allowance received by
the Underwriter in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates
to
information supplied by the Company or the Underwriter,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriter
agree that it would not be just and equitable if contribution
pursuant to this Section 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
Unit 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 Unit
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 sotck 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 Unit 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 Unit Purchase
Option and the Underwriter's Warrants. The shares of
Common Stock issuable on due exercise of the Unit
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 Unit 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, the Impoundment
Agreement, and the Unit 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 that no opinion need be expressed as
to financial statements contained in the Registration
Statement or Prospectus); except ats 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.
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) The Underwriter shall have received a letter
addressed to it and dated the date of this Agreement and the
Closing Date, respectively, from Silverman, Olson,
Thorvilson, and Kaufmann, Ltd., independent public
accountants for the Company, stating that (i) with respect to
the Company they are independent public accountants within
the meaning of the Act and the applicable Regulations
thereunder and the response to Item 509 of Regulation S-B as
reflected by the Registration Statement is correct insofar as
it
relates to them; (ii) in their opinion, the financial
statements of
the Company examined by them at all dates and for all periods
referred to in their opinion and included in the Registration
Statement and Prospectus, comply in all material respects with
the applicable accounting requirements of the Act and the
Regulations thereunder with respect to registration statements
on Form S-B2; (iii) on the basis of certain indicated
procedures
(but not an examination in accordance with generally accepted
accounting principles), including examinations of the
instruments of the Company set forth under "Capitalization"
and/or "Summary Financial Information" in the Prospectus, a
reading of the latest available interim unaudited financial
statements of the Company, whether or not appearing in the
Prospectus, inquiries of the officers of the Company or other
persons responsible for its financial and accounting matters
regarding the specific items for which representations are
requested below, and a reading of the minute books of the
Company, nothing has come to their attention which would
cause them to believe that during the period from the last
audited balance sheet included in the Registration Statement to
a specified date not more than five days prior to the date of
such letter (a) there has been any change in the capital stock
or
other securities of the Company or any payment or declaration
of any dividend or other distribution in respect thereof or
exchange therefor from that shown on its audited balance
sheets or in the debt of the Company from that shown or
contemplated under "Capitalization" in the Registration
Statement or Prospectus other than as set forth in or
contemplated by the Registration Statement or Prospectus; (b)
there have been any material decreases in net current assets,
or
net assets as compared with amounts shown in the last audited
balance sheet included in the Prospectus so as to make said
financial statements misleading; and (c) on the basis of the
indicated procedures and discussions referred to in clause
(iii)
above, nothing has come to their attention which, in their
judgment, would cause them to believe or indicate that (1) the
unaudited financial statements and schedules set forth in the
Registration Statement and Prospectus do not present fairly the
financial position and results of the Company for the periods
indicated, in conformity with the generally accepted
accounting principles applied on a consistent basis with the
audited financial statements, and (2) the dollar amounts,
percentages and other financial information set forth in the
Registration Statement and Prospectus under the captions
"Prospectus Summary," "Risk Factors," "Dilution,"
"Capitalization," "Executive Compensation," "1996 Stock
Option Plan," "Principal Shareholders," and "Certain
Transactions," are not in agreement with the Company's
general ledger, financial records, or computations made by the
Company therefrom.
(g) The Underwriter shall be furnished without charge,
in addition to the original signed copies, such number of
signed
or photostatic or conformed copies of such letters as the
Underwriter shall reasonably request.
(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 550,000 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 Fifthe 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 800, One Financial Plaza
120 South Sixth Street
Minneapolis, MN 55402
ATTN: President
With copy to
Michael L. Berde, Esq.
Merritt, Furber & Timmer
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