EXHIBIT 1.1
AGENCY AGREEMENT
March 25, 2003
Northland Securities, Inc.
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Ladies and Gentlemen:
Oregon Trail Ethanol Coalition, L.L.C., a Nebraska limited liability
company (the "Company") hereby confirms its agreement with you with respect to
the Company's offer and sale of up to an aggregate of 24,000 of the Company's
membership units (the "Units"). The Company desires to increase the capital of
the Company in the minimum amount of $18,000,000 and a maximum amount of
$24,000,000 by the sale of the Units (the "Offering"). The subscribers therefor,
each of whom will be named in a subscription agreement substantially similar to
the form of subscription agreement attached as an exhibit to the Prospectus
hereinafter referred to (the "Subscription Agreement"), and by which all such
subscribers will be bound, will, at the election of and sole discretion of the
Company, become unitholders ("Unitholders") of the Company. Pursuant to the
terms and conditions hereof, the Company desires to appoint you as the exclusive
third-party selling agent (the "Agent") of the Offering. Agent understands and
agrees that certain of the officers and directors of the Company will also offer
and sell the Units in accordance with the terms and conditions hereof.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with, you as
of the date hereof as follows:
(i) A registration statement on Form SB-2 (File No.
333-97451) and a related prospectus with respect to the Units have been
prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and
regulations of the Commission thereunder (the "Regulations"), and the
Company has so prepared and has filed such amendments thereto, including
Post-Effective Amendment No. 1, and such amended prospectuses as may
have been required to the date hereof and will file such additional
amendments thereto and such amended prospectuses as may hereafter be
required. There have been or will promptly be delivered to you a
conformed copy of such registration statement and amendments and a copy
of each exhibit filed therewith.
Such registration statement, as amended by
Post-Effective Amendment No. 1, at the time it becomes effective and the
prospectus constituting a part thereof (including the information, if
any, deemed to be part thereof pursuant to Rule 430A(b)), as from time
to time amended or supplemented, are hereinafter referred to as the
"Registration Statement," and the "Prospectus," respectively, except
that if any revised prospectus shall be provided to the Agent by the
Company for use in connection with the offering of the Units which
differs from the Prospectus on file at the Commission at the time the
Registration Statement became or becomes effective shall be deemed to be
part of the "Registration Statement" as defined herein, and any
prospectus (including any amendment or supplement thereto or information
which is deemed part thereof) included in such registration statement
shall be deemed to be part of the "Prospectus," as defined herein, as
appropriate. The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder are hereinafter
collectively referred to as the "Exchange Act."
(ii) The Commission has not issued any order
preventing or suspending the use of any prospectus, and each prospectus
has conformed in all material respects with the requirements of the Act
and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein not misleading; and when the Registration Statement
became or becomes effective, and at all times subsequent thereto, up to
the Minimum Subscription Date (as defined in Section 2(e) hereof) and
each Issuance Date (as defined in Section 2(f) hereof), as the case may
be, the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant
to Rule 430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the Act and in all
material respects conformed or will in all material respects conform to
the requirements of the Act, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, included or
will include any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(iii) The Company will not at any time hereafter file
any amendments to the Registration Statement or in accordance with Rule
424(b) of the Regulations of which the Agent shall not have been
previously advised in advance of filing or to which the Agent shall
reasonably object in writing.
(iv) The Company has not sustained since the date of
the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any
material change in the capitalization or long-term debt of the Company
or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial
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position, unitholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus.
(v) The Company is, and at the Minimum Subscription
Date as defined in Section 2 below, and each subsequent Issuance Date
will be, duly formed and validly existing as a limited liability company
in good standing under the laws of Nebraska, with power and authority to
own or lease its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign limited liability
company for the transaction of business and is and will be in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification (except where the failure to be so licensed or qualified
would not, individually or in the aggregate, have a material adverse
effect on the financial condition, results of operations or business of
the Company or subject the Company, its unitholders or its members to
any material liability or disability (a "Material Adverse Effect"). The
Company was organized for the purpose of the transactions contemplated
herein and in the Prospectus. Except as described in the Prospectus, the
Company has not engaged in any business activities other than in
connection with its organization and the transactions contemplated
herein. Complete and correct copies of the Articles of Organization and
the Amended and Restated Operating Agreement (the "LLC Agreement") of
the Company have been delivered to the Agent and are each included as an
appendix to the Prospectus.
(vi) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued equity securities of
the Company have been duly and validly authorized and issued and are
fully paid and (except as required to the contrary by the Nebraska
Limited Liability Company Act) non-assessable and conform in all
material respects to the descriptions thereof in the Prospectus.
(vii) The Units have been duly and validly authorized
and, when issued and delivered against payment therefore as provided in
this Agreement and the Prospectus, will be duly and validly issued and
fully paid and (except as non-assessability may be affected by the
Nebraska Limited Liability Company Act) non-assessable and will conform
to the descriptions thereof contained in the Prospectus.
(viii) The issue and sale of the Units by the Company,
the execution of, and the compliance by the Company, with all of the
applicable provisions of this Agreement and the Financial Services
Agreement (all as described in the Prospectus) and the consummation of
the transactions contemplated herein, therein and in the Prospectus will
not conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
to which the Company is a party or by which the Company is bound or to
which any of the property or assets of the Company is subject; nor will
such action result in any violation of the provisions of any of the
formation or governing documents, including the LLC Agreement, of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of the properties of the Company; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or
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governmental agency or body is required for the issue and sale of the
Units or the consummation of the transactions contemplated by this
Agreement or the Prospectus, except the registration under the Act as
described in Section 1(a) herein and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or "blue sky" laws in connection with the offer and
sale of the Units as contemplated by this Agreement and the Prospectus.
(ix) The Company is not (A) in violation of its
formation or governing documents, including the LLC Agreement, or (B) in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound.
(x) The statements set forth in the Prospectus under
the captions "Summary of Amended and Restated Operating Agreement,"
insofar as they purport to constitute a summary of the terms of the
Units, and under the captions "Description of Membership Units", "Income
Tax Consequences of Owning Our Units" and "Subscription to Membership
Units," insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate, complete and fair in
all material respects.
(xi) BKD, LLP, who have certified certain financial
statements and schedules of the Company included in the Prospectus, are
independent public accountants as required by the Act and the
Regulations.
(xii) The financial statements and schedules of the
Company included in the Registration Statement present fairly the
financial position of the Company as of the respective dates of such
financial statements, and the results of operations and cash flows of
the Company for the respective periods covered thereby, all in
conformity with accounting principles generally accepted in the United
States of America consistently applied throughout the periods involved;
and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. The
financial information set forth in the Prospectus under "Selected
Financial Data" presents fairly on the basis stated in the Prospectus,
the information set forth therein.
(xiii) The projections disclosed under "Prospectus
Summary," "Management's Plan of Operation" and "Business of OTEC" in the
Prospectus, with respect to both the Company's operations and the
ethanol industry, are based on the sources disclosed therein, are
properly summarized, if so summarized from the identified sources, and,
in the opinion of the Company, the assumptions used in the preparation
thereof are reasonable and appropriate.
(xiv) The Company (A) makes and keeps accurate books
and records and (B) maintains internal accounting controls which provide
reasonable assurance that (1) transactions are executed in accordance
with management's authorization, (2) transactions are recorded as
necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (3) access to its assets is
permitted only in
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accordance with management's authorization, and (4) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(xv) The Company is a "small business issuer" as such
term is defined in Rule 405 under the Act.
(xvi) The Company has all of the necessary limited
liability company power and authority to enter into this Agreement and
consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Company. This Agreement
constitutes a valid and binding agreement of the Company.
(xvii) The Company currently maintains or will maintain
insurance (issued by insurers of recognized financial responsibility) of
the types and in the amounts generally deemed adequate for its
businesses and, to the knowledge of the Company, consistent with
insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and
personal property owned or leased by it against theft, damage,
destruction, acts of vandalism, environmental violations or liabilities
and all other risks customarily insured against, all of which insurance
is in full force and effect.
(xviii) To the Company's knowledge, with limited
inquiry, there has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes,
medical wastes, hazardous wastes or hazardous substances by the Company
(or, to the knowledge of the Company, its predecessors in interest) at,
upon or from any of the property now or previously owned or leased by
the Company in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any regulation, order, judgment, decree or permit;
there has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or
caused by the Company or with respect to which the Company has
knowledge; the terms "hazardous wastes," "toxic wastes," "hazardous
substances," and "medical wastes" shall have the meanings specified in
any applicable local, state, federal and foreign laws or regulations
with respect to environmental protection.
(xix) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
and prior to the Minimum Subscription Closing Date, defined in Section 2
below, and each subsequent Issuance Date, except as otherwise may be
specifically described, indicated or contemplated therein, the Company
will not have (A) issued any securities or incurred any material
liability or obligation, direct or contingent, or borrowed money, except
borrowings in the ordinary course of business from the same or similar
sources and in similar amounts as indicated in the Prospectus, or (B)
entered into any transaction or series of transactions which is material
in light of the business of the Company.
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(xx) The Company is not involved in any labor dispute
and, to the knowledge of the Company, no such dispute has been
threatened, except for such disputes as would not have a Material
Adverse Effect.
(xxi) To the Company's knowledge, the Company is not
in violation or default of any statute, law, rule, regulation, judgment,
order or decree of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or any of its properties, as applicable.
(xxii) The Company has or will seek to obtain all
licenses, permits, franchises, or other governmental authorization
necessary for the ownership and operation of an ethanol plant and to the
conduct of its business generally.
(xxiii) There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatened, against or
affecting the Company which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which might
result in any material adverse change in the financial condition,
results of operations or business affairs of the Company; all pending
legal or governmental proceedings to which the Company is a party or of
which any of its respective property or assets is the subject which are
not described in the Registration Statement, including ordinary routine
litigation incidental to its business, are considered in the aggregate
not material; and there are no contracts or documents of the Company
which are required to be described in or filed as exhibits to the
Registration Statement which have not been so described or filed.
(xxiv) The Company has not received a determination
from the Internal Revenue Service, but to its knowledge is qualified and
at all times through the Offering Termination Date, as defined in
Section 2 hereof, will qualify for treatment as a partnership for
Federal income tax purposes under current interpretations of the
Internal Revenue Code of 1986, as amended, and regulations thereunder.
(xxv) On the date hereof, and at all times through the
Offering Termination Date, defined in Section 2 hereof, the Company is
not, and does not intend to conduct its business in a manner in which it
would become, an "investment company" as defined in Section 3(a) of the
Investment Company Act of 1940, as amended.
(xxvi) The Company has filed all federal income and
state and local franchise tax returns required to be filed and have made
timely payments of all taxes shown as due and payable in respect of such
returns, and no deficiency has been asserted with respect thereto by any
taxing authority.
(b) Any certificate signed by any officer of the Company and
delivered to you or your counsel shall be deemed a representation and warranty
by the Company to you as to the matters covered thereby.
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SECTION 2. OFFERING AND SALE OF UNITS.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, you
are hereby appointed the selling agent of the Company during the term herein
specified (the "Offering Period") for the purpose of finding subscribers for the
Units for the account and risk of the Company through a public offering, and
subject to the performance by the Company of all of its obligations to be
performed hereunder and to the completeness and accuracy of all the
representations and warranties contained herein, you hereby accept such agency
and agree on the terms and conditions herein set forth to use commercially
reasonable efforts during the Offering Period to find subscribers for the Units
at a public offering price of $1,000 per Unit, each investor being required to
subscribe for at least 5 Units.
The Offering Period will terminate on April 30, 2003, (the "Offering
Termination Date"). At all times during the Offering Period you shall follow the
procedures set forth in this Section 2.
(b) Signature pages to the Subscription Agreement and the LLC
Agreement (the Subscription Agreement together with the LLC Agreement are
hereinafter referred to as the "Subscription Documents") must be completed by or
on behalf of each person desiring to purchase Units in form and substance
satisfactory to the Company. You shall ascertain that the signature pages to the
Subscription Documents sent in by or on behalf of a prospective purchaser of
Units have been properly completed and executed. You shall return the
Subscription Documents together with a check (in the amount or amounts required
by paragraph (a) above) payable to Midwest Bank, N.A. (the "Bank") with respect
to the Company at Oregon Trail Ethanol Coalition, L.L.C., ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
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You will comply with the requirements of Rule l5c2-4 of the Securities
Exchange Act of 1934, as amended and any applicable state law or regulation
applicable to your efforts in the Offering.
(c) You agree to retain in your records and make available to us,
for a period of at least four years after the Offering Termination Date,
information establishing that each purchaser of the Units pursuant to a
Subscription Agreement solicited by you is within the permitted class of
investors under the requirements, if any, of the jurisdiction in which such
purchaser is a resident, and that investment in the Company is appropriate for
each such purchaser's investment objectives and financial situation. In
addition, you agree that you shall be responsible for determining that each
purchaser of Units pursuant to a Subscription Agreement solicited by you meets
the suitability requirement for investors contained in the Prospectus and you
agree to retain records evidencing such compliance with the suitability
requirement for each investor.
(d) The Company, upon receipt of the aforementioned signature pages
to the Subscription Documents, will determine as soon as practicable (but in no
event more than 30 days after receipt) whether it expects to accept the proposed
purchaser as a Unitholder in the Company, it being understood that the Company
reserves the right to reject the tender of any signature pages to the
Subscription Documents and to reject all tenders after all of the Units have
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been sold. The Company, at its sole discretion, will determine if such
Subscription Documents have been properly completed and executed. Should the
Company determine to accept the tender of the signature pages to the
Subscription Documents, the Company will promptly advise you of such action.
Should the Company determine to reject the tender of the signature pages to the
Subscription Documents, it will promptly notify you in writing (and, if the
Company elects, the prospective purchaser), of such determination, and will
promptly cause the return of the tendered signature pages to the Subscription
Documents and payment of the purchase price of the Units directly to you or to
the prospective purchaser.
(e) "Minimum Subscription Date" as used herein shall mean the date,
no later than April 30, 2003, on which date the Company and the Bank shall
notify you in writing that subscriptions and payments for an aggregate of at
least 18,000 Units shall have been received and accepted by the Company.
"Minimum Subscription Closing Date" as used herein shall mean the first full
business day following the Minimum Subscription Date or such day thereafter as
shall be mutually agreed upon by you and the Company.
(f) In the event the offering is commenced and subscriptions for at
least 18,000 Units shall not have been received by the Offering Termination
Date, all funds received from subscribers (if any) shall be returned by the Bank
to the subscribers in full, without deduction of any escrow or other fees and
expenses and with any interest earned thereon being delivered to the subscribers
on a pro rata basis. If at least 18,000 Units have been subscribed and paid for
and accepted by the Company no later than the Offering Termination Date, then on
the Minimum Subscription Closing Date, at the option of the Company board of
directors, to be exercised in its sole discretion, and upon written notice from
the Company to the Bank of its exercise of such option, the Bank shall make
payment to the Company of 10% of the purchase price for each Unit subscribed and
paid for and accepted by the Company, and the Company shall issue 10% of the
Units subscribed and paid for and accepted by the Company to each purchaser. At
periodic intervals thereafter, to be mutually agreed upon by you and the Company
during the Offering Period, dates shall be established on which the Bank shall
make additional payments to the Company of 10% of the purchase price for each
Unit subscribed and paid for and accepted by the Company after the Minimum
Subscription Date (or after a prior Issuance Date, if applicable), and the
Company shall issue 10% of the Units subscribed and paid for and accepted by the
Company to each additional purchaser (each, an "Issuance Date"). On or following
the Minimum Subscription Closing Date, if the Company receives an executed
commitment letter from a bank or suitable financial institution for the amount
of debt financing that the Company needs (the "Financing Commitment"), then upon
receipt of written notice by the Bank of such Financing Commitment, the Bank
shall make payment to the Company of the remaining 90% of the purchase price for
each Unit subscribed and paid for and accepted by the Company, and the Company
shall issue 90% of the Units subscribed and paid for and accepted by the Company
to each purchaser (an "Issuance Date"). If the Company has not received the
Financing Commitment prior to the Offering Termination Date, then 90% of each
subscriber's purchase price shall be returned by the Bank to the subscribers,
with any interest earned thereon being delivered to the Company.
(g) As consideration for your services, your compensation will be
paid to you as follows:
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(i) If at least 18,000 of the Units are subscribed
for and the required payments and Unit issuances are made at the Minimum
Subscription Closing Date and all conditions precedent hereunder to the
obligations of you and the Company are satisfied on the Minimum
Subscription Closing Date, you will be paid a commission of 1.5833% of
the purchase price of a Unit on each Unit issued on the Minimum
Subscription Closing Date, which commission is due and payable on such
date;
(ii) After the Minimum Subscription Closing Date, you
will be paid at each subsequent Issuance Date a commission of 1.5833% of
the purchase price of a Unit on each Unit issued on such Issuance Date,
which commission is due and payable on such date;
(iii) In addition to the compensation set forth above,
upon Successful Commissioning of the Ethanol Plant you will be paid a
commission of .25% of the aggregate purchase price of all Units issued
during the Offering Period, which commission is due and payable in nine
monthly installments on the first day of each month beginning on the
first day of the first month following the Successful Commissioning of
the Ethanol Plant. "Successful Commissioning" shall mean production of
ethanol meeting design specifications on a daily basis of nameplate
production and all production meets guarantees provided by engineers and
contractors.
Such commissions and expense allowance shall be paid to you by a Company
check.
(h) Subscriptions for Units may be solicited by one or more dealers
(the "Soliciting Dealers") and sales by Soliciting Dealers shall be made under a
Soliciting Dealer Agreement in the form agreed to by you and the Soliciting
Dealer. Pursuant to any Soliciting Dealer Agreements, you will reallow each
Soliciting Dealer a concession in an amount agreed upon by you and the
Soliciting Dealer with respect to each Unit sold by the Company pursuant to a
Subscription Agreement solicited by such Soliciting Dealer, subject to the terms
and conditions set forth in Section 2(g).
(i) Except as disclosed in the Prospectus and the finders'
arrangements specifically described therein, neither you, the Company, nor any
dealer participating in the offering of the Units shall, directly or indirectly,
pay or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
advisor to the purchase of Units; provided, however, that normal sales
commissions or payments pursuant to any sales, incentive program referred to in
the Prospectus payable to a registered broker-dealer or other properly licensed
person for selling Units shall not be prohibited hereby.
(j) You agree that you will not disseminate or publish any
advertisement relating to your solicitation of subscribers for the Units
(including, without limitation, any advertisement relating to seminars) (i) the
form of which has not been submitted to the NASD by you and (ii) that has not
been approved by the Company.
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SECTION 3. COVENANTS OF THE COMPANY.
The Company covenants with you as follows:
(a) It will notify you immediately and confirm the notice in writing
(i) when the Registration Statement and any post-effective amendment thereto
shall have become effective, (ii) of the receipt of any comments from the
Commission with respect to the Registration Statement or any post-effective
amendment, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information relating thereto, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any proceedings for that purpose. The Company will make every
reasonable effort to prevent the issuance by the Commission of any stop order
and, if any such stop order shall at any time be issued, to obtain the lifting
thereof at the earliest possible moment.
(b) It will give you notice of its intention to file or prepare any
amendment to the Registration Statement (including any post-effective amendment)
or any amendment or supplement to the Prospectus (including any revised
prospectus which the Company proposes for use by the Agent in connection with
the offering of the Units which differs from the prospectus on file at the
Commission at the time the Registration Statement became or becomes effective,
whether or not such revised prospectus is required to be filed pursuant to Rule
424(b)) and will furnish you with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement or use any such
prospectus to which you shall reasonably object in writing.
(c) It will deliver to you, as soon as available, one signed copy of
the Registration Statement as originally filed and of each amendment thereto and
one set of exhibits thereto.
(d) It will deliver to you from time to time, before the
Registration Statement becomes effective, such number of copies of the
Registration Statement as originally filed and any amendments thereto and as
soon as the Registration Statement initially becomes effective and thereafter
from time to time during the period when the Prospectus is required to be
delivered under the Act, such number of copies of the Prospectus (as amended or
supplemented) as you may reasonably request for the purposes contemplated by the
Act or the Regulations, and such number of copies of the Subscription Agreement
and the LLC Agreement as you may reasonably request.
(e) During the period when the Prospectus is required to be
delivered pursuant to the Act, the Company will comply, so far as it is able and
at its own expense, with all requirements imposed upon it by the Act, as now and
hereafter amended, and by the Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in, the Units
during such period in accordance with the provisions herein and as set forth in
the Prospectus.
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(f) If any event relating to or affecting the Company shall occur as
a result of which it is necessary, in your view, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a subscriber, the Company
will forthwith prepare and furnish to you, without expense to you, a reasonable
number of copies of an amendment or amendments of, or a supplement or
supplements to, the Prospectus (in form and substance satisfactory to you) which
amend or supplement the Prospectus so that as amended or supplemented it will
not contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a subscriber,
not misleading. For the purposes of this Section 3(f), the Company will furnish
such information with respect to themselves as you may from time to time
reasonably request.
(g) It will comply with all applicable registration, filing and
reporting requirements of the Exchange Act.
(h) It will endeavor in good faith, in cooperation with you, to
qualify the Units for offering and sale under the applicable securities or "blue
sky" laws of such jurisdictions as you may designate; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify to do business or to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. It will give you notice of any
correspondence received from any state securities commission regarding the
Offering and will give you notice of its intention to file, or prepare for
filing, any materials related to the Offering with any state securities
commission; it will furnish you copies of any of the foregoing promptly upon
receipt or prior to filing, as applicable, and will not file any such materials
to which you shall reasonably object in writing. In each jurisdiction where the
Units shall have been qualified as above provided, the Company will make and
file such statements and reports in each year as are or may be required by the
laws of such jurisdiction.
(i) It will make generally available to the Company's security
holders (i.e., the holders of Units) as soon as practicable, but not later than
120 days after the close of the period covered thereby, an earnings statement of
the Company (in form complying with the provisions of Section 11(a) of the Act
and Rule 158 promulgated thereunder, which need not be certified by independent
public accountants unless required by the Act or the Regulations) covering the
twelve-month period, or such earlier period since the Company's inception,
beginning not later than the first day of the Company's fiscal quarter following
the effective date of the Registration Statement. As used in this subsection,
the terms "earnings statement" and "made generally available to the Company's
security holders" shall have the meanings contained in Rule 158 promulgated
under the Act.
- 11 -
(j) It will for a period of two years following the Offering
Termination Date or the earlier expiration or termination of this Agreement
pursuant to Section 10 below, furnish directly to you the following:
(i) as soon as practicable after the end of each
fiscal year, one copy of the Company's annual report, including
therein the accountants' report, the balance sheet, the related
statements of profit and loss and cash flows for the Company,
together with such accountants' comments and notations with
respect thereto in such detail as the Company may customarily
receive from such accountants;
(ii) as soon as practicable after the end of each
fiscal quarterly period, one copy of a balance sheet of the
Company as at the end of such period, setting forth in
reasonable detail its financial position, together with related
statements of profit and loss and cash flows, none of which
statements need be audited, but shall be certified as correct by
the Company;
(iii) copies of any report, application or document
which the Company shall file with the Commission; and
(iv) as soon as the same shall be sent to holders of
Units, each communication which shall be sent to the holders of
Units, including any other annual or interim report of the
Company.
(k) It will deliver to you, from time to time, all supplemental
sales material (whether designated solely for broker-dealer use or otherwise)
proposed to be used or delivered by the Company in connection with the offering
of Units.
(l) It intends to source funds and to use funds in the manner
specified in the Prospectus.
(m) It will use the net proceeds received by it from the sale of the
Units being sold by it in the manner specified in the Prospectus.
(n) It will maintain adequate books and records setting forth a true
and accurate account of all business transactions arising out of and in
connection with the conduct of the Company. You or your designated
representative shall have the right, at any reasonable time, to have access to
and inspect and copy the contents of such books and records.
SECTION 4. COVENANTS OF NORTHLAND SECURITIES, INC..
You covenant with the Company as follows:
(a) You agree to manage the distribution of the Units and to sell
the Units according to all of the terms and conditions of the Registration
Statement, the Rules of
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Fair Practice of the NASD, all applicable state and federal laws, including the
Act, as amended, and any and all regulations related thereto. You shall not have
any authority to give any information or make any representations in connection
with any offer or sale of the Units other than as contained in the Prospectus or
as is otherwise expressly authorized in writing by the Company, provided,
however, that you shall use only such sales literature and/or advertising in
connection with the sale of the Units as shall be approved by the Company.
(b) The Units shall be offered and sold only where the Units may be
legally offered and sold, and only to such persons in such states who shall be
legally qualified to purchase the Units. The Company shall give you written
notice at the time of effectiveness of the Registration Statement of those
states in which the offering and sale of the Units may be made, and shall amend
such notice thereafter as additional states are added. No Units shall be offered
or sold in any other states.
(c) Neither you nor any person associated with you shall give any
information, written or oral, or make any representation, written or oral, in
connection with the offering other than those contained in the Prospectus or
such other material as may be provided or approved by the Company.
SECTION 5. PAYMENT OF EXPENSES AND FEES.
The Company will pay all expenses incident to the performance of the
obligations of the Company under this Agreement, including (i) the printing and
delivery to you in quantities as hereinabove stated of copies of the
Registration Statement and all amendments thereto and of the Prospectus and any
supplements or amendments thereto, and of the Subscription Agreement; (ii) the
printing, execution, filing and delivery to you in quantities as hereinabove
stated of copies of any supplemental sales material to be used in connection
with the offering approved by the Company and utilized in sales of the Units
directly to the public; (iii) the qualification of the Units under the
securities or "blue sky" laws of the jurisdictions designated by you in
accordance with the provisions of Section 3(h), including filing fees and the
fees and disbursements of any counsel incurred in connection therewith; (iv) the
fees and disbursements of counsel and accountants for the Company; (v) the
filing fee of the NASD and the fees and disbursements of counsel incurred in
connection with the obtaining of NASD approval of the compensation arrangements
relating to the offering of the Units; and (vi) delivery to you of such number
of copies as you may reasonably request of the Blue Sky Survey to be prepared by
▇▇▇▇▇ ▇▇▇▇ Law Firm L.L.P. which shall be delivered to you and the Company.
SECTION 6. CONDITIONS OF YOUR OBLIGATIONS.
Your obligations hereunder are subject to the accuracy of and compliance
with the representations and warranties of the Company, to the performance by
the Company of its obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall become effective not later than
5:30 P.M., Eastern time, on the date hereof, or, with your consent, at a later
time and date
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not later, however, than 5:30 P.M., Eastern time, on the business day following
the date hereof; and at the Minimum Subscription Closing Date and Issuance Date
no stop order suspending the effectiveness thereof shall have been issued under
the Act or proceeding therefor initiated or threatened by the Commission and not
rescinded.
(b) At the Minimum Subscription Closing Date and on each Issuance
Date thereafter, you shall receive the opinion of ▇▇▇▇▇ ▇▇▇▇, as counsel for the
Company, to the effect that:
(i) the Company has been duly organized and is
validly existing as a limited liability company in good standing
under the laws of the State of Nebraska with power and authority
to own its properties and conduct its business as described in
the Prospectus; and the Company has been duly qualified to do
business as a foreign limited liability company under the
limited liability company law of, and is in good standing as
such in, every jurisdiction where the ownership or leasing of
property, or the conduct of its business requires such
qualification except where the failure so to qualify would not
have a Material Adverse Effect;
(ii) the authorized equity of the Company, of which
there is outstanding the amount set forth in the Registration
Statement and Prospectus, conforms as to legal matters in all
material respects to the description thereof in the Registration
Statement and Prospectus;
(iii) the issued and outstanding equity of the Company
has been duly authorized and validly issued and is fully paid
and non-assessable;
(iv) the certificates for the Units to be delivered
hereunder are in due and proper form, and when duly
countersigned by the Company's transfer agent and delivered to
you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of this
Agreement, the Units represented thereby will be duly authorized
and validly issued, fully paid and non-assessable;
(v) the Registration Statement has become effective
under the Act, and, to the actual knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the
Act, and the Registration Statement (including the information
deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), the
Prospectus and each amendment or supplement thereto (except for
the financial statements, schedules and other historical or
prospective statistical or financial data included therein as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act; although
such counsel cannot guarantee the accuracy or completeness of
the statements contained in the Registration Statement or
- 14 -
Prospectus, nothing has come to such counsel's attention that
has led counsel to believe that either the Registration
Statement (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable) or the Prospectus, or the
Registration Statement or the Prospectus as amended or
supplemented (except as aforesaid), as of their respective
effective or issue dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus (except as aforesaid) as
amended or supplemented, if applicable, as of the Minimum
Subscription Date, and each Issuance Date, will be, as the case
may be, contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the
statements therein not misleading in light of the circumstances
under which they were made (except that we express no opinion as
to financial statements and finance data contained in the
Registration Statement or Prospectus, or any document
incorporated by reference therein); the statements in the
Registration Statement and the Prospectus summarizing statutes,
rules and regulations are accurate and fairly and correctly
present the information required to be presented by the Act or
the Regulations, in all material respects and such counsel does
not know of any statutes, rules and regulations required to be
described or referred to in the Registration Statement or the
Prospectus that are not described or referred to therein as
required; and to such counsel's actual knowledge there are no
legal or governmental proceedings pending or threatened required
to be described in the Prospectus which are not described as
required, nor of any contracts or documents of a character
required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration
Statement which are not described or filed, as required;
(vi) the statements under the captions "Description
of Membership Units" and "Summary of Amended and Restated
Operating Agreement," " Income Tax Consequences of Owning Our
Units" and "Subscription to Membership Units," in the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present, in all material
respects, the information called for with respect to such
documents and matters;
(vii) this Agreement and the performance of the
Company's obligations hereunder have been duly authorized by all
necessary limited liability company action and this Agreement
have been duly executed and delivered by and on behalf of the
Company, and are legal, valid, and binding agreements of the
Company, enforceable in accordance with their respective terms;
and no approval, authorization or consent of any public board,
agency, or instrumentality of the United States or of any state
or other jurisdiction is necessary in connection with the issue
or sale of the Units pursuant to this Agreement (other than
under the Act, applicable "blue sky" laws and the rules of the
NASD) or the consummation by the Company of any other
transactions contemplated hereby;
- 15 -
(viii) the execution and performance of this Agreement
will not contravene any of the provisions of, or result in a
default under, any agreement, franchise, license, indenture,
mortgage, deed of trust, or other instrument known to such
counsel of the Company; or by which its property is bound and
which contravention or default would be material to the Company;
or violate any of the provisions of the Articles of Organization
or LLC Agreement of the Company or, so far as is known to such
counsel, violate any statute, order, rule or regulation of any
regulatory or governmental body having jurisdiction over the
Company;
(ix) to such counsel's knowledge, all offers and
sales of the Company's units since the Company's inception were
at all relevant times exempt from the registration requirements
of the Act and were duly registered or the subject of an
available exemption from the registration requirements of the
applicable state securities or "blue sky" laws;
(x) the Company is not an "investment company" or a
person "controlled by" an "investment company" within the
meaning of the Investment Company Act; and
(xi) the Company has not received a determination
from the Internal Revenue Service, but to such counsel's
knowledge the Company qualifies for treatment as a partnership
for Federal income tax purposes under current interpretations of
the Internal Revenue Code of 1986, as amended, and regulations
thereunder.
In rendering such opinion, such counsel may state that insofar
as their opinion under clause (v) above relates to the accuracy and
completeness of the Prospectus and Registration Statement, it is based
upon a general review with the Company's representatives and independent
accountants of the information contained therein, without independent
verification by such counsel of the accuracy or completeness of such
information.
(c) At the Minimum Subscription Closing Date and on each Issuance
Date thereafter you shall receive a certificate signed by the principal
executive officer and principal financial officer of the Company to the effect
that (i) the signer has carefully examined the LLC Agreement, the Registration
Statement and the Prospectus and, in the signer's opinion, at the time the
Registration Statement became effective and at the Minimum Subscription Closing
Date and Issuance Date, as the case may be, the Registration Statement did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Prospectus, as of its issue date and as of such date, did
not contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (ii) since the
effective date of the Registration Statement, no event has occurred which should
have been set forth in an amendment of, or supplement to, the Prospectus but
which has not been so set forth; (iii) no stop order suspending the
- 16 -
effectiveness of the Registration Statement, has been issued and no proceedings
therefor have been instituted or threatened by the Commission and not rescinded;
(iv) the representations, warranties and agreements contained in Section 1(a)
are true and correct in all material respects with the same effect as though
expressly made at the Minimum Subscription Closing Date and Issuance Date as the
case may be; (v) since the effective date of the Registration Statement, no
material adverse change in circumstance has occurred with regard to the
transactions described in the Prospectus which should have been set forth in an
amendment of, or supplement to, the Prospectus, but which has not been so set
forth; (vi) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, no material and unfavorable
change, financial or otherwise, in the business, condition or prospects of the
Company has occurred or become known; no transaction which is material and
unfavorable to the Company has been entered into by the Company; and there has
not been any obligation, contingent or otherwise, directly or indirectly
incurred by the Company, which is material to the Company, other than such
obligations that are incurred in the ordinary course of the Company's business;
and (vii) subsequent to the execution and delivery of this Agreement, there has
been no change, or any development involving a prospective change, in or
affecting particularly the business or properties of the Company, whether or not
arising in the ordinary course of business, which is material and adverse to the
current or prospective financial condition or results of operations of the
Company.
(d) At the Minimum Subscription Closing Date and each Issuance Date,
you shall have received from BKD, LLP a letter, in form and substance
satisfactory to you and your counsel, dated as of the minimum Subscription
Closing Date or Issuance Date (except that the specified date referred to in
such subsection will be a date not more than five days prior to the Minimum
Subscription Closing Date or such Issuance Date) advising that (i) they are
independent public accountants as required by the Act and the Regulations, (ii)
it is their opinion that the financial statements of the Company included in the
Prospectus, and covered by their opinions therein, comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Regulations relating to financial statements in registration statements on Form
SB-2, (iii) based on procedures set forth in such letter nothing has come to
their attention which would indicate that the unaudited financial statements and
supporting schedules, if any, of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations, or are not presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the respective audited financial
statements of the Company, (iv) based on procedures set forth in such letter
nothing has come to their attention which would indicate that during the period
from December 31, 2002 to a specified date not more than five business days
prior to the date of the letter there has been any change in the equity, capital
accounts, or short-term or long-term indebtedness of the Company or any decrease
in net assets as compared with the amounts shown in their respective balance
sheets as of December 31, 2002 included in the Registration Statement, except
for changes or decreases that the Registration Statement discloses have occurred
or may occur; (v) they have carried out certain procedures, as specified in a
draft of such letter approved by you, performed for the purpose of comparing
certain
- 17 -
financial information and percentages appearing in the Registration Statement,
as specified in such draft letter, with indicated amounts in the financial
statements or accounting records of the Company and certain of its affiliates
and have found such information and percentages to be in agreement with the
relevant accounting and financial information of the Company and certain of its
affiliates.
(e) At the Minimum Subscription Closing Date and at all times
through the Offering Termination Date, ▇▇▇▇▇ ▇▇▇▇ shall have been furnished with
such additional information, opinions and documents, including supporting
documents relating to parties described in the Prospectus and certificates
signed by such parties with regard to information relating to them and included
in the Prospectus as they may reasonably require for the purpose of enabling
them to pass upon the sale of the Units as herein contemplated and related
proceedings, in order to evidence the accuracy or completeness of any of the
representations or warranties or the fulfillment of any of the conditions herein
contained and in order to qualify the Units under the securities or "blue sky"
laws of the jurisdictions designated by you in accordance with the provisions of
Section 3(h); and all actions taken by the Company in connection with the sale
of the Units as herein contemplated shall be reasonably satisfactory in form and
substance to you.
(f) At the Minimum Subscription Closing Date and on each Issuance
Date, the qualification of the Units under the specified "blue sky"
jurisdictions remain valid.
(g) At the Minimum Subscription Closing Date and on each Issuance
Date the Company shall be in compliance with all reporting requirements under
the Exchange Act.
(h) If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all your obligations hereunder may be cancelled by you by
notifying the Company of such cancellation in writing at any time at or prior to
the Minimum Subscription Closing Date, or at any time after the Minimum
Subscription Closing Date, all your obligations hereunder may be cancelled or
terminated by you by notifying the Company of such cancellation or termination
in writing at any time at or prior to the Offering Termination Date and any such
cancellation or termination shall be without liability of any party to any other
party (except for the expenses to be paid or reimbursed pursuant to Section 5
hereof and except to the extent provided in Section 7 hereof).
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you which
approval shall not be unreasonably withheld. The Company shall furnish you with
such manually signed or conformed copies of such opinions, certificates, letters
and documents as you request.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless you and each
person, if any, who controls you within the meaning of the Act or the Exchange
Act against any losses, claims, damages or liabilities to which you or such
controlling person may become subject under the
- 18 -
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of the Company), insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, including the information
deemed to be part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A, if applicable, any preliminary prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and will reimburse you and each such controlling person for any legal or other
expenses reasonably incurred by you or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that (i) any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any preliminary prospectus,
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by you,
specifically for use therein, which such information is limited to the third
paragraph under the subsection "Underwriting" under the section "Subscription to
Membership Units" in the Prospectus; or (ii) if such statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
and (A) any such loss, claim, damage or liability suffered or incurred by you
(or any person who controls you) resulted from an action, claim or suit by any
person who purchased Units which are the subject thereof from you in the
offering and (B) you failed to deliver or provide a copy of the Prospectus to
such person at or prior to the confirmation of the sale of such Units in any
case where such delivery is required by the Act. In addition to its other
obligations under this Section 7(a), the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 7(a), it will reimburse
you on a monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse you for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) You will indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act or the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company, or any such director, officer or controlling person may become subject
under the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with your written consent), insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any (i) failure of Agent to comply with laws or
regulations, including, without limitation, NASD rules, applicable to its
activities hereunder as exclusive third-party selling agent; and (ii) untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary
- 19 -
prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any preliminary prospectus, the
Prospectus, or any amendment or supplement thereto in reliance upon and in
conformity with any written information furnished to the Company by you
specifically for use in the preparation thereof, which such information is
limited to the third paragraph under the subsection "Underwriting" under the
section "Subscription to Membership Units" in the Prospectus; and will reimburse
any legal or other expenses reasonably incurred by the Company, or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. In addition to
their other obligations under this Section 7(b), you agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 7(b), you will
reimburse the Company on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of your
obligation to reimburse the Company for such expenses and the possibility that
such payments might later be held to have been improper by a court of competent
jurisdiction. This indemnity agreement will be in addition to any liability
which you may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 7, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party except to the extent
that the indemnifying party was prejudiced by such failure to notify. In case
any such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it inappropriate for the same counsel to
represent both of them, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defense and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defense in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable
- 20 -
for the expenses of more than one separate counsel, approved by you in the case
of paragraph (a) representing all indemnified parties not having different or
additional defenses or potential conflicting interest among themselves who are
parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and you from the offering of the Units or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and you in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company and you
shall be deemed to be in the same proportion in the case of the Company as the
total price paid to the Company for the Units by you (net of commission but
before deducting expenses), and in your case, as the commission received by you
bears to the total of such amounts paid to the Company and received by you as
commission in each case as contemplated by the Prospectus. The relative fault of
the Company and you shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or by you and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.
Notwithstanding the provisions of this Section 7, you shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Units sold by it and distributed to the public were offered
to the public exceeds the amount of any damages which you have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The provisions of this Section 7 shall survive any termination
of this Agreement.
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SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this
Agreement (including your covenants provided in Section 4 hereof) or contained
in a certificate of the Company submitted pursuant hereto shall remain operative
and in full force and effect, regardless of any investigation made by, or on
behalf of, you or any person who controls you, or by or on behalf of the Company
and shall survive the Offering Termination Date or the expiration or termination
of this Agreement for a period of two (2) years.
SECTION 9. EFFECTIVE DATE OF THIS AGREEMENT.
This Agreement shall become effective (i) at 11:30 A.M., Eastern time,
on the first full business day following the day on which the Post-Effective
Amendment to the Registration Statement initially becomes effective or (ii) at
the time of the initial public offering by you, after the Post-Effective
Amendment to the Registration Statement initially becomes effective, of the
Units, whichever shall first occur. The time of the initial public offering
shall mean the time of the release by you, for publication, of the first
newspaper advertisement, which is subsequently published, relating to the Units
or the time at which the Units are first generally offered by you to
subscribers, whichever shall first occur. You or the Company may prevent this
Agreement from becoming effective by giving the notice indicated in Section 10
prior to the time when this Agreement would otherwise become effective as herein
provided.
SECTION 10. TERMINATION.
Without limiting the right to terminate this Agreement pursuant to any
other provision hereof:
(a) Either the Company or you may terminate this Agreement if by May
1, 2003 the Company has not raised its minimum subscription amount as set forth
in Prospectus and Registration Statement.
(b) In the event the offering is commenced and subscriptions for at
least 18,000 Units shall not have been received by the Minimum Subscription
Date, this Agreement shall terminate without obligation on your part or on the
part of the Company, except as provided in Section 5 hereof and except that the
indemnification or contribution, as the case may be, provided in Section 7
hereof shall continue after such termination of this Agreement.
(c) This Agreement may be terminated by the Company by notice to you
or by you by notice to the Company at any time prior to the time this Agreement
shall become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company to you (except for the expenses
to be paid or reimbursed pursuant to Section 5 hereof and except to the extent
provided in Section 7 hereof).
(d) This Agreement may also be terminated by you prior to the
Minimum Subscription Closing Date if (i) trading in securities on the New York
Stock Exchange shall have been suspended or minimum prices shall have been
established on such exchange, or (ii) a
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banking moratorium shall have been declared by Minnesota, New York, or United
States authorities, or (iii) there shall have been any change in financial
markets or in political, economic or financial conditions which, in your
opinion, either renders it impracticable or inadvisable to proceed with the
offering and sale of the Units on the terms set forth in the Prospectus or
materially and adversely affects the market for the Units, or (iv) if there
shall have occurred any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of a national emergency or war by the
United States, an act of terrorism shall have been committed against the United
States or any of its nationals or properties; or (v) there shall have occurred
such a calamity or crisis or such a material adverse change in general domestic
or international economic, political or financial conditions, including without
limitation as a result of terrorist activities (or the effect of international
conditions on the financial markets in the United States shall be such), that in
your judgment makes it impracticable or inadvisable to proceed with the
solicitation of offers to purchase Units. Any termination pursuant to this
paragraph (b) shall be without liability on your part to the Company or on the
part of the Company to you (except for expenses to be paid or reimbursed
pursuant to Section 5 hereof and except to the extent provided in Section 7
hereof).
(e) This Agreement shall automatically expire nine months after
Successful Commissioning of the Company's ethanol plant. For purposes of this
Section 10(e), the term "Successful Commissioning" shall mean the production of
ethanol meeting design specifications on a daily basis of nameplate production,
and all production meets the guarantees provided by engineers and contractors.
(f) The provisions of Section 7 shall survive the expiration or
earlier termination of this Agreement.
SECTION 11. POST-EFFECTIVE AMENDMENT.
The Company represents, warrants and covenants to you that if as of
April 30, 2003, subscriptions for at least 18,000 Units shall not have been
received, it will file a post-effective amendment to the Registration Statement
de-registering all of the Units and if at the Offering Termination Date
subscriptions for all the Units shall not have been received it will file a
post-effective amendment to the Registration Statement de-registering the unsold
Units and, in either case, will terminate any additional offerings of Units
pursuant to such Registration Statement. In addition, the Company represents and
warrants to you that it will file all reports required by the regulations with
regard to sales of the Units and use of the proceeds therefrom.
SECTION 12. NOTICES AND AUTHORITY TO ACT.
All communications hereunder shall be in writing and, if sent to you,
shall be mailed, delivered or faxed and confirmed to you at Northland
Securities, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention ▇▇▇▇ ▇▇▇▇▇▇, with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
P.A., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Towers, 150 So. ▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
or, if sent to the Company, shall be delivered or faxed and confirmed at Oregon
Trail Ethanol Coalition, L.L.C., ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇,
▇▇▇▇▇ Attention: President, with a copy to ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
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SECTION 13. PARTIES.
This Agreement shall inure to the benefit of and be binding upon each of
you and the Company and your and the Company's respective successors, this
Agreement and the conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective successors and controlling persons, and for the benefit of no other
person, firm or corporation, except as otherwise specifically provided herein.
Section 14. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
State of Minnesota.
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If the foregoing is accordance with your understanding of our agreement,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement among you and the
Company in accordance with its terms.
Very truly yours,
OREGON TRAIL ETHANOL COALITION, L.L.C.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Chairman of the Board
Confirmed and accepted as of the date
first above written:
NORTHLAND SECURITIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: Chief Operating Officer
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