EXHIBIT 1.1
1,400,000 SHARES COMMON STOCK
INDUSTRIAL RUBBER PRODUCTS, INC.
UNDERWRITING AGREEMENT
______________________, 1998
X. X. Xxxxxxxx & Company
As Representative of the Several Underwriters
Xxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000-0000
Dear Ladies and Gentlemen:
Industrial Rubber Products, Inc., a Minnesota corporation (the
"Company"), hereby confirms its agreement to issue and sell to the underwriters
named in Schedule I hereto (the "Underwriters"), for which X. X. Xxxxxxxx &
Company is acting as the representative (in such capacity, the
"Representative"), an aggregate of 1,400,000 shares of authorized but unissued
common stock, par value $.001 per share, of the Company (the "Common Stock").
Such 1,400,000 shares of Common Stock are collectively referred to in this
Agreement as the "Firm Shares." The Company also hereby confirms its agreement
to issue and sell to the Underwriters an aggregate of up to 210,000 additional
shares of Common Stock upon the request of the Representative solely for the
purpose of covering overallotments. Such additional shares are referred to in
this Agreement as the "Option Shares." The Firm Shares and the Option Shares are
collectively referred to herein as the "Shares." Further, the Company hereby
confirms its agreement to issue to the Representative warrants for the purchase
of a total of 140,000 shares as described in Section 5 hereof (the
"Representative's Warrants"), assuming purchase by the Underwriters of the Firm
Shares. The shares issuable upon exercise of the Representative's Warrants are
referred to as the "Warrant Shares."
The Company hereby confirms the arrangements with respect to the
purchase, severally and not jointly, by each of the Underwriters the number of
the Firm Shares set forth opposite their respective names in Schedule I, plus
their pro rata portion of the Option Shares purchased if the overallotment
option is exercised in whole or in part. The Company has been advised and hereby
acknowledges that X. X. Xxxxxxxx & Company has been duly authorized to act as
the representative of the Underwriters. As used in this Agreement, the term
"Underwriter" refers to any individual member of the underwriting syndicate and
includes any party substituted for an Underwriter under Section 9 hereof.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the several Underwriters as
follows:
(a) A registration statement on Form SB-2 with respect to the
Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "1933 Act")
and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") thereunder and has been
filed with the SEC under the 1933 Act. The Company has filed such
amendments to the registration statement and such amended preliminary
prospectuses as may have been required to be filed to the date hereof.
If the Company has elected not to rely upon Rule 430A, the Company has
prepared and will promptly file an amendment to the registration
statement and an amended prospectus (provided the Representative has
consented to such filing). If the Company has elected to rely upon Rule
430A, it will prepare and timely file a prospectus pursuant to Rule
424(b) that discloses the information previously omitted from the
prospectus in reliance upon Rule 430A. Copies of such registration
statement and each pre-effective amendment thereto, and each related
preliminary prospectus have been delivered by the Company to the
Representative. Such registration statement, as amended or
supplemented, including all prospectuses included as a part thereof,
financial schedules, exhibits, the information (if any) deemed to be
part thereof pursuant to Rules 430A and 434 under the 1933 Act and any
registration statement filed pursuant to Rule 462 under the 1933 Act,
is herein referred to as the "Registration Statement." The term
"Prospectus" as used herein shall mean the final prospectus, as amended
or supplemented, included as a part of the Registration Statement on
file with the SEC when it becomes effective; provided, however, that if
a prospectus is filed by the Company pursuant to Rules 424(b) and 430A
or a term sheet is filed by the Company pursuant to Rule 434 under the
1933 Act, the term "Prospectus" as used herein shall mean the
prospectus so filed pursuant to Rules 424(b) and 430A) and the term
sheet so filed pursuant to Rule 434. The term "Preliminary Prospectus"
as used herein means any prospectus, as amended or supplemented, used
prior to the Effective Date (as defined in Section 4(a) hereof) and
included as a part of the Registration Statement, including any
prospectus filed with the SEC pursuant to Rule 424(a).
(b) Neither the SEC nor any state securities division has
issued any order preventing or suspending the use of any Preliminary
Prospectus, or issued a stop order with respect to the offering of the
Shares or requiring the recirculation of a Preliminary Prospectus and,
to the best knowledge of the Company, no proceeding for any such
purpose has been initiated or threatened. Each part of the Registration
Statement, when such part became or becomes effective, each Preliminary
Prospectus, on the date of filing with the SEC, and the Prospectus and
any amendment or supplement thereto, on the date of filing thereof with
the SEC and on any Closing Date (as defined in Section 3 hereof), as
the case may be, conformed or will conform in all material respects
with the requirements of the 1933 Act and the Rules and Regulations and
the securities laws ("Blue Sky Laws") of the states where the Shares
are to be sold (the "States") and contained or will contain all
statements that are required to be stated therein in accordance with
the 1933 Act, the Rules
and Regulations and the Blue Sky Laws of the States. When the
Registration Statement became or becomes effective and when any
post-effective amendments thereto shall become effective, the
Registration Statement did not and will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Neither any Preliminary Prospectus, on the date of filing thereof with
the SEC, nor the Prospectus or any amendment or supplement thereto, on
the date of filing thereof with the SEC and on the First and Second
Closing Dates, contained or will contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that none of the
representations and warranties in this Subsection 1(b) shall apply to
statements in, or omissions from, the Registration Statement,
Preliminary Prospectus or the Prospectus, or any amendment thereof or
supplement thereto, which are based upon and conform to written
information furnished to the Company by the Underwriters specifically
for use in the preparation of the Registration Statement, Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto.
There is no contract or other document of the Company of a character
required by the 1933 Act or the Rules and Regulations to be described
in the Registration Statement or Prospectus, or to be filed as an
exhibit to the Registration Statement, that has not been described or
filed as required. The descriptions of all such contracts and documents
or references thereto are correct and include the information required
under the 1933 Act and the Rules and Regulations.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Minnesota, with full corporate power and authority, to own, lease
and operate its properties and conduct its business as described in the
Registration Statement and Prospectus. The Company is duly qualified to
do business as a foreign corporation in good standing in each
jurisdiction in which the ownership or lease of its properties, or the
conduct of its business, requires such qualification and in which the
failure to be qualified or in good standing would have a material
adverse effect on the business of the Company. The Company has all
necessary and material authorizations, approvals and orders of and from
all governmental regulatory officials and bodies to own its properties
and to conduct its business as described in the Registration Statement
and Prospectus, and is conducting its business in substantial
compliance with all applicable material laws, rules and regulations of
the jurisdictions in which it is conducting business. The Company holds
all licenses, certificates, permits, authorizations, approvals and
orders of and from all state, federal and other governmental regulatory
officials and bodies necessary to own its properties and to conduct its
business as described in the Registration Statement and Prospectus, or
has obtained waivers from any such applicable requirements from the
appropriate state, federal or other regulatory authorities. All such
licenses, permits, approvals, certificates, consents, orders and other
authorizations are in full force and effect, and the Company has not
received notice of any proceeding or action relating to the revocation
or modification of any such license, permit, approval, certificate,
consent, order or other authorization which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, might materially and adversely affect the conduct of the
business or the condition, financial or otherwise, or the earnings,
affairs or business prospects of the Company.
(d) The Company has no subsidiaries and is not affiliated with
any other Company or business entity, except as disclosed in the
Prospectus.
(e) The Company is not in violation of its Articles of
Incorporation, as amended, or Bylaws or in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan agreement,
joint venture or other agreement or instrument to which the Company is
a party or by which the Company or its properties are bound, and there
does not exist any state of facts which constitutes an event of default
on the part of the Company or which, with notice or lapse of time or
both, would constitute such an event of default. The Company is not, to
the best of its knowledge after due inquiry, in violation of any law,
order, rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign, which
violation is material to the business of the Company.
(f) The Company has full requisite power and authority to
enter into this Agreement. This Agreement has been duly authorized,
executed and delivered by the Company and will be a valid and binding
agreement on the part of the Company, enforceable in accordance with
its terms, if and when this Agreement shall have become effective in
accordance with Section 8, except as enforceability may be limited by
the application of bankruptcy, insolvency, moratorium or similar laws
affecting the rights of creditors generally and by judicial limitations
on the right of specific performance and except as the enforceability
of the indemnification or contribution provisions hereof may be
affected by applicable federal or state securities laws. The
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, (i) any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note,
agreement or other evidence of indebtedness, lease, contract or other
agreement or instrument to which the Company is a party or by which the
property or assets of the Company is bound, (ii) the Company's Articles
of Incorporation, as amended, or Bylaws or (iii) any statute or any
order, rule or regulation of any court, governmental agency or body
having jurisdiction over the Company. No consent, approval,
authorization or order of any court, governmental agency or body is
required for the consummation by the Company of the transactions on its
part herein contemplated, except such as may be required under the 1933
Act, the Rules and Regulations, the Blue Sky Laws, the rules and
regulations of the National Association of Securities Dealers, Inc.
("NASD") and the rules and regulations of Nasdaq.
(g) Except as is otherwise expressly stated in the
Registration Statement or Prospectus, there are no actions, suits or
proceedings pending before any court or governmental agency, authority
or body to which the Company is a party or of which the business or
property of the Company is the subject which might result in any
material adverse change in the condition (financial or otherwise),
business or prospects of the Company, materially and adversely affect
its properties or assets or prevent consummation of the transactions
contemplated by this Agreement; and, to the best of the Company's
knowledge, no such actions, suits or proceedings are threatened except
as is otherwise expressly stated in the Registration Statement or
Prospectus. The Company is not aware of any facts which would form the
basis for the assertion of any material claim or liability which are
not disclosed in the Registration Statement or the Prospectus or
adequately reserved for in the financial statements which are a part
thereof, except for such claims or liabilities which are not currently
expected to have a material adverse effect on the condition (financial
or otherwise) or the earnings, affairs or business prospects of the
Company. All pending legal or governmental proceedings to which the
Company is a party or to which any of its property is subject which are
not described in the Registration Statement and the Prospectus,
including ordinary routine litigation incidental to the business, are,
considered in the aggregate, not material to the Company.
(h) The authorized, issued and outstanding capital stock of
the Company is as set forth under the caption "Capitalization" in the
Prospectus. The outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable. The
Shares conform in substance to all statements relating thereto
contained in the Registration Statement and Prospectus. The Shares to
be sold by the Company hereunder have been duly authorized and, when
issued and delivered pursuant to this Agreement, will be validly
issued, fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus. No preemptive rights
or similar rights of any security holders of the Company exist with
respect to the issuance and sale of the Shares by the Company or
exercise of the Representative's Warrants. Except as disclosed in the
Prospectus, the Company has received waivers from each security holder
that has the right to require the Company to register under the 1933
Act any securities of any nature owned or held by such person either in
connection with the transactions contemplated by this Agreement or
after a demand for registration by such holder. Upon payment for and
delivery of the Shares pursuant to this Agreement, the Underwriters
will acquire the Shares, free and clear of all liens, encumbrances or
claims. The certificates evidencing the Shares will comply as to form
with all applicable provisions of the laws of the State of Minnesota.
Except as set forth in any part of the Registration Statement, the
Company does not have outstanding any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, any
Common Stock or other securities of the Company, or any such warrants,
convertible securities or obligations.
(i) The Representative's Warrants and the Warrant Shares have
been duly authorized. The Representative's Warrants, when issued and
delivered to the Representa-
tive, will constitute valid and binding obligations of the Company in
accordance with their terms, except as enforceability may be limited by
the application of bankruptcy, insolvency, moratorium or similar laws
affecting the rights of creditors generally and by judicial limitations
on the right of specific performance. The Warrant Shares when issued in
accordance with the terms of this Agreement and pursuant to the
Representative's Warrants, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights or similar rights on
the part of any person or entity. A sufficient number of shares of
Common Stock of the Company have been reserved for issuance by the
Company upon exercise of the Representative's Warrants.
(j) McGladrey & Xxxxxx, LLP, whose reports appear in the
Registration Statement and Prospectus, are independent accountants
within the meaning of the 1933 Act and the Rules and Regulations. The
financial statements of the Company, together with the related notes,
forming part of the Registration Statement and Prospectus (the
"Financial Statements"), fairly present the financial position and the
results of operations of the Company at the respective dates and for
the respective periods to which they apply. The Financial Statements
are accurate, complete and correct and have been prepared in accordance
with the 1933 Act, the Rules and Regulations and generally accepted
accounting principles ("GAAP"), consistently applied throughout the
periods involved, except as may be otherwise stated therein. The
summaries of the Financial Statements and the other financial,
statistical and related notes set forth in the Registration Statement
and the Prospectus are (i) accurate and correct and fairly present the
information purported to be shown thereby as of the dates and for the
periods indicated on a basis consistent with the audited financial
statements of the Company and (ii) in compliance in all material
respects with the requirements of the 1933 Act and the Rules and
Regulations.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and at any
Closing Date, except as is otherwise disclosed in the Registration
Statement or Prospectus, there has not been:
(i) any change in the capital stock or long-term debt
(including any capitalized lease obligation), or increase in
the short-term debt of the Company;
(ii) any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock of
the Company;
(iii) any adverse change, or any development
involving a material adverse change, in or affecting the
business, business prospects, properties, assets, patents or
patent applications (including those of the Company and those
relating to devices or technologies licensed to the Company),
management, financial position, stockholders' equity, results
of operations or general condition of the Company;
(iv) any material transaction entered into by the
Company;
(v) any material obligation, direct or contingent,
incurred by the Company, except obligations incurred in the
ordinary course of business that, in the aggregate, are not
material; or
(vi) any dividend or distribution of any kind
declared, paid or made on the Company's capital stock.
(l) Except as is otherwise disclosed in the Registration
Statement or Prospectus, the Company has good and marketable title to
all of the property, real and personal, described in the Registration
Statement or Prospectus as being owned by the Company, free and clear
of all liens, encumbrances, equities, charges or claims, except as do
not materially interfere with the uses made and to be made by the
Company of such property or as disclosed in the Financial Statements.
Except as is otherwise disclosed in the Registration Statement or
Prospectus, the Company has valid and binding leases to the real and
personal property described in the Registration Statement or Prospectus
as being under lease to the Company, except as to those leases which
are not material to the Company or the lack of enforceability of which
would not materially interfere with the use made and to be made by the
Company of such leased property.
(m) There has been no unlawful storage, treatment or disposal
of waste by the Company at any of the facilities owned or leased
thereby, except for such violations which would not have a material
adverse effect on the condition, (financial or otherwise) or the
shareholders' equity, results of operation, business, properties or
prospects of the Company. There has been no material spill, discharge,
leak, emission, ejection, escape, dumping or release of any kind onto
the properties owned or leased by the Company, or into the environment
surrounding those properties, of any toxic or hazardous substances, as
defined under any federal, state or local regulations, laws or
statutes, except for those releases either permissible under such
regulations, laws or statutes or otherwise allowable under applicable
permits or which would not have a material adverse effect on the
condition (financial or otherwise) or the shareholders' equity, results
of operation, business, properties or prospects of the Company.
(n) The Company has filed all necessary federal and state
income and franchise tax returns and paid all taxes shown as due
thereon. The Company is not in default in the payment of any taxes and
has no knowledge of any tax deficiency which might be asserted against
it which would materially and adversely affect the Company's business
or properties.
(o) No labor disturbance by the employees of the Company
exists or, to the best of the Company's knowledge, is imminent which
could reasonably be expected to have a material adverse effect on the
conduct of the business, operations, financial condition or income of
the Company.
(p) Except as disclosed in the Prospectus:
(i) The Company owns or possesses the unrestricted
rights to use all patents, copyrights, trademarks, trade
secrets and proprietary rights or information necessary for
the development, manufacture, operation and sale of all
products and services sold or proposed to be sold by the
Company and for the conduct of its present or intended
business as described in the Prospectus. There are no pending
legal, governmental or administrative proceedings relating to
patents, copyrights, trademarks or proprietary rights or
information to which the Company is a party or to which any
property of the Company is subject and no such proceedings
are, to the best of the Company's knowledge, threatened or
contemplated against the Company by any governmental agency or
authority or others. The Company has not received any notice
of conflict with asserted rights of others. The Company is not
using any confidential information or trade secrets of any
third party without such party's consent.
(ii) The Company does not infringe upon the right or
claimed rights of any person under or with respect to any of
the intangible rights listed in the preceding subsection. The
Company is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to
any owner of, licensor of, or other claimant to, any patent,
trademark, trade name, copyright or other intangible asset,
with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(q) The Company intends to apply the proceeds from the sale of
the Shares by it to the purposes and substantially in the manner set
forth in the Prospectus.
(r) The Company has no defined benefit pension plan or other
pension benefit plan, which is intended to comply with the provisions
of the Employee Retirement Income Security Act of 1974 as amended from
time to time, except as disclosed in the Registration Statement.
(s) To the best of the Company's knowledge, no person is
entitled, directly or indirectly, to compensation from the Company or
the Underwriters for services as a finder in connection with the
transactions contemplated by this Agreement.
(t) The conditions for use of a Registration Statement on Form
SB-2 for the distribution of the Shares have been satisfied with
respect to the Company.
(u) The Company has not taken and will not take, directly or
indirectly, any action (and does not know of any action by its
directors, officers, stockholders, or others) which has constituted or
is designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation, as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act") or otherwise, of the
price of any security of the Company to facilitate the sale or resale
of the Shares.
(v) The Company has not sold any securities in violation of
Section 5 of the 1933 Act.
(w) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts adequate for its business
and in line with the insurance maintained by similar companies and
businesses.
(x) The Company hereby represents that, as of the date hereof,
it has complied with all provisions of Section 517.075, Florida
Statutes and Rule 3E-900-001 of the Rules of the Florida Department of
Banking and Finance, Division of Securities, copies of which are
attached hereto.
(y) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations and (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP.
(z) All material transactions between the Company and its
stockholders who beneficially own more than 5% of any class of the
Company's voting securities have been accurately disclosed in the
Prospectus, and the terms of each such transaction are fair to the
Company and no less favorable to the Company than the terms that could
have been obtained from unrelated parties.
(aa) The Company has obtained a written agreement, enforceable
by the Representative from each of the officers and directors and the
sole existing stockholder of the Company, that for one year following
the Effective Date, such person will not, without the Representative's
prior written consent, sell, transfer or otherwise dispose of, or agree
to sell, transfer or otherwise dispose of, other than by gift to donees
who agree to be bound by the same restriction or by will or the laws of
descent, any of his or her Common Stock, or any options, warrants or
rights to purchase Common Stock or any shares of Common Stock received
upon exercise of any options, warrants or rights to purchase Common
Stock, all of which are beneficially held by such persons during the
180-day period.
(bb) The Common Stock of the Company has been approved by
Nasdaq for trading on its Small Cap Market following effectiveness of
the Registration Statement.
(cc) The Company has not distributed and will not distribute
any prospectus or other offering material in connection with the
offering and sale of the Shares other than Preliminary Prospectus or
the Prospectus or other materials permitted by the Act to be
distributed by the Company.
(dd) To the Company's knowledge, none of the Company's
officers, directors or security holders has any affiliations with the
NASD, except as set forth in the Registration Statement or as otherwise
disclosed in writing to the Representative.
(ee) The Company is not, and upon completion of the sale of
the Shares contemplated hereby will not be required to, register as an
"investment company" under the Investment Company Act of 1940, as
amended.
(ff) Any certificate signed by any officer of the Company and
delivered to the Representative or counsel to the Underwriters shall be
deemed to be a representation and warranty of the Company to each
Underwriter as to the matters covered thereby.
2. Purchase, Sale, Delivery and Payment.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company agrees to issue and sell to each of the
Underwriters, and the Underwriters agree, severally and not jointly, to
purchase from the Company, at $5.00 per Share (net of underwriting
discounts and commissions of $.3750 per Share) the respective amount of
Firm Shares set forth opposite such Underwriter's name in Schedule I
hereto. The Underwriters will collectively purchase all of the Firm
Shares if any are purchased.
(b) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth,
the Company hereby grants an option to the Underwriters to purchase an
aggregate of the Option Shares at the same purchase price as the Firm
Shares for use solely in covering any overallotments made by the
Underwriters in the sale and distribution of the Firm Shares. The
option granted hereunder may be exercised at any time (but not more
than once) within 45 days after the Effective Date (as defined in
Section 4(a) hereof) upon notice (confirmed in writing) by the
Representative to the Company setting forth the aggregate number of
Option Shares as to which the Underwriters are exercising the option
and the date on which certificates for such Option Shares are to be
delivered. Option Shares shall be purchased severally for the account
of each Underwriter in proportion to the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto. The
option granted hereby may be canceled by the Representative as to the
Option Shares for which the option is unexercised at any time prior to
the expiration of the 45-day period upon notice to the Company.
(c) The Company will deliver the Firm Shares to the
Representative at the offices of Xxxxxxxxxx & Xxxxx, P.A., unless some
other place is agreed upon, at 10:00 A.M., Minneapolis time, against
payment of the purchase price at the same place, on the third full
business day after trading the Shares has commenced (but not more than
ten full business days after the date the Registration Statement is
declared effective), or such earlier time as
may be agreed upon between the Representative and the Company. Such
time and place is herein referred to as the "First Closing Date."
(d) The Company will deliver the Option Shares being purchased
by the Underwriters to the Representative at the offices of Xxxxxxxxxx
& Xxxxx, P.A. set forth in Section 2(c) above, unless some other place
is agreed upon, at 10:00 a.m., Minneapolis time, against payment of the
purchase price at the same place, on the date determined by the
Representative and of which the Company has received notice as provided
in Section 2(b), which shall not be earlier than one nor later than
three full business days after the exercise of the option as set forth
in Section 2(b), or at such other time not later than ten full business
days thereafter as may be agreed upon by the Representative and the
Company, such time and date being herein referred to as the "Second
Closing Date." The First and Second Closing Dates are collectively
referred to herein as the "Closing Date."
(e) Certificates for the Shares to be delivered will be
registered in such names and issued in such denominations as the
Underwriters shall request of the Company at least two full business
days prior to the First Closing Date or the Second Closing Date, as the
case may be. The certificates will be made available to the
Underwriters in definitive form for the purpose of inspection and
packaging at least 24 hours prior to each respective Closing Date.
(f) Payment for the Shares shall be made, against delivery to
the Representative or its designated agent, of certificates for the
Shares by wire transfer to a designated account of the Company.
(g) The Underwriters will make a public offering of the Shares
directly to the public (which may include selected dealers who are
members in good standing with the NASD or foreign dealers not eligible
for membership in the NASD but who have agreed to abide by the
interpretation of the NASD's Board of Governor's with respect to
free-riding and withholding) as soon as the Underwriters deem
practicable after the Registration Statement becomes effective at the
Price to Public set forth in Section 2(a) above, subject to the terms
and conditions of this Agreement and in accordance with the Prospectus.
Such concessions from the public offering price may be allowed selected
dealers of the NASD as the Underwriters determine, and the Underwriters
will furnish the Company with such information about the distribution
arrangements as may be necessary for inclusion in the Registration
Statement. It is understood that the public offering price and
concessions may vary after the initial public offering. The
Underwriters shall offer and sell the Shares only in jurisdictions in
which the offering of Shares has been duly registered or qualified, or
is exempt from registration or qualification, and shall take reasonable
measures to effect compliance with applicable state and local
securities laws.
(h) On the First Closing Date, the Company shall issue and
deliver to the Representative the Representative's Warrants.
(i) It is understood that the Representative, individually and
not as the Representative, may (but shall not be obligated to) make
payment on behalf of any Underwriter or Underwriters for the Shares to
be purchased by such Underwriter or Underwriters. No such payment by
the Representative shall relieve such Underwriter or Underwriters from
any of its or their other obligations hereunder.
3. Further Agreements of the Company. The Company hereby covenants and
agrees with each of the Underwriters as follows:
(a) If the Registration Statement has not become effective
prior to the date hereof, the Company will use its best efforts to
cause the Registration Statement and any subsequent amendments thereto
to become effective as promptly as possible. The Company will notify
the Representative promptly, after the Company shall receive notice
thereof, of the time when the Registration Statement, or any subsequent
amendment thereto, has become effective or any supplement to the
Prospectus has been filed. Following the execution and delivery of this
Agreement, the Company will prepare, and timely file or transmit for
filing with the SEC in accordance with Rules 430A, 424(b) and 434, as
applicable, copies of the Prospectus, or, if necessary, a
post-effective amendment to the Registration Statement (including the
Prospectus), in which event, the Company will take all necessary action
to have such post-effective amendment declared effective as soon as
possible. The Company will notify the Representative promptly upon the
Company's obtaining knowledge of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or of
the initiation or threat of any proceedings for that purpose and will
use its best efforts to prevent the issuance of any stop order and, if
a stop order is issued, to obtain as soon as possible the withdrawal or
lifting thereof. The Company will promptly prepare and file at its own
expense with the SEC any amendments of, or supplements to, the
Registration Statement or the Prospectus which may be necessary in
connection with the distribution of the Shares by the Underwriters.
During the period when a Prospectus relating to the Shares is required
to be delivered under the 1933 Act, the Company will promptly file any
amendments of, or supplements to, the Registration Statement or the
Prospectus which may be necessary to correct any untrue statement of a
material fact or any omission to state any material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company will notify the
Representative promptly of the receipt of any comments from the SEC
regarding the Registration Statement or Prospectus or request by the
SEC for any amendment thereof or supplement thereto or for any
additional information. The Company will not file any amendment of, or
supplement to, the Registration Statement or Prospectus, whether prior
to or after the Effective Date, which shall not previously have been
submitted to the Representative and its counsel a reasonable time prior
to the proposed filing or to which the Representative shall have
reasonably objected.
(b) The Company has used and will continue to use its best
efforts to register or qualify the Shares for sale under the securities
laws of such jurisdictions as the Representative may designate and the
Company will file such consents to service of process
or other documents necessary or appropriate in order to effect such
registration or qualification. In each jurisdiction in which the Shares
shall have been registered or qualified as above provided, the Company
will continue such registrations or qualifications in effect for so
long as may be required for purposes of the distribution of the Shares;
provided, however, that in no event shall the Company be obligated to
qualify to do business as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action which would
subject it to the service of process in suits, other than those arising
out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject. In each jurisdiction where any of the Shares
shall have been so qualified, the Company will file such statements and
reports as are or may be reasonably required by the laws of such
jurisdiction to continue such qualification in effect. The Company will
notify the Representative immediately of, and confirm in writing, the
suspension of qualification of the Shares or the threat of such action
in any jurisdiction. The Company will use its best efforts to qualify
or register its Common Stock for sale in nonissuer transactions under
(or obtain exemptions from the application of) the securities laws of
such states designated by the Representative (and thereby permit
market-making transactions and secondary trading in its Common Stock in
such states), and will comply with such securities laws and will
continue such qualifications, registrations and exemptions in effect
for a period of five years after the date hereof.
(c) The Company will furnish to the Representative, as soon as
available, copies of the Registration Statement (one of which will be
signed and which shall include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such
documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the 1933 Act, all in such quantities as the
Representative may from time to time reasonably request prior to the
printing of each such document. The Company specifically authorizes the
Underwriters and all dealers to whom any of the Shares may be sold by
the Underwriters to use and distribute copies of such Preliminary
Prospectuses and Prospectuses in connection with the sale of the Shares
as and to the extent permitted by the federal and applicable state and
local securities laws.
(d) For as long as the Company has more than 100 beneficial
owners, but in no event more than five years after the Effective Date,
the Company will mail as soon as practicable to the holders of its
Common Stock substantially the following documents, which documents
shall be in compliance with this Section if they are in the form
prescribed by the 1934 Act:
(i) within forty-five days after the end of the first three
quarters of each fiscal year, copies of the quarterly
unaudited statement of profit and loss and quarterly unaudited
balance sheets of the Company and any material subsidiaries;
and
(ii) within ninety days after the close of each fiscal year,
appropriate financial statements as of the close of such
fiscal year for the Company and any material subsidiary which
shall be certified to by a nationally recognized firm of
independent
certified public accountants in such form as to disclose the
Company's financial condition and the results of its
operations for such fiscal year.
(e) For as long as the Company has more than 100 beneficial
owners, but in no event more than five years after the Effective Date,
the Company will furnish to the Representative (i) concurrently with
furnishing such reports to its stockholders, the reports described in
Section 3(d) hereof; (ii) as soon as they are available, copies of all
other reports (financial or otherwise) mailed to security holders; and
(iii) as soon as they are available, copies of all reports and
financial statements furnished to, or filed with, the SEC, the NASD,
any securities exchange or any state securities commission by the
Company. During such period, the foregoing financial statements shall
be on a consolidated basis to the extent that the accounts of the
Company and any subsidiary or subsidiaries are consolidated and shall
be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(f) The Company will not, without the prior written consent of
the Representative, which consent shall not be unreasonably withheld,
sell or otherwise dispose of any capital stock or securities
convertible or exercisable into capital stock of the Company (other
than pursuant to currently outstanding options and warrants) during the
twelve month period following the Effective Date. Prior to the Closing
Date, the Company will not repurchase or otherwise acquire any of its
capital stock or declare or pay any dividend or make any distribution
on any class of its capital stock.
(g) Subject to the proviso set forth below, the Company shall
be responsible for and pay all costs and expenses incident to the
performance of its obligations under this Agreement including, without
limiting the generality of the foregoing, (i) all costs and expenses in
connection with the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments thereof
or supplements to any of the foregoing; (ii) the issuance and delivery
of the Shares, including taxes, if any; (iii) the cost of all
certificates representing the Shares; (iv) the fees and expenses of the
Transfer Agent for the Shares; (v) the fees and disbursements of
counsel for the Company; (vi) all fees and other charges of the
independent public accountants of the Company; (vii) the cost of
furnishing and delivering to the Underwriters and dealers participating
in the offering copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectuses, the Prospectus and any
amendments of, or supplements to, any of the foregoing; (viii) the NASD
filing and quotation fees; (ix) the fees and disbursements, including
filing fees and all accountable fees and expenses of counsel for the
Representative incurred in registering or qualifying the Shares for
sale under the laws of such jurisdictions upon which the Representative
and the Company may agree; and (x) a nonaccountable expense allowance
to the Representative equal to 2% of the gross proceeds from the
offering and sale of the Shares (the "Offering"). The Representative
hereby acknowledge receipt of a $10,000 advance against the
Representative's non-accountable expense allowance referred to in the
preceding sentence. In the event this Agreement is terminated pursuant
to Section 8 below,
the Company shall remain obligated to pay the Representative its
accountable expenses, including but not limited to travel expenses and
expenses of its legal counsel, not to exceed $30,000. Further, if upon
termination of this Agreement pursuant to Section 8 below, the
Representative's actual accountable out-of-pocket expenses do not
exceed the $10,000 advance against the Representative's accountable
expense allowance, the portion of the advance not used will be
reimbursed to the Company by the Representative.
(h) The Company will not take, and will use its best efforts
to cause each of its officers and directors not to take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Shares.
(i) The Company will use its best efforts to maintain the
listing of its Common Stock on the Nasdaq Small Cap Market.
(j) For a period of at least three years after the Effective
Date, the Company will file with the SEC all reports and other
documents as may be required by the 1933 Act, the Rules and Regulations
and the 1934 Act.
(k) The Company will apply the proceeds from the sale of the
Shares substantially in the manner set forth in the Prospectus.
(l) Prior to or as of the First Closing Date, the Company
shall have performed each condition to the Underwriters' obligations
required to be performed by it pursuant to Section 4 hereof.
(m) Other than as permitted by the 1933 Act and the Rules and
Regulations, the Company will not distribute any prospectus or other
offering material in connection with the Offering.
(n) The Company will apply the net proceeds from the sale of
the Shares substantially in the manner set forth in the Prospectus.
(o) During the period ending 270 days from the Effective Date,
the Company agrees that it will issue press releases, make public
statements and respond to inquiries of the press and securities
analysts only after conferring with its counsel and with the
Representative.
(p) On First Closing Date, the Company shall grant to the
Representative the Representative's Warrants, in substantially the form
attached as Appendix A hereto.
(q) Prior to or as of either Closing Date, the Company shall
have performed each condition to closing required to be performed by
the Company pursuant to Section 4 hereof.
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein shall be subject to the accuracy of the representations and
warranties of the Company, in the case of the Firm Shares as of the date hereof
and the First Closing Date (as if made on and as of the First Closing Date) and
in the case of the Option Shares, as of the date hereof and the Second Closing
Date (as if made on and as of the Second Closing Date), to the performance by
the Company of its obligations hereunder, and to the satisfaction of the
following additional conditions on or before the First Closing Date in the case
of the Firm Shares and on or before the Second Closing Date in the case of the
Option Shares:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M. Minneapolis time, on the first full business day
following the date of this Agreement, or such later date as shall be
consented to in writing by the Representative (the "Effective Date").
If the Company has elected to rely upon Rule 430A, the information
concerning the price of the Shares and price-related information
previously omitted from the effective Registration Statement pursuant
to Rule 430A shall have been transmitted to the SEC for filing pursuant
to Rule 424(b) within the prescribed time period, and prior to the
Closing Date the Company shall have provided evidence satisfactory to
the Representative of such timely filing (or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the 1933 Act and the Rules and
Regulations). No stop order suspending the effectiveness thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or, to the knowledge of the Company or the Representative,
threatened by the SEC or any state securities commission or similar
regulatory body. Any request of the SEC for additional information (to
be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Underwriters and their legal counsel. The NASD, upon review of the
terms of the Offering, shall not have objected to the terms of the
Underwriters' participation in the Offering.
(b) The Representative shall not have advised the Company that
the Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains any untrue statement of a fact which is
material or omits to state a fact which is material and is required to
be stated therein or is necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that this Section 4(b) shall not apply
to statements in, or omissions from, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, which are
based upon and conform to written information furnished to the Company
by any of the Underwriters specifically for use in the preparation of
the Registration Statement or the Prospectus, or any such amendment or
supplement.
(c) Subsequent to the date as of which information is given
the Registration Statement and Prospectus, there shall not have
occurred any change, or any development involving a prospective change,
which materially and adversely affects the business or
properties of the Company and which, in the reasonable opinion of the
Representative, materially and adversely affects the market for the
Shares.
(d) The Representative shall have received the opinion of
Johnson, Killen, Xxxxxxxxx & Xxxxxx, P.A. and the opinion of Lommen,
Nelson, Xxxx & Xxxxxxxxx, P.A., counsel for the Company, dated as of
such respective Closing Date, addressed to the Underwriters and
satisfactory in form and substance to the Representative and its
counsel, to the effect that:
(i) The Company has been duly incorporated and is
validly existing in good standing under the laws of the State
of Minnesota with the requisite corporate power to own, lease
and operate its properties and conduct its business as
described in the Prospectus; and is duly qualified to do
business as a foreign corporation in good standing in all
jurisdictions where the ownership or leasing of its properties
or the conduct of its business requires such qualification and
in which the failure to be so qualified or in good standing
would have a material adverse effect on its business. The
activities of the Company are permitted under the 1933 Act,
the Rules and Regulations and other applicable laws.
(ii) The number of authorized, issued and outstanding
shares of capital stock of the Company are as set forth under
the caption "Capitalization" in the Prospectus. The
outstanding shares of capital stock of the Company have been
duly authorized and validly issued, and are fully paid and
nonassessable. Upon delivery of and payment for the Shares
hereunder, the Underwriters will acquire the Shares free and
clear of all liens, encumbrances or claims. To the best of
such counsel's knowledge, no preemptive rights, contractual or
otherwise, of securities holders of the Company exist with
respect to the issuance or sale of the Shares by the Company
pursuant to this Agreement or the issuance of the Warrant
Shares upon exercise of the Representative's Warrants. To the
best of such counsel's knowledge, no rights to require
registration of shares of Common Stock or other securities of
the Company exist which may be exercised in connection with
the filing of the Registration Statement. The Shares,
Representative's Warrants and Warrant Shares conform as to
matters of law in all material respects to the description of
such securities made in the Prospectus and such description
accurately sets forth the material legal provisions thereof
required to be set forth in the Prospectus.
(iii) The Shares have been duly authorized and, upon
delivery to the Underwriters against payment therefor, will be
validly issued, fully paid and nonassessable.
(iv) The certificates evidencing the Shares comply as
to form with the applicable provisions of the laws of the
State of Minnesota.
(v) The Representative's Warrants have been duly
authorized, executed and delivered by the Company and are the
valid and binding obligations of the Company, enforceable in
accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency,
moratorium, or other laws of general application affecting the
rights of creditors generally and by judicial limitations on
the right of specific performance and other equitable
remedies. The Warrant Shares when issued in accordance with
the terms of this Agreement and pursuant to the
Representative's Warrants will be validly issued, fully paid
and nonassessable. A sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the
Representative's Warrants.
(vi) The Registration Statement has become and is
effective under the 1933 Act, the Prospectus has been filed as
required by Rule 424(b), if necessary and, to the best
knowledge of such counsel, no stop orders suspending the
effectiveness of the Registration Statement have been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the 0000 Xxx.
(vii) To the best of such counsel's knowledge, there
are no material legal or governmental proceedings of a
character required by the 1933 Act and the Rules and
Regulations to be described or referred to in the Registration
Statement or Prospectus that are not described or referred to
therein. All pending legal or governmental proceedings, if
any, to which the Company is a party or to which any of its
property is subject which are not described in the
Registration Statement and the Prospectus, including ordinary
routine litigation incidental to the business, are, considered
in the aggregate, not material to the Company.
(viii) No authorization, approval or consent of any
governmental authority or agency is necessary in connection
with the issuance and sale of the Shares as contemplated under
this Agreement, except such as may be required and obtained
under the 1933 Act or under state or other securities laws in
connection with the purchase and distribution of the Shares by
the Underwriters.
(ix) The Registration Statement, when it became
effective, the Prospectus and any amendments thereof or
supplements thereto, (other than the financial statements and
supporting financial and statistical data included or
incorporated therein, as to which such counsel need express no
opinion) on the date of filing or the date thereof, complied
as to form in all material respects with the requirements of
the 1933 Act and the Rules and Regulations, and the conditions
for use of a registration statement on Form SB-2 for the
distribution of shares have been satisfied with respect to the
Company.
(x) This Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of the
Company, enforceable in accordance
with its terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, moratorium or similar
laws affecting the rights of creditors generally and judicial
limitations on the right of specific performance and except as
the enforceability of indemnification or contribution
provisions hereof may be limited by federal or state
securities laws.
(xi) Such counsel does not know of any contracts,
agreements, documents or instruments required to be filed as
exhibits to the Registration Statement or described in the
Registration Statement or the Prospectus which are not so
filed or described as required, and does not know of any
amendment to the Registration Statement required to be filed
that has not been filed; and insofar as any statements in the
Registration Statement or the Prospectus constitute summaries
of any contract, agreement, document or instrument to which
the Company is a party, such statements are accurate summaries
and fairly present the information called for with respect to
such matters.
(xii) To the best of such counsel's knowledge, there
are no defects in title or leasehold interests, or any liens,
encumbrances, equities, charges or claims, not disclosed in
the Registration Statement or Prospectus which would
materially affect the present occupancy or use of any of the
real or personal property owned or leased by the Company.
(xiii) To the best of such counsel's knowledge,
except as described in the Prospectus, there are no United
States patents of third parties which are infringed by the
manufacture, use or sale of the products or processes
currently made, used or sold by the Company.
(xiv) To the best of such counsel's knowledge there
are no legal, governmental or administrative proceedings
pending or threatened against the Company that relate to
patents, trademarks or other intellectual property, except for
pending or proposed United States and foreign patent
applications.
(xv) To the best of such counsel's knowledge, except
as described in the Prospectus, after due inquiry, the Company
has not received any notice of conflict with the asserted
rights of others in respect of any trademarks, service marks,
trade names, trademark registrations, service xxxx
registrations, copyrights, licenses, inventions, trade
secrets, patents, patent applications, know-how, or similar
rights, nor of any threatened actions with respect thereto,
which, if determined adversely to the Company, would
individually or in the aggregate have a material adverse
effect on the general affairs, financial position, net worth
or results of operations of the Company.
(xvi) To the best of such counsel's knowledge, after
due inquiry, the Company owns, possesses or is licensed under
all such material trademarks,
trademark applications, trademark registrations, service
marks, service xxxx registrations, copyrights, patents, patent
applications and licenses as are described in the Prospectus
and which are necessary for the Company's present or planned
future business as described in the Prospectus.
(xvi) The performance of this Agreement and the
consummation of the transactions described herein will not
result in a violation or default under, the Company's Articles
of Incorporation, as amended, Bylaws or other governing
documents. To the best of such counsel's knowledge, (a) the
Company is not in violation of, or in default under, its
Articles of Incorporation, as amended, Bylaws or other
governing documents; and (b) the execution, delivery and
performance of this Agreement and the consummation of the
transactions described herein will not result in a material
violation of, or a material default under, the terms or
provisions of (A) any bond, debenture, note, or other evidence
of indebtedness or any contract, license, indenture, mortgage,
loan agreement, joint venture or partnership agreement, lease,
agreement or instrument to which the Company is a party or by
which the Company or any of its properties is bound, or (B)
any law, order, rule, regulation, writ, injunction, or decree
known to such counsel of any government, governmental agency
or court having jurisdiction over the Company or any of its
properties.
(xvii) To the best of such counsel's knowledge, sales
of unregistered securities by the Company prior to the
Effective Date were exempt from registration requirements of
the Act and are not required to be integrated under Rule
502(a) of the Regulation D of the Act with the public offering
contemplated hereby.
(xviii) The Company is not, and immediately upon
completion of the sale of the Shares contemplated hereby will
not be required to register as an "investment company" under
the Investment Company Act of 1940, as amended.
(xix) To the best of such counsel's knowledge, the
Company has not consummated any form of business combination
which is required to be described or referenced in the
Registration Statement that is not so described or referenced.
In expressing the foregoing opinion, as to matters of fact relevant to
conclusions of law, counsel may rely, to the extent that they deem proper, upon
certificates of public officials and of the officers of the Company, provided
that copies of such officers' certificates are attached to the opinion.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, although such counsel cannot guarantee
the accuracy, completeness or fairness of any of the statements contained in the
Registration Statement, Prospectus, or any amendment thereof or supplement
thereto in connection with such counsel's representation, investigation and due
inquiry
of the Company in the preparation of the Registration Statement, Prospectus and
any amendment thereof or supplement thereto, nothing has come to the attention
of such counsel which causes them to believe that the Registration Statement,
Prospectus, or any amendment thereof or supplement thereto (other than the
financial statements and supporting financial and statistical data included or
incorporated therein, as to which such counsel need express no opinion) contains
an 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, in
light of the circumstances in which they were made, not misleading; provided,
however, that such opinion of counsel does not require any statement concerning
statements in, or omissions from, the Registration Statement, Prospectus, or any
amendment thereof or supplement thereto, which are based upon and conform to
written information furnished to the Company by any of the Underwriters
specifically for use in the preparation of the Registration Statement,
Prospectus, or any such amendment or supplement.
(e) The Representative shall have received from Xxxxxxxxxx &
Xxxxx, P.A., its counsel, such opinion or opinions as the
Representative may reasonably require, dated as of each Closing Date
and satisfactory in form and substance to the Representative, with
respect to the sufficiency of corporate proceedings and other legal
matters relating to this Agreement and the transactions contemplated
hereby, and the Company shall have furnished to said counsel such
documents as they may have requested for the purpose of enabling them
to pass upon such matters. In connection with such opinion, as to
matters of fact relevant to conclusions of law, such counsel may rely,
to the extent that they deem proper, upon representations or
certificates of public officials and of responsible officers of the
Company.
(f) The Underwriter and the Company shall have received
letters, dated the date hereof and as of each Closing Date, from
McGladery & Xxxxxx, LLP independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial and statistical information
contained in the Registration Statement and the Prospectus, all in form
and substance satisfactory to the Representative and its counsel.
(g) The Representative shall have received from the Company a
certificate, dated as of such Closing Date, of the principal executive
officer and the principal financial or accounting officer of the
Company to the effect that:
(i) The representations and warranties of the Company
in this Agreement are true and correct as if made on and as of
such Closing Date. The Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at, or prior to, such date.
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued and no proceeding
for that purpose has been instituted or is pending or to the
best knowledge of such officers contemplated under the 1933
Act.
(iii) Neither the Registration Statement nor the
Prospectus nor any amendment thereof or supplement thereto
included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and,
since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended
or supplemented prospectus which has not been so set forth;
provided, however, that such certificate does not require any
representation concerning statements in, or omissions from,
the Registration Statement or Prospectus, or any amendment
thereof or supplement thereto, which are based upon and
conform to written information furnished to the Company by any
of the Underwriters specifically for use in the preparation of
the Registration Statement or the Prospectus, or any such
amendment or supplement.
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, and except as contemplated or referred to in the
Prospectus, no event has occurred that should have been set
forth in an amendment or supplement to Registration Statement
or the Prospectus which has not been so set forth and the
Company has not incurred any direct or contingent liabilities
or obligations material to the Company, or entered into any
material transactions, except liabilities, obligations or
transactions in the ordinary course of business, and there has
not been any change in the capital stock or long-term debt of
the Company, (including any capitalized lease obligations),
any material increase in the short-term debt of the Company,
any material adverse change in the financial position, net
worth or results of operations of the Company or declaration
or payment of any dividend.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, the Company has not sustained any material loss
of, or damage to, its properties, whether or not insured.
(vi) Except as is otherwise expressly stated in the
Registration Statement and Prospectus, there are no material
actions, suits or proceedings pending before any court or
governmental agency, authority or body, or, to the best of
their knowledge, threatened, to which the Company is a party
or of which the business or property of the Company is the
subject.
(h) The Representative shall have received, dated as of each
Closing Date, from the Secretary of the Company a certificate of
incumbency certifying the names, titles and signatures of the officers
authorized to carry out the resolutions of the Board of Directors of
the Company authorizing and approving the execution, delivery and
performance of this Agreement, a copy of such resolutions to be
attached to such certificate, certifying that such
resolutions and the Articles of Incorporation, as amended of the
Company and the Bylaws of the Company have been validly adopted and
have not been amended or modified.
(i) The Representative shall have received an original written
agreement from each of the officers, directors and stockholders of the
Company, that for twelve months following the Effective Date, such
person will not, without the Representative's prior written consent,
sell, transfer or otherwise dispose of, or agree to sell, transfer or
otherwise dispose of, other than by gift to donees who agree to be
bound by the same restriction or by will or the laws of descent, any of
his or her Common Stock, or any options, warrants or rights to purchase
Common Stock or any shares of Common Stock received upon exercise of
any options, warrants or rights to purchase Common Stock, all of which
are beneficially held by such persons during the twelve month period.
(j) The Company shall not have failed to have performed any of
its agreements herein contained and required to be performed by it at
or prior to the First Closing Date or the Second Closing Date, as the
case may be. The Representative may waive in writing the performance of
any one or more of the conditions specified in this Section 4 or extend
the time for their performance.
(k) The Shares shall have been registered or qualified for
sale or exempt from such registration or qualification under the
securities laws of such jurisdictions as designated by the
Representative such qualifications or exemptions shall continue in
effect to and including the First Closing Date or the Second Closing
Date, as the case may be.
(l) The Company shall have furnished to the Representative,
dated as of the date of each Closing Date, such further certificates
and documents as the Representative or its counsel shall have
reasonably required.
(m) All such opinions, certificates, letters and documents
will be in compliance with the provisions hereof only if they are
reasonably satisfactory to the Representative and its legal counsel.
All statements contained in any certificate, letter, or other document
delivered pursuant hereto by, or on behalf of, the Company shall be
deemed to constitute representations and warranties of the Company.
(n) The Representative may waive in writing the performance of
any one or more of the conditions specified in this Section 4 or extend
the time for their performance.
(o) If any of the conditions specified in this Section 4 shall
not have been fulfilled when and as required by this Agreement to be
fulfilled, this Agreement and all obligations of the Underwriters
hereunder may be canceled at, or at any time prior to, each Closing
Date by the Representative. Any such cancellation shall be without
liability of the Underwriters to the Company and shall not relieve the
Company of its obligations under Section 3(g) hereof. Notice of such
cancellation shall be given to the Company at the
address specified in Section 11 hereof in writing, or by telegraph or
telephone confirmed in writing.
5. Representative's Warrants. On the First Closing Date, the Company
shall sell to the Representative for $50 the Representative's Warrants, which
warrants shall first become exercisable one year after the Effective Date and
shall remain exercisable for a period of four years thereafter. The
Representative's Warrants shall be subject to certain transfer restrictions and
shall be in substantially the form filed as an exhibit to the Registration
Statement and attached as Appendix A hereto.
6. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act against any losses,
claims, damages or liabilities, joint or several, to which such
Underwriter or each such controlling person may become subject, under
the 1933 Act, the 1934 Act, the common law or otherwise, insofar as
such losses, claims, damages or liabilities (or judicial or
governmental actions or proceedings in respect thereof) arise out of,
or are based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any
amendment thereof, or the omission or alleged omission to state in the
Registration Statement or any amendment thereof a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus if used prior to
the Effective Date of the Registration Statement or in the Prospectus
(as amended or as supplemented, if the Company shall have filed with
the SEC any amendment thereof or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
or (iii) any untrue statement or alleged untrue statement of a material
fact contained in any application or other statement executed by the
Company or based upon written information furnished by the Company
filed in any jurisdiction in order to qualify the Shares under, or
exempt the Shares or the sale thereof from qualification under, the
securities laws of such jurisdiction, or the omission or alleged
omission to state in such application or statement a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and the Company will reimburse each Underwriter and each
such controlling person for any legal or other expenses reasonably
incurred by such Underwriter or controlling person (subject to the
limitation set forth in Section 6(c) hereof) in connection with
investigating or defending against 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 any such loss, claim, damage
or liability arises out of, or is based upon, an untrue statement, or
alleged untrue statement, omission or alleged omission, made in
reliance upon and in conformity with written information furnished to
the Company by, or on behalf of, any
Underwriter specifically for use in the preparation of the Registration
Statement or any such post effective amendment thereof, any such
Preliminary Prospectus or the Prospectus or any such amendment thereof
or supplement thereto, or in any application or other statement
executed by the Company or any Underwriter filed in any jurisdiction in
order to qualify the Shares under, or exempt the Shares or the sale
thereof from qualification under, the securities laws of such
jurisdiction; and provided further that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to
any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied
in the Prospectus, such indemnity agreement shall not inure to the
benefit of any Underwriter if the person asserting any loss, claim,
damage or liability purchased the Shares from such Underwriter which
are the subject thereof (or to the benefit of any person who controls
such Underwriter), if a copy of the Prospectus was not sent or given to
such person with, or prior to, the written confirmation of the sale of
such Shares to such person. This indemnity agreement is in addition to
any liability which the Company may otherwise have.
(b) Each Underwriter severally, but not jointly, agrees to
indemnify and hold harmless the Company, each of the Company's
directors, each of the Company's officers who has signed the
Registration Statement and each person who controls the Company within
the meaning of Section 15 of the 1933 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 1933 Act,
the 1934 Act, the common law, or otherwise, insofar as such losses,
claims, damages, or liabilities (or judicial or governmental actions or
proceedings in respect thereof) arise out of, or are based upon, (i)
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, or
the omission or alleged omission to state in the Registration Statement
or any amendment thereof, a material fact required to be stated therein
or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus if used prior to the Effective
Date of the Registration Statement or in the Prospectus (as amended or
as supplemented, if the Company shall have filed with the SEC any
amendment thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (iii) any
untrue statement or alleged untrue statement of a material fact
contained in any application or other statement executed by the Company
or by any Underwriter and filed in any jurisdiction in order to qualify
the Shares under, or exempt the Shares or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the
omission or alleged omission to state in such application or statement
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; in each case to the extent, but only the extent,
that such untrue statement, alleged untrue statement, omission or
alleged omission, was made in reliance upon and in conformity with
written information furnished to the Company by, or on behalf of, any
Underwriter specifically for use in the preparation of the Registration
Statement or any such
post effective amendment thereof, any such Preliminary Prospectus or
the Prospectus or any such amendment thereof or supplement thereto, or
in any application or other statement executed by the Company or by any
Underwriter and filed in any jurisdiction; and each Underwriter will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in
connection with investigating or defending against any such loss,
claim, damage, liability or action. This indemnity agreement is in
addition to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6, notify in writing the
indemnifying party of the commencement thereof. The omission so to
notify the indemnifying party will not relieve the indemnifying party
from any liability under this Section 6 as to the particular item for
which indemnification is then being sought, unless such omission so to
notify prejudices the indemnifying party's ability to defend such
action. In case any such action is brought against any indemnified
party and the indemnified party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such
indemnified party; and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that if, in
the reasonable judgment of the indemnified party, it is advisable for
such parties and controlling persons to be represented by separate
counsel, any indemnified party shall have the right to employ separate
counsel to represent it and all other parties and their controlling
persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriters against
the Company or by the Company against the Underwriters hereunder, in
which event the fees and expenses of such separate counsel shall be
borne by the indemnifying party and paid as incurred. Any such
indemnifying party shall not be liable to any such indemnified party on
account of any settlement of any claim or action effected without the
prior written consent of such indemnifying party.
7. Contribution.
(a) If the indemnification provided for in Section 6 is
unavailable under applicable law to any indemnified party in respect of
any losses, claims, damages or liabilities referred to therein, then
each 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 the Underwriters
from the offering of the Shares 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 the
Underwriters 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 Company and the
Underwriters agree that contribution determined by per capita
allocation (even if the Underwriters were considered a single person)
would not be equitable. The respective relative benefits received by
the Company on the one hand, and the Underwriters, on the other hand,
shall be deemed to be in the same proportion (A) in the case of the
Company, as the total price paid to the Company for the Shares by the
Underwriters (net of underwriting discount received but before
deducting expenses) bears to the aggregate public offering price of the
Shares and (B) in the case of the Underwriters, as the aggregate
underwriting discount received by them bears to the aggregate public
offering price of the Shares, in each case as reflected in the
Prospectus. The relative fault of the Company and the Underwriters
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 by the Underwriters 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, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price
at which the Shares underwritten by it were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto. The Underwriters' obligation to contribute
pursuant to this section are several and not joint. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls an Underwriter within the meaning
of the 1933 Act or the 1934 Act shall have the same rights to
contribution as such Underwriter, each person who controls the Company
within the meaning of the 1933 Act or the 1934 Act shall have the same
rights to contribution as the Company and each officer of the Company
who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company.
(b) Promptly after receipt by a party to this Agreement of
notice of the commencement of any action, suit or proceeding, such
person will, if a claim for contribution in respect thereof is to be
made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the omission so to
notify the Contributing Party will not relieve the Contributing Party
from any liability which it may have to any party other than under this
Section 7, unless such omission so to
notify prejudices the Contributing Party's ability to defend such
action. Any notice given pursuant to Section 6 hereof shall be deemed
to be like notice under this Section 7. In case any such action, suit
or proceeding is brought against any party, and such person notifies a
Contributing Party of the commencement thereof, the Contributing Party
will be entitled to participate therein with the notifying party and
any other Contributing Party similarly notified.
8. Effective Date of This Agreement and Termination.
(a) This Agreement shall become effective at 8:00 a.m.,
Minneapolis time, on the day on which the Underwriters release the
initial public offering of the Firm Shares for sale to the public. The
Representative shall notify the Company immediately after any action
has been taken which causes this Agreement to become effective. Until
this Agreement is effective, it may be terminated by the Company or the
Representative by giving notice as hereinafter provided, except that
the provisions of Sections 3(g), 6, 7 and 8 shall at all times be
effective. For purposes of this Agreement, the release of the initial
public offering of the Firm Shares for sale to the public shall be
deemed to have been made when the Underwriters release, by telegram or
otherwise, firm offers of the Firm Shares to securities dealers or
release for publication a newspaper advertisement relating to the Firm
Shares, whichever occurs first. This Agreement, shall nevertheless,
become effective at such time earlier than the time specified above as
the Representative may determine, by notice to the Company.
(b) Until the First Closing Date, this Agreement may be
terminated by the Representative, at its option, by giving notice to
the Company, if (i) the Company shall have sustained a loss by fire,
flood, accident or other calamity which is material with respect to the
business of the Company; the Company shall have become a party to
material litigation, not disclosed in the Registration Statement or the
Prospectus; or the business or financial condition of the Company shall
have become the subject of any material litigation, not disclosed in
the Registration Statement or the Prospectus; or there shall have been,
since the respective dates as of which information is given in the
Registration Statement or the Prospectus, any material adverse change
in the general affairs, business, key personnel, capitalization,
financial position or net worth of the Company, whether or not arising
in the ordinary course of business, which loss or change, in the
reasonable judgment of the Representative, shall render it inadvisable
to proceed with the delivery of the Shares, whether or not such loss
shall have been insured; (ii) trading in securities generally on the
New York Stock Exchange, American Stock Exchange, Nasdaq National
Market, Nasdaq Small Cap Market or the over-the-counter market shall
have been suspended or minimum prices shall have been established on
such exchange by the SEC or by such exchanges or markets; (iii) a
general banking moratorium shall have been declared by federal, New
York or Minnesota authorities; (iv) there shall have been such a
material adverse change in general economic, monetary, political or
financial conditions, or the effect of international conditions on the
financial markets in the United States shall be such that, in the
judgment of the Representative, makes it inadvisable to proceed with
the delivery of the Shares; (v)
the enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of either of any court or
other governmental authority which, in the judgment of the
Representative, materially and adversely affects or will materially and
adversely affect the business or operations of the Company; (vi) there
shall be a material outbreak of hostilities or material escalation and
deterioration in the political and military situation between the
United States and any foreign power, or a formal declaration of war by
the United States of America shall have occurred; or (vii) the Company
shall have failed to comply with any of the provisions of this
Agreement on its part to be performed on or prior to such date or if
any of the conditions, agreements, representations or warranties of the
Company shall not have been fulfilled within the respective times
provided for in this Agreement. Any such termination shall be without
liability of any party to any other party, except as provided in
Sections 6 and 7 hereof; provided, however, that the Company shall
remain obligated to pay costs and expenses to the extent provided in
Section 3(g) hereof.
(c) If the Representative elects to prevent this Agreement
from becoming effective or to terminate this Agreement as provided in
this Section 8, it shall notify the Company promptly by telegram or
telephone, confirmed by letter sent to the address specified in Section
11 hereof. If the Company shall elect to prevent this Agreement from
becoming effective, it shall notify the Representative promptly by
telegram or telephone, confirmed by letter sent to the address
specified in Section 11 hereof.
9. Default of Underwriter. If any Underwriter or Underwriters default
in their obligation to purchase the Firm Shares hereunder and the aggregate
amount of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to purchase does not exceed 10% of the total amount of Firm Shares,
the other Underwriters shall be obligated, severally, in proportion to their
respective commitments hereunder, to purchase the Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed to purchase. If any
Underwriter or Underwriters so defaults and the aggregate amount of Firm Shares
with respect to which such default or defaults occur is more than 10% of the
total number of Firm Shares and arrangements satisfactory to the Representative
and the Company for purchase of such Firm Shares by other persons (who may
include one or more of the nondefaulting Underwriters, including the
Representative) are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any nondefaulting Underwriter or
the Company except for the provisions of Sections 6 and 7 hereof. In any such
case, either the Representative or the Company shall have the right to postpone
the Closing Date, but in no event for more than seven days, in order that any
required changes, not including a reduction in the number of Firm Shares, to the
Registration Statement and the Prospectus of any other documents or arrangements
may be effected. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 9. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
10. Survival of Indemnities, Contribution Agreements, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriters contained in Sections 6 and 7, respectively, the
representations and warranties of the Company set forth in Section 1 hereof and
the covenants of the Company set forth in Section 3 hereof shall
remain operative and in full force and effect, regardless of any investigation
made by, or on behalf of, the Underwriters, the Company, any of its officers and
directors, or any controlling person referred to in Sections 6 and 7, and shall
survive the delivery of and payment for the Shares. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of any party or of any such controlling person, or
any legal representative of such controlling person, as the case may be, shall
be entitled to the benefit of the respective indemnity and contribution
agreements.
11. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to
Representative or any of the Underwriters, shall be mailed, delivered or
telegraphed and confirmed, to X.X. Xxxxxxxx & Company, Xxx Xxxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Xxxxxxx X. Xxxxxxx,
with a copy to Xxxxxxx X. Xxxx, Esq., Xxxxxxxxxx & Xxxxx, P.A., 1100
International Centre, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000; or,
if sent to the Company, shall be mailed, delivered or telegraphed and confirmed,
to Industrial Rubber Products, Inc., 0000 Xxxx Xxxxxxxx, Xxxxxxx, Xxxxxxxxx
00000, Attention: Xxxxxx X. Xxxxxx, with a copy to Xxxx X. Nys, Johnson, Killen,
Xxxxxxxxx & Xxxxxx, P.A., 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxx 00000.
12. Information Furnished by the Underwriter. The statements relating
to the stabilization activities of the Underwriters and the statements under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute the written information furnished by, or on behalf of, the
Underwriters specifically for use with reference to the Underwriters referred to
in Section 1(b) and Section 6 hereof.
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company, their respective
successors and assigns, and the officers, directors and controlling persons
referred to in Sections 6 and 7. Nothing expressed in this Agreement is intended
or shall be construed to give any person or corporation, other than the parties
hereto, their respective successors and assigns, and the controlling persons,
officers and directors referred to in Sections 6 and 7 any legal or equitable
right, remedy, or claim under, or in respect of, this Agreement or any provision
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors, assigns and
such controlling persons, officers and directors, and for the benefit of no
other person or corporation. No purchaser of any Shares from the Underwriters
shall be construed a successor or assign merely by reason of such purchase.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, without regard to the
conflict of law provisions thereof.
If the foregoing is in accordance with the Representative's
understanding of this agreement, kindly sign and return to the Company the
enclosed counterpart of this Agreement, whereupon it will become a binding
agreement between the Company and each of the several Underwriters in accordance
with its terms.
Very truly yours,
INDUSTRIAL RUBBER PRODUCTS, INC.
By__________________________________
Its_________________________________
ACCEPTANCE
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
undersigned for itself and as Representative of the several Underwriters
referred to in the foregoing Agreement as of the date first above written.
X. X. XXXXXXXX & COMPANY
By________________________________
Its_______________________________
SCHEDULE I
Name of Underwriter Number of Firm Shares
1. X. X. Xxxxxxxx and Company
2. [NAME]
3. [NAME]
4. [NAME]
5. [NAME]
6. [NAME]
7. [NAME]
8. [NAME]
9. [NAME]
10. [NAME]
TOTAL
APPENDIX A
WARRANT
TO PURCHASE 140,000 SHARES OF COMMON STOCK
OF
INDUSTRIAL RUBBER PRODUCTS, INC.
___________________, 1998
(issuance date)
THIS CERTIFIES THAT, for good and valuable consideration, X. X.
Xxxxxxxx & Company (the "Representative"), or its registered assigns, is
entitled to subscribe for and purchase from, Industrial Rubber Products, Inc., a
Minnesota corporation (the "Company"), at any time after the one-year
anniversary of the issuance date of this Warrant, to and including the five-year
anniversary of the issuance date of this Warrant, 140,000 fully paid and
nonassessable shares of the Common Stock of the Company at the price of $6.00
per share (the "Warrant Exercise Price"), subject to the antidilution provisions
of this Warrant. Reference is made to this Warrant in the Underwriting Agreement
dated ______________, 1998, by and between the Company and the Representative.
The shares which may be acquired upon exercise of this Warrant are referred to
herein as the "Warrant Shares." As used herein, the term "Holder" means the
Representative, any party who acquires all or a part of this Warrant as a
registered transferee of the Representative, or any record holder or holders of
the Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant. As used herein, the term "Common Stock" means and includes the
Company's presently authorized common stock, $.001 par value, and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to a fixed sum or percentage in respect of the rights of
the Holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution, or winding up of the
Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for such shares.
(b) This Warrant may not be sold, assigned, hypothecated, or otherwise
transferred until the one year anniversary of the issuance date of this Warrant.
Thereafter, this Warrant may not be sold, assigned, hypothecated, or otherwise
transferred other than by will or pursuant to the operation of law, except to a
person who is an officer of the Representative. Further, this Warrant may not be
sold, transferred, assigned, hypothecated or divided into two or more Warrants
of smaller denominations, nor may any Warrant shares issued pursuant to exercise
of this Warrant be transferred, except as provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Representative shall be such Holder, an agreement
of indemnity by such Holder shall be sufficient for all purposes of this Section
2. This Warrant shall be promptly canceled by the Company upon the surrender
hereof in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the
subsection (b) below, certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the right to
purchase the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the Holder
within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9 hereof.
If registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
upon exercise of the subscription rights evidenced by this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section 5.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), there shall be no adjustment under Subsection (a)
of this Section above but the Holder of each Warrant then outstanding shall have
the right thereafter to convert such Warrant into the kind and amount of shares
of stock and other securities and property which he would have owned or have
been entitled to receive immediately after such consolidation, merger, statutory
exchange, sale, or conveyance had such Warrant been converted immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale,
or conveyance and in any such case, if necessary, appropriate adjustment shall
be made in the application of the provisions set forth in this Section with
respect to the rights and interests thereafter of any Holders of the Warrant, to
the end that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock and other securities and property thereafter deliverable
on the exercise of the Warrant. The provisions of this Subsection shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock or other securities purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel to the Company and
satisfactory to the Company to prevent further transfers which would be in
violation of Section 5 of the Securities Act of 1933, as amended (the "1933
Act") and applicable state securities laws; and provided further that the
prospective transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company for the transfer or disposition
of the Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to this Section 7 may not
be effected without registration or qualification of this Warrant or such
Warrant Shares the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit its activities in respect to such as, in the
opinion of both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section 8, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the closing sale price reported by Nasdaq National Market or any national
securities exchange or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in Nasdaq
SmallCap, or if not listed on a national securities exchange or quoted in Nasdaq
SmallCap Market, the average of the last reported closing bid and asked prices
as reported by Metro Data Company, Inc. from quotations by market makers in such
Common Stock on the Minneapolis-St. Xxxx local over-the-counter market.
9. Registration Rights.
(a) If at any time after the one-year anniversary of the issuance date
of this Warrant and prior to the end of the two-year period following complete
exercise of this Warrant or the close of business on the seven-year anniversary
of the issuance of this Warrant, whichever occurs earlier, the Company proposes
to register under the 1933 Act (except by a Form S-4 or Form S-8 Registration
Statement or any successor forms thereto) or qualify for a public distribution
under Section 3(b) of the 1933 Act, any of its securities, it will give written
notice to all Holders of this Warrant, any Warrants issued pursuant to Section 2
and/or Section 3(a) hereof, and any Warrant Shares of its intention to do so
and, on the written request of any such Holder given within thirty (30) days
after the receipt of any such notice (which request shall specify the interest
in this Warrant or the Warrant Shares intended to be sold or disposed of by such
Holder and describe the nature of any proposed sale or other disposition
thereof), the Company will use its best efforts to cause all such Warrant
Shares, the Holders of which shall have requested the registration or
qualification thereof, to be included in such registration statement proposed to
be filed by the Company; provided, however, that if a greater number of Warrant
Shares is offered for participation in the proposed offering than in the
reasonable opinion of the managing underwriter of the proposed offering can be
accommodated without adversely affecting the proposed offering, then the amount
of Warrant Shares proposed to be offered by such Holders for registration, as
well as the number of securities of any other selling shareholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
(b) Further, on a one-time basis during the four-year period commencing
on the one-year anniversary of the issuance date of this Warrant, upon request
by the Holder or Holders of a majority in interest of this Warrant, of any
Warrants issued pursuant to Section 2 and/or Section 3(a) hereof, and of any
Warrant Shares, the Company will promptly take all necessary steps to register
or qualify, on Form S-3 (or successor form) under the 1933 Act and the
securities laws of such states as the Holders may reasonably request, such
number of Warrant Shares issued and to be issued upon conversion of the Warrants
requested by such Holders in their request to the Company. The Company shall
keep effective and maintain any registration, qualification, notification, or
approval specified in this Paragraph (b), and from time to time shall amend or
supplement the prospectus used in connection therewith to the extent necessary
in order to comply with applicable law, for such period, as may be reasonably
necessary for such Holders or Holders of such Warrant Shares to dispose of such
Warrant Shares.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following fees,
costs, and expenses: all registration, filing and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
and any other expenses relating to the sale
of securities by the selling Holders not expressly included above shall be borne
by the selling Holders.
(d) The Company hereby indemnifies each of the Holders of this Warrant
and of any Warrant Shares, and the officers and directors, if any, who control
such Holders, within the meaning of Section 15 of the 1933 Act, against all
losses, claims, damages, and liabilities caused by (1) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (and as amended or supplemented if the Company shall
have furnished any amendments thereof or supplements thereto), any Preliminary
Prospectus or any state securities law filings; (2) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages, or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission contained in information furnished in
writing to the Company by such Holder expressly for use therein; and each such
Holder by its acceptance hereof severally agrees that it will indemnify and hold
harmless the Company, each of its directors, each of its officers who signs such
Registration Statement, and each person, if any, who controls the Company,
within the meaning of Section 15 of the 1933 Act, with respect to losses,
claims, damages, or liabilities which are caused by any untrue statement or
alleged untrue statement, omission or alleged omission contained in information
furnished in writing to the Company by such Holder expressly for use therein.
10. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
holder of this Warrant and the Company. This Warrant shall be construed and
enforced in accordance with and governed by the laws of the State of Minnesota
without regard to its choice of law provisions.
IN WITNESS WHEREOF, Industrial Rubber Products, Inc. has caused this
Warrant to be signed by its duly authorized officer as of the date first above
written.
INDUSTRIAL RUBBER PRODUCTS, INC.
By______________________________
Its_____________________________
TO: INDUSTRIAL RUBBER PRODUCTS, INC.
NOTICE OF EXERCISE OF WARRANT To Be Executed by the Registered Holder in
Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
-----------------------------
(Print Name)
Please insert social security
or other identifying number
of registered Holder of
certificate (______________) Address:
------------------------------
------------------------------
Date:
------------------------ ------------------------------
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _____________________________ the right to purchase the
securities of Industrial Rubber Products, Inc., Incorporated to which the within
Warrant relates and appoints _____________, attorney, to transfer said right on
the books of Industrial Rubber Products, Inc., Incorporated with full power of
substitution in the premises.
Dated:
--------------------- ------------------------------
(Signature)
Address:
------------------------------
------------------------------
Social Security or Tax I.D. Number
of Assignee:
-------------------------------
