1,000,000 SHARES COMMON STOCK
MERCURY WASTE SOLUTIONS, INC.
UNDERWRITING AGREEMENT
______________________, 1997
Equity Securities Trading Co., Inc.
000 Xxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
Dear Ladies and Gentlemen:
Mercury Waste Solutions, Inc., a Minnesota corporation (the "Company"),
hereby confirms its agreement to issue and sell to Equity Securities Trading
Co., Inc. (the "Underwriter"), an aggregate of 1,000,000 shares of authorized
but unissued common stock, par value $0.01 per share, of the Company (the
"Common Stock"). Such 1,000,000 shares of Common Stock are collectively referred
to in this Agreement as the "Firm Shares." Additionally, the Company confirms
its agreement to sell up to 150,000 shares of Common Stock (the "Option Shares")
upon the request of the Underwriter 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 Underwriter warrants for the purchase of a total of 100,000 shares
as described in Section 5 hereof (the "Underwriter's Warrants"), assuming
purchase by the Underwriter of the Firm Shares. The shares issuable upon
exercise of the Underwriter's Warrants are referred to herein as the "Warrant
Shares."
The Company hereby confirms the arrangements with respect to the
purchase by the Underwriter of the Firm Shares plus the Option Shares purchased
if the overallotment option is exercised in whole or in part.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Underwriter 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 Underwriter 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
Underwriter. Such registration statement, as amended or supplemented,
including all prospectuses included as a part thereof, financial
schedules, exhibits, the information (if any) deemed to be 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 5(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 2 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 Underwriter 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 material 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 or Bylaws. The Company is not 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, 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 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 in the Prospectus. The outstanding Common
Stock of the Company is 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 Underwriter's Warrants. Except as
disclosed in the Prospectus, the Company has no agreement with any
security holder which gives such security holder 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 Underwriter 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 Underwriter's Warrants and the Warrant Shares have
been duly authorized. The Underwriter's Warrants, when issued and
delivered to the Underwriter, 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 Underwriter'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
Underwriter's Warrants.
(j) McGladrey & Ag, 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) 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.
(n) 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.
(o) 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.
(p) 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.
(q) The Company has no defined benefit pension plan or other
pension benefit plan, except for its 401(k) Plan which has no benefit
obligations and has not been funded, 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.
(r) To the best of the Company's knowledge, no person is
entitled, directly or indirectly, to compensation from the Company or
the Underwriter for services as a finder in connection with the
transactions contemplated by this Agreement.
(s) 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.
(t) 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.
(u) The Company has not sold any securities in violation of
Section 5(a) of the 1933 Act.
(v) 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.
(w) 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.
(x) 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.
(y) 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.
(z) The Company has obtained a written agreement, in the form
attached hereto as Schedule I, from each of the officers, directors,
and stockholders of the Company who hold at least 5% of the outstanding
Common Stock of the Company, that for one year following the Effective
Date, such person will not, without the Underwriter's prior written
consent, sell, transfer or otherwise dispose of, or agree to sell,
transfer, or otherwise dispose of, any of his or her shares of Common
Stock or any options, warrants or rights to purchase Common Stock,
beneficially held by such persons during such one-year period other
than by gift to donees who agree to be bound by the same restriction or
by will or the laws of descent.
(aa) The Common Stock of the Company has been approved by
Nasdaq for trading on its SmallCap Market(sm) following effectiveness
of the Registration Statement.
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 the Underwriter,
and the Underwriter agrees to purchase the Firm Shares from the
Company, at $_____________ per Firm Share (which price represents the
Price to Public, as set forth in the Prospectus, less underwriting
discounts and commissions of 9% of the Price to Public or $_____ per
Share). The Underwriter will 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 Underwriter 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
Underwriter 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 5(a)
hereof) upon notice (confirmed in writing) by the Underwriter to the
Company setting forth the aggregate number of Option Shares as to which
the Underwriter is exercising the option and the date on which
certificates for such Option Shares are to be delivered. The option
granted hereby may be canceled by the Underwriter 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
Underwriter 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 of 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 Underwriter 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 Underwriter to the Underwriter at the offices of Xxxxxxxxxx &
Xxxxx, P.A. set forth in Section 2(c) above, unless some other place is
agreed upon, at 9:00 a.m., Minneapolis time, against payment of the
purchase price at the same place, on the date determined by the
Underwriter 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 Underwriter 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
Underwriter 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 Underwriter
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 Underwriter or its designated agent, of certificates for the Shares
by wire transfer to a designated account of the Company.
(g) The Underwriter 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 Underwriter 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 Underwriter determine, and the Underwriter
will furnish the Company with such information about the distribution
arrangements as may be necessary for inclusion in the Registration
Statement. It is understood that the public offering price and
concessions may vary after the initial public offering. The Underwriter
shall offer and sell the 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 Underwriter the Underwriter's Warrants against payment
by the Underwriter of the purchase price therefor of $50.00.
3. Further Agreements of the Company. The Company hereby covenants and
agrees with the Underwriter 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 Underwriter 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 Underwriter 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 Underwriter.
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 Underwriter
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 Underwriter and its counsel a reasonable time prior to the proposed
filing or to which the Underwriter 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 Underwriter 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 Underwriter 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 Underwriter (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 Underwriter, 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
Underwriter may from time to time reasonably request prior to the
printing of each such document. The Company specifically authorizes the
Underwriter and all dealers to whom any of the Shares may be sold by
the Underwriter 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 Underwriter (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 Underwriter, 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
existing stock option plans and currently outstanding options and
warrants) during the six-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 by the Company
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 Underwriter 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 Underwriter, incurred in registering or
qualifying the Shares for sale under the laws of such jurisdictions
upon which the Underwriter and the Company may agree; and (x) a
nonaccountable expense allowance to the Underwriter equal to 2% of the
gross proceeds of the Offering. In the event this Agreement is
terminated pursuant to Section 8 below, the Company shall remain
obligated to pay the Underwriter its actual accountable out-of-pocket
expenses, including reasonable fees of the Underwriter's counsel, in an
amount not to exceed $30,000 without the prior written approval of the
Company. All reimbursements of such expenses shall be made by the
Company within 10 days after the Underwriter delivers to the Company a
written itemization of such expenses.
(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
quotation of its Common Stock on the Nasdaq SmallCap Market(sm).
(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 closing required to be performed
by it pursuant to Section 5 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) On First Closing Date, the Company shall grant to the
Underwriter the Underwriter's Warrants, in substantially the form
attached as Appendix B hereto.
(o) Grants to the Underwriter a right of first refusal to
participate as the sole or managing agent or underwriter, as the case
may be, for any private equity or debt offering or public equity or
debt offering by the Company (excluding employee benefit plans and
long-term debt financing obtained solely from any bank chartered under
the laws of the United States or under the laws of any state thereof
(or an affiliate of such bank), or obtained under any insurance company
licensed to do business within the United States (or an affiliate of
such insurance company), if any such long-term debt financing does not
require or involve the material issuance of any of the Company's Common
Stock or other equity security or any rights with regard thereto), or
as the Company's financial representative in any corporate transaction
such as a recapitalization, merger or acquisition, until the expiration
of the three-year period following the Effective Date. If the Company
receives a bona fide offer from any third party to serve as sole or
managing agent or underwriter in such a private or public offering
which the Company is willing to accept, the Company shall promptly give
written notice to the Underwriter, including all essential terms and
conditions of such offer. The Underwriter shall have thirty days (ten
days in the case of any proposed offering within six months of the date
hereof) after receipt of such written notice to elect to enter into an
agreement with the Company as sole or managing agent or underwriter, as
the case may be, on the same terms and conditions as set forth in the
Company's written notice. If the Underwriter declines to exercise its
right of first refusal or fails to notify the Company within the
thirty-day period (or ten-day period, as the case may be) of an
election to invoke its right of first refusal, the Company may enter
into an agreement with such third party from whom it has received a
bona fide offer and the Underwriter's right of first refusal hereunder
shall continue until expiration of the three-year period following the
Effective Date. If the Company fails to enter into such an agreement
with such third party or if the terms and conditions of such offer are
thereafter materially changed, the right of first refusal granted to
the Underwriter shall once again apply. Such rights of first refusal
granted hereby shall be assignable to a successor corporation of the
Underwriter or to an entity or person purchasing all or substantially
all of the assets of the Underwriter.
4. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter 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 Underwriter (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 Underwriter 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 Underwriter,
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
Underwriter and their legal counsel. The NASD, upon review of the terms
of the Offering, shall not have objected to the terms of the
Underwriter' participation in the Offering.
(b) The Underwriter 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 5(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 Underwriter 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 Underwriter,
materially and adversely affects the market for the Shares.
(d) The Underwriter shall have received the opinion of Maslon,
Edelman, Xxxxxx & Brand, counsel for the Company, dated as of such
respective Closing Date and satisfactory in form and substance to the
Underwriter 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 and the
activities of the Company are permitted under the 1933 Act,
the Rules and Regulations and other applicable laws.
(ii) The number of authorized and, to the best of
such counsel's knowledge, the number of issued and outstanding
shares of capital stock of the Company are as set forth in the
Prospectus and all such capital stock has been duly authorized
and is validly issued, fully paid and nonassessable. Upon
delivery of and payment for the Shares hereunder, the
Underwriter 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 Underwriter'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, Underwriter's Warrants and
Warrant Shares conform as to matters of law in all material
respects to the description of these 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 Underwriter 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 Underwriter'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, and except as the enforceability of indemnification
or contribution provisions hereof may be limited by federal or
state securities laws. The Warrant Shares when issued in
accordance with the terms of this Agreement and pursuant to
the Underwriter'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
Underwriter'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 Underwriter.
(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.
(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) To the best of such counsel's knowledge, the
execution, delivery and performance of this Agreement and the
consummation of the transactions described herein will not
result in a violation of, or a default under, the terms or
provisions of (A) any material bond, debenture, note,
contract, lease, license, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument
to which the Company is a party or by which the Company or any
of its properties are bound, or (B) any material 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.
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
Underwriter specifically for use in the preparation of the Registration
Statement, Prospectus, or any such amendment or supplement.
(e) The Underwriter shall have received the opinion of
Xxxxxxxxx Xxxxxxxx & Xxxxxxxx, P.A., intellectual property counsel for
the Company, dated as of such respective Closing Date and satisfactory
in form and substance to the Underwriter and its counsel, to the effect
that:
(i) 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.
(ii) To the best of such counsel's knowledge, and
except as stated below, 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.
(iii) To the best of such counsel's knowledge, 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.
(iv) 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.
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 intellectual property
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
intellectual property portions 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 intellectual property
portions of the Registration Statement, Prospectus, or any amendment thereof or
supplement thereto contain 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.
(f) The Underwriter shall have received from Xxxxxxxxxx &
Xxxxx, P.A., its counsel, such opinion or opinions as the Underwriter
may reasonably require, dated as of each closing date and satisfactory
in form and substance to the Underwriter, 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.
(g) The Underwriter and the Company shall have received
letters, dated the date hereof and as of each Closing Date, from
McGladrey & 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 Underwriter.
(h) The Underwriter shall have received from the Company a
certificate, dated as of the First 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
each 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 Underwriter 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.
(i) The Underwriter shall have received, dated as of the First
Closing Date, from the Secretary of the Company a certificate of
incumbency certifying the names, titles and signatures of the officers
authorized to execute 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 of the Company and the Bylaws of the Company
have been validly adopted and have not been amended or modified.
(j) The Underwriter shall have received a written agreement,
in the form attached hereto as Schedule I, from each of the officers
and directors of the Company and each stockholder of the Company who
holds at least 5% of the outstanding Common Stock of the Company, that
for one year following the Effective Date, such person will not,
without the Underwriter'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 one-year period.
(k) 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 Underwriter may waive in writing the performance of
any one or more of the conditions specified in this Section 5 or extend
the time for their performance.
(l) 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 Underwriter
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.
(m) The Company shall have furnished to the Underwriter, dated
as of the date of each Closing Date, such further certificates and
documents as the Underwriter shall have reasonably required.
(n) All such opinions, certificates, letters and documents
will be in compliance with the provisions hereof only if they are
reasonably satisfactory to the Underwriter 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.
(o) The Underwriter may waive in writing the performance of
any one or more of the conditions specified in this Section 5 or extend
the time for their performance.
(p) If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement to be
fulfilled, this Agreement and all obligations of the Underwriter
hereunder may be canceled at, or at any time prior to, each Closing
Date by the Underwriter. Any such cancellation shall be without
liability of the Underwriter 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 10 hereof in writing, or by telegraph or telephone confirmed in
writing.
5. Underwriter's Warrants. On the First Closing Date, the Company shall
sell to the Underwriter for $100 the Underwriter's Warrants, which shall first
become exercisable one year after the Effective Date and shall remain
exercisable for a period of four years thereafter. The Underwriter's Warrants
shall be subject to certain transfer restrictions and shall be in substantially
the form attached as Appendix A hereto.
6. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless
the Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the 1933 Act against any losses,
claims, damages or liabilities, joint or several, to which the
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
made by the Company in Section 1 hereof; (ii) 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; (iii) 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 Commission 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 (iv) 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. The Company
will reimburse the Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by the Underwriter or such
controlling person (subject to the limitation set forth in Section 7(d)
hereof) in connection with investigating or defending against any such
loss, claim, damage, liability or action. The Company, however, 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, the 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 the 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. Further,
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 the Underwriter if the
person asserting any loss, claim, damage or liability purchased the
Shares from the Underwriter which are the subject thereof (or to the
benefit of any person who controls the 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 due to
the fault of the Underwriter. This indemnity agreement is in addition
to any liability which the Company may otherwise have.
(b) The Underwriter 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 Commission 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 the
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, the
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 the Underwriter and filed in any
jurisdiction. The 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.
Further, 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 the Company if the person
asserting any loss, claim, damage or liability purchased the Shares
from the Underwriter which are the subject thereof (or to the benefit
of any person who controls any 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 due to
no fault of the Underwriter. This indemnity agreement is in addition to
any liability which the Underwriter 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 it 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. 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 Underwriter against the
Company or by the Company against the Underwriter 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 for any reason or is insufficient to hold harmless an
indemnified party under Section 6(a) or (b) above in respect of any
losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company and the Underwriter from the offering of the Firm Shares
and the Option Shares, if any. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law
or if the indemnified party failed to give the notice required under
Section 6(c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Underwriter in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriter shall be deemed to
be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriter, in
each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriter
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
10(e) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
The Company and the Underwriter agree that it would not be
just and equitable if contribution pursuant to this Section 7(a) were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to
above in this Section 7(a). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
Section 7(a) shall be deemed to include any legal or other expenses to
which such indemnified party would be entitled if Section 6(a) or (b)
were applied. Notwithstanding the provisions of this Section 7(a), the
Underwriter shall not be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by
it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
(b) Promptly after receipt by any party to this Agreement of
notice of the commencement of any action, suit or proceeding, such
party 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. The omission so to
notify the contributing party will not relieve it from any liability
that it may have to any other party so long as the failure to notify
does not materially prejudice the contributing party's rights. If any
such action, suit or proceeding is brought against any party, and such
party 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.
(c) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under Section 6 or this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. A successor to the
Underwriter or to the Company, or any actor or officer of, or any
person controlling, the Underwriter or the Company shall be entitled to
the benefits of the agreements contained in Sections 6 and 7.
8. Effective Date of This Agreement and Termination.
(a) This Agreement shall become effective upon the release by
the Underwriter of the initial public offering of the Firm Shares for
sale to the public. The Underwriter 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 Underwriter by giving notice as
hereinafter provided, except that the provisions of Sections 3(g), 6,
7, 8, 9 and 13 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 Underwriter releases, 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.
(b) Until the First Closing Date, this Agreement may be
terminated by the Underwriter, 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 Underwriter, 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
SmallCap Market(sm) 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
Underwriter, 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
Underwriter, 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 Underwriter 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
10 hereof. If the Company shall elect to prevent this Agreement from
becoming effective, it shall notify the Underwriter promptly by
telegram or telephone, confirmed by letter sent to the address
specified in Section 10 hereof.
9. Survival of Indemnities, Contribution Agreements, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter 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 Underwriter, 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.
10. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to Underwriter
or any of the Underwriter, shall be mailed, delivered or telegraphed and
confirmed, to Equity Securities Trading Co., Inc., 000 Xxxxx Xxxxx, Xxxxxx
Xxxxxx, XX 00000, Attention: Xxxxxxxx X. Xxxxxx, Vice President with a copy to
Xxxxxx X. Xxxxx, 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 Mercury Waste
Solutions, Inc., 000 Xxxxx Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000, Attention:
Xxxxxxx X. Xxxxxxx, with a copy to Xxxxxxx Xxxxxxxx, Esq., Maslon, Edelman,
Xxxxxx & Brand, 0000 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000-0000.
11. Information Furnished by the Underwriter. The statements relating
to the stabilization activities of the Underwriter 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
Underwriter specifically for use with reference to the Underwriter referred to
in Sections 1(b) and 6 hereof.
12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriter 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 Underwriter
shall be construed a successor or assign merely by reason of such purchase.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
If the foregoing is in accordance with the Underwriter'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 the Underwriter in accordance with its terms.
Very truly yours,
MERCURY WASTE SOLUTIONS, INC.
By_______________________________________
Its______________________________________
ACCEPTANCE
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
undersigned
EQUITY SECURITIES TRADING CO., INC.
By_______________________________________
Its______________________________________
SCHEDULE I
PERSONS TO BE
SUBJECT TO LOCK-UP AGREEMENT
FORM OF LOCK-UP AGREEMENT
The undersigned, a director, executive officer, or beneficial owner of
the common stock, $0.01 par value (the "Common Stock"), of Mercury Waste
Solutions, Inc. (the "Company"), understands that the Company has filed with the
Securities and Exchange Commission a registration statement on Form SB-2 (the
"Registration Statement") for the registration of up to 1,000,000 shares of
Common Stock, plus an overallotment option of 150,000 shares of Common Stock.
The undersigned further understands that in connection with the public offering
of the Shares, the Company contemplates entering into an underwriting agreement
with Equity Securities Trading Co., Inc. (the "Underwriter").
In order to induce the Underwriter to proceed with the public offering,
the undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated the undersigned will not, without the
prior written consent of the Underwriter, during the one-year period commencing
on the effective date of the Registration Statement (the "Lockup Period") (i)
sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwise
dispose of any shares of Common Stock of the Company beneficially held by the
undersigned during the Lockup Period, (ii) sell, transfer or otherwise dispose
of or agree to sell, transfer or otherwise dispose of any options, rights,
warrants or other securities exercisable or convertible into shares of Common
Stock of the Company beneficially held by the undersigned during the Lockup
Period, or (iii) sell or grant, or agree to sell or grant, options, rights,
warrants or other securities exercisable or convertible into to any such shares
of Common Stock. The foregoing does not prohibit gifts to donees who agree to be
bound by the restrictions set forth herein or transfers by will or the laws of
descent.
This Agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
Dated: _________________ ________________________________
