1,400,000 SHARES COMMON STOCK
INDUSTRIAL RUBBER PRODUCTS, INC.
UNDERWRITING AGREEMENT
______________________, 1998
▇. ▇. ▇▇▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Dear Ladies and Gentlemen:
Industrial Rubber Products, Inc., a Minnesota corporation (the
"Company"), hereby confirms its agreement to issue and sell ▇. ▇. ▇▇▇▇▇▇▇▇ &
Company (the "Underwriter") an aggregate of 1,400,000 shares of authorized but
unissued common stock, par value $.001 per share, of the Company (the "Common
Stock"). Such 1,400,000 shares of Common Stock are collectively referred to in
this Agreement as the "Firm Shares." The Company also hereby confirms its
agreement to issue and sell to the Underwriter an aggregate of up to 210,000
additional shares of Common Stock 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 140,000 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 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 4(a) hereof) and
included as a part of the Registration Statement, including any
prospectus filed with the SEC pursuant to Rule 424(a).
(b) Neither the SEC nor any state securities division has
issued any order preventing or suspending the use of any Preliminary
Prospectus, or issued a stop order with respect to the offering of the
Shares or requiring the recirculation of a Preliminary Prospectus and,
to the best knowledge of the Company, no proceeding for any such
purpose has been initiated or threatened. Each part of the Registration
Statement, when such part became or becomes effective, each Preliminary
Prospectus, on the date of filing with the SEC, and the Prospectus and
any amendment or supplement thereto, on the date of filing thereof with
the SEC and on any Closing Date (as defined in Section 3 hereof), as
the case may be, conformed or will conform in all material respects
with the requirements of the 1933 Act and the Rules and Regulations and
the securities laws ("Blue Sky Laws") of the states where the Shares
are to be sold (the "States") and contained or will contain all
statements that are required to be stated therein in accordance with
the 1933 Act, the Rules and Regulations and the Blue Sky Laws of the
States. When the Registration Statement became or becomes effective and
when any post-effective amendments thereto shall become effective, the
Registration Statement did not and will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Neither any Preliminary Prospectus, on the date of filing thereof with
the SEC, nor the Prospectus or any amendment or supplement thereto, on
the date of filing thereof with the SEC and on the First and Second
Closing Dates, contained or will contain any untrue statement of a
material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that
none of the representations and warranties in this Subsection 1(b)
shall apply to statements in, or omissions from, the Registration
Statement, Preliminary Prospectus or the Prospectus, or any amendment
thereof or supplement thereto, which are based upon and conform to
written information furnished to the Company by the 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 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 Restated Articles
of Incorporation, as amended, or Restated Bylaws or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any bond, debenture, note or
other evidence of indebtedness or in any contract, indenture, mortgage,
loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which the Company or its properties are
bound, and there does not exist any state of facts which constitutes an
event of default on the part of the Company or which, with notice or
lapse of time or both, would constitute such an event of default. The
Company is not, to the best of its knowledge after due inquiry, in
violation of any law, order, rule, regulation, writ, injunction or
decree of any government, governmental instrumentality or court,
domestic or foreign, which violation is material to the business of the
Company.
(f) The Company has full requisite power and authority to
enter into this Agreement. This Agreement has been duly authorized,
executed and delivered by the Company and will be a valid and binding
agreement on the part of the Company, enforceable in accordance with
its terms, if and when this Agreement shall have become effective in
accordance with Section 8, except as enforceability may be limited by
the application of bankruptcy, insolvency, moratorium or similar laws
affecting the rights of creditors generally and by judicial limitations
on the right of specific performance and except as the enforceability
of the indemnification or contribution provisions hereof may be
affected by applicable federal or state securities laws. The
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, (i) any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note,
agreement or other evidence of indebtedness, lease, contract or other
agreement or instrument to which the Company is a party or by which the
property or assets of the Company is bound, (ii) the Company's Restated
Articles of Incorporation, as amended, or Restated Bylaws or (iii) any
statute or any order, rule or regulation of any court, governmental
agency or body having jurisdiction over the Company. No consent,
approval, authorization or order of any court, governmental agency or
body is required for the consummation by the Company of the
transactions on its part herein contemplated, except such as may be
required under the 1933 Act, the Rules and Regulations, the Blue Sky
Laws, the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and the rules and regulations of
Nasdaq.
(g) Except as is otherwise expressly stated in the
Registration Statement or Prospectus, there are no actions, suits or
proceedings pending before any court or governmental agency, authority
or body to which the Company is a party or of which the business or
property of the Company is the subject which might result in any
material adverse change in the condition (financial or otherwise),
business or prospects of the Company, materially and adversely affect
its properties or assets or prevent consummation of the transactions
contemplated by this Agreement; and, to the best of the Company's
knowledge, no such actions, suits or proceedings are threatened except
as is otherwise expressly stated in the Registration Statement or
Prospectus. The Company is not aware of any facts which would form the
basis for the assertion of any material claim or liability which are
not disclosed in the Registration Statement or the Prospectus or
adequately reserved for in the financial statements which are a part
thereof, except for such claims or
liabilities which are not currently expected to have a material adverse
effect on the condition (financial or otherwise) or the earnings,
affairs or business prospects of the Company. All pending legal or
governmental proceedings to which the Company is a party or to which
any of its property is subject which are not described in the
Registration Statement and the Prospectus, including ordinary routine
litigation incidental to the business, are, considered in the
aggregate, not material to the Company.
(h) The authorized, issued and outstanding capital stock of
the Company is as set forth under the caption "Capitalization" in the
Prospectus. The outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable. The
Shares conform in substance to all statements relating thereto
contained in the Registration Statement and Prospectus. The Shares to
be sold by the Company hereunder have been duly authorized and, when
issued and delivered pursuant to this Agreement, will be validly
issued, fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus. No preemptive rights
or similar rights of any security holders of the Company exist with
respect to the issuance and sale of the Shares by the Company or
exercise of the Underwriter's Warrants. Except as disclosed in the
Prospectus, the Company has received waivers from each security holder
that has the right to require the Company to register under the 1933
Act any securities of any nature owned or held by such person either in
connection with the transactions contemplated by this Agreement or
after a demand for registration by such holder. Upon payment for and
delivery of the Shares pursuant to this Agreement, the 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 Representa-tive, will constitute valid and binding
obligations of the Company in accordance with their terms, except as
enforceability may be limited by the application of bankruptcy,
insolvency, moratorium or similar laws affecting the rights of
creditors generally and by judicial limitations on the right of
specific performance. The Warrant Shares when issued in accordance with
the terms of this Agreement and pursuant to the 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 & ▇▇▇▇▇▇, LLP, whose reports appear in the
Registration Statement and Prospectus, are independent accountants
within the meaning of the 1933 Act and the Rules and Regulations. The
financial statements of the Company, together with the
related notes, forming part of the Registration Statement and
Prospectus (the "Financial Statements"), fairly present the financial
position and the results of operations of the Company at the respective
dates and for the respective periods to which they apply. The Financial
Statements are accurate, complete and correct and have been prepared in
accordance with the 1933 Act, the Rules and Regulations and generally
accepted accounting principles ("GAAP"), consistently applied
throughout the periods involved, except as may be otherwise stated
therein. The summaries of the Financial Statements and the other
financial, statistical and related notes set forth in the Registration
Statement and the Prospectus are (i) accurate and correct and fairly
present the information purported to be shown thereby as of the dates
and for the periods indicated on a basis consistent with the audited
financial statements of the Company and (ii) in compliance in all
material respects with the requirements of the 1933 Act and the Rules
and Regulations.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and at any
Closing Date, except as is otherwise disclosed in the Registration
Statement or Prospectus, there has not been:
(i) any change in the capital stock or long-term debt
(including any capitalized lease obligation), or increase in
the short-term debt of the Company;
(ii) any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock of
the Company;
(iii) any adverse change, or any development
involving a material adverse change, in or affecting the
business, business prospects, properties, assets, patents or
patent applications (including those of the Company and those
relating to devices or technologies licensed to the Company),
management, financial position, stockholders' equity, results
of operations or general condition of the Company;
(iv) any material transaction entered into by the
Company;
(v) any material obligation, direct or contingent,
incurred by the Company, except obligations incurred in the
ordinary course of business that, in the aggregate, are not
material; or
(vi) any dividend or distribution of any kind
declared, paid or made on the Company's capital stock.
(l) Except as is otherwise disclosed in the Registration
Statement or Prospectus, the Company has good and marketable title to
all of the property, real and personal, described in the Registration
Statement or Prospectus as being owned by the Company, free and clear
of all liens, encumbrances, equities, charges or claims, except as do
not materially interfere with the uses made and to be made by the
Company of such property or as disclosed in the Financial Statements.
Except as is otherwise disclosed in the Registration Statement or
Prospectus, the Company has valid and binding leases to the real and
personal
property described in the Registration Statement or Prospectus as being
under lease to the Company, except as to those leases which are not
material to the Company or the lack of enforceability of which would
not materially interfere with the use made and to be made by the
Company of such leased property.
(m) There has been no unlawful storage, treatment or disposal
of waste by the Company at any of the facilities owned or leased
thereby, except for such violations which would not have a material
adverse effect on the condition, (financial or otherwise) or the
shareholders' equity, results of operation, business, properties or
prospects of the Company. There has been no material spill, discharge,
leak, emission, ejection, escape, dumping or release of any kind onto
the properties owned or leased by the Company, or into the environment
surrounding those properties, of any toxic or hazardous substances, as
defined under any federal, state or local regulations, laws or
statutes, except for those releases either permissible under such
regulations, laws or statutes or otherwise allowable under applicable
permits or which would not have a material adverse effect on the
condition (financial or otherwise) or the shareholders' equity, results
of operation, business, properties or prospects of the Company.
(n) The Company has filed all necessary federal and state
income and franchise tax returns and paid all taxes shown as due
thereon. The Company is not in default in the payment of any taxes and
has no knowledge of any tax deficiency which might be asserted against
it which would materially and adversely affect the Company's business
or properties.
(o) No labor disturbance by the employees of the Company
exists or, to the best of the Company's knowledge, is imminent which
could reasonably be expected to have a material adverse effect on the
conduct of the business, operations, financial condition or income of
the Company.
(p) Except as disclosed in the Prospectus:
(i) The Company owns or possesses the unrestricted
rights to use all patents, copyrights, trademarks, trade
secrets and proprietary rights or information necessary for
the development, manufacture, operation and sale of all
products and services sold or proposed to be sold by the
Company and for the conduct of its present or intended
business as described in the Prospectus. There are no pending
legal, governmental or administrative proceedings relating to
patents, copyrights, trademarks or proprietary rights or
information to which the Company is a party or to which any
property of the Company is subject and no such proceedings
are, to the best of the Company's knowledge, threatened or
contemplated against the Company by any governmental agency or
authority or others. The Company has not received any notice
of conflict with asserted rights of others. The Company is not
using any confidential information or trade secrets of any
third party without such party's consent.
(ii) The Company does not infringe upon the right or
claimed rights of any person under or with respect to any of
the intangible rights listed in the preceding subsection. The
Company is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to
any owner of, licensor of, or other claimant to, any patent,
trademark, trade name, copyright or other intangible asset,
with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(q) The Company intends to apply the proceeds from the sale of
the Shares by it to the purposes and substantially in the manner set
forth in the Prospectus.
(r) The Company has no defined benefit pension plan or other
pension benefit plan, which is intended to comply with the provisions
of the Employee Retirement Income Security Act of 1974 as amended from
time to time, except as disclosed in the Registration Statement.
(s) To the best of the Company's knowledge, no person is
entitled, directly or indirectly, to compensation from the Company or
the Underwriter for services as a finder in connection with the
transactions contemplated by this Agreement.
(t) The conditions for use of a Registration Statement on Form
SB-2 for the distribution of the Shares have been satisfied with
respect to the Company.
(u) The Company has not taken and will not take, directly or
indirectly, any action (and does not know of any action by its
directors, officers, stockholders, or others) which has constituted or
is designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation, as defined in the Securities
Exchange Act of 1934, as
amended (the "1934 Act") or otherwise, of the price of any security of
the Company to facilitate the sale or resale of the Shares.
(v) The Company has not sold any securities in violation of
Section 5 of the 1933 Act.
(w) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts adequate for its business
and in line with the insurance maintained by similar companies and
businesses.
(x) The Company hereby represents that, as of the date hereof,
it has complied with all provisions of Section 517.075, Florida
Statutes and Rule 3E-900-001 of the Rules of the Florida Department of
Banking and Finance, Division of Securities, copies of which are
attached hereto.
(y) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations and (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP.
(z) All material transactions between the Company and its
stockholders who beneficially own more than 5% of any class of the
Company's voting securities have been accurately disclosed in the
Prospectus, and the terms of each such transaction are fair to the
Company and no less favorable to the Company than the terms that could
have been obtained from unrelated parties.
(aa) The Company has obtained a written agreement, enforceable
by the Underwriter from the sole existing stockholder 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 such 12 month period.
(bb) The Common Stock of the Company has been approved by
Nasdaq for trading on its Small Cap Market following effectiveness of
the Registration Statement.
(cc) The Company has not distributed and will not distribute
any prospectus or other offering material in connection with the
offering and sale of the Shares other than Preliminary Prospectus or
the Prospectus or other materials permitted by the Act to be
distributed by the Company.
(dd) To the Company's knowledge, none of the Company's
officers, directors or security holders has any affiliations with the
NASD, except as set forth in the Registration Statement or as otherwise
disclosed in writing to the Underwriter.
(ee) The Company is not, and upon completion of the sale of
the Shares contemplated hereby will not be required to, register as an
"investment company" under the Investment Company Act of 1940, as
amended.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or counsel to the Underwriter shall be
deemed to be a representation and warranty of the Company to the
Underwriter as to the matters covered thereby.
2. Purchase, Sale, Delivery and Payment.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company,
at $5.00 per Share (net of underwriting discounts and commissions of
$.3750 per Share) the Firm Shares. 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 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 4(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 ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, P.A. set forth in Section 2(c) above, unless some other place is
agreed upon, at 10:00 a.m., Minneapolis
time, against payment of the purchase price at the same place, on the
date determined by the 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 deems
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 determines, 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.
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 options
granted under the Company's Stock Option Plan as described in the
Registration Statement and securities issuable upon exercise thereof)
during the twelve month period following the Effective Date. Prior to
the Closing Date, the Company will not repurchase or otherwise acquire
any of its capital stock or declare or pay any dividend or make any
distribution on any class of its capital stock.
(g) Subject to the proviso set forth below, the Company shall
be responsible for and pay all costs and expenses incident to the
performance of its obligations under this Agreement including, without
limiting the generality of the foregoing, (i) all costs and expenses in
connection with the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments thereof
or supplements to any of the foregoing; (ii) the issuance and delivery
of the Shares, including taxes, if any; (iii) the cost of all
certificates representing the Shares; (iv) the fees and expenses of the
Transfer Agent for the Shares; (v) the fees and disbursements of
counsel for the Company; (vi) all fees and other charges of the
independent public accountants of the Company; (vii) the cost of
furnishing and delivering to the 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 from the offering and
sale of the Shares (the "Offering"). The Underwriter hereby acknowledge
receipt of a $10,000 advance against the Underwriter's non-accountable
expense allowance referred to in the preceding sentence. In the event
this Agreement is terminated pursuant to Section 8 below, the Company
shall remain obligated to pay the Underwriter its accountable expenses,
including but not limited to travel expenses and expenses of its legal
counsel, not to exceed $30,000. Further, if upon termination of this
Agreement pursuant to Section 8 below, the Underwriter's actual
accountable out-of-pocket expenses do not exceed the $10,000 advance
against the Underwriter's accountable expense allowance, the portion of
the advance not used will be reimbursed to the Company by the
Underwriter.
(h) The Company will not take, and will use its best efforts
to cause each of its officers and directors not to take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Shares.
(i) The Company will use its best efforts to maintain the
listing of its Common Stock on the Nasdaq Small Cap Market.
(j) For a period of at least three years after the Effective
Date, the Company will file with the SEC all reports and other
documents as may be required by the 1933 Act, the Rules and Regulations
and the 1934 Act.
(k) The Company will apply the proceeds from the sale of the
Shares substantially in the manner set forth in the Prospectus.
(l) Prior to or as of the First Closing Date, the Company
shall have performed each condition to the Underwriter's obligations
required to be performed by it pursuant to Section 4 hereof.
(m) Other than as permitted by the 1933 Act and the Rules and
Regulations, the Company will not distribute any prospectus or other
offering material in connection with the Offering.
(n) The Company will apply the net proceeds from the sale of
the Shares substantially in the manner set forth in the Prospectus.
(o) During the period ending 120 days from the Effective Date,
the Company agrees that it will issue press releases, make public
statements and respond to inquiries of the press and securities
analysts only after conferring with its counsel and with the
Underwriter.
(p) On First Closing Date, the Company shall grant to the
Underwriter the Underwriter's Warrants, in substantially the form
attached as Appendix A hereto.
(q) Prior to or as of either Closing Date, the Company shall
have performed each condition to closing required to be performed by
the Company pursuant to Section 4 hereof.
4. Conditions of the Underwriter's Obligations. The obligation 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 its legal counsel. The NASD, upon
review of the terms of the Offering, shall not have objected to the
terms of the Underwriter's 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 4(b) shall not apply
to statements in, or omissions from, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, which are
based upon and conform to written information furnished to the Company
by 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
Johnson, Killen, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A. and the opinion of Lommen,
Nelson, ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.A., counsel for the Company, dated as of
such respective Closing Date, addressed to the Underwriter 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. The
activities of the Company are permitted under the 1933 Act,
the Rules and Regulations and other applicable laws.
(ii) The number of authorized, issued and outstanding
shares of capital stock of the Company are as set forth under
the caption "Capitalization" in the Prospectus. The
outstanding shares of capital stock of the Company have been
duly authorized and validly issued, and are fully paid and
nonassessable. Upon delivery of and payment for the Shares
hereunder, the Underwriter will acquire the Shares free and
clear of all liens, encumbrances or claims. To 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 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 such securities made in the Prospectus and such
description accurately sets forth the material legal
provisions thereof required to be set forth in the Prospectus.
(iii) The Shares have been duly authorized and, upon
delivery to the 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. 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 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 1933 Act.
(vii) To 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 conditions for use of a registration
statement on Form SB-2 for the distribution of shares have
been satisfied with respect to the Company.
(x) This Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as
enforceability may be limited by the application of
bankruptcy, insolvency, moratorium or similar laws affecting
the rights of creditors generally and judicial limitations on
the right of specific performance and except as the
enforceability of indemnification or contribution provisions
hereof may be limited by federal or state securities laws.
(xi) Such counsel does not know of any contracts,
agreements, documents or instruments required to be filed as
exhibits to the Registration Statement or described in the
Registration Statement or the Prospectus which are not so
filed or described as required, and does not know of any
amendment to the Registration Statement required to be filed
that has not been filed; and insofar as any statements in the
Registration Statement or the Prospectus constitute summaries
of any contract, agreement, document or instrument to which
the Company is a party, such statements are accurate summaries
and fairly present the information called for with respect to
such matters.
(xii) To such counsel's knowledge, there are no
defects in title or leasehold interests, or any liens,
encumbrances, equities, charges or claims, not disclosed in
the Registration Statement or Prospectus which would
materially affect the present occupancy or use of any of the
real or personal property owned or leased by the Company.
(xiii) To such counsel's knowledge, except as
described in the Prospectus, there are no United States
patents of third parties which are infringed by the
manufacture, use or sale of the products or processes
currently made, used or sold by the Company.
(xiv) To such counsel's knowledge there are no legal,
governmental or administrative proceedings pending or
threatened against the Company that relate to patents,
trademarks or other intellectual property, except for pending
or proposed United States and foreign patent applications.
(xv) To such counsel's knowledge, except as described
in the Prospectus, after due inquiry, the Company has not
received any notice of conflict with the asserted rights of
others in respect of any trademarks, service marks, trade
names, trademark registrations, service ▇▇▇▇ registrations,
copyrights, licenses, inventions, trade secrets, patents,
patent applications, know-how, or similar rights, nor of any
threatened actions with respect thereto, which, if determined
adversely to the Company, would individually or in the
aggregate have a material adverse effect on the general
affairs, financial position, net worth or results of
operations of the Company.
(xvi) To 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 ▇▇▇▇ registrations,
copyrights, patents, patent applications and licenses as are
described in the Prospectus and which are necessary for the
Company's present or planned future business as described in
the Prospectus.
(xvi) The performance of this Agreement and the
consummation of the transactions described herein will not
result in a violation or default under, the Company's Restated
Articles of Incorporation, as amended, Restated Bylaws or
other governing documents. To such counsel's knowledge, (a)
the Company is not in violation of, or in default under, its
Restated Articles of Incorporation, as amended, Restated
Bylaws or other governing documents; and (b) the execution,
delivery and performance of this Agreement and the
consummation of the transactions described herein will not
result in a material violation of, or a material default
under, the terms or provisions of (A) any bond, debenture,
note, or other evidence of indebtedness or any contract,
license, indenture, mortgage, loan agreement, joint venture or
partnership agreement, lease, agreement or instrument to which
the Company is a party or by which the Company or any of its
properties is bound, or (B) any law, order, rule, regulation,
writ, injunction, or decree known to such counsel of any
government, governmental agency or court having jurisdiction
over the Company or any of its properties.
(xvii) To such counsel's knowledge, sales of
unregistered securities by the Company prior to the Effective
Date were exempt from registration requirements of the Act and
are not required to be integrated under Rule 502(a) of the
Regulation D of the Act with the public offering contemplated
hereby.
(xviii) The Company is not, and immediately upon
completion of the sale of the Shares contemplated hereby will
not be required to register as an "investment company" under
the Investment Company Act of 1940, as amended.
(xix) To such counsel's knowledge, the Company has
not consummated any form of business combination which is
required to be described or referenced in the Registration
Statement that is not so described or referenced.
In expressing the foregoing opinion, as to matters of fact relevant to
conclusions of law, counsel may rely, to the extent that they deem proper, upon
certificates of public officials and of the officers of the Company, provided
that copies of such officers' certificates are attached to the opinion.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, although such counsel cannot guarantee
the accuracy, completeness or fairness of any of the statements contained in the
Registration Statement, Prospectus, or any amendment thereof or supplement
thereto in connection with such counsel's representation, investigation and due
inquiry of the Company in the preparation of the Registration Statement,
Prospectus and any amendment thereof or supplement thereto, nothing has come to
the attention of such counsel which causes them to believe that the Registration
Statement, Prospectus, or any amendment thereof or supplement thereto (other
than the financial statements and supporting financial and statistical data
included or incorporated therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
provided, however, that such opinion of counsel does not require any statement
concerning statements in, or omissions from, the Registration Statement,
Prospectus, or any amendment thereof or supplement thereto, which are based upon
and conform to written information furnished to the Company by 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 from ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, 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.
(f) The Underwriter and the Company shall have received
letters, dated the date hereof and as of each Closing Date, from
McGladery & ▇▇▇▇▇▇, 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 and its counsel.
(g) The Underwriter shall have received from the Company a
certificate, dated as of such Closing Date, of the principal executive
officer and the principal financial or accounting officer of the
Company to the effect that:
(i) The representations and warranties of the Company
in this Agreement are true and correct as if made on and as of
such Closing Date. The Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at, or prior to, such date.
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued and no proceeding
for that purpose has been instituted or is pending or to the
best knowledge of such officers contemplated under the 1933
Act.
(iii) Neither the Registration Statement nor the
Prospectus nor any amendment thereof or supplement thereto
included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and,
since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended
or supplemented prospectus which has not been so set forth;
provided, however, that such certificate does not require any
representation concerning statements in, or omissions from,
the Registration Statement or Prospectus, or any amendment
thereof or supplement thereto, which are based upon and
conform to written information furnished to the Company by 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.
(h) The Underwriter shall have received, dated as of each
Closing Date, from the Secretary of the Company a certificate of
incumbency certifying the names, titles and signatures of the officers
authorized to carry out the resolutions of the Board of Directors of
the Company authorizing and approving the execution, delivery and
performance of this Agreement, a copy of such resolutions to be
attached to such certificate, certifying that such resolutions and the
Restated Articles of Incorporation, as amended of the Company and the
Restated Bylaws of the Company have been validly adopted and have not
been amended or modified.
(i) The Underwriter shall have received an original written
agreement from the sole existing stockholders of the Company, that for
twelve months 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 twelve month period.
(j) The Company shall not have failed to have performed any of
its agreements herein contained and required to be performed by it at
or prior to the First Closing Date or the Second Closing Date, as the
case may be.
(k) The Shares shall have been registered or qualified for
sale or exempt from such registration or qualification under the
securities laws of such jurisdictions as designated by the 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.
(l) 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 or its counsel shall have reasonably
required.
(m) All such opinions, certificates, letters and documents
will be in compliance with the provisions hereof only if they are
reasonably satisfactory to the 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.
(n) The Underwriter may waive in writing the performance of
any one or more of the conditions specified in this Section 4 or extend
the time for their performance.
(o) If any of the conditions specified in this Section 4 shall
not have been fulfilled when and as required by this Agreement to be
fulfilled, this Agreement and all obligations of the 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 11 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 $50 the Underwriter's Warrants, which warrants shall
first become exercisable one year after the Effective Date and shall remain
exercisable for a period of four years thereafter. The Underwriter's Warrants
shall be subject to certain transfer restrictions and shall be in substantially
the form filed as an exhibit to the Registration Statement and attached as
Appendix A hereto.
6. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless
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 such
Underwriter or each such controlling person may become subject, under
the 1933 Act, the 1934 Act, the common law or otherwise, insofar as
such losses, claims, damages or liabilities (or judicial or
governmental actions or proceedings in respect thereof) arise out of,
or are based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any
amendment thereof, or the omission or alleged omission to state in the
Registration Statement or any amendment thereof a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus if used prior to
the Effective Date of the Registration Statement or in the Prospectus
(as amended or as supplemented, if the Company shall have filed with
the SEC any amendment thereof or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
or (iii) any untrue statement or alleged untrue statement of a material
fact contained in any application or other statement executed by the
Company or based upon written information furnished by the Company
filed in any jurisdiction in order to qualify the Shares under, or
exempt the Shares or the sale thereof from qualification under, the
securities laws of such jurisdiction, or the omission or alleged
omission to state in such
application or statement a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and the
Company will reimburse the Underwriter and each such controlling person
for any legal or other expenses reasonably incurred by such Underwriter
or controlling person (subject to the limitation set forth in Section
6(c) hereof) in connection with investigating or defending against any
such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of, or is based upon,
an untrue statement, or alleged untrue statement, omission or alleged
omission, made in reliance upon and in conformity with written
information furnished to the Company by, or on behalf of, 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; and provided further that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to
any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied
in the Prospectus, such indemnity agreement shall not inure to the
benefit of the Underwriter if the person asserting any loss, claim,
damage or liability purchased the Shares from such Underwriter which
are the subject thereof (or to the benefit of any person who controls
such Underwriter), if a copy of the Prospectus was not sent or given to
such person with, or prior to, the written confirmation of the sale of
such Shares to such person. This indemnity agreement is in addition to
any liability which the Company may otherwise have.
(b) 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 SEC any amendment thereof or
supplement thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading; or (iii) any untrue
statement or alleged untrue statement of a material fact contained in
any application or other statement executed by the
Company or by 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; and 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.
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 the indemnifying party
from any liability under this Section 6 as to the particular item for
which indemnification is then being sought, unless such omission so to
notify prejudices the indemnifying party's ability to defend such
action. In case any such action is brought against any indemnified
party and the indemnified party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such
indemnified party; and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that if, in
the reasonable judgment of the indemnified party, it is advisable for
such parties and controlling persons to be represented by separate
counsel, any indemnified party shall have the right to employ separate
counsel to represent it and all other parties and their controlling
persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the 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 under applicable law to any indemnified party in respect of
any losses, claims, damages or liabilities referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Underwriter from the
offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the
Underwriter in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The Company and the
Underwriter agree that contribution determined by per capita allocation
would not be equitable. The respective relative benefits received by
the Company on the one hand, and the Underwriter, on the other hand,
shall be deemed to be in the same proportion (A) in the case of the
Company, as the total price paid to the Company for the Shares by the
Underwriter (net of underwriting discount received but before deducting
expenses) bears to the aggregate public offering price of the Shares
and (B) in the case of the Underwriter, as the aggregate underwriting
discount received by them bears to the aggregate public offering price
of the Shares, in each case as reflected in the Prospectus. The
relative fault of the Company and the Underwriter shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company
or by the Underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares
underwritten by it were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls the Underwriter within the meaning
of the 1933 Act or the 1934 Act shall have the same rights to
contribution as the Underwriter, each person who controls the Company
within the meaning of the 1933 Act or the 1934 Act shall have the same
rights to contribution as the Company and each officer of the Company
who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company.
(b) Promptly after receipt by a party to this Agreement of
notice of the commencement of any action, suit or proceeding, such
person will, if a claim for contribution in respect thereof is to be
made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the omission so to
notify the Contributing Party will not relieve the Contributing Party
from any liability which it may have to any party other than under this
Section 7, unless such omission so to notify prejudices the
Contributing Party's ability to defend such action. Any notice given
pursuant to Section 6 hereof shall be deemed to be like notice under
this Section 7. In case any such action, suit or proceeding is brought
against any party, and such person notifies a Contributing Party of the
commencement thereof, the Contributing Party will be entitled to
participate therein with the notifying party and any other Contributing
Party similarly notified.
8. Effective Date of This Agreement and Termination.
(a) This Agreement shall become effective at 8:00 a.m.,
Minneapolis time, on the day on which the Underwriter releases 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 and 8 shall at all times be
effective. For purposes of this Agreement, the release of the initial
public offering of the Firm Shares for sale to the public shall be
deemed to have been made when the 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. This Agreement, shall nevertheless,
become effective at such time earlier than the time specified above as
the Underwriter may determine, by notice to the Company.
(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
Small Cap Market or the over-the-counter market shall have been
suspended or minimum prices shall have been established on such
exchange by the SEC or by such exchanges or markets; (iii) a general
banking moratorium shall have been declared by federal, New York or
Minnesota
authorities; (iv) there shall have been such a material adverse change
in general economic, monetary, political or financial conditions, or
the effect of international conditions on the financial markets in the
United States shall be such that, in the judgment of the 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
11 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 11 hereof.
10. 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.
11. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered or telegraphed and confirmed, to ▇.▇.
▇▇▇▇▇▇▇▇ & Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., 1100 International Centre, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or, if sent to the Company, shall be mailed,
delivered or telegraphed and confirmed, to Industrial Rubber Products, Inc.,
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with a copy to ▇▇▇▇ ▇. Nys,
Johnson, Killen, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
12. 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 Section 1(b) and Section 6 hereof.
13. 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.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, without regard to the
conflict of law provisions thereof.
If the foregoing is in accordance with the 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,
INDUSTRIAL RUBBER PRODUCTS, INC.
By
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Its
-----------------------------------
ACCEPTANCE
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
undersigned as of the date first above written.
▇. ▇. ▇▇▇▇▇▇▇▇ & COMPANY
By
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Its
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APPENDIX A
WARRANT
TO PURCHASE 140,000 SHARES OF COMMON STOCK
OF
INDUSTRIAL RUBBER PRODUCTS, INC.
___________________, 1998
(issuance date)
THIS CERTIFIES THAT, for good and valuable consideration, ▇. ▇.
▇▇▇▇▇▇▇▇ & Company (the "Underwriter"), or its registered assigns, is entitled
to subscribe for and purchase from, Industrial Rubber Products, Inc., a
Minnesota corporation (the "Company"), at any time after the one-year
anniversary of the issuance date of this Warrant, to and including the five-year
anniversary of the issuance date of this Warrant, 140,000 fully paid and
nonassessable shares of the Common Stock of the Company at the price of $6.00
per share (the "Warrant Exercise Price"), subject to the antidilution provisions
of this Warrant. Reference is made to this Warrant in the Underwriting Agreement
dated ______________, 1998, by and between the Company and the Underwriter. The
shares which may be acquired upon exercise of this Warrant are referred to
herein as the "Warrant Shares." As used herein, the term "Holder" means the
Underwriter, any party who acquires all or a part of this Warrant as a
registered transferee of the Underwriter, or any record holder or holders of the
Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant. As used herein, the term "Common Stock" means and includes the
Company's presently authorized common stock, $.001 par value, and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to a fixed sum or percentage in respect of the rights of
the Holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution, or winding up of the
Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for such shares.
(b) Until exercisable, this Warrant may not be sold, assigned,
hypothecated, or otherwise transferred, other than by will or pursuant to the
operation of law, except to a person who is an officer and shareholder of the
Underwriter. Further, this Warrant may not be sold, transferred, assigned,
hypothecated or divided into two or more Warrants of smaller denominations, nor
may
any Warrant shares issued pursuant to exercise of this Warrant be transferred,
except as provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Underwriter shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the
subsection (b) below, certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the right to
purchase the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the Holder
within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9 hereof.
If registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
upon exercise of the subscription rights evidenced by this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section 5.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), there shall be no adjustment under Subsection (a)
of this Section above but the Holder of each Warrant then outstanding shall have
the right thereafter to convert such Warrant into the kind and amount of shares
of stock and other securities and property which he would have owned or have
been entitled to receive immediately after such consolidation, merger, statutory
exchange, sale, or conveyance had such Warrant been converted immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale,
or conveyance and in any such case, if necessary, appropriate adjustment shall
be made in the application of the provisions set forth in this Section with
respect to the rights and interests thereafter of any Holders of the Warrant, to
the end that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock and other securities and property thereafter deliverable
on the exercise of the Warrant. The provisions of this Subsection shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock or other securities purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written
notice, the Company shall present copies thereof to the Company's counsel and to
counsel to the original purchaser of this Warrant. If in the opinion of each
such counsel the proposed transfer may be effected without registration or
qualification (under any federal or state securities laws), the Company, as
promptly as practicable, shall notify the Holder of such opinion, whereupon the
Holder shall be entitled to transfer this Warrant or to dispose of Warrant
Shares received upon the previous exercise of this Warrant, all in accordance
with the terms of the notice delivered by the Holder to the Company; provided
that an appropriate legend may be endorsed on this Warrant or the certificates
for such Warrant Shares respecting restrictions upon transfer thereof necessary
or advisable in the opinion of counsel to the Company and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws; and provided further that the prospective transferee or
purchaser shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply with the
exemptions relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to this Section 7 may not
be effected without registration or qualification of this Warrant or such
Warrant Shares the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit its activities in respect to such as, in the
opinion of both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section 8, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the closing sale price reported by Nasdaq National Market or any national
securities exchange or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in Nasdaq
SmallCap, or if not listed on a national securities exchange or quoted in Nasdaq
SmallCap Market, the average of the last reported closing bid and asked prices
as reported by Metro Data Company, Inc. from quotations by market makers in such
Common Stock on the Minneapolis-St. ▇▇▇▇ local over-the-counter market.
9. Registration Rights.
(a) If at any time after the one-year anniversary of the issuance date
of this Warrant and prior to the end of the two-year period following complete
exercise of this Warrant or the close of business on the seven-year anniversary
of the issuance of this Warrant, whichever occurs earlier, the Company proposes
to register under the 1933 Act (except by a Form S-4 or Form S-8 Registration
Statement or any successor forms thereto) or qualify for a public distribution
under Section 3(b) of the 1933 Act, any of its securities, it will give written
notice to all Holders of this
Warrant, any Warrants issued pursuant to Section 2 and/or Section 3(a) hereof,
and any Warrant Shares of its intention to do so and, on the written request of
any such Holder given within thirty (30) days after the receipt of any such
notice (which request shall specify the interest in this Warrant or the Warrant
Shares intended to be sold or disposed of by such Holder and describe the nature
of any proposed sale or other disposition thereof), the Company will use its
best efforts to cause all such Warrant Shares, the Holders of which shall have
requested the registration or qualification thereof, to be included in such
registration statement proposed to be filed by the Company; provided, however,
that if a greater number of Warrant Shares is offered for participation in the
proposed offering than in the reasonable opinion of the managing underwriter of
the proposed offering can be accommodated without adversely affecting the
proposed offering, then the amount of Warrant Shares proposed to be offered by
such Holders for registration, as well as the number of securities of any other
selling shareholders participating in the registration, shall be proportionately
reduced to a number deemed satisfactory by the managing underwriter.
(b) Further, on a one-time basis during the four-year period commencing
on the one-year anniversary of the issuance date of this Warrant, upon request
by the Holder or Holders of a majority in interest of this Warrant, of any
Warrants issued pursuant to Section 2 and/or Section 3(a) hereof, and of any
Warrant Shares, the Company will promptly take all necessary steps to register
or qualify, on Form S-3 (or successor form) under the 1933 Act and the
securities laws of such states as the Holders may reasonably request, such
number of Warrant Shares issued and to be issued upon conversion of the Warrants
requested by such Holders in their request to the Company. The Company shall
keep effective and maintain any registration, qualification, notification, or
approval specified in this Paragraph (b), and from time to time shall amend or
supplement the prospectus used in connection therewith to the extent necessary
in order to comply with applicable law, for such period, as may be reasonably
necessary for such Holders or Holders of such Warrant Shares to dispose of such
Warrant Shares.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following fees,
costs, and expenses: all registration, filing and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
and any other expenses relating to the sale of securities by the selling Holders
not expressly included above shall be borne by the selling Holders.
(d) The Company hereby indemnifies each of the Holders of this Warrant
and of any Warrant Shares, and the officers and directors, if any, who control
such Holders, within the meaning of Section 15 of the 1933 Act, against all
losses, claims, damages, and liabilities caused by (1) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (and as amended or supplemented if the Company shall
have furnished any
amendments thereof or supplements thereto), any Preliminary Prospectus or any
state securities law filings; (2) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages, or liabilities
are caused by any untrue statement or omission or alleged untrue statement or
omission contained in information furnished in writing to the Company by such
Holder expressly for use therein; and each such Holder by its acceptance hereof
severally agrees that it will indemnify and hold harmless the Company, each of
its directors, each of its officers who signs such Registration Statement, and
each person, if any, who controls the Company, within the meaning of Section 15
of the 1933 Act, with respect to losses, claims, damages, or liabilities which
are caused by any untrue statement or alleged untrue statement, omission or
alleged omission contained in information furnished in writing to the Company by
such Holder expressly for use therein.
10. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
holder of this Warrant and the Company. This Warrant shall be construed and
enforced in accordance with and governed by the laws of the State of Minnesota
without regard to its choice of law provisions.
IN WITNESS WHEREOF, Industrial Rubber Products, Inc. has caused this
Warrant to be signed by its duly authorized officer as of the date first above
written.
INDUSTRIAL RUBBER PRODUCTS, INC.
By
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Its
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TO: INDUSTRIAL RUBBER PRODUCTS, INC.
NOTICE OF EXERCISE OF WARRANT To Be Executed by the Registered Holder in
Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
-------------------------------
(Print Name)
Please insert social security
or other identifying number
of registered Holder of
certificate (______________) Address:
-------------------------------
-------------------------------
Date:
------------------ -------------------------------
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto __________________________ the right to purchase the securities
of Industrial Rubber Products, Inc., Incorporated to which the within Warrant
relates and appoints _____________, attorney, to transfer said right on the
books of Industrial Rubber Products, Inc., Incorporated with full power of
substitution in the premises.
Dated:
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(Signature)
Address:
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Social Security or Tax I.D. Number
of Assignee:
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