1
EXHIBIT 1.1
ROCKWELL MEDICAL TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
Dated: , 1997
▇▇▇▇▇ ▇▇▇▇ & CO., INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
The undersigned, ROCKWELL MEDICAL TECHNOLOGIES, INC., a Michigan
corporation (the "Company"), proposes to issue and sell to ▇▇▇▇▇ ▇▇▇▇ & Co.,
Inc. ("▇▇▇▇▇ ▇▇▇▇" or "Underwriter") pursuant to this Underwriting Agreement
("Agreement"), an aggregate of 1,800,000 shares of the Company's Common Stock
(the "Common Stock") at $4.00 per share and 2,700,000 warrants (the "Warrants")
to purchase shares of Common Stock at $.10 per Warrant. The Warrants are
exercisable to purchase one share of Common Stock, at any time commencing one
year from the date on which the Registration Statement (as defined in Section
1(a) hereof), shall have become or been declared effective (the "Effective
Date"), and ending on the fourth anniversary of the Effective Date. The Warrant
exercise price, subject to adjustment as described in the agreement providing
for the Warrants (the "Warrant Agreement"), shall be $4.50 per share, subject to
adjustment as described in the Warrant Agreement.
The shares of Common Stock and the Warrants will be separately
transferable immediately upon issuance. Commencing one year after the Effective
Date, the Warrants are subject to redemption by the Company at $0.10 per
Warrant, provided that (a) prior notice of not less than 30 days is given to the
holders of the Warrants (the "Warrantholders"), and (b) the closing bid price
per share of Common Stock, if traded on The NASDAQ Stock Market, or the last
sale price per share of Common Stock, if traded on a national exchange, for the
20 consecutive trading days ending on the third day prior to the date on which
notice of redemption is given, is in excess of $7.00.
2
In addition, the Company proposes to grant to ▇▇▇▇▇ ▇▇▇▇ the
Over-Allotment Option (as defined in Section 2(c) hereof) to purchase all or any
part of an aggregate of 270,000 shares of Common Stock and 405,000 Warrants, and
to issue to you the Underwriter's Warrant (as defined in Section 11 hereof) to
purchase certain further additional shares of Common Stock and Warrants.
The aggregate of 1,800,000 shares of Common Stock to be sold by the
Company, together with the aggregate of 270,000 additional shares of Common
Stock that are the subject of the Over-allotment Option, are herein collectively
called the "Shares." The Shares and the Warrants (including the Warrants subject
to the Over-Allotment Option and the Warrants issuable upon exercise of the
Underwriter's Warrant), the shares of Common Stock issuable upon exercise of the
Warrants and the shares of Common Stock issuable upon exercise of the
Underwriter's Warrant, are herein collectively called the "Securities." The term
"Underwriter's Counsel" shall mean the firm of ▇▇▇▇▇▇▇, Savage, Kaplowitz, &
▇▇▇▇▇▇▇▇▇▇, LLP, counsel to the Underwriter, and the term "Company Counsel"
shall mean the firm of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇, counsel to the Company.
Unless the context otherwise requires, all references herein to a "Section"
shall mean the appropriate Section of this Agreement.
You have advised the Company that you desire to purchase the shares of
Common Stock and the Warrants as herein provided. The Company confirms the
agreements made by it with respect to the purchase of the shares of Common Stock
and the Warrants by you, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) REGISTRATION STATEMENT; PROSPECTUS; A registration statement
(File No. 333-31991) on Form SB-2 relating to the public offering of the
Securities (the "Offering"), including a preliminary form of prospectus, copies
of which have heretofore been delivered to you, has been prepared by the Company
in conformity with the requirements of the Securities Act of 1933 (the "Act"),
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated thereunder (the "Rules and Regulations"), and has been
filed with the Commission under the Act. As used herein, the term "Preliminary
Prospectus" shall mean each prospectus filed pursuant to Rule 430 or Rule 424(a)
of the Rules and Regulations. The Preliminary Prospectus bore the legend
required by Item 501 of Regulation S-B under the Act and the Rules and
Regulations. Such registration statement (including all financial statements,
schedules and exhibits) as amended at the time it becomes effective and the
final prospectus included therein are herein respectively called the
"Registration Statement" and the "Prospectus," except that (i) if the prospectus
filed by the Company pursuant to Rule 424(b) or Rule 430A of the Rules and
Regulations shall differ from such final prospectus as then amended, then the
term "Prospectus" shall instead mean the prospectus first filed pursuant to said
Rule 424(b) or Rule 430A, and (ii) if such registration statement is amended or
such prospectus is amended or supplemented after the effective date of such
registration statement and prior to the Option Closing Date (as defined in
Section 2(c) hereof), then (unless the context necessarily requires otherwise)
the term "Registration Statement" shall include such registration statement as
2
3
so amended, and the term "Prospectus" shall include such prospectus as so
amended or supplemented, as the case may be.
(b) CONTENTS OF REGISTRATION STATEMENT. On the Effective Date, and
at all times subsequent thereto for so long as the delivery of a prospectus is
required in connection with the offering or sale of any of the Securities, (i)
the Registration Statement and the Prospectus shall in all material respects
conform to the requirements of the Act and the Rules and Regulations, and (ii)
neither the Registration Statement nor the Prospectus shall include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary or make statements therein in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company makes no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement or Prospectus 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 thereof. It is understood that the statements set forth in the
Prospectus with respect to stabilization, the material set forth under the
caption "UNDERWRITING," the information on the cover page of the Prospectus
regarding the underwriting arrangements and the identity of the Underwriter's
Counsel under the caption "LEGAL MATTERS," which information the Underwriter
hereby represents and warrants to the Company is true and correct in all
material respects and does not omit to state any material fact required to be
stated therein or necessary to make statements therein, in light of the
circumstances in which they were made, not misleading, constitute the only
information furnished in writing by or on behalf of the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
Except for the registration rights granted under the Underwriter's
Warrant, or as disclosed in the Prospectus, no holders of any securities of the
Company or of any options, warrants or convertible or exchangeable securities of
the Company exercisable for or convertible or exchangeable for securities of the
Company, have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company.
(c) ORGANIZATION, STANDING, ETC. The Company and Rockwell Medical
Transport, Inc., the Company's wholly-owned subsidiary (the "Subsidiary"), are
each duly incorporated and validly exist as corporations in good standing under
the laws of their respective jurisdictions of incorporation, with full power and
corporate authority to own their properties and conduct their business as
described in the Prospectus, and are duly qualified or licensed to do business
as foreign corporations and are in good standing in each other jurisdiction in
which the nature of their business or the character or location of their
properties requires such qualification, except where failure so to qualify will
not have a material adverse effect on the business, properties or financial
condition of the Company or the Subsidiary, as the case may be.
3
4
(d) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company as of the date of the Prospectus is as set forth in the
Prospectus under the caption "CAPITALIZATION". The shares of Common Stock issued
and outstanding on the Effective Date have been duly authorized, validly issued
and are fully paid and non-assessable. No options, warrants or other rights to
purchase, agreements or other obligations to issue, or agreements or other
rights to convert any obligation into, any shares of capital stock of the
Company or the Subsidiary have been granted or entered into by the Company or
the Subsidiary, except as expressly described in the Prospectus. The Securities
conform to all statements relating thereto contained in the Registration
Statement or the Prospectus.
(e) SECURITIES. The Securities conform, or will conform when
issued, in all material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. The Securities have
been duly authorized and, when issued and delivered against payment therefor
pursuant to this Agreement, the Warrant Agreement or the Underwriter's Unit
Purchase Option, as the case may be, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor the
offering or sale of any of the Securities as contemplated by this Agreement
gives rise to any rights, other than those which have been waived or satisfied,
for or relating to the registration of any securities of the Company, except as
described in the Registration Statement.
(f) AUTHORITY, ETC. This Agreement, the Warrant Agreement, the
Underwriter's Warrant Agreement, and the Financial Consulting Agreement (as
hereinafter defined), have been duly and validly authorized, executed and
delivered by the Company and, assuming due execution of this Agreement and such
other agreements by the other party or parties hereto and thereto, constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms. The Company has full right, power and
lawful authority to authorize, issue and sell the Securities and the
Underwriter's Warrant on the terms and conditions set forth herein. All
consents, approvals, authorizations and orders of any court or governmental
authority which are required in connection with the authorization, execution and
delivery of such agreements, the authorization, issue and sale of the Securities
and the Underwriter's Warrant, and the consummation of the transactions
contemplated hereby have been obtained.
(g) NO CONFLICT. Except as described in the Prospectus, neither
the Company nor the Subsidiary is in violation, breach or default of or under,
and consummation of the transactions hereby contemplated and fulfillment of the
terms of this Agreement will not conflict with or result in a breach of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance pursuant to the terms
of, any contract, indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary may be bound or to which any of
the property or assets of the Company or the Subsidiary are subject, nor will
such action result in any violation of the provisions of the Certificate of
Incorporation or the By-laws of the Company, or the certificate
4
5
of incorporation or by-laws of the Subsidiary, or any statute or any order, rule
or regulation applicable to the Company or the Subsidiary, or of any court or of
any regulatory authority or other governmental body having jurisdiction over the
Company or the Subsidiary.
(h) ASSETS. Subject to the qualifications stated in the
Prospectus: (i) the Company and the Subsidiary, as the case may be, has good and
marketable title to all properties and assets described in the Prospectus as
owned by it, including without limitation intellectual property, free and clear
of all liens, charges, encumbrances or restrictions, except such as do not
materially affect the value of such properties or assets and do not interfere
with the use made or proposed to be made of such assets or properties by the
Company or the Subsidiary or are not materially significant or important in
relation to the business of the Company or the Subsidiary, as the case may be;
(ii) all of the material leases and subleases under which the Company or the
Subsidiary is the lessor or sublessor of properties or assets or under which the
Company or the Subsidiary hold properties or assets as lessee or sublessee, as
described in the Prospectus, are in full force and effect and, except as
described in the Prospectus, neither the Company nor the Subsidiary is in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no claim has been asserted by any party
adverse to the rights of the Company or the Subsidiary as lessor, sublessor,
lessee or sublessee under any such lease or sublease, or affecting or
questioning the right of the Company or the Subsidiary to continued possession
of the leased or subleased premises or assets under any such lease or sublease,
except as described or referred to in the Prospectus; and (iii) the Company and
the Subsidiary, as the case may be, owns or leases all such assets and
properties, described in the Prospectus, as are necessary to its operations as
now conducted and, except as otherwise stated in the Prospectus, as proposed to
be conducted as set forth in the Prospectus.
The outstanding debt, the property and the business of the Company
conforms in all material respects to the descriptions thereof contained in the
Registration Statement and Prospectus.
(i) INDEPENDENT ACCOUNTANTS. Coopers & ▇▇▇▇▇▇▇, who have given
their report on certain financial statements filed or to be filed with the
Commission as a part of the Registration Statement, and which are included in
the Prospectus, are with respect to the Company, independent public accountants
as required by the Act and the Rules and Regulations.
(j) FINANCIAL STATEMENTS. The consolidated financial statements,
together with related notes, set forth in the Registration Statement and the
Prospectus present fairly the consolidated financial position, results of
operations, changes in stockholders' equity and cash flows of the Company and
the Subsidiary on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. Such
financial statements and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the entire period involved, except to the extent disclosed therein.
The Summary Financial Data and Selected Financial Data
5
6
included in the Registration Statement and the Prospectus present fairly the
information shown therein and have been prepared on a basis consistent with that
of the financial statements included in the Registration Statement and the
Prospectus.
(k) NO MATERIAL CHANGE. Except as otherwise set forth in the
Prospectus, subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, neither the Company nor the
Subsidiary has: (i) incurred any liability or obligation, direct or contingent,
or entered into any transaction, which is material to its business; (ii)
effected or experienced any change in its capital stock or incurred any
long-term debt; (iii) issued any options, warrants or other rights to acquire
its capital stock; (iv) declared, paid or made any dividend or distribution of
any kind on its capital stock; or (v) effected or experienced any adverse
change, or development involving a prospective adverse change, in its financial
position, net worth, results of operations, business or business prospects,
assets or properties or key personnel.
(l) LITIGATION. Except as set forth in the Prospectus, there is
not now pending nor, to the knowledge of the Company, threatened, any action,
suit or proceeding (including any related to environmental matters or
discrimination on the basis of age, sex, religion or race), whether or not in
the ordinary course of business, to which the Company or the Subsidiary is a
party or its business or property is subject, before or by any court or
governmental authority, which, if determined adversely to the Company, would
have a material adverse effect on the financial position, net worth, or results
of operations, business or business prospects, assets or property of the Company
or the Subsidiary; and no labor disputes involving the employees of the Company
or the Subsidiary exist which would affect materially adversely the business,
property, financial position or results of operations of the Company or the
Subsidiary.
(m) EMPLOYEE AND INDEPENDENT CONTRACTOR MATTERS. The Company and
the Subsidiary have generally enjoyed satisfactory employer/employee
relationships with their respective employees and are in compliance in all
material respects with all Federal, state and local laws and regulations,
including but not limited to, applicable tax laws and regulations, respecting
the employment of their respective employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. To the knowledge
of the Company or the Subsidiary, there are no pending or threatened
investigations involving the Company or the Subsidiary by the U.S. Department of
Labor or corresponding foreign agency, or any other governmental agency
responsible for the enforcement of such Federal, state or local laws and
regulations. To the knowledge of the Company or the Subsidiary, there are no
unfair labor practice charges or complaints against the Company or the
Subsidiary pending before the National Labor Relations Board or corresponding
foreign agency or any strikes, picketing, boycotts, disputes, slowdowns or
stoppages pending or threatened against or involving the Company or the
Subsidiary, or any predecessor entity, and none has occurred. No representation
question exists respecting the employees of the Company or the Subsidiary. No
collective
6
7
bargaining agreements or modifications thereof are currently in effect or being
negotiated by the Company or the Subsidiary and their respective employees. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or the Subsidiary.
Neither the Company nor the Subsidiary: (i) maintain nor have
maintained, sponsored or contributed to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), except for the Stock Option Plan described in the Prospectus;
(ii) presently maintain or contribute nor at any time in the past, have they
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA; or (iii) has ever completely or partially withdrawn from a
"multi-employer plan."
The Company and the Subsidiary have generally enjoyed satisfactory
relationships with their respective independent contractors and are in
compliance in all material respects with all federal, state and local laws and
regulations, including but not limited to applicable tax laws and regulations,
respecting the engagement of their respective independent contractors.
(n) NO UNLAWFUL PROSPECTUSES. The Company has not distributed any
prospectus or other offering material in connection with the Offering
contemplated herein, other than any Preliminary Prospectus, the Prospectus or
other material permitted by the Act and the Rules and Regulations.
(o) TAXES. Except as disclosed in the Prospectus, the Company and
the Subsidiary have filed all necessary federal, state, local and foreign income
and franchise tax returns and has paid all taxes shown as due thereon on or
before the date such taxes are due to be paid; and there is no tax deficiency
which has been or, to the knowledge of the Company, might be asserted against
the Company or the Subsidiary.
(p) LICENSES, ETC. The Company and the Subsidiary have in effect
all necessary licenses, permits and other governmental authorizations currently
required for the conduct of its business or the ownership of its property, as
described in the Prospectus, and is in all material respects in compliance
therewith. To the knowledge of the Company, none of the activities or business
of the Company or the Subsidiary is in violation of, or would cause the Company
or the Subsidiary to violate, any law, rule, regulation or order of the United
States, any country, state, county or locality, the violation of which would
have a material adverse effect upon the financial position, net worth, results
of operations, business or business prospects, assets or property of the Company
or the Subsidiary.
(q) NO PROHIBITED PAYMENTS. Neither the Company, the Subsidiary,
nor, to the knowledge of the Company or the Subsidiary, any of their respective
employees or officers or directors, agents or any other person acting on behalf
of the Company or the Subsidiary has, directly or indirectly, contributed or
agreed to contribute any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer, supplier, or official or governmental
7
8
agency or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company or the Subsidiary (or assist it in connection with any actual or
proposed transaction) which (i) could reasonably be expected to subject the
Company or the Subsidiary to any material damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, could reasonably be expected to have had a materially adverse effect on
the assets, business or operations of the Company or the Subsidiary as reflected
in any of the financial statements contained in the Prospectus, or (iii) if not
continued in the future, could reasonably be expected to materially adversely
affect the assets, business, operations or prospects of the Company or the
Subsidiary. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(r) TRANSFER TAXES. On the Closing Dates (as defined in Section
2(d) hereof), all transfer and other taxes (including franchise, capital stock
and other taxes, other than income taxes, imposed by any jurisdiction), if any,
which are required to be paid in connection with the sale and transfer of the
Securities to the Underwriter hereunder shall have been fully paid or provided
for by the Company, and all laws imposing such taxes shall have been fully
complied with.
(s) EXHIBITS. All contracts and other documents of the Company or
the Subsidiary described in the Registration statement or the Prospectus or to
be filed as exhibits to the Registration Statement, have been described in the
Registration Statement or the Prospectus or filed with the Commission, as
required under the Rules and Regulations.
(t) SUBSIDIARIES. Rockwell Medical Transportation, Inc. is the
Company's only subsidiary and is wholly-owned by the Company.
(u) SHAREHOLDER AGREEMENTS, REGISTRATION RIGHTS. Except as
described in the Prospectus, no security holder of the Company has any rights
with respect to the purchase, sale or registration of any Securities, and all
registration rights with respect to the Offering have been waived.
(v) NO STABILIZATION OR MANIPULATION. Neither the Company nor, to
the Company's knowledge, any of its officers or directors or any of its
employees or stockholders, have taken and will not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, under the Exchange Act or otherwise,
the stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Securities.
(w) NO FINDERS. Except as described in the Prospectus and amounts
previously paid to Maidstone Financial, Inc., to the knowledge of the Company or
the Subsidiary, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, commitments, payments or issuances of securities
with respect to the Company that may affect the Underwriter's compensation, as
determined by
8
9
the National Association of Securities Dealers, Inc. ("NASD").
(x) LOCK-UP AGREEMENTS. The Company has obtained from each
director, officer and existing stockholder of the Company (the "Existing
Shareholders"), a LockUp Agreement (as defined in Section 3(r) hereof) in the
form previously delivered.
(y) LICENSING AND ACCREDITATION. The Company has at all times
since the commencement of its business been in compliance with all federal,
state and local laws, rules and regulations applicable to the nature of its
business and operations. The Company has all necessary licenses to operate its
business.
(aa) NO ADVERSE EFFECT OF TRANSACTION CONTEMPLATED HEREBY. Neither
the completion of the Offering nor any of the transactions contemplated herein
or in the Prospectus, including but not limited to the issuance of any of the
Securities, will result in a "change of control" or the loss of, or have any
adverse effect on, the maintenance in good standing of the Company's licenses.
2. PURCHASE, DELIVERY AND SALE OF SECURITIES
(a) PURCHASE PRICE FOR SECURITIES. The Securities shall be sold to
and purchased by the Underwriter at the purchase price of $3.60 per share of
Common Stock and $.09 per Warrant (that being the public offering price of $4.00
per share of Common Stock and $.10 per Warrant less an underwriting discount of
10 percent) (the "Purchase Price").
(b) FIRM SECURITIES.
(i) Subject to the terms and conditions of this Agreement,
and on the basis of the representations, warranties and agreements herein
contained the Company agrees to issue and sell to the Underwriter, and the
Underwriter, agrees to buy from the Company at the Purchase Price (the "Firm
Securities").
(ii) Delivery of the Firm Securities against payment therefor
shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be designated by agreement
between you and the Company) at 10:00 a.m., New York Time, on , 1997, or
at such later time and date, not later than three business days after the
Effective Date, as you may designate (such time and date of payment and
delivery for the Firm Securities being herein called the "First Closing Date").
Time shall be of the essence and delivery of the Firm Securities at the time
and place specified in this Section 2(b)(ii) is a further condition to the
obligations of the Underwriter hereunder.
9
10
(c) OPTION SECURITIES.
(i) In addition, subject to the terms and conditions of this
Agreement, and on the basis of the representations, warranties and agreements
herein contained, the Company hereby grants to ▇▇▇▇▇ ▇▇▇▇ an option (the
"Over-Allotment Option"), to purchase from the Company all or any part of an
additional 270,000 shares of Common Stock and/or 405,000 Warrants at the
Purchase Price (the "Option Securities").
(ii) The Over-Allotment Option may be exercised by ▇▇▇▇▇ ▇▇▇▇, in
whole or in part, within forty-five days after the Effective Date, upon written
notice by ▇▇▇▇▇ ▇▇▇▇ to the Company advising it of the number of Option
Securities as to which the Over- Allotment Option is being exercised, the names
and denominations in which the certificates for the Shares and the Warrants are
to be registered, and the time and date when such certificates are to be
delivered. Such time and date shall be determined by you but shall not be less
than two nor more than ten business days after exercise of the Over-Allotment
Option, nor in any event prior to the First Closing Date (such time and date
being herein called the "Option Closing Date"). Delivery of the Option
Securities against payment therefor shall take place at ▇▇▇▇▇ ▇▇▇▇'▇ offices.
Time shall be of the essence and delivery at the time and place specified in
this Section 2(c)(ii) is a further condition to the obligations of the
Underwriter hereunder.
(iii) The Over-Allotment may be exercised only to cover over-
allotments in the sale by the Underwriter of Firm Securities.
(d) DELIVERY OF CERTIFICATES; PAYMENT.
(i) The Company shall make the certificates for the Shares and the
Warrants to be purchased hereunder available to you for checking at least two
full business days prior to the First Closing Date or the Option Closing Date
(each, a "Closing Date"), as the case may be. The certificates shall be in such
names and denominations as you may request at least two business days prior to
the relevant Closing Date. Time shall be of the essence and the availability of
the certificates at the time and place specified in this Section 2(d)(i) is a
further condition to the obligations of the Underwriter hereunder.
(ii) On the First Closing Date the Company shall deliver to you
for the account of the Underwriter definitive engraved certificates in
negotiable form representing all of the Shares and the Warrants to be sold by
the Company, against payment of the Purchase Price therefor by you for the
several account of the Underwriter, by certified or bank cashier's checks
payable in New York Clearing House funds to the order of the Company.
(iii) In addition, if and to the extent that ▇▇▇▇▇ ▇▇▇▇ exercises
the Over-Allotment Option, then on the Option Closing Date the Company shall
deliver to you for the account of ▇▇▇▇▇ ▇▇▇▇ or its designees definitive
engraved certificates in negotiable form
10
11
representing the Shares and the Warrants to be sold by the Company, against
payment of the Purchase Price therefor by ▇▇▇▇▇ ▇▇▇▇ for the account of ▇▇▇▇▇
▇▇▇▇ or its designees, by certified or bank cashier's checks payable in next day
funds to the order of the Company.
(iv) It is understood that the Underwriter proposes to offer the
Shares and Warrants to be purchased hereunder to the public, upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter that:
(a) REGISTRATION.
(i) The Company shall use its best efforts to cause the
Registration Statement to become effective and, upon notification from the
Commission that the Registration Statement has become effective, shall so advise
you and shall not at any time, whether before or after the Effective Date, file
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus of which you shall not previously have been advised and furnished
with a copy, or to which you or Underwriter's Counsel shall have objected in
writing, or which is not in compliance with the Act and the Rules and
Regulations.
(ii) Promptly after you or the Company shall have been advised
thereof, you shall advise the Company or the Company shall advise you, as the
case may be, and confirm such advice in writing, of (A) the receipt of any
comments of the Commission, (B) the effectiveness of any post-effective
amendment to the Registration Statement, (C) the filing of any supplement to the
Prospectus or any amended Prospectus, (D) any request made by the Commission for
amendment of the Registration Statement or amendment or supplementing of the
Prospectus, or for additional information with respect thereto, or (E) the
issuance by the Commission or any state or regulatory body of any stop order or
other order denying or suspending the effectiveness of the Registration
Statement, or preventing or suspending the use of any Preliminary Prospectus, or
suspending the qualification of the Securities for offering in any jurisdiction,
or otherwise preventing or impairing the Offering, or the institution or threat
of any proceeding for any of such purposes. The Company and you shall not
acquiesce in such order or proceeding, and shall instead actively defend such
order or proceeding, unless the Company and you agree in writing to such
acquiescence.
(iii) The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and selected dealers to use the Prospectus in connection with
the sale of the shares of Common Stock and Warrants for such period as in the
opinion of Underwriter's Counsel the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a prospectus is required under the
Act to be delivered in connection with sales by an underwriter or dealer, of any
event of which the
11
12
Company has knowledge and which materially affects the Company or the
Securities, or which in the opinion of Company Counsel or of Underwriter's
Counsel should be set forth in an amendment to the Registration Statement or an
amendment or supplement to the Prospectus in order to make the statement made
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required to be delivered to a purchaser of the shares of
Common Stock and Warrants, or in case it shall be necessary to amend or
supplement the Prospectus to comply with the Act or the Rules and Regulations,
the Company shall notify you promptly and forthwith prepare and furnish to the
Underwriter copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request, in
order that the Prospectus, as so amended or supplemented, shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of each such amendment to the Registration Statement, amended
Prospectus or supplement to be attached to the Prospectus shall be without
expense to the Underwriter, except that in the case that the Underwriter is
required, in connection with the sale of the shares of Common Stock and
Warrants, to deliver a prospectus nine months or more after the Effective Date,
the Company shall upon your request and at the expense of the Underwriter, amend
the Registration Statement and amend or supplement the Prospectus, or file a new
registration statement, if necessary, and furnish the Underwriter with
reasonable quantities of prospectuses complying with section 10(a)(3) of the
Act.
(iv) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto. The Company will deliver to or upon your order, from time to time until
the Effective Date as many copies of any Preliminary Prospectus filed with the
Commission prior to the Effective Date as the Underwriter may reasonably
request. The Company will deliver to you on the Effective Date and thereafter
for so long as a Prospectus is required to be delivered under the Act, from time
to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriter may from time to time reasonably
request.
(v) The Company shall comply with the Act, the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"), and
the rules and regulations promulgated thereunder in connection with the offering
and issuance of the Securities in all material respects.
(b) BLUE SKY. The Company shall, at its own expense, use its best
efforts to qualify or register the Securities for sale (or obtain an exemption
from registration) under the securities or "blue sky" laws of such jurisdictions
as you may designate, and shall make such applications and furnish such
information to Underwriter's Counsel as may be required for that purpose, and
shall comply with such laws; provided, however, that the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or to
execute a general consent to service of process in any jurisdiction in any
action other than one arising out of the offering or sale of the shares of
Common Stock and Warrants. The Company shall bear all of
12
13
the expense of such qualifications and registrations, including without
limitation the legal fees and disbursements of Underwriter's Counsel, which
fees, exclusive of disbursements, shall not exceed $35,000 (unless otherwise
agreed) of which $10,000 has been paid. After each Closing Date the Company
shall, at its own expense, from time to time prepare and file such statements
and reports as may be required to continue each such qualification (or maintain
such exemption from registration) in effect for so long a period as required by
law, regulation or administrative policy in connection with the offering of the
Securities.
(c) EXCHANGE ACT REGISTRATION. The Company shall at its own expense,
prepare and file with the Commission a registration statement (on Form 8-A or
Form 10) under section 12 of the Exchange Act, and shall use its best efforts to
cause such registration statement to be declared effective by the Commission on
an accelerated basis on the Effective Date and maintained in effect for at least
five years from the Effective Date.
(d) PROSPECTUS COPIES. The Company shall deliver to you on or before
the First Closing Date a copy of the Registration Statement including all
financial statements, schedules and exhibits filed therewith, and of all
amendments thereto. The Company shall deliver to or on the order of the
Underwriter, from time to time until the Effective Date, as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date as
the Underwriter may reasonably request. The Company shall deliver to the
Underwriter on the Effective Date, and thereafter for so long as a prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request.
(e) AMENDMENTS AND SUPPLEMENTS. The Company shall, promptly upon your
request, prepare and file with the Commission any amendments to the Registration
Statement, and any amendments or supplements to the Preliminary Prospectus or
the Prospectus, and take any other action which in the reasonable opinion of
Underwriter's Counsel and Company Counsel may be reasonably necessary or
advisable in connection with the distribution of the Units, and shall use its
best efforts to cause the same to become effective as promptly as possible.
(f) CERTAIN MARKET PRACTICES. The Company has not taken, and shall not
take, directly or indirectly, any action designed, or which might reasonably be
expected, to cause or result in, or which has constituted, the stabilization or
manipulation of the price of the Securities to facilitate the sale or resale
thereof.
(g) CERTAIN REPRESENTATIONS. Neither the Company nor any representative
of the Company has made or shall make any written or oral representation in
connection with the Offering and sale of the Securities or the Underwriter's
Warrant which is not contained in the Prospectus, which is otherwise
inconsistent with or in contravention of anything contained in the Prospectus,
or which shall constitute a violation of the Act, the Rules and Regulations, the
Exchange Act or the rules and regulations promulgated under the Exchange Act.
13
14
(h) CONTINUING REGISTRATION OF WARRANTS AND UNDERLYING COMMON STOCK.
For so long as any Warrant is outstanding, the Company shall, at its own
expense: (i) use its reasonable best efforts to cause post-effective amendments
to the Registration Statement, or new registration statements relating to the
Warrants and the Common Stock underlying the Warrants to become effective in
compliance with the Act and without any lapse of time between the effectiveness
of the Registration Statement and of any such post-effective amendment or new
registration statement; provided, however, that the Company shall have no
obligation to maintain the effectiveness of such Registration Statement or file
a new Registration Statement, or to keep available a prospectus at any time at
which such registration or prospectus is not then required; (ii) cause a copy of
each Prospectus, as then amended, to be delivered to each holder of record of a
Warrant; (iii) furnish to the Underwriter and dealers as many copies of each
such Prospectus as the Underwriter or dealers may reasonably request; and (iv)
maintain the "blue sky" qualification or registration of the Warrants and the
Common Stock underlying the Warrants, or have a currently available exemption
therefrom, in each jurisdiction in which the Securities were so qualified or
registered for purposes of the Offering.
(i) USE OF PROCEEDS. The Company shall apply the net proceeds from the
sale of the shares of Common Stock and Warrants substantially for the purposes
set forth in the Prospectus under the caption "USE OF PROCEEDS," and shall file
such reports with the Commission with respect to the sale of the shares of
Common Stock and Warrants and the application of the proceeds therefrom as may
be required pursuant to Rule 463 of the Rules and Regulations.
(j) TWELVE MONTHS' EARNINGS STATEMENT. The Company shall make generally
available to its security holders and deliver to you as soon as it is
practicable so to do, but in no event later than ninety days after the end of
twelve months after the close of its current fiscal quarter, an earnings
statement (which need not be audited) covering a period of at least twelve
consecutive months beginning after the Effective Date, which shall satisfy the
requirements of section 11(a) of the Act.
(k) NASDAQ EXCHANGE LISTINGS, ETC. The Company shall immediately make
all filings required to seek approval for the quotation of the Securities on the
NASDAQ SmallCap Market ("NASDAQ") and shall use its best efforts to effect and
maintain such approval for at least five years from the Effective Date. Within
10 days after the Effective Date, the Company shall also use its best efforts to
list itself, on an expedited basis, in ▇▇▇▇▇'▇ OTC Industrial Manual, Standard
and Poor's Corporation Descriptions or other recognized securities manuals
acceptable to the Underwriter and to cause such listing to be maintained for
five years from the Effective Date.
(l) BOARD OF DIRECTORS. For a period of three (3) years after the First
Closing Date, the Company shall nominate and use its best efforts to engage a
designee of ▇▇▇▇▇ ▇▇▇▇ as a nonvoting advisor to the Company's Board of
Directors (the "Advisor") or, in lieu thereof, to designate an individual for
election as a director, in which case the Company shall use its best efforts to
have such individual elected as a director. The designee may be a director,
14
15
officer, partner, employee or affiliate of an Underwriter, and ▇▇▇▇▇ ▇▇▇▇ shall
designate such person in writing to the Board. In the event ▇▇▇▇▇ ▇▇▇▇ shall not
have designated such individual at the time of any meeting of the Board or such
person is unavailable to serve, the Company shall notify ▇▇▇▇▇ ▇▇▇▇ of each
meeting of the Board. An individual, if any, designated by ▇▇▇▇▇ ▇▇▇▇ shall
receive all notices and other correspondence and communications sent by the
Company to members of the Board. Such Advisor shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging, and transportation. In addition,
such Advisor shall be entitled to the same compensation as the Company gives to
other non-employee directors for acting in such capacity. The Company further
agrees that, during said three (3) year period, it shall schedule no less than
four (4) formal and "in person" meetings of its Board of Directors in each such
year at which meetings such Advisor shall be permitted to attend as set forth
herein; said meetings shall be held quarterly each year and thirty (30) days
advance notice of such meetings shall be given to the Advisor. Further, during
such three (3) year period, the Company shall give notice to ▇▇▇▇▇ ▇▇▇▇ with
respect to any proposed acquisitions, mergers, reorganizations or other similar
transactions.
The Company agrees to indemnify and hold harmless the Underwriter and
the Advisor against any and all claims, actions, damages, costs and expenses,
and judgments arising solely out of the attendance and participation of the
Advisor at any such meeting described herein. In the event the Company maintains
a liability insurance policy affording coverage for the acts of its officers and
directors, it agrees, if possible, to include the Advisor as an insured under
such policy.
(m) PERIODIC REPORTS. For so long as the Company is a reporting
company under section 12(g) or section 15(d) of the Exchange Act, the Company
shall, at its own expense, hold an annual meeting of stockholders for the
election of directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years, and furnish to its stockholders an annual report (including financial
statements audited by certified public accountants) in reasonable detail. In
addition, during the period ending five years from the date hereof, the Company
shall, at its own expense, furnish to you: (i) within 90 days of the end of each
fiscal year, a balance sheet of the Company and the Subsidiary as at the end of
such fiscal year, together with statements of income, stockholders' equity and
cash flows of the Company and the Subsidiary as at the end of such fiscal year,
all in reasonable detail and accompanied by a copy of the certificate or report
thereon of certified public accountants; (ii) as soon as they are available, a
copy of all reports (financial or otherwise) distributed to security holders;
(iii) as soon as they are available, a copy of all non- confidential reports and
financial statements furnished to or filed with the Commission; and (iv) such
other information as you may from time to time reasonably request. The financial
statements referred to herein shall be on a consolidated basis to the extent the
accounts of the Company and the Subsidiary are consolidated in reports furnished
to its stockholders generally.
(n) FORM S-8 REGISTRATIONS. For a period of two years following
the First Closing Date, the Company shall not, without ▇▇▇▇▇ ▇▇▇▇'▇ prior
written consent, register
15
16
or otherwise facilitate the registration of any of its securities issuable upon
the exercise of options, warrants (other than up to 450,000 options issued
pursuant to the Company's Stock Option Plan, the Warrants and the Underwriter's
Warrant) or other rights, whether by means of a Registration Statement on Form
S-8 or otherwise.
(o) FUTURE SALES. For a period of two years following the First
Closing Date, the Company shall not, without ▇▇▇▇▇ ▇▇▇▇'▇ prior written consent,
sell or otherwise dispose of any securities of the Company, including but not
limited to the issuance of any Common Stock, and the granting of any options or
warrants. Notwithstanding the foregoing, the Company may at any time issue
shares of Common Stock pursuant to the exercise of the Warrants, the
Underwriter's Warrant, the Warrants underlying the Underwriter's Warrant and
options, warrants or conversion rights issued and outstanding on the Effective
Date and described in the Prospectus.
(p) REGULATION S SALES. For a period of two years following the
First Closing Date, the Company shall not issue or sell any securities pursuant
to Regulation S of the Rules and Regulations under the Act, without ▇▇▇▇▇ ▇▇▇▇'▇
prior written consent.
(q) AGREEMENTS WITH STOCKHOLDERS, DIRECTORS AND OFFICERS. The
Company shall cause each of the Company's existing stockholders, directors and
officers to enter into written agreements with ▇▇▇▇▇ ▇▇▇▇ (the "Lock-up
Agreements") prior to the Effective Date, that, for a period of thirteen months
from the Effective Date, they will not, without the consent of ▇▇▇▇▇ ▇▇▇▇, (i)
publicly sell any securities of the Company owned directly or indirectly by them
or owned beneficially by them (as defined in the Exchange Act), or (ii)
otherwise sell, or transfer such securities unless the transferee agrees in
writing to be bound by an identical lock-up.
(r) WARRANT SOLICITATION. Upon the exercise of any Warrants on or
after the first anniversary of the Effective Date, the Company shall pay to
▇▇▇▇▇ ▇▇▇▇ a commission of five (5%) percent of the aggregate exercise price of
such Warrants, a portion of which may be reallowed by ▇▇▇▇▇ ▇▇▇▇ to the dealer
who solicited the exercise (which may also be you), if: (i) the market price of
the Common Stock is greater than the exercise price of the Warrant on the date
of exercise; (ii) the exercise of the Warrant was solicited by a member of the
NASD; (iii) the Warrant is not held in a discretionary account; (iv) the
disclosure of the compensation arrangements has been made in documents provided
to customers, both as part of the Offering and at the time of exercise; and (v)
the solicitation of the Warrant was not in violation of Regulation M promulgated
under the Exchange Act. No commission shall be paid to you on any Warrant
exercise prior to the first anniversary of the Effective Date, or on any Warrant
exercised at any time without solicitation by ▇▇▇▇▇ ▇▇▇▇ or a soliciting dealer.
(s) AVAILABLE SHARES. The Company shall reserve and at all times
keep available that maximum number of it authorized but unissued shares of
Common Stock which are issuable upon exercise of options pursuant to the
Company's Stock Option Plan, the Warrants, the Underwriter's Warrant, and the
Warrants issuable upon exercise of the Underwriter's Warrant, in each case
taking into account the anti-dilution provisions thereof.
16
17
(t) FINANCIAL CONSULTING AGREEMENT. On the First Closing Date and
simultaneously with the delivery of the Firm Securities, the Company shall
execute and deliver to ▇▇▇▇▇ ▇▇▇▇ an agreement with ▇▇▇▇▇ ▇▇▇▇, or its
representative, in the form previously delivered to the Company by ▇▇▇▇▇ ▇▇▇▇,
regarding the services of ▇▇▇▇▇ ▇▇▇▇ or its representative a financial
consultant to the Company (the "Financial Consulting Agreement"), for a
twenty-four month period commencing as of the date hereof at a fee equal to
$4,166 per month which shall be paid in its entirety on the First Closing Date.
(u) MANAGEMENT. On each Closing Date, the President of the Company
shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. Prior to the Effective Date, the Company shall have
obtained "key- employee" life insurance coverage in the amount of $1,000,000 on
▇▇. ▇▇▇▇▇▇. Prior to the Effective Date, the Company shall have entered into an
employment agreement with ▇▇. ▇▇▇▇▇▇▇ as set forth in the Registration
Statement.
(v) STOCK TRANSFER SHEETS. The Company shall instruct its Transfer
Agent (as defined in Section 4(h) hereto) to deliver to you copies of all advice
sheets showing the daily transfer of the outstanding shares of Common Stock and
Warrants sold by the Company in the public offering and shall, at its own
expense, furnish you weekly for the first six weeks following the First Closing
Date and monthly thereafter during the period ending three years following the
First Closing Date with Depository Trust Company stock transfer sheets.
(w) PUBLIC RELATIONS. Prior to the Effective Date the Company
shall have retained a public relations firm reasonably acceptable to you, and
shall continue to retain such firm, or an alternate firm reasonably acceptable
to ▇▇▇▇▇ ▇▇▇▇, for a period of twelve (12) months.
(x) ADDITIONAL REPRESENTATIONS. The Company shall engage the
Underwriter's Counsel to provide the Underwriter, at the First Closing Date and
quarterly thereafter, until such time as the Common Stock is listed on the New
York Stock Exchange or the American Stock Exchange or quoted on NASDAQ National
Market System, with an opinion, setting forth those states in which the Common
Stock may be traded in non-issuer transactions under the blue sky laws of the
fifty states. The Company shall pay the Underwriter's Counsel a one-time fee of
$12,500 at the First Closing Date for such opinions.
(aa) BOUND VOLUMES. Within a reasonable time after the First
Closing Date, the Company shall deliver to you, at the Company's expense, five
bound volumes in form and content acceptable to ▇▇▇▇▇ ▇▇▇▇, containing the
Registration Statement and all exhibits filed therewith and all amendments
thereto, and all other agreements, correspondence, filings, certificates and
other documents filed and/or delivered in connection with the Offering.
4. CONDITIONS TO UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the shares of Common Stock and Warrants
which you have agreed to purchase hereunder are subject to the accuracy (as of
the date hereof and as of each Closing Date) of and compliance with the
representations and warranties of the
17
18
Company contained herein, the performance by the Company of all of their
respective obligations hereunder and the following further conditions:
(a) EFFECTIVE REGISTRATION STATEMENT; NO STOP ORDER. The
Registration Statement shall have become effective and you shall have received
notice thereof not later than 6:00 p.m., New York time, on the date of this
Agreement, or at such later time or on such later date as to which you may agree
in writing. In addition, on each Closing Date (i) no stop order denying or
suspending the effectiveness of the Registration Statement shall be in effect,
and no proceedings for that or any similar purpose shall have been instituted or
shall be pending or, to your knowledge or to the knowledge of the Company, shall
be contemplated by the Commission, and (ii) all requests on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriter's Counsel.
(b) OPINION OF COMPANY COUNSEL. On the First Closing Date, you
shall have received the opinion, dated as of the First Closing Date, of Company
Counsel, in form and substance satisfactory to the Underwriter's Counsel, to the
effect that:
(i) the Company and the Subsidiary have been duly
incorporated and validly exist as corporations in good standing under
the laws of their respective jurisdictions of incorporation, with full
corporate power and authority to own their properties and conduct their
business as described in the Prospectus, and are duly qualified or
licensed to do business as foreign corporations and are in good
standing in each other jurisdiction in which the nature of their
business or the character or location of their properties requires such
qualification, except where failure to so qualify will not have a
material adverse affect on the business, properties or financial
condition of the Company or the Subsidiary, as the case may be;
(ii) (A) the authorized capitalization of the Company as
of the date of the Prospectus was as is set forth in the Prospectus
under the caption "CAPITALIZATION;" (B) all of the shares of Common
Stock now outstanding have been duly authorized and validly issued, are
fully paid and non-assessable, conform in all material respects to the
description thereof contained in the Prospectus, have not been issued
in violation of the preemptive rights of any stockholder and, except as
described in the Prospectus, are not subject to any restrictions upon
the voting or transfer thereof; (C) all of the shares of Common Stock
and all of the Warrants have been duly authorized and, when issued and
delivered to the Underwriter against payment therefor as provided
herein, shall be validly issued, fully paid and non-assessable, shall
not have been issued in violation of the preemptive rights of any
stockholder, and no personal liability shall attach to the ownership
thereof; (D) the stockholders of the Company do not have any preemptive
rights or other rights to subscribe for or purchase, and except for the
transfer restrictions imposed by Rule 144 of the Rules and Regulations
18
19
promulgated under the Act or contained in the Lock-up Agreements
executed with the Underwriter, there are no restrictions upon the
voting or transfer of, any of the Securities; (E) the shares of Common
Stock and the Warrants the Warrant Agreement and the Underwriter's
Warrant conform in all material respects to the respective descriptions
thereof contained in the Prospectus; (F) all issuances of the Company's
securities have been made in compliance with, or under an exemption
from, the Act and applicable state securities laws; (G) a sufficient
number of shares of Common Stock has been reserved, for all times when
any of the Warrants (including the Warrants issuable upon exercise of
the Underwriter's Warrant are outstanding, for issuance upon exercise
of all of the Warrants; and (H) to the knowledge of such counsel,
neither the filing of the Registration Statement nor the offering or
sale of the shares of Common Stock and Warrants as contemplated by this
Agreement gives rise to any registration rights or other rights, other
than those which have been effectively waived or satisfied or described
in the Prospectus, for or relating to the registration of any
securities of the Company;
(iii) the certificates evidencing the shares of Common
Stock and the Warrants are each in valid and proper legal form; and the
Warrants are exercisable for shares of Common Stock in accordance with
the terms of the Warrants and at the prices therein provided for;
(iv) this Agreement, the Warrant Agreement, the
Underwriter's Warrant, and the Financial Consulting Agreement have been
duly and validly authorized, executed and delivered by the Company and
(assuming due execution and delivery thereof by the Underwriter and/or
American Stock Transfer & Trust Company, as the case may be) all of
such agreements are, or when duly executed shall be, the valid and
legally binding obligations of the Company, enforceable in accordance
with their respective terms (except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the rights of creditors
generally); provided, however, that no opinion need to be expressed as
to the enforceability of the indemnity provisions contained in Section
6 or the contribution provisions contained in Section 7;
(v) to the knowledge of such counsel, other than as
described in the Prospectus (A) there is no pending, threatened or
contemplated legal or governmental proceeding affecting the Company or
the Subsidiary which could materially and adversely affect the
business, property, operations, condition (financial or otherwise) or
earnings of the Company or the Subsidiary, or which questions the
validity of the Offering, the Securities, this Agreement, the Warrant
Agreement, the Underwriter's Warrant, or the Financial Consulting
Agreement or of any action taken or to be taken by the Company pursuant
thereto; and (B) there is no legal or governmental regulatory
proceeding required to be described or referred to in the Registration
Statement which is not so described or referred to;
19
20
(vi) to the knowledge of such counsel, (A) the Company
is not in violation of or default under this Agreement, the Warrant
Agreement, the Underwriter's Warrant, or the Financial Consulting
Agreement; and (B) to the knowledge of such counsel, the execution and
delivery hereof and thereof and consummation of the transactions herein
or therein contemplated shall not result in a material violation of, or
constitute a default under, the Certificate of Incorporation or By-laws
of the Company or the certificate of incorporation or by-laws of the
Subsidiary, or any material obligation, agreement, covenant of
condition contained in any bond, debenture, note or other evidence of
indebtedness, or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to
which the Company or the Subsidiary is a party or by which the assets
of the Company or the Subsidiary are bound, or any material order,
rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court applicable to the Company or the
Subsidiary;
(vii) to the knowledge of such counsel, (a) the Company
and the Subsidiary have obtained, or are in the process of obtaining,
all licenses, permits and other governmental authorizations necessary
to the conduct of its business as described in the Prospectus, (b) such
obtained licenses, permits and other governmental authorizations are in
full force and effect, and (c) the Company and the Subsidiary are in
all material respects complying therewith;
(viii) the Registration Statement has become effective
under the Act, and to the knowledge of such counsel, no stop order
denying or suspending the effectiveness of the Registration Statement
is in effect, and no proceedings for that or any similar purpose have
been instituted or are pending before or threatened by the Commission;
(ix) the Registration Statement and the Prospectus
(except for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which counsel
need not express an opinion) comply as to form in all material respects
with the Act and the Rules and Regulations;
(x) all descriptions contained in the Registration
Statement and the Prospectus, and any amendments or supplements
thereto, of contracts and other documents are accurate and fairly
present the information required to be described, and such counsel is
familiar with all contracts and other documents referred to in the
Registration Statement and the Prospectus, and any such amendment or
supplement, or filed as exhibits to the Registration Statement and, to
the knowledge of such counsel, no contract, document, license or permit
of a character required to be summarized or described therein or to be
filed as an exhibit thereto is not so summarized, described or filed.
20
21
(xi) the statements in the Registration Statement and
the Prospectus under the captions "Risk Factors," "Use of Proceeds,"
"Business," "Management," and "Description of Securities," which
purport to summarize the provisions of agreements, licenses, statutes
or rules and regulations, have been reviewed by such counsel and are
accurate summaries in all material respects;
(xii) except for registration under the Act and
registration or qualification of the Securities under applicable state
or foreign securities or blue sky laws, no authorization, approval,
consent or license of any governmental or regulatory authority or
agency is necessary in connection with: (A) the authorization,
issuance, sale, transfer or delivery of the Securities by the Company
in accordance with this Agreement; (B) the execution, delivery and
performance of this Agreement by the Company or the taking of any
action contemplated herein; (C) the issuance of the Underwriter's
Warrant in accordance with this Agreement or the Securities issuable
upon exercise thereof; or the taking of any action contemplated herein.
Such opinion shall also state that Company Counsel's examination of the
Registration Statement and its discussions with the Company and its independent
auditors did not disclose any information which gives Company Counsel reason to
believe that the Registration Statement (other than the financial statements and
other financial and statistical information as to which counsel need not express
an opinion) at the time it became effective contained 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 not misleading, or that the
Prospectus (other than the schedules, financial statements and other financial
and statistical information as to which no view is expressed) at the time it
became effective contained 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 not misleading, or that the Prospectus (other than the
financial statements and other financial and statistical information as to which
counsel need not express an opinion) contains any untrue statement of a material
fact or omits 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. In addition, such opinion shall also cover such matters incident to
the transactions contemplated hereby as you or Underwriter's Counsel shall
reasonably request. In rendering such opinion, Company Counsel may rely as to
matters of fact upon certificates of officers of the Company, and of public
officials, and may rely as to all matters of law other than the law of the
United States or the State of New York and the General Corporation Law of the
State of Michigan upon opinions of counsel satisfactory to you, in which case
the opinion shall state that they have no reason to believe that you and they
are not entitled so to rely.
(c) CORPORATE PROCEEDINGS. All corporate proceedings and other
legal matters relating to this Agreement, the Registration Statement, the
Prospectus and other related matters shall be reasonably satisfactory to or
approved by Underwriter's Counsel.
21
22
(d) COMFORT LETTER. Prior to the Effective Date, and again on and
as of the First Closing Date, you shall have received a letter from Coopers &
▇▇▇▇▇▇▇, certified public accountants for the Company, satisfactory in form and
substance to the Underwriter's Counsel.
(e) BRING DOWN. At each of the Closing Dates, (i) the
representations and warranties of the Company contained in this Agreement shall
be true and correct with the same effect as if made on and as of such Closing
Date, and the Company shall have performed all of its obligations hereunder and
satisfied all the conditions to be satisfied at or prior to such Closing Date;
(ii) the Registration Statement and the Prospectus shall contain all statements
which are required to be stated therein in accordance with the Act and the Rules
and Regulations, and shall in all material respects conform to the requirements
of the Act and the Rules and Regulations, and neither the Registration Statement
nor the Prospectus shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated or which they were made, not
misleading; (iii) there shall have been, since the respective dates as of which
information is given, no material adverse change in the business, property,
operations, condition (financial or otherwise), earnings, capital stock,
long-term or short-term debt or general affairs of the Company from that set
forth in the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the Effective
Date, and the Company shall not have incurred any material liabilities nor
entered into any material agreement other than as referred to in the
Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding shall be pending or threatened against
the Company before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially adversely affect the business, property, operations, condition
(financial or otherwise), earnings or general affairs of the Company. In
addition, you shall have received, at the First Closing Date, a certificate
signed by the principal executive officer and by the principal financial officer
of the Company, dated as of the First Closing Date, evidencing compliance with
the provisions of this Section 4(g).
(f) TRANSFER AND WARRANT AGENT. On or before the Effective Date,
the Company shall have appointed American Stock Transfer & Trust Company (or
other agent mutually acceptable to the Company and ▇▇▇▇▇ ▇▇▇▇), as its transfer
agent and warrant agent ("Transfer Agent") to transfer all of the shares of
Common Stock and Warrants issued in the Offering, as well as to transfer other
shares of the Common Stock outstanding from time to time.
(g) NASD APPROVAL OF UNDERWRITER'S COMPENSATION. By the Effective
Date, the Underwriter shall have received clearance from the NASD as to the
amount of compensation allowable or payable to the Underwriter, as described in
the Registration Statement.
(h) CERTAIN FURTHER MATTERS. On each Closing Date, Underwriter's
Counsel shall have been furnished with all such other documents and certificates
as they may reasonably request for the purpose of enabling them to render their
legal opinion to the
22
23
Underwriter and in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants, or the fulfillment of any of the conditions, herein contained.
(i) All proceedings taken in connection with the authorization,
issuance or sale of the Securities, as herein contemplated shall be reasonably
satisfactory in form and substance to the Underwriter and to Underwriter's
Counsel;
(ii) On each Closing Date there shall have been duly tendered to
you for your account the appropriate number of Securities;
(iii) No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 3(b) hereof shall have been
issued on either Closing Date, and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Underwriter or the Company, shall be
contemplated;
(iv) Prior to each Closing Date there shall not have been received
or provided by the Company's independent public accountants or attorneys,
qualifications to the effect of either difficulties in furnishing certifications
as to material items including, without limitation, information contained within
the footnotes to the financial statements, or as affecting matters incident to
the issuance and sale of the Securities or as to corporate proceedings or other
matters;
(v) On or prior to the First Closing Date, the Underwriter's
Warrant, the Warrant Agreement and the Financial Consulting Agreement shall have
been executed and delivered by the Company, and the Lock-Up Agreements shall
have been executed and delivered by all of the Company's officers, directors and
existing stockholders, to the Underwriter.
(i) ADDITIONAL CONDITIONS. Upon exercise of the Over-Allotment
Option, ▇▇▇▇▇ ▇▇▇▇'▇ obligations to purchase and pay for the Option Securities
shall be subject (as of the date hereof and as of the Option Closing Date) to
the following conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, no stop order denying or suspending the effectiveness
thereof shall have been issued, and no proceedings for that or any similar
purpose shall have been instituted or shall be pending or, to your knowledge or
the knowledge of the Company, shall be contemplated by the Commission, and all
reasonable requests on the part of the Commission for additional information
shall have been complied with to the satisfaction of Underwriter's Counsel.
(ii) On the Option Closing Date there shall have been
delivered to you the signed opinion of Company Counsel, dated as of the Option
Closing Date, in form and substance satisfactory to Underwriter's Counsel, which
opinion shall be substantially the same in scope and substance as the opinion
furnished to you on the First Closing Date pursuant to
23
24
Section 4(b), except that such opinion, where appropriate, shall cover the
Option Units rather than the Firm Securities. If the First Closing Date is the
same as the Option Closing Date, such opinions may be combined.
(iii) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities shall be
satisfactory in form and substance to you, and you and Underwriter's Counsel
shall have been furnished with all such documents, certificates and opinions as
you may reasonably request in connection with this transaction in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company or its compliance with any of the covenants or
conditions contained herein.
(iv) On the Option Closing Date there shall have been
delivered you a letter in form and substance satisfactory to ▇▇▇▇▇ ▇▇▇▇ from
Coopers & ▇▇▇▇▇▇▇, dated the Option Closing Date addressed to you, confirming
the information in their letter referred to in Section 4(f) as of the date
thereof and stating that, without any additional investigation required, nothing
has come to their attention during the period from the ending date of their
review referred to in such letter to a date not more than five banking days
prior to the Option Closing Date which would require any change in such letter
if it were required to be dated the Option Closing Date.
Any certificate signed by any officer of the Company and delivered to
the Underwriter or to Underwriter's Counsel shall be deemed a representation and
warranty by the Company to the Underwriter as to the statements made therein. If
any of the conditions herein provided for in this Section shall not have been
completely fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be cancelled at, or at
any time prior to, each Closing Date by your notifying the Company of such
cancellation in writing or by telecopy at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of any Underwriter to the
Company, except as otherwise provided herein.
5. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to sell and deliver the shares of Common Stock and Warrants are subject
to the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective not later than 6:00 p.m. New York Time, on the date
of this Agreement, or at such later time or on such later date as the Company
and you may agree in writing.
(b) NO STOP ORDER. On the applicable Closing Date, no stop order
denying or suspending the effectiveness of the Registration Statement shall have
been issued under the Act or any proceedings therefor initiated or threatened by
the Commission.
(c) PAYMENT FOR SECURITIES. On the applicable Closing Date, you
shall have made payment, for the several accounts of the Underwriter, of the
aggregate Purchase Price
24
25
for the shares of Common Stock and Warrants then being purchased by certified or
bank cashier's checks payable in next day funds to the order of the Company.
If the conditions to the obligations of the Company provided by this Section 5
have been fulfilled on the First Closing Date but are not fulfilled after the
First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Option Securities upon
exercise of the Over-Allotment Option shall be affected.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. As used in this Agreement, the
term "Liabilities" shall mean any and all losses, claims, damages and
liabilities, and actions and proceedings in respect thereof (including without
limitation all reasonable costs of defense and investigation and all attorneys'
fees) including without limitation those asserted by any party to this Agreement
against any other party to this Agreement. The Company hereby indemnifies and
holds harmless the Underwriter and each person, if any, who controls the
Underwriter within the meaning of the Act, from and against all Liabilities,
joint or several, to which the Underwriter or such controlling person may become
subject, under the Act or otherwise, insofar as such Liabilities arise out of or
are based upon: (i) any untrue statement or alleged untrue statement of any
material fact, in light of the circumstances in which it was made, contained in
(A) the Registration Statement or any amendment thereto, or the Prospectus or
any Preliminary Prospectus, or any amendment or supplement thereto, or (B) any
"blue sky" application or other document executed by the Company specifically
for that purpose, or based upon written information furnished by the Company,
filed in any state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof (any such application, document or
information being herein called a "Blue Sky Application"); or (ii) the omission
or alleged omission to state in the Registration Statement or any amendment
thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which it was made, not misleading; provided, however, that the
Company shall not be liable in any such case to the extent, but only to the
extent, that any such Liabilities arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission (x) made
in reliance upon and in conformity with written information furnished to the
Company through you by or on behalf of the Underwriter specifically for use in
the preparation of the Registration Statement or any such amendment thereto, or
the Prospectus or any such Preliminary Prospectus, or any such amendment or
supplement thereto, or any such Blue Sky Application or (y) corrected by the
final Prospectus and the failure of the Underwriter to deliver the final
Prospectus. The foregoing indemnity shall be in addition to any other liability
which the Company may otherwise have.
(b) INDEMNIFICATION BY UNDERWRITER. The Underwriter hereby
indemnifies and holds harmless the Company, each of its directors, each nominee
(if any) for director named in the Prospectus, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, from and
25
26
against all Liabilities to which the Company or any such director, nominee,
officer or controlling person may become subject under the Act or otherwise,
insofar as such Liabilities arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment thereto, or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that any such Liabilities arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement or any amendment
thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company through you, by or on behalf of such Underwriter,
specifically for use in the preparation thereof. In no event shall the
Underwriter be liable under this Section 6(b) for any amount in excess of the
compensation received by the Underwriter, in the form of underwriting discounts
or otherwise, pursuant to this Agreement or any other agreement contemplated
hereby. The foregoing indemnity shall be in addition to any other liability
which the Underwriter may otherwise have.
(c) PROCEDURE. Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify in writing the indemnifying
party of the commencement thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 6 unless the rights of
the indemnifying party have been prejudiced by such omission or delay. In case
any such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions hereof, with counsel 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 shall 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. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided,
however, that the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both such
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it which
are different from or in addition to those available to the indemnifying party
or that the indemnified and indemnifying party have conflicting interests which
would make it inappropriate for the same counsel to represent both of them (in
which case the indemnifying party shall into have the right to assume the
defense of such action
26
27
on behalf of the indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party.
7. CONTRIBUTION. In order to provide for just and equitable
contribution under the Act in any case in which (a) any indemnified party makes
claims for indemnification pursuant to Section 6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification in
such case, or (b) contribution under the Act may be required on the part of any
indemnified party, then such indemnified party and each indemnifying party (if
more than one) shall contribute to the aggregate Liabilities to which it may be
subject, in either such case (after contribution from others) in such proportion
that the Underwriter is responsible in the aggregate for the portion of such
Liabilities represented by the percentage that the underwriting discount per
share of Common Stock and Warrant appearing on the cover page of the Prospectus
bears to the public Offering price per share of Common Stock and Warrant
appearing thereon, and the Company shall be responsible for the remaining
portion; provided, however, that if such allocation is not permitted by
applicable law, then the relative fault of the Company, and the Underwriter in
connection with the statements or omissions which resulted in such Liabilities
and other relevant equitable considerations shall also be considered. The
relative fault shall be determined by reference to, among other things, whether
in the case of an untrue statement of material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company, or the Underwriter, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would not be just and
equitable if the respective obligations of the Company, and the Underwriter to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate Liabilities or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this Section 7. Moreover, the contribution of the
Underwriter shall not be in excess of the cash compensation received by the
Underwriter, in the form of underwriting discounts or otherwise, pursuant to
this agreement or any other agreement contemplated hereby. No person guilty of a
fraudulent misrepresentation (within the meaning of section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this Section 7, the term "Company"
shall include any officer, director or person who controls the Company within
the meaning of section 15 of the Act. If the full amount of the contribution
specified in this Section 7 is not permitted by law, then each indemnified party
and each person who controls an indemnified party shall be entitled to
contribution from each indemnifying party to the full extent permitted by law.
The foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having
27
28
liability under section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement of
any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. COSTS AND EXPENSES.
(a) CERTAIN COSTS AND EXPENSES. Whether or not this Agreement
becomes effective or the sale of the shares of Common Stock and Warrants to the
Underwriter is consummated, the Company shall pay all costs and expense incident
to the issuance, offering, sale and delivery of the Units and the performance of
its obligations under this Agreement, including without limitation: (i) all fees
and expenses of the Company's legal counsel and accountants; (ii) all costs and
expenses incident to the preparation, printing, filing and distribution of the
Registration Statement (including the financial statements contained therein and
all exhibits and amendments thereto), each Preliminary Prospectus and the
Prospectus, each as amended or supplemented, this Agreement and the other
underwriting documents, as well as the other agreements and documents referred
to herein and the Blue Sky Memorandum; each in such quantities as you shall deem
necessary; (iii) all fees of NASD required in connection with the filing
required by NASD to be made by the Underwriter with respect to the Offering;
(iv) all expenses, including fees (but not in excess of the amount set forth in
Section 3(b)) and disbursements of Underwriter's Counsel in connection with the
qualification of the Securities under the "blue sky" laws which you shall
designate; (v) all costs and expenses of printing the respective certificates
representing the shares of Common Stock and the Warrants; (vi) the expense of
placing one or more "tombstone" advertisements or promotional materials as
directed by you (provided, however, that the aggregate amount thereof shall not
exceed $10,000) and of offering memorabilia; (vii) all costs and expenses of the
Company and its employees (but not of the Underwriter or its employees)
associated with due diligence meetings and presentations (including the payment
for road show conference centers); (viii) all costs and expenses associated with
the preparation of a seven to ten minute professional video presentation
concerning the Company, its products and its management for broker due diligence
purposes; (ix) any and all taxes (including without limitation any transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales of
the shares of Common Stock and Warrants to the Underwriter hereunder; and (x)
all costs and expenses incident to the furnishing of any amended Prospectus or
any supplement to be attached to the Prospectus as required by Sections 3(a) and
3(d), except as otherwise provided by said Sections. In addition, the Company
shall engage Underwriter's Counsel to provide the Underwriter, at the Closing
and quarterly thereafter, until such time as the Common Stock is listed on the
New York Stock Exchange or the American Stock Exchange or quoted on NASDAQ/NMS,
with a memorandum, setting forth those states in which the Common Stock and the
Warrants may be traded in non-issuer transactions under the blue sky laws of the
50 states. The Company shall pay such counsel a one-time fee of $12,500 at the
Closing for such opinions.
(b) UNDERWRITER'S EXPENSE ALLOWANCE. In addition to the expenses
described in Section 8(a), the Company shall on the First Closing Date pay to
▇▇▇▇▇ ▇▇▇▇ a non-
28
29
accountable expense allowance, which shall include fees of Underwriter's
Counsel, exclusive of the fees referred to in Section 3(b), of $224,100 (that
being an amount equal to three percent (3%) of the gross proceeds received upon
sale of the Firm Securities). In the event that the Over- Allotment Option is
exercised, then the Company shall, on the Option Closing Date, pay to ▇▇▇▇▇
▇▇▇▇, based on the number of Option Securities to be sold by the Company, an
additional amount equal to three percent (3%) of the gross proceeds received
upon sale of any of the Option Securities, in the amount of $33,615 if the
Over-Allotment Option is exercised in full.
(c) NO FINDERS. No person is entitled either directly or
indirectly to compensation from the Company, the Underwriter or any other person
for services as a finder in connection with the Offering, and the Company hereby
indemnifies and holds harmless the Underwriter, and the Underwriter hereby
indemnifies and holds harmless the Company from and against all Liabilities,
joint or several, to which the indemnified party may become subject insofar as
such Liabilities arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the Offering by reason of such
person's or entity's influence or prior contact with the indemnifying party.
9. EFFECTIVE DATE. The Agreement shall become effective upon its
execution, except that you may, at your option, delay its effectiveness until
10:00 a.m., New York time, on the first full business day following the
Effective Date, or at such earlier time after the Effective Date as you in your
discretion shall first commence the initial public offering by the Underwriter
of any of the shares of Common Stock and Warrants. The time of the initial
public offering shall mean the time of release by you of the first newspaper
advertisement which is subsequently published with respect to the shares of
Common Stock and Warrants, or the time when the shares of Common Stock and
Warrants are first generally offered by you to dealers by letter or telegram,
whichever shall first occur. This Agreement may be terminated by you at any time
before it becomes effective as provided above, except that the provisions of
Sections 3(x), 6, 7, 8, 12, 13, 14 and 15 shall remain in effect notwithstanding
such termination.
10. TERMINATION.
(a) GROUNDS FOR TERMINATION.
(i) This Agreement, except for Sections 3(x), 6, 7, 8, 12,
13, 14 and 15, may be terminated at any time prior to the First Closing Date,
and the Over-Allotment Option, if exercised, may be canceled at any time prior
to the Option Closing Date, by you if in your sole judgment it is impracticable
to offer for sale or to enforce contracts made by you for the resale of the
shares of Common Stock and Warrants agreed to be purchased hereunder, by reason
of: (A) the Company having sustained a material loss, whether or not insured, by
reason of fire, earthquake, flood, accident or other calamity, or from any labor
dispute or court or government action, order or decree; (B) trading in
securities on the New York Stock Exchange or the American Stock Exchange having
been suspended or limited; (C) material governmental
29
30
restrictions having been imposed on trading in securities generally which are
not in force and effect on the date hereof; (D) a banking moratorium having been
declared by federal or New York State authorities; (E) an outbreak or
significant escalation of major international hostilities or other national or
international calamity having occurred; (F) the passage by the Congress of the
United States or by any state legislative body of similar impact, of any act or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is reasonably believed likely by you to have a material adverse
impact on the business, financial condition or financial statements of the
Company; (G) any material adverse change in the financial or securities markets
beyond normal fluctuations in the United States having occurred since the date
of this Agreement; or (H) any material adverse change having occurred, since the
respective dates for which information is given in the Registration Statement
and Prospectus, in the earnings, business, prospects or condition (financial or
otherwise) of the Company, whether or not arising in the ordinary course of
business.
(ii) ▇▇▇▇▇ ▇▇▇▇ shall have the right, in its sole discretion,
to terminate this Agreement, including without limitation, the obligation to
purchase the Firm Securities and the obligation to purchase the Option
Securities after the exercise of the Over- Allotment Option, by notice given to
the Company prior to delivery and payment for all the Firm Securities or the
Option Securities, as the case may be, if any of the conditions enumerated in
Section 4 are not either fulfilled or waived by the Underwriter on or before any
Closing Date.
(iii) Anything herein to the contrary notwithstanding, if
this Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 8(a) hereof, the
Underwriter shall provide the Company with, and the Company shall pay, a
statement of the Underwriter's accountable expenses.
(b) NOTIFICATION. If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided by this Section 10
or by Section 9, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
11. UNDERWRITER'S WARRANT. On the First Closing Date, the
Company shall issue and sell to you, for $10.00, and upon the terms and
conditions set forth in the form of Underwriter's Warrants filed as an exhibit
to the Registration Statement, an option entitling you to purchase 180,000
shares of Common Stock and 270,000 Warrants at an exercise price equal to 165%
of the initial public offering price per unit exercisable for a period of four
years commencing one year from the Effective Date (the "Underwriter's Warrant").
The Underwriter's Warrant grant to the holders thereof certain "piggyback"
registration rights for a period of seven years, and demand registration rights
for a period of four years, commencing one year from the Effective Date with
respect to the registration under the Securities Act of the Securities issuable
30
31
upon exercise thereof. In the event of conflict in the terms of this Agreement
and the Underwriter's Warrant, the terms and conditions of the Underwriter's
Warrant shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties,
covenants and other statements of the Company and the Underwriter set forth in
Sections 3, 6, 7 and 8 of this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of any other party, and
shall survive delivery of and payment for the shares of Common Stock and
Warrants and the termination of this Agreement. The Company hereby indemnifies
and holds harmless the Underwriter from and against all Liabilities, joint or
several, to which the Underwriter may become subject insofar as such Liabilities
arise out of or are based upon the breach or failure of any of the provisions of
Sections 3, 6, 7 and 8.
13. NOTICES. All communications hereunder shall be in writing
and, except as otherwise expressly provided herein, if sent to you, shall be
mailed, delivered or telegraphed and confirmed to you at ▇▇▇▇▇ ▇▇▇▇ & Co., Inc.,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Esq., ▇▇▇▇▇▇▇, Savage, Kaplowitz, & ▇▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; or if sent to the Company, shall be mailed, delivered, or
telegraphed and confirmed to it at Rockwell Medical Technologies, Inc., ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇, 2290 First National Building, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
14. PARTIES IN INTEREST. This Agreement is made solely for the
benefit of the Underwriter, the Company, and, to the extent expressed, any
person controlling the Company or the Underwriter, as the case may be, and the
directors of the Company, nominees for directors of the Company (if any) named
in the Prospectus, officers of the Company who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such, from the Underwriter of the shares of Common Stock and
Warrants.
15. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The parties agree to submit
themselves to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York, which shall be
the sole tribunals in which any parties may institute and maintain a legal
proceeding against the other party arising from any dispute in this Agreement.
In the event either party initiates a legal proceeding in a jurisdiction other
than in the courts of the State of New York or of the United States of America
for the Southern District of New York, the other party may assert as a complete
defense and as a basis for dismissal of such legal proceeding that the legal
proceeding was not initiated and maintained in the courts of the State of New
York or of the United States of America for the Southern District of New York,
in accordance with the provisions of this Section 15.
31
32
16. ENTIRE AGREEMENT. This Agreement, the Underwriter's
Warrant and the Financial Consulting Agreement contain the entire agreement
between the parties hereto in connection with the subject matter hereof and
thereof.
17. COUNTERPARTS. This Agreement may be executed in two or
more counterpart copies, each of which shall be deemed and an original but all
of which together shall constitute one and the same instrument.
32
33
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
ROCKWELL MEDICAL TECHNOLOGIES, INC.
By:___________________________
Name:
Title:
Accepted as of the date
first above written:
New York, New York
▇▇▇▇▇ ▇▇▇▇ & CO., INC.
By: _______________________
Name:
Title:
33