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EXHIBIT 1.1
ROCKWELL MEDICAL TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
Dated: , 1997
MAIDSTONE FINANCIAL, INC.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
The undersigned, ROCKWELL MEDICAL TECHNOLOGIES, INC., a
Michigan corporation (the "Company"), proposes to issue and sell to Maidstone
Financial, Inc. ("Maidstone" or "Underwriter") pursuant to this Underwriting
Agreement ("Agreement"), an aggregate of 1,500,000 Units (the "Units"), each
consisting of one share of the common stock, no par value per share, of the
Company (the "Common Stock"), and two Class A Redeemable Common Stock Purchase
Warrants (the "Warrants"). The Warrants are each 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 included in the
Units will be detachable and 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
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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 $8.50.
In addition, the Company proposes to grant to Maidstone the
Over-Allotment Option (as defined in Section 2(c) hereof) to purchase all or
any part of an aggregate of 225,000 additional Units, and to issue to you the
Underwriter's Unit Purchase Options (as defined in Section 11 hereof) to
purchase certain further additional Units.
The aggregate of 1,500,000 shares of Common Stock comprising
the Units to be sold by the Company, together with the aggregate of 225,000
additional shares of Common Stock comprising the Units that are the subject of
the Over-allotment Option, are herein collectively called the "Shares." The
Units, the Shares, the Warrants (including the Warrants included in the Units,
the additional Warrants included in the Units subject to the Over-Allotment
Option and the Warrants issuable upon exercise of the Underwriter's Unit
Purchase Options), the shares of Common Stock issuable upon exercise of the
Warrants and the shares of Common Stock issuable upon exercise of the
Underwriter's Unit Purchase Options, are herein collectively called the
"Securities." The term "Underwriter's Counsel" shall mean the firm of Xxxxxxx,
Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP, counsel to the Underwriter, and
the term "Company Counsel" shall mean the firm of Xxxxxxxx Xxxxxx Xxxxxxxx &
Xxxx, 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
Units as herein provided. The Company confirms the agreements made by it with
respect to the purchase of the Units 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. 33-_______) 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
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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 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 Unit Purchase Options, to the Selling Security Holders named in
the Registration Statement, 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
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business, properties or financial condition of the Company or the Subsidiary,
as the case may be.
(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 Unit Purchase Option, 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 Unit Purchase Option 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 Unit
Purchase Option, 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
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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 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 & Xxxxxxx,
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
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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 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 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
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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 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
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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 Units 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, 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 the National
Association of
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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 Lock-Up 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 UNITS
(a) PURCHASE PRICE FOR UNITS. The Units shall be
sold to and purchased by the Underwriter at the purchase price of $3.78 per
Unit (that being the public offering price of $4.20 per Unit less an
underwriting discount of 10 percent) (the "Purchase Price").
(b) FIRM UNITS.
(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 Units").
(ii) Delivery of the Firm Units against
payment therefor shall take place at the offices of Maidstone Financial, Inc.,
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (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 eight
business days after the Effective Date, as you may designate (such time and
date of payment and delivery for the Firm Units being herein called the "First
Closing Date"). Time shall be of the essence and delivery of the Firm Units at
the time and place specified in this Section 2(b)(ii) is a further condition to
the obligations of the Underwriter hereunder.
(c) OPTION UNITS.
(i) In addition, subject to the terms
and conditions of this Agreement, and on the basis of the representations,
warranties and agreements herein contained,
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the Company hereby grants to Maidstone an option (the "Over-Allotment Option"),
to purchase from the Company all or any part of an aggregate of an additional
225,000 Units at the Purchase Price (the "Option Units").
(ii) The Over-Allotment Option may be
exercised by Maidstone, in whole or in part, within forty-five days after the
Effective Date, upon written notice by Maidstone to the Company advising it of
the number of Option Units as to which the Over- Allotment Option is being
exercised, the names and denominations in which the certificates for the Shares
and the Warrants comprising such Option Units 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 Units against payment therefor
shall take place at Maidstone's 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 Units.
(d) DELIVERY OF CERTIFICATES; PAYMENT.
(i) The Company shall make the
certificates for the Shares and the Warrants comprising the Units 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
comprising the Firm Units 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
Maidstone exercises the Over-Allotment Option, then on the Option Closing Date
the Company shall deliver to you for the account of Maidstone or its designees
definitive engraved certificates in negotiable form representing the Shares and
the Warrants comprising the Option Units to be sold by the Company, against
payment of the Purchase Price therefor by Maidstone for the account of
Maidstone or its designees, by certified or bank cashier's checks payable in
next day funds to the order of the Company.
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(iv) It is understood that the
Underwriter proposes to offer the Units 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 Units 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 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
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Prospectus is required to be delivered to a purchaser of the Units, 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 Units, 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 Units. The Company shall bear all of 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). 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
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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 Unit Purchase Option 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.
(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,
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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 Units 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 Units 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 Xxxxx'x 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 Fist Closing Date, the Company shall nominate and use its
best efforts to engage a designee of Maidstone 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, officer, partner, employee or affiliate of an Underwriter,
and Maidstone shall designate such person in writing to the Board. In the
event Maidstone 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 Maidstone of each meeting of the Board. An individual, if any,
designated
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by Maidstone 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 Maidstone 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
Maidstone's prior written consent, register 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 Unit Purchase Options) or
other rights, whether
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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 Maidstone's
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 Unit Purchase Option, the Warrants
underlying the Underwriter's Unit Purchase Option, 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 Maidstone's 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 Maidstone (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
Maidstone, (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 Maidstone a commission of five (5%) percent of the
aggregate exercise price of such Warrants, a portion of which may be reallowed
by Maidstone 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 Maidstone 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
Unit Purchase Options, and the Warrants issuable upon exercise of the
Underwriter's Unit Purchase Options, in each case taking into account the
anti-dilution provisions thereof.
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(t) FINANCIAL CONSULTING AGREEMENT. On the First
Closing Date and simultaneously with the delivery of the Firm Units, the
Company shall execute and deliver to Maidstone an agreement with Maidstone, or
its representative, in the form previously delivered to the Company by
Maidstone, regarding the services of Maidstone 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 Xxxxxx Xxxxxxx. Prior to the Effective Date,
the Company shall have obtained "key-employee" life insurance coverage in the
amount of $1,000,000 on Xx. Xxxxxx. Prior to the Effective Date, the Company
shall have entered into an employment agreement with Xx. Xxxxxxx 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 Maidstone, 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
Maidstone, 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 Units 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 Company contained
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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 and all of the Warrants comprising the Units 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 promulgated under the Act or
contained in the Lock-up Agreements
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executed with the Underwriter, there are no restrictions upon the
voting or transfer of, any of the Securities; (E) the Shares and the
Warrants comprising the Units, the Warrant Agreement and the
Underwriter's Unit Purchase Option 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 Unit Purchase
Option) 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 Units 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
and the Warrants comprising the Units 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 Unit Purchase Option, 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 Continental 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 Unit Purchase
Option, 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;
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(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 Unit Purchase Option, 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.
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(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 Unit Purchase Option 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.
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(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 & Xxxxxxx, 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 Continental Stock Transfer &
Trust Company (or other agent mutually acceptable to the Company and
Maidstone), as its transfer agent and warrant agent ("Transfer Agent") to
transfer all of the Shares 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
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reasonably request for the purpose of enabling them to render their legal
opinion to the 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 Unit Purchase Option, 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, Maidstone's obligations to purchase and pay for the
Option Units 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
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same in scope and substance as the opinion furnished to you on the First
Closing Date pursuant to Section 4(b), except that such opinion, where
appropriate, shall cover the Option Units rather than the Firm Units. 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
Units 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
Maidstone from Coopers & Xxxxxxx, 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 Units 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 UNITS. On the applicable Closing
Date, you shall have made payment, for the several accounts of the Underwriter,
of the aggregate Purchase Price for
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the Units 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 Units 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,
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from and 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
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counsel to represent both of them (in which case the indemnifying party shall
into have the right to assume the defense of such action 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 Unit appearing on the cover page of the
Prospectus bears to the public Offering price per Unit 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
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liabilities of any persons having 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 Units 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 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 Units
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 Maidstone the balance of a non-accountable expense
allowance, which shall include fees of Underwriter's
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Counsel, exclusive of the fees referred to in Section 3(b), of $189,000 (that
being an amount equal to three percent (3%) of the gross proceeds received upon
sale of the Firm Units), of which $63,000 has been paid to Maidstone prior to
the date hereof. In the event that the Over-Allotment Option is exercised,
then the Company shall, on the Option Closing Date, pay to Maidstone, based on
the number of Option Units 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 Units, in the amount of $28,350 if the Over-Allotment Option is
exercised in full. In the event that the transactions contemplated hereby fail
to be consummated for any reason, then Maidstone shall return to the Company
that portion of $63,000 heretofore paid by the Company to the extent that it
has not been utilized by you in connection with the Offering for accountable
out-of-pocket expenses; provided, however, that if such failure is due to a
breach by the Company of any covenant, representation or warranty contained
herein or because any other condition to the Underwriter's obligations
hereunder required to be fulfilled by the Company is not fulfilled, then the
Company shall be liable for your accountable out-of-pocket expenses to the full
extent thereof (with credit given to the $63,000 paid).
(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 Units. 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 Units, or the time when the
Units 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.
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(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 Units 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 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) Maidstone shall have the right, in
its sole discretion, to terminate this Agreement, including without limitation,
the obligation to purchase the Firm Units and the obligation to purchase the
Option Units after the exercise of the Over- Allotment Option, by notice given
to the Company prior to delivery and payment for all the Firm Units or the
Option Units, 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.
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11. UNDERWRITER'S UNIT PURCHASE OPTION. 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 Unit Purchase
Options filed as an exhibit to the Registration Statement, an option entitling
you to purchase 150,000 Units at an exercise price equal to 120% 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 Unit Purchase
Option"). The Underwriter's Unit Purchase Option 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 upon exercise thereof. In the event of conflict in the
terms of this Agreement and the Underwriter's Unit Purchase Option, the terms
and conditions of the Underwriter's Unit Purchase Option 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 Units 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 Maidstone
Financial, Inc., 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy
sent to Xxx X. Xxxxxxxxx, Esq., Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx &
Xxxxxx, LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; or if sent to the
Company, shall be mailed, delivered, or telegraphed and confirmed to it at
Rockwell Medical Technologies, Inc., 00000 Xxxxxxx Xxxx Xxxxx, Xxxxx, Xxxxxxxx
00000, with a copy sent to Xxxxxxx X. Xxxxx, Esq., Xxxxxxxx Xxxxxx Xxxxxxxx &
Xxxx, 2290 First National Building, 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000-0000.
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 Units.
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
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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.
16. ENTIRE AGREEMENT. This Agreement, the Underwriter's
Unit Purchase Option, 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.
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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
MAIDSTONE FINANCIAL, INC.
By:________________________________
Name:
Title:
33
