1,150,000 Units
Milestone Scientific Inc.
UNDERWRITING AGREEMENT
___________, 2003
Xxxxxxx Investment Company, Inc.
As Representative of the
Several Underwriters
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Gentlemen:
Milestone Scientific Inc., a Delaware corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as Representative (the "Representative") an
aggregate of 1,000,000 Units (the "Firm Units"). Each Unit will consist of two
shares ("Share") of the common stock, par value $0.001 of the Company ("Common
Stock") and one warrant (individually, a "Warrant" and, collectively, the
"Warrants") each to purchase one share of Common Stock. The Warrants are to be
issued under the terms of a Warrant Agreement (the "Warrant Agreement") by and
between the Company and [______________], as warrant agent (the "Warrant
Agent"), in each case substantially in the form most recently filed as an
exhibit to the Registration Statement (hereinafter defined). The respective
number of the Firm Units to be so purchased by the several Underwriters are set
forth opposite their names in Schedule I hereto. The Company also proposes to
grant to the Representative an option to purchase in aggregate up to 150,000
additional Units, identical to the Firm Units (the "Option Units"), as set forth
below.
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I. The Firm Units and the
Option Units (to the extent the aforementioned option is exercised) are herein
collectively called the "Units."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
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1. Representations and Warranties of the Company. The Company represents
and warrants to each of the Underwriters as follows:
(a) A registration statement on Form S-2 (File No. __________) with
respect to the Units has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (i) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (ii) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Units, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Except as described in the
Registration Statement, the Company does not own a controlling interest in any
other corporation or other business entity that has any material assets,
liabilities or operations. Each entity that the Registration Statement discloses
as being controlled by the Company (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing under the laws
of its jurisdiction of organization and has the necessary legal power and
authority to own or lease its properties and to conduct its business as
described in the Registration Statement. The Company and each Subsidiary is duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification.
(c) The outstanding shares of each class or series of capital stock or
other equity interests of the Company and each Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable and, except
as disclosed in the Registration Statement, have been issued and sold by the
Company or the Subsidiary in compliance in all material respects with applicable
securities laws; the issuance and sale of the Units have been duly authorized by
all necessary corporate action and, when issued and paid for as contemplated
herein, the Units will be validly issued, fully paid and non-assessable; and no
preemptive rights of shareholders exist with respect to any security of the
Company or the issue and sale thereof. Except as set forth in the Registration
Statement, neither the filing of the Registration Statement nor the offering or
sale of the Units as contemplated by this Agreement gives rise to any rights,
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other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock or other securities of the Company.
The Company has duly and validly reserved, out of its authorized and unissued
Common Stock, for issuance upon exercise of Warrants a number of shares
sufficient for such purposes, including Warrants included in the Option Units
and Units obtainable on exercise of the Representative's Warrants issuable as
described in Section 2(d) (the "Representative's Warrants").
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Common Stock conforms and the Warrants
and the Representative's Warrants will conform to the description thereof
contained in the Registration Statement. The forms of certificates for the
Common Stock, the Warrants and the Representative's Warrants conform to the
requirements of the corporate law of Delaware.
(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Units nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements that are required to be stated therein by the Company and will
conform to the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative, specifically for use in
the preparation thereof.
(f) The consolidated financial statements of the Company, together
with related notes and schedules as set forth in the Registration Statement,
present fairly the consolidated financial position and the results of operations
and cash flows of the Company and its consolidated subsidiaries at the indicated
dates and for the indicated periods. The impact of each material accounting
judgment made in the preparation of the financial statements included in the
Registration Statement has been fairly and adequately disclosed in the notes
thereto or elsewhere in the Registration Statement. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein and in the Registration Statement, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data of the Company included in
the Registration Statement presents fairly the information shown therein and
such data has been compiled on a basis consistent with the financial statements
presented therein and the books and records of the Company.
(g) X.X. Xxxx LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants
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as required by the Act and the Rules and Regulations. There are no facts or
circumstances that would cause the selection and/or engagement of X.X. Xxxx LLP
as auditors of the Company's financial statements included in the Registration
Statement or the Prospectus to constitute a violation of Title II of the
Xxxxxxxx-Xxxxx Act of 2002 or any rules adopted or proposed to be adopted
pursuant thereto.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
before any court or administrative agency or otherwise which if determined
adversely to the Company or such Subsidiary might result in any material adverse
change in the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company or
prevent the consummation of the transactions contemplated hereby, except as set
forth in the Registration Statement.
(i) The Company and each Subsidiary either has, or has disposed of in
the ordinary course of business since December 31, 2002, good and marketable
title to all of its properties and assets, tangible and intangible, reflected in
the consolidated balance sheet of the Company and its consolidated Subsidiaries
as of that date that is a part of the financial statements included in the
Registration Statement, and has good and marketable title to all other property
described in the Registration Statement as owned by the Company or a Subsidiary,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
those reflected in such financial statements (or as described in the
Registration Statement) or which are not material. All of the leases and
subleases under which the Company or any Subsidiary holds properties are in full
force and effect (with only such exceptions as are commonly accepted by prudent
companies engaged in the business of the Company or such Subsidiary) and neither
the Company nor any Subsidiary has received notice of any claim that is
materially adverse to the rights of the Company or any Subsidiary under any of
such leases or subleases.
(j) The Company, for itself and its Subsidiaries that have been
consolidated for tax purposes, has filed all federal, state, local and foreign
income tax returns which have been required to be filed and has paid all taxes
indicated by said returns and all assessments received by it to the extent that
such taxes have become due and are not being contested in good faith. All tax
liabilities have been adequately provided for in the financial statements of the
Company. Except as described in the Registration Statement, all of the
Subsidiaries are consolidated with the Company for tax purposes.
(k) Since the respective dates as of which information is given in the
Registration Statement, as it may have been amended or supplemented, there has
not been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise), or
prospects of the Company or any Subsidiary, whether or not occurring in the
ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or any Subsidiary, other than transactions in the ordinary course
of business and changes and transactions described in the Registration
Statement, as it may be amended or supplemented. Neither the Company nor any
Subsidiary has any material contingent obligations which are not
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disclosed in the Company's financial statements included in the Registration
Statement or elsewhere in the Prospectus.
(l) Neither the Company nor any Subsidiary is, nor, with the giving of
notice or lapse of time or both, will any such entity be, in violation of or in
default under its Certificate of Incorporation or Bylaws or other charter
documents or under any agreement, lease, contract, indenture or other instrument
or obligation to which it is a party or by which it, or any of its properties,
is bound and which default is of material significance in respect of the
condition, financial or otherwise of the Company or such Subsidiary or the
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company or such Subsidiary. The
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which any member of the Company is a party, or of the
Certificate of Incorporation or Bylaws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Units for public offering by
the Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.
(n) The Company or a Subsidiary holds all patents, patent rights,
trademarks, trade names, copyrights, trade secrets and licenses of any of the
foregoing (collectively, "Intellectual Property Rights") that are necessary to
the conduct of its businesses; there is no claim pending or, to the best
knowledge of the Company, threatened against the Company or any Subsidiary or
any of their respective officers, directors or employees alleging any
infringement of Intellectual Property Rights, or any violation of the terms of
any license relating to Intellectual Property Rights, nor does the Company know
of any basis for any such claim. The Company knows of no infringement by others
of Intellectual Property Rights owned by or licensed to the Company or a
Subsidiary. The Company or a Subsidiary has obtained, is in compliance in all
material respect with and maintains in full force and effect all material
licenses, certificates, permits, orders or other, similar authorizations granted
or issued by any governmental agency (collectively "Government Permits")
required to conduct its business as it is presently conducted. No proceeding to
revoke, limit or otherwise materially change any Government Permit has been
commenced or, to the Company's best knowledge, is threatened against the Company
or any Subsidiary, and the Company has no reason to anticipate that any such
proceeding will be commenced against the Company or any Subsidiary. Except as
disclosed or contemplated in the Prospectus, the Company has no reason to
believe that any pending application for a Government Permit will be denied or
limited in a manner inconsistent with the Company's business plan as described
in the Prospectus.
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(o) The Company and each Subsidiary is in all material respects in
compliance with all applicable Environmental Laws. The Company has no knowledge
of any past, present or, as anticipated by the Company, future events,
conditions, activities, investigation, studies, plans or proposals that (i)
would interfere with or prevent compliance with any Environmental Law by the
Company or any Subsidiary or (ii) could reasonably be expected to give rise to
any common law or other liability, or otherwise form the basis of a claim,
action, suit, proceeding, hearing or investigation, involving the Company or any
Subsidiary and related to Hazardous Substances or Environmental Laws. Except for
the prudent and safe use and management of Hazardous Substances in the ordinary
course of the Company's business, (i) no Hazardous Substance is or has been
used, treated, stored, generated, manufactured or otherwise handled on or at any
Facility and (ii) to the Company's best knowledge, no Hazardous Substance has
otherwise come to be located in, on or under any Facility. No Hazardous
Substances are stored at any Facility except in quantities necessary to satisfy
the reasonably anticipated use or consumption by the Company. No litigation,
claim, proceeding or governmental investigation is pending regarding any
environmental matter for which the Company or any Subsidiary has been served or
otherwise notified or, to the knowledge of the Company, threatened or asserted
against the Company or any Subsidiary, or the officers or directors of the
Company or any Subsidiary in their capacities as such, or any Facility or the
Company's business. There are no orders, judgments or decrees of any court or of
any governmental agency or instrumentality under any Environmental Law which
specifically apply to the Company or any Subsidiary, any Facility or any of the
Company's or any Subsidiary's operations. Neither the Company nor any Subsidiary
has received from a governmental authority or other person (i) any notice that
it is a potentially responsible person for any Contaminated site or (ii) any
request for information about a site alleged to be Contaminated or regarding the
disposal of Hazardous Substances. There is no litigation or proceeding against
any other person by the Company or any Subsidiary regarding any environmental
matter. The Company has disclosed in the Prospectus or made available to the
Underwriters and their counsel true, complete and correct copies of any reports,
studies, investigations, audits, analyses, tests or monitoring in the possession
of or initiated by the Company or any Subsidiary pertaining to any environmental
matter relating to the Company, any Subsidiary, their past or present operations
or any Facility.
For the purposes of the foregoing paragraph, "Environmental Laws" means any
applicable federal, state or local statute, regulation, code, rule, ordinance,
order, judgment, decree, injunction or common law pertaining in any way to the
protection of human health or the environment, including without limitation, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Toxic Substances Control Act, the
Clean Air Act, the Federal Water Pollution Control Act and any similar or
comparable state or local law; "Hazardous Substance" means any hazardous, toxic,
radioactive or infectious substance, material or waste as defined, listed or
regulated under any Environmental Law; "Contaminated" means the actual existence
on or under any real property of Hazardous Substances, if the existence of such
Hazardous Substances triggers a requirement to perform any investigatory,
remedial, removal or other response action under any Environmental Laws or if
such response action legally could be required by any governmental authority;
"Facility" means any property currently owned, leased or occupied by the
Company.
(p) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or intends to take, directly or indirectly, any action
which is designed to
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cause or result in, or which constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock or the Warrants to facilitate the sale or resale of the Units.
(q) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and regulations
of the Commission thereunder.
(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has adopted Disclosure Controls and Procedures, as
defined in Section 13a-14(c) of the rules and regulations adopted under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and has
implemented such procedures as adopted and has evaluated the effectiveness of
such Disclosure Controls and Procedures.
(s) The Company and each Subsidiary carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.
(t) The Company and each Subsidiary is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any Subsidiary would have any liability; neither the
Company nor any Subsidiary has incurred and the Company does not expect that it
or any Subsidiary will incur liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any Subsidiary would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.
(u) The Company and each Subsidiary is in material compliance with all
laws, rules, regulations, orders of any court or administrative agency,
operating licenses or other requirements imposed by any governmental body
applicable to it, including, without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards applicable to the its
business; and the conduct of the business of the Company and each Subsidiary, as
described in the Prospectus, will not cause the Company or such Subsidiary to be
in violation of any such requirements.
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(v) Each of the Warrants and the Representative's Warrants have been
authorized for issuance to the purchasers thereof or to the Representative or
its designees, as the case may be, and will, when issued, possess rights,
privileges, and characteristics as represented in the most recent form of
Warrant Agreement or Representative's Warrants, as the case may be, filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Warrants and the Representative's Warrants, when issued and delivered
against payment therefor in accordance with the terms thereof, will be duly and
validly issued, fully paid, nonassessable and free of preemptive rights, and all
corporate action required to be taken for the authorization and issuance of the
Warrants and the Representative's Warrants, and the securities to be issued upon
their exercise, have been validly and sufficiently taken. The execution by the
Company of the Warrant Agreement and the Representative's Warrants has been duly
authorized by all required action of the Company and, when so executed and
delivered (and assuming due and valid execution by the Warrant Agent, in the
case of the Warrant Agreement) will constitute the valid an binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(w) Except as disclosed in the Prospectus, neither the Company nor any
of its officers, directors or affiliates have caused any person, other than the
Underwriters, to be entitled to reimbursement of any kind, including, without
limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Units, as a result of the consummation of such offering based on
any activity of such person as a finder, agent, broker, investment adviser or
other financial service provider.
(x) Except as described in the Prospectus, the Company does not
directly or indirectly control or have a material interest in any other business
entity.
(y) The Units, the Common Stock and the Warrants have been approved
for listing on the American Stock Exchange ("AMEX") upon the effectiveness of
the Registration Statement and the Company has satisfied all of the requirements
of AMEX for such listing and for the trading of its Common Stock, Units and
Warrants on AMEX.
(z) The Company has adopted organizational structures and policies
sufficient to comply with the requirements of the AMEX corporate governance
rules in effect as of the date hereof and as proposed to be amended in
accordance with any proposed rules of AMEX published for comment as of the date
hereof (collectively, the "AMEX Corporate Governance Rules"). Without limiting
the generality of the foregoing, the Company's Board of Directors has validly
appointed an Audit Committee and a Compensation Committee whose composition
satisfies the requirements of the AMEX Corporate Governance Rules. The Board of
Directors and/or the Audit Committee or Compensation Committee, as the case may
be, has adopted a charter governing the respective activities of the Audit and
Compensation Committees that satisfies the requirements of the AMEX Corporate
Governance Rules. The Audit Committee and the Compensation Committee have each
acted in accordance with the provisions of their respective charters, as amended
from time to time.
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(aa) Neither the Board of Directors nor the Audit Committee has been
informed, nor is any director of the Company aware, of (i) any significant
deficiencies in the design or operation of the Company's internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weakness in the Company's internal
controls; or (ii) any fraud, whether or not material, that involves management
or other employees of the Company who have a significant role in the Company's
internal controls.
(bb) Each of the certifications made by the principal executive and
principal financial officers of the Company pursuant to Section 302 of the
Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations adopted thereunder was
correct in all material respects when made.
(cc) The Company and each Subsidiary has complied with all provisions
of Section 517.075 Florida Statutes, relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
2. Purchase, Sale and Delivery of the Units.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of [$____] per Unit, the number of Firm
Units set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to be made in
New York Clearing House funds and, at the option of the Representative, by bank
wire to an account specified by the Company, certified or bank cashier's checks
drawn to the order of the Company, against either uncertificated delivery of
Firm Units or of certificates therefor (which delivery, if certificated, shall
take place in such location in New York, New York as may be specified by the
Representative) to the Representative for the several accounts of the
Underwriters. Such payment is to be made at the offices of the Representative at
the address set forth on the first page of this agreement, at 7:00 a.m., Pacific
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.) Except
to the extent uncertificated Firm Units are delivered at closing, the
certificates for the Firm Units will be delivered in such denominations and in
such registrations as the Representative requests in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representative at least one business day prior to the
Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriters to purchase the Option Units
at the price per Unit as set forth in Section 2(a). The option granted hereby
may be exercised in whole or in part by giving written notice (i) at any time
before the Closing Date and (ii) only once thereafter within 45 days after
9
the date of this Agreement, by the Representative to the Company setting forth
the number of Option Units as to which the Underwriters are exercising the
option, the names and denominations in which the Option Units are to be
registered and the time and date at which certificates representing such Units
are to be delivered. The time and date at which certificates for Option Units
are to be delivered shall be determined by the Representative but shall not be
earlier than three nor later than 10 full business days after the exercise of
such option, nor in any event prior to the Closing Date (such time and date
being herein referred to as the "Option Closing Date"). If the date of exercise
of the option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The option with
respect to the Option Units granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Units by the Underwriters. The
Representative may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Units shall be made on
the Option Closing Date in New York Clearing House funds and, at the option of
the Representative, by bank wire to an account specified by the Company, or
certified or bank cashier's check drawn to the order of the Company for the
Option Units to be sold by the Company in consideration either of uncertificated
delivery of Option Units or delivery of certificates therefor (which delivery,
if certificated, shall take place in such location in New York, New York as may
be specified by the Representative) to the Representative for the several
accounts of the Underwriters. Except to the extent uncertificated Option Units
are delivered at closing, the certificates for the Option Units will be
delivered in such denominations and in such registrations as the Representative
requests in writing not later than the second full business day prior to the
Option Closing Date, and will be made available for inspection by the
Representative at least one business day prior to the Option Closing Date.
(d) In addition to the sums payable to the Representative as provided
elsewhere herein, the Representative shall be entitled to receive at the
Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, Representative's Warrants for the
purchase of up to 100,000 Units at a price of [$____] per Unit, upon the terms
and subject to adjustment and conversion as described in the form of
Representative's Warrants filed as an exhibit to the Registration Statement.
3. Offering by the Underwriters.
(a) It is understood that the several Underwriters are to make a
public offering of the Firm Units as soon as the Representative deems it
advisable to do so. The Firm Units are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms. To the extent, if at all, that any Option Units are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.
It is further understood that you will act as the Representative for the
Underwriters in the offering and sale of the Units in accordance with an
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
10
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representative containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy or to which the
Representative shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(b) The Company will advise the Representative promptly (i) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (ii) of receipt of any comments from the Commission, (iii) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representative in endeavoring
to qualify the Units for sale under the securities laws of such jurisdictions as
the Representative may reasonably have designated in writing and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Representative may
reasonably request for distribution of the Units.
(d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representative such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representative
may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Units as contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
11
Company or in the reasonable opinion of the Underwriters, it becomes necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any time to
amend or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances existing
at the time the Prospectus is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representative similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(h) The Company will make no offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivatives of Common Stock (or agreement therefor), directly or indirectly, for
a period of ninety days after the date of this Agreement otherwise than
hereunder, or pursuant to contractual obligations existing on the date hereof or
pursuant to employee benefit plans in effect on the date hereof, or with the
prior written consent of the Representative, which consent will not be
unreasonably withheld.
(i) The Company will use its best efforts to list, subject to notice
of issuance of the Units, the Common Stock and the Warrants on the AMEX and to
cause such listing to remain in effect with respect to each such security unless
and until (i) such security expires; (ii) such security is listed on another
exchange of at least comparable reputation; or (iii) the Company is no longer
required to file reports under Section 12 of the Exchange Act.
(j) The Company has caused each officer and director and each person
who owns, beneficially or of record, shares of the Common Stock constituting 5%
or more of the Common Stock outstanding immediately prior to the date hereof to
furnish to you, on or prior to the date of this agreement, a letter or letters,
in form and substance satisfactory to the Underwriters ("Lock-up Agreements"),
pursuant to which each such person has agreed not to offer, sell, sell short or
otherwise dispose of any shares of Common Stock or other capital stock of the
Company, or any other securities convertible, exchangeable or exercisable for
Common Stock or derivatives of Common Stock owned by such person or request the
registration for the
12
offer or sale of any of the foregoing (or as to which such person has the right
to direct the disposition) for a period of 90 days after the date of this
Agreement, directly or indirectly, except with the prior written consent of the
Representative.
(k) The Company shall apply the net proceeds of its sale of the Units
as set forth in the Prospectus 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 in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company to register as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock, and shall comply with the provisions of the Warrant Agreement with
respect to the appointment and maintenance of a Warrant Agent for the Warrants.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
5. Costs and Expenses.
(a) The Representative shall be entitled to reimbursement from the
Company, for itself alone and not as Representative of the Underwriters, to a
non-accountable expense allowance equal to 3.0% of the aggregate initial public
offering price of the Firm Units and any Option Units purchased by the
Underwriters. The Representative shall be entitled to withhold this allowance on
the Closing Date related to the purchase of the Firm Units or the Option Units,
as the case may be.
(b) In addition to the payment described in Paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the AMEX listing application, the costs of due diligence
investigation of the principals of the Company, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees and expenses (including any fees and disbursements of counsel for the
Underwriters) incident to securing the required review by the NASD Regulation,
Inc. of the underwriting terms and arrangements; the AMEX listing fee; and the
expenses, including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Units under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the Units
to the several Underwriters will be paid by the Company. The Company agrees to
pay all costs and expenses of the Underwriters, including the fees and
disbursements of
13
counsel for the Underwriters, incident to the offer and sale of directed Units
by the Underwriters to employees and persons having business relationships with
the Company. The Company shall not, however, be required to pay for any of the
Underwriters' expenses (other than those related to qualification under NASD
regulation and state securities or Blue Sky laws) except that, if this Agreement
shall not be consummated, then the Company shall reimburse the several
Underwriters for accountable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Units or in contemplation of performing
their obligations hereunder; but the Company shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Units.
6. Conditions of Obligations of the Underwriters. The several obligations
of the Underwriters to purchase the Firm Units on the Closing Date and the
Option Units, if any, on the Option Closing Date are subject to the accuracy, as
of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company contained herein, and to the
performance by the Company of their covenants and obligations hereunder and to
the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representative and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Units.
The Representative shall have received on the Closing Date or the Option Closing
Date, as the case may be, the opinion of Morse, Zelnick, Rose & Lander LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement.
(ii) Each Subsidiary has been duly organized and is validly
existing as a business entity in good standing under the laws of its
jurisdiction of formation with all requisite power and authority under the laws
governing such entities to own or lease its properties and conduct its business
as described in the Registration Statement.
(iii) The Company and each Subsidiary is duly qualified to
transact business in all jurisdictions in which the conduct of its business
requires such qualification, or in
14
which the failure to qualify would have a material adverse effect upon the
business of the Company.
(iv) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable; all of the securities of the Company conform to
the description thereof contained in the Prospectus; the certificates for the
Common Stock and the Warrants are in due and proper form; no preemptive rights
of shareholders exist with respect to any of the Common Stock or the issuance or
sale thereof pursuant to any applicable statute or the provisions of the
Company's Articles of Incorporation or Bylaws or, to such counsel's best
knowledge, pursuant to any contractual obligation. The Company's ownership
interest in each Subsidiary is, in all material respects, as described in the
Registration Statement.
(v) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Units or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(vi) The Warrant Agreement and the Warrants have been duly
authorized by the Company. When duly executed, authenticated, issued and
delivered as contemplated in the Registration Statement and the Warrant
Agreement, the Warrant Agreement and the Warrants will constitute legally
binding obligations of the Company, enforceable against it in accordance with
their terms and, in the case of the Warrants, entitled to the benefits of the
Warrant Agreement subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(vii) The Warrants are exercisable to purchase Common Stock in
accordance with the terms of the Warrant Agreement; the shares of Common Stock
initially issuable upon exercise of the Warrants (including Warrants comprising
the Option Units and Warrants issuable on exercise of the Representative's
Warrants) have been duly authorized and reserved for issuance upon such
conversion or exercise, as the case may be, and, when issued upon such
conversion or exercise in accordance with the terms of the Warrant Agreement
will be validly issued, fully paid and nonassessable.
(viii) The Representative's Warrants have been duly authorized by
the Company. When duly executed, issued and delivered as contemplated in the
Registration
15
Statement, the Representative's Warrants will constitute the legally binding
obligation of the Company, enforceable against it in accordance with its terms
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(ix) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.
(x) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).
(xi) The statements under the captions "Business-Patents and
Intellectual Property," "Business-Government Regulation," "Shares Eligible for
Future Sale," "Description of Securities" and _______________________ in the
Prospectus and in Items __ and __ of the Registration Statement, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called for with
respect to such documents and matters.
(xii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(xiii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any Subsidiary.
(xiv) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of the
Company, as amended, or any agreement or instrument known to such counsel to
which the Company is a party or by which the Company may be bound.
(xv) Each of this Agreement and the Warrant Agreement has been
duly authorized, executed and delivered by the Company.
(xvi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD, as to which such counsel need
express no opinion) except such as have been obtained or made, specifying the
same.
(xvii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net
16
proceeds therefrom as described in the Prospectus, required to register as an
investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters governed by the
laws of states other than Oregon, or federal laws on local counsel in such
jurisdictions, provided that in each case such counsel shall state that they
believe that they and the Underwriters are justified in relying on such other
counsel. In addition to the matters set forth above, the opinion of Morse,
Zelnick, Rose & Lander LLP shall also include a statement to the effect that
nothing has come to the attention of such counsel that has caused them to
believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein).
(b) The Representative shall have received from Holland & Knight LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (ix) and (x) of Paragraph (b) of this Section 6. In rendering such
opinion Holland & Knight LLP may rely as to all matters governed other than by
the laws of the State of Oregon or Federal laws on the opinion of counsel
referred to in Paragraph (b) of this Section 6. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel that has caused them to
believe that (i) the Registration Statement, or any amendment thereto, as of the
time it became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act) and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to such
statement, Holland & Knight LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(c) The Representative shall have received at or prior to the Closing
Date from Holland & Knight LLP a memorandum or summary, in form and substance
satisfactory to the Representative, with respect to the qualification for
offering and sale by the Underwriters of the Units under the state securities or
Blue Sky laws of such jurisdictions as the Representative may reasonably have
designated to the Company.
17
(d) The Representative, on behalf of the several Underwriters, shall
have received, on each of the dates hereof, the Closing Date and the Option
Closing Date, as the case may be, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representative, of X.X. Xxxx LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(e) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for such purpose have been taken or are, to his
or her knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company or
the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company, whether or not
arising in the ordinary course of business.
18
(f) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representative may reasonably have requested.
(g) The Common Stock and the Warrants have been approved for
listing upon notice of issuance of the Units on AMEX.
(h) The Lock-up Agreements described in Section 4(j) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representative and to Holland & Knight LLP, counsel
for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company. The obligations of the
Company to sell and deliver the portion of the Units required to be delivered as
and when specified in this Agreement are subject to the conditions that at the
Closing Date or the Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue
19
statement, or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representative specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, 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, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the 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, in
the light of the circumstances under which they were made, not misleading; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation) the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any
20
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation
21
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Units purchased by such Underwriter, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Units and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters. If on the Closing Date or the Option Closing
Date, as the case may be, any Underwriter shall fail to purchase and pay for the
portion of the Units which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of the
Company), you, as Representative of the Underwriters, shall use reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Units or Option Units,
as the case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representative, shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion
22
to the respective numbers of Firm Units or Option Units, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Units or
Option Units, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of Firm Units or
Option Units, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Units or Option Units, as the case may be, covered
hereby, the Company or you as the Representative of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representative, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows:
if to the Underwriters, to
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X.X. Xxxxxxx
with a copy, which shall not constitute notice, to
Holland & Knight LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxx X. xxx Xxxxxx
if to the Company, to
Milestone Scientific Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxx
with copy, which shall not constitute notice, to
Morse, Zelnick, Rose & Lander LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
23
11. Termination. This Agreement may be terminated by you by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the Units are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company, the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company, whether or not arising in the ordinary
course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Units or to enforce contracts for
the sale of the Units, (iii) the Dow Xxxxx Industrial Average shall have fallen
by 15 percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the New York
Stock Exchange or AMEX or limitation on prices (other than limitations on hours
or numbers of days of trading) for securities on either such Exchange, (v) the
enactment, publication, decree or other promulgation of any statute, regulation,
rule or order of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect the
business or operations of the Company, (vi) declaration of a banking moratorium
by United States or New York State authorities, (vii) any downgrading in the
rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (viii) the suspension of trading of the Common Stock or the
Warrants by the Commission or AMEX, or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors. This Agreement has been and is made solely for the benefit
of the Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters. The Company and the Underwriters
acknowledge and agree that the only information furnished or to be furnished by
any
24
Underwriter to the Company for inclusion in the Prospectus or the Registration
Statement consists of the information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriters),
legends required by Item 502(b) of Regulation S-B under the Act and the
information under the caption "Underwriting" in the Prospectus.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Units under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oregon. All disputes relating to this Underwriting
Agreement shall be adjudicated before a court located in Multnomah County,
Oregon to the exclusion of all other courts that might have jurisdiction.
(Remainder of page intentionally left blank; signature page follows)
25
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
MILESTONE SCIENTIFIC INC.
By: ______________________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By: ______________________________________
Name:
Title:
26
SCHEDULE I
Schedule of Underwriters
Number of Firm Units
Underwriter to Be Purchased
------------------------------------------ -------------------------------
Xxxxxxx Investment Company, Inc.
Total
# 1331484_v1
