<PAGE> 1
As filed with the Securities and Exchange Commission on July 24, 1997
Registration No. 333-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------
ROCKWELL MEDICAL TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
Michigan 3845 38-3317208
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
28025 Oakland Oaks Drive
Wixom, Michigan 48393
Telephone: (248) 449-3353
(Address and telephone number of principal executive offices)
28025 Oakland Oaks Drive
Wixom, Michigan 48393
(Address of principal place of business or intended principal place of business)
------------------------
ROBERT L. CHIOINI
President and Chief Executive Officer
Rockwell Medical Technologies, Inc.
28025 Oakland Oaks Drive
Wixom, Michigan 48393
Telephone: (248) 449-3353
(Name, address and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Patrick T. Duerr, Esq. Jay M. Kaplowitz, Esq.
Honigman Miller Schwartz and Cohn Arthur S. Marcus, Esq.
2290 First National Building Gersten, Savage, Kaplowitz,
Detroit, Michigan 48226-3583 Fredericks & Curtin, LLP
Telephone: (313) 256-7736 101 East 52nd Street
Telecopier: (313) 256-4215 New York, New York 10022-6018
Telephone: (212) 752-9700
Telecopier: (212) 980-5192
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement is declared effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] ____________
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1)
- ------------------------------------------------------------------------------------------------------------------------
Units (each consisting of one Common Share, no par value,
and two Warrants)........................................ 1,725,000(2) $4.20 $7,245,000
- ------------------------------------------------------------------------------------------------------------------------
Common Shares issuable upon exercise of Warrants........... 3,450,000(3) $4.50 $15,525,000
- ------------------------------------------------------------------------------------------------------------------------
Underwriter Warrants to purchase Units (each consisting of
one Common Share, no par value, and two Warrants)........ 150,000(3) $.000067 $10.00
- ------------------------------------------------------------------------------------------------------------------------
Underwriter Units (each consisting of one Common Share, no
par value, and two Warrants)............................. 150,000(3) $5.04 $756,000
- ------------------------------------------------------------------------------------------------------------------------
Common Shares issuable upon exercise of Underwriter
Warrants................................................. 300,000(3) $4.50 $1,350,000
- ------------------------------------------------------------------------------------------------------------------------
Total Registration Fee..................................................................................................
========================================================================================================================
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<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT OF
TITLE OF EACH CLASS OF REGISTRATION
SECURITIES TO BE REGISTERED FEE
- ------------------------------------------------------------------------------------------------------------------------
Units (each consisting of one Common Share, no par value,
and two Warrants)........................................ $2,195.45
- ------------------------------------------------------------------------------------------------------------------------
Common Shares issuable upon exercise of Warrants........... $4,704.55
- ------------------------------------------------------------------------------------------------------------------------
Underwriter Warrants to purchase Units (each consisting of
one Common Share, no par value, and two Warrants)........ (4)
- ------------------------------------------------------------------------------------------------------------------------
Underwriter Units (each consisting of one Common Share, no
par value, and two Warrants)............................. $229.09
- ------------------------------------------------------------------------------------------------------------------------
Common Shares issuable upon exercise of Underwriter
Warrants................................................. $409.09
- ------------------------------------------------------------------------------------------------------------------------
Total Registration Fee..................................... $7,538.18
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee, based
on a bona fide estimate of the maximum public offering price pursuant to
Rule 457(a) promulgated under the Securities Act of 1933.
(2) Includes 225,000 Units which may be purchased by the Underwriters to cover
over-allotments, if any.
(3) Pursuant to Rule 416, there are also being registered such indeterminate
number of additional shares as may become issuable pursuant to the
anti-dilution provisions of the Warrants and the Underwriter Warrants (and
the Warrants included therein).
(4) Pursuant to Rule 457(g) promulgated under the Securities Act of 1933, no
filing fee is required.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 24, 1997
PROSPECTUS
ROCKWELL MEDICAL TECHNOLOGIES, INC.
1,500,000 UNITS
CONSISTING OF 1,500,000 COMMON SHARES AND
3,000,000 COMMON SHARE PURCHASE WARRANTS.
Each unit ("Unit") of Rockwell Medical Technologies, Inc. (the "Company")
consists of (i) one of the Company's common shares, no par value (the "Common
Shares"), and (ii) two redeemable common share purchase warrants (the
"Warrants"), which are transferable separately immediately upon issuance. Each
Warrant entitles the registered holder thereof to purchase one Common Share at
an exercise price of $4.50 per share, subject to adjustment in certain events,
at any time during the period commencing one year from the date upon which the
Registration Statement of which this Prospectus forms a part is declared
effective by the Securities and Exchange Commission (the "Effective Date") and
expiring on the fourth anniversary of the Effective Date. The Warrants are
subject to redemption by the Company for a redemption price of $.10 per Warrant
at any time commencing one year from the Effective Date (with the prior consent
of Maidstone Financial, Inc. (the "Underwriter")) on no less than 30 days prior
written notice to the holders of the Warrants, provided the closing bid price of
the Common Shares had been greater than $8.50 per share for 20 consecutive
trading days ending on the third day prior to the date on which the Company gave
notice of redemption. The Warrants will be exercisable until the close of
business on the day immediately preceding the date fixed for redemption. See
"Description of Securities." The Common Shares and Warrants offered hereby are
collectively referred to as the "Securities."
Prior to this offering ("Offering"), there has been no public market for
the Units, the Common Shares or the Warrants, and there can be no assurance that
any such market for the Units, the Common Shares or the Warrants will develop
after the closing of the Offering, or that, if developed, it will be sustained.
The offering price of the Units and the exercise price and the other terms of
the Warrants were established by negotiations between the Company and the
Underwriter and do not necessarily bear any direct relationship to the Company's
asset value, earnings, book value per share or other generally accepted criteria
of value. See "Underwriting". It is expected that the initial public offering
price will be $4.20 per Unit.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION TO THE PUBLIC. ONLY INVESTORS WHO
CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT SHOULD INVEST. FOR A
DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN THE COMPANY AND
IMMEDIATE SUBSTANTIAL DILUTION, SEE "RISK FACTORS" COMMENCING ON PAGE 8 AND
"DILUTION" AT PAGES 17-18.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit.............................. $ $ $
- -----------------------------------------------------------------------------------------------------------------
Total(3).............................. $ $ $
=================================================================================================================
</TABLE>
(footnotes appear on page 2)
-------------------------
MAIDSTONE FINANCIAL, INC.
MAIDSTONE LOGO
-------------------------
The date of this Prospectus is , 1997
<PAGE> 3
(1) Does not include additional compensation to be received by the
Underwriter consisting of (i) a non-accountable expense allowance
payable to the Underwriter in the amount of $189,000 ($217,350 if the
Over-Allotment Option (as defined below), is exercised in full), or
$0.126 per Unit, (ii) warrants (the "Underwriter Warrants") entitling
the Underwriter to purchase up to 150,000 Units for a purchase price of
$5.04 per Unit (120% of the initial public offering price), exercisable
at any time during the period commencing one year from the Effective
Date and expiring on the fourth anniversary of the Effective Date, and
(iii) a financial advisory agreement with the Underwriter for 24 months
commencing on the date of the closing of the Offering for a fee of
$4,166 per month, or an aggregate of $99,984, payable in its entirety
at the closing of the Offering. In addition, the Company has (i)
granted to the Underwriter, effective upon completion of this Offering,
a right of first refusal for a period of three years after the
Effective Date for any public or private offering of securities by the
Company, its affiliates or any present or future subsidiaries to raise
capital, and (ii) agreed to pay the Underwriter, under certain
circumstances, a warrant solicitation fee of 5% of the exercise price
of each Warrant exercised and to indemnify the Underwriter against
certain civil liabilities, including those arising under the Securities
Act of 1933, as amended (the "Securities Act"). See "Underwriting."
(2) After deducting discounts and commissions payable to the Underwriter,
but before deducting the expenses of this Offering payable by the
Company, estimated at $700,000 (approximately $0.47 per Unit),
including the Underwriter's non-accountable expense allowance and the
financial advisory fee. See "Underwriting."
(3) The Company has granted the Underwriter an option, exercisable for a
period of 45 days after the Effective Date, to purchase up to an
additional 225,000 Units, upon the same terms and conditions as the
Units being offered by this Prospectus solely for the purpose of
covering over-allotments, if any (the "Over-Allotment Option"). If the
Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$7,245,000, $724,500 and $6,520,500, respectively. See "Underwriting."
The Units are being offered by the Underwriter on a "firm commitment"
basis, subject to prior sale, when, as and if delivered to the Underwriter and
subject to certain conditions. Subject to the provisions of the underwriting
agreement between the Underwriter and the Company, the Underwriter reserves the
right to withdraw, cancel or modify the Offering and to reject any order in
whole or in part. It is expected that delivery of certificates representing the
Common Shares and the Warrants will be made against payment therefor at the
offices of the Underwriter, 101 East 52nd Street, New York, New York 10022, on
or about , 1997.
------------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE UNITS, THE COMMON
SHARES AND THE WARRANTS OFFERED HEREBY, INCLUDING PURCHASES OF THE UNITS, THE
COMMON SHARES OR THE WARRANTS TO STABILIZE THEIR MARKET PRICES, PURCHASES OF THE
UNITS, THE COMMON SHARES OR THE WARRANTS TO COVER SOME OR ALL OF A SHORT
POSITION IN THE UNITS, THE COMMON SHARES OR THE WARRANTS MAINTAINED BY THE
UNDERWRITER AND PENALTY BID TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE> 4
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act
with respect to the securities offered hereby (the "Registration Statement").
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto as permitted by the Rules and
Regulations of the Commission. For further information with respect to the
Company and such securities, reference is made to the Registration Statement and
to the exhibits filed therewith. Statements contained in this Prospectus as to
the contents of any contracts or other documents referred to herein are not
necessarily complete and where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit to which reference is made for a full statement
of the provisions thereof. The Registration Statement, including exhibits filed
therewith, may be inspected, without charge, at the principal office of the
Commission located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
Copies of all or any part of the Registration Statement (including the exhibits
thereto) also may be obtained from the Public Reference Section of the
Commission at the its principal office in Washington, D.C., at the Commission's
prescribed rates. Electronic registration statements made through the Electronic
Data Gathering Analysis and Retrieval system are publicly available through the
Commission's web site at http://www.sec.gov.
Before the Effective Date, the Company was not obligated to file periodic
reports with the Commission under Section 15(d) or 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends to
furnish its shareholders and holders of the Warrants with annual reports
containing audited financial statements and such other reports as the Company
deems appropriate or as may be required by law.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information, financial statements and related notes appearing elsewhere
in this Prospectus. Each prospective investor is urged to read this Prospectus
in its entirety and carefully consider the information set forth under the
heading "Risk Factors." Unless the context requires otherwise, all references
herein to the Company include Rockwell Medical Technologies, Inc., a Michigan
corporation, and Rockwell Transportation, Inc., a Michigan corporation, a
wholly-owned subsidiary of the Company. Except as otherwise stated, all
information assumes no exercise of the Over-Allotment Option.
THE COMPANY
Rockwell Medical Technologies, Inc. manufactures hemodialysis concentrates
and dialysis kits, and sells, distributes and delivers such concentrates and
dialysis kits, as well as other hemodialysis products, to hemodialysis providers
in the United States and Venezuela. Hemodialysis is a process which duplicates
kidney function in patients whose kidneys have failed to function properly.
Without properly functioning kidneys, the patient's body cannot rid itself of
excess water and waste products nor regulate the amount of electrolytes in the
patient's blood. Without hemodialysis, these patients would die.
Hemodialysis patients generally receive their treatment at hospitals or
independent hemodialysis providers. According to the United States Department of
Health and Human Services (the "DHHS"), since 1973 the total number of
hemodialysis providers in the U.S. has more than quintupled from 606 in 1973 to
over 3,082 in December 1996. Independent providers comprised 2,212 of such
providers and hospitals comprised 746 of such providers. The Company currently
supplies over 220 hemodialysis providers in 18 states across the United States,
as well as hemodialysis providers in Venezuela. The number of patients receiving
hemodialysis has also grown substantially in recent years. According to the
DHHS, in 1985, there were approximately 68,390 patients receiving hemodialysis
treatments in the United States. It is estimated by the DHHS that in 1996 over
216,000 patients received hemodialysis treatments. According to the DHHS, from
1985 to 1996, the number of hemodialysis stations, which are areas equipped to
provide adequate and safe dialysis therapy, grew from 17,845 stations to 45,244
stations.
A hemodialysis station contains a dialysis machine that takes a concentrate
solution and certain chemical powders and accurately dilutes them with purified
water. The resulting solution, known as dialysate, is them pumped through a
device known as an artificial kidney (dialyzer), while at the same time, the
patient's blood is pumped through a membrane within the dialyzer. Excess water
and chemicals from the patient's blood pass through the membrane and are carried
away in the dialysate while certain chemicals in the dialysate pass through the
membrane into the patient's blood to maintain proper chemical levels in the
body. In addition to using concentrate solutions and chemical powders (which
must be replaced for each use by each patient), a dialysis station also requires
various other ancillary products such as dialysis on-off kits, sterile
subclavian dressing change trays, arterial and venous blood tubing lines,
fistula needles, intravenous administration sets, transducer protectors,
dialyzers and over 120 other ancillary products, all of which the Company sells.
The Company's objective is to increase its market share in the expanding
hemodialysis market and become profitable by (i) acting as a single source
supplier to hemodialysis clinics by offering over 120 different products used by
hemodialysis providers, (ii) increasing revenue by manufacturing and/or
distributing new products which may offer the Company opportunities to earn
higher profit margins than some of the Company's existing products, and
generating "back-haul" revenue from its trucking operations, and (iii) using its
own delivery vehicles and drivers to deliver its products, thereby offering a
high level of customer service to hemodialysis providers.
The Company is a Michigan corporation, incorporated on October 25, 1996. On
February 19, 1997, the Company acquired substantially all of the assets of
Rockwell Medical Supplies, LLC (the "Supply Company") and of Rockwell
Transportation, LLC (the "Transportation Company") (collectively, the
"Predecessor Company" or "Sellers") used in connection with the business of
manufacturing hemodialysis
4
<PAGE> 6
concentrates and dialysis kits and distributing and delivering these and other
products to hemodialysis clinics. The Predecessor Company began operations in
January 1996.
In connection with the acquisition of the business of the Predecessor
Company, the Company has issued 1,416,664 shares of non-voting Series A
Preferred Stock, $1.00 par value per share (the "Series A Preferred Stock"), to
the Supply Company, which Series A Preferred Stock pays an 8.5% cumulative
dividend. The Company has an obligation to redeem the Series A Preferred Stock
on or before January 31, 1998 (the "Mandatory Redemption Date"). See "Certain
Transactions -- Acquisition of Business of Predecessor Company" and Note 9 of
Notes to Consolidated Financial Statements included in this Prospectus. The
Company intends to use a portion of the net proceeds of the Offering to redeem
the Series A Preferred Stock. See "Use of Proceeds."
The executive offices of the Company are located at 28025 Oakland Oaks,
Wixom, Michigan 48393 (telephone number (248) 449-3353).
THE OFFERING
Securities Offered......... 1,500,000 Units each consisting of one Common Share
and two redeemable Warrants. Each Warrant entitles
the holder thereof to purchase one Common Share at
an exercise price of $4.50, subject to adjustment
in certain events. The Warrants are separately
tradeable and transferable upon issuance. See
"Description of Securities" and "Underwriting."
Offering Price............. $4.20 per Unit.
Terms of Warrants:
Exercise price........... $4.50 per share, subject to adjustment in certain
events. See "Description of Securities --
Warrants."
Exercise period.......... Any time during the period commencing one year
after the Effective Date and ending on the fourth
anniversary of the Effective Date.
Redemption............... Redeemable by the Company, with the prior written
consent of the Underwriter, at a price of $.10 per
Warrant upon not less than 30 days prior written
notice to the holders of the Warrants at any time
commencing one year after the Effective Date,
provided the closing bid price of the Common Shares
had been greater than $8.50 for 20 consecutive
trading days ending on the third day prior to the
date upon which the Company gives notice of
redemption. See "Description of Securities --
Warrants."
Common Shares Outstanding:
Prior to the Offering.... 3,015,000 Common Shares. (1)
After the Offering....... 4,609,286 Common Shares. (1)(2)
Use of Proceeds............ The net proceeds of the Offering will be used (i)
to redeem 1,416,664 shares of Series A Preferred
Stock for a total redemption price of approximately
$1,453,458 (assuming the redemption occurs on
September 19, 1997), (ii) to purchase equipment,
(iii) to pay approximately $200,000 of accounts
payable and accrued expenses, and (iv) for working
capital, including the financing of marketing and
sales activities. See "Use of Proceeds."
Risk Factors............... Investment in the Securities offered hereby
involves a high degree of risk and immediate
substantial dilution to public investors. See "Risk
Factors" and "Dilution."
5
<PAGE> 7
Proposed Nasdaq SmallCap
Market Symbols:.......... Units -- ; Common Shares -- ;
Warrants -- .
- ------------------
(1) Does not include (i) 520,000 Common Shares reserved for issuance upon
exercise of outstanding warrants (the "Bridge Warrants"), at an exercise
price of $4.50 per share, which Bridge Warrants are exercisable at any time
commencing one year from the Effective Date and ending on the fourth
anniversary of the Effective Date and will be automatically converted into
warrants having terms identical to the Warrants offered hereby on the
Effective Date, (ii) 450,000 Common Shares reserved for issuance under the
Company's 1997 Stock Option Plan, under which options to acquire an
aggregate of 295,000 Common Shares have been granted, and (iii) 94,286
Common Shares (the "Additional Shares") to be issued to investors in the
First Prior Financing (as defined below). See "Management -- Compensation --
-- Compensation of Directors" and "Description of Securities -- Prior
Financings."
(2) Includes the 94,286 Additional Shares. See "Description of Securities --
Prior Financings." Does not include (i) 3,000,000 Common Shares reserved for
issuance upon exercise of the Warrants, and (ii) 450,000 Common Shares
reserved for issuance upon exercise of the Underwriter Warrants and upon
exercise of the 300,000 underlying Warrants. See "Description of Securities"
and "Underwriting."
6
<PAGE> 8
SUMMARY COMBINED/CONSOLIDATED FINANCIAL INFORMATION
(IN WHOLE DOLLARS)
COMBINED/CONSOLIDATED STATEMENT OF INCOME (LOSS) DATA:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1) COMPANY
------------------------------ ------------
FOR THE FROM JANUARY 1 FROM
YEAR ENDED TO INCEPTION TO
DECEMBER 31, FEBRUARY 19, MAY 31,
1996(2) 1997 1997(3)
------------ -------------- ------------
<S> <C> <C> <C>
Total Sales............................................ $ 1,019,856 $ 343,555 $ 795,271
Cost of Sales.......................................... 1,617,363 529,121 1,103,088
----------- --------- ----------
Gross Margin (Deficit)................................. (597,507) (185,566) (307,817)
Selling, General and Administrative.................... 773,344 177,015 421,060
----------- --------- ----------
Operating Loss......................................... (1,370,851) (362,581) (728,877)
Interest Expense, Net.................................. 12,634 3,438 43,512
----------- --------- ----------
Net Loss............................................... $(1,383,485) $(366,019) $ (772,389)
=========== ========= ==========
Net Loss Per Common Share (4).......................... $ (0.30)
Weighted Average Number of Common Shares Outstanding... 2,617,553
</TABLE>
COMBINED/CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY(1) ----------------------------
---------------------------- MAY 31, 1997
DECEMBER 31, FEBRUARY 19, ----------------------------
1996 1997 ACTUAL AS ADJUSTED(5)
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
Cash...................................... $ 65,978 $ 44,270 $ 0 $1,903,539
Working Capital (Deficit)(6).............. (2,120,969) (2,429,316) 43,164 2,146,703
Total Assets.............................. 1,391,659 1,197,974 3,467,257 7,170,796
Series A Preferred Stock.................. -- -- 1,416,664 --
Accumulated Deficit....................... (1,442,412) (1,808,431) (772,389) (772,389)
Total Shareholders' Equity (Deficiency)... (1,392,412) (1,758,431) 1,333,961 6,654,164
</TABLE>
- ------------------
(1) The financial statements of the Predecessor Company are presented on a
combined basis as they are entities under common control.
(2) The Predecessor Company was formed in 1995. The Predecessor Company engaged
in limited activity in 1995, consisting primarily of the purchase of certain
equipment, the payment of a facility lease deposit, and the payment of
$58,927 for certain start-up expenses.
(3) The Company was incorporated on October 25, 1996 and engaged in
organizational matters until the acquisition of the Predecessor Company
which was consummated at the close of business on February 19, 1997.
(4) See Note 2 of Notes to Consolidated Financial Statements included in this
Prospectus for information with respect to the calculation of per share
data.
(5) Adjusted to reflect the sale of 168,333 Common Shares from the Second Prior
Financing (as defined below) issued subsequent to May 31, 1997 and the sale
of 1,500,000 Units offered hereby at the assumed public offering price of
$4.20 per Unit and the receipt and application of the estimated net proceeds
from such sale, including the redemption of the Series A Preferred Stock,
including accrued dividends. See "Use of Proceeds" and "Capitalization."
(6) Working Capital (Deficit) for Predecessor Company includes the Obligation
Payable to Members of $1,868,149 at December 31, 1996 and at February 19,
1997.
7
<PAGE> 9
RISK FACTORS
The securities offered hereby are highly speculative in nature, involve a
high degree of risk and should be purchased only by persons who can afford to
lose their entire investment. Each prospective investor should carefully
consider the following risk factors, as well as all other information set forth
in this Prospectus, before making an investment decision.
1. CONTINUING LOSSES; ACCUMULATED DEFICIT; NEGATIVE GROSS MARGINS. Since
inception, the Company (including the business engaged in by the Predecessor
Company) has experienced losses and negative gross margins. Since inception
through May 31, 1997, the Company has incurred an accumulated deficit of
$772,389, including a net loss of $772,389 (on sales of $795,271) for such
period. On a cumulative basis, the businesses of the Company and the Predecessor
Company have incurred an accumulated deficit of $2,580,820, including a net loss
of $2,521,893 (on sales of $2,158,682). In addition, the Company experienced a
gross margin deficit of $307,817 for the period from inception to May 31, 1997.
There can be no assurance that the Company will ever operate profitably. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Plan of Operation" and Note 3 of the Notes to Consolidated
Financial Statements appearing elsewhere herein.
2. LOSSES ASSOCIATED WITH THE COMPANY'S TRANSPORTATION BUSINESS. As a
result of operating its own fleet of trucks to deliver its products, the
Company's costs of delivery have been significantly in excess of the costs that
the Company would have incurred had it used common carriers to deliver its
products. While the Company has implemented plans to improve its operating
efficiencies and to seek additional revenue from its trucking operations by
contracting for its trucks to act as common carriers during their return to the
Company's manufacturing facility after delivery of the Company's products, no
assurance can be given that the Company will be successful in improving such
operations or obtaining sufficient revenue to offset the additional costs of the
Company's transportation business. If the Company were unsuccessful in improving
such operations or obtaining sufficient additional transportation-related
revenue to offset such additional costs, the Company may be forced to abandon
its strategy of using its own trucks to deliver its products. In such event, the
Company is unable to predict what effect, if any, such change in strategy would
have on the Company's customers and the ability of the Company to successfully
market its products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Trucking Operations."
3. "GOING CONCERN UNCERTAINTY." Due to the Company's history of losses,
negative gross margins and its current financial condition, the Company's
independent auditors' report expresses an uncertainty concerning the Company's
ability to continue as a going concern. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Report of
Independent Accountants" on the Company's Consolidated Financial Statements
appearing at page F-2 hereof.
4. LIMITED OPERATING HISTORY. The Company commenced operations in February
1997 when it consummated the purchase of the assets of the Predecessor Company.
The Predecessor Company commenced operations in January 1996. Accordingly, the
Company has a limited operating history upon which an evaluation of its business
and prospects can be based. An investment in the securities of the Company is
subject to all of the risks involved in a newly established business venture.
Potential investors should evaluate the Company in light of the problems,
delays, expenses and difficulties frequently encountered by companies at this
early stage of operations, many of which may be beyond the Company's control,
including, but not limited to, those relating to marketing, competition, and
unanticipated problems and additional costs relating to the Company's
operations.
5. SUBSTANTIAL PORTION OF PROCEEDS USED TO REDEEM SERIES A PREFERRED STOCK
AND TO PAY CURRENT LIABILITIES. $1,453,458 (29.2%) of the net proceeds of the
Offering will be used to redeem the Company's Series A Preferred Stock, assuming
it is redeemed on September 19, 1997. In addition, approximately $200,000 (4.0%)
of the net proceeds of the Offering are budgeted to pay accounts payable and
accrued liabilities incurred in the Company's operations and not related to this
Offering. Accordingly, fewer proceeds will be available to the Company for
future operations and marketing activities or for working capital. See "Use of
Proceeds."
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<PAGE> 10
6. COMPETITION. The Company is involved in a field characterized by intense
competition in which the Company will be selling products that are the same as
those readily available from more established companies which have substantially
greater financial, technical, manufacturing, marketing, research and development
and management resources than those of the Company. There can be no assurance
that the Company will be able to compete successfully in the future. See
"Business -- Competition."
7. POSSIBLE DELISTING. The Nasdaq Stock Market has proposed amendments to
its rules which, if adopted, would increase the eligibility and maintenance
criteria for The Nasdaq SmallCap Market. Under the proposed rules, in order to
qualify for initial listing in The Nasdaq SmallCap Market, a company must, among
other things, have (i) at least one year of operating history (or have at least
$50 million in market capitalization), (ii) net tangible assets (i.e., total
assets less total liabilities and goodwill) of at least $4 million (or net
income in two of the most recent three fiscal years of at least $750,000, or a
market capitalization of $50 million), (iii) a market value of public float
(shares held by non-affiliates of the Company) of at least $5 million, (iv) a
minimum bid price of $4.00, and (v) at least 300 shareholders. The Nasdaq Stock
Market, Inc. has announced that these new standards will apply retroactively, if
adopted. If and when the proposed rules are adopted, it is possible that the
Company will be unable to satisfy the revised listing criteria because the
Company does not currently meet the one year operating history requirement and
there can be no assurance that the Company will meet the other listing criteria
after it has one year of operating history. If the Company does not satisfy the
revised listing criteria, the Company's securities could be subject to
delisting.
Even if the Company's securities meet the requirements for initial
inclusion in The Nasdaq SmallCap Market, there can be no assurance that they
will meet the maintenance criteria for continued listing. Existing maintenance
criteria require, among other things, that an issuer have total assets of $2
million and total equity of $1 million and that the listed security has a
minimum bid price of $1.00 (or at least $2 million in capital surplus and a
market value of public float of at least $1 million). The proposed amendment
would require, among other things, that an issuer have net tangible assets of $2
million (or alternatively net income of $500,000 in two of the most recent three
fiscal years, or a market capitalization of $35 million) and that the listed
security has a minimum bid price of $1.00. If the Company is unable to satisfy
The Nasdaq SmallCap maintenance criteria in the future, the Units, the Common
Shares and Warrants may be delisted from trading on The Nasdaq SmallCap Market.
If the Company's securities are delisted from the Nasdaq SmallCap Market,
trading, if any, would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets" or the "Electronic Bulletin Board" of the National
Association of Securities Dealers, Inc. ("NASD"), and, consequently, an investor
could find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, the Company's securities. In addition, if the Company's
securities are delisted from The Nasdaq SmallCap Market, they would be subject
to a rule that imposes additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors (generally institutions and persons with net worth in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by this rule, the broker-dealer
must make disclosures to the purchaser, make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to purchase. Consequently, the rule may restrict the ability
of broker-dealers to sell the Company's securities and may affect the ability of
holders of the Company's securities, including purchasers in this Offering, to
sell such securities in the secondary market. Delisting from The Nasdaq SmallCap
Market may also cause a decline in share price, loss of news coverage of the
Company and difficulty in obtaining subsequent financing.
8. GOVERNMENT REGULATION. The testing, manufacture and sale of medical
products, such as the hemodialysis concentrates manufactured by the Company, as
well as the ancillary products for hemodialysis distributed by the Company, are
subject to extensive regulation by the Food and Drug Administration ("FDA")
pursuant to the Federal Food Drug and Cosmetic Act ("FDC Act"), and by other
federal, state and foreign authorities. Pursuant to the FDC Act, and the
regulations promulgated thereunder, the FDA regulates the preclinical and
clinical testing, manufacture, labeling, distribution and promotion of medical
devices. Under the FDC Act, medical devices must receive either 510(k) clearance
or PMA approval before they may be commercially marketed in the United States.
Noncompliance with applicable requirements can
9
<PAGE> 11
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of marketing clearances or approvals and criminal prosecution, any of
which actions could have an adverse effect on the Company's business, financial
condition or results of operations.
The Company's hemodialysis concentrates have FDA clearance. There can be no
assurance, however, that current FDA clearances for the Company's concentrates
will not be rescinded or that, if and when any additional products are developed
by the Company or the Company modifies its existing concentrates, they will
receive FDA clearance. If any current or future clearances or approvals are
rescinded or denied, sales of the affected products in the United States would
be prohibited during the period the products do not have such clearances. There
can be no assurance that the Company will be able to obtain necessary regulatory
approvals or clearances on a timely basis or at all, and delays in receipt of or
failure to receive such approvals or clearances, the loss of previously received
approvals or clearances, limitations on intended use imposed as a condition of
such approvals or clearances, any limitations on the Company's market required
by any clearances, any resulting delays in market introduction or failure to
comply with existing or future regulatory requirements would have an adverse
effect on the Company's business, financial condition and results of operations.
In addition, new FDA-related legislation or new FDA regulations could impose
additional regulatory requirements including, but not limited to, imposing
significant fees for seeking market clearance or approval for medical devices.
See "Business -- Government Regulation."
The Company's products are subject to strict federal regulations regarding
the quality of manufacturing known as Good Manufacturing Practices ("GMP"). The
FDA conducts periodic inspections and surveillance of the manufacturing and the
packaging facilities of medical device manufacturers to determine compliance
with GMP. No assurance can be given that, when the Company is inspected, it will
be found to be in compliance with GMP. In addition, the Medical Device Reporting
("MDR") regulation obligates the Company to report to the FDA any incident in
which its product may have caused or contributed to a death or serious injury,
or in which its product malfunctioned and, if the malfunction were to recur, it
would be likely to cause or contribute to a death or serious injury. Changes in
existing requirements or adoption of new requirements could have an adverse
effect on the Company's business, financial condition and results of operations.
There can be no assurance that the Company will not incur significant costs to
comply with laws and regulations in the future or that laws and regulations will
not have an adverse effect upon the Company's business, financial condition and
results of operation. If, as a result of FDA inspections, MDR reports or other
information, the FDA believes that the Company is not in compliance with
applicable laws and regulations, the FDA can institute proceedings or recall,
detain or seize products, totally or partially suspend production, enjoin future
violations, or assess civil and/or criminal fines and penalties against the
Company, its officers or employees. Any action by the FDA could result in
disruption of the Company's operations for an indeterminate period of time and
have a material adverse affect on the Company's business, financial condition
and results of operations. See "Business -- Government Regulation."
9. ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants are subject to
redemption by the Company on 30 days prior written notice under certain
conditions. If the Warrants are so redeemed, Warrant holders will lose the right
to exercise the Warrants so redeemed, except during such 30-day notice period.
Redemption of the Warrants could force the holders to exercise the Warrants and
pay the exercise price at a time when it may be disadvantageous for the holders
to do so, to sell the Warrants at the current market price for the Warrants when
they might otherwise wish to hold the Warrants, or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants at the time of redemption. See "Description of Securities -- Warrants."
10. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF COMMON SHARES UNDERLYING
THE WARRANTS; EXERCISE OF WARRANTS. The Warrants, which are part of the Units
offered hereby, will be detachable immediately from the Units and separately
tradeable. Although the Units will not knowingly be sold to purchasers in
jurisdictions in which the Units are not registered or otherwise qualified for
sale, purchasers may buy Units or Warrants in the after-market or may move to
jurisdictions in which the shares underlying the Warrants are not so registered
or qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue Common Shares to those persons desiring to
exercise their Warrants unless and until such shares could be qualified for sale
in jurisdictions in which such purchasers reside, or an exemption to such
qualification
10
<PAGE> 12
exists in such jurisdiction. No assurances can be given that the Company will be
able to effect any required registration or qualification.
In addition, investors purchasing Units in this Offering will not be able
to exercise the Warrants unless at the time of exercise this registration
statement is current and the Common Shares issuable upon exercise of such
Warrants have been qualified or deemed to be exempt under the securities laws of
the state of residence of the holder of such Warrants. There can be no assurance
that such shares can be qualified on or before the exercise date or that the
Company will maintain a current prospectus relating thereto until the expiration
of the Warrants.
11. DEPENDENCE ON KEY PERSONNEL. The success of the Company is materially
dependent upon the efforts of Robert L. Chioini, the Company's President and
Chief Executive Officer. The Company and Mr. Chioini have entered into a
three-year employment agreement expiring in February 2000, and the Company
maintains a key-man life insurance policy on the life of Mr. Chioini in the
amount of $1,000,000. If the Company were to lose the services of Mr. Chioini,
such event could materially and adversely affect the Company's business,
financial condition and results of operations. See "Management -- Employment
Agreement."
12. POSSIBLE INSUFFICIENCY OF INSURANCE. As a supplier of medical products,
the Company may face potential liability from a person who claims that he or she
suffered physical harm as a result of the use of the Company's products. If
litigation is initiated because of such harm, the Company may be sued, and
regardless of whether it is ultimately determined to be liable, the Company may
incur significant legal expenses not covered by insurance. In addition, product
liability litigation could damage the Company's reputation and therefore impair
its marketing ability. Such litigation could also impair the Company's ability
to retain products liability insurance or make such insurance more expensive.
The Company maintains products liability insurance in the amount of $5 million
per occurrence and $6 million in the aggregate. The Company believes that its
current insurance will be sufficient to cover any potential liabilities to the
Company arising from its business and operations. There is, however, no
assurance that the Company can retain such insurance or that such insurance
would be sufficient to protect the Company against liabilities associated with
its business. In the event of an uninsured or inadequately insured product
liability claim in the future, the Company's business financial condition and
results of operations could be adversely affected.
13. ABSENCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING
PRICE. Prior to this Offering, there has been no public market for the Company's
Units, Common Shares or Warrants and there can be no assurance that a regular
trading market will develop for any or all of these securities upon completion
of this Offering. The public offering price for the Units and the exercise price
of the Warrants have been determined by negotiation between the Company and the
Underwriter and are not necessarily related to the Company's asset value, net
worth or other established criteria of value. See "Underwriting."
14. SUBSTANTIAL DILUTION; PURCHASE OF COMMON SHARES BY INSIDERS AT BELOW
OFFERING PRICE. A purchaser in this Offering will experience immediate and
substantial dilution of $3.17 per share (approximately 75%) in that the offering
price exceeds the net tangible book value of the Company after giving effect to
the Offering. The Common Shares held by the Company's Principal Shareholders
were purchased for prices significantly lower than the public offering price.
Accordingly, investors in the Offering will bear a disproportionate share of the
risk of an investment in the Company. See "Dilution."
15. VOTING CONTROL; POTENTIAL ANTI-TAKEOVER EFFECT. Upon the completion of
this Offering, the officers and directors of the Company will beneficially own
approximately 43.4% of the Company's voting shares (assuming no exercise of any
options granted to such officers and directors). Accordingly, they may be able
to effectively elect all of the directors of the Company and control the
Company's affairs. The Company's shareholders do not have the right to
cumulative voting in the election of directors. The Board of Directors has the
authority, without further approval of the Company's shareholders, to issue
shares of preferred stock, no par value per share (the "Preferred Stock"),
having such rights, preferences and privileges as the Board of Directors may
determine. Any such issuance of Preferred Stock could, under certain
circumstances, have the effect of delaying or preventing a change in control of
the Company and may adversely affect the rights of holders of Common Shares,
including by decreasing the amount of earnings and assets available for
distribution to holders of Common Shares and adversely affect the relative
voting power or other rights of the
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<PAGE> 13
holders of the Company's Common Shares. The Company has agreed with the
Underwriter that, except for issuances disclosed in or contemplated by this
Prospectus, it will not issue any securities, including but not limited to any
shares of Preferred Stock, for a period of 24 months following the Effective
Date, without the prior written consent of the Underwriter. In addition, the
Company is subject to Michigan statutes regulating business combinations,
takeovers and control share acquisitions which might also hinder or delay a
change in control of the Company. Anti-takeover provisions that could be
included in the Preferred Stock when issued and the Michigan statutes regulating
business combinations, takeovers and control share acquisitions can have a
depressive effect on the market price of the Company's securities and can limit
shareholders' ability to receive a premium on their shares by discouraging
takeover and tender offer bids. See "Principal Stockholders" and "Description of
Securities -- Preferred Stock."
The Directors of the Company serve staggered three-year terms, and
directors may not be removed without cause. The Company's Articles of
Incorporation also set the minimum and maximum number of directors constituting
the entire Board at three and fifteen, respectively, and require approval of
holders of a majority of the Company's voting shares to amend these provisions.
These provisions could have an anti-takeover effect by making it more difficult
to acquire the Company by means of a tender offer, a proxy contest or otherwise
or the removal of incumbent officers and directors. These provisions could
delay, deter or prevent a tender offer or takeover attempt that a shareholder
might consider in his or her best interests, including those attempts that might
result in a premium over the market price for the Common Shares held by the
Company's shareholders. See "Description of Securities -- Common Shares."
16. SHARES ELIGIBLE FOR FUTURE SALE. The Company is unable to predict the
effect, if any, that future sales of Common Shares, or the availability of
Common Shares for future sales, will have on the market price of the Common
Shares from time to time. Sales of substantial amounts of Common Shares
(including shares issued upon the exercise of warrants or stock options), or the
possibility of such sales, could adversely affect the market price of the Units,
Common Shares or Warrants and also impair the Company's ability to raise capital
through an offering of its equity securities in the future. Upon completion of
the Offering, the Company will have 4,609,286 Common Shares outstanding
(assuming no exercise of the Underwriter Over-Allotment Option, the Warrants,
the Bridge Warrants, the Underwriter Warrants and other outstanding options and
warrants). Of these shares, the 1,500,000 Common Shares sold in this Offering
will be freely tradeable without restriction under the Securities Act, except
for any shares purchased by any person who is or thereby becomes an "affiliate"
of the Company, which shares will be subject to the resale limitations contained
in Rule 144 promulgated under the Securities Act. The remaining 3,109,286 Common
Shares outstanding are, and the shares issuable upon exercise of the Bridge
Warrants will be "restricted securities" (as that term is defined in Rule 144
promulgated under the Securities Act) which may be publicly sold only if
registered under the Securities Act or if sold in accordance with an applicable
exemption from registration, such as Rule 144. Officers, directors and other
security holders of the Company owning and/or having rights to acquire in the
aggregate Common Shares have entered into agreements (the "Lock-Up
Agreements") with the Underwriter not to sell or otherwise dispose of any
securities of the Company, including Common Shares, for a period of 13 months
following the Effective Date, without the prior written consent of the
Underwriter, which may be granted or withheld in the sole and absolute
discretion of the Underwriter, subject to an exemption for certain tender
offers. Following expiration of the term of the Lock-Up Agreements, 3,109,286
shares will become eligible for resale pursuant to Rule 144, subject to the
volume limitations and compliance with the other provisions of Rule 144.
Furthermore, the holders of the Underwriter Warrants (including the securities
issuable upon exercise thereof) have demand and piggyback registration rights
with respect to the Common Shares issuable upon exercise of the Underwriter
Warrants and the underlying Warrants, which Common Shares have been registered
by the Company on the Registration Statement on Form SB-2 of which this
Prospectus is a part. The Company also intends to register the Common Shares
issuable upon the exercise of options available under the Company's 1997 Stock
Option Plan; which shares will become, upon registration, freely tradeable
subject to the Lock-Up Agreements. In addition, the investors in the First Prior
Financing and the investors in the Second Prior Financing have piggy-back
registration rights with respect to their Common Shares, Bridge Warrants and the
underlying Common Shares. These rights have been waived in connection with this
Offering, but any future exercise of these rights could involve substantial
expense to the Company and may adversely affect the terms upon which the Company
may obtain additional financing. Any
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<PAGE> 14
substantial sale of restricted securities pursuant to Rule 144 or a registration
statement may have an adverse effect on the market price of the Units, Common
Shares or Warrants. See "Description of Securities -- Registration Rights,"
"Description of Securities -- Warrants," "Description of Securities -- Prior
Financings" and "Underwriting".
17. OUTSTANDING WARRANTS AND OPTIONS. In addition to the 3,000,000 Warrants
to be issued in connection with this Offering (3,450,000 Warrants if the
Over-Allotment Option is exercised in full), upon completion of this Offering
the Company will sell the Underwriter the Underwriter Warrants to purchase
150,000 Units. Furthermore, the Company has outstanding Bridge Warrants to
purchase an aggregate of 520,000 Common Shares. The Company has also reserved an
additional 450,000 Common Shares for issuance upon exercise of options under the
Company's 1997 Stock Option Plan, of which options covering an aggregate of
295,000 Common Shares have already been granted. The exercise of warrants or
options and the sale of the underlying Common Shares (or even the potential of
such exercise or sale) may have a depressive effect on the market price of the
Common Shares and the Warrants. Holders of such warrants and options are likely
to exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by the options and warrants.
Further, while its warrants and options are outstanding, the Company's ability
to obtain additional financing on favorable terms may be adversely affected. In
addition, exercise of such options would substantially dilute a prospective
investor's investment in the Company. See "Underwriting" and "Description of
Securities."
18. EFFECT OF ISSUANCE OF COMMON SHARES. Immediately after the Offering,
assuming the Over-Allotment Option is not exercised, the Company will have an
aggregate of approximately 10,970,714 Common Shares authorized but unissued and
not reserved for specific purposes. All of such shares may be issued without any
action or approval by the Company's shareholders. Although there are no present
plans, agreements, commitments or undertakings with respect to the issuance of
additional shares or securities convertible into any such shares by the Company
(other than those currently reserved for issuance), any Common Shares issued
would further dilute the percentage ownership of the Company held by the public
shareholders. The Company has agreed with the Underwriter that, except for the
issuances disclosed in or contemplated by this Prospectus (including issuance of
the currently reserved shares), it will not issue any securities, including but
not limited to any Common Shares, for a period of 24 months following the
Effective Date, without the prior written consent of the Underwriter. See
"Underwriting."
19. ABILITY TO MANAGE GROWTH. The Company contemplates a rapid expansion of
its business. If the Company were to experience significant growth in the
future, such growth would likely result in new and increased responsibilities
for management personnel and place significant strain upon the Company's
management, operating and financial systems and resources. To accommodate such
growth and compete effectively, the Company must continue to implement and
improve its operational, financial, management and information systems,
procedures and controls, and to expand, train and manage its personnel. There
can be no assurance that the Company's personnel, systems, procedures and
controls will be adequate to support the Company's future operations. Any
failure to implement and improve the Company's operational, financial,
management and information systems, procedures or controls or to expand, train
or manage employees or to manage effectively any actual or expected future
growth, could materially and adversely affect the Company's business, financial
condition and results of operations. See "Risk Factors -- Dependence on Key
Personnel," "Business -- Employees" and "Management -- Directors, Executive
Officers and Key Employees."
20. BROAD DISCRETION IN THE APPLICATION OF NET PROCEEDS. Approximately $1.5
million, or approximately 30.5%, of the net proceeds of the Offering have been
allocated to working capital and general corporate purposes. Accordingly,
management will have broad discretion with respect to that portion of the net
proceeds. See "Use of Proceeds."
21. ABSENCE OF DIVIDENDS ON COMMON SHARES. Since inception, the Company has
not paid any cash dividend on its Common Shares and it does not anticipate
paying such dividends in the foreseeable future. The payment of dividends by the
Company is within the discretion of its Board of Directors and depends upon the
Company's earnings, capital requirements, financial condition and requirements,
future prospects, restrictions
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<PAGE> 15
in future financing agreements, business conditions and other factors deemed
relevant by the Board. The Company intends to retain earnings, if any, to
finance its operations. See "Dividend Policy."
22. LIMITED UNDERWRITING EXPERIENCE OF UNDERWRITER. The Underwriter has
served as the sole or managing underwriter of only four firm commitment public
offerings and participated in two other underwritten public offerings as a
member of the underwriting syndicate. Since the Underwriter's experience in
underwriting firm commitment public offerings is limited, there can be no
assurance that its lack of experience may not adversely affect the public
offering of the Company's securities and the subsequent development, if any, of
a trading market for the Company's securities. See "Risk Factors --
Underwriter's Influence on the Market; Possible Limitations on Market Making
Activities."
23. INFORMAL INVESTIGATION OF UNDERWRITER. The Company has been advised
that the Underwriter is subject to an informal investigation commenced in March
1996 by the Commission. To date, the Commission has only requested certain
documents from the Underwriter, and the Underwriter has not been advised of the
status of the investigation. There can be no assurance that a formal order of
investigation will not be issued, or if issued, that sanctions will not be
imposed against the Underwriter. In October 1996, the National Association of
Securities Dealers, Inc. (the "NASD") commenced an examination of certain of the
Underwriter's previous underwritings and has requested documents and information
in connection with those underwritings. The NASD examination is ongoing and no
findings have been made to date. There can be no assurance that such
investigation or examination may not affect the Underwriters' ability to
maintain a market in the Units, Common Shares and Warrants.
24. UNDERWRITER'S INFLUENCE ON THE MARKET; POSSIBLE LIMITATIONS ON MARKET
MAKING ACTIVITIES. A significant number of Units, Common Shares and Warrants may
be sold to customers of the Underwriter. Such customers subsequently may engage
in transactions for the sale or purchase of such securities through or with the
Underwriter or based on the recommendations of the Underwriter. The Underwriter
has indicated that it intends to act as a market-maker and otherwise effect
transactions in the Units, Common Shares and Warrants. To the extent the
Underwriter acts as a market-maker in the Units, Common Shares and Warrants, it
may exert a dominating influence in the markets for those securities. The prices
and liquidity of the Units, Common Shares and Warrants may be significantly
affected to the extent, if any, that the Underwriter participates in such
markets. The Underwriter may discontinue such activities at any time or from
time to time. The Underwriter also has the right to act as the Company's
exclusive agent in connection with any future solicitation of holders of
Warrants to exercise their Warrants. Applicable rules of the Commission prohibit
the Underwriter and any other soliciting broker-dealers from engaging in any
market making activities or solicited brokerage activities with regard to the
Units, Common Shares and Warrants for a period of up to five business days prior
to the solicitation of the exercise of any Warrants until the later of the
termination of such solicitation activity or the termination of any right the
Underwriter may have to receive a fee for the solicitation of the Warrants. As a
result, the Underwriter and such soliciting broker-dealers may be unable to
continue to make a market for the Units, Common Shares and the Warrants during
certain periods while the Warrants are exercisable. Such a limitation, while in
effect, could impair the liquidity and market price of the Units, Common Shares
and the Warrants. See "Underwriting."
25. UNDERWRITER'S POTENTIAL INFLUENCE ON THE COMPANY. The Company has
agreed that for a period of no less than three years from the Effective Date,
the Company will engage a designee, acceptable to the Underwriter and the
Company, to serve as an advisor ("Advisor") to the Company's Board of Directors.
Such Advisor shall be entitled to attend all meetings of the Board of Directors,
to receive all notices and other correspondence and communications sent by the
Company to the Board of Directors, and to receive compensation equal to the
compensation paid to non-employee directors of the Company. The Company has also
agreed that, in lieu of the Underwriter's right to designate an Advisor, the
Underwriter has the right to designate one person for election as a director of
the Company and the Company has agreed to use its best efforts to obtain the
election of such designee to the Board of Directors. The engagement of such
Advisor and/or the election of such designee, if any, to the Company's Board of
Directors, may enable the Underwriter to exert influence on the Company. See
"Underwriting."
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26. POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's
securities may be highly volatile. Quarterly operating results of the Company,
changes in the general conditions in the economy, the financial markets, or the
medical products industry, changes in financial estimates by securities analysts
or failure by the Company to meet such estimates, litigation involving the
Company, actions by governmental agencies or other developments affecting the
Company or its competitors, could cause the market price of the Company's
securities to fluctuate substantially. In particular, the stock market may
experience significant price and volume fluctuations which may affect the market
price of the Company's securities for reasons that are unrelated to the
Company's operating performance and that are beyond the Company's control.
27. LIMITED MARKETING CAPABILITY; DEPENDENCE ON SALES REPRESENTATIVES AND
DISTRIBUTORS. The Company intends to market its products through its own
employees and to retain independent sales representatives and distributors. The
Company has only limited experience in the development and marketing of medical
products, and its direct sales force consists of only one person. The Company is
substantially dependent on its independent sales representatives and
distributors to generate sales. Failure of independent sales representatives and
distributors to market, promote and sell the Company's products would have an
adverse affect on the Company's business, financial condition and results of
operations.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 Units
offered by this Prospectus (after deducting underwriting commissions and
discounts and estimated offering expenses) are estimated to be approximately
$4,970,000 ($5,820,500 if the Over-allotment Option is exercised in full) at the
assumed public offering price of $4.20 per Unit. The Company expects to use the
net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
DOLLAR AMOUNT PERCENTAGE
------------- -----------
<S> <C> <C>
Purchase of Equipment(1).................................. $1,800,000 36.2%
Redemption of Series A Preferred Stock(2)................. $1,453,458 29.2%
Payment of Accounts Payable and Accrued Expenses.......... $ 200,000 4.0%
Working Capital(3)........................................ $1,516,542 30.6%
---------- -----
$4,970,000 100%
========== =====
</TABLE>
- ------------------
(1) Consists primarily of additional production equipment and supplies necessary
to increase the Company's production capacity and to produce and package
liquid bicarbonate, a product which the Company has recently obtained
clearance from the FDA to manufacture and distribute. Also includes the
purchase and/or lease of additional tractor-trailers to expand the Company's
transportation capabilities to accommodate the Company's expected sales
growth. The Company has no commitments to date for the purchase of any such
equipment.
(2) The Series A Preferred Stock was issued in partial payment of the deferred
purchase price for the Predecessor Company. See "Certain Transactions --
Acquisition of Business of Predecessor Company." Holders of Series A
Preferred Stock are entitled to receive, out of funds legally available for
the payment of dividends, cumulative cash dividends in the amount of $0.085
per share per year (prorated for partial years) accruing from June 1, 1997.
The redemption price for the Series A Preferred Stock equals $1.00 per share
plus accumulated and unpaid dividends on the redemption date. Upon
completion of the Offering, the Company expects that it will redeem the
Series A Preferred Stock on September 19, 1997. See "Description of
Securities -- Series A Preferred Stock."
(3) Includes working capital and other ongoing selling, general and
administrative expenses. See the Consolidated Financial Statements as of,
and for the period ended May 31, 1997, included elsewhere in this
Prospectus, for information about the Company's current working capital
needs (including accounts payable and accrued expenses) and ongoing selling,
general and administrative expenses.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the Offering based upon the current state of its business
development and management estimates of current industry conditions. The net
proceeds may be reallocated among the categories set forth above or otherwise in
response to, among other things, changes in the Company's business plans, future
revenues and expenses and industry, regulatory or competitive conditions. The
amount and timing of expenditures will vary depending on a number of factors,
including changes in the Company's contemplated operations or business plans and
changes in economic and industry conditions. Any such shifts will be at the
discretion of the Board of Directors and officers of the Company.
Pending such uses, the net proceeds of the Offering are expected to be
invested in U.S. Government Securities or deposited in federally insured
accounts of banks or money market accounts of other financial institutions, or
invested in short-term, investment-grade, interest-bearing investments or other
similar short-term investments.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
May 31, 1997 (assuming the issuance of the Series A Preferred Stock), (ii) on a
pro forma basis after giving effect to the issuance of 168,333 Common Shares
pursuant to the Second Prior Financing, which shares were issued between May 31,
1997 and July 15, 1997, and (iii) on a pro forma as adjusted basis after giving
effect to the issuance and sale of the 1,500,000 Units in the Offering at the
assumed public offering price of $4.20 per Unit, the application of the
estimated net proceeds of $4,970,000 thereof, and the issuance of 94,286
Additional Shares. The information set forth below should be read in conjunction
with the consolidated financial statements and notes thereto appearing elsewhere
herein and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
AT MAY 31, 1997
---------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
<S> <C> <C> <C>
Series A Preferred Stock, $1.00 par value,
1,416,664 shares authorized; 1,416,664 shares
issued and outstanding at May 31, 1997 and pro
forma; no shares issued and outstanding, as
adjusted........................................ $1,416,664 $1,416,664 --
Shareholders' equity:
Preferred Stock, no par value, no shares issued
and outstanding at May 31, 1997, pro forma or
as adjusted.................................. -- -- --
Common Shares, no par value, 20,000,000 shares
authorized; 2,846,667 shares issued and
outstanding at May 31, 1997; 3,015,000 shares
issued and outstanding, pro forma; and
4,609,286 shares issued and outstanding, as
adjusted(1).................................. 2,106,350 2,493,347 7,426,553
---------- ---------- ----------
Accumulated Deficit(2).......................... (772,389) (772,389) (772,389)
---------- ---------- ----------
Total Shareholders' Equity...................... 1,333,961 1,720,958 6,654,164
---------- ---------- ----------
Total Capitalization............................ $2,750,625 $3,137,622 $6,654,164
========== ========== ==========
</TABLE>
- ------------------
(1) Includes (i) at May 31, 1997 351,667 Common Shares issued in connection with
the Second Prior Financing prior to May 31, 1997 and, on a pro forma and pro
forma as adjusted basis, an additional 168,333 Common Shares issued in
connection with the Second Prior Financing between May 31, 1997 and July 15,
1997, and (ii) on an as adjusted basis, the 94,286 Additional Shares to be
issued to the investors in the First Prior Financing. Excludes, (i) 520,000
Common Shares issuable upon exercise of the Bridge Warrants, (ii) 450,000
Common Shares reserved for issuance under the Company's 1997 Stock Option
Plan, of which options to acquire an aggregate of 295,000 Common Shares have
been granted, (iii) 3,000,000 Common Shares reserved for issuance upon
exercise of the Warrants, and (iv) 450,000 Common Shares reserved for
issuance upon exercise of the Underwriter Warrants and upon exercise of the
300,000 underlying Warrants. See "Description of Securities" and
"Underwriting."
(2) Management believes the accumulated deficit has continued to increase during
the third quarter ending September 30, 1997.
DILUTION
The net tangible book value (deficit) of the Company as of May 31, 1997, on
a pro forma basis assuming completion of the Second Prior Financing, was
($189,249), or ($.06) per Common Share, based on 3,015,000 Common Shares
outstanding. Net tangible book value (deficit) per share is equal to the
Company's total tangible assets (total assets less intangible assets) less its
total liabilities, divided by the number of Common Shares outstanding. After
giving effect to the sale of the 1,500,000 Units offered hereby at an assumed
initial
17
<PAGE> 19
public offering price of $4.20 per Unit (allocating no value to the Warrants
included in the Units), and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds", the pro forma as adjusted net
tangible book value of the Company at May 31, 1997 would have been $4,743,957,
or $1.03 per share, based on 4,609,286 Common Shares outstanding after this
Offering (including the Additional Shares to be issued to investors in the First
Prior Financing). This represents an immediate increase of $1.09 per share in an
adjusted net tangible book value to existing shareholders and immediate dilution
of $3.17 per share from the assumed public offering price to the new investors
purchasing Units in the Offering. Dilution per share represents the difference
between the public offering price and the pro forma net tangible book value per
share after the Offering. The following table illustrates the per share dilution
to the new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $4.20
Net tangible book value (deficit) per share before the
Offering.................................................. $(.06)
Increase per share attributable to new investors............ 1.09
-----
Pro forma net tangible book value per share after the
Offering.................................................. 1.03
-----
Dilution per share to new investors......................... $3.17
=====
</TABLE>
The following table sets forth the difference between (i) the current
shareholders who are promoters, officers, directors or beneficial owners of 5%
or more of the outstanding Common Shares ("Insiders"), (ii) the other present
shareholders, and (iii) the new investors, with respect to the number of shares
purchased from the Company, the total consideration paid (other than services)
and the average price per share (assuming no exercise of the Warrants or any
other outstanding options or warrants):
<TABLE>
<CAPTION>
SHARES PERCENT OF CONSIDERATION PERCENT OF TOTAL AVERAGE PRICE
PURCHASED TOTAL SHARES PAID CONSIDERATION PAID PER SHARE
--------- ------------ ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Insiders....................... 2,000,000 43.4% $ 1,000 * **
Other present
shareholders(1).............. 1,109,286 24.1% 2,797,500 30.7% $2.52
New Investors.................. 1,500,000 32.5% 6,300,000 69.3% $4.20
--------- ----- ---------- ------ -----
Total..................... 4,609,286 100.0% $9,098,500 100.0% $1.97
========= ===== ========== ====== =====
</TABLE>
- ------------------
* Less than one percent.
** Less than $.01.
(1) Includes 94,286 Additional Shares to be issued to investors in the First
Prior Financing. See "Description of Securities -- Prior Financings."
The foregoing assumes no exercise of the 450,000 options (reserved) and
3,970,000 warrants (outstanding) to purchase Common Shares at the closing of
this Offering (see "Description of Securities"). In the event such options and
warrants are exercised, investors in this Offering may experience further
dilution.
DIVIDEND POLICY
The payment of dividends by the Company is within the discretion of its
Board of Directors and depends in part upon the Company's earnings, capital
requirements, financial condition and requirements, future prospects,
restrictions in future financing agreements, business conditions and other
factors deemed relevant by the Board. Since its inception, the Company has not
paid any cash dividends on its Common Shares and does not anticipate paying such
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance its operations.
18
<PAGE> 20
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed for the purpose of acquiring substantially all the
assets of Rockwell Medical Supplies, LLC, and a related entity, Rockwell
Transportation, LLC. The Company acquired the Predecessor Company on February
19, 1997 for a purchase price of approximately $2.4 million. The purchase price
was financed with an initial cash payment to the Predecessor Company of
$150,000, a cash payment of approximately $375,000 to NBD Bank to discharge the
Predecessor Company's obligation under a loan arrangement, and a $1.9 million
note payable to the Predecessor Company. The Company funded the initial cash
payments of $525,000 with a portion of the proceeds of a private placement of
the Company's Common Shares (the "First Prior Financing"). See "Description of
Securities -- Prior Financings." The balance of the $1.2 million in net proceeds
raised in the First Prior Financing was used to fund the Company's net losses
and capital equipment purchases.
In May through July, 1997, the Company sold an aggregate of 26 units, each
unit consisting of 20,000 Common Shares and 20,000 Bridge Warrants for a
purchase price of $60,000 per unit, or an aggregate of $1,560,000 (the "Second
Prior Financing"). The net proceeds of the Second Prior Financing were
approximately $1,248,347, of which $500,000 were used to reduce the obligation
under the note payable to the Predecessor Company. The balance is being used to
fund the Company's net losses and for capital equipment expenditures. The
remaining balance of $1,416,664 under the note payable to the Predecessor
Company was converted into 1,416,664 shares of Series A Preferred Stock.
PLAN OF OPERATION
During the next 12 months the Company plans to continue to manufacture and
distribute hemodialysis concentrates and dialysis kits and distribute other
hemodialysis products to hemodialysis providers. The Company intends to take
advantage of the increasing number of hemodialysis providers and patients (see
"Business -- General") and to implement its strategies of acting as a single
source supplier, increasing revenue by selling new products and obtaining
"back-haul" revenue from its trucks and offering a high level of customer
service (see "Business -- Strategy") to attempt to increase its sales and market
share. No assurance can be given, however, that the Company's sales or market
share will increase. See "Risk Factors -- Competition."
If the Company's sales volumes increase, it expects to add additional
production and administrative employees and truck drivers (see "Business --
Employees") and it expects to expand its facilities and acquire additional
laboratory and production equipment. The Company also expects that it will need
cash over the next 12 months (i) to redeem the Series A Preferred Stock, (ii) to
fund operating losses, and (iii) for working capital and other ongoing selling,
general and administrative expenses. The Company believes that cash from
operations together with the net proceeds of this Offering will be sufficient to
sustain the Company's operations at budgeted levels and its needs for liquidity
for at least the next twelve months.
During the period from February 20, 1997 to May 31, 1997, the Company
experienced a negative gross margin of approximately $308,000. Approximately
$125,000 of this amount is attributable to excess costs of transportation which
the Company incurred as a result of its trucking operations over the cost that
the Company estimates it would have incurred had it used common carriers to
deliver its products. Approximately $250,000 of cost of sales was attributable
primarily to overhead costs associated with the Company's manufacturing
operations.
In order to improve the Company's gross margin to a break-even point, the
Company must (i) increase its revenue from manufacturing operations to
approximately twice the amount generated during the period from February 20,
1997 to May 31, 1997, (ii) achieve certain planned operating efficiencies in its
manufacturing operations, (iii) obtain additional revenue from its trucking
operations sufficient to cover the additional costs of such operations by
contracting for its trucks to act as common carriers during their return to the
Company's manufacturing facility after a delivery of the Company's products, and
(iv) improve the
19
<PAGE> 21
operating efficiencies of the Company's trucking operations. If the Company is
not successful in increasing its revenue from the sale of hemodialysis
concentrates and other ancillary products while achieving certain planned
operating efficiencies, the Company's gross margin will likely remain negative.
Also, as the Company expands its trucking operations, its ability to generate
"back-haul" revenue is likely to lag behind the cost increases associated with
such expansion. In addition, if the Company is not successful in improving the
operating efficiencies of its trucking operations or if the Company's strategy
of obtaining "back-haul" revenue for its trucks to offset the additional costs
of maintaining its own trucks versus using common carriers is not successful,
the Company may have to abandon its strategy of using its own trucks to deliver
its products to customers. In such event, the Company is unable to predict what
effect, if any, such change would have on the Company's customers and the
ability of the Company to successfully market its products. Even if the Company
were to be successful in generating a positive gross margin, the Company will
require significant additional revenue growth to fund the Company's existing and
anticipated selling, general and administrative expenses and interest expense.
No assurance can be given that the Company will be able to increase sales in a
sufficient amount to cover such expenses, or that such expenses will not
increase in the future. See "Risk Factors -- Continuing Losses; Accumulated
Deficit; Negative Gross Margins."
NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
Statement establishes standards for computing and presenting earnings per share
("EPS") and applies to all entities with publicly-held common shares or
potential common shares. This Statement replaces the presentation of primary EPS
and fully-diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Similar to fully diluted EPS, diluted EPS reflects
the potential dilution of securities that could share in the earnings. This
Statement is not expected to have a material effect on the Company's reported
EPS amounts. The Statement is effective for the Company's financial statements
for the year ending December 31, 1997.
20
<PAGE> 22
BUSINESS
GENERAL
Rockwell Medical Technologies, Inc. manufactures hemodialysis concentrates
and dialysis kits, and sells, distributes and delivers such concentrates and
dialysis kits, as well as other hemodialysis products, to hemodialysis providers
in the United States and Venezuela. Hemodialysis is a process which is able to
duplicate kidney function in patients whose kidneys have failed to function
properly. Without properly functioning kidneys, the patient's body cannot rid
itself of excess water and waste products nor regulate the amount of
electrolytes in the patient's blood. Without hemodialysis, these patients would
die.
INDUSTRY BACKGROUND
Hemodialysis patients are classified into three categories: (i) "end stage
renal disease patients," which are those patients who must have hemodialysis
treatments for the remainder of their lives or until they receive a successful
kidney transplant, (ii) "chronic patients," which are those patients who do not
currently require hemodialysis treatments but are suffering a gradual and
progressive loss of kidney function which typically progresses to "end stage
renal disease" requiring hemodialysis treatments, and (iii) "acute patients,"
which are those patients who have suffered a rapid and sudden loss of kidney
function and require only temporary hemodialysis until their kidneys begin to
function properly again. In 1995, there were an estimated 200,000 end stage
renal disease patients and 700,000 chronic patients, according to the DHHS. In
addition, an estimated 250,000 persons in the United States suffer acute renal
failure each year. Most patients undergoing hemodialysis treatment generally
receive three treatments per week or 156 treatments per year, although the
amount of weekly treatments may vary.
A hemodialysis provider such as a hospital or a free standing clinic uses
hemodialysis stations to treat patients. A hemodialysis station contains a
dialysis machine that takes a concentrate solution and certain chemical powders,
such as the Company's solutions and powders, and accurately dilutes them with
purified water. The resulting solution, known as dialysate, is then pumped
through a device known as an artificial kidney (dialyzer), while at the same
time the patient's blood is pumped through a membrane within the dialyzer.
Excess water and chemicals from the patient's blood pass through the membrane
and are carried away in the dialysate while certain chemicals in the dialysate
penetrate the membrane and enter the patient's blood to maintain proper chemical
levels in the body. Dialysate generally contains dextrose, sodium, calcium,
potassium, magnesium, chloride and acetic acid. The patient's physician
prescribes the formula required for each patient based on each particular
patient's needs, although most patients receive one of eight common
formulations.
In addition to using concentrate solutions and chemical powders (which must
be replaced for each use by each patient), a dialysis station also requires
various other ancillary products such as dialysis on-off kits, sterile
subclavian dressing change trays, arterial and venous blood tubing lines,
fistula needles, intravenous administration sets, transducer protectors,
dialyzers and over 120 other ancillary products, all of which the Company sells.
INDUSTRY TRENDS
Hemodialysis patients generally receive their treatment at hospitals or
independent hemodialysis providers. According to the U.S. Department of Health
and Human Services (the "DHHS"), since 1973 the total number of hemodialysis
providers in the United States has more than quintupled from 606 in 1973 to over
3,082 in December 1996. Independent providers comprised 2,212 of such providers
and hospitals comprised 746 of such providers. The Company currently supplies
over 220 hemodialysis providers in 18 states across the United States, as well
as hemodialysis providers in Venezuela. The number of patients receiving
hemodialysis has also grown substantially in recent years. According to the
DHHS, in 1985, there were approximately 68,390 patients receiving hemodialysis
treatments in the United States. It is estimated by the DHHS that in 1996 over
216,000 patients received hemodialysis treatments. According to the DHHS, from
1985 to 1996, the number of hemodialysis stations, which are areas equipped to
provide adequate and safe dialysis therapy, grew from 17,845 stations to 45,244
stations.
21
<PAGE> 23
STRATEGY
The Company's objective is to increase its market share in the expanding
hemodialysis market and improve profitability by implementing the following
strategies:
- Acting as a Single Source Supplier. By offering over 120 different
products used by hemodialysis providers, the Company has positioned
itself as a "one-stop-shop" to its customers for the concentrates,
chemicals and supplies necessary to support a hemodialysis
operation. Some of the Company's competitors for concentrates do not
offer a full line of hemodialysis products, requiring customers to
do business with a number of suppliers in order to purchase
necessary supplies. The Company has entered into agreements with
ancillary product manufacturers, which allow the Company to be a
"full-line" supplier of hemodialysis products.
- Increasing Revenue through Sales of New Products and Increased
"Back-haul" Revenue. The Company intends to manufacture and/or
distribute additional hemodialysis products not currently offered by
the Company, which products may offer opportunities to earn higher
profit margins than some of the Company's existing products. For
example, the Company recently obtained a 510(k) approval from the
FDA to market liquid bicarbonate, a product used primarily by acute
care hemodialysis providers and certain chronic care providers. The
Company intends to install a production line to manufacture liquid
bicarbonate, although no assurance can be given that the Company
will be successful in establishing a production line for such
product or that the Company can successfully market such product. In
addition, the Company intends to pursue contracts for its trucks to
act as common carriers for third parties during their return to the
Company's manufacturing facility after a delivery of the Company's
products.
- Offering a Higher Level of Customer Service. By using its own
delivery vehicles and drivers, the Company believes that it can
offer a higher level of customer service to hemodialysis providers
than if it relied primarily on the use of common carriers to
distribute its products. However, if the Company is not successful
in improving the operating efficiencies of its trucking operations
or implementing its strategy of obtaining "back-haul" revenue to
cover the additional costs associated with maintaining a fleet of
trucks as opposed to using common carriers, the Company may be
forced to abandon this strategy. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Plan of
Operation" and "-- Trucking Operations."
In addition, the Company employs experienced personnel to operate its
manufacturing plant and has purchased "state-of-the-art" laboratory and
manufacturing equipment.
PRODUCTS
The Company manufactures hemodialysis concentrates and dialysis kits, and
sells, distributes and delivers such products, as well as a full line of
ancillary hemodialysis products to hemodialysis providers located in 18 states
in the United States and in Venezuela. Through the Company's wholly-owned
subsidiary, Rockwell Transportation, Inc., the Company leases and operates a
fleet of ten tractor-trailers which it uses to deliver its products to
customers.
On June 16, 1997, the Company obtained 510(k) clearance from the FDA to
market liquid bicarbonate, a product used primarily by acute care hemodialysis
providers and certain chronic care providers. Upon completion of the Offering,
the Company intends to acquire and install equipment necessary to manufacture
and package liquid bicarbonate and to market such product. No assurance can be
given that the Company will be successful in establishing a production line for
liquid bicarbonate or that the Company can successfully market such product on a
profitable basis. See "Use of Proceeds."
TRUCKING OPERATIONS
The Company's wholly-owned subsidiary, Rockwell Transportation, Inc.,
directly delivers substantially all of the products the Company sells through a
fleet of ten tractor-trailers that the Company leases from a truck leasing
company pursuant to a two-year lease. The Company currently employs ten drivers
to operate its truck
22
<PAGE> 24
fleet, one dispatcher and one person to manage its trucking operations. The
Company's hemodialysis concentrates are generally packaged in 55 gallon
re-usable drums weighing approximately 580 pounds each. The Company's drivers
perform services for customers that are generally not available from common
carriers, such as stock rotation, non-loading-dock delivery and drum pump-offs,
which require the driver to pump hemodialysis concentrates from the 55 gallon
drums into larger holding tanks within the hemodialysis clinic. The Company's
main competitors generally use common carriers for delivery of their products.
The Company believes it offers a high level of service to its customers through
the use of its own delivery vehicles and drivers.
As a result of using its own fleet of delivery trucks to deliver its
products, the Company's transportation costs have been approximately twice the
cost of hiring common carriers to deliver products. The Company believes that it
can offset such higher costs by contracting with third parties for its trucks to
act as common carriers during their return to the Company's manufacturing
facility after a delivery of concentrates and other products. In March 1997, the
Company hired an experienced manager to manage its trucking operations and to
develop and implement a plan to improve the operating efficiencies of the
trucking operations and to begin soliciting "back-haul" revenue. If the Company
were unsuccessful in obtaining sufficient revenue to cover the additional costs
associated with using its own trucks for deliveries, the Company may consider
abandoning its strategy of using its own trucks, and hire common carriers or
make other arrangements to deliver its products. The Company is unable to
predict what effect, if any, such change in strategy would have on the Company's
customers, or on its ability to market its products. Additionally, as the
Company's business expands, the Company may expand its fleet of delivery trucks
to accommodate such increased business. If the Company expands its fleet of
trucks, the amount of "back-haul" revenue that will be necessary to cover the
excess costs of maintaining such fleet will also increase.
Under the terms of the Company's leasing arrangement with its truck leasing
company, the leasing company is responsible for the maintenance necessary to
keep the trucks in good operating condition. The Company's trucking operations
are and will continue to be subject to various state and federal regulations,
which if changed or modified, could adversely affect the Company's business,
financial condition and results of operations.
SALES AND MARKETING
The Company sells its products to hemodialysis providers through two
independent sales representative companies, one direct salesperson employed by
the Company and two independent distributors. The independent sales
representative companies are paid on a commission only basis and are responsible
for paying their own expenses. The Company's direct salesperson is an employee
of the Company and is paid a salary plus a commission. In addition, the Company
sells its products to hemodialysis distributors who employ their own sales force
to sell products purchased from the Company.
For the period from February 20, 1997 to May 31, 1997, sales of the
Company's products for use at clinics in Venezuela accounted for approximately
15% of the Company's total sales during such period. Such sales consisted of
acetate concentrate. The Company sells such products primarily to several
Miami-based distributors, who then sell the products to the government of
Venezuela through a competitive bidding process.
COMPETITION
Other than the Company, there are currently three other major suppliers of
concentrates and/or ancillary products used by hemodialysis clinics. The other
major suppliers of hemodialysis products are Gambro Healthcare ("Gambro"), which
supplies concentrates and blood tubing and also owns clinics which treat
approximately 22,000 hemodialysis patients (assuming completion of the recently
announced acquisition of Vivra Renal Care, Inc. by Gambro), Fresenius Medical
Care, Inc. ("Fresenius"), which supplies concentrates, blood tubing, ancillary
products and also owns clinics which treat approximately 44,000 hemodialysis
patients, and Renal Systems (a division of Minntech Corporation), which supplies
concentrates and renalin, a specialty product used to sterilize dialyzer
machines, but does not carry a wide line of hemodialysis products.
23
<PAGE> 25
Two of the Company's major competitors, Gambro and Fresenius, own and
operate a substantial number of hemodialysis clinics which compete for patients
in the same markets as the providers and hospitals to which they sell
hemodialysis products. Although the Company believes that its business
strategies provide it with competitive advantages over each of its three major
competitors, each of such competitors is a more established company with
substantially greater financial, technical, manufacturing, marketing, research
and development and management resources than those of the Company and well
established reputations, customer relationships and marketing and distribution
networks. The Company believes that many of the Company's products are
commodities, including its concentrates, and therefore, believes that price,
customer service and convenience are the principal competitive factors in the
hemodialysis products industry. There can be no assurance that the Company will
be able to compete successfully in the future. See "Risk Factors --
Competition."
QUALITY ASSURANCE/CONTROL
To assure quality and consistency of the Company's concentrates, the
Company conducts rigorous testing during the manufacturing process. Once a batch
of product is mixed, the Company's in-house quality control laboratory conducts
tests to verify that the chemical properties of the mix match the specifications
required by the particular customer. Upon verification that the batch meets the
specifications, the Company packages concentrates into either one-gallon
containers or 55-gallon drums. The Company further tests packaged concentrate
samples at the beginning and end of each production run to assure product
consistency during the filling process. Once the packaged product passes the
final tests, the product is released for shipment.
The Company has purchased new testing equipment it believes to be
"state-of-the-art" in order to assure quality and consistency in the manufacture
of its concentrates. The equipment allows the Company to analyze the materials
used in the hemodialysis concentrate manufacturing process, to assay and adjust
the in-process hemodialysis concentrate, and to assay and certify that the
finished products are within the chemical and biological specifications required
by the clinics. In addition, the Company's testing equipment allows it to reduce
the costs of performing necessary tests while improving the accuracy of such
tests. The Company also has been able to reduce the amount of labor and
maintenance necessary to perform such tests and maintain the equipment.
The Company's quality assurance department is managed by Ruth E. Homsher,
Ph.D., manager of the Quality Control Laboratory. Dr. Homsher is directly
responsible for all testing procedures, validation techniques and related
customer quality issues. For a description of Dr. Homsher's background, see
"Management."
GOVERNMENT REGULATION
The testing, manufacture and sale of the Company's hemodialysis
concentrates and the ancillary products distributed by the Company are subject
to regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign agencies. Pursuant to the Federal Food, Drug,
and Cosmetic Act, and the regulations promulgated thereunder, the FDA regulates
the preclinical and clinical testing, manufacture, labeling, distribution and
promotion of medical devices. Noncompliance with applicable requirements can
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of marketing clearances or approvals and criminal prosecution.
A medical device may be marketed in the United States only with prior
authorization from the FDA unless it is subject to a specific exemption. Devices
classified by the FDA as posing less risk than class III devices are categorized
as class I (general controls) or class II (general and specific controls) and
are eligible to seek "510(k) clearance." Such clearance generally is granted
when submitted information establishes that a proposed device is "substantially
equivalent" in intended use to a class I or II device already legally on the
market or to a "preamendment" class III device (i.e., one that has been in
commercial distribution since before May 28, 1976) for which the FDA has not
called for PMA applications (as defined below). The FDA in recent years has been
requiring a more rigorous demonstration of substantial equivalence than in the
past,
24
<PAGE> 26
including requiring clinical trial data in some cases. For any devices that are
cleared through the 510(k) process, modifications or enhancements that could
significantly affect safety or effectiveness, or constitute a major change in
the intended use of the device, will require new 510(k) submissions. The Company
believes that it now usually takes from one to four months from the date of
submission to obtain 510(k) clearance, but it can take substantially longer. The
Company's hemodialysis concentrates, liquid bicarbonate and other ancillary
products are categorized as class II devices.
A device requiring prior marketing authorization that does not qualify for
510(k) clearance is categorized as class III, which is reserved for devices
classified by FDA as posing the greatest risk (e.g., life-sustaining,
life-supporting or implantable devices), or devices that are not substantially
equivalent to a legally marketed class I or class II device. A class III device
generally must receive approval of a premarket approval ("PMA") application,
which requires proving the safety and effectiveness of the device to the FDA.
The process of obtaining PMA approval is expensive and uncertain. The Company
believes that is usually takes from one to three years after filing, but it can
take longer.
If human clinical trials of a device are required, whether for a 510(k)
submission or a PMA application, and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or the distributor of the
device) will have to file an investigational device exemption ("IDE")
application prior to commencing human clinical trials. The IDE application must
be supported by data, typically including the results of animal and laboratory
testing. If the IDE application is approved by the FDA and one or more
appropriate Institutional Review Boards ("IRBs"), human clinical trials may
begin at a specific number of investigational sites with a specific number of
patients, as approved by the FDA. If the device presents a "nonsignificant risk"
to the patient, a sponsor may begin the clinical trial after obtaining approval
for the study by one or more appropriate IRBs without the need for FDA approval.
Any devices manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA and certain state agencies. Manufacturers of medical devices for
marketing in the United States are required to adhere to applicable regulations
setting forth detailed Good Manufacturing Practices requirements, which
including testing, control and documentation requirements. The FDA has recently
finalized changes to the GMP regulations that will likely increase the cost of
compliance with GMP requirements. Manufacturers and distributors must also
comply with Medical Device Reporting ("MDR") requirements that a firm report to
the FDA any incident in which its product may have caused or contributed to a
death or serious injury, or in which its product malfunctioned and, if the
malfunction were to recur, it would be likely to cause or contribute to a death
or serious injury. Labeling and promotional activities are subject to scrutiny
by the FDA and, in certain circumstances, by the Federal Trade Commission.
Current FDA enforcement policy prohibits the marketing of approved medical
devices for unapproved uses.
The Company is subject to routine inspection by the FDA and certain state
agencies for compliance with GMP requirements and other applicable regulations.
The Company also is subject to numerous federal, state and local laws relating
to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances.
The Supply Company received 510(k) clearance from the FDA to market
hemodialysis concentrate solutions and powders on March 1, 1996. Such 510(k)
clearance was assigned to the Company on February 19, 1997, in connection with
the purchase of the Predecessor Company. In addition, the Company received
510(k) clearance from the FDA to market liquid bicarbonate on June 16, 1997. The
Company's retention of such 510(k) clearances also is dependent upon its
compliance with the FDA Act and related laws and regulations, including GMP
regulations. There can be no assurance that the Company will maintain its 510(k)
authority from the FDA to manufacture and distribute its products. Failure to do
so could result in the need to cease manufacturing and/or distributing Company
products, which would have a material adverse effect on the Company's business,
financial condition and results of operations. If any of the Company's FDA
clearances are denied or rescinded, sales of the Company's product in the United
States would be prohibited during the period the Company does not have such
clearances.
25
<PAGE> 27
PROPERTIES
The Company leases an approximately 32,500 square foot facility located in
Wixom, Michigan, which is comprised of manufacturing, warehouse, office and
laboratory space. The Company is party to a lease (the "Lease") covering such
facility that expires on December 15, 2000 and provides for a monthly rental
payment of $19,770.83, plus a monthly escrow deposit of $2,217.90 to fund real
estate taxes. This facility was formerly leased by the Predecessor Company, and
the Lease was assigned to the Company in connection with the acquisition of the
Predecessor Company's business. In connection with such assignment of the Lease,
the landlord required the Company to deposit into escrow $178,000, which is to
be applied against future lease payments and as additional security deposit in
accordance with the assignment agreement. The Company believes that its
facilities are suitable and adequate for its current operations, but may not be
adequate if the Company expands its operations.
SUPPLIERS
The Company believes that the raw materials for the Company's hemodialysis
concentrates, the components for the Company's hemodialysis kits and the
ancillary hemodialysis products distributed by the Company are generally
available from several potential suppliers.
EMPLOYEES
As of the date of this Prospectus, the Company has 46 employees, of which
one is a direct salesperson, four are laboratory technicians, ten are truck
drivers and eight are engaged in corporate management and administration. The
remaining 23 employees are hourly workers including secretaries and plant
employees. The Company's arrangements with its employees are not governed by any
collective bargaining agreement. All employees, except Mr. Chioini, are employed
on an "at-will" basis. If the Company's sales volumes increase, the Company
expects to add additional production and administrative personnel and truck
drivers.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings.
26
<PAGE> 28
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES.
The directors, executive officers and key employees of the Company and the
positions held by them are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert L. Chioini............................ 32 President, Chief Executive Officer and Director
Gary D. Lewis................................ 46 Chairman of the Board
Michael J. Xirinachs......................... 37 Director
Norman L. McKee.............................. 41 Director
James J. Connor.............................. 45 Vice President of Finance, Chief Financial
Officer, Treasurer and Secretary
Donald A. Danald............................. 53 Vice President of Regulatory Affairs
Ruth E. Homsher, Ph.D........................ 51 Manager, Quality Control Laboratory
</TABLE>
ROBERT L. CHIOINI is a founder of the Company, has served as the President
and Chief Executive Officer of the Company since February 1997, and has been a
director of the Company since its formation in October 1996. From January 1996
to February 1997, Mr. Chioini served as Director of Operations of Rockwell
Medical Supplies, LLC, a company which manufactured hemodialysis concentrates
and distributed such concentrates and other hemodialysis products. From January
1995 to January 1996, Mr. Chioini served as President of Rockwell Medical Inc, a
company which manufactured hemodialysis concentrates and distributed such
concentrates and other hemodialysis products. From 1993 to 1995, Mr. Chioini
served as a Regional Sales Manager at Dial Medical of Florida, Inc., currently
Gambro Healthcare, a company which manufactures and distributes hemodialysis
concentrates and owns hemodialysis clinics. From 1990 to 1993, Mr. Chioini
served as a Regional Sales Manager for R. Louis Enterprises, Inc., a medical
products distributor. Mr. Chioini is a party to an employment agreement with the
Company which expires February 19, 2000.
GARY D. LEWIS is a founder of the Company and has been Chairman of the
Board of Directors of the Company since its formation in October 1996. Mr. Lewis
also served as Secretary and Treasurer of the Company from October 1996 to July
1997. Mr. Lewis has also served as President of OmniSource, Inc., a medical
device distributor, since December 1994. Mr. Lewis also founded and served as
President and Chief Executive Officer of Somanetics Corporation, a medical
device manufacturer, from its inception in 1982 to February 1995. Mr. Lewis is
also a majority stockholder of, and serves as President and a director of, Wall
Street Partners, Inc. ("Wall Street"), a management consulting firm that
provides business consulting services to the Company. See "Certain Transactions
- -- Consulting Agreement."
MICHAEL J. XIRINACHS is a founder of the Company and has been a director of
the Company since its formation. Mr. Xirinachs also serves as a Senior Vice
President of Investments of D.H. Blair & Co., Inc., an investment banking firm
which Mr. Xirinachs joined in 1988. Mr. Xirinachs is also a stockholder of, and
serves as Vice President and a director of, Wall Street. See "Certain
Transactions -- Consulting Agreement."
NORMAN L. MCKEE joined the Board of Directors of the Company in July 1997.
In July 1997, Mr. McKee founded, and currently serves as the President of,
Strategic Growth Management, Inc., a management consulting firm. Mr. McKee
served as Senior Vice President, Treasurer and Chief Financial Officer of Saga
Communications, Inc. ("Saga"), a company which owns and operates radio stations
and a television station, from 1994 to July 1997. From 1988 to 1994, Mr. McKee
served as Vice President, Treasurer and Chief Financial Officer of Saga. Mr.
McKee also served on the Board of Directors of Saga from 1992 to July 1997.
JAMES J. CONNOR has served as the Vice President of Finance, Chief
Financial Officer, Treasurer and Secretary of the Company since July 1997. From
May 1995 to July 1997, Mr. Connor founded and was a principal of Connor &
Connor, a financial services consulting firm. From January 1992 to May 1995,
27
<PAGE> 29
Mr. Connor served as the President of Glacier Vandervell, Inc., an automotive
and diesel engine bearing manufacturer that supplies products to OEM customers
in the automotive industry.
DONALD A. DANALD joined the Predecessor Company in April 1996 as Vice
President of Regulatory Affairs and joined the Company in the same capacity
after the acquisition of the Predecessor Company's business. From 1990 to April
1996, Mr. Danald was a manager of the Laboratory and Quality Control departments
at Dial Medical of Florida, Inc., currently Gambro Healthcare, a competitor of
the Company. See "Business -- Competition."
RUTH E. HOMSHER, PH.D., joined the Predecessor Company in January 1996 as
Manager of the Quality Control Laboratory and joined the Company in the same
capacity after the acquisition of the Predecessor Company's business. From
December 1995 to January 1996, Dr. Homsher worked as an independent clinical
laboratory consultant. From January 1994 to December 1995, Dr. Homsher was the
Director of Quality Assurance and Technical support for Brendan Scientific, a
manufacturer of quality control software for clinical, research and industrial
laboratories. From February 1993 to December 1994, Dr. Homsher was a Senior
Research Scientist at McCann Associates, a manufacturer of diagnostic and
clinical reagents. From January 1990 to January 1993, Dr. Homsher was a clinical
chemist and quality assurance specialist for Roche Biomedical Laboratories,
Inc., a reference laboratory for clinical laboratories.
The Company's Articles of Incorporation, as amended (the "Articles of
Incorporation"), provide for a staggered Board of Directors, whereby the
directors are divided into three classes (as nearly equal in number as
feasible). The initial terms of each of the classes of directors expires at the
annual meetings of the shareholders to be held in 1998, 1999 and 2000 for the
Class I, Class II and Class III directors, respectively. Thereafter, the term of
each class shall be for three years or until their successors are elected and
qualified or until their earlier death, resignation or removal. Pursuant to the
Company's Articles of Incorporation, directors may be removed only for cause.
The following directors have been elected to fill the following classes: Class I
(initial term until the 1998 annual meeting) -- Mr. Lewis and Mr. McKee; Class
II (initial term until the 1999 annual meeting) -- Mr. Xirinachs; and Class III
(initial term until the 2000 annual meeting) -- Mr. Chioini.
Officers serve at the discretion of the Board of Directors. Pursuant to the
Underwriting Agreement, the Company has agreed, for a period of no less than
three years from the Effective Date, to engage a designee, acceptable to the
Underwriter and the Company, to serve as an Advisor to the Company's Board of
Directors. Such Advisor shall be entitled to attend all meetings of the Board of
Directors, to receive all notices and other correspondence and communications
sent by the Company to its directors, and to receive compensation equal to the
compensation paid to nonemployee directors of the Company. The Company has also
agreed that, in lieu of the Underwriter's right to designate an Advisor, the
Underwriter has the right to designate one person for election as a director,
and the Company has agreed to use its best efforts to cause such designee to be
elected to the Board of Directors.
COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Company's Chief Executive Officer for the year ended December 31,
1996 by the Predecessor Company. During the year ended December 31, 1996, no
other officers earned in excess of $100,000 in total annual salary and bonus.
28
<PAGE> 30
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
SALARY OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR ($) COMPENSATION ($)
--------------------------- ---- ------ ----------------
<S> <C> <C> <C>
Robert L. Chioini, President and Chief Executive Officer... 1996(1) $59,000 $5,800(2)
</TABLE>
- ------------------
(1) Reflects amounts paid by the Predecessor Company to Mr. Chioini for such
fiscal year. The Company did not commence operations until February 1997. On
February 19, 1997, the Company entered into a three-year employment
agreement with Mr. Chioini pursuant to which Mr. Chioini is being paid an
annual salary of $115,000 plus certain other perquisites. Upon completion of
the Offering, Mr. Chioini's salary will be increased to an annual rate of
$150,000. See " -- Employment Agreements."
(2) Represents reimbursement of expenses incurred by Mr. Chioini relating to the
personal use of a Company automobile.
In July 1997, Mr. Chioini was granted on option to purchase 90,000 Common
Shares at a per share exercise price of $3.00, under the Company's 1997 Stock
Option Plan. Such option vests in 25% cumulative annual installments beginning
on the date of grant.
COMPENSATION OF DIRECTORS
The Company's directors who are not officers or employees of the Company
(collectively, the "Outside Directors") receive $1,000 for each Board meeting
attended in person and $250 for each telephonic Board meeting attended. The
Company also reimburses Outside Directors for their reasonable expenses of
attending Board and Board committee meetings.
In July 1997, the Board of Directors and shareholders of the Company
adopted the Rockwell Medical Technologies, Inc. 1997 Stock Option Plan (the
"Stock Option Plan"). The Stock Option Plan permits the Board of Directors,
among other things, to grant options to purchase Common Shares to directors of
the Company, including Outside Directors. In July 1997, the Board of Directors
granted to each of the three existing Outside Directors options to purchase
20,000 Common Shares at a per share exercise price of $3.00. Upon the election
of any new member to the Board of Directors who is an Outside Director, the
Board of Directors intends to grant to such member an option to purchase 20,000
Common Shares at a per share exercise price equal to the fair market value of a
Common Share at the date of grant. Beginning with the first annual meeting of
the shareholders of the Company after July 1997, provided that a sufficient
number of Common Shares remain available under the Stock Option Plan, on each
date on which an annual meeting of the shareholders of the Company is held, the
Board of Directors intends to grant to each Outside Director who is then serving
on the Board of Directors, an option to purchase 5,000 Common Shares. The
exercise price of the options will be the fair market value of the Common Shares
on the date of grant. The options granted to Outside Directors under the Stock
Option Plan will become fully exercisable on the first anniversary of the date
of grant. Such options will expire ten years after the date of grant. If an
Outside Director becomes an officer or employee of the Company and continues to
serve as a member of the Board of Directors, options granted under the Stock
Option Plan will remain exercisable in full.
For a description of the Company's consulting agreement with Wall Street, a
consulting company owned by Mr. Lewis and Mr. Xirinachs, each of whom is a
director of the Company, see "Certain Transactions--Consulting Agreement."
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Robert L. Chioini in
February 1997, pursuant to which Mr. Chioini is employed as the President and
Chief Executive Officer of the Company for a period ending February 19, 2000.
Mr. Chioini's base salary is $115,000, which may be increased by the Board of
Directors. The Board has increased his salary to $150,000 effective on the
closing date of this Offering.
29
<PAGE> 31
Mr. Chioini's employment agreement contains a three year non-compete provision
and provides for him to devote his full-time and attention to the Company's
business.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION ON DIRECTORS' LIABILITY
The Michigan Business Corporation Act, as amended, authorizes a corporation
under specified circumstances to indemnify its directors and officers (including
reimbursement for expenses incurred). The provisions of the Company's Bylaws
relating to indemnification of directors and executive officers generally
provide that directors and executive officers will be indemnified to the fullest
extent permissible under Michigan law. The provision also provides for the
advancement of litigation expenses at the request of a director or executive
officer. These obligations are broad enough to permit indemnification with
respect to liabilities arising under the Securities Act or the Michigan Uniform
Securities Act, as amended. The Company believes that such indemnification will
assist the Company in continuing to attract and retain talented directors and
officers in light of the risk of litigation directed against directors and
officers of publicly-held corporations.
The Michigan Business Corporation Act, as amended, also permits Michigan
corporations to limit the personal liability of directors for a breach of their
fiduciary duty. The provisions of the Company's Articles of Incorporation limit
director liability to the maximum extent currently permitted by Michigan law.
Michigan law allows a corporation to provide in its articles of incorporation
that a director of the corporation will not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability for specified acts. As a result of the
inclusion of such a provision, shareholders of the Company may be unable to
recover monetary damages against directors for actions taken by them which
constitute negligence or gross negligence or which are in violation of their
fiduciary duties, although it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable remedies are found
not to be available to shareholders in any particular case, shareholders may not
have any effective remedy against the challenged conduct. These provisions,
however, do not affect liability under the Securities Act.
In addition, the Company has obtained Directors' and Officers' liability
insurance. The policy provides for $1,000,000 in coverage including prior acts
dating to the Company's inception and liabilities under the Securities Act in
connection with this Offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
CERTAIN TRANSACTIONS
FORMATION OF THE COMPANY
In October 1996, Messrs. Chioini, Lewis and Xirinachs founded the Company.
In connection with the formation of the Company Messrs. Chioini, Lewis and
Xirinachs received 500,000, 750,000 and 750,000 shares, respectively, of the
Company's Common Shares for an aggregate purchase price of $1,000.
ACQUISITION OF BUSINESS OF PREDECESSOR COMPANY
On February 19, 1997, the Company acquired the business of the Predecessor
Company for total consideration of $2,441,664.47 pursuant to an Asset Purchase
Agreement dated as of November 1, 1996, as amended (the "Asset Purchase
Agreement"). Mr. Robert L. Chioini, the President, Chief Executive Officer and a
director of the Company, owns a 20% equity interest in the Supply Company. The
purchase price consisted of: (i) $150,000 paid to the Sellers in cash; (ii) a
cash payment to NBD Bank of approximately $375,000 to retire an outstanding debt
owed by the Predecessor Company to NBD Bank; and (iii) an 8.5% promissory note
in the principal amount of $1,916,664.47 made by the Company in favor of the
Supply
30
<PAGE> 32
Company (the "Note"). Under the terms of the Note and the Asset Purchase
Agreement, a prepayment of $500,000 on the Note was due on May 19, 1997, which
date was extended by the Supply Company to May 31, 1997. Pursuant to a letter
agreement dated April 4, 1997, the Supply Company agreed that, upon receipt of
the $500,000 prepayment on the Note, the remaining principal balance under the
Note would be converted into shares of Series A Preferred Stock at a conversion
ratio of one share of Series A Preferred Stock for each $1.00 of outstanding
principal due under the Note. The Company made the required $500,000 prepayment
under the Note and the Note was converted into 1,416,664 shares of Series A
Preferred Stock.
Under the terms of the Series A Preferred Stock, the Company is obligated
to redeem such Series A Preferred Stock on or before January 31, 1998 (the
"Mandatory Redemption Date"), at a redemption price of $1.00 per share, plus any
accrued and unpaid dividends from June 1, 1997. The Company's obligation to
redeem the Series A Preferred Stock has been guaranteed (the "Guaranty") by each
of Messrs. Chioini, Lewis and Xirinachs, and such Guaranty is secured by the
pledge of 1,478,260 Common Shares (the "Pledged Shares") owned by such Principal
Shareholders pursuant to an Escrow Agreement dated as of July 22, 1997 (the
"Escrow Agreement"). If the Company fails to redeem the outstanding shares of
Series A Preferred Stock on or before the Mandatory Redemption Date, the Supply
Company has a period of 45 days following such date to elect either to: (i)
exercise its rights under the Guaranty and the Escrow Agreement to retain the
Pledged Shares which remain held in escrow, in full satisfaction and discharge
of the Guaranty and the Company's obligation to redeem the Series A Preferred
Stock; or (ii) terminate its rights under the Guaranty, relinquish and terminate
its interest in the Pledged Shares and proceed against the Company to collect
the outstanding redemption payment. In addition to the mandatory redemption
discussed above, the Company has the right to redeem shares of Series A
Preferred Stock at any time prior to the Mandatory Redemption Date. The Company
intends to use a portion of the net proceeds of this Offering to fund the
payment of the redemption price necessary to redeem the Series A Preferred
Stock. See "Use of Proceeds."
In addition, in connection with the purchase of the business from the
Predecessor Company, the Company paid $178,000 to the landlord under the Lease,
as a prepayment of future rents and as an additional security deposit in order
to induce such landlord to consent to the assignment of the Lease and to release
the Predecessor Company and its shareholders, including Mr. Chioini, from their
obligations under the Lease. See "Business -- Properties."
CONSULTING AGREEMENT
The Company is party to a consulting agreement with Wall Street dated as of
February 19, 1997 pursuant to which Wall Street provides management and
financial consulting services to the Company. The Company has agreed to pay Wall
Street a consulting fee of $25,000 per month from the date of the agreement
through December 1997, subject to renewal upon the mutual agreement of the
Company and Wall Street. Prior to February 19, 1997, Wall Street rendered
consulting services to the Company beginning in November 1996, for a consulting
fee of $25,000 per month. Wall Street is owned by Gary D. Lewis and by Michael
J. Xirinachs, each of whom are founders of the Company and serve as Directors of
the Company. The Company has paid or accrued an aggregate of $175,000 in
consulting fees to Wall Street under these arrangements through May 31, 1997.
SHAREHOLDER LOANS
On April 29, 1997, Messrs. Chioini, Lewis and Xirinachs loaned $50,000,
$25,000 and $50,000, respectively, to the Company. The loans were evidenced by
8.5% promissory notes in the amounts of $50,000, $25,000 and $50,000,
respectively. The Company repaid such loans, including accrued interest, in
June, 1997.
31
<PAGE> 33
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 21, 1997, certain information
concerning the Common Shares beneficially owned by each director and the chief
executive officer of the Company, by all executive officers and directors of the
Company as a group, and by each shareholder that is a beneficial owner of more
than 5% of the outstanding Common Shares:
<TABLE>
<CAPTION>
Percentage
Amount and Beneficially Owned
Nature of Beneficial --------------------------------------------------
Name Ownership(1) Before the Offering(2) After the Offering(3)
- ----------------------------------- -------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Gary D. Lewis(4)(5)(6)............. 750,000 24.9% 16.3%
Michael J. Xirinachs(4)(6)......... 750,000 24.9% 16.3%
Robert L. Chioini(4)(6)(7)......... 522,500 17.2% 11.3%
Norman L. McKee.................... 0 -- --
All directors and executive
officers as a group (6
persons)(8)...................... 2,043,750 66.8% 43.9%
</TABLE>
- ------------------
(1) Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated, subject to community property laws,
where applicable. For purposes of computing the percentage of outstanding
shares held by each person or group of persons named above as of the date of
the table, any security which such person or group of persons has the right
to acquire within 60 days after such date is deemed to be outstanding for
the purpose of computing the percentage ownership for such person or
persons, but it not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
(2) Based on 3,015,000 Common Shares outstanding as of July 21, 1997.
(3) Based on 4,609,286 Common Shares outstanding, assuming all 1,500,000 Units
offered hereby are sold to third parties and assuming the issuance of 94,286
Additional Shares to investors in the First Prior Financing. See
"Description of Securities -- Prior Financings."
(4) Address is c/o the Company, 28025 Oakland Oaks Drive, Wixom, Michigan 48393.
(5) Includes 675,000 Common Shares owned jointly with Mr. Lewis's wife and
75,000 Common Shares held in custodial accounts for the benefit of Mr.
Lewis's three minor children.
(6) 554,347, 554,347, and 369,566 of Common Shares owned by Mr. Lewis, Mr.
Xirinachs and Mr. Chioini, respectively, have been pledged to secure their
obligations under the Guaranty to the Supply Company of the Company's
obligation to redeem the Series A Preferred Stock on the Mandatory
Redemption Date. The Principal Shareholders retain voting and dispositive
power with respect to the Pledged Shares until the occurrence of a default
in the Company's obligation to redeem the Series A Preferred Stock. Any such
default could result in a change in control of the Company. See "Certain
Transactions -- Acquisition of Business of Predecessor Company." The Company
intends to use a portion of the proceeds of this Offering to redeem the
Series A Preferred Stock. See "Use of Proceeds."
(7) Includes 22,500 Common Shares that Mr. Chioini has the right to acquire
within 60 days.
(8) Includes 43,750 Common Shares which all executive officers and directors as
a group have the right to acquire within 60 days.
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<PAGE> 34
DESCRIPTION OF SECURITIES
UNITS
Each Unit consists of one Common Share and two Warrants, each Warrant
entitling the holder to purchase one Common Share. The Common Shares and
Warrants are immediately transferable separately.
GENERAL
The authorized capital shares of the Company consist of an aggregate of
20,000,000 Common Shares, no par value per share ("Common Shares"), 1,416,664
shares of 8.5% non-voting cumulative Series A Preferred Stock, $1.00 par value
per share (the "Series A Preferred Stock"), and 2,000,000 shares of Preferred
Stock, no par value per share (the "Preferred Stock"). 3,015,000 Common Shares,
1,416,664 shares of Series A Preferred Stock and no shares of Preferred Stock
are currently issued and outstanding. 94,286 Additional Shares will be issued to
investors in the First Prior Financing on the closing date of this Offering.
COMMON SHARES
Holders of Common Shares are entitled to one vote per Common Share on each
matter submitted to a vote of shareholders of the Company and to participate
ratably in dividends and other distributions when and if declared by the Board
of Directors from funds legally available therefor. See "Risk Factors -- Absence
of Dividends on Common Shares." Upon the liquidation, dissolution or winding up
of the Company, holders of Common Shares are entitled to share pro rata in any
assets available for distribution to shareholders after payment of all
obligations of the Company and after provision has been made with respect to
each class of stock, if any, having preference over the Common Shares. Holders
of Common Shares do not have cumulative voting rights or preemptive,
subscription or conversion rights and are not redeemable. The Common Shares
presently outstanding are, and the Common Shares to be issued in connection with
this Offering will be, duly authorized, validly issued, fully paid and
non-assessable.
The Board of Directors is authorized to issue additional Common Shares
within the limits authorized by the Company's Articles of Incorporation without
further shareholder action. The Company has agreed with the Underwriter that it
will not issue any securities, including but not limited to Common Shares, for a
period of 24 months following the Effective Date, except as disclosed in or
contemplated by this Prospectus, without the prior written consent of the
Underwriter.
The directors of the Company serve staggered three-year terms. The
directors of the Company will hold office until the Annual Meeting of
Shareholders to be held in 1998 for Gary D. Lewis and Norman L. McKee, the
Annual Meeting of Shareholders to be held in 1999 for Michael J. Xirinachs, and
the Annual Meeting of Shareholders to be held in 2000 for Robert L. Chioini, and
until their successors are elected and qualified. Directors may not be removed
without cause. The Articles of Incorporation also set the minimum and maximum
number of directors constituting the entire Board at three and fifteen,
respectively, and require approval of holders of a majority of the Company's
voting shares to amend these provisions.
SERIES A PREFERRED STOCK
The Board of Directors has authorized and issued 1,416,664 shares of Series
A Preferred Stock. The terms of the Series A Preferred Stock are as follows:
Dividend Rights. Holders of Series A Preferred Stock are entitled to
receive, out of funds legally available for the payment of dividends, cumulative
cash dividends in the amount of $0.085 per share per year (pro rated for partial
years) accruing from June 1, 1997, as and when directed by the Board of
Directors of the Company. As long as any shares of Series A Preferred Stock are
outstanding, the Company may not (i) declare, pay, or set money, securities or
other property apart for the payment of, any dividend on any other shares of the
Company, including all classes of common stock and any other series of preferred
stock (all of such shares of the Company referred to as the "Junior Shares"), or
(ii) make any payment on account of, or set money, securities or other property
apart for the payment into, a sinking or other similar fund for the purchase,
redemption or other retirement of, any of the Junior Shares or any warrants,
rights, calls or options
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<PAGE> 35
exercisable for or exchangeable into any of the Junior Shares (collectively, the
"Junior Securities"), or (iii) make any distribution in respect of any Junior
Securities, either directly or indirectly, and whether in cash, obligations or
shares of the Company or other property (other than distributions or dividends
in Junior Shares to the holders of Junior Shares), and shall not permit any
corporation or other entity directly or indirectly controlled by the Company to
purchase or redeem any of the Junior Securities, unless prior to or concurrently
with such declaration, payment, setting apart for payment, purchase, redemption
or distribution, as the case may be, all accrued and unpaid dividends on the
Series A Preferred Stock shall have been paid.
Redemption. The Company is required to redeem all outstanding shares of
Series A Preferred Stock on January 31, 1998 (the "Mandatory Redemption Date"),
at a purchase price equal to $1.00 per share plus accumulated and unpaid
dividends on the Mandatory Redemption Date. The purchase price must be paid in
cash. From and after the Mandatory Redemption Date, the holders of Series A
Preferred Stock will not have any rights as shareholders of the Company except
the right to receive from the Company the redemption price of such Series A
Preferred Stock, without interest, upon the surrender of such Series A Preferred
Stock to the Company. In addition, the Company has the right and option at any
time prior to the Mandatory Redemption Date to purchase, redeem or otherwise
acquire any or all of the Series A Preferred Stock for a purchase price equal to
$1.00 per share plus accumulated and unpaid dividends on such share through the
date of repurchase or redemption. Upon consummation of this Offering, the
Company intends to repurchase and redeem all of the Series A Preferred Stock for
a purchase price of approximately $1,453,000 (assuming such redemption is
effected on September 19, 1997). See "Use of Proceeds."
Liquidation Rights. Subject to the prior rights of the Company's creditors,
the holders of the Series A Preferred Stock are entitled to receive, upon any
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
$1.00 per share, plus accrued and unpaid dividends, before any payment to
holders of Junior Shares. If, in any such case, the assets of the Company are
insufficient to make such payment in full, then the available assets will be
distributed among the holders of the Series A Preferred Stock ratably in
proportion to the full amount to which each holder would be entitled.
Conversion Rights. Holders of Series A Preferred Stock have no conversion
rights; however, the obligation of the Company to effect the mandatory
redemption of the Series A Preferred Stock by the Mandatory Redemption Date is
guaranteed by the Principal Shareholders pursuant to the Guaranty, which
Guaranty is secured by a pledge of the Pledged Stock. See "Certain Transactions
- -- Acquisition of Business of Predecessor Company."
Voting Rights. Holders of Series A Preferred Stock have no voting rights,
except as may be required by law.
WARRANTS
The Warrants offered hereby will be issued in registered form under a
Warrant Agreement (the "Warrant Agreement") between the Company and American
Stock Transfer & Trust Company as warrant agent (the "Warrant Agent").
Each Warrant will be separately transferable and will entitle the
registered holder thereof to purchase one Common Share at $4.50 per share
(subject to adjustment as described below) for a period of three years
commencing one year after the Effective Date and ending on the fourth
anniversary of the Effective Date (the "Exercise Period"). The exercise price of
the Warrants was determined by negotiation between the Company and the
Underwriter and should not be construed to be predictive of, or to imply that,
any price increases will occur in the Company's securities. The exercise price
and the number and kind of Common Shares issuable upon the exercise of each
Warrant are subject to adjustment in the event of a stock split, stock dividend,
recapitalization, merger, consolidation or certain other events. No adjustment
for previously paid cash dividends, if any, will be made upon exercise of the
Warrants. A holder of Warrants may exercise such Warrants by surrendering the
certificate evidencing such Warrants before the earlier of the expiration or
redemption date to the Warrant Agent at its offices, together with the form of
election to purchase on the reverse side of such certificate properly completed
and executed and the payment of the exercise price and any
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<PAGE> 36
transfer tax. If less than all of the Warrants evidenced by a Warrant
certificate are exercised, a new certificate will be issued for the remaining
number of Warrants.
The Company has authorized and reserved for issuance a number of Common
Shares sufficient to provide for the exercise of the Warrants. When issued, upon
proper exercise of the Warrants and payment of the exercise price specified in
the Warrants, each Common Share will be fully paid and nonassessable. Holders of
Warrants will not have any voting or other rights as shareholders of the Company
unless and until Warrants are exercised and shares issued pursuant thereto.
The Warrants may be redeemed by the Company at a price of $.10 per Warrant,
upon not less than 30 days prior written notice to registered holders of the
Warrants at any time during the Exercise Period, with the prior written consent
of the Underwriter, if the average of the closing bid quotations of the Common
Shares, during the period of 20 consecutive trading days ending on the third day
prior to the date upon which notice of redemption is given, as reported on The
Nasdaq SmallCap Market (or if the Common Shares are not quoted thereon, the
closing sale price of the Common Shares on the Nasdaq National Market or other
principal securities exchange upon which the Common Shares are then quoted or
listed, or such other reporting system that provides closing sale prices for the
Common Shares), is greater than $8.50 per share, subject to adjustment in the
event of stock splits and similar events. The Warrants will be exercisable until
the close of business on the day immediately preceding the date fixed for the
redemption of the Warrants in the notice of redemption. The Company may redeem
the Warrants at a time when it is disadvantageous for the holders of the
Warrants. The holders of the Warrants may, therefore, be forced to exercise the
Warrants and pay the exercise price or sell the Warrants at the current market
price for the Warrants when they otherwise might wish to hold the Warrants, or
accept the redemption price, which is likely to be substantially less than the
market price of the Warrants at the time of redemption.
The Company will pay the Underwriter a fee of 5% of the exercise price of
each Warrant exercised, provided (i) the market price of Common Shares on the
date the Warrant was exercised was equal to or greater than the Warrant exercise
price on that date, (ii) the exercise of the Warrant was solicited by a member
of the National Association of Securities Dealers, Inc. ("NASD"), (iii) the
Warrant was not held in a discretionary account, (iv) the disclosure of
compensation arrangements was made in documents provided to the holders of the
Warrants, (v) the solicitation of the exercise of the Warrant was not a
violation of Rule 101 of Regulation M under the Exchange Act and (vi) the
Underwriter is designated in writing as the soliciting NASD member. The
Underwriter and any other soliciting broker/dealers will be prohibited from
engaging in any market making activities or solicited brokerage activities with
regard to the Company's securities during the periods prescribed by Rule 101 of
Regulation M before the solicitation of the exercise of any Warrant until the
later of the termination of such solicitation activity or the termination of any
right the Underwriter and any other soliciting broker/dealer may have to receive
a fee for the solicitation of the exercise of the Warrants.
For a description of the requirements with respect to the maintenance of an
effective registration statement in order to permit holders to exercise
Warrants, see "Risk Factors -- Non-registration in Certain Jurisdictions of
Common Shares Underlying the Warrants; Exercise of Warrants."
PREFERRED STOCK
The Company is authorized to issue up to 2,000,000 shares of Preferred
Stock in one or more series, each with such designations, rights, preferences,
privileges and restrictions as may be determined from time to time by the Board
of Directors. Accordingly, the Board of Directors is empowered, without further
shareholder approval, to issue Preferred Stock with dividend, liquidation,
conversion, voting or other rights that could decrease the amount of earnings
and assets available for distribution to holders of Common Shares or adversely
affect the voting power or other rights of the holders of Common Shares. The
issuance of Preferred Stock could be used, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of the
Company. Anti-takeover provisions that could be included in the Preferred Stock
when issued may have a depressive effect on the market price of the Company's
securities and may limit shareholders' ability to receive a premium on their
shares by discouraging takeover and tender offer bids. The Company has no
present intention to issue any shares of Preferred Stock. The Company has agreed
with the
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<PAGE> 37
Underwriter that, except for issuances disclosed in or contemplated by this
Prospectus, it will not issue any securities, including but not limited to any
shares of Preferred Stock, for a period of 24 months following the Effective
Date, without the prior written consent of the Underwriter. See "Underwriting."
PRIOR FINANCINGS
In February 1997, the Company sold an aggregate of 495,000 Common Shares
for a purchase price of $2.50 per Common Share (the "First Prior Financing").
The aggregate net proceeds to the Company from the First Prior Financing were
$1,212,500, plus the discharge of a $25,000 debt owed to one of the investors.
In connection with the First Prior Financing, purchasers of Common Shares
offered thereby were granted a right to receive additional Common Shares if the
Company engaged in an initial public offering of its Common Shares at a public
offering price per share that was less than twice the per share purchase price
paid by the investors in the First Prior Financing. In such event, the Company
must issue additional Common Shares to the investors that participated in the
First Prior Financing such that the effective purchase price paid by such
investors for Common Shares (including the Additional Shares) equals one-half of
the initial public offering price. Accordingly, assuming the Company completes
this Offering at an initial public offering price of $4.20 per Unit, the Company
will issue an aggregate of 94,286 Additional Shares to the investors that
participated in the First Prior Financing.
The Company also granted "piggyback" registration rights to investors that
purchased Common Shares in the First Prior Financing. See "-- Registration
Rights."
In May through July 1997, the Company sold an aggregate of 26 units, each
unit consisting of 20,000 Common Shares and 20,000 Bridge Warrants for a
purchase price of $60,000 per unit, or an aggregate of $1,560,000 (the "Second
Prior Financing"). Each Bridge Warrant entitles the registered holder thereof to
purchase one Common Share at an exercise price of $4.50 per share, subject to
adjustment in certain events, at any time commencing one year from the Effective
Date and ending on the fourth anniversary of the Effective Date. On the
Effective Date, the Bridge Warrants will convert automatically into warrants
having terms identical to the Warrants being offered in the Offering.
In connection with the Second Prior Financing, the Company paid aggregate
fees of $156,000 to Maidstone Financial, Inc., the Underwriter in this Offering,
which acted as placement agent. In addition, the Company paid the Underwriter a
$46,800 non-accountable expense allowance and other expenses of such financing.
The net proceeds of the Second Prior Financing (approximately $1,248,348) were
used in part to reduce the obligation under the note payable to the Predecessor
Company ($500,000) and to fund the Company's operating losses and provide
working capital.
REGISTRATION RIGHTS
Investors in the First Prior Financing have the right to request
registration of the Common Shares issued in connection with the First Prior
Financing in any registration statement filed by the Company with the Commission
under the Securities Act (with certain exceptions) for the issuance and sale of
its securities. Pursuant to lock-up agreements signed by each of the investors
in the First Prior Financing, such investors have waived their registration
rights with respect to this Offering and have agreed not to sell or otherwise
dispose of securities of the Company, including Common Shares, for a period of
13 months following the Effective Date, without the prior written consent of the
Underwriter, which may be granted or withheld in the sole and absolute
discretion of the Underwriter.
Investors who acquired Common Shares and Bridge Warrants in the Second
Prior Financing have the right to request registration of the Common Shares
and/or Bridge Warrants (or securities issued therefor) and the Common Shares
issued or issuable upon exercise therefor in any registration statement filed by
the Company with the Commission under the Securities Act (with certain
exceptions) for the issuance and sale of its securities. Pursuant to lock-up
agreements signed by each of the investors in the Second Prior Financing, such
investors have waived their registration rights with respect to this Offering
and have agreed not to sell or otherwise dispose of securities of the Company,
including Common Shares and the Bridge Warrants, for a
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<PAGE> 38
period of 13 months following the Effective Date, without the prior written
consent of the Underwriter, which may be granted or withheld in the sole and
absolute discretion of the Underwriter.
The holders of the Underwriter Warrants (including the securities issuable
upon exercise thereof) have demand and piggyback registration rights with
respect to the Common Shares issuable upon exercise of the Underwriter Warrants
and the underlying Warrants, which Common Shares have been registered by the
Company on the Registration Statement on Form SB-2 of which this Prospectus is a
part.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
4,609,286 Common Shares (assuming no exercise of the Over-Allotment Option, the
Warrants, the Bridge Warrants, the Underwriter Warrants and other outstanding
options and warrants) and 1,416,664 shares of Series A Preferred Stock, which
Series A Preferred Stock will be redeemed using a portion of the proceeds of
this Offering. Of these shares, the 1,500,000 Common Shares sold in this
Offering (in addition to the 3,000,000 Common Shares issuable upon exercise of
the Warrants) will be freely tradeable without restriction under the Securities
Act, except for any shares purchased by any person who is or thereby becomes an
"affiliate" of the Company, which shares will be subject to the resale
limitations contained in Rule 144 promulgated under the Securities Act. The
remaining 3,109,286 Common Shares are "restricted securities" (as that term is
defined in Rule 144) which may be publicly sold only if registered under the
Securities Act or if sold in accordance with an applicable exemption from
registration, such as Rule 144. Of the outstanding restricted Common Shares,
2,000,000 shares will be owned by Messrs. Lewis, Xirinachs and Chioini, who may
be deemed "affiliates" of the Company, as that term is defined in Rule 144. An
additional 520,000 Common Shares underlying the Bridge Warrants will, upon
issuance, be "restricted securities."
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company, whose restricted securities have satisfied a one-year holding
period, is entitled to sell (together with any person with whom such individual
is required to aggregate sales), within any three month period, a number of
restricted shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class, or, if the shares are quoted on The Nasdaq
Stock Market or a national securities exchange, the average weekly trading
volume during the four calendar weeks preceding the filing of Form 144 with
respect to the sale. A person who has not been an affiliate of the Company for
at least three months, and whose restricted securities have satisfied a two-year
holding period, is entitled to sell such restricted securities under Rule 144
without regard to any of the limitations described above. Affiliates, however,
continue to be subject to such limitations even after such two-year holding
period, and they are subject to such limitations with respect to their sales of
non-restricted securities.
The restricted Common Shares will be eligible for sale pursuant to Rule 144
commencing 90 days after the Effective Date. However, officers, directors and
other security holders of the Company owning and/or having rights to acquire in
the aggregate Common Shares have entered into agreements with the
Underwriter not to sell or otherwise dispose of any securities of the Company,
including Common Shares, for a period of 13 months following the Effective Date,
without the prior written consent of the Underwriter, which may be granted or
withheld in the sole and absolute discretion of the Underwriter; provided,
however, that if prior to the expiration of the lock-up period, the Company's
Common Shares are subject to a tender offer and holders of the Company's Common
Shares (other than the existing shareholders) agree to tender a majority of the
outstanding Common Shares to the offeror, then the Underwriter shall release all
shareholders subject to the Lock-Up Agreements from the restrictions imposed
thereby solely for the purpose of tendering their Common Shares to the offeror
pursuant to the terms of the tender offer. Following expiration of the term of
the Lock-Up Agreements, 3,109,286 shares will become eligible for resale
pursuant to Rule 144, subject to the volume limitations and compliance with the
other provisions of Rule 144. Furthermore, the holders of the Underwriter
Warrants (including the securities issuable upon exercise thereof) have demand
and piggyback registration rights with respect to the Common Shares issuable
upon exercise of the Underwriter Warrants and the underlying Warrants, which
Common Shares have been registered by the Company on the Registration Statement
on Form SB-2 of which this Prospectus is a part. The Company also intends to
register the 450,000
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Common Shares issuable upon the exercise of options available under the
Company's 1997 Stock Option Plan. In addition, the investors in the First Prior
Financing and the investors in the Second Prior Financing have piggy-back
registration rights with respect to their Common Share, Bridge Warrants and the
520,000 underlying Common Shares. These rights have been waived in connection
with this Offering.
The Company is unable to predict the effect that sales under Rule 144,
pursuant to a registered public offering or otherwise may have on the then
prevailing market price of the Units, Common Shares or Warrants, but such sales
may have a substantial depressive effect on such market price. The above is a
summary of Rule 144 and is not intended to be a complete description of the
Rule. See "-- Registration Rights," "--Warrants," "Certain Transactions" and
"Underwriting".
As a result of the Offering, an additional 3,000,000 Common Shares
(3,450,000 if the Over-Allotment Option is fully exercised) will be subject to
issuance upon the exercise of the Warrants offered hereby, and an additional
450,000 Common Shares will be subject to issuance upon the exercise of the
Underwriter Warrants and the underlying Warrants.
As of July 21, 1997, there were 39 record holders of the Common Shares.
ANTI-TAKEOVER LEGISLATION
Chapters 7A and 7B of the Michigan Business Corporation Act, as amended,
may affect attempts to acquire control of the Company. In general, under Chapter
7A, "business combinations" (defined to include, among other transactions,
certain mergers, dispositions of assets or shares and recapitalizations) between
covered Michigan business corporations or their subsidiaries and an "interested
shareholder" (defined as the direct or indirect beneficial owner of at least 10
percent of the voting power of a covered corporation's outstanding shares) can
only be consummated if approved by at least 90 percent of the votes of each
class of the corporation's shares entitled to vote and by at least two-thirds of
such voting shares not held by the "interested shareholder" or affiliates,
unless five years have elapsed after the person involved became an "interested
shareholder" and unless certain price and other conditions are satisfied. The
Board of Directors has the power to elect to be subject to Chapter 7A as to
specifically identified or unidentified interested shareholders.
In general, under Chapter 7B, an entity that acquires "Control Shares" of
the Company may vote the Control Shares on any matter only if a majority of all
shares, and of all non-"Interested Shares", of each class of stock entitled to
vote as a class, approve such voting rights. Interested Shares are shares owned
by officers of the Company, employee-directors of the Company and the entity
making the Control Share Acquisition (as defined). Control Shares are shares
that, when added to shares already owned by an entity, would give the entity
voting power in the election of directors or any of three thresholds: one-fifth,
one-third and a majority. The effect of the statute is to condition the
acquisition of voting control of a corporation on the approval of a majority of
the pre-existing disinterested shareholders. The Board of Directors may amend
the bylaws before a Control Share Acquisition occurs to provide that Chapter 7B
does not apply to the Company.
TRANSFER AGENT AND WARRANT AGENT
The Company has engaged American Stock Transfer & Trust Company to act as
Transfer Agent for the Company's Units and Common Shares and Warrant Agent for
the Warrants.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement"), the Company has agreed to sell to the Underwriter,
and the Underwriter has agreed to purchase, the number of Units set forth
opposite its name below at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITER UNITS
----------- -----
<S> <C>
Maidstone Financial, Inc. .................................. 1,500,000
---------
Total.................................................. 1,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriter are
subject to certain conditions precedent. The Underwriter is committed to
purchase all of the Units offered hereby, on a firm commitment basis, if any are
purchased.
The Underwriter has advised the Company that it proposes initially to offer
the 1,500,000 Units to the public at the public offering price set forth on the
cover page of this Prospectus and that it may allow to selected dealers who are
members of the NASD concessions not in excess of $ per Unit, of which not
more than $ per Unit may be re-allowed to certain other dealers who are NASD
members. After the initial public offering, the public offering price,
concession and reallowance may be changed by the Underwriter.
The Underwriting Agreement also provides that the Underwriter will receive
a non-accountable expense allowance of 3% of the gross proceeds of the Offering.
The Company also has agreed to pay all expenses in connection with qualifying
the Units, Common Shares and the Warrants offered hereby for sale under the laws
of such states as the Underwriter may designate, including expenses of counsel
retained for such purpose by the Underwriter.
Pursuant to the Over-Allotment Option, which is exercisable for a period of
45 days after the Effective Date, the Underwriter may purchase up to 225,000
Units, solely to cover over-allotments, at the offering price, less the
underwriting discounts and commissions.
The Company has agreed to sell to the Underwriter on the closing date of
this Offering, for $10, the Underwriter Warrants to purchase 150,000 Units. The
Underwriter Warrants shall be exercisable for a period of three years commencing
, 1998 (one year after the Effective Date) at an exercise price
equal to $5.04 (120% of the offering price of the Units sold to the public in
the Offering). The Underwriter Warrants are not transferable prior to
, 1998, except to officers of the Underwriter, members of the
selling group and their officers and partners.
The Company has agreed that, upon written request of the then holder(s) of
a majority of the Warrants and the Common Shares issued and/or issuable upon
exercise of the Underwriter Warrants (the "Underwriter Warrant Shares") which
were originally issued to the Underwriter or to its designees, made at any time
within the period commencing one year and ending five years after the Effective
Date, the Company will file, at its sole expense, no more than once, a
registration statement under the Securities Act registering the Underwriter
Warrant Shares. The Company has agreed to use its best efforts to cause the
registration statement to become effective. The holders of the Underwriter
Warrants may demand registration without exercising the Underwriter Warrants
and, in fact, are never required to exercise such Underwriter Warrants. The
Company has registered the Underwriter Warrant Shares pursuant to the
Registration Statement on Form SB-2 of which this Prospectus is a part.
The Company has also agreed that if, at any time within the period
commencing one year and ending five years after the Effective Date, it should
file a registration statement with the Commission pursuant to the Securities
Act, regardless of whether some of the holders of the Underwriter Warrants and
the Underwriter Warrant Shares shall have therefore availed themselves of any of
the registration rights above, the Company, at its own expense, will offer to
said holders (with certain exceptions) the opportunity to register the
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<PAGE> 41
Underwriter Warrant Shares. The objection of a subsequent underwriter to the
above "piggyback" registration rights would preclude such inclusion.
In addition to the demand and "piggyback" registration rights described
above, the Company has agreed to cooperate with the then holders of the
Underwriter Warrants and Underwriter Warrant Shares in the preparation and
execution of any registration statement required in order to sell or transfer
the Underwriter Warrant Shares and will supply all information required
therefor, but the expenses of such registration statement will be pro-rated
between the Company and the holders of the Underwriter Warrants and Underwriter
Warrant Shares in proportion to the aggregate sales price of the securities
being issued by each of them.
For the life of the Underwriter Warrants, the holders thereof are given, at
nominal cost, the opportunity to profit from a rise in the market price of the
Common Shares with a resulting dilution in the interest of other shareholders of
the Company. Further, such holders may be expected to exercise the Underwriter
Warrants at a time when the Company would in all likelihood be able to obtain
equity capital on terms more favorable than those provided in the Underwriter
Warrants. In addition, the Company may find it more difficult to raise
additional capital while the Underwriter Warrants are outstanding.
In connection with this Offering, the Underwriter and selling group members
and their respective affiliates may engage in stabilizing, syndicate short
covering transactions, or other transactions during the offering that may
stabilize, maintain or otherwise affect the market price of the Units, Common
Shares and Warrants. Stabilization transactions, effected in accordance with
Rule 104 of Regulation M, are bids for or purchases of Units, Common Shares or
Warrants for the purpose of preventing or retarding a decline in the market
price of the Units, Common Shares or Warrants or all of them to facilitate the
Offering. The Underwriter also may create a short position for its account by
selling more Units in connection with the Offering than it is committed to
purchase from the Company, and in such case may purchase Units, Common Shares or
Warrants in the open market to cover all or a portion of such short position.
The Underwriter may also cover all or a portion of such short position by
exercising the Over-Allotment Option. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Units, Common Shares
and Warrants at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph is required, and,
if they are undertaken they may be discontinued at any time.
The Company has agreed not to issue any Common Shares, preferred stock or
any warrants, options or other rights to purchase Common Shares or preferred
stock prior to , 1999, without the prior written consent of the
Underwriter, except as contemplated by or as disclosed in this Prospectus.
Officers, directors and other security holders of the Company owning and/or
having rights to acquire in the aggregate Common Shares, have entered into
agreements not to sell or otherwise dispose of any securities of the Company,
including Common Shares (except under certain circumstances in connection with a
third party tender offer for the Common Shares), prior to , 1998,
without the prior written consent of the Underwriter, which may be granted or
withheld in the sole and absolute discretion of the Underwriter. See "Shares
Eligible for Future Sale."
The Company has granted to the Underwriter, effective upon completion of
this Offering, a right of first refusal for a period of three years after the
Effective Date for any public or private offering of securities by the Company,
its affiliates or any present or future subsidiaries to raise capital.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against liabilities in connection with the
Offering, including liabilities under the Securities Act.
The Underwriter has informed the Company that it does not expect sales to
discretionary accounts to exceed % of the Units offered hereby.
The Underwriter has served as the sole or managing underwriter of only four
firm commitment public offerings and participated in two other underwritten
public offerings as a member of the underwriting syndicate. Since the
Underwriter's experience in underwriting firm commitment public offerings is
limited, there can be no assurance that its lack of experience may not adversely
affect the public offering of the
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<PAGE> 42
Company's securities and the subsequent development, if any, of a trading market
for the Company's securities. See "Risk Factors -- Underwriter's Influence on
the Market; Possible Limitations on Market Making Activities."
The Company has been advised that the Underwriter is subject to an informal
investigation commenced in March 1996 by the Securities and Exchange Commission.
To date, the Commission has only requested certain documents from the
Underwriter, and the Underwriter has not been advised of the status of the
investigation. There can be no assurance that a formal order of investigation
will not be issued, or if issued, that sanctions will not be imposed against the
Underwriter. In October 1996, the NASD commenced an examination of certain of
the Underwriter's previous underwritings and has requested documents and
information in connection with those underwritings. The NASD examination is
ongoing and no findings have been made to date. There can be no assurance that
such investigation or examination may not affect the Underwriter's ability to
maintain a market in the Units, Common Shares and Warrants.
The Company has agreed that upon the Effective Date of the Offering it
will, for a period of not less than three years, engage a designee, acceptable
to the Company and the Underwriter, as an advisor to the Board. In lieu of the
Underwriter's right to designate an advisor, the Company has agreed, if
requested by the Underwriter during such three year period, to nominate and use
its best efforts to cause the election of a designee of the Underwriter as a
director of the Company. The Underwriter has not yet designated any such person.
The Underwriter intends to act as a market maker for the Units, Common
Shares and Warrants after the closing of the Offering.
The Company will pay the Underwriter a fee of 5% of the exercise price of
each Warrant exercised, provided (i) the market price of the Common Shares on
the date the Warrant was exercised was equal to or greater than the Warrant
exercise price on that date, (ii) the exercise of the Warrant was solicited by a
member of the NASD, (iii) the Warrant was not held in a discretionary account,
(iv) the disclosure of compensation arrangements was made in documents provided
to the holders of the Warrants, (v) the solicitation of the exercise of the
Warrant was not a violation of Rule 101 of Regulation M under the Exchange Act
and (vi) the Underwriter is designated in writing as the soliciting NASD member.
The Underwriter and any other soliciting broker/dealers will be prohibited from
engaging in any market making activities or solicited brokerage activities with
regard to the Company's securities during the periods prescribed by Rule 101 of
Regulation M before the solicitation of the exercise of any Warrant until the
later of the termination of such solicitation activity or the termination of any
right the Underwriter and any other soliciting broker/dealer may have to receive
a fee for the solicitation of the exercise of the Warrants.
The Underwriter acted as placement agent for the Second Prior Financing,
for which it received selling commissions of $156,000 and a non-accountable
expense allowance of $46,800 and other expenses of the offering.
The Company has agreed to retain the Underwriter as a management and
financial advisor for a period of 24 months commencing on the Effective Date at
a fee equal to $4,166 per month. The entire fee ($99,984) is payable at the
closing of the Offering. In its capacity as an advisor to the Company, the
Underwriter will be obligated to provide general financial advisory services to
the Company on an as-needed basis with respect to possible future financings or
acquisitions by the Company and related matters. The Underwriter is not
obligated to provide any minimum number of hours of advisory services to the
Company.
In addition, the Company has agreed to engage a financial public relations
firm reasonably satisfactory to the Underwriter. The public relations firm will
not be associated with the Underwriter or any of its affiliates. Such firm, or
an acceptable substitute firm, shall be continuously engaged until a date 24
months from the closing of the Offering.
The initial public offering price of the Units offered hereby and the
initial exercise price and other terms of the Warrants have been determined by
negotiation between the Company and the Underwriter and do not necessarily bear
any direct relationship to the Company's assets, earnings, book value per share
or other generally accepted criteria of value. Factors considered in determining
the offering price of the Units and the
41
<PAGE> 43
exercise price of the Warrants included the business in which the Company is
engaged, the Company's financial condition, an assessment of the Company's
management, the general condition of the securities markets, the demand for
similar securities of comparable companies, and other factors deemed relevant.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Honigman Miller Schwartz and Cohn, 2290 First National Building,
Detroit, Michigan 48226-3583. Certain legal matters in connection with the
Offering will be passed upon for the Underwriter by Gersten, Savage, Kaplowitz,
Fredericks & Curtin, LLP, 101 East 52nd Street, New York, New York 10022-6018.
EXPERTS
The combined balance sheet of the Predecessor Company as of February 19,
1997 and December 31, 1996 and the combined statements of operations,
shareholders' deficiency and cash flows for the period from January 1, 1997
through February 19, 1997 and the year ended December 31, 1996 included in this
Prospectus, the consolidated balance sheet of the Company as of May 31, 1997 and
the consolidated statements of operations, shareholders' equity and cash flows
for the period from inception to May 31, 1997 included in this Prospectus, have
been audited by Coopers & Lybrand LLP, independent auditors, as stated in their
reports appearing in this Prospectus and elsewhere in the registration statement
(which reports on the financial statements express an unqualified opinion and
include an explanatory paragraph referring to an uncertainty concerning the
Company's ability to continue as a going concern), and have been included herein
in reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of said firm as experts in accounting and auditing.
42
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I. Consolidated Financial Statements for Rockwell
Medical Technologies, Inc. and Subsidiary
Report of Independent Accountants............ F-2
Consolidated Balance Sheet at May 31, 1997... F-3
Consolidated Income Statement for the period
from inception to May 31, 1997............. F-4
Consolidated Statement of Changes in
Shareholders' Equity for the period from
inception to May 31, 1997.................. F-5
Consolidated Statement of Cash Flows for the
period from inception to May 31, 1997...... F-6
Notes to the Consolidated Financial
Statements................................. F-7
II. Combined Financial Statements for Rockwell Medical
Supplies, L.L.C. and Rockwell Transportation, L.L.C.
Report of Independent Accountants............ F-14
Combined Balance Sheet at February 19, 1997
and December 31, 1996...................... F-15
Combined Income Statement for the period from
January 1 to February 19, 1997 and the year
ended December 31, 1996.................... F-16
Combined Statement of Changes in Members'
Deficit for the period from January 1 to
February 19, 1997 and the year ended
December 31, 1996.......................... F-17
Combined Statement of Cash Flows for the
period from January 1 to February 19, 1997
and the year ended December 31, 1996....... F-18
Notes to the Combined Financial Statements... F-19
</TABLE>
F-1
<PAGE> 45
[COOPERS & LYBRAND LETTERHEAD]
COOPERS & LYBRAND LOGO
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Rockwell Medical Technologies, Inc. and Subsidiary:
We have audited the consolidated balance sheet of Rockwell Medical
Technologies, Inc. and Subsidiary at May 31, 1997 and the related consolidated
statements of income, stockholders' equity, and cash flows for the period ended
May 31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Rockwell Medical Technologies, Inc. and Subsidiary at May 31, 1997 and the
results of their operations and their cash flows for the period ended May 31,
1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
3 to the consolidated financial statements, the Company has incurred losses from
operations and requires additional cash flow to fund operations and the
redemption of the Series A Preferred Stock due January 31, 1998 that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
COOPERS & LYBRAND LLP
Detroit, Michigan
July 11, 1997, except for Note 11 as to
which the date is July 22, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
F-2
<PAGE> 46
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(WHOLE DOLLARS)
<TABLE>
<CAPTION>
MAY 31,
1997
-------
<S> <C>
Certificate of Deposit...................................... $ 25,000
Accounts Receivable, net of allowance for doubtful accounts
of $10,000................................................ 299,544
Inventory................................................... 311,878
Other Current Assets........................................ 123,374
----------
Total Current Assets 759,796
Property and Equipment, net................................. 658,857
Other Noncurrent Assets..................................... 138,397
Excess of Purchase Price over Fair Value of Net Assets
Acquired, net............................................. 1,910,207
----------
Total Assets........................................... $3,467,257
==========
Notes Payable to Shareholders............................... $ 125,000
Accounts Payable............................................ 500,027
Accrued Liabilities......................................... 91,605
----------
Total Current Liabilities.............................. 716,632
Redeemable Preferred Stock -- Series A...................... 1,416,664
Shareholders' Equity:
Common Stock.............................................. 2,106,350
Deficit................................................... (772,389)
----------
1,333,961
----------
Total Liabilities and Shareholders' Equity............. $3,467,257
==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 47
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD FROM INCEPTION TO MAY 31, 1997
(WHOLE DOLLARS)
<TABLE>
<S> <C>
Sales....................................................... $ 795,271
Cost of Sales............................................... 1,103,088
----------
Gross Deficit............................................. (307,817)
Selling, General and Administrative......................... 421,060
Interest Expense, net....................................... 43,512
----------
Net loss.................................................. $ (772,389)
==========
Net Loss per share.......................................... $ (0.30)
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 48
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION TO MAY 31, 1997
(WHOLE DOLLARS)
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON RETAINED SHAREHOLDERS'
SHARES STOCK DEFICIT EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Issuance of Common Stock, no par value
-- Initial Capitalization............ 2,000,000 $ 1,000 $ 1,000
Issuance of Common Stock, no par value
-- First Prior Financing............. 495,000 1,212,500 1,212,500
Issuance of Common Stock, no par value
-- Second Prior Financing............ 351,667 892,850 892,850
Net loss............................... (772,389) (772,389)
--------- ---------- --------- ----------
Total............................. 2,846,667 $2,106,350 $(772,389) $1,333,961
========= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 49
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION TO MAY 31, 1997
(WHOLE DOLLARS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (772,389)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and Amortization.......................... 90,107
-----------
(682,282)
Changes in Working Capital:
Increase in Accounts Receivable...................... (110,270)
Increase in Inventory................................ (67,231)
Increase in Other current Assets..................... (74,476)
Decrease in Accounts Payable......................... (179,914)
Increase in Other Liabilities........................ 61,728
-----------
Net change in Working Capital..................... (370,163)
Net cash used in operations............................... (1,052,445)
Cash flows from investing activities:
Purchase of Business, net of cash acquired................ (508,887)
Purchase of Equipment..................................... (6,621)
Purchase of Certificate of Deposit........................ (25,000)
-----------
Cash used in Investing Activities......................... (540,508)
Cash flows from financing activities:
Issuance of Common Stock -- initial capitalization........ 1,000
Issuance of Common Stock -- First Prior Financing......... 1,212,500
Issuance of Common Stock -- Second Prior Financing........ 892,850
Proceeds from notes payable-shareholders.................. 125,000
Payment on promissory note.................................. (500,000)
Deposits paid on leases................................... (138,397)
-----------
Cash provided by financing activities..................... 1,592,953
Increase in cash............................................ --
Cash at beginning of period................................. 0
-----------
Cash at end of period....................................... $ 0
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 50
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND CAPITALIZATION
Rockwell Medical Technologies, Inc. (the "Company") was incorporated in
October 1996 for the purpose of purchasing and operating the business of
Rockwell Medical Supplies, L.L.C. and its sister company, Rockwell
Transportation, L.L.C. (collectively, the "Predecessor Companies" or the
"Seller"). The Company is, and the Predecessor Companies were, in the business
of manufacturing and distributing hemodialysis concentrates and dialysis kits to
hemodialysis clinics throughout the United States and Venezuela. Sales to
Venezuela accounted for approximately 15% of total sales. The Company also
packages, sells and distributes ancillary products related to the hemodialysis
process, as did the Predecessor Companies.
The Company received $1,212,500 in net proceeds from the issuance of Common
Stock in the First Prior Financing. Approximately $500,000 of which was used to
partially fund the acquisition of the Predecessor Companies. The remaining
purchase price was financed through the issuance of a $1,916,664 promissory note
(see Note 4).
The Company is regulated by the Federal Food and Drug Administration under
the Federal Drug and Cosmetics Act, as well as by other federal, state and local
agencies. In March 1996 the Predecessor Companies received 510(k) approval from
the FDA to market hemodialysis solutions and powders, which commenced in May
1996. The 510(k) approval was assigned to the Company in connection with the
purchase of the Predecessor Companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts
of Rockwell Medical Technologies, Inc. and its wholly-owned subsidiary, Rockwell
Transportation, Inc. All intercompany balances and transactions have been
eliminated.
REVENUE RECOGNITION
The Company recognizes revenue at the date of shipment.
INVENTORY
Inventory is stated at net realizable value, which includes only raw
material costs and excludes the conversion costs required to produce finished
goods, due to continuing negative gross margins.
PROPERTY AND EQUIPMENT
Property and Equipment are recorded at cost. Expenditures for normal
maintenance and repairs are charged to expense as incurred. Property and
equipment are depreciated using the straight line method over their useful
lives, which range from three to eight years.
EXCESS OF PURCHASE PRICE OVER FAIR VALUE OF NET ASSETS ACQUIRED
The excess of the price paid by the Company over the fair value of the net
assets of the Predecessor Companies has been recorded as an intangible asset and
is being amortized on the straight line basis over an estimated useful life of
10 years. The Company assesses the recoverability of the asset based on
estimated future undiscounted cash flows of the business. Based upon the
Company's analysis no impairment of the asset exists at May 31, 1997.
F-7
<PAGE> 51
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Company has recorded a deferred tax asset of approximately $257,000
related to the net operating loss carry forward. This deferred asset has been
fully offset by a valuation allowance due to the uncertainty of realization.
ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date the financial
statements and reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
NET LOSS PER SHARE
Net loss per share is calculated based on the weighted average shares
outstanding of 2,617,553 including 94,286 of additional shares estimated to be
issuable to the shareholders in the First Prior Financing who were entitled to
receive additional shares for no additional consideration if the public offering
price of the shares to be issued in an initial public offering of the Company's
securities was less than $5.00 per share.
3. MANAGEMENT'S PLAN OF OPERATION
Since February 20, 1997 the Company had been engaged in the business of
manufacturing, selling, and distributing hemodialysis concentrates and kits to
various clinics throughout the United States and Venezuela. The Company paid
approximately $2.4 million for the operating assets and liabilities of the
Predecessor Companies. Since inception through May 31, 1997 the Company has
recorded losses of $772,389 and used approximately $1,052,000 to fund operating
needs since the purchase of the business (see Note 4). Those needs were funded,
from inception through May 31, 1997, through proceeds from the issuance of
Common Stock and warrants.
A significant portion of the working capital requirements, approximately
$375,000, was due to an initial funding of an escrow account for future facility
lease payments, and the immediate payment to trade creditors to ensure continued
uninterrupted delivery of raw materials and services. After considering these
one-time cash requirements, the Company estimates its cash flows from operations
will be deficient by approximately $100,000 per month for the next three to six
months for working capital purposes. To fund these working capital requirements,
the Company anticipates using a three phased approach as follows 1.) negotiating
with its trade creditors to extend terms of payment, 2.) securing a line of
credit with a commercial banking institution to be drawn on as funds are
required, and 3.) using the proceeds from the issuance of 1,500,000 shares of
the Company's Common Stock in a registration to be filed with the Securities and
Exchange Commission (the "Offering"). Anticipated net proceeds associated with
this Offering are estimated at approximately $5 million. Without the successful
completion of the Offering the future viability of the Company cannot be
assured.
In addition to working capital requirements, the Company is required to
redeem the 8.5% Series A Preferred Stock on January 31, 1998. (See note 8).
Without the successful completion of the Offering, the Company will be unable to
meet the mandatory redemption obligation of the Series A Preferred Stock. In the
event the Company fails to meet these redemption requirements a change in
control of the Company may result.
The Company has developed cost reduction plans to improve efficiencies and
reduce costs. In particular the distribution costs associated with the Company's
wholly owned subsidiary, Rockwell Transportation, Inc. are substantial. Cost
reduction plans are being developed to reduce inefficiencies in the Company's
transportation operations and in the production process. Plans to maximize
production capacity through both
F-8
<PAGE> 52
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
increased production hours and equipment utilization are in process. The Company
feels that the market demand is greater than current production quantities and
that increasing capacity through fundamental management techniques can be
effected with minimum variable labor and manufacturing costs. Further, these
actions will require minimum capital investment.
Future Company plans have been developed to increase sales with new product
offerings and increased market penetration of existing product lines; however
these actions will require capital investment estimated at $1.8 million. The
effective implementation of these plans will not be possible without the
successful completion of the Offering.
There can be no assurance that even if the Company receives additional
capital it will be able to achieve the planned efficiencies and increased sales
levels to sustain its operations. There can be no assurance that the Company
will obtain any funds on terms acceptable to the Company and at times required
by the Company. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount or classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
4. PURCHASE OF THE BUSINESS
Effective February 19, 1997 the Company purchased the assets and assumed
certain liabilities of the Predecessor Companies for a purchase price of
approximately $2.4 million, excluding liabilities assumed. The transaction was
accounted for using the purchase method of accounting. The purchase price has
been allocated to assets acquired and liabilities assumed based on the estimated
fair market value at the date of acquisition, as follows:
<TABLE>
<S> <C>
Working capital, less cash acquired......................... $ (226,999)
Property and Equipment...................................... 688,534
Excess of purchase price over fair value of net assets...... 1,964,016
-----------
2,425,551
Promissory Note at 8.5%..................................... (1,916,664)
-----------
Net cash paid for business acquired.................... $ 508,887
===========
</TABLE>
The purchase price consisted of : (i) $150,000 cash payment to the Sellers;
(ii) a cash payment to NBD Bank of approximately $375,000 to retire related
outstanding debt; and (iii) the remainder of the purchase price was satisfied by
an 8.5% promissory note (the "Note") in the principal amount of approximately
$1.9 million. Under the terms of the Note and the Asset Purchase Agreement, a
prepayment of $500,000 on the Note was due in May 1997. Pursuant to a letter
agreement, the Sellers agreed that upon receipt of the prepayment, the remaining
Note balance would be converted into shares of Series A Redeemable Preferred
Stock at a conversion ratio of one share of Series A Preferred Stock to one
dollar of outstanding principal due under the Note. The Company made the
required prepayment and the Note was converted to 1,416,664 shares of Series A
Preferred Stock.
5. INVENTORY
Components of inventory are as follows:
<TABLE>
<S> <C>
Raw Materials............................................... $229,962
Finished Goods.............................................. 81,916
--------
Total $311,878
========
</TABLE>
F-9
<PAGE> 53
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY AND EQUIPMENT
Major classes of Property and Equipment, stated at cost, are as follows:
<TABLE>
<S> <C>
Leasehold Improvements...................................... $ 57,400
Machinery and Equipment..................................... 428,867
Office Furniture and Equipment.............................. 85,141
Laboratory Equipment........................................ 77,056
Vehicles including trailers................................. 46,691
--------
$695,155
Accumulated Depreciation.................................. (36,298)
--------
Net Property, and Equipment................................. $658,857
========
</TABLE>
7. NOTES PAYABLE TO SHAREHOLDERS
On May 31, 1997 shareholders notes payable were $125,000 at an interest
rate of 8.5%. All notes and accrued interest were paid in full in June 1997.
8. LEASES
The Company leases a facility for production and administrative offices as
well as transportation equipment used by the Company's subsidiary, Rockwell
Transportation, Inc. These leases have been accounted for as operating leases.
Lease payments were $166,647 for the period ended May 31, 1997. Future minimum
rental payment under lease agreements are as follows:
<TABLE>
<CAPTION>
<S> <C>
Period from June 1, 1997 to December 31, 1997............... $254,931
Year ending December 31, 1998............................... 437,025
Year ending December 31, 1999............................... 348,475
Year ending December 31, 2000............................... 192,510
Year ending December 31, 2001............................... 12,600
</TABLE>
In accordance with the assignment of the facility lease from the
Predecessor Companies, the landlord required a deposit in escrow of $178,000
which is to be applied against future lease payments of $39,542 in each of the
years ending December 31, 1998 and 1999, $59,313 in the year ending December 31,
2000, with the balance held as additional security deposit until the expiration
of the facility lease.
A $25,000 letter of credit has been established for the benefit of certain
lessors. The letter of credit is collateralized by a short term certificate of
deposit.
9. CAPITAL STOCK
The authorized capital stock of the Company consists of 4,000,000 shares of
Common Stock, no par value per share, of which 2,846,667 shares were outstanding
at May 31, 1997; and 8.5% non-voting cumulative redeemable Series A Preferred
Stock, $1.00 par value (the "Series A Preferred Stock"), of which 1,416,664
shares were issued effective May 31, 1997.
COMMON STOCK
Holders of the shares of Common Stock are entitled to one vote per share on
all matters submitted to a vote of shareholders of the Company and are to
receive dividends when and if declared by the Board of Directors. Dividends may
not be paid to the common shareholders until the redeemable Series A preferred
stock is redeemed. The Board is authorized to issue additional shares of Common
Stock within the limits of
F-10
<PAGE> 54
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company's Articles of Incorporation without further shareholder action.
Holders of 495,000 shares of Common Stock are entitled to receive an additional
94,286 shares of Common Stock at the effective date of the offering for no
additional consideration per the terms of the First Prior Financing Agreement.
These shares have been included in the net loss per share calculation.
SERIES A PREFERRED STOCK
Holders of Series A Preferred Stock are entitled to receive, out of funds
legally available for the payment of dividends, cumulative cash dividends in the
amount of $.085 per share per year accruing from June 1, 1997, as and when
directed by the Board of Directors of the Company. As long as any shares of
Series A Preferred Stock are outstanding, the Company may not (i) declare, pay,
or set money, securities or other property apart for the payment of, any
dividend on any shares of the Company, including all classes of common stock and
any other series of preferred stock (all of such shares of the Company referred
to as "Junior Shares"), or (ii) make any payment on account of, or set money,
securities or other property apart for, the payment into a sinking or other
similar fund for the purchase, redemption or other retirement of, any of the
Junior Shares or any warrants, rights, calls or other options exercisable for or
exchangeable into any of the Junior Shares (collectively the "Junior
Securities"), or (iii) make any distribution in respect of any Junior
Securities, either directly or indirectly, and whether in cash, obligations or
shares of the Company or other property (other than distributions or dividends
in Junior Shares to the holders of Junior Shares), and shall not permit any
corporation or other entity directly or indirectly controlled by the Company to
purchase or redeem any of the Junior Securities, unless prior to or currently
with such declaration, payment, setting apart for payment, purchase, redemption
or distribution, as the case may be, all accrued and unpaid dividends on the
Series A Preferred Stock shall have been paid.
The Company is required to redeem all outstanding shares of Series A
Preferred Stock on January 31, 1998 (the "Mandatory Redemption Date"), at a
redemption price equal to $1.00 per share plus accumulated and unpaid dividends
accrued through the Mandatory Redemption Date. The purchase price must be paid
in cash. From and after the Mandatory Redemption Date, the holders of Series A
Preferred Stock will not have any rights as shareholders of the Company except
the right to receive from the Company the redemption price of such Series A
Preferred Stock, without interest, upon the surrender of such Series A Preferred
Stock to the Company. In addition, the Company has the right and option at any
time prior to the Mandatory Redemption Date to purchase, redeem or otherwise
acquire any or all of the Series A Preferred Stock for a purchase price equal to
$1.00 per share plus accumulated and unpaid dividends on such share through the
date of repurchase or redemption.
Subject to the prior rights of the Company's creditors, the holders of the
Series A Preferred Stock are entitled to receive, upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, $1.00 per
share, plus accrued and unpaid dividends. If, in any such case, the assets of
the Company are insufficient to make such payment in full, then the available
assets will be distributed among the holders of the Series A Preferred Stock
ratably in proportion to the full amount to which each holder would be entitled.
Holders of Series A Preferred Stock have no conversion rights, however, the
obligation of the Company to effect the mandatory redemption of the Series A
Preferred Stock by the Mandatory Redemption Date is guaranteed by certain of the
Company's principal shareholders (the "Guaranty"). Such Guaranty is secured by
the pledge of 1,478,260 shares of Common Stock (the "Pledged Shares") pursuant
to an Escrow Agreement dated as of July 22, 1997 (the "Escrow Agreement"). In
the event the Company fails to redeem the outstanding shares of Series A
Preferred Stock on or before the Mandatory Redemption Date, the Predecessor
Companies have a period of 45 days following such date to elect either to: (i)
exercise their rights under the Guaranty and the Escrow Agreement to retain the
shares of Common Stock which remain held in escrow, in full satisfaction and
discharge of the Guaranty and the Company's obligation to redeem the Series A
Preferred Stock; or (ii) terminate their rights under the Guaranty and to
relinquish and terminate
F-11
<PAGE> 55
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
their interest in the Pledged Shares and to proceed against the Company to
collect the outstanding redemption payment.
Holders of Series A Preferred Stock have no voting rights except as may be
required by law.
WARRANTS
Holders of the Warrants are entitled to purchase at the stated exercise
price of the Warrant one share of Common Stock of the Company subject to certain
adjustments and provisions. At May 31, 1997 there were 351,667 warrants issued
and outstanding. These Warrants do not become effective until after the
completion of the Offering (see Note 2 in these Notes to Consolidated Financial
statements).
Each Warrant will be separately transferable and will entitle the
registered holder to purchase one share of Common Stock at the exercise price of
$4.50 per share for a period of three years commencing one year after the
effective date of the Offering and ending on the fourth anniversary of the
effective date of the Offering (the "Exercise Period"). The exercise price and
the number of shares of Common Stock to be issued upon the exercise of each
Warrant are subject to adjustment in the event of stock split, stock dividend,
recapitalization, merger, consolidation or certain other events.
Under certain conditions, the Warrants may be redeemed by the Company at a
redemption price of $.10 per Warrant upon not less than 30 days prior written
notice to the holders of such Warrants, provided the closing bid price of the
Common Stock has been at least $8.50 for 20 consecutive trading days ending on
the third day prior to the date the notice of redemption is given.
10. RELATED PARTIES TRANSACTIONS
During the period ended May 31, 1997 the Company paid or accrued fees to
the consulting firm of Wall Street Partners, Inc. for financial and management
services of $175,000. Under a current agreement, the Company is obligated to pay
additional consulting fees of $175,000 over the next year. The principals of the
consulting firm are shareholders of the Company and members of the Board of
Directors.
In addition, the Company settled a certain obligation in the amount of
$25,000 to a related party through the issuance of 10,000 shares of Common
Stock.
11. SUBSEQUENT EVENTS
On July 22, 1997, the Company amended its Articles of Incorporation to:
increase the authorized Common Stock to 20,000,000 shares; and to provide for
the issuance of the 1,416,664 shares of Series A Preferred Stock. On July 22,
1997 the Company issued 1,416,664 shares of Series A Preferred Stock, effective
May 31, 1997, to the Sellers in accordance with the Asset Purchase Agreement
(see Note 4).
The Amendment to the Articles of Incorporation also authorizes the Company
to issue up to 2,000,000 shares of "blank check" Preferred Stock (the "Blank
Check Preferred Stock") with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
is empowered without further shareholder approval, to issue the Blank Check
Preferred Stock with dividend liquidation, conversion, voting or other rights
that could decrease the amount of earnings and assets available for distribution
to holders of Common Stock or adversely affect the voting power or other rights
of the holders of the Company's Common stock. In the event of issuance, the
Blank Check Preferred Stock could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing change in control of the Company.
On July 15, 1997 the Board of Directors and shareholders of the Company
adopted the Rockwell Medical Technologies, Inc. 1997 Stock Option Plan. The plan
provides for the issuance of 450,000 options with an exercise price equal to
fair value at the date of grant. Also effective July 15, 1997, the Company
granted 295,500 Stock options to officers and directors of the Company at an
exercise price of $3.00.
F-12
<PAGE> 56
[COOPERS & LYBRAND LETTERHEAD]
COOPERS & LYBRAND LOGO
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
Rockwell Medical Supplies, L.L.C and
Rockwell Transportation, L.L.C:
We have audited the combined balance sheets of Rockwell Medical Supplies,
L.L.C and Rockwell Transportation, L.L.C (the "Company") at February 19, 1997
and December 31, 1996 and the related combined statements of income, members'
deficit, and cash flows for the period ended February 19, 1997 and the year
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Rockwell
Medical Supplies, L.L.C and Rockwell Transportation, L.L.C at February 19, 1997
and December 31, 1996 and the results of their operations and their cash flows
for the period ended February 19, 1997 and the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
Detroit, Michigan
July 11, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
F-13
<PAGE> 57
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
COMBINED BALANCE SHEETS
(WHOLE DOLLARS)
<TABLE>
<CAPTION>
FEBRUARY 19, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash........................................................ $ 44,270 $ 65,978
Accounts Receivable, net of allowance for doubtful accounts
of $10,000 and $5,000 at February 19, 1997 and December
31, 1996, respectively.................................... 189,274 205,168
Inventory................................................... 244,647 343,539
Other Current Assets........................................ 48,898 48,417
----------- -----------
Total Current Assets...................................... 527,089 663,102
Property and Equipment, net................................. 670,885 728,557
----------- -----------
Total Assets.............................................. $ 1,197,974 $ 1,391,659
=========== ===========
Notes Payable, Bank......................................... 375,000 375,000
Payable to Members.......................................... $ 1,868,149 $ 1,868,149
Accounts Payable............................................ 679,941 512,074
Accrued Liabilities......................................... 33,315 28,848
----------- -----------
Total Current Liabilities................................. 2,956,405 2,784,071
Members' Deficit:
Contributed Capital......................................... 50,000 50,000
Deficit..................................................... (1,808,431) (1,442,412)
----------- -----------
Total Liabilities and Members' Deficit.................... $ 1,197,974 $ 1,391,659
=========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-14
<PAGE> 58
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
COMBINED INCOME STATEMENTS
(WHOLE DOLLARS)
<TABLE>
<CAPTION>
JANUARY 1 TO YEAR ENDED
FEBRUARY 19, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Sales....................................................... $ 343,555 $ 1,019,856
Cost of Sales............................................... 529,121 1,617,363
--------- -----------
Gross Margin.............................................. (185,566) (597,507)
Selling, General and Administrative Expenses................ 177,015 773,344
Interest Expense............................................ 3,438 12,634
--------- -----------
Net Loss.................................................. $(366,019) $(1,383,485)
========= ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-15
<PAGE> 59
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
COMBINED STATEMENT OF CHANGES IN MEMBERS' DEFICIT
(WHOLE DOLLARS)
<TABLE>
<CAPTION>
CONTRIBUTED TOTAL MEMBERS
CAPITAL DEFICIT DEFICIT
----------- ------- -------------
<S> <C> <C> <C>
Balances at January 1, 1996.......................... $50,000 $ (58,927) $ (8,927)
------- ----------- -----------
Net loss........................................... -- (1,383,485) (1,383,485)
------- ----------- -----------
Balances at December 31, 1996........................ 50,000 (1,442,412) (1,392,412)
Net loss for the period January 1, 1997 to
February 19, 1997............................. -- (366,019) (366,019)
------- ----------- -----------
Balances at February 19, 1997........................ $50,000 $(1,808,431) $(1,758,431)
======= =========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-16
<PAGE> 60
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
COMBINED STATEMENT OF CASH FLOWS
(WHOLE DOLLARS)
<TABLE>
<CAPTION>
JANUARY 1 TO YEAR ENDED
FEBRUARY 19, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Cash flows from Operating Activities:
Net loss................................................. $(366,019) $(1,383,485)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation.......................................... 17,649 133,659
Changes in working capital:
Accounts Receivable................................. 15,894 (205,168)
Inventory........................................... 98,892 (343,539)
Other Current Assets................................ (481) (8,876)
Accounts Payable.................................... 207,890 512,074
Accrued Liabilities................................. 4,467 28,848
--------- -----------
Net cash used in operating activities............ (21,708) (1,266,487)
Cash flows from Investing Activities:
Purchases of Equipment................................... (549,713)
-----------
Net cash used in investing activities............ -- (549,713)
Cash flows from Financing Activities:
Members' capital contributions........................... -- 50,000
Proceeds of Bank loans................................... -- 375,000
From Members............................................. -- 1,457,178
--------- -----------
Net cash provided by financing activities........ -- 1,882,178
Net (decrease) increase in cash.................. (21,708) 65,978
Cash at beginning of the period.................. 65,978 --
--------- -----------
Cash at end of the period........................ $ 44,270 $ 65,978
========= ===========
Supplemental cash flow information
Interest expense paid.................................... 3,438 12,634
========= ===========
Supplemental non-cash disclosure:
$40,023 of equipment was exchanged for payment of an
account payable.
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-17
<PAGE> 61
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND CAPITALIZATION
Rockwell Medical Supplies, L.L.C. was established in October 1995 for the
purpose of manufacturing hemodialysis concentrates and dialysis kits for sale
and distribution to hemodialysis clinics throughout the United States. It also
packages, sells and distributes ancillary products related to the hemodialysis
process.
There was limited activity during 1995, consisting primarily of the
purchase of certain equipment, the payment of a facility lease security deposit
and the payment of $58,927 for certain start up expenses.
Rockwell Transportation, L.L.C. was established in March 1996 for the
purpose of distributing products produced by Rockwell Medical Supplies, L.L.C.
The combined entity of Rockwell Medical Supplies, L.L.C. and Rockwell
Transportation, L.L.C. is referred to as the "Company".
The Company is regulated by the Federal Food and Drug Administration under
the Federal Drug and Cosmetics Act, as well as by other Federal, State and Local
agencies. In March 1996 the Company received 510(k) approval from the FDA to
market hemodialysis solutions and powders. The Company began manufacturing,
distributing and selling hemodialysis solutions in May 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The combined financial statements of the Company include the accounts of
Rockwell Medical Supplies, L.L.C. and it's sister company Rockwell
Transportation, L.L.C. which are entities under common control. All intercompany
balances and transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue at the date of shipment.
INVENTORY
Inventory is stated at net realizable value, including raw material costs
and excluding the conversion cost required to produce finished goods. Cost of
sales for the period ended February 19, 1997 is calculated based on the material
gross margin for the preceding twelve month period.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for normal
maintenance and repairs are charged to expense as incurred. Property and
equipment are depreciated using the straight line method over their useful life,
which ranges from three to eight years.
INCOME TAXES
As a limited liability company, it was intended that the Company be
classified as a partnership for federal income tax purposes and, as such, it was
treated as a "pass-through" entity that was not subject to federal income tax.
ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
F-18
<PAGE> 62
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
LOSS PER SHARE
The Company is a Limited Liability Corporation; accordingly loss per share
information is not relevant.
3. SALE OF THE BUSINESS
Effective February 19, 1997 the assets of the Company were sold to Rockwell
Medical Technologies, Inc. (the "Successor Company"). Total purchase price for
essentially all the operating assets was approximately $2.4 million excluding
the assumption of certain liabilities. The Asset Purchase Agreement provided a
cash payment at closing of $150,000 to the Sellers; payoff of the Notes Payable
to Bank of $375,000; and the balance in the form of a promissory note of
approximately $1.9 million payable to certain members of the Company. In May
1997, as provided in the Asset Purchase Agreement, a $500,000 cash payment was
received on the promissory note. The remaining unpaid principal was converted to
8.5% Non-Voting Redeemable Series A Preferred Stock of the Successor Company,
redeemable on or before January 31, 1998.
One of the Members of the Company is a minority shareholder of the
Successor Company and is employed as an Officer and Director of the Successor
Company.
4. INVENTORY
Components of inventory are as follows:
<TABLE>
<CAPTION>
FEBRUARY 19, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw Material........................................ $121,829 $282,235
Finished Goods...................................... 122,818 61,304
-------- --------
Total.......................................... $244,647 $343,539
======== ========
</TABLE>
5. PROPERTY AND EQUIPMENT
Major classes of Property and Equipment, stated at cost, are as follows:
<TABLE>
<CAPTION>
FEBRUARY 19, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Machinery and Equipment............................. $ 580,875 $ 580,875
Office furniture and equipment...................... 109,562 109,562
Laboratory Equipment................................ 95,326 95,326
Vehicles, including trailers........................ 36,170 76,453
--------- ---------
Total Cost..................................... 821,933 862,216
Accumulated Depreciation............................ (151,048) (133,659)
--------- ---------
Net Property and Equipment.......................... $ 670,885 $ 728,557
========= =========
</TABLE>
6. PAYABLE TO MEMBERS
Payable to Members is comprised of obligations of the Company to certain
Members of the Company who advanced operating funds to the Company during 1996
and 1995.
F-19
<PAGE> 63
ROCKWELL MEDICAL SUPPLIES, L.L.C.
AND ROCKWELL TRANSPORTATION, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. NOTES PAYABLE TO BANK
The Company had a Master Demand Business Loan Note with National Bank of
Detroit in the amount of $400,000, at the current prime rate, of which $375,000
was outstanding at December 31, 1996 and February 19, 1997. At December 31, 1996
and February 19, 1997 the bank's prime rate was 8.5%. The principal and interest
amounts of the Note were paid in full in accordance with the Asset Purchase
Agreement (See Note 3). This note was collateralized by the assets of the
Company.
8. LEASES
The Company leases a facility and certain equipment under operating leases.
Lease payments were $339,790 and $50,439 for the year ended December 31, 1996
and the period ended February 19, 1997, respectively. Effective February 19,
1997 all leases relating to the operations of the Company were assigned to the
Successor Company.
F-20
<PAGE> 64
======================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE OF COMMON SHARES IMPLIES UNDER ANY
CIRCUMSTANCES THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY
OR THE FACTS DESCRIBED IN THIS PROSPECTUS SINCE THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................ 3
Prospectus Summary.................... 4
Risk Factors.......................... 8
Use of Proceeds....................... 16
Capitalization........................ 17
Dilution.............................. 17
Dividend Policy....................... 18
Management's Discussions and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 21
Management............................ 27
Certain Transactions.................. 30
Security Ownership of Certain
Beneficial Owners and Management.... 32
Description of Securities............. 33
Shares Eligible for Future Sale....... 37
Underwriting.......................... 39
Legal Matters......................... 42
Experts............................... 42
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
1,500,000 UNITS
ROCKWELL MEDICAL
TECHNOLOGIES, INC.
CONSISTING OF
1,500,000 COMMON SHARES AND
3,000,000 COMMON SHARE
PURCHASE WARRANTS
---------------------------
PROSPECTUS
---------------------------
MAIDSTONE FINANCIAL, INC.
MAIDSTONE LOGO
, 1997
======================================================
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Sections 561-571 of the Michigan Business Corporation Act, as
amended, directors and officers of a Michigan corporation may be entitled to
indemnification by the corporation against judgments, expenses, fines and
amounts paid by the director or officer in settlement of claims brought against
them by third persons or by or in the right of the corporation if those
directors and officers acted in good faith and in a manner reasonably believed
to be in, or not opposed to, the best interest of the corporation or its
shareholders.
The Registrant is obligated under its bylaws and an employment agreement
with its chief executive officer to indemnify a present or former director or
executive officer of the Registrant, and may indemnify any other person, to the
fullest extent now or hereafter permitted by law in connection with any actual
or threatened civil, criminal, administrative or investigative action, suit or
proceeding arising out of their past or future service to the Registrant or a
subsidiary, or to another organization at the request of the Registrant or a
subsidiary. In addition, the Articles of Incorporation of the Company, as
amended, limit certain personal liabilities of directors of the Company.
Reference is also made to Section of the Underwriting Agreement (a form
of which is attached to this Registration Statement as Exhibit 1.1) with respect
to undertakings to indemnify the Registrant, its directors and officers and each
person who controls the Registrant within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), against certain civil liabilities,
including certain liabilities under the Securities Act.
The Registrant has obtained Directors' and Officers' liability insurance.
The policy provided for $1,000,000 in coverage including prior acts dating to
the Company's inception and liabilities under the Securities Act in connection
with this Offering.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
discounts and commissions) which will be paid by the Registrant in connection
with the issuance and distribution of the securities being registered hereby.
With the exception of the SE registration fee and the NASD filing fee, all
amounts indicated are estimates.
<TABLE>
<S> <C>
SE Registration fee......................................... $ 7,538
NASD filing fee............................................. 2,988
Nasdaq listing fee.......................................... 10,000
Underwriter non-accountable expense allowance............... 189,000
Underwriter advisory fee.................................... 99,984
Directors' and Officers' liability insurance................ 80,000
Printing expenses (other than stock certificates)........... 60,000
Printing and engraving of stock and warrant certificates.... 4,000
Legal fees and expenses (other than blue sky)............... 100,000
Accounting fees and expenses................................ 100,000
Blue sky fees and expenses (including legal and filing
fees)..................................................... 35,000
Transfer Agent and Warrant Agent fees and expenses.......... 5,000
Miscellaneous............................................... 6,490
--------
Total.................................................. $700,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since inception (October 25, 1996), the Company has sold securities to a
limited number of persons, as described below. Except as indicated, there were
no underwriters involved in the transactions and there were
II-1
<PAGE> 66
no underwriting discounts or commissions paid in connection therewith. The
purchasers of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to, or for sale
in connection with, any distribution thereof and appropriate legends were
affixed to the certificates for the securities issued in such transactions. All
purchasers of securities in each such transaction had adequate access to
information about the Company, and in the case of transactions exempt from
registration under Section 4(2) of the Securities Act, were sophisticated
investors.
1. In October 1996, in connection with the formation of the Company,
the Company sold to Gary D. Lewis, Michael J. Xirinachs and Robert L.
Chioini an aggregate of 2,000,000 Common Shares for an aggregate purchase
price of $1,000. The Common Shares were sold in reliance of the exemptions
from registration contained in Section 4(2) of the Securities Act.
2. In February 1997, the Company sold to 17 accredited investors an
aggregate of 495,000 Common Shares at a price of $2.50 per share. The gross
proceeds to the Company from such sales were $1,237,500 (including the
discharge of a $25,000 debt owed to one of the investors). The Common
Shares were sold in reliance upon the exemption from registration contained
in Sections 4(2) and 4(6) of the Securities Act and Rule 506 of Regulation
D promulgated under Section 4(2) of the Securities Act ("Regulation D").
3. In May through July 1997, the Company sold to 19 accredited
investors an aggregate of 26 units, each unit consisting of 20,000 Common
Shares and 20,000 Common Shares Purchase Warrants, at a price of $60,000
per unit (the "Second Prior Financing"), for gross proceeds of $1,560,000.
The warrants are exercisable to purchase one Common Share each at any time
during the three year period beginning one year after the Effective Date at
$4.50 per share. In connection with the Second Prior Financing, the Company
paid Maidstone Financial, Inc., as placement agent, selling commissions of
$156,000, and a non-accountable expense allowance of $46,800. Each of the
investors in the Second Prior Financing represented to the Company that
such investor was an "accredited investor" (as defined in Rule 501(a) of
Regulation D). The securities sold in the Second Prior Financing were sold
in reliance upon the exemptions from registration contained in Section 4(2)
and 4(6) of the Securities Act and Rule 506 of Regulation D.
4. In July 1997, the Company issued and sold to RMS of Michigan,
L.L.C. (formerly known as Rockwell Medical Supplies, LLC, "Supply Company")
1,416,664 shares of Series A Preferred Stock at a purchase price of $1.00
per share, in consideration for the cancellation of a promissory note,
issued by the Company in favor of Supply Company, which had an outstanding
principal balance of $1,416,664. Such Series A Preferred Stock was issued
and sold in reliance upon the exemption from registration contained in
Section 4(2) of the Act.
ITEM 27. EXHIBITS
See Exhibit Index immediately preceding the exhibits.
ITEM 28. UNDERTAKINGS
(a) The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information set forth in the registrant statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if,
II-2
<PAGE> 67
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement relating
to the securities offered, and the offering of such securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The undersigned small business issuer hereby undertakes that it will
provide the Underwriter at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the small business issuer pursuant
to the foregoing provisions, or otherwise, the small business issuer
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
the small business issuer of the expenses incurred or paid by a
director, officer, or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(d) The undersigned small business issuer will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the small business
issuer under Rule 424(b)(1) or (4) or 497(h) under the Securities
Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effect amendment that contains a form of prospectus as a new
registration statement for the securities offered in the
registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.
II-3
<PAGE> 68
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Wixom,
State of Michigan, on July 22, 1997.
ROCKWELL MEDICAL TECHNOLOGIES, INC.
(Registrant)
By: /s/ ROBERT L. CHIOINI
------------------------------------
Robert L. Chioini
President and Chief Executive
Officer
II-4
<PAGE> 69
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned officers
and directors of Rockwell Medical Technologies, Inc., a Michigan corporation
(the "Company"), hereby constitutes and appoints Robert L. Chioini and Gary D.
Lewis, and each of them (with full power of substitution and re-substitution),
his or her true and lawful attorneys-in-fact and agents for each of the
undersigned and on his or her behalf and in his or her name, place and stead, in
any and all capacities, with full power and authority in such attorneys-in-fact
and agents and in any one or more of them, to sign, execute and affix his seal
thereto and file with the Securities and Exchange Commission and any state
securities regulatory board or commission the registration statement on Form
SB-2 to be filed by the Company under the Securities Act of 1933, as amended,
which registration statement relates to the registration and sale of Units,
Common Shares and Warrants by the Company, any and all amendments or supplements
to such registration statement, including any amendment or supplement thereto
changing the amount of securities for which registration is being sought, any
post-effective amendment, and any registration statement or amendment to such
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, with all exhibits and
any and all documents required to be filed with respect thereto with any
regulatory authority, including, without limitation, The Nasdaq Stock Market,
the National Association of Securities Dealers, Inc. and any federal or state
regulatory authority pertaining to such registration statement; granting unto
such attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in order to effectuate the same as fully to all intents and
purposes as he or she might or could do if personally present, hereby ratifying
and confirming all that such attorneys-in-fact and agents, and each of them and
any of their substitutes, may lawfully do or cause to be done by virtue of this
Power of Attorney.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT L. CHIOINI President, Chief Executive Officer July 22, 1997
- --------------------------------------------- and Director (Principal Executive
Robert L. Chioini Officer)
/s/ JAMES J. CONNOR Vice President of Finance, Chief July 22, 1997
- --------------------------------------------- Financial Officer, Treasurer and
James J. Connor Secretary (Principal Financial
Officer and Principal Accounting
Officer)
/s/ GARY D. LEWIS Director July 22, 1997
- ---------------------------------------------
Gary D. Lewis
/s/ MICHAEL J. XIRINACHS Director July 22, 1997
- ---------------------------------------------
Michael J. Xirinachs
/s/ NORMAN L. MCKEE Director July 22, 1997
- ---------------------------------------------
Norman L. McKee
</TABLE>
II-5
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Advisory and Investment Banking Agreement between
the Registrant and Maidstone Financial, Inc.
3(i).1 Articles of Incorporation of the Registrant
3(i).2 Certificate of Amendment to Articles of Incorporation of the
Registrant
3(i).3 Certificate of Correction to Articles of Incorporation of
the Registrant
3(i).4 Certificate of Amendment to Articles of Incorporation of the
Registrant
3(ii) Bylaws of the Registrant
4.1* Form of Warrant Agreement
4.2 Form of Underwriter's Unit Purchase Option
4.3* Specimen Common Share Certificate
4.4 Specimen Warrant Certificate (included as Exhibit A to
Exhibit 4.1)
4.5* Form of Bridge Warrant
4.6* Registration Rights Agreement among the Registrant and the
holders of the Bridge Warrants
4.7* Form of Lock-up Agreement
5.1* Opinion of Honigman Miller Schwartz and Cohn concerning the
legality of the securities being offered
10.1 Rockwell Medical Technologies, Inc. 1997 Stock Option Plan
10.2 Employment Agreement dated as of February 19, 1997 between
the Company and Robert L. Chioini
10.3 Consulting and Financial Advisory Services Agreement dated
February 19, 1997 between the Company and Wall Street
10.4 Asset Purchase Agreement dated as of November 1, 1996 by and
among the Predecessor Company, the Family Partnerships (as
defined therein), the Members (as defined therein) and the
Company (formerly known as Acquisition Partners, Inc.)
10.5 First Amendment to Asset Purchase Agreement dated as of
January 31, 1997 by and among the Predecessor Company, the
Family Partnerships, the Members and the Company (formerly
known as Acquisition Partners, Inc.)
10.6 Second Amendment to Asset Purchase Agreement dated as of
February 19, 1997 by and among the Predecessor Company, the
Family Partnerships, the Members and the Company (formerly
known as Acquisition Partners, Inc.)
10.7 Letter Agreement dated April 4, 1997 among the parties to
the Asset Purchase Agreement concerning the conversion of
the promissory note payable to the Supply Company
10.8 Share Pledge and Escrow Agreement dated as of July 22, 1997
among the Principal Shareholders, the Supply Company, the
Company and Honigman Miller Schwartz and Cohn, as Escrow
Agent.
10.9 Lease Agreement dated as of September 5, 1995 between the
Supply Company, as tenant, and Oakland Oaks, L.L.C., as
landlord
10.10 Assignment and First Amendment to Wixom Building Lease dated
as of February 19, 1997 among the Supply Company, as
assignor, the Company, as assignee, and Oakland Oaks,
L.L.C., as landlord
21.1 List of Subsidiaries
23.1 Consent of Coopers & Lybrand LLP
23.2 Consent of Honigman Miller Schwartz and Cohn (to be included
in Exhibit 5.1 to this Registration Statement)
24.1 Power of Attorney (included on the signature page of this
Registration Statement)
27.1 Financial Data Schedule for the Company
27.2 Financial Data Schedule for the Predecessor Companies
27.3 Financial Data Schedule for the Predecessor Companies
</TABLE>
- ------------------
* To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 1.1
ROCKWELL MEDICAL TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
Dated: , 1997
MAIDSTONE FINANCIAL, INC.
101 East 52nd Street
New York, New York 10022
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
<PAGE> 2
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 Gersten,
Savage, Kaplowitz, Fredericks & Curtin, LLP, counsel to the Underwriter, and
the term "Company Counsel" shall mean the firm of Honigman Miller Schwartz &
Cohn, 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
2
<PAGE> 3
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
3
<PAGE> 4
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
4
<PAGE> 5
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 & Lybrand,
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
5
<PAGE> 6
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
6
<PAGE> 7
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
7
<PAGE> 8
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
8
<PAGE> 9
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.,
101 East 52nd Street, New York, New York 10022 (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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<PAGE> 10
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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<PAGE> 11
(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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<PAGE> 12
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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<PAGE> 13
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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<PAGE> 14
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 Moody's 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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<PAGE> 15
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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<PAGE> 16
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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<PAGE> 17
(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 Robert Chioini. Prior to the Effective Date,
the Company shall have obtained "key-employee" life insurance coverage in the
amount of $1,000,000 on Mr. Chioni. Prior to the Effective Date, the Company
shall have entered into an employment agreement with Mr. Chioini 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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<PAGE> 18
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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<PAGE> 19
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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<PAGE> 21
(xi) the statements in the Registration
Statement and the Prospectus under the captions "Risk Factors," "Use
of Proceeds," "Business," "Management," and "Description of
Securities," which purport to summarize the provisions of agreements,
licenses, statutes or rules and regulations, have been reviewed by
such counsel and are accurate summaries in all material respects;
(xii) except for registration under the
Act and registration or qualification of the Securities under
applicable state or foreign securities or blue sky laws, no
authorization, approval, consent or license of any governmental or
regulatory authority or agency is necessary in connection with: (A)
the authorization, issuance, sale, transfer or delivery of the
Securities by the Company in accordance with this Agreement; (B) the
execution, delivery and performance of this Agreement by the Company
or the taking of any action contemplated herein; (C) the issuance of
the Underwriter's 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 & Lybrand, 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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<PAGE> 23
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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<PAGE> 24
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 & Lybrand, 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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<PAGE> 27
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.
30
<PAGE> 31
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., 101 East 52nd Street, New York, New York 10022, with a copy
sent to Jay M. Kaplowitz, Esq., Gersten, Savage, Kaplowitz, Fredericks &
Curtin, LLP, 101 East 52nd Street, New York, New York 10022; or if sent to the
Company, shall be mailed, delivered, or telegraphed and confirmed to it at
Rockwell Medical Technologies, Inc., 28025 Oakland Oaks Drive, Wixom, Michigan
48393, with a copy sent to Patrick T. Duerr, Esq., Honigman Miller Schwartz &
Cohn, 2290 First National Building, 660 Woodward Avenue, Detroit, Michigan
48226-3583.
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
31
<PAGE> 32
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.
32
<PAGE> 33
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this Agreement, whereupon it will become
a binding agreement between the Company and the Underwriter in accordance with
its terms.
Very truly yours,
ROCKWELL MEDICAL TECHNOLOGIES, INC.
By:________________________________
Name:
Title:
Accepted as of the date
first above written:
New York, New York
MAIDSTONE FINANCIAL, INC.
By:________________________________
Name:
Title:
33
<PAGE> 1
EXHIBIT 1.2
ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into as of the __ day of
____________, 1997 by and between Maidstone Financial, Inc., a New York
corporation ("Maidstone"), and Rockwell Medical Technologies, Inc., a Michigan
corporation (the "Company").
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. PURPOSE: The Company hereby engages Maidstone for
the term specified in Paragraph 2 hereof to render consulting advice to the
Company as an investment banker relating to financial and similar matters upon
the terms and conditions set forth herein.
2. TERM: Except as otherwise specified in paragraph 4
hereof, this Agreement shall be effective from ______________, 1997 to
________________, 1999.
3. DUTIES OF MAIDSTONE: During the term of this
Agreement, Maidstone shall seek out Transactions (as hereinafter defined) on
behalf of the Company and shall furnish advice to the Company in connection
with any such Transactions.
4. COMPENSATION: In consideration for the services
rendered by Maidstone to the Company pursuant to this Agreement (and in
addition to the expenses provided for in Paragraph 5 hereof), the Company shall
compensate Maidstone as follows:
<PAGE> 2
(a) The Company shall pay Maidstone a fee of
$4,166 per month during the term of this Agreement. The sum of $99,984 shall
be payable in full on the date of this Agreement;
(b) In the event that any Transaction (as
hereinafter defined) occurs during the term of this Agreement or one year
thereafter, the Company shall pay fees to Maidstone as follows:
CONSIDERATION FEE
------------- ---
$ - 0 - to $ 500,000 Minimum fee of $25,000
$ 500,000 to $5,000,000 5% of Consideration
$5,000,000 or more $250,000 plus 1% of the
Consideration in excess
of $5,000,000
For the purposes of this Agreement, "Consideration"
shall mean the total market value on the day of the closing of stock, cash,
assets and all other property (real or personal) exchanged or received,
directly or indirectly by the Company or any of its security holders in
connection with any Transaction. Any co-broker retained by Maidstone shall be
paid by Maidstone.
For the purposes of the Agreement, a "Transaction"
shall mean (a) any transaction originated by Maidstone, other than in the
ordinary course of trade or business of the Company, whereby, directly or
indirectly, control of or a material interest in the Company or any of its
businesses or any of their respective assets, is transferred for Consideration,
(b) any transaction originated by Maidstone whereby the Company acquires any
other company or the
-2-
<PAGE> 3
assets of any other company or an interest in any other company (an
"Acquisition") or (c) any sale or Acquisition in connection with which the
Company engages an investment banker other than Maidstone and pays such
investment banker a fee in respect of such Transaction.
In the event Maidstone originates a line of credit
with a lender, the Company and Maidstone will mutually agree on a satisfactory
fee and the terms of payment of such fee; provided, however, that in the event
the Company is introduced to a corporate partner by Maidstone in connection
with a merger, acquisition or financing and a credit line develops directly as
a result of the introduction, the appropriate fee shall be the amount set forth
in the schedule above. In the event Maidstone introduces the Company to a
joint venture partner or customer and sales develop as a result of the
introduction, the Company agrees to pay a fee of five percent (5%) of total
sales generated directly from this introduction during the first two years
following the date of the first sale. Total sales shall mean cash receipts
less any applicable refunds, returns, allowances, credits and shipping charges
and monies paid by the Company by way of settlement or judgment arising out of
claims made by or threatened against the Company. Commission payments shall be
paid on the 15th day of each month following the receipt of customers' payment.
In the event any adjustments are made to the total sales after the commission
has been paid, the Company shall be entitled to an appropriate refund or credit
against future payments under this Agreement. All fees to be paid pursuant to
this Agreement, except as otherwise specified, are due and payable to Maidstone
in cash at the closing or closings of any transaction specified in Paragraph 4
hereof. In the event that this Agreement shall not be
-3-
<PAGE> 4
renewed or if terminated for any reason, notwithstanding any such non-renewal
or termination, Maidstone shall be entitled to a full fee as provided under
Paragraphs 4 and 5 hereof, for any transaction for which the discussions were
initiated during the term of this Agreement and which is consummated within a
period of twelve months after non-renewal or termination of this Agreement.
5. EXPENSES OF MAIDSTONE: In addition to the fees
payable hereunder, and regardless of whether any transaction set forth in
Paragraph 4 hereof is proposed or consummated the Company shall reimburse
Maidstone for all fees and disbursements of Maidstone's counsel and Maidstone's
travel and out-of-pocket expenses incurred in connection with the services
performed by Maidstone pursuant to this Agreement, including without
limitation, hotels, food and associated expenses and long-distance telephone
calls.
6. LIABILITY OF MAIDSTONE:
(1) The Company acknowledges that all opinions and
advice (written or oral) given by Maidstone to the Company in connection with
Maidstone's engagement are intended solely for the benefit and use of the
Company in considering the transaction to which they relate, and the Company
agrees that no person or entity other than the Company shall be entitled to
make use of or rely upon the advice of Maidstone to be given hereunder, and no
such opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or
-4-
<PAGE> 5
referred to at any time, in any manner or for any purpose, nor may the Company
make any public references to Maidstone, or use Maidstone's name in any annual
reports or any other reports or releases of the Company without Maidstone's
prior written consent.
(2) The Company acknowledges that Maidstone makes no
commitment whatsoever as to making a market in the Company's securities or to
recommending or advising its clients to purchase the Company's securities.
Research reports or corporate finance reports that may be prepared by Maidstone
will, when and if prepared, be done solely on the merits or judgment of
analysis of Maidstone or any senior corporate finance personnel of Maidstone.
7. MAIDSTONE'S SERVICES TO OTHERS: The Company
acknowledges that Maidstone's or its affiliates are in the business of
providing financial services and consulting advice to others. Nothing herein
contained shall be construed to limit or restrict Maidstone in conducting such
business with respect to others, or in rendering such advice to others.
8. COMPANY INFORMATION:
(a) The Company recognizes and confirms that, in
advising the Company and in fulfilling its engagement hereunder, Maidstone will
use and rely on data, material and other information furnished to Maidstone by
the Company. The Company acknowledges and agrees that in performing its
services under this engagement, Maidstone may rely upon the data, material and
other information supplied by the Company without
-5-
<PAGE> 6
independently verifying the accuracy, completeness or veracity of same.
(b) Except as contemplated by the terms hereof or
as required by applicable law, Maidstone shall keep confidential all material
non-public information provided to it by the Company, and shall not disclose
such information to any third party, other than such of its employees and
advisors as Maidstone determines to have a need to know.
9. INDEMNIFICATION:
a. The Company shall indemnify and hold Maidstone
harmless against any and all liabilities, claims, lawsuits, including any and
all awards and/or judgments to which it may become subject under the Securities
Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934,
as amended (the "Act") or any other federal or state statute, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with the services rendered
by Maidstone or any transactions in connection with this Agreement, except for
any liabilities, claims and lawsuits (including awards and/or judgments),
arising out of acts or omissions of Maidstone. In addition, the Company shall
also indemnify and hold Maidstone harmless against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing.
Maidstone shall give the Company prompt notice of any
such liability, claim or lawsuit which Maidstone contends is the subject matter
of the Company's indemnification and the Company thereupon shall be granted the
right to take any and all
-6-
<PAGE> 7
necessary and proper action, at its sole cost and expense, with respect to such
liability, claim and lawsuit, including the right to settle, compromise and
dispose of such liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or authorities.
Maidstone shall indemnify and hold the Company
harmless against any and all liabilities, claims and lawsuits, including any
and all awards and/or judgments to which it may become subject under the 1933
Act, the Act or any other federal or state statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards and/or
judgments) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact required to be stated or necessary to make
the statement therein, not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Company by or on behalf
of Maidstone for inclusion in any registration statement or prospectus or any
amendment or supplement thereto in connection with any transaction to which
this Agreement applies. In addition, Maidstone shall also indemnify and hold
the Company harmless against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing.
The Company shall give to Maidstone prompt notice of
any such liability, claim or lawsuit which the Company contends is the subject
matter of Maidstone's indemnification and Maidstone thereupon shall be granted
the right to a take any and all necessary and proper action, at its sole cost
and expense, with respect to such liability, claim and lawsuit, including the
-7-
<PAGE> 8
right to settle, compromise or dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
b. In order to provide for just and equitable
contribution under the Act in any case in which (i) any person entitled to
indemnification under this Section 9 makes claim for indemnification pursuant
hereto 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 this Section 10
provides for indemnification in such case, or (ii) contribution under the Act
may be required on the part of any such person in circumstances for which
indemnification is provided under this Section 10, then, and in each such case,
the Company and Maidstone shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after any contribution
from others) in such proportion taking into consideration the relative benefits
received by each party from the offering covered by the prospectus with respect
to any transactions in connection with this Agreement (taking into account the
portion of the proceeds of the offering realized by each), the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was assessed, the opportunity to correct and prevent any
statement or omission and other equitable considerations appropriate under the
circumstances; provided, however, that notwithstanding the above in no event
shall Maidstone be required to contribute any amount in excess of 10% of the
public offering price of any securities to which such Prospectus applies; and
provided, that, in any such
-8-
<PAGE> 9
case, 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
was not guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party
to this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (the "Contributing Party"),
notify the Contributing Party of the commencement thereof, but the omission so
to notify the Contributing Party will not relieve it from any liability which
it may have to any other party other than for contribution hereunder. In case
any such action, suit or proceeding is brought against any party, and such
party notifies a Contributing Party or his or its representative of the
commencement thereof within the aforesaid fifteen (15) days, the Contributing
Party will be entitled to participate therein with the notifying party and any
other Contributing Party similarly notified. Any such Contributing Party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution
without the written consent of the Contributing Party. The indemnification
provisions contained in this Section 10 are in addition to any other rights or
remedies which either party hereto may have with respect to the other or
hereunder.
10. MAIDSTONE AN INDEPENDENT CONTRACTOR : Maidstone shall
perform its services hereunder as an independent contractor and not as an
employee of the Company or an
-9-
<PAGE> 10
affiliate thereof. It is expressly understood and agreed to by the parties
hereto that Maidstone shall have no authority to act for, represent or bind the
Company or any affiliate thereof in any manner, except as may be agreed to
expressly by the Company in writing from time to time.
11. MISCELLANEOUS:
(1) This Agreement between the Company and
Maidstone constitutes the entire agreement and understanding of the parties
hereto, and supersedes any and all previous agreements and understandings,
whether oral or written, between the parties with respect to the matters set
forth herein.
(2) Any notice or communication permitted or
required hereunder shall be in writing and shall be deemed sufficiently given
if hand-delivered or sent (i) postage prepaid by registered mail, return
receipt requested, or (ii) by facsimile, to the respective parties as set forth
below, or to such other address as either party may notify the other in
writing:
If to the Company, to: Rockwell Medical Technologies, Inc.
28025 Oakland Oaks Drive
Wixom, Michigan 48393
with a copy to: Patrick T. Duerr
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
If to Maidstone, to: Maidstone Financial Inc.
101 East 52nd Street
New York, New York 10022
with a copy to: JAY M. KAPLOWITZ
-10-
<PAGE> 11
Gersten, Savage, Kaplowitz,
Fredericks & Curtin, LLP
101 East 52nd Street
New York, New York 10022
(3) This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors, legal representatives and assigns.
(4) This Agreement may be executed in any number
of counterparts, each of which together shall constitute one and the same
original document.
(5) No provision of this Agreement may be
amended, modified or waived, except in a writing signed by all of the parties
hereto.
(6) This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
giving effect to conflict of law principles. The parties hereby agree that any
dispute which may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in New York City, and
they hereby submit to the exclusive jurisdiction of the courts of the State of
New York located in New York, New York and of the federal courts in the
Southern District of New York with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Agreement, and consent
to the service of process in any such action or legal proceeding by means of
registered or certified mail, return receipt requested, in care of the address
set forth in Paragraph 11(b) hereof.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
MAIDSTONE FINANCIAL, INC.
By:________________________________
ROCKWELL MEDICAL TECHNOLOGIES, INC.
By:________________________________
-12-
<PAGE> 1
EXHIBIT 3(i).1
C&S-500 (REV. 8/93)
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
(Date Received) (For Bureau Use Only)
Filed October 25, 1996
Name
Jeanette M. Russow
Honigman Miller Schwartz and Cohn
- --------------------------------------
Address
2290 First National Building
- --------------------------------------
City State Zip Code
Detroit MI 48226 EFFECTIVE DATE:
- --------------------------------------
Document will be returned to the name
and address you enter above.
/___/___/___/ - /___/___/___/
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATION
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
ARTICLE I
The name of the corporation is: Acquisition Partners, Inc.
ARTICLE II
The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
ARTICLE III
The total authorized shares:
1. Common Shares 60,000
-----------------------------------------------------
Preferred Shares -0-
-----------------------------------------------------
2. A statement of all of any of the relative rights, preferences and
limitations of the shares of each class is as follows: None
<PAGE> 2
ARTICLE IV
1. The address of the registered office is:
2290 First National Building Detroit, Michigan 48226
--------------------------------------------------------------------
2. The mailing address of the registered office, if different than above:
---------------------------------------------------------------------
3. The name of the resident agent at the registered office is: Patrick
T. Duerr --------
--------
ARTICLE V
The name and address of the incorporator is as follows:
Name Residence or Business Address
Jeanette M. Russow 2290 First National Building Detroit, Michigan 48226
- ----------------------------------------------------------------------------
ARTICLE VI
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each
shareholder who signs the consent. No written consents shall be effective to
take the corporate action referred to unless, within 60 days after the record
date for determining shareholders entitled to express consent or to dissent
from a proposal without a meeting, written consents dated not more than 10 days
before the record date and signed by a sufficient number of shareholders to
take the action are delivered to the corporation. Delivery shall be to the
corporation's registered office, its principal place of business, or an officer
or agent of the corporation having custody of the minutes of the proceedings of
its shareholders. Delivery made to a corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who would have
been entitled to notice of the shareholder meeting if the action had been taken
at a meeting and who have not consented in writing.
<PAGE> 3
ARTICLE VII
To the full extent permitted by the Michigan Business Corporation Act or any
other applicable laws presently or hereafter in effect, no director of the
corporation shall be personally liable to the corporation or its shareholders
for or with respect to any acts or omissions in the performance of his or her
fiduciary duties as a director of the corporation. Any repeal or modification
of this Article VII shall not adversely affect any right or protection of a
director of the corporation existing immediately prior to, or for or with
respect to, any acts or omissions occurring before such repeal or modification.
I, the incorporator sign my name this 24th day of October, 1996.
Jeanette M. Russow
----------------------
Jeanette M. Russow
<PAGE> 4
<TABLE>
<S><C>
Name of Person or Organization Remitting Fees: Preparer's Name and Business Telephone Number:
Honigman Miller Schwartz and Cohn Jeanette M. Russow
- ------------------------------------------- -----------------------------------------
(313) 256-7634
-----------------------------------------
INFORMATION AND INSTRUCTIONS
1. The Articles of Incorporation cannot be filed until this form, or a comparable
document, is submitted.
2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation and Securities Bureau. The original
will be returned to the address appearing in the box on the front as
evidence of filing. Since this document will be maintained on optical disk
media, it is important that the filing be legible. Documents with poor black
and white contract, or otherwise illegible, will be rejected.
3. This document is to be used pursuant to the provisions of Act 284, P.A. of
1972, by one or more persons for the purpose of forming a domestic profit
corporation.
4. Article I - The corporation name of a domestic profit corporation is
required to contain one of the following words or abbreviations:
"Corporation", "Company", Incorporated", "Limited", "Corp.", "Co.", "Inc.",
or "Ltd".
5. Article II - State, in general terms, the character of the particular
business to be carried on. Under section 202(b) of the Act, it is
sufficient to state substantially, alone or with specifically enumerated
purposes, that the corporation may engage in any activity within the
purposes for which corporations may be formed under the Act. The Act
requires, however, that educational corporations state their specific
purposes.
6. Article III - Indicate the total number of shares which the corporation
has authority to issue. If there is more than one class or series of
shares, state the relative rights, preferences and limitations of the
shares of each class in Article III(2).
7. Article IV - A post office box may not be designated as the address of the
registered office.
8. Article V - The Act requires one or more incorporators. Educational
corporations are required to have at least three (3) incorporators. The
addresss(es) should include a street number and name (or other designation),
city and state.
9. The duration of the corporation should be stated in the articles only if
the duration is not perpetual.
10. This document is effective on the date endorsed "filed" by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated as an additional article.
11. The articles must be signed in ink by each incorporator. The names of the
incorporators as set out in Article V should correspond with the
signatures.
12. FEES: Make remittance payable to the State of Michigan. Include corporation
name on check or money order.
NONREFUNDABLE FEE $10.00
ORGANIZATION FEE: first 60,000 authorized shares or portion thereof $50.00
TOTAL MINIMUM FEE $60.00
ADDITIONAL ORGANIZATION FEE FOR AUTHORIZED SHARES OVER 60,000:
each additional 20,000 authorized shares or portion thereof $30.00
maximum fee for first 100,000,000 authorized shares $5,000.00
each additional 20,000 authorized shares or portion thereof
in excess of 10,000,000 shares $30.00
maximum fee per filing for authorized shares in
excess of 10,000,000 shares $200,000.00
13. Mail form and fee to:
Michigan Department of Consumer and The office is located at:
Industry Service
Corporation, Securities and Land
Development Bureau
Corporation
Division 6546 Mercantile Way
P.O. Box 30054 Lansing, MI 48910
Lansing, MI 48909-7554 Telephone: (517) 334-6302
</TABLE>
<PAGE> 1
EXHIBIT 3(i).2
C&S-515 (REV. 8/96)
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
(Date Received) (For Bureau Use Only)
NOV 22 1996
FILED
NOV 22 1996
ADMINISTRATOR
MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Name
Jeanette M. Russow
Honigman Miller Schwartz and Cohn
- ---------------------------------------------------
Address
2290 First National Building
- ---------------------------------------------------
City State Zip Code
Detroit MI 48226 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
Document will be returned to the name and address you enter above.
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following certificate:
1. The name of the corporation or limited liability company is:
Acquisition Partners, Inc.
2. The identification number assigned by the Bureau is: /4/2/7/ - /7/4/5/
------ -------
3. The location of the registered office is:
2290 First National Building, Detroit, Michigan 48226
4. Articles I and III of the Articles of Incorporation are hereby amended
to read in their entirety as follows:
ARTICLE I
---------
The name of the corporation is: Rockwell Medical Technologies, Inc.
ARTICLE III
-----------
The total authorized shares:
1. Common Shares 4,000,000
------------------------------------------
Preferred Shares -0-
------------------------------------------
2. A statement of all of any of the relative rights, preferences
and limitations of the shares of each class is as follows: None
<PAGE> 2
5. (For profit corporations, and for nonprofit corporations whose articles state
the corporation is organized on a stock or on a membership basis.)
The foregoing amendment to the Articles of Incorporation was duly adopted
on the 22nd day of November, 1996 by the shareholders if a profit
corporation, or by the shareholders or members if a nonprofit corporation
(check one of the following)
/ / at a meeting. The necessary votes were cast in favor of the amendment.
/ / by written consent of the shareholders or members having not less than
the minimum number of votes required by statute in accordance with
Section 407(1) of and (2) of the Act if a nonprofit corporation, or
Section 407(1) of the Act if a profit corporation. Written notice to
shareholders or members who have not consented in writing has been
given. (Note: Written consent by less than all of the shareholders or
members is permitted only if such provision appears in the Articles of
Incorporation.)
/X/ by written consent of all the shareholders or members entitled to vote
in accordance with Section 407(3) of the Act if a nonprofit corporation,
or Section 407(2) of the Act if a profit corporation.
Signed this 22nd day of November, 1996.
By /s/ Robert L. Chioini
----------------------------------------
(Signature of President, Vice-President,
Chairperson or Vice-Chairperson)
Robert L. Chioini, President
--------------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
C&S -515
Name of Person or Organization Remitting Fees:
Honigman Miller Schwartz and Cohn
Preparer's Name and Business Telephone Number:
Jeanette M. Russow
(313) 256-7634
INFORMATION AND INSTRUCTIONS
1. The amendment cannot be filed until this form, or a comparable document,
is submitted.
2. Submit one original of this document. Upon filing, the document will
be added to the records of the Corporation and Securities Bureau. The
original will be returned to the address appearing in the box on the
front as evidence of filing.
Since this document will be maintained on optical disk media, it is
important that the filing be legible. Documents with poor black and
white contrast, or otherwise illegible, will be rejected.
3. This document is to be used pursuant to the provisions of Section 631
of the Act for the purpose of amending the articles of incorporation of
a domestic profit corporation or nonprofit corporation. Do not use
this form for restated articles. A nonprofit corporation is one
incorporated to carry out any lawful purpose or purposes not involving
pecuniary profit or gain for its directors, officers, shareholders, or
members.
4. Item 2 - Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
5. Item 4 - The article(s) being amended must be set forth in its entirety.
However, if the article being amended is divided into separately
identifiable sections, only the sections being amended need be
included.
6. This document is effective on the date endorsed "filed" by the Bureau.
A later effective date, no more than 90 days after the date of
delivery, may be stated as an additional article.
7. If the amendment is adopted before the first meeting of the board of
directors, item 5(a) must be completed and signed in ink by a majority
of the incorporators if more than one listed in Article V of the
Articles of Incorporation if a profit corporation, and all the
incorporators if a nonprofit corporation. If the amendment is
otherwise adopted, item 5(b) must be completed and signed in ink by the
president, vice-president, chairperson, or vice-chairperson of the
corporation.
8. FEES: Make remittance payable to the State of Michigan. Include
corporation name and identification number on check or money order.
NONREFUNDABLE FEE...............................................$10.00
TOTAL MINIMUM FEE...............................................$10.00
ADDITIONAL FEES DUE FOR INCREASED AUTHORIZED SHARES OF PROFIT
CORPORATIONS ARE:
each additional 20,000 authorized shares or portion
thereof.............................................. $ 30.00
maximum fee for first 10,000,000 authorized shares... $ 5,000.00
each additional 20,000 authorized shares or portion
thereof in excess of 10,000,000 shares............... $ 30.00
maximum fee per filing for authorized shares in
excess of 10,000,000 shares.......................... $ 200,000.00
9. Mail form and fee to: The office is located at:
Michigan Department of Consumer and 6546 Mercantile Way
Industry Services Corporation, Lansing, MI 48910
Securities and Land Development Bureau Telephone: (517) 334-6302
Corporation Division
P.O. Box 30054
Lansing, MI 48909-7554
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
C&S518 (Rev.5/93) EXHIBIT 3(i).3
<TABLE>
<S><C>
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MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- ---------------------------------------------------------------------------------------------------------------------------
Dated Received (FOR BUREAU USE ONLY)
APR 09 1997
FILED
APR -9 1997
- -----------------------------------------------------------------
NAME
JANIS K. KUJAN, LEGAL ASSISTANT Administrator
- ----------------------------------------------------------------- MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
ADDRESS CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
HONIGMAN MILLER SCHWARTZ AND COHN
2290 FIRST NATIONAL BUILDING
- -----------------------------------------------------------------
CITY STATE ZIP CODE
DETROIT, MI 48226 EFFECTIVE DATE: 10-25-96
- -----------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS YOU ENTER ABOVE
</TABLE>
CERTIFICATE OF CORRECTION
FOR USE BY CORPORATIONS AND LIMITED LIABILITY COMPANIES
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), Act 162, Public Acts of 1982 (nonprofit corporations), or
Act 23, Public Acts of 1993 (limited liability companies), the undersigned
corporation or limited liability company executes the following Certificate:
<TABLE>
<S><C>
1. The name of the corporation or limited liability company is: ROCKWELL MEDICAL TECHNOLOGIES, INC.
2. The identification number assigned by the Bureau is: 4 2 7 - 7 4 5
3. The corporation or limited liability company is formed under the laws of the State of Michigan
-------------
4. THAT Articles of Incorporation
-------------------------------------------------------------------------------
(TITLE OF DOCUMENT BEING CORRECTED)
was filed by the Bureau on October 25, 1996 and that said document requires correction.
---------------------------
5. DESCRIBE THE INACCURACY OR DEFECT CONTAINED IN THE ABOVE NAMED DOCUMENT:
Article III, Paragraph 1 did not accurately reflect the authorized common shares of the corporation.
6. THE DOCUMENT IS CORRECTED AS FOLLOWS:
The total authorized shares:
1. Common Shares 4,000,000
Preferred Shares -0-
2. A statement of all of the relative rights, preferences and limitations of the shares of each class is as follows:
None
READ INSTRUCTION #7
BEFORE SIGNING SIGNED this 8th DAY OF April, 1997
--- -----------
BY BY /s/ Jeanette M. Russow BY
----------------------------------- ---------------------------------------- -----------------------------------
(SIGNATURE) (SIGNATURE) (SIGNATURE)
Jeanette M. Russow, Incorporator
----------------------------------- ---------------------------------------- -----------------------------------
(TYPE OR PRINT NAME AND TITLE) (TYPE OR PRINT NAME AND TITLE) (TYPE OR PRINT NAME AND TITLE)
</TABLE>
<PAGE> 2
Name of Person or Organization
Remitting Fees:
HONIGMAN MILLER SCHWARTZ
------------------------
AND COHN
------------------------
Preparer's Name and Business
Telephone Number:
JANIS K. KUJAN, LEGAL ASSISTANT
------------------------
(313) 256-7833
------------------------
INFORMATION AND INSTRUCTIONS
1. The certificate of correction cannot be filed until this form, or a
comparable document, is submitted.
2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation and Securities Bureau. The
original will be returned to the address you enter in the box on the front
as evidence of filing.
Since this document will be maintained on optical disc media, it is
important that the filing be legible. Documents with poor black and white
contrast, or otherwise illegible, will be rejected.
3. The corrected document is effective in its corrected form as of its
original filing date except as to a person who relied upon the inaccurate
portion of the document and was, as a result of the inaccurate portion of
the document, adversely affected by the correction.
4. Item 2 - Enter the identification number assigned by the Bureau.
5. This document is to be used pursuant to section 133 of Act 284, PA 1972;
section 133 of Act 162, PA 1982; or section 106 of Act 23, PA of 1993 for
the purpose of correcting a document filed with the Bureau which at the
time of filing was an inaccurate record of the action referred to in the
document or was defectively or erroneously executed. It may be used by
corporations or limited liability companies.
6. Item 6 - State the provision as it should have originally appeared.
7. This certificate must be signed in ink in the same manner as was required
for the document to be corrected.
8. Fees: Make remittance payable to the State of Michigan. Include name and
identification number on check or money order. NONREFUNDABLE FILING FEE
CORPORATIONS .................................................. $10.00
LIMITED LIABILITY COMPANIES ................................... $25.00
9. Mail form and fee to: The office is located at:
Michigan Department of Commerce 6546 Mercantile Way
Corporation and Securities Bureau Lansing, MI 48910
Corporation Division (517) 334-6302
P.O. Box 30054
Lansing, MI 48909-7554
<PAGE> 1
C&S 515 (Rev. 8/96) EXHIBIT 3(i).4
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
Date Received (FOR BUREAU USE ONLY)
JUL 18 1997
FILED
JUL 22 1997
Name David A. Breach
Honigman Miller Schwartz and Cohn
Administrator
MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Address
2290 First National Building 660 Woodward Avenue
City State Zip Code
Detroit Michigan 48226-3583 EFFECTIVE DATE:
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS YOU ENTER ABOVE
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is:
Rockwell Medical Technologies, Inc.
2. The identification number assigned by the Bureau is: 427-745
3. The location of the registered office is:
2290 First National Building Detroit, Michigan 48226
(Street Address) (City) (ZIP Code)
4. Article III of the Articles of Incorporation is hereby amended and
Articles VIII, IX, X and XI are hereby added to the Articles of
Incorporation as follows:
See Rider A attached.
<PAGE> 2
5. (For amendments adopted by unanimous consent of incorporation before the
first meeting of the board of directors or trustees.)
The foregoing amendment to the Articles of Incorporation was duly adopted
on the ___________ day of ___________________, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the Board of Directors or Trustees.
Signed this ____________ day of __________________
__________________________________ ______________________________
(Signature) (Signature)
__________________________________ ______________________________
(Type or Print Name) (Type or Print Name)
__________________________________ ______________________________
(Signature) (Signature)
__________________________________ ______________________________
(Type or Print Name) (Type or Print Name)
6. (For profit corporations, and for nonprofit corporations whose articles state
the corporation is organized on a stock or on a membership basis.)
The foregoing amendment to the Articles of Incorporation was duly adopted on
the 16th day of July, 1997 by the shareholders if a profit corporation, or by
the shareholders or members if a nonprofit corporation (check one of the
following)
[ ] at a meeting. The necessary votes were cast in favor of the amendment.
[x] by written consent of the shareholders or members having not less than
the minimum number of votes required by statute in accordance with
Section 407(1) and (2) of the Act if a nonprofit corporation, or Section
407(1) of the Act if a profit corporation. Written notice to
shareholders or members who have not consented in writing has been
given. (Note: Written consent by less than all of the shareholders or
members is permitted only if such provision appears in the Articles of
Incorporation.)
[ ] by written consent of all the shareholders or members entitled to vote
in accordance with section 407(3) of the Act if a nonprofit
corporation, or Section 407(2) of the Act if a profit corporation.
Signed this 17th day of July, 1997
By /s/ Robert L. Chioini
---------------------------------------------------
(Signature of President, Vice-President,
Chairperson or Vice-Chairperson
Robert L. Chioini President
------------------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE> 3
Rider A
1. Article III is hereby deleted and replaced in its entirety with the
following:
The total authorized shares:
1. Common Shares: 20,000,000
Preferred Shares: 3,416,664
2. A statement of any of the relative rights, preferences and
limitations of the shares of each class as follows:
A. Designation. ROCKWELL MEDICAL TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Michigan (the
"Corporation"), hereby designates 1,416,664 preferred shares of the Corporation
as Series A Preferred Shares, par value $1.00 per share (the "Series A
Preferred Shares"), from the Corporation's 3,416,664 authorized preferred
shares.
B. Dividends.
(i) Amount and Timing. The holders of Series A Preferred
Shares shall be entitled to receive, out of funds legally
available for the payment of dividends, cumulative cash dividends in
the amount of $0.085 per share per year, which shall accrue, unless and
until paid, ratably each day such share is outstanding from June 1, 1997
until such share is redeemed, liquidated or cancelled. Such dividends
will be computed on the basis of a 360-day year for the actual number
of days elapsed and the dividends shall be paid in cash. Dividends
paid in respect of the Series A Preferred Shares may only be paid as
and when directed by the Board of Directors of the Corporation or on
the Mandatory Redemption Date (as set forth in Paragraph D).
(ii) Priority. As long as any Series A Preferred Shares are
outstanding, the Corporation shall not (a) declare, pay, or set
money, securities or other property apart for the payment of, any
dividend on any other shares of the Corporation, including all classes
of common shares and any other series of preferred shares (all of such
shares of the Corporation referred to as the "Junior Shares"), or (b)
make any payment on account of, or set money, securities or other
property apart for the payment into a sinking or other similar fund for
the purchase, redemption or other retirement of, any of the Junior
Shares or any warrants, rights, calls or options exercisable for or
exchangeable into any of the Junior Shares (collectively, the "Junior
Securities"), or (c) make any distribution in respect of any Junior
Securities, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property (other than
distributions or dividends in Junior Shares to the holders of Junior
Shares), and shall not permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase or redeem any
of the Junior Securities, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase, redemption
or distribution, as the case may be, all accrued and unpaid dividends
on the Series A Preferred Shares shall have been paid.
<PAGE> 4
C. Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
Series A Preferred Shares then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its shareholders an
amount in cash equal to $1.00 for each share outstanding, plus an amount in
cash equal to all accrued but unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding up before any payment shall be made or any
assets distributed to the holders of any of the Junior Securities. If the
assets of the Corporation available for distribution to its shareholders are
not sufficient to pay in full the liquidation payments payable to the holders
of outstanding Series A Preferred Shares, then the holders of all such shares
shall share ratably in the distribution of all assets available for
distribution to the Corporation's shareholders in proportion to the amounts
that would have been paid on such distribution if the assets of the Corporation
available for distribution to its shareholders had been sufficient to pay in
full the liquidation payments payable to the holders of outstanding Series A
Preferred Shares. If the assets of the Corporation available for distribution
exceed the maximum amount which may be distributed to holders of Series A
Preferred Shares, the remaining assets available for distribution shall be
distributed among the holders of Junior Securities.
(ii) For purposes of this Paragraph C, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation or its outstanding shares nor the consolidation or merger of the
Corporation with one or more other corporations shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Corporation,
voluntary or involuntary, unless such sale, conveyance, exchange or transfer
shall be in connection with a plan of liquidation, dissolution or winding up of
the Corporation.
D. Redemptions.
(i) Mandatory Redemption. Series A Preferred Shares shall be
subject to purchase by the Corporation, and shall be purchased by the
Corporation, as follows: On January 31, 1998 (the "Mandatory Redemption Date"),
the Corporation shall redeem the outstanding Series A Preferred Shares at a
purchase price equal to $1.00 per share plus accumulated and unpaid dividends
on the Mandatory Redemption Date, which purchase price shall be payable in
cash. From and after the Mandatory Redemption Date, the holders of Series A
Preferred Shares shall not have any rights as shareholders except the right to
receive from the Corporation the redemption price of such Series A Preferred
Shares, without interest, upon the surrender of such Series A Preferred Shares.
(ii) Optional Redemption. In addition to the Corporation's
obligation to redeem the then outstanding Series A Preferred Shares set forth
in Paragraph D (i) above, the Corporation has the right and option at any time
prior to the Mandatory Redemption Date to purchase, redeem or otherwise acquire
any or all Series A Preferred Shares for a purchase price equal to $1.00 per
share plus accumulated and unpaid dividends on such
2
<PAGE> 5
share through the date of repurchase or redemption, which purchase price
shall be payable in cash.
(iii) Effect of Redemption. Upon redemption of the Series A
Preferred Shares in accordance with Article III, D., such Series A
Preferred Shares shall no longer be authorized for reissuance.
E. Voting Rights. The holders of Series A Preferred Shares shall have
no voting rights, except such rights, if any, as cannot legally be denied to
them or relinquished by them.
2. Article VIII is hereby added in its entirety:
The Board of Directors may cause the Corporation to issue
Preferred shares in one or more series, each series to bear a
distinctive designation and to have such relative rights and preferences
as shall be prescribed by resolution of the Board. Such resolutions,
when filed, shall constitute amendments to these Articles of
Incorporation.
3. Article IX is hereby added in its entirety:
The business and affairs of the corporation shall be managed by
or under the direction of a Board of Directors consisting of not less
than 3 or more than 15 directors, the exact number of directors to be
determined from time to time solely by a resolution adopted by an
affirmative vote of a majority of the entire Board of Directors. The
directors shall be divided into three classes, designated Class I, Class
II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the
entire Board of Directors. The term of office of one class shall expire
each year. At each annual meeting of stockholders, the successors to the
class of directors whose term shall then expire shall be elected to hold
office for a term expiring on the third succeeding annual meeting.
If the number of directors is changed, any increase or decrease
shall be apportioned among the classes of directors so as to maintain
the number of directors in each class as nearly equal as possible, but
in no case will a decrease in the number of directors shorten the term
of any incumbent director. When the number of directors is increased by
the Board of Directors and any newly created directorships are filled by
the Board, the additional directors shall be classified as provided by
the Board.
A director shall hold office until the meeting for the year in
which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Newly
created directorships resulting from an increase in the number of
directors and any vacancy on the Board of Directors may be filled only
3
<PAGE> 6
by the Board by an affirmative vote of a majority of the directors then in
office. If the number of directors then in office is less than a quorum,
such newly created directorships and vacancies may be filled by a majority
of the directors then in office, although less than a quorum, or by the sole
remaining director. A director elected by the Board of Directors to fill a
vacancy shall hold office until the next election of the class for which the
director shall have been chosen and until his or her successor shall be
elected and shall qualify. A director or the entire Board of Directors may
be removed only for cause.
Notwithstanding the foregoing, whenever the holders of any one or
more classes of preferred stock or series thereof issued by the Company
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of shareholders, the election,
term of office, filling of vacancies and other features of such directorship
shall be governed by the terms of these Articles of Incorporation applicable
thereto, except that such directors so elected shall not be divided into
classes pursuant to this Article.
This Article IX may not be amended by less than unanimous written
consent of shareholders, and may only be amended by the affirmative vote of
a majority of the shares entitled to vote thereon, in addition to the vote
otherwise required by the Michigan Business Corporation Act.
4. Article X is hereby added in its entirety:
No action by written consent of holders of less than all the
outstanding shares entitled to vote on such action shall be effective
unless the proposed action shall have been approved by the Board of
Directors before the consent of shareholders is executed.
5. Article XI is hereby added in its entirety:
Pursuant to Section 784(1)(b) of the Michigan Business Corporation
Act, the Corporation elects not to be governed by Chapter 7A of the Michigan
Business Corporation Act, being Sections 775 through 784 of the Michigan
Business Corporation Act; provided that the Corporation's Board of Directors
may terminate this election in whole or in part by action of a majority of
directors then in office.
4
<PAGE> 1
EXHIBIT 3(ii)
BYLAWS
OF
ROCKWELL MEDICAL TECHNOLOGIES, INC.,
a Michigan corporation
<PAGE> 2
BYLAWS
OF
ROCKWELL MEDICAL TECHNOLOGIES, INC.,
a Michigan corporation
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Advance Notice Requirements for Stockholder Proposals and Director Nominees . . . . 1
2.6 List of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Quorum; Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Questions Concerning Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Telephonic Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Number and Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Classes, Election and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.12 Telephonic Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Additional Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.15 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.16 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
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ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Officers and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Chairperson of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.10 Executive Vice Presidents and Vice Presidents . . . . . . . . . . . . . . . . . . . 8
4.11 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.12 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.13 Assistant Vice Presidents, Secretaries and Treasurers. . . . . . . . . . . . . . . . 9
4.14 Execution of Contracts and Instruments . . . . . . . . . . . . . . . . . . . . . . . 9
4.15 Voting of Shares and Securities of Other Corporations and Entities. . . . . . . . . 9
ARTICLE V NOTICES AND WAIVERS OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Delivery of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD . . . . . . . . . . . . . . . . . . . 11
6.1 Certificates for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII GENERAL PROVISIONS 13
8.1 Checks and Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.6 Application of Chapter 7A of the Michigan Business Corporation Act . . . . . . . . . 13
ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X SCOPE OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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ROCKWELL MEDICAL TECHNOLOGIES, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation
shall be located at such place in Michigan as the Board of Directors from time
to time determines.
1.2 Other Offices. The Corporation may also have offices or
branches at such other places as the Board of Directors from time to time
determines or the business of the Corporation requires.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Time and Place. All meetings of the shareholders shall be
held at such place and time as the Board of Directors determines.
2.2 Annual Meetings. An annual meeting of shareholders shall be
held on a date, not later than 180 days after the end of the immediately
preceding fiscal year, to be determined by the Board of Directors. At the
annual meeting, the shareholders shall elect directors and transact such other
business as is properly brought before the meeting and described in the notice
of meeting. If the annual meeting is not held on its designated date, the
Board of Directors shall cause it to be held as soon thereafter as convenient.
2.3 Special Meetings. Special meetings of the shareholders, for
any purpose, (a) may be called by the Corporation's chief executive officer or
the Board of Directors, and (b) shall be called by the President or Secretary
upon written request (stating the purpose for which the meeting is to be
called) of the holders of a majority of all the shares entitled to vote at the
meeting.
2.4 Notice of Meetings. Written notice of each shareholders'
meeting, stating the place, date and time of the meeting and the purposes for
which the meeting is called, shall be given (in the manner described in Section
5.1 below) not less than 10 nor more than 60 days before the date of the
meeting to each shareholder of record entitled to vote at the meeting. Notice
of adjourned meetings is governed by Section 2.7 below.
2.5 Advance Notice Requirements for Stockholder Proposals and
Director Nominees. At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors in accordance with Section 2.4 above,
(b) otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c)
<PAGE> 5
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, or for a
stockholder to nominate candidates for election as directors at an annual or
special meeting of the stockholders, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered, mailed and received at the principal
executive offices of the Corporation, (a) in the case of an annual meeting that
is called for a date that is within 30 days before or after the anniversary
date of the immediately preceding annual meeting of stockholders, not less than
60 days nor more than 90 days prior to such anniversary date, and (b) in the
case of an annual meeting that is not called for a date that is within 30 days
before or after the anniversary date of the immediately preceding annual
meeting, or in the case of a special meeting of the stockholders called for the
purpose of electing directors, not later than the close of business on the
tenth day following the day on which notice of the date of the meeting was
mailed or public disclosure of the date of the meeting was made, whichever
occurs first. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned by the stockholder, and
(d) any material interest of the stockholder in such business. Notwithstanding
anything in the Bylaws to the contrary, no business shall be conducted at any
annual meeting or special meeting called for the purpose of electing directors
except in accordance with the procedures set forth in this Section 2.5. The
Chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Section 2.5, and if he or
she should so determine, he or she shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
2.6 List of Shareholders. The officer or agent who has charge of
the stock transfer books for shares of the Corporation shall make and certify a
complete list of the shareholders entitled to vote at a shareholders' meeting
or any adjournment of the meeting. The list shall be arranged alphabetically
within each class and series and shall show the address of, and the number of
shares held by, each shareholder. The list shall be produced at the time and
place of the meeting and may be inspected by any shareholder at any time during
the meeting.
2.7 Quorum; Adjournment. At all shareholders' meetings, the
shareholders present in person or represented by proxy who, as of the record
date for the meeting, were holders of shares entitled to cast a majority of the
votes at the meeting, shall constitute a quorum. Once a quorum is present at a
meeting, all shareholders present in person or represented by proxy at the
meeting may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum. Regardless of
whether a quorum is present, a shareholders' meeting may be adjourned to
another time and place by a vote of the shares present in person or by proxy
without notice other than announcement at the meeting; provided, that (a) only
such business may be transacted at the adjourned meeting as might have been
transacted at the original meeting and (b) if the adjournment is for more than
60 days or if after
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<PAGE> 6
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting must be given to each shareholder of record entitled
to vote at the meeting.
2.8 Voting. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share
having voting power held by such shareholder and on each matter submitted to a
vote. A vote may be cast either orally or in writing. When an action, other
than the election of directors, is to be taken by vote of the shareholders, it
shall be authorized by a majority of the votes cast by the holders of shares
entitled to vote on such action. Directors shall be elected by a plurality of
the votes cast at any election.
2.9 Proxies. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
other persons to act for him or her by proxy. Each proxy shall be in writing
and signed by the shareholder or the shareholder's authorized agent or
representative. A proxy is not valid after the expiration of three years after
its date unless otherwise provided in the proxy.
2.10 Questions Concerning Elections. The Board of Directors may,
in advance of the meeting, or the presiding officer may, at the meeting,
appoint one or more inspectors to act at a shareholders' meeting or any
adjournment thereof. If appointed, the inspectors shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine challenges and
questions arising in connection with the right to vote, count and tabulate
votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders.
2.11 Telephonic Attendance. Shareholders may participate in any
shareholders' meeting by means of conference telephone or similar
communications equipment through which all persons participating in the meeting
may communicate with the other participants. All participants shall be advised
of the communications equipment and the names of the participants in the
conference shall be divulged to all participants. Participation in a meeting
pursuant to this Section 2.10 constitutes presence in person at such meeting.
2.12 Action by Written Consent. To the extent permitted by the
Articles of Incorporation or applicable law, any action required or permitted
to be taken at any shareholders' meeting may be taken without a meeting, prior
notice and a vote, by written consent of shareholders. No action by written
consent of holders of less than all the outstanding shares entitled to vote on
such action shall be effective unless the proposed action shall have been
approved by the Board of Directors before the consent of shareholders is
executed.
3
<PAGE> 7
ARTICLE III
DIRECTORS
3.1 Number and Residence. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors
consisting of not less than three nor more than fifteen members. The number of
directors shall be determined from time to time by a resolution adopted by an
affirmative vote of the entire Board of Directors. Directors need not be
Michigan residents or shareholders of the Corporation.
3.2 Classes, Election and Term. The directors shall be divided
into three classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the total number
of directors constituting the entire Board of Directors. When this Section 3.2
becomes first effective, the term of office of Class I directors shall end on
the first annual stockholders' meeting after their election; the term of office
of Class II directors shall end on the second annual stockholders' meeting
after their election; and the term of office of Class III directors shall end
on the third annual stockholders' meeting after their election. At each annual
meeting thereafter, a number of directors equal to the number of the class
whose term expires at the time of the meeting shall be elected to hold office
for a term that shall expire on the third succeeding annual meeting.
If the number of directors is changed, any increase or decrease shall be
apportioned among the classes of directors so as to maintain the number of
directors in each class as nearly equal as possible, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
When the number of directors is increased by the Board of Directors and any
newly created directorships are filled by the Board, the additional directors
shall be classified as provided by the Board of Directors.
Notwithstanding the foregoing, whenever the holders of any one or more classes
of preferred stock or series thereof issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorship shall be governed by the
terms of these Bylaws applicable thereto, except that such directors so elected
shall not be divided into classes pursuant to this Article.
3.3 Resignation. A director may resign by written notice to the
Corporation. A director's resignation is effective upon its receipt by the
Corporation or a later time set forth in the notice of resignation.
3.4 Removal. One or more directors may be removed only for cause
by vote of the holders of a majority of the shares entitled to vote at an
election of directors.
3.5 Vacancies. A director shall hold office until the meeting for
the year in which his or her term expires and until his or her successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
4
<PAGE> 8
Vacancies, including vacancies resulting from an increase in the number of
directors, may be filled by the Board of Directors, by the affirmative vote of
a majority of all the directors remaining in office. If the number of
directors then in office is less than a quorum, such newly created
directorships and vacancies may be filled by a majority of the directors then
in office, although less than a quorum, or by the sole remaining director. A
director elected by the Board of Directors to fill a vacancy shall hold office
until the next election of the class for which the director shall have been
chosen and until his or her successor shall be elected and shall qualify.
3.6 Place of Meetings. The Board of Directors may hold meetings
at any location. The location of annual and regular Board of Directors'
meetings shall be determined by the Board and the location of special meetings
shall be determined by the person calling the meeting.
3.7 Annual Meetings. Each newly elected Board of Directors may
meet promptly after the annual shareholders' meeting for the purposes of
electing officers and transacting such other business as may properly come
before the meeting. No notice of the annual directors' meeting shall be
necessary to the newly elected directors in order to legally constitute the
meeting, provided a quorum is present.
3.8 Regular Meetings. Regular meetings of the Board of Directors
or Board committees may be held without notice at such places and times as the
Board or committee determines at least 30 days before the date of the meeting.
3.9 Special Meetings. Special meetings of the Board of Directors
may be called by the chief executive officer, and shall be called by the
President or Secretary upon the written request of two directors, on two days
notice to each director or committee member by mail or 24 hours notice by any
other means provided in Section 5.1. The notice must specify the place, date
and time of the special meeting, but need not specify the business to be
transacted at, nor the purpose of, the meeting. Special meetings of Board
committees may be called by the Chairperson of the committee or a majority of
committee members pursuant to this Section 3.9.
3.10 Quorum. At all meetings of the Board or a Board committee, a
majority of the directors then in office, or of members of such committee,
constitutes a quorum for transaction of business, unless a higher number is
otherwise required by the Articles of Incorporation, these Bylaws or the Board
resolution establishing such Board committee. If a quorum is not present at
any Board or Board committee meeting, a majority of the directors present at
the meeting may adjourn the meeting to another time and place without notice
other than announcement at the meeting. Any business may be transacted at the
adjourned meeting which might have been transacted at the original meeting,
provided a quorum is present.
3.11 Voting. The vote of a majority of the members present at any
Board or Board committee meeting at which a quorum is present constitutes the
action of the Board of Directors or of the Board committee, unless a higher
vote is otherwise required by the Michigan Business Corporation Act, the
Articles of Incorporation, these Bylaws, or the Board resolution establishing
the Board committee.
5
<PAGE> 9
3.12 Telephonic Participation. Members of the Board of Directors
or any Board committee may participate in a Board or Board committee meeting by
means of conference telephone or similar communications equipment through which
all persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section 3.12 constitutes presence
in person at such meeting.
3.13 Action by Written Consent. Any action required or permitted
to be taken under authorization voted at a Board or Board committee meeting may
be taken without a meeting if, before or after the action, all members of the
Board then in office or of the Board committee consent to the action in
writing. Such consents shall be filed with the minutes of the proceedings of
the Board or committee and shall have the same effect as a vote of the Board or
committee for all purposes.
3.14 Additional Committees. The Board of Directors may, by
resolution passed by a majority of the directors then in office, designate one
or more committees, each consisting of one or more directors. The Board may
designate one or more directors as alternate members of a committee, who may
replace an absent or disqualified member at a committee meeting. In the
absence or disqualification of a member of a committee, the committee members
present and not disqualified from voting, regardless of whether they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in place of such absent or disqualified member. Any
committee, to the extent provided in the resolution of the Board, may exercise
all powers and authority of the Board of Directors in management of the
business and affairs of the Corporation, except a committee does not have power
or authority to:
(a) Amend the Articles of Incorporation.
(b) Adopt an agreement of merger or share exchange.
(c) Recommend to shareholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets.
(d) Recommend to shareholders a dissolution of the
Corporation or a revocation of a dissolution.
(e) Amend the Bylaws of the Corporation.
(f) Unless the resolution designating the committee or a
later Board of Director's resolution expressly so provides, declare a
distribution or dividend or authorize the issuance of shares.
Each committee and its members shall serve at the pleasure of the Board, which
may at any time change the members and powers of, or discharge, the committee.
Each committee shall keep regular minutes of its meetings and report them to
the Board of Directors when required.
6
<PAGE> 10
3.15 Compensation. The Board, by affirmative vote of a majority of
directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of directors for services to the
Corporation as directors, officers or members of a Board committee. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation for such service.
3.16 Amendment. This Article III may not be amended by less than
unanimous written consent of shareholders, and may only be amended by the
affirmative vote of a majority of the shares entitled to vote thereon, in
addition to the vote otherwise required by the Michigan Business Corporation
Act.
ARTICLE IV
OFFICERS
4.1 Officers and Agents. The Board of Directors, at its first
meeting after each annual meeting of shareholders, shall elect a President, a
Secretary and a Treasurer, and may also elect and designate as officers a
Chairperson of the Board, a Vice Chairperson of the Board and one or more
Executive Vice Presidents, Vice Presidents, Assistant Vice Presidents,
Assistant Secretaries and Assistant Treasurers. The Board of Directors may
also from time to time appoint, or delegate authority to the Corporation's
chief executive officer to appoint, such other officers and agents as it deems
advisable. Any number of offices may be held by the same person, but an
officer shall not execute, acknowledge or verify an instrument in more than one
capacity if the instrument is required by law to be executed, acknowledged or
verified by two or more officers. An officer has such authority and shall
perform such duties in the management of the Corporation as provided in these
Bylaws, or as may be determined by resolution of the Board of Directors not
inconsistent with these Bylaws, and as generally pertain to their offices,
subject to the control of the Board of Directors.
4.2 Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
4.3 Term. Each officer of the Corporation shall hold office for
the term for which he or she is elected or appointed and until his or her
successor is elected or appointed and qualified, or until his or her
resignation or removal. The election or appointment of an officer does not, by
itself, create contract rights.
4.4 Removal. An officer elected or appointed by the Board of
Directors may be removed by the Board of Directors with or without cause. The
removal of an officer shall be without prejudice to his or her contract rights,
if any.
4.5 Resignation. An officer may resign by written notice to the
Corporation. The resignation is effective upon its receipt by the Corporation
or at a subsequent time specified in the notice of resignation.
7
<PAGE> 11
4.6 Vacancies. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
4.7 Chairperson of the Board. The Chairperson of the Board, if
such office is filled, shall be a director and shall preside at all
shareholders' and Board of Directors' meetings.
4.8 Chief Executive Officer. The Chairperson of the Board, if
any, or the President, as designated by the Board, shall be the chief executive
officer of the Corporation and shall have the general powers of supervision and
management of the business and affairs of the Corporation usually vested in the
chief executive officer of a corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. If no
designation of chief executive officer is made, or if there is no Chairperson
of the Board, the President shall be the chief executive officer. The chief
executive officer may delegate to the other officers such of his or her
authority and duties at such time and in such manner as he or she deems
advisable.
4.9 President. If the office of Chairperson of the Board is not
filled, the President shall perform the duties and execute the authority of the
Chairperson of the Board. If the Chairperson of the Board is designated by the
Board as the Corporation's chief executive officer, the President shall be the
chief operating officer of the Corporation, shall assist the Chairperson of the
Board in the supervision and management of the business and affairs of the
Corporation and, in the absence of the Chairperson of the Board, shall preside
at all shareholders' and Board of Directors' meetings. The President may
delegate to the officers other than the Chairperson of the Board, if any, such
of his or her authority and duties at such time and in such manner as he or she
deems appropriate.
4.10 Executive Vice Presidents and Vice Presidents. The Executive
Vice Presidents and Vice Presidents shall assist and act under the direction of
the Corporation's chief executive officer, unless otherwise determined by the
Board of Directors or the chief executive officer. The Board of Directors may
designate one or more Executive Vice Presidents and may grant other Vice
Presidents titles which describe their functions or specify their order of
seniority. In the absence or disability of the President, the authority of the
President shall descend to the Executive Vice Presidents or, if there are none,
to the Vice Presidents in the order of seniority indicated by their titles or
otherwise specified by the Board. If not specified by their titles or the
Board, the authority of the President shall descend to the Executive Vice
Presidents or, if there are none, to the Vice Presidents, in the order of their
seniority in such office.
4.11 Secretary. The Secretary shall act under the direction of the
Corporation's chief executive officer and President. The Secretary shall
attend all shareholders' and Board of Directors' meetings, record minutes of
the proceedings and maintain the minutes and all documents evidencing corporate
action taken by written consent of the shareholders and Board of Directors in
the Corporation's minute books. The Secretary shall perform these duties for
Board committees when required. The Secretary shall see to it that all notices
of shareholders' meetings and special Board of Directors' meetings are duly
given in accordance with applicable law, the Articles of Incorporation and
these Bylaws. The Secretary shall have custody of the Corporation's seal and,
when authorized by the Corporation's chief executive officer, President
8
<PAGE> 12
or the Board of Directors, shall affix the seal to any instrument requiring it
and attest such instrument.
4.12 Treasurer. The Treasurer shall act under the direction of the
Corporation's chief executive officer and President. The Treasurer shall have
custody of the corporate funds and securities and shall keep full and accurate
accounts of the Corporation's assets, liabilities, receipts and disbursements
in books belonging to the Corporation. The Treasurer shall deposit all moneys
and other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the
Corporation's chief executive officer, the President or the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the
Corporation's chief executive officer, the President and the Board of Directors
(at its regular meetings or whenever they request it) an account of all his or
her transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond for the faithful discharge of his or her duties in such
amount and with such surety as the Board prescribes.
4.13 Assistant Vice Presidents, Secretaries and Treasurers. The
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, if
any, shall act under the direction of the Corporation's chief executive
officer, the President and the officer they assist. In the order of their
seniority, the Assistant Secretaries shall, in the absence or disability of the
Secretary, perform the duties and exercise the authority of the Secretary. The
Assistant Treasurers, in the order of their seniority, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the authority of
the Treasurer.
4.14 Execution of Contracts and Instruments. The Board of
Directors may designate an officer or agent with authority to execute any
contract or other instrument on the Corporation's behalf; the Board may also
ratify or confirm any such execution. If the Board authorizes, ratifies or
confirms the execution of a contract or instrument without specifying the
authorized executing officer or agent, the Corporation's chief executive
officer, the President, any Executive Vice President or Vice President or the
Treasurer may execute the contract or instrument in the name and on behalf of
the Corporation and may affix the corporate seal to such document or
instrument.
4.15 Voting of Shares and Securities of Other Corporations and
Entities. Unless the Board of Directors otherwise directs, the Corporation's
chief executive officer shall be entitled to vote or designate a proxy to vote
all shares and other securities which the Corporation owns in any other
corporation or entity.
9
<PAGE> 13
ARTICLE V
NOTICES AND WAIVERS OF NOTICE
5.1 Delivery of Notices. All written notices to shareholders,
directors and Board committee members shall be given personally or by mail
(registered, certified or other first class mail, with postage pre-paid),
addressed to such person at the address designated by him or her for that
purpose or, if none is designated, at his or her last known address. Written
notices to directors or Board committee members may also be delivered at his or
her office on the Corporation's premises, if any, or by overnight carrier,
telegram, telex, telecopy, radiogram, cablegram, facsimile, computer
transmission or similar form of communication, addressed to the address
referred to in the preceding sentence. Notices given pursuant to this Section
5.1 shall be deemed to be given when dispatched, or, if mailed, when deposited
in a post office or official depository under the exclusive care and custody of
the United States postal service. Notices given by overnight carrier shall be
deemed "dispatched" at 9:00 a.m. on the day the overnight carrier is reasonably
requested to deliver the notice. The Corporation shall have no duty to change
the written address of any director, Board committee member or shareholder
unless the Secretary receives written notice of such address change.
5.2 Waiver of Notice. Action may be taken without a required
notice and without lapse of a prescribed period of time, if at any time before
or after the action is completed the person entitled to notice or to
participate in the action to be taken or, in the case of a shareholder, his or
her attorney-in-fact, submits a signed waiver of the requirements, or if such
requirements are waived in such other manner permitted by applicable law.
Neither the business to be transacted at, nor the purpose of, the meeting need
be specified in the written waiver of notice. Attendance at any shareholders'
meeting (in person or by proxy) will result in both of the following:
(a) Waiver of objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the
meeting.
(b) Waiver of objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
A director's attendance at or participation in any Board or Board committee
meeting waives any required notice to him or her of the meeting unless he or
she, at the beginning of the meeting or upon his or her arrival, objects to the
meeting or the transacting of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting.
10
<PAGE> 14
ARTICLE VI
SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD
6.1 Certificates for Shares. The shares of the Corporation shall
be represented by certificates signed by the Chairperson of the Board,
Vice-chairperson of the Board, President or a Vice-president. The certificates
also may be signed by another officer of the Corporation. The officers'
signatures may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation or its employee.
If any officer who has signed or whose facsimile signature has been placed upon
a certificate ceases to be such officer before the certificate is issued, it
may be issued by the Corporation with the same effect as if the person were
such officer at the date of issue.
6.2 Lost or Destroyed Certificates. The Board of Directors may
direct or authorize an officer to direct that a new certificate for shares be
issued in place of any certificate alleged to have been lost or destroyed.
When authorizing such issue of a new certificate, the Board of Directors or
officer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner (or the owner's legal representative) of such lost
or destroyed certificate to give the Corporation an affidavit claiming that the
certificate is lost or destroyed or a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to such old or new certificate.
6.3 Transfer of Shares. Shares of the Corporation are
transferable only on the Corporation's stock transfer books upon surrender to
the Corporation or its transfer agent of a certificate for the shares, duly
endorsed for transfer, and the presentation of such evidence of ownership and
validity of the transfer as the Corporation requires.
6.4 Record Date. The Board of Directors may fix, in advance, a
date as the record date for determining shareholders for any purpose, including
determining shareholders entitled to (a) notice of, and to vote at, any
shareholders' meeting or any adjournment of such meeting; (b) express consent
to, or dissent from, a proposal without a meeting; or (c) receive payment of a
share dividend or distribution or allotment of a right. The record date shall
not be more than 60 nor less than 10 days before the date of the meeting, nor
more than 10 days after the Board resolution fixing a record date for
determining shareholders entitled to express consent to, or dissent from, a
proposal without a meeting, nor more than 60 days before any other action.
If a record date is not fixed:
(a) the record date for determining the shareholders
entitled to notice of, or to vote at, a shareholders' meeting shall be
the close of business on the day next preceding the day on which
notice of the meeting is given, or, if no notice is given, the close
of business on the day next preceding the day on which the meeting is
held; and
11
<PAGE> 15
(b) if prior action by the Board of Directors is not
required with respect to the corporate action to be taken without a
meeting, the record date for determining shareholders entitled to
express consent to, or dissent from, a proposal without a meeting,
shall be the first date on which a signed written consent is properly
delivered to the Corporation; and
(c) the record date for determining shareholders for any
other purpose shall be the close of business on the day on which the
resolution of the Board of Directors relating to the action is
adopted.
A determination of shareholders of record entitled to notice of, or to vote at,
a shareholders' meeting shall apply to any adjournment of the meeting, unless
the Board of Directors fixes a new record date for the adjourned meeting.
Only shareholders of record on the record date shall be entitled to
notice of, or to participate in, the action to which the record date relates,
notwithstanding any transfer of shares on the Corporation's books after the
record date. This Section 6.4 shall not affect the rights of a shareholder and
the shareholder's transferor or transferee as between themselves.
6.5 Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of a share for all purposes, including notices, voting, consents, dividends and
distributions, and shall not be bound to recognize any other person's equitable
or other claim to interest in such share, regardless of whether it has actual
or constructive notice of such claim or interest.
ARTICLE VII
INDEMNIFICATION
The Corporation shall, to the fullest extent authorized or permitted
by the Michigan Business Corporation Act, (a) indemnify any person, and his or
her heirs, personal representatives, executors, administrators and legal
representatives, who was, is, or is threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(collectively, "Covered Matters"); and (b) pay or reimburse the reasonable
expenses incurred by such person and his or her heirs, executors,
administrators and legal representatives in connection with any Covered Matter
in advance of final disposition of such Covered Matter. The Corporation may
provide such other indemnification to directors, officers, employees and agents
by insurance, contract or otherwise as is permitted by law and authorized by
the Board of Directors.
12
<PAGE> 16
ARTICLE VIII
GENERAL PROVISIONS
8.1 Checks and Funds. All checks, drafts or demands for money
and notes of the Corporation must be signed by such officer or officers or such
other person or persons as the Board of Directors from time to time designates.
All funds of the Corporation not otherwise employed shall be deposited or used
as the Board of Directors from time to time designates.
8.2 Fiscal Year. The fiscal year of the Corporation shall end on
such date as the Board of Directors from time to time determines.
8.3 Corporate Seal. The Board of Directors may adopt a corporate
seal for the Corporation. The corporate seal, if adopted, shall be circular
and contain the name of the Corporation and the words "Corporate Seal
Michigan". The seal may be used by causing it or a facsimile of it to be
impressed, affixed, reproduced or otherwise.
8.4 Books and Records. The Corporation shall keep within or
outside of Michigan books and records of account and minutes of the proceedings
of its shareholders, Board of Directors and Board committees, if any. The
Corporation shall keep at its registered office or at the office of its
transfer agent within or outside of Michigan records containing the names and
addresses of all shareholders, the number, class and series of shares held by
each and the dates when they respectively became recordholders of shares. Any
of such books, records or minutes may be in written form or in any other form
capable of being converted into written form within a reasonable time.
8.5 Financial Statements. The Corporation shall cause to be made
and distributed to its shareholders, within four months after the end of each
fiscal year, a financial report (including a statement of income, year-end
balance sheet, and, if prepared by the Corporation, its statement of sources
and application of funds) covering the preceding fiscal year of the
Corporation.
8.6 Application of Chapter 7A of the Michigan Business Corporation
Act. Pursuant to Section 784(1)(b) of the Michigan Business Corporation Act,
the Corporation elects not to be governed by Chapter 7A of the Michigan
Business Corporation Act, being Sections 775 through 784 of the Michigan
Business Corporation Act; provided that the Corporation's Board of Directors
may terminate this election in whole or in part by action of a majority of
directors then in office.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted,
by action of either the shareholders or a majority of the Board of Directors
then in office. The Articles of
13
<PAGE> 17
Incorporation or these Bylaws may from time to time specify particular
provisions of the Bylaws which may not be altered or repealed by the Board of
Directors.
ARTICLE X
SCOPE OF BYLAWS
These Bylaws govern the regulation and management of the affairs of
the Corporation to the extent that they are consistent with applicable law and
the Articles of Incorporation; to the extent they are not consistent,
applicable law and the Articles of Incorporation shall govern.
14
<PAGE> 1
EXHIBIT 4.2
UPO-1 UNDERWRITER'S UNIT PURCHASE OPTION
Dated: ________________, 1997
THIS CERTIFIES THAT _________________________________ is entitled to
purchase from ROCKWELL MEDICAL TECHNOLOGIES, INC., a Michigan corporation (the
"Company"), ______Units at a purchase price of $_______ per Unit (the "Exercise
Price"), subject to adjustment as provided in paragraph 8 hereof, at any time
during the four-year period commencing one (1) year from the date hereof. Each
Unit consists of one (1) share of the Company's common stock, no par value per
share (the "Common Stock") and two (2) Class A redeemable common stock purchase
warrants (the "Warrants"), each Warrant exercisable to purchase one share of
Common Stock at an initial exercise price of $4.50 per share (the "Redeemable
Warrant Exercise Price"). This Underwriter's Warrant (the "Underwriter's
Warrant") is one of a series of Underwriter's Warrants to purchase, in the
aggregate, up to 150,000 Units issued pursuant to an Underwriting Agreement
dated ___________, 1997, among the Company and Maidstone Financial, Inc. (the
"Underwriter"), in connection with a public offering, through the Underwriter,
of 1,500,000 Units as therein described (and up to 225,000 additional Units
covered by an over-allotment option granted by the Company to the Underwriter,
hereinafter referred to together with the 1,500,000 Units, as the "Public
Units") and in consideration of $10.00 received by the Company for the
Underwriter's Warrants. Each Public Unit consists of one share of Common Stock
and two redeemable common stock purchase warrants each to purchase one share of
common stock (the "Public Warrants"). Except as specifically otherwise provided
herein, the Units, as well as the shares of Common Stock and Redeemable Warrants
included in the Units issuable pursuant to the Underwriter's Warrant shall have
the same terms and conditions as the Public Units, the Common Stock and the
Public Warrants, respectively, as described under the caption "Description of
Securities" in the Company's Registration Statement on Form SB-2, File No.
33-_______ (the "Registration Statement"), except that the Holders shall have
registration rights under the Securities Act of 1933, as amended (the "Act"),
for the Underwriter's Warrant, the Common Stock and Redeemable Warrants included
in the Units, and the Common Stock purchasable upon exercise of the Redeemable
Warrants, as more fully described in paragraph 6 herein.
1. The rights represented by the Underwriter's Warrant shall be
exercised at the price, subject to adjustment in accordance with paragraph 8
hereof, and during the periods as follows:
(a) During the period from the date hereof to ___________,
1998 (the "First Anniversary Date"), inclusive, the Holders
shall have no right to purchase any Units hereunder, except
that in the event of any merger, consolidation or sale of
substantially all the assets of the Company as an entirety
prior to the First Anniversary Date, the Holders shall have
the right to exercise the Underwriter's Warrant at such time
and into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a
holder of the number of shares of Common Stock and
Redeemable Warrants into which the Underwriter's Warrant
might have been exercisable immediately prior thereto.
<PAGE> 2
(b) Between __________, 1998 and ___________, 2002 (the
"Expiration Date") inclusive, the Holders shall have the option
to purchase Units hereunder at a price of $5.04 per Unit (120% of
the initial public offering price), subject to adjustment as
provided in paragraph 8 hereof.
(c) After the Expiration Date, the Holders shall have no right
to purchase any Units hereunder.
2. (a) The rights represented by the Underwriter's Warrant may be
exercised at any time within the periods above specified, in whole or in part,
by (i) the surrender of the Underwriter's Warrant (with the purchase form at the
end hereof properly executed) at the principal executive office of the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the Holders at the addresses of the Holders appearing on the books of
the Company); (ii) payment to the Company of the exercise price then in effect
for the number of Units specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any; and (iii) delivery to the Company
of a duly executed agreement signed by the person(s) designated in the purchase
form to the effect that such person(s) agree(s) to be bound by the provisions of
paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7 hereof. The
Underwriter's Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of business on the
date the Underwriter's Warrant is surrendered and payment is made in accordance
with the foregoing provisions of this paragraph 2, and the person or persons in
whose name or names the certificates for shares of Common Stock and Redeemable
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Common Stock and Redeemable Warrants at that time and date.
Certificates representing the Common Stock and Redeemable Warrants so purchased
shall be delivered to the Holders within a reasonable time, not exceeding ten
(10) days, after the rights represented by this Warrant shall have been so
exercised.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) of paragraph 2, the Holders may elect to exercise this
Underwriter's Warrant in whole or in part by receiving Units equal to the value
(as determined below) of this Underwriter's Warrant at the principal office of
the Company together with notice of such election in which event the Company
shall issue to the Holders a number of Units computed using the following
formula:
X = Y(A-B)
-----
A
Where: X = the number of Units to be issued to the Holders;
Y = the number of Units to be exercised under this Underwriter's
Warrant;
A = the current fair market value of one share of Common Stock
(calculated as described below); and
B = the Exercise Price.
<PAGE> 3
As used herein, the current fair market value of Common Stock shall
mean the greater of (x) the average of the closing prices of the Company's
Common Stock sold on all securities exchanges on which the Common Stock may at
the time be listed and the NASDAQ National Market, or, if there have been no
sales on any such exchange or the NASDAQ National Market on such day, the
average of the highest bid and lowest asked price on such day on The Nasdaq
SmallCap Market or otherwise in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any similar successor
organization (the "Market Price"), on the trading day immediately preceding the
date notice of exercise of this Underwriter's Warrant is given or (y) the
average of the Market Price per share of Common Stock for the five trading days
immediately preceding the date notice of exercise of this Underwriter's Warrant
is given. If on any date for which the Market Price per share of Common Stock is
to be determined the Common Stock is not listed on any securities exchange or
quoted on the NASDAQ National Market or on The Nasdaq SmallCap Market or
otherwise in the over-the-counter market, the Market Price per share of Common
Stock shall be the highest price per share which the Company could then obtain
from a willing buyer (not a current employee or director) for shares of Common
Stock sold by the Company, from authorized but unissued shares, as determined in
good faith by the Board of Directors of the Company, unless prior to such date
the Company has become subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
Market Price per share of Common Stock shall be deemed to be the value received
by the holders of the Company's Common Stock for each share thereof pursuant to
the Company's acquisition.
3. The Underwriter's Warrant and the securities issuable upon
exercise thereof shall not be transferred, sold, assigned, or hypothecated for a
period of one year commencing on the Effective Date except that it may be
transferred to successors of the Holders, and may be assigned in whole or in
part to any person who is an officer of either of the Holders or to any member
of the selling group and/or the officers or partners thereof during such period.
In the event that the Underwriter's Warrant is transferred after one year from
the Effective Date, it must be exercised immediately upon such transfer and, if
not exercised immediately upon transfer, the Underwriter's Warrant shall lapse.
Any such assignment shall be effected by the Holders by (i) executing the form
of assignment at the end hereof and (ii) surrendering the Underwriter's Warrant
for cancellation at the office or agency of the Company referred to in paragraph
2 hereof, accompanied by a certificate (signed by an officer of each of the
Holders if the Holders are corporations), stating that each transferee is a
permitted transferee under this paragraph 3; whereupon the Company shall issue,
in the name or names specified by the Holders (including the Holders) a new
Underwriter's Warrant or Warrants of like tenor and representing in the
aggregate rights to purchase the same number of Units (consisting of the same
number of shares of Common Stock and Redeemable Warrants) as are purchasable
hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be purchased hereunder or upon exercise of the Redeemable Warrants
will, upon issuance against payment of the purchase price therefor, be duly and
validly issued, fully paid and nonassessable, and no personal liability will
attach to the holder thereof. The Company further
<PAGE> 4
covenants and agrees that, during the periods within which the Underwriter's
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of the Underwriter's Warrant and the Redeemable Warrants.
5. The Underwriter's Warrant shall not entitle the Holders to any
voting rights or other rights as stockholders of the Company.
6. (a) (i) The Company shall advise the Holders or its
transferees, whether the Holders hold the Underwriter's Warrant or have
exercised the Underwriter's Warrant and hold shares of Common Stock and/or
Redeemable Warrants by written notice at least four weeks prior to the filing of
any post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the Act
covering any securities of the Company, for its own account or for the account
of others, except for any registration statement filed on Form S-4 or S-8, and
will, for a period of seven years from the Effective Date, upon the request of
the Holders, and subject to subparagraph (a)(ii) of this paragraph 6, include in
any such post-effective amendment to the Registration Statement or in any new
registration statement such information as may be required to permit a public
offering of the Underwriter's Warrant, the Common Stock issuable upon the
exercise thereof or upon exercise of the Redeemable Warrants or the Redeemable
Warrants (collectively, the "Registrable Securities"). The Company shall supply
prospectuses and such other document as the Holders may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities, use its best efforts to register and qualify any of the Registrable
Securities for sale in such states as such Holders designate and do any and all
other acts and things which may be necessary or desirable to enable such Holders
to consummate the public sale or other disposition of the Registrable
Securities, all at no expense to the Holders or the Underwriter, and furnish
indemnification in the manner provided in paragraph 7 hereof. The Holders shall
furnish information and indemnification as set forth in paragraph 7.
(ii) If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to
subparagraph (a)(i) of this paragraph 6. If the managing underwriter determines
that a limitation of the number of shares to be underwritten is required, the
underwriter may exclude some or all Registrable Securities from such
registration (the "Excluded Registrable Securities"); provided, however, that no
other security-holder may include any such securities in such Registration
Statement if any of the Registrable Securities have been excluded from such
registration; and further provided that the Company will file a new Registration
Statement covering the Excluded Registrable Securities, at the Company's
expense, within six months after the completion of such underwritten offering.
(b) If any 50% Holder (as defined below) shall give notice to the
Company at any time to the effect that such Holder desires to register under the
Act any or all of the Registrable Securities under such circumstances that a
public distribution (within the meaning of the Act) of any such securities will
be involved, then the Company will promptly, but no later than four weeks after
receipt of such notice, file a post-effective amendment to the current
Registration Statement or a new registration statement pursuant to the Act, so
that such
<PAGE> 5
designated Registrable Securities may be publicly sold under the Act as
promptly as practicable thereafter and the Company will use its best efforts to
cause such registration to become and remain effective (including the taking of
such steps as are necessary to obtain the removal of any stop order) within 90
days after the receipt of such notice, provided, that such Holder shall furnish
the Company with appropriate information in connection therewith as the Company
may reasonably request in writing. The 50% Holder may, at its option, request
the filing of a post-effective amendment to the current Registration Statement
or a new registration statement under the Act on two occasions during the
four-year period beginning one year from the Effective Date. The 50% Holder
may, at its option, request the registration of the Underwriter's Warrant
and/or any of the securities underlying the Underwriter's Warrant in a
registration statement made by the Company as contemplated by subparagraph (a)
of this paragraph 6 or in connection with a request made pursuant to this
subparagraph (b) of paragraph 6 prior to acquisition of the shares of Common
Stock and Redeemable Warrants issuable upon exercise of the Underwriter's
Warrant. The 50% Holder may, at its option, request such post-effective
amendment or new registration statement during the described period with
respect to the Underwriter's Warrant, or separately as to the Common Stock and
Redeemable Warrants issuable upon the exercise of the Underwriter's Warrant,
and such registration rights may be exercised by the 50% Holder prior to or
subsequent to the exercise of the Warrant. Within ten days after receiving any
such notice pursuant to this subparagraph (b) of paragraph 6, the Company shall
give notice to any other Holders of the Underwriter's Warrant, advising that
the Company is proceeding with such post-effective amendment or registration
statement and offering to include therein the securities underlying that part
of the Warrant held by the other Holders, provided that they shall furnish the
Company with such appropriate information (relating to the intentions of such
Holders) in connection therewith as the Company shall reasonably request in
writing. All costs and expenses of the first post-effective amendment or new
registration statement shall be borne by the Company, except that the Holder(s)
shall bear the fees of their own counsel and any underwriting discounts or
commissions applicable to any of the securities sold by them. All costs and
expenses of the second such post-effective amendment or new registration
statement shall be borne by the Holder(s). The Company will maintain such
registration statement or post-effective amendment current under the Act for a
period of at least six months (and for up to an additional three months if
requested by the Holder(s)) from the effective date thereof. The Company shall
provide prospectuses, and such other documents as the Holder(s) may request in
order to facilitate the public sale or other disposition of the Registrable
Securities, use its best efforts to register and qualify any of the Registrable
Securities for sale in such states as such Holder(s) designate and furnish
indemnification in the manner provided in paragraph 7 hereof.
(c) The term "50% Holder" as used in this paragraph 6 shall mean
the Holder(s) of at least 50% of the Underwriter's Warrant and/or the Common
Stock underlying the Underwriter's Warrant and the Redeemable Warrants and shall
include any owner or combination of owners of such securities, which ownership
shall be calculated by determining the number of shares of Common Stock held by
such owner or owners as well as the number of shares then issuable upon exercise
of the Underwriter's Warrant and the Redeemable Warrants.
<PAGE> 6
(d) If at any time prior to the effectiveness of the
registration statement filed in connection with an offering pursuant to this
paragraph 6 the 50% Holder shall determine not to proceed with the registration,
upon notice to the Company and the payment to the Company by the 50% Holder of
the Company's expenses, if any, theretofore incurred in connection with the
registration statement, the 50% Holder may terminate its participation in the
offering, and the registration statement previously filed shall not be counted
against the number of demand registrations permitted under this paragraph 6.
The 50% Holder need not pay to the Company its expenses incurred in connection
with the registration statement, however, if such 50% Holder shall have
determined not to proceed because of material adverse developments on the part
of the Company of which such 50% Holder obtained knowledge subsequent to the
giving to the Company of the written request to register Registrable Securities
pursuant to this paragraph 6.
(e) Notwithstanding the foregoing, if the Company shall furnish
to such 50% Holder a certificate signed by the President of the Company stating
that in the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future containing the disclosure of material information
required to be included therein by reason of the federal securities laws, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period during which such disclosure would be
seriously detrimental, provided that this period will not exceed 30 days and
provided further, that the Company shall not defer its obligation in this matter
more than once in any 12 month period.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Underwriter's Warrant or any Common Stock issued or issuable
upon the exercise of the Underwriter's Warrant or the Redeemable Warrants, or
any Redeemable Warrants is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each Holder of the securities covered
by such registration statement, amendment or supplement (such Holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof, arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon 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 and will reimburse the Distributing
Holder or such controlling person or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim,
<PAGE> 7
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder or any other Distributing
Holder for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint or several, 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 in respect thereof, arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arises out of or are based upon 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 such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder for use in the preparation thereof; and will
reimburse the Company or any such director, officer or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
paragraph 7.
(d) In case any such action is brought against any indemnified
party, and it notified an indemnifying party of the commencement thereof, the
indemnifying party will 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, 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 will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
8. The Exercise Price in effect at any time and the number and kind
of securities purchasable upon the exercise of each Warrant shall be subject to
adjustment from time to time upon the happening of certain events hereinafter
described; provided, however, that no adjustment shall be required in respect of
the Redeemable Warrants.
<PAGE> 8
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, or (iv) the outstanding
shares of Common Stock of the Company are at any time changed into or exchanged
for a different number or kind of shares or other security of the Company or of
another corporation through reorganization, merger, consolidation, liquidation
or recapitalization, then appropriate adjustments in the number and kind of such
securities subject to this Warrant shall be made and the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination, reclassification,
reorganization, merger, consolidation, liquidation or recapitalization shall be
proportionately adjusted so that the Holders of this Warrant exercised after
such date shall be entitled to receive the aggregate number and kind of
securities which, if this Warrant had been exercised by such Holders immediately
prior to such date, they would have owned upon such exercise and been entitled
to receive upon such dividend, distribution, subdivision, combination,
reclassification, reorganization, merger, consolidation, liquidation or
recapitalization. For example, if the Company declares a 2 for 1 stock
distribution and the Exercise Price immediately prior to such event was $5.04
per Unit [120% of the initial public offering price of the Public Units] and the
number of Units purchasable upon exercise of this Warrant was 150,000, the
adjusted Exercise Price immediately after such event would be $2.52 per Unit and
the adjusted number of Units purchasable upon exercise of this Warrant would be
300,000. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) In case the Company shall hereafter distribute without
consideration to all holders of its Common Stock evidence of its indebtedness or
assets (excluding cash dividends or distributions and dividends or distributions
referred to in subparagraph (a) of this paragraph 8, or subscription rights or
warrants, then in each such case the Exercise Price in effect thereafter shall
be determined by multiplying the number of Units issuable upon exercise of the
Underwriter's Warrant by the Exercise Price in effect immediately prior thereto,
multiplied by a fraction, the numerator of which shall be the total number of
shares of Common Stock then outstanding multiplied by the current Exercise
Price, less the fair market value (as determined by the Company's Board of
Directors) of said assets, or evidence of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by the current Exercise Price.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(c) In case the Company shall issue shares of its Common Stock
[excluding shares issued (i) in any of the transactions described in
subparagraphs(a) or (b) of this paragraph 8; (ii) as part of the Public Units,
(iii) upon conversion or exchange of securities convertible into or exchangeable
for Common Stock, (iv) upon exercise of options granted under the Company's
Stock Option Plan, as amended to date, if such shares would otherwise be
included in this subsection (c), (v) upon exercise of the Underwriter's Warrant
or the Public Warrants or the Units or (vi) upon exercise of rights or warrants
issued to the holders of the Common Stock, but only if no adjustment is required
pursuant to this paragraph 8 (without regard to subsection (g) of this paragraph
8) with respect to the transaction giving rise to such rights]
<PAGE> 9
for a consideration per share less than the current Redeemable Warrant Exercise
Price on the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted immediately thereafter so that it
shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares plus the number of shares of Common Stock
which the aggregate consideration received (determined as provided in
subparagraph (f) of this paragraph 8) for the issuance of such additional
shares would purchase at the current Redeemable Warrant Exercise Price, and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such adjustment
shall be made successively whenever such an issuance is made.
(d) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock (excluding securities issued in
transactions described in subparagraph (b) of paragraph 8) for a consideration
per share of Common Stock initially deliverable upon conversion or exchange of
such securities (determined as provided in subparagraph (f) of paragraph 8) less
than the current Redeemable Warrant Exercise Price in effect immediately prior
to the issuance of such securities, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities plus the number
of shares of Common Stock which the aggregate consideration received (determined
as provided in subparagraph (f) of paragraph 8) for such securities would
purchase at the current Redeemable Warrant Exercise Price, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the maximum number of shares of Common
Stock of the Company deliverable upon conversion of or in exchange for such
securities at the initial conversion or exchange price or rate. Such adjustment
shall be made successively whenever such an issuance is made.
(e) Whenever the Exercise Price payable upon exercise of the
Underwriter's Warrant is adjusted pursuant to subparagraphs (a), (b), (c) or (d)
of paragraph 8, the number of shares of Common Stock purchasable upon exercise
of this Underwriter's Warrant shall simultaneously be adjusted by multiplying
the number of shares of Common Stock issuable upon exercise of this
Underwriter's Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(f) For purposes of any computation respecting consideration
received pursuant to subparagraphs (c) and (d) of paragraph 8, the following
shall apply:
(i) in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company
for any underwriting of the issue or otherwise in connection
therewith;
<PAGE> 10
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the accounting
treatment thereof), whose determination shall be conclusive; and
(iii) in the case of the issuance of securities convertible
into or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Company upon the conversion or exchange
thereof (the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this
subparagraph (f) of paragraph 8.
(g) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by reason
of this subparagraph (g) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this paragraph 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be. Anything
in this Section 8 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the Exercise Price,
in addition to those required by this Section 8, as it shall determine, in its
sole discretion, to be advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any federal
income tax liability to the holders of Common Stock or securities convertible
into Common Stock (including the Redeemable Warrants issuable upon exercise of
the Underwriter's Warrant).
(h) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly cause a notice setting forth the adjusted Exercise
Price and adjusted number of shares of Common Stock or other securities
purchasable upon exercise of the Underwriter's Warrant to be mailed to the
Holders, at their addresses set forth herein, and shall cause a certified copy
thereof to be mailed to the Company's transfer agent, if any. The Company may
retain a firm of independent certified public accountants selected by the Board
of Directors (who may be the regular accountants employed by the Company) to
make any computation required by this paragraph 8, and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
(i) In the event that at any time, as a result of an adjustment
made pursuant to the provisions of this paragraph 8, the Holders of the
Underwriter's Warrant thereafter shall become entitled to receive any securities
of the Company, other than Common Stock and the Redeemable Warrants included in
the Units, thereafter the number of such other securities so receivable upon
exercise of the Underwriter's Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with
<PAGE> 11
respect to the Common Stock contained in subparagraphs (a) to (g), inclusive of
this paragraph (i).
9. This Agreement shall be governed by and in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, ROCKWELL MEDICAL TECHNOLOGIES, INC. has caused
this Underwriter's Warrant to be signed by its duly authorized officers, and
this Underwriter's Warrant to be dated __________________, 1997.
ROCKWELL MEDICAL TECHNOLOGIES, INC.
By: ______________________________________
Name:
Title:
<PAGE> 12
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant,
hereby irrevocably elects to exercise the purchase rights represented by such
Warrant for, and to purchase thereunder, ______________ Units of ROCKWELL
MEDICAL TECHNOLOGIES, INC., each Unit consisting of one (1) share of Common
Stock, no par value per share, and two (2) Redeemable Common Stock Purchase
Warrants each to purchase one (1) share of Common Stock, and herewith makes
payment of $_____________________ therefor (or hereby surrenders and delivers
that portion of the Underwriter's Warrant having equivalent value (as determined
in accordance with the provisions of subparagraph (d) of paragraph 2 of the
Underwriter's Warrant)), and requests that the certificates for shares of Common
Stock and Redeemable Warrants be issued in the name(s) of, and delivered to
_____________________, whose address(es) is (are):
Dated: _________________________, 19_________
______________________________________________
Signature
(Print name under signature)
(Signature must conform in all respects to the
name of holder as specified on the face of the
Underwriter's Warrant).
===============================================
(Insert Social Security or Other
Identifying Number of Holder)
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant)
<PAGE> 13
FOR VALUE RECEIVED __________________________________________________
hereby sells, assigns and transfers unto_______________________________________
(Please print name and address of transferee)
this Warrant, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________________
_____________________ Attorney, to transfer the within Warrant on the books of
ROCKWELL MEDICAL TECHNOLOGIES, INC., with full power of substitution.
Dated: ________________________
Signature _____________________
(Print name under signature)
(Signature must conform in all
respects to the name of holder as
specified on the face of the
Underwriter's Warrant).
================================
(Insert Social Security or Other
Identifying Number of Holders)
<PAGE> 1
EXHIBIT 10.1
R0CKWELL MEDICAL TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
1. Definitions: As used herein, the following terms shall have
the following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and the applicable rules and regulations thereunder.
(b) "Committee" shall mean, (i) with respect to
administration of the Plan regarding Participants who are subject to
Section 16(a) and (b) of the Exchange Act, a committee meeting the
standards of Rule 16b-3 of the Rules and Regulations under the
Exchange Act, or any similar successor rule, appointed by the Board of
Directors of the Company to perform any of the functions and duties of
the Committee under the Plan, or the Board of Directors as a whole,
and (ii) with respect to administration of the Plan regarding all
other Participants, such committee or the Board of Directors of the
Company, as described in clause (i), or such other committee or entity
appointed by the Board of Directors of the Company to perform any of
the functions and duties of the Committee under the Plan.
(c) "Common Shares" shall mean the Common Shares, no par
value per share, of the Company.
(d) "Company" shall mean Rockwell Medical Technologies,
Inc., a Michigan corporation, or any successor thereof.
(e) "Discretion" shall mean the sole discretion of the
Committee, with no requirement whatsoever that the Committee follow
past practices, act in a manner consistent with past practices, or
treat any key employee, director, consultant or advisor in a manner
consistent with the treatment afforded other key employees, directors,
consultants or advisors with respect to the Plan or otherwise.
(f) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder.
(g) "Incentive Option" shall mean an option to purchase
Common Shares which meets the requirements set forth in the Plan and
also is intended to be, and qualifies as, an incentive stock option
within the meaning of Section 422 of the Code.
(h) "Nonqualified Option" shall mean an option to
purchase Common Shares which meets the requirements set forth in the
Plan but is not intended to be, or does not qualify as, an incentive
stock option within the meaning of the Code.
(i) "Participant" shall mean any individual designated by
the Committee under Paragraph 6 for participation in the Plan.
<PAGE> 2
(j) "Plan" shall mean this Rockwell Medical Technologies,
Inc. 1997 Stock Option Plan.
(k) "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations thereunder.
(l) "Subsidiary" shall mean any corporation or other
entity in which the Company has a direct or indirect ownership
interest of 50% or more of the total combined voting power of all
classes of outstanding voting equity interests.
2. Purpose of Plan: The purpose of the Plan is to provide key
employees (including officers), directors, consultants and advisors of the
Company and its Subsidiaries (collectively, "key employees") with an increased
incentive to make significant and extraordinary contributions to the long-term
performance and growth of the Company and its Subsidiaries, to join the
interests of key employees, directors, consultants and advisors with the
interests of the shareholders of the Company, and to facilitate attracting and
retaining key employees, directors, consultants and advisors of exceptional
ability.
3. Administration: The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall
determine, from those eligible to be Participants under the Plan, the persons
to be granted stock options, the amount of stock to be optioned to each such
person, the time such options shall be granted and the terms and conditions of
any stock options. Such terms and conditions may, in the Committee's
Discretion, include, without limitation, provisions providing for termination
of the option, forfeiture of the gain on any option exercises or both if the
Participant competes with the Company or otherwise acts contrary to the
Company's interests, and provisions imposing restrictions, potential forfeiture
or both on shares acquired upon exercise of options granted pursuant to this
Plan. The Committee may condition any grant on the potential Participant's
agreement to such terms and conditions.
Subject to the provisions of the Plan, the Committee is authorized to
interpret the Plan, to promulgate, amend and rescind rules and regulations
relating to the Plan and to make all other determinations necessary or
advisable for its administration. Interpretation and construction of any
provision of the Plan by the Committee shall, unless otherwise determined by
the Board of Directors of the Company, be final and conclusive. A majority of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by a majority of the Committee, shall be the acts of the Committee.
4. Indemnification: In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any option granted hereunder to the full extent
provided for under the Company's articles of incorporation or bylaws with
respect to indemnification of directors of the Company.
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<PAGE> 3
5. Maximum Number of Shares Subject to Plan: The maximum number
of shares with respect to which stock options may be granted under the Plan
shall be an aggregate of 450,000 Common Shares, which may consist in whole or
in part of authorized and unissued or reacquired Common Shares. Unless the
Plan shall have been terminated, shares covered by the unexercised portion of
canceled, expired or otherwise terminated options under the Plan shall again be
available for option and sale.
Subject to Paragraph 16, the number and type of shares subject to each
outstanding stock option, the option price with respect to outstanding stock
options, the aggregate number and type of shares remaining available under the
Plan, and the maximum number and type of shares that may be granted to any
Participant in any fiscal year of the Company pursuant to Paragraph 6, shall be
subject to such adjustment as the Committee, in its Discretion, deems
appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, statutory share exchanges or reorganizations of or
by the Company; provided, that no fractional shares shall be issued pursuant to
the Plan, no rights may be granted under the Plan with respect to fractional
shares, and any fractional shares resulting from such adjustments shall be
eliminated from any outstanding option.
6. Participants: The Committee shall determine and designate
from time to time, in its Discretion, those key employees (including officers),
directors, consultants and advisors of or to the Company or any Subsidiary to
whom options are to be granted and who thereby become Participants under the
Plan; provided, however, that (a) Incentive Options shall be granted only to
employees (as defined in the Code) of the Company or a corporate Subsidiary, to
the extent required by Section 422 of the Code, or any successor provision, and
(b) no Participant may be granted stock options to purchase more than 200,000
Common Shares in the aggregate in any fiscal year of the Company, subject to
any adjustments provided in the final paragraph of Paragraph 5 and in Paragraph
16.
7. Allotment of Shares: The Committee shall determine and fix
the number of Common Shares to be offered to each Participant; provided, that
no Incentive Option may be granted under the Plan to any one Participant which
would result in the aggregate fair market value, determined as of the date the
option is granted, of the underlying stock with respect to which Incentive
Options are exercisable for the first time by such individual during any
calendar year (under all of such plans of the Company and its parent and
Subsidiary corporations) exceeding $100,000.
8. Option Price: Subject to the rules set forth in this
Paragraph 8, the Committee, in its Discretion, shall establish the option price
at the time any option is granted. With respect to an Incentive Option, such
option price shall not be less than 100% of the fair market value of the stock
on the date on which such option is granted; provided, that with respect to an
Incentive Option granted to an employee who at the time of the grant owns
(after applying the attribution rules of Section 424(d) of the Code) more than
10% of the total combined voting stock of the Company or of any parent or
Subsidiary, the option price shall not be less than 110% of the fair market
value of the stock subject to the Incentive Option on the date such option is
-3-
<PAGE> 4
granted. With respect to a Nonqualified Option, the option price shall be not
less than the par value, if any, of the Common Shares. Fair market value of a
share shall be determined by the Committee and may be determined by using the
closing sale price of the Company's stock on any exchange or other market on
which the Common Shares shall be traded on such date, or if there is no sale on
such date, on the next following date on which there is a sale, or the average
of the closing bid and asked prices in any market or quotation system in which
the Common Shares shall be listed or traded on such date. The option price
will be subject to adjustment in accordance with the provisions of Paragraphs 5
and 16 of the Plan.
9. Granting and Exercise of Options: The granting of options
under the Plan shall be effected in accordance with determinations made by the
Committee pursuant to the provisions of the Plan, by execution of instruments
in writing in form approved by the Committee. Such instruments shall
constitute binding contracts between the Company and the Participant.
Subject to the terms of the Plan, the Committee, in its Discretion,
may grant to Participants Incentive Options, Nonqualified Options or any
combination thereof. Each option granted under the Plan shall designate the
number of shares covered thereby, if any, with respect to which the option is
an Incentive Option and the number of shares covered thereby, if any, with
respect to which the option is a Nonqualified Option.
Subject to the terms of the Plan, each option granted under the Plan
shall be exercisable at any such time or times or in any such installments as
may be determined by the Committee in its Discretion; provided, that the
aggregate fair market value (determined as of the date the option is granted)
of the underlying stock with respect to which Incentive Options are exercisable
for the first time by such individual during any calendar year (under all of
such plans of the Company and its parent and Subsidiary corporations) shall not
exceed $100,000. Except as provided in Paragraph 13, options may be exercised
only while the Participant is an employee, director, consultant or advisor of
the Company or a Subsidiary.
Notwithstanding any other term or provision of this Plan, but subject
to the requirements of the Code with respect to Incentive Options that are
intended to remain Incentive Options, in connection with a Participant ceasing
to be an employee of the Company or a Subsidiary for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its Discretion (exercised at the date of the grant of the stock
option or after the date of grant), in whole or in part, the time or times or
installments with respect to which any option granted under this Plan shall be
exercisable in connection with termination of a Participant's employment with
the Company or a Subsidiary, subject to any restrictions, terms and conditions
fixed by the Committee either at the date of the award or at the date it
exercises such Discretion.
Successive stock options may be granted to the same Participant,
whether or not the option or options previously granted to such Participant
remain unexercised. A Participant may exercise any option granted under the
Plan, if then exercisable, notwithstanding that options granted to such
Participant prior to the option then being exercised remain unexercised.
-4-
<PAGE> 5
10. Payment of Option Price: At the time of the exercise in whole
or in part of any option granted under this Plan, payment in full in cash, or
with the consent of the Committee, in its Discretion, in Common Shares or by a
promissory note payable to the order of the Company which is acceptable to the
Committee, shall be made by the Participant for all shares so purchased. Such
payment may, with the consent of the Committee, in its Discretion, also consist
of a cash down payment and delivery of such a promissory note in the amount of
the unpaid exercise price. In the Discretion of, and subject to such
conditions as may be established by, the Committee, payment of the option price
may also be made by the Company retaining from the shares to be delivered upon
exercise of the stock option that number of shares having a fair market value
on the date of exercise equal to the option price of the number of shares with
respect to which the Participant exercises the option. In the Discretion of
the Committee, a Participant may exercise an option, if then exercisable, in
whole or in part, by delivery to the Company of written notice of the exercise
in such form as the Committee may prescribe, accompanied by irrevocable
instructions to a stock broker to promptly deliver to the Company full payment
for the shares with respect to which the option is exercised from the proceeds
of the stock broker's sale of or loan against some or all of the shares. Such
payment may also be made in such other manner as the Committee determines is
appropriate, in its Discretion. No Participant shall have any of the rights of
a shareholder of the Company under any option until the actual issuance of
shares to such Participant, and prior to such issuance no adjustment shall be
made for dividends, distributions or other rights in respect of such shares,
except as provided in Paragraphs 5 and 16.
11. Transferability of Option: Except as otherwise provided in
this Paragraph 11, (i) to the extent required by Section 422 of the Code, or
any successor section, but only with respect to Incentive Options, or (ii) to
the extent determined by the Committee in its Discretion (either by resolution
or by a provision in, or amendment to, the option), (a) no option granted under
the Plan to a Participant shall be transferable by such Participant otherwise
than (1) by will, or (2) by the laws of descent and distribution or, (3) with
respect to Nonqualified Options only (unless permitted by Section 422 of the
Code or any successor section), pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and (b) such option shall be
exercisable, during the lifetime of the Participant, only by the Participant.
The Committee may, in its Discretion, authorize all or a portion of
the options to be granted to an optionee to be on terms which permit transfer
by such optionee to, and the exercise of such option by, (i) the spouse,
children or grandchildren of the optionee ("Immediate Family Members"), (ii) a
trust or trusts for the exclusive benefit of such Immediate Family Members,
(iii) a partnership in which such Immediate Family Members are the only
partners, or (iv) such other persons or entities as determined by the
Committee, in its Discretion, on such terms and conditions as the Committee, in
its Discretion, may determine; provided, that (y) the stock option agreement
pursuant to which such options are granted must be approved by the Committee
and must expressly provide for transferability in a manner consistent with this
Paragraph 11, and (z) subsequent transfers of transferred options shall be
prohibited except for transfers the original
-5-
<PAGE> 6
optionee would be permitted to make (if he or she were still the owner of the
option) in accordance with this Paragraph 11.
Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately before transfer,
provided, that for purposes of Paragraphs 9, 10, 14, 16 and 18 the term
"Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Paragraph 13 shall continue to be applied with
respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods,
specified in Paragraph 13. The original optionee shall remain subject to
withholding taxes and related requirements upon exercise provided in Paragraph
15. The Company shall have no obligation to provide any notice to any
transferee, including, without limitation, notice of any termination of the
option as a result of termination of the original optionee's employment with,
or other service to, the Company.
12. Continuance of Employment; No Right to Continued Employment:
The Committee may require, in its Discretion, that any Participant under the
Plan to whom an option shall be granted shall agree in writing as a condition
of the granting of such option to remain in his or her position as an employee,
director, consultant or advisor of the Company or a Subsidiary for a designated
minimum period from the date of the granting of such option as shall be fixed
by the Committee.
Nothing contained in the Plan or in any option granted pursuant to the
Plan, nor any action taken by the Committee hereunder, shall confer upon any
Participant any right with respect to continuation of employment, consultation
or other service by or to the Company or a Subsidiary nor interfere in any way
with the right of the Company or a Subsidiary to terminate such person's
employment, consultation or other service at any time.
13. Termination of Employment; Expiration of Options: Subject to
the other provisions of the Plan, including, without limitation, Paragraphs 9
and 16 and this Paragraph 13, all rights to exercise options shall terminate
when a Participant ceases to be an employee, director, consultant or advisor of
or to the Company or a Subsidiary for any cause, except that the Committee may,
in its Discretion, permit the exercise of all or any portion of the options
granted to such Participant
(i) for a period not to exceed three months following such
termination with respect to Incentive Options that are intended to
remain Incentive Options if such termination is not due to death or
permanent disability of the Participant,
(ii) for a period not to exceed one year following termination
of employment with respect to Incentive Options that are Intended to
remain Incentive Options if termination of employment is due to the
death or permanent disability of the Participant, and
-6-
<PAGE> 7
(iii) for a period not to extend beyond the expiration date
with respect to Nonqualified Options or Incentive Options that are not
intended to remain Incentive Options,
all subject to any restrictions, terms and conditions fixed by the Committee
either at the date of the award or at the date it exercises such Discretion.
In no event, however, shall an option be exercisable after its expiration date,
and, unless the Committee in its Discretion determines otherwise (pursuant to
Paragraph 9 or Paragraph 16), an option may only be exercised after termination
of a Participant's employment, consultation or other service by or to the
Company to the extent exercisable on the date of such termination or to the
extent exercisable as a result of the reason for such termination. The
Committee may evidence the exercise of its Discretion under this Paragraph 13
in any manner it deems appropriate, including by resolution or by a provision
in, or amendment to, the option.
If not sooner terminated, each stock option granted under the Plan
shall expire not more than 10 years from the date of the granting thereof;
provided, that with respect to an Incentive Option granted to a Participant
who, at the time of the grant, owns (after applying the attribution rules of
Section 424(d) of the Code) more than 10% of the total combined voting stock of
all classes of stock of the Company or of any parent or Subsidiary, such option
shall expire not more than 5 years after the date of granting thereof.
14. Investment Purpose: If the Committee in its Discretion
determines that as a matter of law such procedure is or may be desirable, it
may require a Participant, upon any exercise of any option granted under the
Plan or any portion thereof and as a condition to the Company's obligation to
deliver certificates representing the shares subject to exercise, to execute
and deliver to the Company a written statement, in form satisfactory to the
Committee, representing and warranting that the Participant's purchase of
Common Shares upon exercise thereof shall be for such person's own account, for
investment and not with a view to the resale or distribution thereof and that
any subsequent sale or offer for sale of any such shares shall be made either
pursuant to (a) a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement has become effective and is
current with respect to the shares being offered and sold, or (b) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the Participant shall, prior to any offer for sale or
sale of such shares, obtain a favorable written opinion from counsel for or
approved by the Company as to the availability of such exemption. The Company
may endorse an appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any shares issued or transferred
to the Participant upon exercise of any option granted under the Plan.
15. Withholding Payments: If upon the exercise of any
Nonqualified Option or a disqualifying disposition (within the meaning of
Section 422 of the Code) of shares acquired upon exercise of an Incentive
Option, there shall be payable by the Company or a Subsidiary any amount for
income tax withholding, in the Committee's Discretion, either the Participant
shall pay such amount to the Company, or the amount of Common Shares delivered
by the Company to the Participant shall be appropriately reduced, to reimburse
the Company or such Subsidiary
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for such payment. The Company or any of its Subsidiaries shall have the right
to withhold the amount of such taxes from any other sums or property due or to
become due from the Company or any of its Subsidiaries to the Participant upon
such terms and conditions as the Committee shall prescribe. The Company may
also defer issuance of the stock upon exercise of such option until payment by
the Participant to the Company of the amount of any such tax. The Committee
may, in its Discretion, permit Participants to satisfy such withholding
obligations, in whole or in part, by electing to have the amount of Common
Shares delivered or deliverable by the Company upon exercise of a stock option
appropriately reduced, or by electing to tender Common Shares back to the
Company subsequent to exercise of a stock option to reimburse the Company or
such Subsidiary for such income tax withholding, subject to such rules and
regulations, if any, as the Committee may adopt. The Committee may make such
other arrangements with respect to income tax withholding as it shall
determine.
16. Extraordinary Transactions: In case the Company (i)
consolidates with or merges into any other corporation or other entity and is
not the continuing or surviving entity of such consolidation or merger, or (ii)
permits any other corporation or other entity to consolidate with or merge into
the Company and the Company is the continuing or surviving entity but, in
connection with such consolidation or merger, the Common Shares are changed
into or exchanged for stock or other securities of any other corporation or
other entity or cash or any other assets, or (iii) transfers all or
substantially all of its properties and assets to any other corporation or
other person or entity, or (iv) dissolves or liquidates, or (v) effects a
capital reorganization or reclassification in such a way that holders of Common
Shares shall be entitled to receive stock, securities, cash or other assets
with respect to or in exchange for the Common Shares, then, and in each such
case, proper provision shall be made so that, each Participant holding a stock
option upon the exercise of such option at any time after the consummation of
such consolidation, merger, transfer, dissolution, liquidation, reorganization
or reclassification (each transaction, for purposes of this Paragraph 16, being
herein called a "Transaction"), shall be entitled to receive (at the aggregate
option price in effect for all Common Shares issuable upon such exercise
immediately prior to such consummation and as adjusted to the time of such
Transaction), in lieu of Common Shares issuable upon such exercise prior to
such consummation, the stock and other securities, cash and assets to which
such Participant would have been entitled upon such consummation if such
Participant had so exercised such stock option in full immediately prior
thereto (subject to adjustments subsequent to such Transaction provided for in
Paragraph 5).
Notwithstanding anything in the Plan to the contrary, in connection
with any Transaction and effective as of a date selected by the Committee,
which date shall, in the Committee's judgment, be far enough in advance of the
Transaction to permit Participants holding stock options to exercise their
options and participate in the Transaction as a holder of Common Shares, the
Committee, acting in its Discretion without the consent of any Participant, may
effect one or more of the following alternatives with respect to all of the
outstanding stock options (which alternatives may be made conditional on the
occurrence of the applicable Transaction and which may, if permitted by law,
vary among individual Participants): (a) accelerate the time at which stock
options then outstanding may be exercised so that such stock options may be
exercised in full for a limited period of time on or before a specified date
fixed by the Committee
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<PAGE> 9
after which specified date all unexercised stock options and all rights of
Participants thereunder shall terminate; (b) accelerate the time at which stock
options then outstanding may be exercised so that such stock options may be
exercised in full for their then remaining term; or (c) require the mandatory
surrender to the Company of outstanding stock options held by such Participants
(irrespective of whether such stock options are then exercisable) as of a date,
before or not later than sixty days after such Transaction, specified by the
Committee, and in such event the Company shall thereupon cancel such stock
options and shall pay to each Participant an amount of cash equal to the excess
of the fair market value of the aggregate Common Shares subject to such stock
option, determined as of the date such Transaction is effective, over the
aggregate option price of such shares, less any applicable withholding taxes;
provided, however, the Committee shall not select an alternative (unless
consented to by the Participant) such that, if a Participant exercised his or
her accelerated stock option pursuant to alternative (a) or (b) and
participated in the Transaction or received cash pursuant to alternative (c),
the alternative would result in the Participant's owing any money by virtue of
the operation of Section 16(b) of the Exchange Act. If all such alternatives
have such a result, the Committee shall, in its Discretion, take such action to
put such Participant in as close to the same position as such Participant would
have been in had alternative (a), (b) or (c) been selected but without
resulting in any payment by such Participant pursuant to Section 16(b) of the
Exchange Act. Notwithstanding the foregoing, with the consent of affected
Participants, each with respect to such Participant's option only, the
Committee may in lieu of the foregoing make such provision with respect to any
Transaction as it deems appropriate.
17. Effectiveness of Plan: This Plan shall be effective on the
date the Board of Directors of the Company adopts this Plan, provided, that the
shareholders of the Company approve the Plan within 12 months before or after
its adoption by the Board of Directors. Options may be granted before
shareholder approval of this Plan, but each such option shall be subject to
shareholder approval of this Plan. No option granted under this Plan shall be
exercisable unless and until this Plan shall have been approved by the
Company's shareholders.
18. Termination, Duration and Amendments to the Plan: The Plan
may be abandoned or terminated at any time by the Board of Directors of the
Company. Unless sooner terminated, the Plan shall terminate on the date ten
years after the earlier of its adoption by the Board of Directors or its
approval by the shareholders of the Company, and no stock options may be
granted under the Plan thereafter. The termination of the Plan shall not
affect the validity of any option which is outstanding on the date of
termination.
For the purpose of conforming to any changes in applicable law or
governmental regulations, or for any other lawful purpose, the Board of
Directors shall have the right, with or without approval of the shareholders of
the Company, to amend or revise the terms of this Plan or any option agreement
under this Plan at any time; provided, however, that (i) to the extent required
by Section 162(m) of the Code and related regulations, or any successor rule,
but only with respect to amendments or revisions affecting Participants whose
compensation is subject to Section 162(m) of the Code, and to the extent
required by Section 422 of the Code, or any successor section, but only with
respect to Incentive Options, no such amendment or revision
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<PAGE> 10
shall increase the maximum number of shares in the aggregate which are subject
to this Plan (subject, however, to the provisions of Paragraphs 5 and 16)
without the approval or ratification of the shareholders of the Company, and
(ii) no such amendment or revision shall change the option price (except as
contemplated by Paragraphs 5 and 16) or alter or impair any option which shall
have been previously granted under this Plan, in a manner adverse to a
Participant, without the consent of such Participant.
As adopted by the Board of Directors on July 15, 1997.
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of February
19, 1997 between Rockwell Medical Technologies, Inc., a Michigan corporation
(the "Company"), and Robert L. Chioini ("Employee").
In consideration of the mutual covenants contained in this Agreement, the
Company and Employee agree as follows:
1. Employment
During the term of this Agreement (as defined in Sections 2 and 4), the
Company shall employ Employee, and Employee hereby accepts such employment by
the Company, on a full time basis, in accordance with the terms and conditions
set forth in this Agreement.
(a) Duties. Employee shall serve in such capacities and shall
perform such duties, services and responsibilities and have such authority and
powers for, and on behalf of, the Company as are established from time to time
by, or in accordance with procedures established by, the Board of Directors of
the Company.
(b) Performance. Employee shall perform the duties called for under
this Agreement to the best of his ability and shall devote all of his business
time, energies, efforts and skill to such duties during the term of his
employment and shall not seek or accept employment with any other employer or
business or engage in any other business of any nature whatsoever, in any
capacity whatsoever, unless approved in writing in advance by the Board of
Directors of the Company.
2. Term
Subject to Section 17 below, the term of Employee's employment under this
Agreement shall begin on the date first written above and shall continue for
three years, unless earlier terminated pursuant to Section 4.
3. Compensation, Expenses and Benefits
As full compensation for Employee's performance of his duties pursuant to
this Agreement, the Company shall pay Employee during the term of this
Agreement, and Employee shall accept as full payment for such performance, the
following amounts and benefits:
(a) Salary. As salary for Employee's services to be rendered under
this Agreement, the Company shall pay Employee an annual salary of $115,000,
which may be adjusted from time to time by the Board of Directors of the
Company.
(b) Bonus. In addition to his salary, Employee shall be entitled to
bonuses in such amounts and at such times as may be determined from time to
time by the Board of Directors of the Company, in its sole discretion. The
Board of Directors of the Company shall
<PAGE> 2
review Employee's salary and bonus at least once each year to determine the
amount, if any, of Employee's bonus.
(c) Business Expenses. The Company shall pay or reimburse Employee
for all reasonable, ordinary and necessary travel, entertainment, meals,
lodging and other out-of-pocket expenses incurred by Employee in connection
with the Company's business, for which Employee submits appropriate receipts
and which have been authorized by the Chairman of the Board of the Company.
(d) Benefits. Employee shall be eligible to participate in all fringe
benefits, if any, including insurance and other employee benefit plans,
applicable to other similar executive officers of the Company, when and if
adopted and made available during the term of this Agreement to employees with
similar periods of service, subject to any eligibility or other requirements
for participating in such fringe benefits and to the actual existence of the
respective plans.
(e) Automobile. The Company shall pay to Employee an automobile
allowance in an amount determined from time to time by the Board of Directors
of the Company.
4. Termination
(a) Death. Employee's employment under this Agreement shall terminate
immediately upon Employee's death.
(b) Disability. Employee's employment under this Agreement shall
terminate, at the Company's option, immediately upon notice to Employee given
after Employee's "total disability," but no earlier than the later of (i) the
day after six (6) consecutive months during which Employee suffers from a "total
disability," and (ii) the day that Employee is eligible to begin receiving
disability benefits under any disability insurance policy or its equivalent
provided to employees, including the Employee, under Section 3(d) above.
"Total disability" shall mean Employee's physical or mental condition which
renders Employee unable to perform the duties contemplated by Section 1 above.
If the Company and Employee are unable to agree whether Employee is suffering
from a "total disability," the question shall be decided by a physician
mutually agreed upon and paid for by the Company, whose determination shall be
final and binding. If Employee and the Company are unable to agree on a
physician, Employee and the Company shall each choose one physician who shall
mutually choose a third physician, whose determination shall be final and
binding. Employee shall continue to receive compensation pursuant to Section 3
during the period prior to termination of Employee's employment pursuant to
this Section 4(b), less any disability benefits Employee receives pursuant to
the insurance policy or its equivalent provided by Section 3(d) with respect to
such period, if any.
(c) With Cause. The Company shall have the right, upon written
notice to Employee, to terminate Employee's employment under this Agreement for
"cause." Such termination shall be effective immediately upon Employee's
receipt of such written notice. "Cause" means material breach by Employee of
this Agreement, any material breach by Employee of his fiduciary duties to the
Company, gross neglect, gross abuse of office amounting to a breach of trust,
fraud, any willful violation of any law, rule or regulation (other than traffic
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<PAGE> 3
violations and similar offenses), which violation resulted in a conviction and
shall have a material adverse effect upon the Company, any act of theft or
dishonesty by Employee, or any action by Employee (or failure to act) which, in
the judgment of the Board of Directors of the Company, constitutes malfeasance,
negligence, insubordination or a refusal to follow direct instructions or
widely know Company policies.
(d) Without Cause. The Company and Employee shall each have the
right, upon written notice to the other, to terminate Employee's employment
under this Agreement without cause. Such termination shall be effective 30
days after receipt of such notice.
5. Effects of Termination
(a) If Employee's employment under this Agreement is terminated
pursuant to Sections 4(a), (b) or (c), if Employee resigns pursuant to Section
4(d) or if either party gives notice to the other party of its intention not to
renew this Agreement in accordance with Section 17, the Company's obligations
under this Agreement, including its obligations under Section 3, shall end
except for the Company's obligation to: (i) reimburse Employee (or his estate)
for all out-of-pocket expenses incurred and unpaid pursuant to Section 3(c) and
all benefits actually due pursuant to Sections 3(d), accrued and unpaid through
the date of termination; and (ii) pay to Employee (or his estate) any salary
and bonus compensation, pursuant to Sections 3(a) and 3(b), actually earned,
accrued and unpaid through the date of termination.
(b) If the Company terminates Employee's employment under this
Agreement pursuant to Section 4(d), the Company shall provide the benefits set
forth in Section 3(d) for a period of twelve months beginning after the 30
days' written notice and shall pay Employee an amount equal to $150,000,
payable in equal monthly installments over a period of twelve months beginning
after the 30 days' written notice, subject to earlier termination upon the
occurrence of any of the events described in Sections 4(a) or (c). Except for
the payment and benefits set forth in the preceding sentence, Employee shall be
entitled to no other compensation, payment or benefit from the Company upon
termination by the Company pursuant to Section 4 (d) above.
(c) Termination of Employee's employment under this Agreement shall
not affect either party's rights and obligations under Sections 3 (subject to
the limitations set forth in Sections 5(a) and (b)), 5, 7, 8, 9, 10 and 11, and
such rights and obligations shall continue and survive the termination of
Employee's employment and this Agreement, for any reason, notwithstanding any
breach of this Agreement by Employee or by the Company.
6. Conflicts of Interest
While employed by the Company, Employee shall not, directly or indirectly,
unless approved in writing by the Chairman of the Board of the Company:
(a) participate in any way in the benefits of transactions between the
Company and its suppliers or customers, or have personal financial transactions
with any of the Company's suppliers or customers, including, without
limitation, having a financial interest in the Company's suppliers or
customers, or making loans to, or receiving loans from, the Company's suppliers
or customers;
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<PAGE> 4
(b) realize a personal gain or advantage from a transaction in which
the Company has an interest or use information obtained in connection with
Employee's employment with the Company for Employee's personal advantage or
gain; or
(c) accept any offer to serve as an officer, director, partner,
consultant, agent or manager with, or to be employed in a technical capacity
by, a person or entity which does business with the Company.
7. Solicitation of Employees and Consultants
Upon termination of Employee's employment with the Company under this
Agreement, with or without cause, by either the Company or Employee, Employee
shall not for a period of three years following the date of such termination,
directly or indirectly:
(a) solicit or attempt to hire any person who is then employed by, or
is a consultant to, the Company or who was employed by, or was a consultant to,
the Company at any time during the two year period before the termination of
Employee's employment with the Company under this Agreement; or
(b) encourage any such person to terminate his or her employment or
consultation with the Company.
8. Covenant Not to Compete
During the term of Employee's employment under this Agreement and (i) for a
period of three years following the termination of Employee's employment with
the Company under this Agreement (the "Period"), Employee shall not, directly
or indirectly, himself, or through or for an individual, person or entity
wherever located:
(a) engage in any activities, perform any services in connection with
any products, or sell any products, which are similar to the activities or
services performed by, or products sold by, the Company during the term of
Employee's employment under this Agreement; or
(b) be employed by, consult with, own any capital stock of, or have
any financial interest of any kind in, any individual, person or entity,
wherever located, which conducts a business reasonably similar to the Company's
business; provided, that Employee may own, for investment purposes only, up to
3% of the stock of any publicly traded business whose stock is either listed on
a national stock exchange or on the Nasdaq National Market System (if Employee
is not otherwise affiliated with such business).
9. Solicitation of Company Customers
Upon termination of Employee's employment with the Company under this
Agreement, with or without cause, by either the Company or Employee, Employee
shall not, directly or indirectly, at any time within the Period, solicit any
entity that was a customer of the Company at any time within the two year
period before the date of such termination to perform services
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<PAGE> 5
or supply products for such customer of a similar nature to those services
performed or products provided by the Company to such customer during the term
of such employment under this Agreement.
10. Confidentiality; Return of Documents
Employee further agrees that Employee will not, at any time, for so long as
any Confidential Information (as defined below) shall remain confidential or
otherwise remain wholly or partially protectable, either during the term of
Employee's employment with the Company under this Agreement or thereafter, use
or disclose, directly or indirectly, to any person or entity outside the
Company any Confidential Information. For purposes of this Agreement,
"Confidential Information" shall mean all business and technical information of
any nature and in any form which at the time or times concerned is not
generally known to those persons engaged in business similar to that conducted
or contemplated by the Company (other than by the act or acts of an employee
not authorized by the Company to disclose such information) and which relates
to any one or more of the aspects of the present or past business of the
Company or an affiliate of the Company or any of their respective predecessors,
including, without limitation, patents and patent applications, inventions and
improvements (whether or not patentable), development projects, policies,
processes, formulas, techniques, know-how and other facts relating to
manufacturing, sales, advertising, promotions, financial matters, or other
trade secrets. Upon termination of Employee's employment with the Company for
any reason, all documents, procedural manuals, guides, specifications, plans,
drawings, designs and similar materials, diaries, records, notebooks, and
similar repositories of or containing Confidential Information, including all
copies thereof, then in Employee's possession or control, whether prepared by
Employee or others, shall be left with, or forthwith returned by Employee to,
the Company.
11. Company's Remedies
Employee acknowledges and agrees that the covenants and undertakings
contained in Sections 1(b), 6, 7, 8, 9 and 10 of this Agreement relate to
matters which are of a special, unique and extraordinary character and that a
violation of any of the terms of such Sections will cause irreparable injury to
the Company, the amount of which will be difficult, if not impossible, to
estimate or determine and which cannot be adequately compensated. Therefore,
Employee agrees that the Company, in addition to any other available remedies
under applicable law, shall be entitled, as a matter of course, to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of
any such terms by Employee and such other persons as the court shall order.
12. Employee's Remedies
Employee's remedy against the Company for breach of this Agreement and/or
wrongful termination of his employment is the collection of any compensation
due him as provided in Sections 3 and 5 and such other remedies available to
Employee under law or in equity.
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<PAGE> 6
13. Assignment
The Company shall not be required to make any payment under this Agreement
to any assignee or creditor of Employee, other than to Employee's legal
representative on death. Employee's obligations under this Agreement are
personal and may not be assigned, delegated or transferred in any manner and
any attempt to do so shall be void. Employee, or his legal representative,
shall have no rights by way of anticipation or otherwise to assign or otherwise
dispose of any right of Employee under this Agreement. The Company may assign
this Agreement without Employee's consent to any successor to the Company's
business. This Agreement shall be binding upon, and shall inure to the benefit
of, the Company, Employee and their permitted successors and assigns.
14. Company's Obligations Unfunded
Except for any benefits under any benefit plan of the Company that are
required by law or by express agreement to be funded, it is understood that the
Company's obligations under this Agreement are not funded, and it is agreed
that the Company shall not be required to set aside or escrow any monies in
advance of the due date of the payment of such monies to Employee.
15. Notices
(a) To Employee. Any notice to be given under this Agreement by the
Company to Employee shall be deemed to be given if delivered to Employee in
person or three business days after mailed to him by certified or registered
mail, postage prepaid, return receipt requested, to:
Robert L. Chioini
38864 Equestrian South, #49205
Farmington Hills, Michigan 48331
With a copy to
Patrick J. Bagley, Esq.
Bagley and Langan PLLC
4515 Highland Road
Waterford, Michigan 48328
or at such other address as Employee shall have advised the Company in writing.
(b) To the Company. Any notice to be given under this Agreement by
Employee to the Company shall be deemed to be given three business days after
mailed by certified or registered mail, postage prepaid, return receipt
requested, to:
Rockwell Medical Technologies, Inc.
28025 Oakland Oaks
Wixom, Michigan 48393
Attention: Gary D. Lewis
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<PAGE> 7
With a copy to:
Patrick T. Duerr, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
or at such other address as the Company shall have advised Employee in writing.
16. Amendments
This Agreement shall not be amended, in whole or in part, except by an
agreement in writing signed by the Company and Employee.
17. Renewal of Term
Not less than 30 days prior to the end of the Term, either party may notify
the other party that it wishes to terminate this Agreement at the end of the
Term. If no such notification is given, the Term of this Agreement will be
extended for an additional one year period with the same terms and conditions
as set forth herein (other than with respect to the length of the Term),
subject to the rights of termination as provided herein.
18. Entire Agreement
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement and all prior agreements or
understandings, oral or written, are merged in this Agreement and are of no
further force or effect. The parties acknowledge that they are not relying on
any representations, express or implied, oral or written, except for those
stated in this Agreement.
19. Captions
The captions of this Agreement are included for convenience only and shall
not affect the construction of any provision of this Agreement.
20. Governing Law and Forum
This Agreement shall be governed by, and interpreted in accordance with,
the laws of the state of Michigan, except for any provisions of Michigan law
which direct the application of other states' laws, and except that if any
provision of this Agreement would be illegal, void, invalid or unenforceable
under such Michigan laws, then the laws of such other jurisdiction which would
render such provisions valid and enforceable shall govern so far as is
necessary to sustain the validity and enforceability of the terms of this
Agreement. Each party consents to be subject to personal jurisdiction of the
courts of Michigan, and any lawsuit or other court action or proceeding
relating to, or arising out of, this Agreement or Employee's employment with
the Company shall be instituted only in the state or federal court of proper
jurisdiction in the state of Michigan.
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<PAGE> 8
21. Severability
All provisions, agreements, and covenants contained in this Agreement are
severable, and in the event any of them shall be held to be illegal, void or
invalid by any competent court or under any applicable law, such provision
shall be changed to the extent reasonably necessary to make the provision, as
so changed, legal, valid and binding. If any provision of this Agreement is
held illegal, void or invalid in its entirety, the remaining provisions of this
Agreement shall not in any way be affected or impaired, but shall remain
binding in accordance with their terms.
22. No Waiver
No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the party against whom enforcement of the waiver is
sought. The waiver by either party of any breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the date and year first above written.
ROCKWELL MEDICAL TECHNOLOGIES, INC.
By: /s/ Garry D. Lewis
----------------------------------------
Its: Chairman of the Board
----------------------------------------
/s/ Robert L. Chioini
----------------------------------------
ROBERT L. CHIOINI
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<PAGE> 1
EXHIBIT 10.3
CONSULTING AND FINANCIAL ADVISORY SERVICES AGREEMENT
This Consulting and Financial Advisory Services Agreement (this
"Agreement") is made as of February 19, 1997 between Rockwell Medical
Technologies, Inc., a Michigan corporation ("Rockwell"), and Wall Street
Partners, Inc., a Michigan corporation ("Wall Street").
RECITALS
A. Rockwell is engaged in the business of, among other things,
manufacturing, marketing, selling and distributing medical supplies and
concentrates to hemodialysis clinics and other distributors and dealers in the
hemodialysis industry.
B. Wall Street is engaged in the business of, among other things,
providing consulting and financial advisory services to other businesses.
C. Rockwell desires to engage Wall Street's expertise and knowledge in
connection with its business and operations, and Wall Street desires to provide
such services to Rockwell, upon the terms and conditions of this Agreement.
Therefore, the parties agree as follows:
1. Consulting Services. During the Term, as defined in Section 2, Wall
Street shall provide to or for the benefit of Rockwell consultation and advice
to the directors, officers and employees of Rockwell with respect to various
business, accounting, and financial matters (the "Services"). Wall Street will
render such consultation and advice as may reasonably be requested by the
officers or directors of Rockwell or by employees so designated by the officers
or directors of Rockwell. Such consultation and advice may regard or involve
all aspects of the business and operations of Rockwell, including its
subsidiary, Rockwell Transportation, Inc. ("Rockwell Transportation"), with the
exception of FDA regulatory matters
2. Term. This Agreement will become effective as of the date hereof and
will remain in effect until December 31, 1997, unless such term is extended by
the mutual consent of the parties.
3. Relationship of the Parties. Nothing herein will be construed to
create a partnership or joint venture by or between Rockwell (including Rockwell
Transportation for this entire Section 3) and Wall Street or to make one the
agent of the other. Rockwell and Wall Street will not hold themselves out as a
partner or agent of the other or to otherwise state or imply by advertising or
otherwise any relationship between them in any manner contrary to the terms of
this Agreement. Rockwell and Wall Street do not have, and will not represent
that they have, the power to bind or legally obligate the other. The parties
acknowledge that this arrangement is not exclusive and Wall Street shall have
the right to render consulting and advisory services to other persons or
entities. No employee of Wall Street will be considered an employee of
Rockwell by either party for any purpose whatsoever, notwithstanding that one
or more employees of Wall Street may be engaged in providing Services provided
by Wall Street to Rockwell on a full-time basis.
<PAGE> 2
4. Consideration. As full consideration for Wall Street's performance of
the Services, and for the covenants described in Section 5 of this Agreement,
Rockwell will pay Wall Street $25,000 per month (which amount will be prorated
for any partial periods worked based on a five business day week). All amounts
are payable in U.S. funds on the last day of each month, in arrears.
5. Confidentiality.
(a) Wall Street will not, at any time during the Term (other than as
may be required in connection with the performance of its Services hereunder) or
thereafter, directly or indirectly, use, communicate, disclose or disseminate
any Confidential Information (as defined in subparagraph (b) of this Section 5)
in any manner whatsoever.
(b) As used in subparagraph (a) of this Section 5, the term
"Confidential Information" will mean all business and technical information
including, but not limited to, information of any nature and in any form which
at the time or times concerned is not generally known to those persons engaged
in business similar to that conducted or contemplated by Rockwell and Rockwell
Transportation (other than by an act or acts of an employee not authorized to
disclose such information), and which relates to one or more aspects of the
present or past business of Rockwell and Rockwell Transportation or any
affiliate or predecessor, including, without limitation, patents and patent
applications, inventions and improvements (whether or not patentable),
development projects, policies, processes, formulas, techniques, know-how,
pricing, financial information, and other facts relating to manufacturing,
sales, advertising, promotions, transportation, packaging, labeling, lab
techniques and testing methods, distribution, financial matters, strategies,
customers and potential customers, marketing and sales methods, preparation of
bids, vendor sources and vendor financing arrangements, other than information
which is independently developed or which is in the public domain or which
becomes available to a recipient on a non-confidential basis without violating
subparagraph (a) of this Section 5 or which is required to be disclosed by law
and is disclosed in a manner so required.
6. Notices. Any notice or other communication required or permitted
hereunder will be in writing and shall be deemed given when so delivered
personally or received by facsimile or overnight carrier or, if mailed, four
days after the date of mailing, as follows:
(a) If to Rockwell, to it at:
Rockwell Medical Technologies, Inc.
28025 Oakland Oaks Drive
Wixom, Michigan 48393
Attention: Mr. Robert L. Chioini, President
Facsimile: (248) 449-3363
-2-
<PAGE> 3
With a copy to:
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: Patrick T. Duerr, Esq.
Facsimile: (313) 962-0176
(b) If to Wall Street, to it at:
Wall Street Partners, Inc.
P. O. Box 36940
Grosse Pointe, Michigan 48236
Attention: Mr. Gary D. Lewis, President
Facsimile: (313) 885-2252
7. Assignment. This Agreement will bind and inure to the benefit of the
parties and their respective successors and assigns. This Agreement will not
be assignable or delegable without the prior written consent of all parties.
8. Entire Agreement; Amendment. This Agreement contains the entire
agreement of the parties with respect to the subject matter of this Agreement.
This Agreement may be altered or amended only by an instrument in writing, duly
executed by both parties or, in the case of a waiver, by the party waiving
compliance.
9. Governing Laws; Venue. The laws of the State of Michigan shall govern
this Agreement, its construction, and the determination of any rights, duties
or remedies of the parties arising out of or relating to this Agreement. The
parties acknowledge that the United States District Court for the Eastern
District of Michigan or the Michigan Circuit Court for the County of Oakland
shall have exclusive jurisdiction over any case or controversy arising out of
or relating to this Agreement and that all litigation arising out of or
relating to this Agreement shall be commenced in the United States District
Court for the Eastern District of Michigan or in the Michigan Circuit Court for
Oakland County.
10. Waiver. No waiver of any breach of any provision of this Agreement
will be deemed a waiver of any preceding or succeeding breach or of any other
provision of this Agreement. No extension of time for performance of any
obligations or acts will be deemed an extension of the time for performance of
any other obligations or acts.
11. Counterparts. This Agreement may be executed in counterparts, each of
which will be an original, but all of which together will constitute one
instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the date first set forth in the introductory paragraph of this Agreement.
ROCKWELL MEDICAL TECHNOLOGIES, INC., a
Michigan corporation
By: /s/ Robert L. Chioini
-----------------------------------------------------
Robert L. Chioini
Its: President
WALL STREET PARTNERS, INC., a Michigan
corporation
By: /s/ Gary D. Lewis
------------------------------------------------------
Gary D. Lewis
Its: President
-4-
<PAGE> 1
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
AMONG
ROCKWELL MEDICAL SUPPLIES, LLC
ROCKWELL TRANSPORTATION, LLC
VIJAY KUMAR CHILAKAPTI, M.D.
KRISHNAPILLAI THAVARAJAH, M.D.
T.K. INVESTMENT COMPANY
ROBERT L. CHIOINI
CHILAKAPTI FAMILY LIMITED PARTNERSHIP
THAVARAJAH FAMILY LIMITED PARTNERSHIP
AND
ACQUISITION PARTNERS, INC.
DATED NOVEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
1 SALE AND PURCHASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------------------------
1.1 Sale and Purchase of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------------------------------
1.2 Consideration for Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------------------
1.2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------
1.2.2 Payments at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------
1.2.3 Adjustment for Members' Interim Cash Flow Fund . . . . . . . . . . . . . . . . . . 3
----------------------------------------------
1.2.4 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------------
1.3 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
1.4 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------
2.1 Representation and Warranties of the Sellers and the Members . . . . . . . . . . . . . . . . . 5
------------------------------------------------------------
2.1.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------
2.1.2 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
----------
2.1.3 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------------
2.1.4 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------------
2.1.5 Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------
2.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
2.1.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . 7
------------------------------------
2.1.8 Miscellaneous Items Relating to Assets . . . . . . . . . . . . . . . . . . . . . . 8
--------------------------------------
2.1.9 Real and Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------------
2.1.10 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------
2.1.11 Licenses, Patents, Trademarks and Similar Rights . . . . . . . . . . . . . . . . . 11
------------------------------------------------
2.1.12 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------------------------
2.1.13 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.14 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----------------
2.1.15 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------
2.1.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------
2.1.17 Pension and Benefit Plans and Compliance with ERISA . . . . . . . . . . . . . . . . 15
---------------------------------------------------
2.1.18 Environmental and Occupational Matters . . . . . . . . . . . . . . . . . . . . . . 16
--------------------------------------
2.1.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------
2.1.20 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------------
2.1.21 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------------
2.1.22 Information Supplied to Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------------------
2.1.23 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
2.1.24 Business of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
2.1.25 Insider and Inter-Sellers Transactions . . . . . . . . . . . . . . . . . . . . . . 20
--------------------------------------
2.1.26 Members Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------
2.1.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
2.2 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
---------------------------------------
2.2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
------------
2.2.2 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . 21
------------------------------------
2.2.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
------------
2.2.4 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2.5 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------
3 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---------
3.1 Covenants of the Sellers and the Members . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------------------------------------
3.1.1 Access for Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------------
3.1.2 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------------
3.1.3 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1.4 Preserve Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------
3.1.5 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------------------
3.1.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------
3.1.7 Approval of Sale of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . 25
------------------------------------
3.1.8 Updated Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------
3.1.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------
3.1.10 Delivery of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-----------------------------
3.1.11 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1.12 Confidentiality and Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . 25
------------------------------------------
3.1.13 Bank Debt; Capital Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
------------------------
3.1.14 Title Policies and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------------------
3.1.15 Environmental Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------------------
3.1.16 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1.17 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1.18 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------
3.1.19 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
------------------
3.2 Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
------------------
3.2.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------------------
3.2.2 Approval of Sale of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . 27
------------------------------------
3.2.3 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2.4 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------
3.2.6 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2.7 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
4 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------------
4.1 Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------------------------
4.1.1 Buyer's Obtaining Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------------------
4.1.2 Buyer's Due Diligence Investigation . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------------------
4.1.3 Accuracy of the Sellers' and the Members
----------------------------------------
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------------------
4.1.4 Compliance with Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------------
4.1.5 Certificate of Sellers Officers and the Members . . . . . . . . . . . . . . . . . . 28
-----------------------------------------------
4.1.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------
4.1.7 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------------
4.1.8 No Material Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------------
4.1.9 Delivery of Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------------------
4.1.10 No Material Change in Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------------------
4.1.11 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1.12 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------------
4.1.13 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----
4.1.14 Transfer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------
4.1.15 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
----------
4.1.16 Assignments of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------------------
4.1.17 Satisfactory Completion of Audit . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------------------
4.1.18 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1.19 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------
4.1.20 Incomplete Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------
4.2 Conditions to the Sellers' and the Members' Obligations . . . . . . . . . . . . . . . . . . . 30
-------------------------------------------------------
4.2.1 Accuracy of Buyer's Representations and Warranties . . . . . . . . . . . . . . . . 30
--------------------------------------------------
4.2.2 Compliance with Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------------
4.2.3 Certificate of Buyer's Officer . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------------
4.2.4 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------
4.2.5 Delivery of Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------------
4.2.6 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2.7 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2.8 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2.9 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5 WARRANTIES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
---------------------------
5.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------
5.2 The Sellers' and the Members' Indemnification of Buyer . . . . . . . . . . . . . . . . . . . . 31
------------------------------------------------------
5.3 Buyer's Indemnification of the Sellers and the Members . . . . . . . . . . . . . . . . . . . . 32
------------------------------------------------------
5.4 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-----------------
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Section Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
5.5 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------
5.6 Buyer's Right to Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------------------
6 OTHER COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------------------------------
6.1 Bulk Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------------------------
6.2 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.5 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------------------
6.9 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------
6.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------
6.11 Transfer and Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------------------
6.12 No Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------
7 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-------------
7.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-------
7.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
----------------
7.3 Governing Law and Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-----------------------
7.4 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
---------------
7.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
------------
7.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
--------------
7.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
------------
7.8 Waiver and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
---------------------
7.9 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
--------------
8 GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
--------
</TABLE>
-iv-
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("AGREEMENT") is made as of November 1,
1996 by and among ROCKWELL MEDICAL SUPPLIES, LLC, a Michigan limited liability
company d/b/a Rockwell Medical Supply (the "SUPPLY COMPANY"), ROCKWELL
TRANSPORTATION, LLC, a Michigan limited liability company (the "TRANSPORTATION
COMPANY" and, together with the Supply Company, the "SELLERS"), T.K. INVESTMENT
COMPANY, a Michigan partnership, which is owned equally by the family
partnerships, CHILAKAPATI FAMILY LIMITED PARTNERSHIP, THAVARAJAH FAMILY LIMITED
PARTNERSHIP (the "Family Partnerships"), the respective general partners of
which are VIJAY KUMAR CHILAKAPTI, M.D. and KRISHNAPILLAI THAVARAJAH, M.D. and
ROBERT L. CHIOINI, (T.K. INVESTMENT COMPANY, THE FAMILY PARTNERSHIPS, VIJAY
KUMAR CHILAKAPTI, M.D., KRISHNAPILLAI THAVARAJAH, M.D. and ROBERT L. CHIOINI
are hereinafter referred to individually as a "MEMBER" and jointly and
severally as the "MEMBERS"), and ACQUISITION PARTNERS, INC., a Michigan
corporation ("BUYER").
RECITALS
A. The Sellers own or lease equipment and real estate and are a
party to various contracts in connection with their respective businesses of
manufacturing concentrates and dialysis kits and supplying these and other
products to the hemodialysis industry, in the case of the Supply Company, and
transporting and delivering such products and supplies to the Supply Company's
customers, in the case of the Transportation Company (collectively, the
"BUSINESS").
B. Buyer wishes to purchase from the Sellers, and the Sellers
wish to sell to Buyer, substantially all of the Sellers' assets, all upon the
terms and conditions set forth in this Agreement.
THEREFORE, the parties agree as follows:
1 SALE AND PURCHASE OBLIGATIONS.
1.1 Sale and Purchase of Purchased Assets. Subject to the terms
and conditions of this Agreement, at the Closing (as defined in Section 1.4),
the Sellers shall sell, assign and transfer to Buyer, and Buyer shall purchase,
the "Purchased Assets." The "PURCHASED ASSETS" means all of the following
assets, properties, rights and claims of the Sellers of every type and nature
and wherever situated:
(a) the Sellers' interest, as lessee, in the real
property lease listed on the attached Exhibit 1.1(a) (THE "LEASE"),
specifically including the Sellers' interest in all leasehold
improvements;
(b) all of the machinery and equipment owned or leased
by the Sellers, including, without limitation, the Sellers' machinery
and equipment listed on the attached
<PAGE> 7
Exhibit 1.1(b) (the "MACHINERY AND EQUIPMENT"), which the Sellers
represent to be a true and complete exhibit listing all of the
Machinery and Equipment they respectively own;
(c) all of the furniture, fixtures and leasehold
improvements owned by the Sellers, including, without limitation, the
Sellers' furniture and fixtures listed on the attached Exhibit 1.1(c)
(the "FURNITURE AND FIXTURES"), which the Sellers represent to be a
true and complete exhibit listing all of the Furniture and Fixtures
they respectively own;
(d) all of the inventories owned by the Sellers,
including, without limitation, raw materials, work-in-process,
finished goods and supplies inventories and all of the Sellers'
inventories listed on the attached Exhibit 1.1(d), which the Sellers
represent to be a true and complete exhibit listing all of the
inventories they respectively own (collectively, the "INVENTORIES");
(e) all of the tools and segments owned by the Sellers;
(f) all of the vehicles and other rolling stock owned
or leased by the Sellers, including, without limitation, the Sellers'
vehicles and rolling stock listed on the attached Exhibit 1.1(f) (the
"VEHICLES"), which the Sellers represent is a true and complete
exhibit listing all of the Vehicles;
(g) all of the intellectual property owned by the
Sellers or which they have the right to use, including, without
limitation, the right to use the names "Rockwell Medical Supply, LLC"
and "Rockwell Transportation, LLC" and any variation of those names,
the right to use the telephone number(s) used by the Sellers
immediately before the Closing Date, all of the Sellers' know-how and
trade secrets and all of the Sellers' trademarks, trade names, service
marks, patents and copyrights listed on the attached Exhibit 1.1(g)
(the "INTELLECTUAL PROPERTY"), which the Sellers represent to be a
true and complete exhibit listing all of their respective Intellectual
Property;
(h) all of the Sellers' rights, claims and payments
under the contracts assumed by Buyer pursuant to Section 1.3(a),
including, without limitation, any rights to receive payments for work
performed on or before the Closing Date pursuant to such contracts;
(i) all of the Sellers' deposits, prepaid expenses,
rights to refunds and other current assets that are not Excluded
Assets;
(j) all of the Sellers' franchises, licenses and
permits, including, without limitation, the Permits (as defined in
Section 2.1.21);
(k) all of the Sellers' files, records, books and
supplier and customer lists;
(l) all of the Sellers' goodwill; and
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(m) All cash, bank deposits, accounts and notes
receivable, deferred income tax benefits, life insurance policies
(including their cash surrender values) and minute books owned by the
Sellers at the Closing Date.
1.2 Consideration for Purchase.
1.2.1 Purchase Price. The aggregate consideration for
the Purchased Assets shall consist of the following, subject to the adjustments
described in this Section 1.2 (the "PURCHASE PRICE"):
(a) the assumption by Buyer of those liabilities
described in Section 1.3(a) (the "LIABILITIES"), plus
(b) $2,085,452 in cash plus $465 each day between
November 1, 1996 and the Closing (the "CASH AMOUNT").
1.2.2 Payments at the Closing. At the Closing, Buyer
shall (i) execute and deliver to the Sellers an appropriate assumption of the
Liabilities, (ii) pay to the Sellers the Cash Amount.
1.2.3 Adjustment for Members' Interim Cash Flow Funding.
The Members agree to personally fund all cash flow needs of the Sellers in the
period from the date hereof to the Closing up to a maximum of $150,000, whether
by means of capital contributions for their respective member accounts,
personal loans to the Sellers or otherwise. The Sellers agree to keep detailed
books and records clearly accounting for any and all such funding provided by
the Members. In the event that such capital contributions result in the
aggregate Members' investment in the Sellers, as of the Closing Date, exceeding
the Cash Amount set forth in Section 1.2.1(b) above, then at the Closing such
Cash Amount shall be increased by the amount of such excess. Additionally, the
Purchase Price is based upon net worth of the Sellers reflected on the Interim
Financial Statements (defined below) ("Interim Net Worth"). An estimate of the
net worth at the Closing will be made and the Cash Amount shall be reduced in
an amount equal to the amount by which the estimated net worth at the Closing
is less than the Interim Net Worth. Any final adjustments required based upon
a definitive determination of the net worth after the Closing shall be made
within 30 days of the Closing. These determinations shall be made by Buyer's
accountants on the basis consistent with Sellers' past accounting practices and
generally accepted accounting principles.
1.2.4 Allocation of Purchase Price. The aggregate
consideration for the Purchased Assets shall be allocated among the Purchased
Assets as set forth on Exhibit 1.2.4, which exhibit attached to this Agreement
at the date of its execution is an estimate based on the estimated Purchase
Price, and which exhibit shall be finalized and modified by agreement of the
parties on or before the Closing Date. If the exhibit is not completed at the
time of the execution of this Agreement, then as a condition to the Closing, it
shall be completed prior to the Closing in a manner which is reasonably
satisfactory to Sellers and Buyer. The parties agree that such
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allocation shall be conclusive and binding for all purposes, and Buyer, the
Members and the Sellers shall each file all income or other tax returns in a
manner consistent with such allocation and consistent with the treatment of the
purchase and sale of the Purchased Assets as taxable sales and purchases of the
Sellers' assets and consistent with Buyer accounting for the Purchased Assets
on its books and records for tax purposes at an aggregate value equal to the
value of the consideration given by Buyer for the Purchased Assets.
1.3 Assumption of Liabilities.
(a) Except as expressly provided in this Section 1.3, Buyer shall
assume no liabilities of the Sellers or the Members. Buyer shall assume the
following liabilities of the Sellers: all obligations of the Sellers after the
Closing Date under (i) the Lease, (ii) trade payables incurred in the normal
course of the Business and (iii) the Sellers' purchase orders pursuant to which
the Sellers provide products or services to their customers that have not been
fully provided on or before the Closing Date (the "PURCHASE ORDERS"), all to
the extent, and only to the extent, assigned to and assumed by Buyer at the
Closing and marked "Assumed" on the attached Exhibit 2.1.14 (the "ASSUMED
AGREEMENTS"). Upon the Closing, Sellers shall be released from all liabilities
assumed pursuant to this Section 1.3.
(b) Without in any way limiting the generality of this Section 1.3
and except as otherwise provided in Section 1.3(a), the Sellers, and not Buyer,
shall be responsible for all claims previously, now or later made on account
of, or arising from, the business conducted by the Sellers, including, but not
limited to, claims in the nature of environmental violations, infringement,
product liability, defective performance, nonperformance and workers'
compensation.
(c) All former employees of the Sellers hired by Buyer shall be
considered "new hires" by Buyer, except for immigration and seniority purposes.
In this regard, Buyer shall assume no past or future obligations of the Sellers
to such employees, including specifically [any obligations under the Sellers'
Profit Sharing Plan or] any obligations to pay severance pay, vacation pay,
commissions, bonuses, pension benefits or similar benefits to such employees,
and such obligations shall be and shall remain obligations of the Sellers as
shall any similar obligations to any employees of the Sellers who are not hired
by Buyer.
1.4 The Closing. The Closing under this Agreement shall be held
at the offices of Honigman Miller Schwartz and Cohn, 2290 First National
Building, Detroit, Michigan 48226 at 10:00 a.m. on or before December 16, 1996,
or such other day and time as Buyer, the Members and the Sellers shall mutually
agree upon in writing. The consummation of the transactions contemplated by
this Agreement at such place and time are sometimes referred to in this
Agreement as the "CLOSING," and such date is sometimes referred to as the
"CLOSING DATE." At the Closing, the Sellers shall assign and convey the
Purchased Assets to Buyer pursuant to Section 1.1, Buyer shall assume the
Liabilities and shall pay or deliver the Purchase Price as described in Section
1.2, and Buyer, the Members and the Sellers shall comply with the applicable
covenants and conditions to Closing set forth in Sections 3 and 4.
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2 REPRESENTATIONS AND WARRANTIES.
2.1 Representation and Warranties of the Sellers and the Members.
To the best of their knowledge, the Sellers and the Members, jointly and
severally, represent and warrant to Buyer the following as of the date of this
Agreement and as of the Closing Date:
2.1.1 Organization and Qualification. Each of the
Sellers is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Michigan. No other jurisdiction
has claimed that the Sellers are required to be qualified or otherwise
authorized to do business in such jurisdiction.
2.1.2 Affiliates. Except for the Members and except as
otherwise described in the attached Exhibit 2.1.2, there are no persons or
corporations or any other business entities controlling, operating under the
control of (including subsidiaries), or operating under common control with,
the Sellers, the Members, the Members' immediate family, or their affiliates,
in the operation of the Business of the Sellers, including, without limitation,
any such relationship with suppliers or customers of the Sellers. For purposes
of this Section 2.1.2, control shall mean ownership of 10% or more of the
equity interest in an entity or effective control of the management and
policies of an entity.
2.1.3 Authority Relative to This Agreement. The Sellers
and the Members have all requisite power and authority to execute, deliver and
comply with its obligations under the terms of this Agreement. Execution,
delivery and performance by the Sellers of this Agreement have been duly
authorized by all necessary action on the part of the Sellers, including
authorization on behalf of the Sellers by its governing body and, if necessary,
its shareholder. No other action on the part of the Sellers, the Members or
any other individual, person or entity, including, without limitation, the
Members' spouse, is necessary to authorize this Agreement or the consummation
of the transactions contemplated by this Agreement. This Agreement has been
duly and validly executed and delivered by the Sellers and the Members and
constitutes a valid and binding obligation of the Sellers and the Members,
enforceable against the Sellers and the Members in accordance with its terms,
except as it may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally, and except as it may be limited by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
2.1.4 Consents and Approvals; No Violation. Except as
set forth in the attached Exhibit 2.1.4, neither the execution nor the delivery
by the Sellers or the Members of this Agreement (including all agreements
provided for in this Agreement) nor the consummation by the Sellers and the
Members of the transactions contemplated by this Agreement (including all
agreements provided for in this Agreement) nor compliance with the terms and
provisions of this Agreement (including all agreements provided for in this
Agreement) nor the assignment to Buyer of the Assumed Agreements, the transfer
to Buyer of the Permits, the continued operation of the Sellers' Business or
the use of the Sellers' assets by Buyer after the Closing, (a) will require any
authorization, consent or approval of any governmental or regulatory authority
or of
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any other person or entity, (b) will violate or breach any provision of the
Operating Agreement of the Sellers, (c) will accelerate any obligation under,
violate or breach any provision of, constitute a default under, result in the
creation of any lien or security interest under, result in the termination of,
require the consent, authorization, approval or order of, or registration or
filing with, any governmental agency or body or any third party under, or in
connection with, any of the terms, covenants, provisions or conditions of (I)
any approval, authorization or order of, or registration or filing with, any
governmental agency or body or any third party, or (II) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, registration or
other authorization, lease, contract (including, without limitation, the
Assumed Agreements and the contracts described in Section 2.1.14), agreement or
other instrument, commitment or obligation to which any of the Sellers or the
Members is a party, or by which any of them or any of their respective
properties or assets may be bound, (d) will violate any order, writ,
injunction, decree, judgment, or arbitration award, or any statute, rule,
regulation or ruling of any court or governmental authority, United States or
foreign, applicable to the Sellers or the Members or to any of their respective
properties or assets, all to the extent such requirement, violation, breach or
default would have a material adverse affect on Sellers' or the Members'
ability to perform their obligations under this Agreement, or (e) to the best
of the Sellers' and the Members' knowledge, will cause any governmental or
regulatory authority to conduct any examination, inspection or audit of the
Sellers.
2.1.5 The Members. The Members control the vote or
approval required to approve the transactions contemplated by this Agreement on
behalf of the Sellers.
2.1.6 Financial Statements.
(a) The attached Exhibit 2.1.6(a) is a copy of the
unaudited balance sheet of the Sellers as at December 31, 1995, and
the related unaudited statements of income, retained earnings and cash
flows for the fiscal year then ended, in each case, including the
Notes to such financial statements. These financial statements (the
"FINANCIAL STATEMENTS") have been prepared in accordance with
generally accepted accounting principles on a basis consistent with
such statements for prior periods and with such footnotes as are
necessary to comply with generally accepted accounting principles.
The balance sheet included in the Financial Statements fairly
presents, as of its date, the financial condition and assets and
liabilities of the Sellers, and the related statements of income,
retained earnings and cash flows included in the Financial Statements
fairly present the results of operations and cash flows of the Sellers
for the fiscal year then ended. The Financial Statements contain
proper accruals of all liabilities of the Sellers and such other
adjustments which are necessary to fairly present the financial
condition, results of operations, cash flows and assets and
liabilities of the Sellers.
(b) The attached Exhibit 2.1.6(b) is a copy of the
balance sheet of the Sellers as at September 30, 1996 and the related
statements of income and retained earnings for the nine months then
ended (the "INTERIM FINANCIAL STATEMENTS"). The balance sheet
included in the Interim Financial Statements fairly presents, as of
its date, the financial
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condition and assets and liabilities of the Sellers, and the related
statements of income and retained earnings included in the Interim
Financial Statements fairly present the results of operations of the
Sellers for the nine months then ended. The Interim Financial
Statements contain proper accruals of all liabilities of the Sellers
and such other adjustments which are necessary to fairly present the
financial condition, results of operations and assets and liabilities
of the Sellers.
2.1.7 Absence of Certain Changes or Events. Except as
set forth in the attached Exhibit 2.1.7, since September 30, 1996, the Sellers
have operated the Business only in the usual and ordinary manner and have used
their best efforts to preserve their present Business organizations intact and
their present relationships with persons having Business dealings with them,
and there has not been:
(a) any material adverse change in the Sellers'
respective business, prospects, operations, properties, assets,
liabilities, competition, earnings or condition (financial or
otherwise), or any failure by the Sellers to pay their debts when due;
(b) any event or condition of any character which,
either individually or in the aggregate, might reasonably be expected
materially and adversely to affect the Business, prospects,
operations, properties, assets, liabilities, competition, earnings or
condition (financial or otherwise) of the Sellers;
(c) any damage, destruction or loss (regardless of
whether covered by insurance) materially and adversely affecting the
Business, prospects, operation, properties, assets, liabilities,
competition, earnings, or condition (financial or otherwise), of the
Sellers;
(d) any declaration, setting aside or payment of any
dividend or other distribution of anything that would otherwise be
included in the Purchased Assets;
(e) any increase in the compensation paid, payable or
to become payable by the Sellers to its officers, directors or
employees, any hiring of new officers, directors or employees or any
increase in any bonus, insurance, pension, or other employee benefit
plan, payments or arrangement (including loans) made to, for or with
any officers, directors, or employees, except that the Sellers has
increased the compensation of its employees who are not shareholders
or directors of the Sellers by not more than $10,000 a year in the
aggregate;
(f) any entry into, amendment of, or termination of,
any agreement, commitment, or material transaction by the Sellers,
including, without limitation, any merger, consolidation, share
exchange, acquisition or disposition of assets or stock or any
financing transaction or capital expenditure not in the ordinary
course of business;
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(g) any properties or assets, real, personal or mixed,
tangible or intangible, of the Sellers mortgaged, pledged or subjected
to any security interest, lien or encumbrance;
(h) any shortage of raw materials or supplies
experienced by the Sellers;
(i) any sale, assignment, transfer, lease, dividend,
distribution or other disposition of any of the Sellers' property or
assets or the Purchased Assets, other that sales of products in the
ordinary course of business;
(j) any change in the customary shipping, purchasing,
billing, payment, return, exchange or other business practices,
policies or procedures of the Sellers;
(k) any change in the Sellers' methods of grading,
classifying or pricing inventory for sale to customers; or
(l) any agreement or understanding to do any of the
foregoing by the Sellers.
2.1.8 Miscellaneous Items Relating to Assets.
(a) Title. Except as set forth in the attached Exhibit
2.1.8(a), the Sellers has, and after giving effect to the transactions
contemplated by this Agreement Buyer will have, good, valid and
marketable title to, or, with respect to assets currently being
leased, a valid leasehold interest in, all assets used by it in the
operation of the Business, including, without limitation, all of the
Purchased Assets, free and clear of all liens, encumbrances,
restrictions, security interests, mortgages, pledges, burdens, claims,
demands, rights and equities of any nature whatsoever, including,
without limitation, the right to sell inventories free of any claims
of manufacturers, licensors or others (collectively, "LIENS"), except
and, with respect to the Real Property, except for customary utilities
easements and such other encumbrances on, or exceptions to, the
Sellers' title to the Real Property as shall not adversely affect the
marketability of such title or its present use and which are
acceptable to Buyer in its sole discretion (the "EXCEPTIONS"). Title
to the Purchased Assets will be transferred by the Sellers to Buyer
free and clear of all security interests, Liens, encumbrances,
restrictions and other burdens, except for the Exceptions.
(b) Defects. There are no defects or damage with
respect to the Purchased Assets, the Sellers' plants, buildings,
structures, leasehold improvements, furniture, fixtures and equipment
being used in the Business, except for normal maintenance, repair and
replacement. Such properties and assets, including, without
limitation the Purchased Assets are in conformity with all applicable
laws and regulations and, except as set forth in the attached Exhibit
2.1.8(b), are in reasonable operating condition and repair, subject to
normal wear and tear. There is no violation, and no existing event or
circumstance that with the passage of time or the giving of notice
would give rise to a violation, of any
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building, zoning or other law, ordinance, rule or regulation (federal,
state or local) in respect to such property, plants or structures.
2.1.9 Real and Personal Property.
(a) The attached Exhibit 2.1.9(a) is a complete and
accurate list of all real property owned, leased, or used in
connection with the operation of the Sellers, with a complete and
accurate legal description of each parcel of real property. On the
Closing Date, the Sellers will be the fee owner of, and will have
marketable title to, such real property, subject only to the
Exceptions.
(b) The attached Exhibits 2.1.9(b)(I) and 2.1.9(b)(II)
are complete and accurate lists of all leases of real and personal
property, respectively, to which the Sellers are a party. Each such
lease, including, without limitation, each lease with related parties,
is in good standing, is valid and binding on the parties to such
lease, is in full force and effect in accordance with its terms and
grants the lessee a valid and enforceable leasehold interest in the
property described in the lease, and there is no default under any
such lease nor do any facts exist that with the giving of notice or
the passage of time or both would give rise to a default under any
such lease. True copies of all such leases, including all
modifications and amendments, have been supplied to Buyer. The
Sellers has fully paid and fully performed all of its obligations and
duties under all such leases which arise from, are on account of, or
relate to, in any part, facts or events that occurred or will occur
before the Closing. There are no taxes, assessments or other costs,
expenses or charges which are due or paid in arrears relating to the
real or personal property leases, for which accruals have not been
made. The Sellers presently enjoys and has the right to quiet
enjoyment of all real property leased by it, and there exists no fact
that would preclude or interfere with such quiet enjoyment for the
full term of each lease and any renewal options related to each lease.
(c) With respect to the Real Property, including the
real property listed on Exhibit 2.1.9(a) and all other real property
owned, leased or used by the Sellers in connection with the Business:
(i) the use of the Real Property by the Sellers
does not violate any applicable zoning, building or use
statutes, rules, ordinances or regulations of any federal,
state, county or local entity, authority or agency, and no
such violations that were outstanding at any time during the
five years before the date of this Agreement. There is no
existing or threatened condemnation or other legal action of
any kind involving the Real Property which may affect the
value or use of the Real Property. The Real Property is free
and clear of any violations of any building, safety and health
ordinances, statutes or regulations;
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(ii) there are no contracts, leases or agreements
in effect with respect to the Real Property of any kind or
nature whatsoever, whether or not of record, except for the
items listed on the attached Exhibit 2.1.9(b)(I);
(iii) there are no building, use, deed or contract
restrictions relating to the current use of the Real Property;
there is no threatened earth subsidence, earth movement or
infestation affecting the Real Property or any buildings or
improvements located on the Real Property and, to the best of
the Sellers' and the Members' knowledge, there are no latent
or patent structural defects on or in any buildings or
improvements located on the Real Property. There is a
dedicated road or right-of-way to each parcel of Real
Property; the Sellers has all easements and rights of ingress
and egress and for utilities and services necessary for all of
its operations;
(iv) there are no unrecorded easements relating to
the Real Property nor any special assessments or proposed
special assessments relating to the Real Property; no federal,
state or local taxing authority has asserted any tax
deficiency, lien or assessment against the Real Property which
has not been paid; and there are no third parties in
possession or claiming rights to possession of the Real
Property;
(v) there are no recorded easements which are
inconsistent with the Sellers' present use of the Real
Property and there are no outstanding accounts payable or
fixed, choate or inchoate mechanics' liens or rights to claim
a mechanics' lien in favor of any contractor, materialman or
laborer or any other person or entity in connection with any
portion of the Real Property and for which the underlying debt
is unpaid, except for those that will be paid in the ordinary
course of business; there has not been any work performed or
materials supplied to the Real Property in the last 90 days
which could give rise to the filing of such liens against the
Real Property and for which the underlying debt is overdue;
and
(vi) there are no encroachments from within or
without the Real Property that adversely affect the use of the
Real Property. The Sellers has provided Buyer with copies of
all surveys relating to the Real Property.
2.1.10 Inventories. The Inventories, including, without
limitation, the products, raw materials, work-in-process, finished goods,
supplies and other inventories, of the Sellers have been purchased by the
Sellers in the ordinary course of business and in compliance with all
applicable requirements for imported goods; none of the Inventories are on
consignment to or by the Sellers or subject to any sale or return arrangement
with the Sellers or its customers, other than returns of products in the
ordinary course of business consistent with the Sellers' return policies for
prior years. All items of such Inventory are good, usable and saleable in the
ordinary course of business and are not obsolete. The Sellers' purchase,
manufacture and sale of inventories do not violate any manufacturers',
licensors' or others' rights.
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2.1.11 Licenses, Patents, Trademarks and Similar Rights.
(a) Exhibit 2.1.11(a) lists all of the permits,
authorizations, approvals, licenses, patents, trademarks, service
marks, trade names, copyrights, processes, designs, formulas, computer
programs, inventions, proprietary manufacturing techniques, trade
secrets, technology, research and development and know-how
("INTANGIBLES") in which the Sellers has any rights, liabilities or
obligations and the expiration date, if any, of the rights under the
Intangibles. With respect to the matters required to be listed on
Exhibit 2.1.11(a), the Sellers, or one of them, is the sole owner or
licensee of all of the Intangibles free from any restriction, right,
encumbrance or other burden, except as otherwise described in Exhibit
2.1.11(a). Each Intangible is valid and binding and is in good
standing, and there are no defaults or events that with the giving of
notice or the passage of time or both could become an event of default
under the Intangibles.
(b) There are no contracts pursuant to which the
Sellers has authorized any person to use or pursuant to which any
person has the right to use any of the Intangibles owned by the
Sellers and all contracts pursuant to which the Sellers are authorized
by any person to use any of the Intangibles not owned by the Sellers.
Failure to renew, cancellation or termination of any of the contracts
by which the Sellers are authorized to use any of the Intangibles of
another party would not adversely affect the Business of the Sellers.
(c) Except as set forth in the attached Exhibit
2.1.11(a): (i) no Intangible, product, permits, authorizations,
approvals, license, patent, process, method, substance, part or other
material presently being sold or employed or contemplated to be sold
or employed by the Sellers infringes on any rights owned or held by
any other person, (ii) there is no pending or threatened claim or
litigation against the Sellers contesting the right of the Sellers to
sell or use any such Intangible, product, license, patent, process,
method, substance, part or other material, and (iii) no Intangible,
product, license, patent, process, method, substance, part or other
material presently being sold or proposed to be sold or employed by
any person infringes on or may infringe on any rights of the Sellers,
nor is there pending or proposed, any patent, formulation, invention,
device, application, or principle or any statute, law, rule,
regulation, standard, or code, that would adversely affect any
Intangible, product, process, method, substance, part or other
material presently being sold or proposed to be sold or employed by
the Sellers. No default has occurred, or will be caused by the
transaction contemplated by this Agreement, in any contract which
authorizes the Sellers to use any of the Intangibles owned by another
party.
2.1.12 Absence of Undisclosed Liabilities.
(a) The Sellers has no liabilities, commitments,
obligations, loans or indebtedness of any nature whatsoever, whether
as primary obligor or guarantor or otherwise, and whether known or
unknown, whether accrued, absolute, contingent or otherwise, whether
liquidated or unliquidated, and whether due or to become due, and has
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not pledged or granted a security interest in any of its assets, and
there is no basis for the assertion against the Sellers of any debt,
liability or obligation, other than (i) those reflected or reserved in
the Interim Financial Statements, (ii) routine accounts payable
incurred in the normal course of the Sellers' Business after September
30, 1996 and up to the Closing, and (iii) except as set forth on the
attached Exhibit 2.1.12(a), all of which the Sellers will pay in the
ordinary course of its business. No default or breach or alleged
default or breach exists, and no facts or events exist that with the
passage of time or the giving of notice or both could give rise to a
default or breach, on the part of the Sellers under any of its
liabilities, except as otherwise disclosed in the attached Exhibit
2.1.12(a).
(b) Except as set forth in Exhibit 2.1.12(b), the
Sellers has no power of attorney outstanding or any obligations or
liabilities as guarantor, surety, co-signor, endorser, co-maker,
indemnitor or otherwise in respect to the obligations of any person,
corporation, partnership, joint venture, association, organization or
other entity.
2.1.13 [RESERVED]
2.1.14 Certain Contracts. Exhibit 2.1.14 contains a
complete list of all contracts, obligations, plans, arrangements and
commitments to which the Sellers are a party or has any liabilities or
obligations, whether or not the subject contract is currently in effect, and
whether oral (other than an oral contract terminable at will by the Sellers
without any liability) or written, express or implied, including, without
limitation, the following:
(a) any employment or consulting agreement, agreement
with independent contractors or pension, disability, profit sharing,
bonus, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, restricted stock, group insurance,
indemnification, severance pay, retirement or other employee benefit
plan, policy, agreement, or arrangement;
(b) any collective bargaining or union contract or
agreement;
(c) any indenture, mortgage, note, installment
obligation, arrangement, agreement or other instrument relating to the
borrowing of money or the guarantee of any obligation for the
borrowing of money;
(d) any agreement, contract or other commitment that
would limit the freedom of the Sellers, Buyer or any third party to
compete in any line of business or with any person or in any
geographical area or otherwise to conduct its business as presently
conducted and proposed to be conducted;
(e) any contract or commitment for the future sale or
provision, lease or purchase by the Sellers of materials, products,
services or supplies (including, without limitation, leases and
capital leases of real or personal property), which is not in the
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ordinary course of business or which is in excess of $10,000 in the
aggregate or which continues for a term of more than 30 days;
(f) any license or franchise agreement, including any
agreement with respect to Intangibles or the Sellers rights, trade
secrets or technology;
(g) any contract or commitment for the acquisition,
construction, purchase or sale of fixed assets in excess of $10,000
per contract or commitment;
(h) any contract or commitment upon which the Business
of the Sellers is substantially dependent;
(i) any contract or agreement, the performance of which
will result in a loss or net expense to the Sellers in excess of
$10,000;
(j) any order, decree, or judgment, whether entered by
consent, stipulation, or otherwise, before, or in connection with, any
court, administrative agency, or governmental authority (federal,
state or local) to which the Sellers is a party or by which the
Sellers or any of the Purchased Assets is bound;
(k) any contract, commitment, arrangement or
relationship which is violative of any federal, state or local
statute, law, rule, regulation or ordinance, including, without
limitation, any such matter that would restrain trade or restrict
competition; and
(l) any partnership, joint venture or similar
agreement.
(m) any other material contract, commitment or
agreement whether or not made in the ordinary course of business.
The Sellers has provided Buyer with a complete and accurate copy of each
contract, including all amendments and modifications to such contracts,
required to be listed in Exhibit 2.1.14 (the "CONTRACTS"). The Contracts are
in full force and effect and are valid and binding obligations of the
contracting parties and there are no past or present breaches or defaults or
events that with the giving of notice of the lapse of time or both could become
a default by the Sellers or by any other contracting party under any of the
Contracts. All of the Assumed Agreements are assignable to Buyer without
payment of any amount or change in any term and without the consent of any
party, unless such consent has been obtained.
2.1.15 Tax Liabilities.
(a) The Sellers has properly completed and filed in
correct form all federal, state and local tax and tax information
returns of every nature required to be filed by it. No extension of
time in which to file any such return is in effect. The Sellers has
delivered to Buyer copies of all tax returns filed by the Sellers.
All such tax or tax
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information returns are true and correct in all material respects.
The Sellers has duly paid or will pay on or before the Closing Date
(regardless of whether the filing of a return is required) all taxes
of every nature (including, without limitation, estimated taxes,
deficiency assessments, penalties, interest and additions to taxes,
income taxes (if any), property taxes, sales taxes, excise taxes,
gross receipts taxes, franchise taxes, and employment taxes), to the
extent such amounts have become due and payable (or claimed to be due
and payable by any federal, state, county, local, foreign or other
taxing authority) and has properly accrued its tax liabilities in the
Financial Statements and the Interim Financial Statements.
(b) Except as disclosed in Exhibit 2.1.15, the Sellers'
tax returns have not been audited. All federal, state and local
income tax deficiencies proposed as a result of any audits or
examinations of the Sellers have been paid, reserved against or
settled. There are no liens upon any of the properties or assets of
the Sellers or on any of the Purchased Assets for taxes due and
payable, or interest or penalties thereon, and there are no pending or
threatened tax examinations. No state of facts exists or has existed
that would constitute grounds for the assessment of any further
federal, state or local tax liability on the Sellers for any year. No
waiver of any statute of limitations relating to the payment of taxes
is in effect or is currently being requested.
(c) All taxes which the Sellers are required by
applicable law, rules or regulations to withhold or collect have been
duly withheld or collected and, to the extent required, have been or
are being paid over to the proper governmental authorities on a timely
basis.
2.1.16 Litigation.
(a) Except as set forth on Exhibit 2.1.16, there is no
litigation or any legal, judicial, administrative, arbitration or
other claim, demand, action, suit, proceeding or investigation,
including, without limitation, antitrust, personal injury, patent
infringement or property damage actions, pending or threatened
against, brought on behalf of, or relating to the Sellers, its
properties, liabilities or business, any of the Purchased Assets or
the transactions contemplated by this Agreement or any injunctions,
decrees, judgments, orders or writs currently in effect and involving
or affecting the Sellers or any of the Purchased Assets.
(b) The Sellers and the Members do not know or have
reasonable grounds to know of any dispute with any person under any
contract which adversely affects, or may adversely affect, the assets,
properties or Business of the Sellers or any of the Purchased Assets.
(c) Except for those noted on the attached Exhibit 2.1.16,
there have been no official citations or notices of violations
received or threatened from any court, administrative agency or
governmental authority which relate to any aspect of the business
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<PAGE> 20
conducted by the Sellers, including, but not limited to, any such
notices or citations from the Federal Food and Drug Administration,
Occupational Safety and Health Administration, the Equal Employment
Opportunity Commission, the Department of Justice, the Federal Trade
Commission, or from any environmental protection agency or similar
authority or agency (federal, state or local).
(d) There are no legal, administrative, arbitration or other
actions or proceedings or governmental investigations, by or on behalf
of any individual or any federal, state or local agency or authority
pending or threatened against the Sellers relating to any federal,
state, or local antitrust or trade regulation laws, rules or
regulations, including, without limitation, those relating to
restraints of trade or competition, unfair trade practices, contracts,
arrangements, relationships or conspiracies in restraints of trade,
price fixing, price discrimination, boycotts, or tying arrangements.
2.1.17 Pension and Benefit Plans and Compliance with
ERISA.
(a) The Sellers has not ever established or maintained,
or made contributions to, or incurred liability in connection with,
any "employee welfare benefit plan" (as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
or any "employee pension benefit plan" (as defined in Section 3(2) of
ERISA and not exempted under Section 4(b) or 201 of ERISA), including
any "multi-employer pension plan" (as defined in Section 3(37) of
ERISA), other than as set forth in Exhibit 2.1.17 (the "PLANS").
(b) Each Plan and any related trust agreements have
been administered and enforced, and the form and operation of each
Plan are, in accordance with their terms and all applicable laws,
rules and regulations, including, without limitation, all applicable
provisions of ERISA, the Internal Revenue Code of 1986, as amended
(the "CODE"), and Internal Revenue Service, Department of Labor and
Pension Benefit Guaranty Corporation regulations, rules,
interpretations, guidelines and requirements (collectively, the
"BENEFIT RULES").
(c) With respect to each Plan, (i) if intended or
designed to qualify under Section 401(a) or 403(a) of the Code, such
Plan has so qualified for its entire existence and its trust has
always been exempt from taxation under Section 501(a) of the Code,
(ii) no breaches of fiduciary duty have occurred, (iii) no disputes
are pending or threatened, nor are there grounds for any dispute, (iv)
no non-exempt prohibited transaction has occurred, (v) no reportable
event has occurred, (vi) all contributions, benefits, premiums due,
and all other payment obligations have been fully accrued in the
Financial Statements and the Interim Financial Statements to the
extent required by generally accepted accounting principles, and have
been made or satisfied on a timely basis, (vi) all contributions made
or required to be made under the Plan meet the requirements for
deductibility under the Code, (vii) the Plan is not subject to either
Section 412 of the Code or Section 302 of ERISA, (viii) all necessary
governmental approvals have been
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obtained, (ix) a favorable determination as to the qualification under
the Code of the Plan and each amendment to the Plan and as to the tax
exemption of its related trust has been made by the Internal Revenue
Service, (x) the Plan, the related trust agreement or annuity
contracts (or any other funding instruments) are legal, valid and
binding and in full force and effect, (xi) all reporting, filing and
disclosure requirements with respect to the Plan have been satisfied,
and (xii) the Plan has never been examined or audited by the Internal
Revenue Service, the Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency.
(d) There are no unpaid liabilities whatsoever with
respect to any of the Plans. This representation includes, but is not
limited to, any liabilities arising from the termination, partial
termination, continuation of the Plans or otherwise, such as required
contributions to the Plans, required payments to the trusts or
trustees, required payments to the Pension Benefit Guaranty
Corporation, required payments to Plan participants, costs, expenses,
penalties, taxes or liabilities incurred for or by reason of breach of
fiduciary standards applicable to the Plans or otherwise. The Sellers
has not engaged in a transaction in connection with which it directly
or indirectly could be subject to either a civil penalty assessed
pursuant to Section 501(i) of ERISA or a tax imposed by Section 4975
of the Code.
(e) The Sellers does not have any current or potential
liability or obligation with respect to any multi-employer plan or a
multiple employer plan, regardless of whether direct or indirect,
actual or contingent.
(f) With respect to each Plan that is a "welfare plan"
(as described in Section 3(1) of ERISA), (i) the Plan does not provide
medical or death benefits with respect to current or former employees
of the Sellers beyond the termination of their employment (other than
coverage mandated by law), (ii) there are no reserves, assets, surplus
or prepaid premiums under the Plan, and (iii) the Plan has been
administered in compliance with Sections 601-608 of ERISA and Sections
162 or 4980B(f) of the Code, where applicable. The Pension Benefit
Guaranty Corporation has not instituted proceedings to terminate any
of the Sellers' employee welfare benefit plans.
2.1.18 Environmental and Occupational Matters. Except for
the matters disclosed on Exhibit 2.1.18:
(a) All federal, state and local permits, licenses and
authorizations required for, or used in, the construction, use and
operation of the Real Property, the Purchased Assets or any of the
Sellers' other property, both real and personal, including, but not
limited to, furniture, fixtures, equipment and plants (all of which
real and personal property is referred to in this Agreement as "RAP
PROPERTY") have been obtained and are, except only for construction
permits and licenses obtained for construction completed in accordance
with all applicable requirements, presently valid and in full force
and effect, and the Sellers has not been and is not in default or
violation of any terms or conditions
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or such permits, licenses or authorizations. A list of all such
permits, licenses and authorizations is attached to this Agreement as
Exhibit 2.1.18(a). The Members and the Sellers shall cooperate fully
with Buyer in order to transfer such permits, licenses or
authorizations, or to obtain new ones, for the construction, use and
operation of the RAP Property and shall cooperate fully with Buyer in
preparing and executing any and all documents necessary to obtain any
of such permits, licenses or authorizations. Buyer shall have all
such permits, licenses and authorization as of the Closing Date. No
other permits, licenses or authorizations are necessary or required
for the construction, use or operation of the RAP Property or any
other aspect of the conduct of the Sellers' Business.
(b) Except as set forth on the attached Exhibit
2.1.18(b), (i) none of the RAP Property nor any property of the
Sellers' or the Members' predecessors has been used to handle, treat,
store or dispose of any chemical, hazardous, solid or toxic waste or
substance, pollutant or contaminant ("HAZARDOUS SUBSTANCE"), and (ii)
none of the RAP Property or any real property of the Sellers' or the
Members' predecessors or any adjacent or adjoining real property,
including, but not limited to, all air, atmosphere, soils,
groundwaters and surface waters located on, in, over or under any RAP
Property, adjacent or adjoining real property or real property of the
Sellers' or Members' predecessors (collectively, the "PROPERTY"), is
contaminated (nor has any of it ever been contaminated) with any
Hazardous Substance or other substances or pollutants which
contamination may give rise to any obligation under any federal,
state, foreign or local law, statute, ordinance, code, rule,
regulation, permit, consent, approval, license, authorization,
judgment, order, writ, decree, injunction, policy, guidance
(regardless of whether draft, proposed or final), publication,
practice, pronouncement, promulgation, statement or ordinance,
including, but not limited to, the federal Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section Section
9601 et seq and the common law (collectively, the "LAWS"), including,
without limitation, obligations to investigate, remove substances or
remediate. Further, no RAP Property or air or atmosphere of any sort
or description, wherever situated, has, by reason of the handling,
storage, transportation, treatment, disposal or emission of any
Hazardous Substance or other substance or pollutant by the Sellers,
the Members or their employees, agents or contractors been
contaminated or adversely affected with or by such Hazardous
Substances or other substances or pollutants which contamination or
adverse effect has or may give rise to any liability or expense under
or by reason of any of the Laws or any claim. There is no release or
threatened release of any Hazardous Substance from or affecting the
Sellers or any of the Property or that could result in any liability
to the Sellers under any of the Laws. There has been no environmental
damage or any past or present threat of any damage to the Sellers' or
the Members' air, water or property, including, without limitation,
the RAP Property.
(c) All tanks that, when considered with all associated
piping, are located either wholly or partially below the surface of
the ground and without regard to whether they are in contact with
soil, within a building or containment structure or otherwise (all
such tanks are referred to in this Agreement as "UNDERGROUND TANKS")
located in, on,
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over or under the Real Property are identified on Exhibit
2.1.18(c). Except as set forth on the attached Exhibit 2.1.18(c), all
Underground Tanks are in a state of good condition and repair and have
not leaked nor are they presently leaking any of the contents which
they have held or presently hold. All Underground Tanks have been
identified, registered, located, constructed, operated and maintained
as required by any applicable Law.
(d) Except as set forth on the attached Exhibit
2.1.18(d), there are no outstanding violations of, or any
administrative or consent decrees pending or entered against the
Sellers or the Members regarding, environmental, occupational (meaning
worker- or work-place-related), safety or land use matters or Laws,
including, but not limited to, reporting requirements and matters
affecting the emission of air pollutants, the discharge of water
pollutants, the management of hazardous or toxic substances or wastes,
noise. All operations conducted on, in, over or under the Real
Property, whether by the Sellers, the Members, their predecessors or
others, have been and are in compliance with all Laws relating to
environmental compliance and control, including, but not limited to,
occupational and safety related matters.
(e) There are no claimed, alleged, suspected or
threatened violations affecting the Sellers, the Members, their
predecessors or the Property with respect to any federal, state or
local environmental, occupational or safety Laws, and there are no
present discussions with any federal, state or local governmental
agency concerning any alleged violation of environmental, occupational
or safety Laws. There are no facts which could support any claims,
allegations or threats or any claims of environmental, occupational or
safety harm or damage caused by or attributable to, in whole or in
part, the ownership or occupancy of the RAP Property or the Sellers'
or the Members' activities or business. Further, and without limiting
the foregoing, no adjacent or adjoining property owner or user has
been claimed against as a result of, alleged to have been in violation
of, or threatened with a violation of, any federal, state or local
environmental Law and is not involved in any discussions with any
federal, state or local governmental agency regarding any of the same.
There are no pending or threatened claims, lawsuits or administrative
proceedings against the Sellers, the Members or their predecessors
regarding environmental, occupational or safety compliance, control or
liability, and no facts exist which could give rise to any such claim,
lawsuit or administrative proceeding.
2.1.19 Labor Matters. Except as disclosed in Exhibit
2.1.19, there are no unfair labor practice, equal employment opportunity or
wage and hour complaints against the Sellers pending before the National Labor
Relations Board or any other governmental or regulatory board or agency
performing similar functions. There is no proceeding with respect to the
Sellers actually pending or threatened before the National Labor Relations
Board or any other governmental or regulatory board or agency performing
similar functions. There is no labor strike, lock-out, sit-down, walkout,
dispute, slow-down, disturbance or stoppage actually pending or threatened
against or involving the Sellers. There is no pending representation question
or organizational activities concerning the employees of the Sellers. The
Sellers are in compliance with all laws regulating wages, hours or working
conditions of employees. All obligations of the
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<PAGE> 24
Sellers to its past and current employees and agents that have become payable
have been paid, including, without limitation, unemployment compensation
payments, profit sharing and retirement benefits, social security and similar
benefits, vacation and holiday pay, bonuses and other forms of compensation.
2.1.20 Compliance with Laws. The Sellers are in
compliance with, and has complied with, all Laws applicable to it or its
business.
2.1.21 Licenses and Permits. The attached Exhibit 2.1.21
is a complete and accurate list of all licenses, permits, registrations,
orders, approvals and other authorizations (and all applications therefor) of
federal, state, county or local governmental, regulatory or administrative
agencies, bodies or authorities (the "PERMITS") held by, necessary to, required
by, or used by, the Sellers in the conduct of its business, including, without
limitation, all environmental, licenses, permits, registrations and other
authorizations. Except as disclosed on Exhibit 2.1.21, all Permits are held
by the Sellers and are in full force and effect; no violations have occurred
with respect to any of such Permits, and no revocation, termination,
limitation, withdrawal or inability to renew any of such Permits is pending or
threatened. The Permits are transferable to Buyer without the payment of any
amount by Buyer or the variation of any terms of such Permits, and the Sellers
has obtained all necessary consents in connection with all such Permits
relating to the sale of the Purchased Assets, including, without limitation,
the transfer of the Permits to Buyer at the Closing. All of such Permits shall
be in full force and effect on and after the Closing.
2.1.22 Information Supplied to Buyer. The Sellers has
provided to Buyer complete and accurate lists and summary descriptions of the
following items relating to the Sellers: (i) the names of all the present
shareholders, directors, officers and employees of the Sellers, the date each
of them was hired by the Sellers, each director's, officer's and employee's
current annualized salary and most recent bonus (including the date such bonus
was paid), and the date and amount his or her compensation was last increased,
(ii) any retirement contracts or deferred compensation arrangements for
employees of the Sellers, salaried or non-salaried, including formal and
informal arrangements or plans, and the funding arrangements with respect to
such contracts or arrangements, (iii) the Sellers' business practices and
policies with respect to purchases, sales and returns, (iv) any employee
manuals or other material setting forth the Sellers' policies as to employment
of its personnel, and (v) the most recent determination letter issued by the
Internal Revenue Service with respect to each Plan which is an employee pension
benefit plan and the Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Plan for the two most recent plan years
of each Plan. All of the information provided by the Sellers or its officers,
employees or agents to Buyer pursuant to this Section, the due diligence
document request to the Sellers or otherwise are true, complete and accurate
responses to such requests for information.
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2.1.23 Suppliers and Customers.
(a) The Sellers have provided to Buyer a complete and
accurate list and description of (i) all suppliers of products or
services to the Sellers (other than legal or accounting services)
aggregating more than $10,000 during the last calendar year, (ii) the
address of each such supplier, (iii) the amount sold to the Sellers
during such period, and the names of any sole source suppliers of
goods or services to the Sellers, with respect to which practical
alternative sources of supply are not available on comparable terms
and conditions. To the best of Sellers' and the Members' knowledge,
the consummation of the transactions contemplated by this Agreement
will not result in the loss to the Sellers of any of its suppliers or
customers and there are no pending or threatened developments with
respect to any of the Sellers' its suppliers or customers which would
have a material adverse effect on the Business, including, without
limitation, any supplier or customer which has, or which has
threatened to, cancel, terminate or change in a manner adverse to the
Sellers its relationship with the Sellers.
(b) The Sellers have provided to Buyer a complete and
accurate list of each customer of the Sellers, the address of each
such customer, the amount purchased by each such customer from the
Sellers, the terms of sale to all customers, the return rights granted
to such customers (including, without limitation, any limits on the
quantity of such returns), and the amount of returns (including
quality rejections) from such customer during each of the two periods
for which sales information is required to be given.
2.1.24 Business of the Sellers. To the best of the
Sellers' and the Members' knowledge, there are no conditions existing with
respect to the Sellers' markets, products, facilities or personnel which might
materially adversely affect its Business or prospects, other than such
conditions as may affect the entire industry in which the Sellers participates.
2.1.25 Insider and Inter-Sellers Transactions. A complete
and accurate list and brief description of all contracts or other transactions
involving the Sellers with respect to which the Members, any officer, director,
employee or shareholder of the Sellers or any person related to any of the
foregoing by blood or marriage is a party, or is in any other way involved, or
has any obligations or liabilities with, is set forth in the attached Exhibit
2.1.25.
2.1.26 Members Conflicts. Neither the Sellers nor the
Members has any direct or indirect interest in any person or entity which
directly or indirectly competes with the Sellers, except as set forth on
Exhibit 2.1.26.
2.1.27 Disclosure. No representation or warranty by the
Sellers or the Members in this Agreement and no statement contained in any
agreement, document (including, without limitation, the Financial Statements,
the Interim Financial Statements and Exhibits to this Agreement), exhibit,
certificate or other writing furnished by or on behalf of any of them pursuant
to the provisions of this Agreement or otherwise contains any untrue statement
of a material fact, misrepresents any material fact or omits any material fact
necessary to make the
20
<PAGE> 26
statements made or contained herein or therein not misleading, which
misrepresentation or omission has an adverse effect on the Sellers, the
Members, the Business, the assets, liabilities, operations, financial
condition, operating results or prospects of the Business, the Purchased Assets
or the condition (financial or otherwise) of the Sellers or the Members. The
Sellers and the Members have disclosed to Buyer all material facts relating to
the Sellers and the assets, liabilities, business, operations, financial
condition, operating results, and prospects of the Sellers or relating to the
Purchased Assets. An explicit, express disclosure contained in any Exhibit to
this Agreement shall be deemed a disclosure with respect to any other Exhibit
required by this Agreement as to which such disclosure is required.
2.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers and the Members the following as of the date of this
Agreement and as of the Closing Date:
2.2.1 Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan.
2.2.2 Authority Relative to This Agreement. Buyer has
all requisite power and authority to execute, deliver and comply with its
obligations under the terms of this Agreement. Execution, delivery and
performance by Buyer of this Agreement have been duly authorized by all
necessary action on the part of Buyer, including authorization on behalf of
Buyer by its Board of Directors and, if necessary, its shareholders. No other
action on the part of the Buyer or any other individual, person or entity is
necessary to authorize this Agreement or the consummation of the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the enforcement of creditors' rights
generally, and except as may be limited by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
2.2.3 No Violation. Neither the execution nor the
delivery by Buyer of this Agreement nor the consummation by Buyer of the
transactions contemplated by this Agreement: (a) will require any
authorization, consent or approval of any governmental or regulatory authority
or of any other person or entity, (b) will violate or breach any provision of
the Articles of Incorporation or bylaws of Buyer, (c) will accelerate any
obligation under, violate or breach any provision of, constitute a default
under, result in the creation of any lien or security interest under, result in
the termination of, require the consent, authorization, approval or order of,
or registration or filing with, any governmental agency or body or any third
party under, any of the terms or conditions of (I) any approval, authorization
or order or, or registration or filing with, any governmental agency or body or
any third party, or (II) any material note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, registration or other authorization, lease,
contract, agreement or other instrument, commitment or obligation to which
Buyer is a party, or by which it or any of its properties or assets may be
bound, which would have a material adverse financial effect on Buyer, or (d)
will violate any order, writ, injunction, decree, judgment, arbitration award,
or any statute, rule, regulation or ruling of any court or governmental
authority,
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United States or foreign, applicable to Buyer or to any of its properties or
assets, all to the extent such requirement, violation, breach or default would
have a material adverse affect on Buyer's ability to perform its obligations
under this Agreement.
2.2.4 [RESERVED]
2.2.5 Disclosure. No representation or warranty by Buyer
in this Agreement and no statement contained in any agreement, document,
certificate or other writing furnished by or on behalf of it pursuant to the
provisions of this Agreement or otherwise contains any untrue statement of a
material fact, misrepresents any material fact or omits any material fact
necessary to make the statements made or contained herein or therein not
misleading, which misrepresentation or omission has an adverse effect on the
Buyer or its financial condition. An explicit, express disclosure contained in
any Exhibit to this Agreement shall be deemed a disclosure with respect to any
other Exhibit required by this Agreement as to which such disclosure is
required.
3 COVENANTS.
3.1 Covenants of the Sellers and the Members.
3.1.1 Access for Audit. Between the date of this
Agreement and the Closing Date, the Sellers and the Members shall cause the
Sellers and its officers, directors, employees and agents to give Buyer and its
officers, directors, employees, counsel, accountants, agents, designees and
other authorized representatives full access during normal business hours to
all of the facilities, assets, properties, books of account, leases,
agreements, commitments, records and personnel of the Sellers and to the
Purchased Assets and to furnish Buyer or its representatives with all such
information concerning the Purchased Assets, the Business, the Sellers and the
Members as Buyer may request, and to cooperate with Buyer, so that Buyer may
have a full opportunity to make a full business, financial, accounting,
environmental and legal audit of the Purchased Assets and the business and
affairs of the Sellers and to assure compliance by the Sellers and the Members
with all of their covenants, representations and warranties under this
Agreement. Buyer will pay the costs of its audit, including the costs of any
environmental audit and studies of the Sellers and the Purchased Assets. This
audit may include, among other things:
(a) review and copying of books, records, contracts,
financial statements, tax returns and other material documents of the
Sellers;
(b) physical inspection of each of the assets and
facilities of the Sellers, including, without limitation, the
Purchased Assets;
(c) an audit of all contracts of the Sellers,
including, without limitation, the Contracts and the Assumed
Agreements;
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(d) discussions with governmental agencies, customers,
vendors, employees and creditors of the Sellers, subject to the
Sellers' consent, which shall not be unreasonably delayed, conditioned
or withheld; and
(e) environmental testing and assessments of the
Sellers' RAP Property, (the "ENVIRONMENTAL AUDIT").
3.1.2 Operation of Business. Between the date of this
Agreement and the Closing Date, except as otherwise expressly consented to in
writing by Buyer, which consent shall not be unreasonably delayed, conditioned
or withheld, or as otherwise expressly required by this Agreement:
(a) The business and operations of the Sellers and the
operation of the Purchased Assets shall be conducted only in the
ordinary course and without any changes in its the customary shipping,
purchasing, billing, payment, return, exchange or other business
practices, policies and procedures.
(b) No increase shall be made in and salary, wage,
bonus, discretionary benefit or other compensation paid, payable or to
become payable by the Sellers to its officers, directors, employees or
agents, including, without limitation, any increase in any bonus,
insurance, pension, or other employee benefit plan, payments or
arrangements (including loans), except such increases that are agreed
to by Buyer or are required by state and federal minimum wage laws.
No new officers, directors or employees shall be hired by the Sellers.
(c) No agreement, lease, plan, other instrument or
commitment, including, without limitation, any employment contract and
any long-term commitment to purchase or lease, shall be entered into,
amended or terminated, by or on behalf of the Sellers except in the
ordinary course of business, and the Sellers shall not make any
capital expenditures except in the ordinary course of business.
(d) Except as provided in Section 1.2.3, no
indebtedness for borrowed money or other debt (other than normal trade
payables in the ordinary course of business) or liability shall be
assumed, incurred or contracted to be assumed or incurred, and no
security interest, mortgage, lien, encumbrance or pledge shall be
granted, by the Sellers or with respect to any of the Purchased
Assets, and no loans shall be granted, other than normal trade credit
in the ordinary course of business. The Sellers shall not incur or
undertake to incur any obligations or any fixed or contingent
liabilities or take any action or conduct except in the ordinary
course of business.
(e) None of the Sellers, the Members or their officers,
directors, shareholders, employees, agents or representatives shall,
directly or indirectly, consummate or agree to consummate, solicit
offers in connection with, encourage, pursue, enter into negotiations
concerning, enter into any agreement or understanding or discussions
with any other
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individual, person or entity concerning, or furnish or cause to be
furnished any information to any person in connection with, any
merger, consolidation, share exchange, joint venture or other business
combination or transaction involving the Sellers, the sale or other
disposition of any shares of the Sellers' stock or all or any portion
of the Sellers' assets or any of the Purchased Assets, except as
provided in this Agreement.
(f) No sale, transfer, assignment, lease, dividend,
distribution or other disposition of anything that would otherwise be
included in the Purchased Assets shall be made or entered into by or
on behalf of the Sellers, other than sales of products in the ordinary
course of business.
(g) The Sellers shall not institute any change with
respect to its management or supervisory personnel, and the Sellers
and the Members shall use their best efforts to preserve intact the
business organization of the Sellers and unless otherwise directed by
Buyer, to retain the services of the officers and key employees of the
Sellers. The Sellers and the Members shall use their best efforts to
maintain the goodwill of the suppliers, customers and employees of,
and of all others having business relationships with, the Sellers.
(h) The Sellers shall not change any of its methods of
grading, classifying or pricing inventory for sale to customers.
(i) The Sellers shall not enter into any agreement or
understanding to do any of the foregoing.
3.1.3 [RESERVED]
3.1.4 Preserve Business. The Sellers and the Members
shall use their best efforts to preserve the business organization of the
Sellers intact, to keep available the services of the Sellers' present officers
and employees and to preserve the Sellers' goodwill, licenses, rights and
authorities before and after the Closing. At no time before or after the
Closing, shall Sellers or Members do anything to adversely impact the business
of Sellers or Buyer or Sellers' or Buyer's relationships with vendors and
customers, including, without limitation, its relationship with VIVRA Renal
Care.
3.1.5 Accuracy of Representations. The Sellers and the
Members shall do all things necessary to assure that all of their
representations and warranties contained in this Agreement are true, in all
material respects, at and as of the Closing.
3.1.6 Insurance. The Sellers shall maintain in force its
existing insurance policies except to the extent they may be replaced with
equivalent policies at lower rates approved in writing by Buyer, which approval
shall not be unreasonably withheld. If, in the opinion of Buyer, additional
coverage is required to keep adequately insured any properties of the Sellers
or any of the Purchased Assets, the Sellers shall, at the written request and
expense
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of Buyer, obtain such additional insurance to the extent available from
financially sound and reputable insurers for a period ending no sooner than the
close of business on the Closing Date.
3.1.7 Approval of Sale of Purchased Assets. The Sellers
and the Members shall cause all of the members of the Sellers to approve this
Agreement and related agreements and the sale of the Purchased Assets
contemplated by this Agreement and shall provide evidence of such approvals to
Buyer at the Closing.
3.1.8 Updated Exhibits. Between the date of this
Agreement and the Closing Date, the Sellers and the Members shall update the
Exhibits to this Agreement to the extent necessary to make their
representations and warranties contained in this Agreement true and accurate in
all material respects as of the Closing Date and shall provide such updated
Exhibits to Buyer on or prior to the Closing Date.
3.1.9 Consents. On or prior to the Closing Date, the
Sellers and the Members shall obtain all of the authorizations, consents and
approvals required to be set forth in Exhibit 2.1.4, including, without
limitation, (i) all requisite consents, waivers, and approvals from third
parties to all contracts or agreements to which the Sellers are a party or by
which the Sellers are bound or which relate to the Purchased Assets, (ii) any
consents required under the Assumed Agreements, and (iii) any consents required
from the Sellers' lenders. The Members and the Sellers shall deliver evidence
of such consents to Buyer on or before the Closing Date.
3.1.10 Delivery of Books and Records. The Sellers and the
Members shall deliver all of the Sellers' books and records to Buyer at the
Closing. Buyer shall allow the Sellers and the Members access to such books
and records, relating to transactions on or prior to the Closing Date, during
Buyer's normal business hours upon reasonable advance notice from the Members
to Buyer.
3.1.11 [RESERVED]
3.1.12 Confidentiality and Non-Compete Agreements. The
Sellers and the Members each shall execute, a Confidentiality and Non-Compete
Agreement with Buyer for a term of five years precluding competition with Buyer
in the Business in North America, in substantially the form attached as Exhibit
3.1.12 (collectively, the "CONFIDENTIALITY AND NON-COMPETE AGREEMENTS"), and
deliver it to Buyer at the Closing.
3.1.13 Bank Debt; Capital Lease. Before the Closing,
Sellers shall notify Buyer of the precise amount of principal, interest and
other charges which are required to be paid to fully discharge all indebtedness
of the Sellers to any financial institution, and Sellers shall cause such
financial institutions to release any Liens they may have on any of the
Purchased Assets at the Closing upon receipt of payment of such principal,
interest and other charges.
3.1.14 Title Policies and Surveys. On or before the
Closing Date, the Sellers and the Members shall obtain a standard ALTA lessee's
title insurance policy in Buyer's name
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for each parcel of the Real Property in the aggregate amount satisfactory to
Buyer, subject only to such exceptions as are acceptable to Buyer (the "TITLE
POLICY"). The Sellers and the Members shall sign such affidavits as are
necessary to obtain the deletion of standard exceptions from the Title Policy.
The Sellers and the Members shall also obtain a current A2 survey of the Real
Property, which survey shall be in form and substance sufficient to permit the
title insurer to delete any survey exception from the Title Policy. The
Sellers and the Members shall also provide Buyer with the existing title
policies, surveys and abstracts in respect of the parcels of Real Property.
Buyer and the Sellers shall each pay one half of the total cost of the Title
Policy and the related survey.
3.1.15 Environmental Remediation.
(a) Remediation Obligation. If the Environmental Audit
discloses any conditions, facts or events (i) that appear to violate
any Laws, (ii) that would violate the Sellers' and the Members'
representations and warranties in Section 2.1.18 if not cured, or
(iii) that, in Buyer's reasonable judgment requires or could require
remediation under any Laws or could result in liability to Buyer under
any Laws, then the Sellers and the Members shall promptly either (as
chosen by Buyer in its sole discretion after notice to the Sellers of
its choice and a reasonable opportunity for the Sellers to consult
with Buyer, and to participate fully in negotiations with governmental
agencies, concerning such choice and the required scope and method of
such remediation) (i) cure such violation, perform such remediation
and prevent such liability, or (ii) reimburse Buyer for all of its
costs and expenses, including, without limitation, its reasonable
costs and expenses of investigation, consultants, attorneys' and
remediation, of curing such violation, performing such remediation and
preventing and/or paying such liability.
(b) Arbitration of Disagreements. Notwithstanding anything
in this Section 3.1.15 to the contrary if the aggregate cost of such
cure, performance, prevention or reimbursement exceeds $10,000 and if
Buyer and the Sellers disagree about the scope or method (or both) of
such cure, performance, prevention, investigation or remediation,
Buyer may proceed as described in Section 3.1.15(a), but such
disagreement (to the extent such disagreement affects Buyer's
obligations under Section 3.1.15(a)) shall be resolved by and through
an arbitration proceeding to be conducted under the auspices of the
American Arbitration Association (or any like organization successor
thereto) in Detroit, Michigan as described in Section 6.4(b) and (c)
(except that all references to Section 6.4 shall be deemed references
to this Section 3.1.15).
3.1.16 [RESERVED]
3.1.17 [RESERVED]
3.1.18 Confidentiality. Between the date of this
Agreement and the earlier of the Closing Date or the termination of this
Agreement, the Sellers and the Members will hold in confidence all confidential
and proprietary information and trade secrets of Buyer disclosed to
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the Sellers or the Members in connection with this Agreement, subject to any
legal requirement that the Sellers or the Members disclose such information.
3.1.19 Further Assurances. The Sellers and the Members
will promptly prepare, execute and deliver to Buyer such lists, instruments and
documents and cooperate with Buyer in such other respects as Buyer may from
time to time, before or after the Closing reasonably request.
3.2 Covenants of Buyer.
3.2.1 Accuracy of Representations. Buyer shall do all
things necessary to assure that all of its representations and warranties
contained in this Agreement are true, in all material respects, at and as of
the Closing.
3.2.2 Approval of Sale of Purchased Assets. Buyer shall
cause its Board of Directors to approve this Agreement and related agreements
and the purchase of the Purchased Assets contemplated by this Agreement and
shall provide evidence of such approval to the Sellers at the Closing.
3.2.3 [RESERVED]
3.2.4 [RESERVED]
3.2.5 Confidentiality. Between the date of this
Agreement and the earlier of the Closing Date or the termination of this
Agreement, Buyer will hold in confidence all confidential and proprietary
information and trade secrets of the Sellers and the Members disclosed to Buyer
in connection with its investigation of the Sellers and the Purchased Assets,
subject to any legal requirement that Buyer disclose such information.
3.2.6 [RESERVED]
3.2.7 [RESERVED]
4 CONDITIONS TO CLOSING.
4.1 Conditions to Buyer's Obligations. Without limiting any other
rights or remedies which Buyer may have at law or in equity, the obligations of
Buyer under this Agreement are subject to the satisfaction of the following
conditions at or prior to the Closing; provided, that Buyer may waive the
satisfaction of any such condition pursuant to a writing signed by Buyer:
4.1.1 Buyer's Obtaining Financing. Buyer shall have
successfully raised sufficient monies to fund the Cash Amount through a private
placement of its debt securities on a best efforts basis.
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4.1.2 Buyer's Due Diligence Investigation. Buyer shall
have been permitted by the Sellers and the Members to conduct and complete a
full due diligence investigation of the Business and assets of the Seller, with
the full cooperation of the Sellers and the Members and Buyer shall be
satisfied with the results in the exercise of its discretion.
4.1.3 Accuracy of the Sellers' and the Members'
Representations and Warranties. All representations and warranties made by the
Sellers or the Members in this Agreement or in any agreement, document or
statement which shall be delivered to Buyer pursuant to this Agreement,
including, without limitation, the representations and warranties in Section
2.1, shall be true and correct, in all material respects, at and as of the
Closing Date, with the same force and effect as though such representations and
warranties had been made at and as of the Closing Date, and Buyer shall not
have discovered any material error, misstatement or omission in the
representations and warranties of the Sellers or the Members contained in this
Agreement.
4.1.4 Compliance with Covenants. All actions,
undertakings, covenants or agreements required to be performed by the Sellers
or the Members before the Closing, including, without limitation, the covenants
of the Sellers and the Members in Section 3.1 and Section 3.1.15, shall have
been so performed or complied with, in all material respects, on or prior to
the Closing Date, and the Sellers and the Members shall have delivered evidence
of such compliance to Buyer on the Closing Date.
4.1.5 Certificate of Sellers Officers and the Members.
The Sellers and the Members shall have delivered to Buyer a Certificate, dated
as of the Closing Date, signed by the Members and the chief executive and
principal financial officers of the Sellers certifying as to the fulfillment of
the conditions specified in Sections 4.1.1 and 4.1.2. The individuals signing
such Certificate shall have no personal liability with respect to such
Certificate in the absence of their personal fraud.
4.1.6 Consents. The Sellers or the Members shall have
obtained the approvals and consents to the transactions contemplated by this
Agreement required to be set forth on Exhibit 2.1.4.
4.1.7 No Material Litigation. No action or proceeding
shall have been instituted, threatened or concluded against the Sellers or the
Members which materially adversely affects or may adversely affect the
Business, business prospects or financial condition of the Sellers or any of
the Purchased Assets, and no action or proceeding shall have been instituted,
threatened or concluded by any governmental instrumentality, agency, or other
person before any court or governmental agency to restrain, prevent or
condition this Agreement or the consummation of the transactions contemplated
by this Agreement, which, in the reasonable opinion of Buyer, makes it
inadvisable to consummate such transactions.
4.1.8 No Material Casualty. There shall have been no
material loss, damage or casualty to the Purchased Assets between the date of
this Agreement and the Closing Date.
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4.1.9 Delivery of Other Documents. The Sellers and the
Members shall have delivered the documents required to be delivered by the
Sellers and/or the Members pursuant to this Agreement.
4.1.10 No Material Change in Exhibits. There shall have
been no material adverse change in the information required to be contained in
the Exhibits to this Agreement from the information contained in such Exhibits
at the date of this Agreement.
4.1.11 [RESERVED]
4.1.12 Operation of Business. During the period of time
from the date of this Agreement to the Closing Date, the business of the
Sellers shall have been operated in compliance with Section 3.1.2, and there
shall have been no material adverse change in the business, prospects,
operations, earnings, assets or financial condition of the Sellers since
September 30, 1996.
4.1.13 Title. The Sellers shall have good and marketable
title to the Purchased Assets free and clear of all mortgages, liens,
restrictions, tenants or tenancies, easements, Liens, encumbrances or other
charges or matters of title, other than the Exceptions and liens for taxes and
assessments not yet due. Buyer shall have obtained the Title Policy, and the
Title Policy shall be subject only to such exceptions as are acceptable to
Buyer.
4.1.14 Transfer Documents. The Sellers and the Members
shall have executed and delivered to Buyer a warranty deed for the Real
Property, certificates of title for the Vehicles, duly endorsed for transfer to
Buyer, and such bills of sale, assignments, patent assignments, certificates of
title and any and all other instruments of conveyance and transfer as are
reasonably required by Buyer and Buyer's counsel in order to effectively convey
and transfer to Buyer the Purchased Assets, free and clear of all security
interests, Liens, encumbrances, restrictions and other burdens, subject to the
Exceptions, effective as of the Closing Date.
4.1.15 Agreements. The following agreements shall have
been executed and delivered. The Sellers and the Members shall each have
entered into a Confidentiality and Non-Compete Agreement with Buyer in the form
of Exhibit 3.1.12.
4.1.16 Assignments of Agreements. Buyer shall have either
received an assignment of the Assumed Agreements without breaching or
terminating the related lease or agreement, or, with respect to the leases,
executed leases between Buyer and the owners of such properties, which leases
are reasonably satisfactory to Buyer.
4.1.17 Satisfactory Completion of Audit. Buyer shall have
completed the audit described in Section 3.1.1, to the extent it so desires,
and shall have been satisfied, in its sole discretion, with the results of such
audit.
4.1.18 [RESERVED]
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4.1.19 Other Requirements. The purchase of the Purchased
Assets shall comply with any other applicable regulatory requirements.
4.1.20 Incomplete Exhibits. All of the parties to this
Agreement recognize that the Exhibits referenced in this Agreement have not
been completed, but will be completed prior to the Closing. Buyer must be
fully satisfied in the exercise of its judgment with the contents of Exhibits
when they are completed as a condition to its obligation to Close under this
Agreement.
4.2 Conditions to the Sellers' and the Members' Obligations.
Without limiting any other rights or remedies which the Sellers or the Members
may have at law or in equity, the obligations of the Sellers and the Members
under this Agreement are subject to the satisfaction of the following
conditions at or prior to the Closing; provided that the Sellers and the
Members may waive the satisfaction of any such condition pursuant to a writing
signed by the Sellers and the Members:
4.2.1 Accuracy of Buyer's Representations and Warranties.
All representations and warranties made by Buyer in this Agreement, including,
without limitation, the representations and warranties in Section 2.2, shall be
true and correct, in all material respects, at and as of the Closing Date, with
the same force and effect as though such representations and warranties had
been made at and as of the Closing Date.
4.2.2 Compliance with Covenants. All actions,
undertakings, covenants, or agreements required to be performed by Buyer before
the Closing, including, without limitation, the covenants of Buyer in Section
3.2, shall have been performed or complied with, in all material respects, on
or prior to the Closing Date.
4.2.3 Certificate of Buyer's Officer. Buyer shall have
delivered to the Sellers and the Members a Certificate, dated as of the Closing
Date, signed by an officer of Buyer, certifying as to the fulfillment of the
conditions specified in Sections 4.2.1 and 4.2.2. The individual signing such
Certificate shall have no personal liability with respect to such Certificate
in the absence of his or her personal fraud.
4.2.4 No Material Litigation. No action or proceeding
shall have been instituted, threatened or concluded by any governmental
instrumentality, agency, or other person before any court or governmental
agency to restrain, prevent, or condition this Agreement or the consummation of
the transactions contemplated by this Agreement.
4.2.5 Delivery of Other Documents. Buyer shall have
delivered the documents required to be delivered by Buyer pursuant to this
Agreement.
4.2.6 [RESERVED]
4.2.7 [RESERVED]
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4.2.8 [RESERVED]
4.2.9 [RESERVED]
5 WARRANTIES; INDEMNIFICATION.
5.1 Survival. All representations, warranties, covenants and
agreements by Buyer, the Sellers and the Members contained in this Agreement
shall survive the execution and delivery of this Agreement and the Closing
Date, notwithstanding any investigation made by or on behalf of Buyer. The
indemnification provisions in this Section 5 and the obligations of the parties
pursuant to these indemnification provisions shall survive the Closing and
shall be binding upon, and fully enforceable against, Buyer on the one hand,
and the Sellers and the Members jointly and severally on the other hand, and
each of their respective successors and assigns. In addition to the
indemnification provisions, Buyer, the Sellers and the Members shall have all
other legal and equitable remedies provided by law for breach of this
Agreement, including specific performance and consequential damages.
5.2 The Sellers' and the Members' Indemnification of Buyer.
Regardless of whether the Closing occurs and regardless of any investigation
made at any time by or on behalf of Buyer or any information Buyer or any of
Buyer's directors, officers, employees, representatives, agents, attorneys,
accountants, or consultants may have, the Sellers and the Members, jointly and
severally, shall indemnify, defend and hold harmless Buyer and each of its
affiliates, directors, officers, employees, agents, accountants, attorneys and
representatives ("BUYER'S PERSONNEL") from and against any demand, claim,
action, cause of action, damage, liability, loss, cost, debt, deficiency,
expense, obligation, tax, assessment, public charge, lawsuit, contract,
agreement, and undertaking of any kind or nature, whether known or unknown,
fixed, actual, accrued or contingent, liquidated or unliquidated (including,
without limitation, interest, penalties, additional federal, state or local
taxes, reasonable attorneys' fees and other costs and expenses incident to this
transaction or proceedings or investigations or the defense of any claim,
whether or not litigation has commenced; provided that costs and expenses
incident to this transaction shall be included in Buyer's Damages only if (i)
all of the conditions to the Sellers' and the Members' obligations set forth in
Section 4.2 are satisfied, and (ii) the Closing does not occur on the Closing
Date) ("BUYER'S DAMAGES") arising out of, resulting from, or relating to, and
the Sellers and the Members shall be, jointly and severally, obligated to pay
Buyer on demand the full amount of any sum which Buyer or any of Buyer's
Personnel pays or become obligated to pay on account of, or with respect to,
any of the following:
(a) Any breach of any representation or warranty made
by the Sellers or the Members in this Agreement, in any related
agreement, in any Exhibit to this Agreement or in any of the documents
executed in connection with this Agreement, including, without
limitation, the Employment Agreements and the Confidentiality and
Non-Compete Agreements. For purposes of this Article V, the "best of
knowledge" standard contained in Article II shall be disregarded and
Sellers and Members shall be required to indemnify
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Buyer's Personnel if any representation and warranty is untrue,
whether or not they had knowledge of such breach.
(b) Any failure of the Sellers or the Members duly to
perform or observe any term, provision, covenant or agreement to be
performed or observed by the Sellers or the Members pursuant to this
Agreement, any related agreement or any of the documents executed in
connection with this Agreement, including, without limitation,
Members' Employment Agreement and Members' Confidentiality and
Non-Compete Agreement;
(c) Any claim for warranty work or repairs or any claim
for injury in connection with the work performed by the Sellers;
(d) The Sellers' failure to close this transaction as
provided in this Agreement, which does not result from a failure of
one or more of the conditions to the Sellers' obligations contained in
Section 4.2 of this Agreement;
(e) Any acts or events relating to the Sellers or the
Purchased Assets occurring, in whole or in part, on or before the
Closing Date and any liabilities or obligations of the Sellers or the
Members of any nature whatsoever or caused by the consummation of the
transactions contemplated by this Agreement (including, without
limitation, any actual or alleged liabilities to trade creditors or
others that Buyer, in its reasonable commercial judgment, pays),
except for the liabilities assumed by Buyer pursuant to Section
1.3(a), but such exception shall only apply to obligations under such
liabilities arising after the Closing Date and not resulting from any
breach, default or violation occurring, in whole or in part, on or
before the Closing Date;
(f) Any of the matters described or required to be
described in Exhibit 2.1.4, Exhibit 2.1.7, Exhibit 2.1.8(a), Exhibit
2.1.11(c), Exhibit 2.1.12(a), Exhibit 2.1.12(b), Exhibit 2.1.14 (to
the extent such Contracts are not Assumed Agreements), Exhibit 2.1.15,
Exhibit 2.1.16, Exhibit 2.1.17 (to the extent such plans are not
Assumed Agreements), Exhibit 2.1.18(b), Exhibit 2.1.18(c), Exhibit
2.1.18(d), Exhibit 2.1.19, or Exhibit 2.1.25.
5.3 Buyer's Indemnification of the Sellers and the Members.
Regardless of whether the Closing occurs, Buyer shall indemnify, defend and
hold harmless the Sellers, the Members, and each of their affiliates,
employees, agents, accountants, attorneys and representatives ("SELLERS'
PERSONNEL") from and against any demand, claim, action, cause of action,
damage, liability, loss, cost, debt, deficiency, expense, obligation, tax,
assessment, public charge, lawsuit, contract, agreement, and undertaking of any
kind or nature, whether known or unknown, fixed, actual, accrued or contingent,
liquidated or unliquidated (including, without limitation, interest, penalties,
additional federal, state or local taxes, reasonable attorneys' fees and other
costs and expenses incident to this transaction or proceedings or
investigations or the defense of any claim, whether or not litigation has
commenced; provided that costs and expenses incident to this transaction shall
be included in Sellers' Damages only if (i) all of the conditions to the
Buyer's obligations set forth in Section 4.1 are satisfied, and (ii) the
Closing does not occur on the
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Closing Date) ("SELLERS' DAMAGES") arising out of, resulting from, or relating
to, and Buyer shall be obligated to pay the Sellers and the Members on demand
the full amount of any sum which the Sellers, the Members or any of Sellers'
Personnel pays or becomes obligated to pay on account of, or in respect to, any
of the following:
(a) Any breach of any representation or warranty made
by Buyer in this Agreement;
(b) Any failure of Buyer duly to perform or observe any
term, provision, covenant or agreement to be performed or observed by
Buyer pursuant to this Agreement or any of the documents executed in
connection with this Agreement, including, without limitation, the
Employment Agreements, and the Confidentiality and Non-Compete
Agreements;
(c) Buyer's failure to close this transaction as
provided in this Agreement, which does not result from a failure of
one or more of the conditions to Buyer's obligations contained in
Section 4.1 of this Agreement; or
(d) Any acts or events relating to the Purchased Assets
or the liabilities assumed by Buyer pursuant to Section 1.3(a) (to the
extent not resulting from any breach, default or violation occurring,
in whole or in part, on or before the Closing Date) occurring after
the Closing Date, except as otherwise provided in Section 5.2.
5.4 Defense of Claims.
(a) If any party ("INDEMNIFIED PARTY") receives notice
of, or discovers, any claim or the commencement of any action for
which the other party or parties ("INDEMNITOR") is or may be liable
under this Section 5 ("INDEMNIFIED CLAIM"), the Indemnified Party
shall promptly notify the Indemnitor of such claim or action in
writing and shall provide the Indemnitor with copies of any pleadings
or other documents evidencing such Indemnified Claim. The Indemnitor
shall be entitled to participate in the defense of any Indemnified
Claim, and, if it so elects, to assume the defense of the Indemnified
Claim, with counsel reasonably satisfactory to the Indemnified Party.
After written notice from the Indemnitor to the Indemnified Party of
such election to assume the defense, the Indemnitor shall not be
liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the
defense of the Indemnified Claim, other than costs and expenses of the
Indemnified Party incurred at the request of the Indemnitor. The
assumption of the defense of any such Indemnified Claim shall not be
deemed an admission by the Indemnitor that it is liable for any such
Indemnified Claim. Except as otherwise provided in this Agreement,
the Indemnitor may, at its election, settle or compromise any
Indemnified Claim but the Indemnified Party shall not settle or
compromise any Indemnified Claim without the prior consent of the
Indemnitor, unless the Indemnitor shall have failed or refused to
assist the Indemnified Party in the defense of such Indemnified Claim
or shall unreasonably
33
<PAGE> 39
withhold its consent to a proposed settlement or compromise of such
claim. The parties shall use their best efforts to agree on whether
Buyer's Damages or Sellers' Damages exist, and if so, the amount. Any
amounts determined to be owed shall be paid within 30 days after such
determination.
(b) The parties agree to reasonably cooperate with each
other in the defense of claims under this Agreement.
5.5 Limitation of Liability.
(a) The Sellers' and the Members' Limits.
Notwithstanding anything in this Section 5 to the contrary, the
Sellers and the Members shall not be liable to indemnify Buyer (i) for
the first $25,000 in the aggregate of Buyer's Indemnified Claims;
provided that this limitation shall not apply if Buyer's aggregate
Indemnified Claims exceeds $25,000, in which case all of such claims
may be asserted, including the first $25,000, or (ii) with respect to
any of Buyer's Indemnified Claims unless either the Sellers or the
Members shall have received written notice of such indemnification
obligation within two years after the Closing Date, except for the
"Buyer Unlimited Claims" (as defined below), for which there shall be
no time limit other than the applicable statute of limitations. For
purposes of this Agreement, "BUYER UNLIMITED CLAIMS" are any
Indemnified Claims (i) for breach of the Sellers', the Members' or
both or their representations or warranties concerning authority or
title relative to this Agreement, including, without limitation the
representations and warranties contained in Sections 2.1.1, 2.1.3,
2.1.4 and 2.1.8(a), (ii) for breach of the Sellers', the Members' or
both of their representations or warranties contained in Sections
2.1.13, 2.1.15, 2.1.16, 2.1.17, 2.1.18 or 2.1.19, (iii) for breach of
the Sellers', the Members' or both of their covenants or agreements
contained in Sections 3.1.15 or 6.4, and (iv) pursuant to Section
5.2(c) or Section 5.2(e).
(b) Buyer's Limits. Notwithstanding anything in this
Section 5 to the contrary, Buyer shall not be liable to indemnify the
Sellers or the Members (i) for the first $25,000 in the aggregate of
the Sellers' and the Members' Indemnified Claims; provided that this
limitation shall not apply if the Sellers' and the Members' aggregate
Indemnified Claims exceeds $25,000, in which case all of such claims
may be asserted, including the first $25,000, or (ii) with respect to
any of the Sellers' or the Members' Indemnified Claims unless Buyer
shall have received written notice of such indemnification obligation
within two years after the Closing Date, except for the "Sellers
Unlimited Claims" (as defined below), for which there shall be no time
limit other than the applicable statute of limitations. For purposes
of this Agreement, "SELLERS UNLIMITED CLAIMS" are any Indemnified
Claims for breach of Buyer's representations or warranties concerning
authority relative to this Agreement, including, without limitation,
the representations and warranties contained in Sections 2.2.1, 2.2.2
and 2.2.3.
34
<PAGE> 40
5.6 Buyer's Right to Offset.
(a) Offset Right. Buyer shall have the right to offset
any indemnification claims against the Sellers, the Members or any of
Sellers' or the Members' successors or assigns, against the payment of
the Cash Amount payable at the Closing. Such offset amounts shall be
treated as if they were fully paid by Buyer to the Sellers.
(b) Non-Exclusive Remedy. This offset remedy of Buyer
is not exclusive but is cumulative with all other remedies of Buyer
against the Sellers or the Members under this Agreement, and this
remedy does not in any way limit their liability to Buyer under this
Agreement.
6 OTHER COVENANTS AND AGREEMENTS.
6.1 Bulk Transfer Provisions. If the bulk transfer provisions of
the applicable states' Uniform Commercial Code were applicable to the
transactions contemplated by this Agreement, it would be impractical to comply
with such provisions. Accordingly, the Sellers and the Members covenant to
indemnify, defend and hold Buyer and Buyer's Personnel harmless from any claims
and demands of creditors of the Sellers arising out of failure to comply with
the bulk transfer provisions if such provisions would be applicable, except for
claims and demands in connection with the Liabilities; provided that such
exception shall apply only to the extent such Liabilities do not resulting from
any breach, default or violation occurring, in whole or in part, on or before
the Closing Date.
6.2 [RESERVED]
6.3 [RESERVED]
6.4 [RESERVED]
6.5 [RESERVED]
6.6 [RESERVED]
6.7 [RESERVED]
6.8 Further Assurances. At any time from and after the Closing
Date, the Sellers, the Members and Buyer shall execute and deliver any further
instruments or documents and take all further action reasonably requested by
any of the other parties to this Agreement to carry out the transactions
contemplated by this Agreement.
6.9 Brokerage. All negotiations relative to this Agreement and
the transactions contemplated in this Agreement have been carried on by the
parties to this Agreement directly without the intervention of any person, and
the consummation of the transactions under this
35
<PAGE> 41
Agreement will not result in any liability by any party for any finder's fee,
brokerage commission or other similar fee. Each party (the "PARTY") shall pay
or discharge, and shall indemnify, defend and hold the other parties harmless
from and against, any and all claims or liabilities for brokerage or other
commissions or finder's or other fees resulting from any actions of the Party
which are not in accordance with the preceding sentence.
6.10 Expenses. Each party to this Agreement shall pay his, her or
its own expenses incident to this Agreement and the transactions contemplated
in this Agreement, including, without limitation, counsel fees, brokerage,
finder or financial advisor fees and accounting fees, except as provided in
Section 6.11.
6.11 Transfer and Other Taxes. Sales, use, transfer, excise,
recording, documentary and similar taxes applicable to the conveyance or
transfer of the Purchased Assets or the recording or filing of any documents
evidencing such conveyance or transfer, if any, shall be paid by the Sellers,
and evidence of the payment of such taxes shall be furnished to Buyer upon its
request.
6.12 No Disclosures. None of Buyer, the Sellers or the Members
shall make any public disclosure or publicity release pertaining to the
existence or subject matter of this Agreement without the consent of the other
parties; provided, however, that Buyer and its affiliates and their directors,
officers, employees and agents shall be permitted to make such disclosures to
the public, to stock exchanges or to governmental agencies as either of them
deems necessary to comply with any applicable securities laws or other laws.
7 MISCELLANEOUS.
7.1 Notices. Any notice or other communication required or which
may be given under this Agreement shall be in writing and either delivered
personally to the addressee, telegraphed, telecopied or telexed to the
addressee, sent by overnight courier to the addressee or mailed, certified or
registered mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed, telecopied or telexed to the addressee, or, if sent by
overnight courier, one business day after the date so sent, or, if mailed,
three business days after the date of mailing, as follows:
If to the Sellers Rockwell Medical Supply, LLC
or the Members: Rockwell Transportation, LLC
28025 Oakland Oaks
Wixom, MI 48393
Attention:
-----------------------
Dr. Vijay Chilakapati
18100 Parkridge Drive
Riverview, MI 48192
36
<PAGE> 42
Dr. Krishapillai Thavarajah
15 Pinegate Drive
Bloomfield Hills, MI 48304
With a copies to: Burton H. Schwartz, Esq.
Schwartz Law Firm
Suite A
37887 W. Twelve Mile Road
Farmington Hills, Michigan 48331
If to Buyer: Acquisition Partners, Inc.
18640 Mack Avenue
P.O. Box 36940
Grosse Pointe, Michigan 48236
Attention: Gary D. Lewis
With a copies to: Patrick T. Duerr, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226-3583
Any or the foregoing may change its address for notices by notice to the other
parties.
7.2 Entire Agreement. This Agreement, including the exhibits,
schedules, documents, certificates and instruments referred to in this
Agreement, embodies the entire agreement and understanding of the parties to
this Agreement with respect to the subject matter of this Agreement. There are
no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement. This Agreement supersedes all prior agreements, commitments and
understandings, written or oral, between the parties with respect to such
subject matter, and any such prior agreements or understandings are merged into
this Agreement.
7.3 Governing Law and Forum. This Agreement shall be governed by
the laws of the State of Michigan (regardless of the laws that might otherwise
govern under applicable Michigan principles of conflicts of law) as to all
matters, including, but not limited to, matters of validity, construction,
effect, performance and remedies. Each of the parties consents to be subject
to personal jurisdiction of the courts of Michigan, including the federal
courts in Michigan, which shall be the sole and exclusive forum for the
resolution of all disputes under this Agreement and its related documents.
7.4 Attorneys' Fees. If any party commences an action against any
other party to enforce any of the terms, covenants, conditions or provisions of
this Agreement or because of a default by a party under this Agreement, the
prevailing party in any such action shall be entitled
37
<PAGE> 43
to recover its reasonable attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action from the losing
party.
7.5 Counterparts. 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 may be
executed by facsimile signatures.
7.6 Interpretation. The headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. All references to "Sections" and "Exhibits" in this Agreement are,
unless specifically indicated otherwise, references to sections of, and
exhibits to, this Agreement. Whenever the singular is used, the same shall
include the plural and vice versa, where appropriate. Words of any gender
shall include each other gender where appropriate. The Exhibits to this
Agreement are a part of this Agreement as if set forth in full in this
Agreement.
7.7 Severability. If any provision of this Agreement is
determined to be illegal, invalid or unenforceable, such illegality, invalidity
or unenforceability shall have no effect on the other provisions of this
Agreement, which shall remain valid, operative and enforceable. In addition,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
7.8 Waiver and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions of this Agreement may be waived, only by a written instrument signed
by the parties or, in the case of a waiver, by the party waiving compliance.
No delay on the part of any party in exercising any right, power or privilege
under this Agreement shall operate as a waiver of such right, power or
privilege, nor shall any waiver on the part of any party of any right, power or
privilege under this Agreement, nor any single or partial exercise of any
right, power or privilege under this Agreement, preclude any other or further
exercise of such right, power or privilege under this Agreement. The rights
and remedies under this Agreement are cumulative and are not exclusive of any
rights or remedies which any party may otherwise have at law or in equity.
Subject to Sections 2.1.27 and 2.2.5, the rights and remedies of any party
arising out of, or otherwise in respect of, any inaccuracy in, or breach of,
any representation, warranty, covenant or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant, agreement or Exhibit contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
7.9 Binding Effect; Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties to this Agreement and
their respective permitted successors and assigns; provided, that the Sellers
and the Members may not assign or transfer any of their
38
<PAGE> 44
rights or delegate any of their obligations under this Agreement, and any
purported assignment or transfer by the Sellers or the Members shall be void;
and provided, further, that Buyer may assign its rights and delegate its duties
under this Agreement to an affiliate of Buyer.
8 GLOSSARY. The following words and phrases are defined in the
following Sections of this Agreement:
<TABLE>
<CAPTION>
Word or Phrase Section
-------------- -------
<S> <C>
Agreement . . . . . . . . . . . . . . . . . . . . . . . . Introductory Paragraph
Assumed Agreements . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Benefit Rules . . . . . . . . . . . . . . . . . . . . . . Section 2.1.17(b)
Business . . . . . . . . . . . . . . . . . . . . . . . . . Recital A
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . Introductory Paragraph
Buyer Unlimited Claims . . . . . . . . . . . . . . . . . . Section 5.5(a)
Buyer's Damages . . . . . . . . . . . . . . . . . . . . . Section 5.2
Buyer's Personnel . . . . . . . . . . . . . . . . . . . . Section 5.2
Cash Amount . . . . . . . . . . . . . . . . . . . . . . . Section 1.2.1(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.17(b)
Confidentiality and Non-Compete Agreements . . . . . . . . Section 3.1.12
Contracts . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.14
Environmental Audit . . . . . . . . . . . . . . . . . . . Section 3.1.1(e)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.17(a)
Exceptions . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.8(a)
Financial Statements . . . . . . . . . . . . . . . . . . . Section 2.1.6(a)
Furniture and Fixtures . . . . . . . . . . . . . . . . . . Section 1.1(c)
Hazardous Substance . . . . . . . . . . . . . . . . . . . Section 2.1.18(b)
Indemnified Claim . . . . . . . . . . . . . . . . . . . . Section 5.4
Indemnified Party . . . . . . . . . . . . . . . . . . . . Section 5.4
Indemnitor . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4
Intangibles . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.11(a)
Intellectual Property . . . . . . . . . . . . . . . . . . Section 1.1(g)
Interim Financial Statements . . . . . . . . . . . . . . . Section 2.1.6(b)
Inventories . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(d)
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.18(b)
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Liabilities . . . . . . . . . . . . . . . . . . . . . . . Section 1.2.1(a)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.8(a)
Machinery and Equipment . . . . . . . . . . . . . . . . . Section 1.1(b)
Members . . . . . . . . . . . . . . . . . . . . . . . . . Introductory Paragraph
Party . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.9
Permits . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.21
</TABLE>
39
<PAGE> 45
<TABLE>
<CAPTION>
Word or Phrase Section
-------------- -------
<S> <C>
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.17(a)
Property . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.18(b)
Purchase Orders . . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . Section 1.2.1
Purchased Assets . . . . . . . . . . . . . . . . . . . . . Section 1.1
RAP Property . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.18(a)
Real Property . . . . . . . . . . . . . . . . . . . . . . Section 1.1(a)
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . Introductory Paragraph
Sellers Unlimited Claims . . . . . . . . . . . . . . . . . Section 5.5(b)
Sellers' Damages . . . . . . . . . . . . . . . . . . . . . Section 5.3
Sellers' Personnel . . . . . . . . . . . . . . . . . . . . Section 5.3
Supply Company . . . . . . . . . . . . . . . . . . . . . . Introductory Paragrapy
Title Policy . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Transportation Company . . . . . . . . . . . . . . . . . . Introductory Paragraph
Underground Tanks . . . . . . . . . . . . . . . . . . . . Section 2.1.18(c)
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(f)
</TABLE>
40
<PAGE> 46
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth in the introductory paragraph of this Agreement.
BUYER: ACQUISITION PARTNERS, INC.
By: /s/ Gary D. Lewis
----------------------------------
Its: Chairman of the Board
-------------------------
THE SELLERS: ROCKWELL MEDICAL SUPPLIES, LLC
By: /s/ Krishnapillai Thavarajah
----------------------------------
Its: Member
-------------------------
ROCKWELL TRANSPORTATION, LLC
By: /s/ Krishnapillai Thavarajah
----------------------------------
Its: Member
-------------------------
THE MEMBERS:
/s/ Vijay Kumar Chilakapati
----------------------------------
VIJAY KUMAR CHILAKAPTI, M.D.
/s/ Krishnapillai Thavarajah
----------------------------------
KRISHNAPILLAI THAVARAJAH, M.D.
/s/ Robert L. Chioini
-----------------------------------
ROBERT L. CHIOINI
T.K. INVESTMENT COMPANY
41
<PAGE> 47
CHILAKAPATI FAMILY LIMITED
PARTNERSHIP
By: /s/ Vijay Kumar Chilakapati
----------------------------------
Its: General Partner
------------------------
THAVARAJAH FAMILY LIMITED
PARTNERSHIP
By: /s/ Krishnapillai Thavarajah
----------------------------------
Its: General Partner
------------------------
42
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
1.1(a) Lease to a Seller, as tenant
1.1(b) Machinery and Equipment
1.1(c) Furniture and Fixtures
1.1(d) Inventories
1.1(f) Vehicles
1.1(g) Intellectual Property
1.2.4 Allocation of Purchase Price
2.1.2 Affiliates
2.1.4 Consents and Approvals
2.1.6(a) Financial Statements
2.1.6(b) Interim Financial Statements
2.1.7 Changes Since September 30, 1996
2.1.8(a) Exceptions to Title
2.1.8(b) Exceptions to Good Operating Condition
2.1.9(a) Real Property
2.1.9(b)(I) Real Property Leases
2.1.9(b)(II) Personal Property Leases
2.1.11(a) Patents, Trademarks, etc. and Infringements
2.1.12(a) Liabilities
2.1.12(b) Powers of Attorney; Guarantees
2.1.14 Contracts
2.1.15 Tax Audits
2.1.16 Litigation
2.1.17 ERISA Plans
2.1.18(a) Environmental Permits
2.1.18(b) Property Used in Connection With Hazardous Waste
2.1.18(c) Underground Tanks
2.1.18(d) Environmental Violations
2.1.19 Labor Claims
2.1.21 Licenses and Permits
2.1.25 Related Party Transactions
2.1.26 Competing Businesses
3.1.12 Form of Confidentiality and Non-Compete Agreement
</TABLE>
43
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ("FIRST AMENDMENT") is made
as of January 31, 1997 by and among ROCKWELL MEDICAL SUPPLIES, LLC, a Michigan
limited liability company d/b/a Rockwell Medical Supply (the "SUPPLY COMPANY"),
ROCKWELL TRANSPORTATION, LLC, a Michigan limited liability company (the
"TRANSPORTATION COMPANY" and, together with the Supply Company, the "SELLERS"),
T.K. INVESTMENT COMPANY, a Michigan partnership, which is owned equally by the
family partnerships, CHILAKAPTI FAMILY LIMITED PARTNERSHIP, THAVARAJAH FAMILY
LIMITED PARTNERSHIP (the "FAMILY PARTNERSHIPS"), the respective general
partners of which are VIJAY KUMAR CHILAKAPTI, M.D. and KRISHNAPILLAI
THAVARAJAH, M.D. and ROBERT L. CHIOINI, (T.K. INVESTMENT COMPANY, THE FAMILY
PARTNERSHIPS, VIJAY KUMAR CHILAKAPTI, M.D., KRISHNAPILLAI THAVARAJAH, M.D. and
ROBERT L. CHIOINI are hereinafter referred to individually as a "MEMBER" and
jointly and severally as the "MEMBERS"), and ACQUISITION PARTNERS, INC., a
Michigan corporation ("BUYER").
RECITALS
A. On November 1, 1996, the Sellers, the Members and Buyer entered into an
Asset Purchase Agreement (the "PURCHASE AGREEMENT") pursuant to which Buyer
agreed to purchase and the Sellers agreed to sell substantially all of the
Sellers' assets upon the terms and conditions set forth in the Purchase
Agreement.
B. The parties to the Purchase Agreement believe it is in their respective
best interests and desire to amend the terms and conditions of the Purchase
Agreement as set forth in this First Amendment.
THEREFORE, the parties agree as follows:
1. Amendment to Section 1.2.1. Section 1.2.1 of the Agreement is hereby
amended by the deletion of the defined term (the "CASH AMOUNT") in the second
line of Section 1.2.1(b) and replacement of such term with the defined term
(the "PAYMENT AMOUNT").
2. Amendment to Section 1.2.2. Section 1.2.2 of the Purchase Agreement is
hereby amended by the deletion of Section 1.2.2 in its entirety and by the
replacement of Section 1.2.2 with the following:
"1.2.2 Payment of the Purchase Price. At the Closing, the Purchase
Price for the Purchased Assets shall be paid as follows:
(a) Buyer shall pay to the Supply Company an aggregate of $150,000
in cash (the "CASH AMOUNT"),
<PAGE> 2
(b) Buyer shall pay to NBD Bank ("NBD") on behalf of the Supply
Company $376,976.56 in cash (the "NBD AMOUNT"), which represents that
amount which will be outstanding to NBD by the Supply Company under loan
#0037028 made by NBD to Supply Company, and
(c) Buyer shall pay the remainder of the Purchase Price by delivery
to the Supply Company of a 8.5% promissory note (the "NOTE") having a
principal face amount equal to the Remaining Balance (as defined below) and
providing for repayment in full of the principal amount plus all accrued
interest on July 31, 1997 (the "MATURITY DATE"), in the form attached as
Exhibit 1.2.2(c)I; provided, however, that the Note shall be subject to
prepayment in accordance with Section 6.2 below. The obligations of Buyer
under the Note shall be secured by a pledge of all of the shares of capital
stock of Buyer (the "PLEDGED STOCK") owned by Gary D. Lewis ("MR. LEWIS"),
Michael J. Xirinachs ("MR. XIRINACHS") and Robert L. Chioini ("MR.
CHIOINI"), pursuant to a share pledge and escrow agreement in the form
attached as Exhibit 1.2.2(c)II to this Agreement (the "PLEDGE AGREEMENT").
For purposes of this Agreement, the "REMAINING BALANCE" shall mean an
amount calculated as follows: the Payment Amount, less the Cash Amount and
less the NBD Amount."
3. Amendment to Section 1.2.3. Section 1.2.3 of the Agreement is hereby
amended by the deletion of "$150,000" in the third line of such Section and the
replacement of such deleted number with "$300,000" and by deletion of "Cash
Amount" in the seventh, eighth and eleventh lines of such Section and the
replacement of such deleted language with "Payment Amount". In addition, the
following sentence shall be inserted between the first and second sentences of
Section 1.2.3: "Any amount contributed to the Sellers pursuant to the preceding
sentence shall bear interest at the rate of 8.5% per annum from the date of
contribution through the Closing Date."
4. Amendment to Section 1.4. Section 1.4 of the Agreement is hereby amended
by the deletion of "December 16, 1996" in the third line of such Section and the
replacement of such deleted language with "February 4, 1997".
5. Amendment to Section 2.1.6. Section 2.1.6 of the Agreement is hereby
amended by the deletion of Section 2.1.6(a) of the Agreement in its entirety.
Section 2.1.6(b) of the Agreement is hereby amended by renumbering such Section
as "Section 2.1.6(a)", by the deletion of "September 30, 1996" in the second
line of such Section and the replacement of such deleted language with "October
31, 1996" and by the deletion of "nine" in the third and sixth lines of such
Section and the replacement of such deleted language with "ten".
6. Deletion of References to "Financial Statements". The Agreement is hereby
amended by the deletion of the following: the language "the Financial
Statements and" in the twelfth line of Section 2.1.15(a) and in the seventh and
eighth lines of Section 2.1.17(c); and the language "the Financial Statements,"
in the third line of Section 2.1.27
-2-
<PAGE> 3
7. Amendments to Change References. The Agreement is hereby amended by
changing all references in the Agreement to "September 30, 1996" to the date
"October 31, 1996".
8. Amendment to Section 3.1.9. Section 3.1.9 of the Agreement is hereby
amended by the addition of the following proviso to the end of the first
sentence of such Section: ";provided, however, that Buyer shall be responsible
for obtaining the consent of the landlord under the Lease to the assignment of
the Lease to Buyer at the Closing."
9. Amendment to Section 4.1.1. Section 4.1.1 of the Agreement is hereby
amended by the deletion of "Cash Amount" in the second line of such Section and
the replacement of such deleted language with "Payment Amount".
10. Amendment to Section 4.1.6. Section 4.1.6 of the Agreement is hereby
amended by the addition of the following exception to the end of such Section:
", except for the consent of the landlord under the Lease, which is the
responsibility of Buyer to obtain."
11. Amendment to Section 4.2. Section 4.2 of the Agreement is hereby amended
by the addition of the following sub-Sections to such Section:
"4.2.6 Consent to Assign Lease and Release of Guaranty. Buyer shall
have obtained the consent of the landlord under the Lease to the assignment
of the Lease from Supply Company to Buyer upon consummation of the
transactions contemplated by this Agreement. Buyer also shall have
obtained the termination and release by the landlord of the guaranty
pursuant to which certain of the members have guaranteed the obligations of
Supply Company under the Lease.
4.2.7 Pledge Agreement. The Pledge Agreement shall have been
executed and delivered by Mr. Lewis, Mr. Xirinachs and Mr. Chioini."
12. Amendment to Section 5.6(a). Section 5.6(a) of the Agreement is hereby
amended by the deletion of "Cash Amount" in the third line of Section 5.6(a)
and the replacement of such deleted language with "Payment Amount".
13. Amendment to Section 6. Section 6 of the Agreement is hereby amended by
the addition of the following sub-Sections to such Section:
"6.2 Prepayment of the Note. Buyer shall make mandatory prepayments of the
Note on a monthly basis from the Closing Date through the Maturity Date
determined as follows:
(a) Buyer shall pay 50% of the net cash proceeds (after deducting
all fees and expenses incurred in generating such cash proceeds) of all
issuances of capital stock of Buyer received by Buyer (the "SUBSCRIPTION
PAYMENTS") during the period from the Closing Date through the Maturity
Date (the "PREPAYMENT PERIOD").
-3-
<PAGE> 4
(b) Mr. Lewis shall provide to the legal counsel of the Sellers,
within five days of the beginning of each calendar month during the
Prepayment Period, a notarized affidavit certifying as to the amount of
Subscription Payments received by Buyer during the preceding calendar
month, or such portion of a calendar month in cases when only a portion of
the calendar month was within the Prepayment Period. If such affidavit
indicates that Subscription Payments were received by Buyer during the
preceding calendar month, Buyer shall make its required prepayment of the
Note pursuant to Section 6.2(a) above, by delivery of a check to the Escrow
Agent (as defined in the Pledge Agreement) concurrently with the delivery
of the affidavit. The Escrow Agent will remit such payment to the Supply
Company and release certain of the Pledge Stock to the pledgors thereof, in
accordance with the Escrow Agreement.
6.3 Post-Closing Employee Salaries. Upon consummation of the Closing and
during the Prepayment Period, Buyer shall not (a) increase the consulting
fee payable to Wall Street Partners, Inc., a Michigan corporation, in
excess of $25,000 per month, or (b) increase the compensation of any
current employee of Buyer in excess of such employee's compensation level
existing on the Closing Date, except that Buyer may increase the
compensation payable to Donald Donald and Ruth Homsher by up to $5,000 per
year per such employee.
6.4 Access to Books and Records. Beginning July 1, 1997 and continuing
through the expiration of the Election Period (as defined in the Pledge
Agreement), the Supply Company and its representatives and agents, at
reasonable times and upon reasonable notice to Buyer and at no cost to
Buyer, shall have access to the books and records of Buyer for the purpose
of ascertaining Buyer's financial condition".
14. The Purchase Agreement. The term "Agreement" as used in the Purchase
Agreement shall hereafter mean the Purchase Agreement as amended by this First
Amendment and shall continue in full force and effect in accordance with the
terms thereof and hereof. The Exhibits referenced in this First Amendment
which were not a part of the Agreement when originally executed are attached to
this First Amendment and shall be deemed a part of the Agreement. In the event
of any inconsistency or conflict between this First Amendment and the Purchase
Agreement, the terms and provisions of this First Amendment shall govern.
15. Governing Law and Forum. This First Amendment shall be governed by the
laws of the State of Michigan (regardless of the laws that might otherwise
govern under applicable Michigan principles of conflicts of law) as to all
matters, including, but not limited to, matters of validity, construction,
effect, performance and remedies. Each of the parties consents to be subject
to personal jurisdiction of the courts of Michigan, including the federal
courts of Michigan, which shall be the sole and exclusive forum for the
resolution of all disputes under this First Amendment.
-4-
<PAGE> 5
16. Counterparts. This First Amendment 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 First Amendment
amy be executed by facsimile signatures.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date set forth in the introductory paragraph of this First Amendment.
BUYER: ROCKWELL MEDICAL TECHNOLOGIES, INC.
(f/k/a Acquisition Partners, Inc.)
By: /s/ Gary D. Lewis
-------------------------------------
Its: President
---------------------------
SELLERS: ROCKWELL MEDICAL SUPPLIES, LLC
By: /s/ Robert L. Chioini
-------------------------------------
ROBERT L. CHIOINI, Member
By: T. K. INVESTMENT COMPANY, Member
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP
By: /s/ Vijay Kumar Chilakapati
----------------------------
Its: General Partner
----------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP
By: /s/ Krishnapillai Thavarajah
----------------------------
Its: General Partner
---------------------
(Signatures continued on next page.)
-5-
<PAGE> 6
(Signatures continued from previous page.)
ROCKWELL TRANSPORTATION, LLC
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapati
--------------------------------
Its: General Partner
----------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Krishnapillai Thavarajah
---------------------------------
Its: General Partner
-----------------------
THE MEMBERS: /s/ Vijay Kumar Chilakapati,
---------------------------------
VIJAY KUMAR CHILAKAPTI, M.D.
/s/ Krishnapillai Thavarajah
---------------------------------
KRISHNAPILLAI THAVARAJAH, M.D.
/s/ Robert L. Chioini
---------------------------------
ROBERT L. CHIOINI
T. K. INVESTMENT COMPANY
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapati
----------------------------------
Its: General Partner
--------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Krishnapillai Thavarajah
----------------------------------
Its: General Partner
--------------------
-6-
<PAGE> 1
EXHIBIT 10.6
SECOND AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT ("SECOND AMENDMENT")
is made as of February 19, 1997 by and among ROCKWELL MEDICAL SUPPLIES, LLC, a
Michigan limited liability company d/b/a Rockwell Medical Supply (the "SUPPLY
COMPANY"), ROCKWELL TRANSPORTATION, LLC, a Michigan limited liability company
(the "TRANSPORTATION COMPANY" and, together with the Supply Company, the
"SELLERS"), T.K. INVESTMENT COMPANY, a Michigan partnership, which is owned
equally by the family partnerships, CHILAKAPTI FAMILY LIMITED PARTNERSHIP,
THAVARAJAH FAMILY LIMITED PARTNERSHIP (the "FAMILY PARTNERSHIPS"), the
respective general partners of which are VIJAY KUMAR CHILAKAPTI, M.D. and
KRISHNAPILLAI THAVARAJAH, M.D. and ROBERT L. CHIOINI, (T.K. INVESTMENT COMPANY,
THE FAMILY PARTNERSHIPS, VIJAY KUMAR CHILAKAPTI, M.D., KRISHNAPILLAI THAVARAJAH,
M.D. and ROBERT L. CHIOINI are hereinafter referred to individually as a
"MEMBER" and jointly and severally as the "MEMBERS"), and ACQUISITION PARTNERS,
INC., a Michigan corporation ("BUYER").
RECITALS
A. On November 1, 1996, the Sellers, the Members and Buyer entered
into an Asset Purchase Agreement, which the parties thereto amended on January
31, 1997 pursuant to the First Amendment to Asset Purchase Agreement (as
amended, the "PURCHASE AGREEMENT"), pursuant to which Buyer agreed to purchase
and the Sellers agreed to sell substantially all of the Sellers' assets upon the
terms and conditions set forth in the Purchase Agreement.
B. The parties to the Purchase Agreement believe it is in their
respective best interests and desire to further amend the terms and conditions
of the Purchase Agreement as set forth in this First Amendment.
THEREFORE, the parties agree as follows:
1. Amendment to Section 1.2.2(c).
(a) Section 1.2.2(c) of the Purchase Agreement is hereby amended by
the deletion of Section 1.2.2(c) in its entirety and by the replacement of
Section 1.2.2(c) with the following:
"(c) Buyer will pay the remainder of the Purchase Price by
delivery to the Supply Company of a 8.5% promissory note (the "NOTE")
having a principal face amount equal to the Remaining Balance (as
defined below) and providing for repayment of $500,000 on or before
May 19, 1997 which payment will include all accrued interest to the
payment date with any excess charged to principal and the remaining
principal balance plus all accrued interest on January 31, 1998 (the
"MATURITY DATE"), in the form
<PAGE> 2
attached as Exhibit 1.2.2(c)I; provided, however, that the Note
shall be subject to prepayment in accordance with Section 6..2
below. The obligations of Buyer under the Note shall be secured
by a pledge of all of the shares of capital stock of Buyer (the
"PLEDGED STOCK") owned by Gary D. Lewis ("MR. LEWIS"), Michael J.
Xirinachs ("MR. XIRINACHS") and Robert L. Chioini ("MR.
CHIOINI"), pursuant to a share pledge and escrow agreement in the
form attached as Exhibit 1.2.2(c)II to this Agreement (the
"PLEDGE AGREEMENT"). For purposes of this Agreement, the
"REMAINING BALANCE" shall mean an amount calculated as follows:
the Payment Amount, less the Cash Amount and less the NBD
Amount."
(b) Exhibit 1.2.2(c)I of the Purchase Agreement is hereby
replaced with the Exhibit 1.2.2(c)I attached to this Second Amendment.
2. Amendment to Section 1.4. Section 1.4 of the Agreement is hereby
amended by the deletion of "February 4, 1997" in the third line of such Section
and the replacement of such deleted language with "February 19, 1997".
3. Amendment to Section 6.2. Section 6.2 of the Agreement is hereby
amended by the deletion of Section 6.2 in its entirety and by the replacement of
Section 6.2 with the following:
"6.2 Prepayment of the Note. Buyer will pay 50% of the net cash
proceeds (after deducting all fees and expenses incurred in
generating such cash proceeds) of all issuances of capital stock
of Buyer received by Buyer (the "SUBSCRIPTION PAYMENTS") during
the period from the Closing Date through the Maturity Date (the
"PREPAYMENT PERIOD"), to the extent that Buyer receives in excess
of $1,750,000 of Subscription Payments during the Prepayment
Period."
4. Amendment to Section 6.4. Section 6.4 of the Agreement is hereby
amended by the deletion of Section 6.4 in its entirety and by the replacement of
Section 6.4 with the following:
"6.4 Access to Books and Records. Beginning January 1, 1998 and
continuing through the Election Period (as defined in the Pledge
Agreement), the Supply Company and its representatives and
agents, at reasonable times and upon reasonable notice to Buyer
and at no cost to Buyer, shall have access to the books and
records of Buyer for the purpose of ascertaining Buyer's
financial condition."
-2-
<PAGE> 3
5. The Purchase Agreement. The term "Agreement" as used in the Purchase
Agreement (as defined in Recital A above) shall hereafter mean the Purchase
Agreement as amended by this Second Amendment and shall continue in full force
and effect in accordance with the terms thereof and hereof. In the event of
any inconsistency or conflict between this Second Amendment and the Purchase
Agreement, the terms and provisions of this Second Amendment shall govern.
6. Governing Law and Forum. This Second Amendment shall be governed by the
laws of the State of Michigan (regardless of the laws that might otherwise
govern under applicable Michigan principles of conflicts of law) as to all
matters, including, but not limited to, matters of validity, construction,
effect, performance and remedies. Each of the parties consents to be subject
to personal jurisdiction of the courts of Michigan, including the federal
courts of Michigan, which shall be the sole and exclusive forum for the
resolution of all disputes under this Second Amendment.
7. Counterparts. This Second Amendment 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 Second Amendment
may be executed by facsimile signatures.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the
date set forth in the introductory paragraph of this Second Amendment.
BUYER: ROCKWELL MEDICAL TECHNOLOGIES, INC.
(f/k/a Acquisition Partners, Inc.)
By: /s/ Gary D. Lewis
------------------------------
Its: Chairman of the Board
-------------------------
THE SELLERS: ROCKWELL MEDICAL SUPPLIES, LLC
By: /s/ Robert L. Chioini
-----------------------------
ROBERT L. CHIOINI, Member
By: T. K. INVESTMENT COMPANY, Member
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP
By: /s/ Vijay Kumar Chilakapati
----------------------------
Its: General Partner
-----------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP
By: /s/ Krishnapillai Thavarajah
-----------------------------
Its: General Partner
--------------------
(Signatures continued on next page.)
-4-
<PAGE> 5
(Signatures continued from previous page.)
ROCKWELL TRANSPORTATION, LLC
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapati
------------------------------
Its: General Partner
------------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Krishnapillai Thavarajah
------------------------------
Its: General Partner
------------------------
THE MEMBERS: /s/ Vijay Kumar Chilakapati
----------------------------------
VIJAY KUMAR CHILAKAPTI, M.D.
/s/ Krishnapillai Thavarajah
----------------------------------
KRISHNAPILLAI THAVARAJAH, M.D.
/s/ Robert L. Chioini
----------------------------------
ROBERT L. CHIOINI
T. K. INVESTMENT COMPANY
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapati
----------------------------
Its: General Partner
-----------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Krishnapillai Thavarajah
----------------------------
Its: General Partner
-----------------------
-5-
<PAGE> 1
EXHIBIT 10.7
ROCKWELL MEDICAL TECHNOLOGIES, INC.
28025 OAKLAND OAKS
WIXOM, MICHIGAN 48393
April 4, 1997
Rockwell Medical Supplies, LLC
Rockwell Transportation, LLC
T.K. Investment Company
Chilakapati Family Limited Partnership
Thavarajah Family Limited Partnership
Vijay Kumar Chilakapati, M.D.
Krishnapillai Thavarajah, M.D.
Robert L. Chioini
c/o Schwartz Law Firm
37887 W. Twelve Mile Road, Suite A
Farmington Hills, Michigan 48331
Gentlemen:
Reference is made to that certain Asset Purchase Agreement, dated as
of November 1, 1996, as amended on January 31, 1997 and on February 19, 1997
(as amended, the "Asset Purchase Agreement"), by and among Rockwell Medical
Technologies, Inc., a Michigan corporation, and the various addressees of this
letter agreement. Capitalized terms used in this letter agreement and not
otherwise defined shall have the meanings set forth in the Asset Purchase
Agreement.
As you know, Buyer is in the process of engaging an investment banking
firm to complete a private placement of its securities and to engage in an
initial public offering of Buyer's securities. In order to facilitate the
initial public offering, the parties to this letter have agreed as follows:
1. Upon receipt of the $500,000 prepayment of the Note, the
Supply Company shall convert the remaining outstanding balance under the Note
into shares of Non-Voting Preferred Stock of Buyer, in accordance with the
terms of the Term Sheet attached to this letter agreement (the "Conversion").
The terms of the Term Sheet are incorporated by reference into this letter
agreement.
2. Concurrently with the Conversion, the Note shall be cancelled
and returned by the Supply Company to Buyer, the Pledge Agreement shall be
deemed terminated and the Escrow Agent (as defined under the Escrow Agreement)
shall deliver the Pledged Stock to the escrow agent under the escrow agreement
referred to under paragraph II.C. of the Term Sheet.
<PAGE> 2
3. The parties to this letter agreement shall execute such
agreements, documents, instruments and certificates as are necessary or
adviseable to carry out the terms of this letter agreement and to effect the
Conversion and the other transactions related thereto.
4. Buyer shall reimburse the Supply Company for up to $1,000 of
legal fees and expenses incurred by the Supply Company in connection with the
transaction restructuring contemplated by this letter agreement upon proof of
payment of such fees and expenses.
5. Except as amended herein, the Asset Purchase Agreement will
remain in full force and effect.
If you are in agreement with the foregoing, please acknowledge your
agreement by signing in the space provided below.
Very truly yours,
ROCKWELL MEDICAL TECHNOLOGIES, INC.
By: /s/ Robert L. Chioini
-----------------------------------
Its: President
--------------------------------
/s/ Gary D. Lewis
--------------------------------------
Gary D. Lewis
/s/ Michael J. Xirinachs
--------------------------------------
Michael J. Xirinachs
Acknowledge and Agreed:
ROCKWELL MEDICAL SUPPLIES, LLC
By: /s/ Robert L. Chioini
--------------------------------------------------
ROBERT L. CHIOINI, Member
By: T. K. INVESTMENT COMPANY, Member
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP
By: /s/ Vijay Kumar Chilakapati
------------------------------------------
Its: General Partner
--------------------------------
[Signatures continued on next page]
2
<PAGE> 3
[Signatures continued from previous page]
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP
By: /s/ Krishnapillai Thavarajah
------------------------------------------
Its: General Partner
--------------------------------
ROCKWELL TRANSPORTATION, LLC
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapti
------------------------------------------
Its: General Partner
--------------------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Krishnapillai Thavarajah
------------------------------------------
Its: General Partner
--------------------------------
T. K. INVESTMENT COMPANY
By: CHILAKAPTI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapti
-----------------------------------------------
Its: General Partner
--------------------------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Krishnapillai Thavarajah
-----------------------------------------------
Its: General Partner
--------------------------------------
[Signaures continued on next page]
3
<PAGE> 4
[Signatures continued from previous page]
/s/ Vijay Kumar Chilakapati
- -----------------------------------------
VIJAY KUMAR CHILAKAPTI, M.D.
/s/ Krishnapillai Thavarajah
- -----------------------------------------
KRISHNAPILLAI THAVARAJAH, M.D.
/s/ Robert L. Chioini
- -----------------------------------------
ROBERT L. CHIOINI
CHILAKAPTI FAMILY LIMITED
PARTNERSHIP
By: /s/ Vijay Kumar Chilakapati
----------------------------
Its: General Partner
-------------------
THAVARAJAH FAMILY LIMITED
PARTNERSHIP
By: /s/ Krishnapillai Thavarajah
----------------------------
Its: General Partner
-------------------
4
<PAGE> 5
TERM SHEET
RESTRUCTURING OF ROCKWELL PROMISSORY NOTE
I. Current Structure of Outstanding Debt:
A. Promissory Note in the amount of $1,916,664.17.
B. Prepayment of $500,000 under the Note to occur on or before May 19,
1997.
C. The Promissory Note is secured by a pledge of 2,000,000 shares of
Common Stock owned by Mr. Lewis, Mr. Xirinachs and Mr. Chioini (the
"Principal Shareholders"). Pledged shares are to be released pro
rata as payments under the Note are received.
II. Proposed Restructured Deal:
A. Concurrently with the receipt by the Supply Company of the $500,000
prepayment under the Promissory Note, the Promissory Note will be
cancelled and shares of Non-Voting Preferred Stock of Buyer, $1.00
par value, will be issued to the Supply Company at the rate of 1
share for each $1.00 of outstanding balance owed under the
Promissory Note. The Preferred Stock will contain a 8.5%
cumulative dividend.
B. Buyer will have an obligation to redeem the outstanding shares of
Preferred Stock (at a redemption price of $1.00 per share plus any
accrued but unpaid dividends) no later than January 31, 1998 (the
"Redemption Date"). Buyer's obligation to redeem the shares of
Preferred Stock will be guaranteed, on a non-recourse basis, by the
Principal Shareholders pursuant to a guaranty to be entered into by
each of the Principal Shareholders (the "Guaranty"). The Guaranty
will be secured by the pledge of an amount of shares of Common
Stock owned by the Principal Shareholders (the "Pledged Shares")
determined by the following formula:
PLEDGED SHARES = (2,000,000 X (CA / 1,916,664.47)),
where CA = the amount outstanding under the Promissory Note at
the time of cancellation.
C. The Pledged Shares will be held by an escrow agent ("Escrow
Agent") satisfactory to the Supply Company and the Principal
Shareholders in accordance with an escrow agreement (the
"Escrow Agreement") containing terms which are similar to the
existing escrow agreement among the parties and which is in a
form reasonably satisfactory to the Principal Shareholders and
the Supply Company.
<PAGE> 6
D. Upon the redemption of all or any portion of the Preferred
Stock, the Pledged Shares shall be released to the Principal
Shareholders on a pro rata basis based upon the number of
shares of Preferred Stock being redeemed versus the number of
shares of Preferred Stock originally issued to the Supply
Company (e.g., if Buyer redeems 50% of the Preferred Stock
issued to the Supply Company, the Escrow Agent shall release
50% of the Pledged Shares to the Principal Shareholders).
E. In the event that Buyer fails to redeem the outstanding shares
of Preferred Stock on the Redemption Date, the Supply Company
shall have a period of 45 days following the Redemption Date
(the "Election Period") to elect either (i) to exercise its
rights under the Guaranty and the Escrow Agreement to retain
the Pledged Shares which remain held by the Escrow Agent
(other than Pledged Shares required to be released to the
Principal Shareholders pursuant to D. above) in full
satisfaction and discharge of the Guaranty and Buyer's
obligation to redeem the Preferred Stock, or (ii) to terminate
its rights under the Guaranty and to relinquish and terminate
its security interest in the Pledged Shares and to proceed
against Buyer to collect the outstanding redemption payment.
Buyer shall make such election by delivery to the Escrow
Agent, Buyer and the Principal Shareholders of written notice
on or prior to the expiration of the Election Period
specifying which remedy it has elected (the "Election
Notice"). If the Supply Company fails to deliver such
Election Notice as provided in the preceding sentence on or
prior to the expiration of the Election Period, the Supply
Company shall be deemed to have elected the remedy provided in
clause (ii) above. During the Election Period and prior to
the date on which the applicable parties receive the Election
Notice, Buyer shall have the right to cure the failure to make
the required redemption payment by payment of the redemption
amount owing in respect of the Preferred Stock. Upon receipt
of such payment, Escrow Agent shall release the Pledged Shares
to the Principal Shareholders and remit such payment to the
Supply Company.
F. In addition to the mandatory redemptions set forth above,
Buyer will have the right to redeem additional shares of
Preferred Stock at any time prior to the Redemption Date.
-2-
<PAGE> 1
EXHIBIT 10.8
SHARE PLEDGE AND ESCROW AGREEMENT
THIS SHARE PLEDGE AND ESCROW AGREEMENT (this "Agreement"), dated as of July
22, 1997, is made by and among GARY D. LEWIS ("Mr. Lewis"), MICHAEL J. XIRINACHS
("Mr. Xirinachs"), ROBERT L. CHIOINI ("Mr. Chioini" and together with Mr. Lewis
and Mr. Xirinachs, the "Pledgors"), ROCKWELL MEDICAL SUPPLIES, LLC, a Michigan
limited liability company ("Creditor"), ROCKWELL MEDICAL TECHNOLOGIES, INC., a
Michigan corporation (the "Company") and HONIGMAN MILLER SCHWARTZ AND COHN
("Escrow Agent").
RECITALS:
A. Pledgors are the legal and beneficial owners of an aggregate of
2,000,000 shares of the issued and outstanding common stock ("Common Stock") of
the Company.
B. Pursuant to an Asset Purchase Agreement dated as of November 1, 1996,
as amended (the "Asset Purchase Agreement"), by and among Creditor,
Transportation Company (as defined therein), the Family Partnerships (as defined
therein), the Members (as defined therein) and the Company, the Company has
purchased substantially all of Creditor's and the Transportation Company's
assets (the "Purchase Transaction").
C. In connection with the Purchase Transaction and pursuant to the terms
of a Letter Agreement, dated as of April 4, 1997 among the parties to the Asset
Purchase Agreement, the Company has issued to Creditor 1,416,664 Series A
Preferred Shares, $1.00 par value per share (the "Preferred Shares"). Under the
terms of the Company's Articles of Incorporation, the Company has an obligation
to redeem the outstanding Preferred Shares, at a redemption price of $1.00 per
share plus accumulated and unpaid dividends, on January 31, 1998 (the "Mandatory
Redemption Date").
D. Pursuant to the terms of a Non-Recourse Guaranty (the "Guaranty"),
dated as of the date hereof, made by the Pledgers in favor of Creditor, the
Pledgors have guaranteed, on a non-recourse basis, the obligation of the Company
to redeem the Series A Preferred Shares on or before the Mandatory Redemption
Date. The Pledgors desire to pledge 1,478,260 shares (the "Shares") of Common
Stock owned by them (554,348 of which Shares are owned by Mr. Lewis, 554,347 of
which Shares are owned by Mr. Xirinachs, and 369,565 of which Shares are owned
by Mr. Chioini).
E. The Pledgors and Creditor desire to have Escrow Agent hold the Shares
as escrow agent, to receive Redemption Payments (as defined in Section 8) as
agent for Creditor, and to release the Shares in accordance with the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 2
1. Definitions. In addition to the terms defined above or elsewhere in
this Agreement, the following terms shall have the following meanings, unless
the context otherwise requires:
"Collateral" shall have the meaning assigned to it in Section 2(c).
"Proceeds" shall have the meaning assigned to it under the UCC and, in
any event, shall include, but not be limited to, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the Pledgors from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to the Pledgors from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority) and (iii) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, including, without
limitation, any and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of, or in
exchange for, any of the Shares.
"UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in the State of Michigan.
2. Pledgor's Pledge. As security for the obligations of the Pledgors
under the Guaranty (the "Obligations"), the Pledgors hereby pledge and grant to
Creditor, for its benefit, a continuing security interest in the following:
(a) the Shares, as evidenced by the stock certificates
concurrently delivered to Escrow Agent (the "Certificates"), including all other
types or items of property arising in respect of the Shares which are to be
pledged to Creditor and held as Collateral under this Agreement;
(b) stock powers ("Powers") duly executed in blank; and
(c) the Proceeds of each of the foregoing (the Shares, the
Powers and the Proceeds are collectively referred to as the "Collateral").
3. Appointment of Escrow Agent. Escrow Agent hereby agrees to act as
escrow agent pursuant to this Agreement and acknowledges receipt of the
Certificates and the Powers from the Pledgors. In addition, any additional
Collateral which Escrow Agent shall receive shall be held by Escrow Agent
pursuant to the terms of this Agreement. The parties acknowledge that Escrow
Agent is acting as escrow agent under this Agreement as an accommodation to the
parties and that Escrow Agent is legal counsel to the Company and Mr. Lewis (and
not to any of the other parties to this Agreement) in connection with the Asset
Purchase Agreement and the related transactions and represents Mr. Lewis and the
Company in various other matters from time to time and may continue to act as
legal counsel to Mr.
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<PAGE> 3
Lewis and the Company. The parties consent (i) to Escrow Agent acting as
escrow agent under this Agreement and as legal counsel to Mr. Lewis and the
Company and (ii) to Escrow Agent also representing the Pledgors and the Company
and not any of the other parties to this Agreement, including, without
limitation, in connection with any dispute or litigation between any of the
parties to the Asset Purchase Agreement, this Agreement and any related
agreement.
4. Preservation of Collateral. Except as provided in Section 10
below, Creditor shall not be required to insure or take any steps to collect or
realize upon the Collateral or any dividends or other distributions on or in
respect of the Shares. The Pledgors shall keep the Collateral free from all
liens, claims and encumbrances other than those created by this Agreement
(collectively, "Liens"), and pay and discharge, when due, all taxes, levies and
other charges upon the Collateral.
5. Voting Rights; Dividends; Etc. During the term of this Agreement:
(a) So long as the Shares are held by Escrow Agent under this
Agreement, the Pledgors shall be entitled to exercise any and all voting and
other consensual rights pertaining to their respective Shares or any part
thereof and Creditor shall execute and deliver (or cause to be executed and
delivered) to the applicable Pledgor all such proxies and other instruments as
such Pledgor may request for the purpose of enabling such Pledgor to exercise
those voting and other rights which he is entitled to exercise pursuant to the
foregoing.
(b) If the Pledgors shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital, or issued in connection with
any reorganization), option or rights, whether as an addition to, in
substitution of, or in exchange for any Shares, or otherwise, the applicable
Pledgor agrees to accept the same as agent for Creditor and to deliver the same
forthwith to Escrow Agent in the exact form received, with the endorsement of
such Pledgor when necessary or appropriate and undated stock powers duly
executed in blank, to be held by Escrow Agent as additional Collateral for the
Obligations.
(c) So long as the Shares are held by Escrow Agent under this
Agreement, the Pledgors shall not be entitled to receive or retain any dividends
or distributions paid in respect of such Shares whether paid or payable in cash
or other property, whether in redemption of, or in exchange for such Shares,
whether in connection with a partial or total liquidation or dissolution of the
Company, or whether in connection with a reduction of capital, capital surplus
or paid-in surplus of the Company or otherwise, and any and all such dividends
or distributions shall be forthwith delivered to Escrow Agent to hold as
Collateral and shall, if received by a Pledgor, be received in trust for
delivery to Escrow Agent, be segregated from the other property or funds of such
Pledgor, and be forthwith delivered to Escrow Agent as Collateral in the same
form as so received (with any necessary endorsement).
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<PAGE> 4
6. Pledgor Representations. Each of the Pledgors represents, warrants
and agrees severally, and not jointly, that:
(a) Such Pledgor is the legal and beneficial owner of such
Pledgor's Shares and there are no outstanding options, warrants, convertible
securities or other rights to acquire such Pledgor's Shares or any other capital
stock of the Company.
(b) There are no restrictions upon the transfer of any of such
Pledgor's Shares and such Pledgor has the right to pledge and grant a security
interest in or otherwise transfer such Shares free of any Liens.
(c) This Agreement, and the transfer to Creditor of such
Pledgor's Shares, creates a valid and perfected first priority security interest
in such Shares in favor of Creditor, and all actions necessary or desirable to
such perfection have been duly taken.
(d) Such Pledgor has made his own arrangements for keeping
informed of changes or potential changes affecting the Collateral (including,
but not limited to, rights to convert, rights to subscribe, payment of
dividends, reorganization or other exchanges, tender offers and voting rights)
and such Pledgor agrees that Creditor shall not have any responsibility or
liability under this Agreement for informing such Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto.
(e) This Agreement and the Powers executed by such Pledgor
have been duly authorized, executed and delivered by such Pledgor and each
constitutes a legal, valid and binding obligation of such Pledgor, enforceable
in accordance with its terms, except as limited by bankruptcy laws and equitable
principles.
7. Terms and Conditions of Escrow Agent Duties. Acceptance by Escrow
Agent of its duties under this Agreement is subject to the following terms and
conditions, which all parties to this Agreement hereby agree shall govern and
control the rights, duties and immunities of Escrow Agent:
(a) The duties and obligations of Escrow Agent shall be
determined solely by the express provisions of this Agreement, and Escrow Agent
shall not be required to take any actions except for the performance of such
duties and obligations as are specifically set out in this Agreement.
(b) Escrow Agent shall not be responsible in any manner
whatsoever for any failure or inability of the Pledgors, Creditor or anyone else
to deliver Collateral to Escrow Agent or otherwise to honor any of the
provisions of this Agreement.
(c) Escrow Agent will be fully protected in acting on, and
relying upon, any written notice, direction, request, waiver, consent, receipt
or other paper or document which
4
<PAGE> 5
Escrow Agent in good faith believes to have been signed or presented by the
proper party or parties, but will not act on oral instructions alone of any
party.
(d) Escrow Agent will not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith or
for any mistake in fact or law, or for anything which it may do or refrain from
doing in connection with this Agreement, except for its own gross negligence,
willful misconduct or an act of bad faith.
(e) Escrow Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of the
provisions of this Agreement or its duties under this Agreement, and it will
incur no liability and will be fully protected in respect of any action taken,
omitted or suffered by it in good faith in accordance with the opinion of such
counsel.
(f) Escrow Agent will be entitled to reimbursement of its
expenses, including, without limitation, the fees and costs of attorneys or
agents which it may find necessary to engage in performing its duties under
this Agreement, all to be paid by the Pledgors and Creditor, and Escrow Agent
will have, and is hereby granted, a prior lien upon any property, cash or
assets held under this Agreement, with respect to its nonreimbursed expenses,
superior to the interests of any other persons or entities.
(g) Escrow Agent will be, and hereby is, jointly and
severally indemnified and saved harmless by the Pledgors, Creditor and the
Company from all losses, costs and expenses (including reasonable attorneys'
fees) which may be incurred by it as a result of its involvement in any
litigation arising from performance of its duties under this Agreement;
provided, that such litigation will not result from any action taken or omitted
by Escrow Agent and for which it will have been adjudged grossly negligent or
guilty of willful misconduct or bad faith; and, such indemnification will
survive termination of this Agreement until extinguished by any applicable
statute of limitations.
8. Release of Collateral Upon Receipt of Payment.
(a) Upon redemption of any portion of the outstanding
Series A Preferred Shares by the Company on or before the Mandatory Redemption
Date (any such redemption payment being referred to herein as a "Redemption
Payment"), Escrow Agent shall release and deliver the Shares to the Pledgors on
a pro rata basis based on the number of Series A Preferred Shares being
redeemed versus the number of Series A Preferred Shares originally issued to
Creditor (for example, if the Company redeems 50% of the Series A Preferred
Shares, Escrow Agent shall release 50% of the Shares to the Pledgors).
(b) The Company shall pay any Redemption Payment to
Escrow Agent and Escrow Agent shall receive such Redemption Payment and shall
remit such Redemption Payment to Creditor or its designee as soon as
practicable but in any event within three business days.
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<PAGE> 6
(c) Any Shares which are released to the Pledgors
pursuant to Section 8(a) above shall not be subject to the pledge created by
this Agreement or to the terms and conditions of this Agreement (including,
without limitation, Section 10 below) and, concurrently with delivery of such
Shares to the Pledgors, Creditor shall execute and deliver to each of the
Pledgors proper instruments acknowledging the release of the pledge created by
this Agreement and transferring such released Shares to the Pledgors.
9. Default. The failure of the Company to redeem the outstanding
Series A Preferred Shares by the Mandatory Redemption Date shall constitute the
"Default" hereunder.
10. Release of Collateral After Default.
(a) In the event of Default, Creditor shall have a period
of 45 days following the Redemption Date (the "Election Period") to elect
either (i) to exercise its rights under the Guaranty and retain the Collateral
then held by Escrow Agent (other than Shares required to be released to the
Pledgors pursuant to Section 8) in full satisfaction and discharge of the
Company's obligation to redeem the Series A Preferred Shares and the Pledgors'
obligations under the Guaranty, or (ii) to relinquish and terminate its rights
under the Guaranty and its security interest in the Collateral and to proceed
against the Company to enforce its rights to have the Series A Preferred Stock
redeemed by the Company. Creditor shall make such election by delivery to
Escrow Agent, the Company and the Pledgors of written notice on or prior to the
expiration of the Election Period specifying which remedy it has elected (the
"Election Notice"). If Creditor fails to deliver such Election Notice as
provided in the preceding sentence on or prior to the expiration of the
Election Period, Creditor shall be deemed to have elected the remedy provided
in clause (ii) above. During the Election Period and prior to the date on
which the applicable parties receive the Election Notice, the Company shall
have the right to cure the Default by redeeming the outstanding Series A
Preferred Shares. In the event the Company cures such Default, Escrow Agent
shall release the Shares to the Pledgors and remit the Redemption Payment to
Creditor in accordance with Section 8 above.
(b) If the Default remains uncured, upon receipt of the
Election Notice, Escrow Agent shall (1) deliver the Collateral to Creditor if
Creditor shall have elected the remedy provided in clause (i) of subsection
10(a) above, or (2) deliver the Collateral to the respective Pledgors if
Creditor shall have elected the remedy provided in clause (ii) of subsection
10(a) above (or if Creditor shall have been deemed to elect such remedy by
failing to deliver an Election Notice on or prior to the expiration of the
Election Period). In the event Collateral is released to the Pledgors pursuant
to clause (2) of this subsection 10(b), Creditor concurrently shall execute and
deliver to each of the Pledgors proper instruments acknowledging the release of
the pledge created by this Agreement and transferring such released Collateral
to the Pledgors.
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<PAGE> 7
11. Termination Date. This Agreement shall terminate on such date
as (a) all of the Obligations shall have been paid or performed in full, or (b)
Escrow Agent shall have released all of the Collateral pursuant to Section 10
above (the "Termination Date").
12. Controversies. If a controversy arises between one or more of
the parties to this Agreement, or between any of the parties to this Agreement
and any person or entity not a party to this Agreement, as to whether or not or
to whom Escrow Agent shall distribute any of the Collateral, or as to any other
matter arising out of or relating to this Agreement or the Collateral, Escrow
Agent shall not be required to determine the controversy and need not make any
distribution of any of such Collateral but may retain the same until the rights
of the parties to the dispute shall have finally been determined by agreement
or by final order of a court of competent jurisdiction; provided, however, that
the time for appeal of any such final order has expired without an appeal
having been made. Escrow Agent shall distribute such Collateral within 15 days
after Escrow Agent has received written notice of any such agreement or final
order (accompanied by an affidavit that the time for appeal has expired without
an appeal having been made). If a controversy of the type referred to in this
Section 12 arises, Escrow Agent may, in its sole discretion, but shall not be
obligated to, commence interpleader or similar actions or proceedings for
determination of the controversy in a circuit court of, or federal district
court in, the State of Michigan.
13. Resignation of Escrow Agent.
(a) Escrow Agent may resign as such following the giving
of 30 days' prior written notice to the other parties to this Agreement.
Similarly, Escrow Agent may be removed and replaced following the giving of 30
days' prior written notice to Escrow Agent by all of the other parties to this
Agreement. In either event, the duties of Escrow Agent shall terminate 30 days
after the date of such notice (or as of such earlier date as may be mutually
agreeable), and Escrow Agent shall then deliver the balance of the Collateral
then in its possession to a successor escrow agent as shall be appointed by all
of the other parties to this Agreement, as evidenced by a written notice filed
with Escrow Agent.
(b) If the other parties to this Agreement are unable to
agree upon a successor escrow agent or shall have failed to appoint a successor
escrow agent prior to the expiration of 30 days following the date of the
notice of resignation or removal, the then acting escrow agent may petition any
court of competent jurisdiction for the appointment of a successor escrow agent
or other appropriate relief, and any such resulting appointment shall be
binding upon all of the parties to this Agreement.
(c) Upon acknowledgment by any successor escrow agent of
the receipt of the then remaining balance of the Collateral, the then acting
escrow agent shall be fully relieved of all duties, responsibilities, and
obligations under this Agreement, except with respect to actions previously
taken or omitted by such escrow agent.
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<PAGE> 8
14. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Entire Agreement; Amendment; Waiver; Headings; Counterparts.
This Agreement and the Guaranty embody the entire agreement and understanding
of the parties with respect to the subject matter of this Agreement. This
Agreement may be amended, modified, superseded, cancelled, renewed or extended
only by a writing signed by all of the parties hereto. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by the
party against whom enforcement of the waiver is sought. The waiver by any party
of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. The headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of 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 may be executed by facsimile
signatures.
16. Successors; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement, their heirs,
personal representatives, successors and assigns. Notwithstanding the
preceding sentence, no party may assign or transfer any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of each of the other parties hereto.
17. Notices, Etc. All notices, requests and other communications
that are required or may be given under this Agreement shall be made by first
class, certified or registered mail or similarly prompt means at the following
addresses:
If to the Pledgors: Mr. Gary D. Lewis
c/o Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attn: Patrick T. Duerr
Mr. Michael J. Xirinachs
266 Half Hollow Road
Dix Hills, New York 11746
Mr. Robert L. Chioini
38864 Equestrian South, #49205
Farmington Hills, Michigan 48331
8
<PAGE> 9
With copies to: Patrick T. Duerr, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
If to Creditor: Rockwell Medical Supplies, LLC
c/o Schwartz Law Firm
Suite A
37887 W. Twelve Mile Road
Farmington Hills, Michigan 48331
Attn: President
With copies to: Burton H. Schwartz, Esq.
Schwartz Law Firm
Suite A
37887 W. Twelve Mile Road
Farmington Hills, Michigan 48331
If to the Company: Rockwell Medical Technologies, Inc.
28025 Oakland Oaks
Wixom, Michigan 48393
Attn: Gary D. Lewis
If to Escrow Agent: Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attn: Patrick T. Duerr
18. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart. This Agreement may be executed by delivery via facsimile
of a copy of an executed signature page.
19. Governing Law. This Agreement is a contract made under, and shall
be governed by and construed in accordance with, the laws of the State of
Michigan applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State. Each
of the parties consents to be subject to the personal jurisdiction of the courts
of Michigan, including the federal courts in Michigan, which shall be the sole
and exclusive forum for the resolution of all disputes under this Agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
/s/ Gary D. Lewis
-------------------------------------
Gary D. Lewis
/s/ Michael J. Xirinachs
-------------------------------------
Michael J. Xirinachs
/s/ Robert L. Chioini
-------------------------------------
Robert L. Chioini
ROCKWELL MEDICAL SUPPLIES, LLC
By: /s/ Robert L. Chioini
-----------------------------------
Robert L. Chioini, Member
By: T. K. INVESTMENT COMPANY, Member
By: CHILAKAPATI FAMILY LIMITED
PARTNERSHIP
By:/s/ Vijay Kumar Chilakapati
-----------------------------
Its: General Partner
------------------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP
By:/s/ Krishnapallai Thavarajah
-----------------------------
Its: General Partner
------------------------
(Signatures continued on next page.)
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<PAGE> 11
(Signatures continued from previous page.)
ROCKWELL TRANSPORTATION, LLC
By: CHILAKAPATI FAMILY LIMITED
PARTNERSHIP, Member
By: /s/ Vijay Kumar Chilakapati
---------------------------
Its: General Partner
-----------------
By: THAVARAJAH FAMILY LIMITED
PARTNERSHIP, Member
By:/s/ Krishnapallai Thavarajah
----------------------------
Its:General Partner
-----------------
ROCKWELL MEDICAL TECHNOLOGIES, INC.,
a Michigan corporation
By:/s/ Robert L. Chioini
------------------------------
Its:President
-------------------------
HONIGMAN MILLER SCHWARTZ AND COHN
By: /s/ Patrick T. Duerr
-----------------------------
Its: Partner
-------------------------
11
<PAGE> 1
EXHIBIT 10.9
WIXOM BUILDING LEASE
GRAND OAKS INDUSTRIAL PARK
THIS LEASE AGREEMENT is made and entered into as of the date of the last
signature shown on the signature page hereof, by and between OAKLAND OAKS,
L.L.C., a Michigan limited liability company, whose address is 21520 Bridge
Street, Southfield, Michigan 48034 ("Landlord"), and ROCKWELL MEDICAL SUPPLY,
L.L.C., a Michigan limited liability company whose address is 811 Livernois,
Ferndale, Michigan 48220 ("Tenant").
ARTICLE I
PRIMARY LEASE PROVISIONS
The following are the primary terms of this Lease.
1.01. Landlord. OAKLAND OAKS, L.L.C.
1.02. Tenant. ROCKWELL MEDICAL SUPPLY, L.L.C.
1.03. Leased Premises. Free standing light industrial building
located at 28025 Oakland Oaks, Wixom, Michigan.
Approximately 32,500 square feet of useable building
area. (See Paragraph 2.01)
1.04. Term. Sixty (60) months. (See Paragraph 2-02)
1.05. Base Rent- $1,186,250.00. (See 1(3.01)
1.06. Monthly Installments (of Base Rent) $19,770.83.
(See Paragraph 3.02)
1.07. Security Deposit. $ 39,541.66.
(See Paragraph 13.04)
1.08. Permitted Use. Light manufacturing of dialysate for the
medical profession and research related thereto. (See
Paragraph 5.01)
1.09. Guarantors. Dr. Krishnapillai Thavarajah and
Dr. Vijay Chilakapati.
ARTICLE II
GRANT AND TERM
2.01. Grant. Landlord, in consideration of the monies to be
paid and the covenants to be performed by Tenant, does hereby demise unto
Tenant, and Tenant hereby leases from Landlord, the
demised premises, specified in Paragraph 1.03 hereof, including the real
property, parking areas, building, and improvements thereon (the "Leased
Premises"). The Leased Premises contains an approximate rentable building
floor area specified in Paragraph 1.03 hereof. Tenant shall be the sole
occupant of the Leased Premises.
2.02. Term. The term of this Lease shall be for the period specified
in Paragraph 1.04 (the "Term"), commencing on the Commencement Date, defined
below.
(a) Commencement Date. The "Commencement Date" shall be
the earlier to occur of (a) the date Landlord notifies Tenant in writing that
the Leased Premises are ready for occupancy including issuance of a temporary
certificate of occupancy by the City of Wixom, and completion of Landlord's
Work, as defined below, or (b) the date on which Tenant or anyone claiming by,
under or through Tenant shall first occupy any portion of the Leased Premises,
including for the purpose of installing trade fixtures and
<PAGE> 2
furnishings or otherwise to make the Leased Premises ready for the conduct of
Tenant's business. If Tenant occupies the Leased Premises prior to Landlord's
completion of Landlord's Work, Tenant shall not interfere with Landlord's Work,
Tenant's occupancy shall be at its own risk, and Landlord shall not be liable
for any loss or damage to Tenant's personal property during the period of time
during which both Tenant and Landlord are working within the Leased Premises.
(b) Landlord's Work. For purposes of this Paragraph,
"Landlord's Work" shall be defined as those alterations and improvements to be
constructed by Landlord as described in Exhibit "All attached hereto.
Landlord's Work shall be deemed completed, and the Leased Premises shall
conclusively be deemed available for occupancy by Tenant when Landlord's
architect certifies in writing that Landlord's Work has been substantially
completed. Landlord's work shall be deemed substantially completed
notwithstanding that (a) certain minor or non- material details of
construction, mechanical adjustment or decoration ("punchlist items") are
incomplete, or (b) portions of Landlord's Work are incomplete because such work
cannot be performed until work to be performed by or on behalf of Tenant is
completed. In the event Landlord is delayed in completing Landlord's Work by
any delay, interference or hindrance of such work by Tenant, Tenant's
contractors or any of their employees or agent's, or by any changes in such
work requested by Tenant and agreed to by Landlord, or by Tenant's failure
timely and properly to perform any of its obligations imposed pursuant to any
work agreed upon between Landlord and Tenant, the Leased Premises shall
conclusively be deemed substantially completed and available for occupancy on
the date on which the same would have been completed in the absence of such
delay, which date shall be determined by Landlord in its sole discretion.
(i) Landlord hereby warrants, for a period of one (1) year
after the Commencement Date, that the Leased Premises, including but not
limited to Landlord's Work, shall be constructed free from defects in materials
and workmanship ("Defect"). If one or more Defects are discovered in the
Leased Premises, including Landlord's Work, Tenant must notify Landlord, in
writing, of the particular Defect(s) claimed. After receipt by Landlord of
written notice of a claimed Defect, Landlord will inspect the claimed
Defect(s). If a Defect is confirmed by Landlord,, Landlord will repair or
replace such Defect, at its sole option, within one hundred twenty (120) days
after Landlord's inspection (longer if weather conditions, Acts of God, labor
problems, materials shortages, or other "force majeure" or "force majesture"
events cause delays). Tenant shall grant Landlord access to the Leased
Premises at all reasonable times to inspect any claimed Defect(s) and to remedy
any confirmed Defect(s), and Tenant shall not interfere with Landlord and its
agents in any such inspections or repairs. Landlord must receive written
notification from Tenant of any claimed Defect not later than one (1) year
after the Commencement Date, or Landlord shall have no obligation to remedy
such Defect.
(ii) The preceding warranty provision specifically EXCLUDES
coverage of all of the following: (A) damage or Defect caused by abuse or
abnormal usage, modifications by Tenant, improper or insufficient maintenance,
improper operation, acts of third parties, normal wear and tear under normal
usage, Acts of God or the elements; (B) Defects which are the result of
characteristics common to the materials used, including, by way of illustration
only and not in limitation, warping and deflection of wood; cracking, fading,
chalking, peeling and checking of paint; cracks due to drying and curing of
concrete, cement, masonry, plaster and bricks; nail pops in drywall; rusting of
steel; drying, shrinking and cracking of caulking and weather-stripping; cracks
in or heaving of tile or cement; settlement; (C) damage or Defects resulting
from condensation on, or expansion or contraction of, materials; (D) broken
windows; and (E) CONSEQUENTIAL OR INCIDENTAL DAMAGES OF EVERY NATURE AND FROM
WHATEVER CAUSE. LANDLORD EXPRESSLY DISCLAIMS ANY, AND ALL IMPLIED WARRANTIES,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE, AND WARRANTIES OF HABITABILITY.
2.03. Submission. The mere submission by Landlord of an unexecuted
copy of this Lease to Tenant shall have no binding effect against Landlord.
2.04. Delayed Availability. Tenant shall have no claim whatsoever
against Landlord, at law or in equity, nor shall Tenant have the right to
-2-
<PAGE> 3
terminate this lease, as a result of Landlord's inability or failure to make
the Leased Premises available for occupancy by Tenant.
2.05. Acceptance of Condition. Except for Landlord's warranty
obligations for the first year after the Commencement Date under Section
2.02(b), Tenant accepts the Leased Premises "AS-IS" and without
representation or warranty as to condition by Landlord. Tenant, by taking
possession of the Leased Premises, shall be deemed to have acknowledged its
inspection of and satisfaction with the condition thereof, including Landlord's
Work, except for punchlist items and Landlord's warranty obligations under
Section 2.02(b).
2.06. Hold Over. In the event Tenant holds over in possession of the
Leased Premises after the expiration of the Term or earlier termination of this
Lease, Landlord, at its exclusive option and sole discretion, may (a) deem
Tenant to be occupying the Leased Premises from month-to-month at an initial
monthly rental fee which is one and one-half (1-1/2) times the Monthly
Installment provided for herein, and otherwise subject to all of the terms,
conditions and other charges of this Lease, or (b) exercise any rights or
remedies it has under this Lease in the event of Default, including an action
against Tenant for trespass. No payment by Tenant or acceptance by Landlord of
an amount less than the Monthly Installment of Base Rent as increased hereunder
shall be deemed to be other than a payment on account for the benefit of
Landlord, and Landlord may accept such amount without prejudice to its right to
recover the balance of the rent or other amounts owed, or to pursue any other
remedy provided herein in the event of a Default.
ARTICLE III
RENT
3.01. Rental Fee. Tenant shall pay to Landlord the sum indicated in
Paragraph 1.05 hereof, as base rent for the Leased Premises for the Term ("Base
Rent"). Tenant's obligation to pay Base Rent, is independent of every other
covenant of this Lease.
3.02. Installment Payments.
(a) Monthly Installments. The Base Rent shall be paid
by Tenant to Landlord in consecutive equal monthly installments in the amount
indicated in Paragraph 1.06 hereof ("Monthly Installments").
(b) Terms of Payment. All Monthly Installments of the
Base Rent shall be paid in advance in immediately available funds, on the first
day of each month during the Term, without any offset, deduction,
abatement, or delay whatsoever, or any demand therefor, by a check or draft
drawn on a financial institution capable of negotiating funds, at the office of
Landlord at the address stated herein, or at such other place as Landlord may,
from time to time, designate in writing. No payment by check or draft shall be
deemed timely made unless honored and paid by the drawee bank upon first
presentment for payment. For safety reasons, cash will not be accepted by
Landlord. In the event the Term commences on a day other than the first day of
a month, or ends on a day other than the last day of a month, the first and/or
last Monthly Installment of Base Rent shall be prorated accordingly, based upon
a thirty (30) day month.
3.3. Additional Rent. Tenant shall pay to Landlord or, at the request of
Landlord, directly to the person or entity demanding payment, promptly upon
presentation of a request for payment, without any deductions or setoff
whatsoever, the following charges ("Additional Rent"):
(a) Applicable Taxes. All "Applicable Taxes" as defined below.
The Applicable taxes for the first and last years of the Term or any
extension thereof will be prorated between Landlord and Tenant so that Tenant
will be responsible for any such tax or assessment attributable to the period
during which Tenant has possession of the Leased Premises. The so-called "due
date" method of proration will be used, it being presumed that taxes and
assessments are payable in advance, As used herein, "Applicable Taxes" shall
mean the sum of (A) all ad valorem real property taxes and assessments of every
nature whatsoever levied upon or with respect to the Leased Premises or the
rent and additional charges payable hereunder, imposed by any taxing authority
having jurisdiction, (B) all reasonable
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costs and expenses incurred by Landlord during negotiations for, or contests
of, the amount of any taxes, (C) all personal property taxes levied on or with
respect to property of Landlord, if any, on the Leased Premises, and (D) all
taxes, levies and charges which may be assessed, levied or imposed by the State
of Michigan or any political subdivision thereof or any governmental authority
having jurisdiction thereover, in replacement of or in addition to all or any
part of ad valorem real property taxes as revenue sources and which in whole or
in part are measured or calculated by or based upon the tax parcel of Landlord
or Tenant, or the rent or other charges payable hereunder. In no event shall
Applicable Taxes include any income, franchise, estate or inheritance tax, or
any penalty or interest for late payment, except for any penalties or interest
arising from Tenant's late payment of sums due hereunder.
(b) Landlord's Insurance. All premiums for fire and extended
coverage insurance, insuring the Leased Premises for the full undepreciated
replacement cost thereof, together with a demolition and increased cost of
construction endorsement, and general liability insurance, rental
interruption insurance and any such other insurance as Landlord shall elect or
be required by any mortgagee to maintain on the Leased Premises ("Insurance").
(c) Estimated Payments. In the event payment of any or all of
the Applicable Taxes or Insurance is to be made from a fund required to be
established by any mortgagee under the terms of any mortgage of the Leased
Premises, or in the event Landlord shall elect to have Applicable Taxes or
Insurance paid in advance of the date due, then Landlord will so notify Tenant,
and Tenant will pay such amounts in estimated monthly installment payments,
sufficient to create a fund from which such sums can be paid, in their
entirety, promptly upon issuance of billings for payment. If actual Applicable
Taxes and Insurance exceed the total amounts from time to time paid therefor
by Tenant, then Tenant will pay on demand any deficiency to Landlord. If such
payments by Tenant, over the Term, exceed the amount of Applicable Taxes and
Insurance paid therefrom, such excess will be refunded by Landlord to Tenant at
the expiration of the Term, or when such excess is refunded by the mortgagee
to Landlord, whichever first occurs.
(d) Treatment. The payment of Additional Rent by Tenant shall,
for all purposes hereunder, be treated in the same manner as the payment of
Monthly Installments of the Base Rent, and Landlord shall have the same rights
and remedies in the event of any delinquent payment of Additional Rent or any
other charges due hereunder as it has in the event of any delinquent payment of
the Base Rent.
3.04. Late Payment. TIME IS OF THE ESSENCE OF THIS LEASE.
(a) Service Charge. If Tenant fails to pay any
Base Rent, Additional Rent or any other monies payable to Landlord hereunder on
or before five (5) days after the date due, then Tenant shall immediately,
without demand therefor, pay to Landlord a service charge of five percent (5%)
of the amount of any such late payment (the "Service Charge"). The Service
Charge is in addition to and not in limitation of any other remedy or right
provided herein, and is intended to compensate Landlord for its fairly
estimated additional administrative expenses associated with monitoring,
receiving, recording, accounting, administering and otherwise handling
delinquent payments. The Service Charge is not intended and shall not be
deemed or construed as an unenforceable penalty.
(b) Interest. If Tenant neglects or fails to pay any
amount payable under this Lease on or before five (5) days after the date
due, Tenant shall pay interest on the unpaid balance, from the due date, at the
annual rate of 15% (the "Lease Rate"), but in no event in excess of the
maximum rate permitted by law. Landlord may apply all or any part of any
subsequent payments of Base Rent to any accrued and unpaid Service Charges or
interest charges.
(c) Returned Checks. In addition to Landlord's other remedies
hereunder, in the event any check or draft tendered in payment of any monies
due hereunder is dishonored for any reason and/or returned unpaid by the drawee
bank, Landlord may require Tenant to make all future rental and other payments
with collected funds only (i.e. Federal wire transfer, money order, certified
or cashier's check).
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(d) Cumulative Charges. The Service Charge and interest on late
payments are separate and cumulative remedies, and in addition to all other
remedies provided herein. Landlord shall have no obligation to accept less
than the full amount of Monthly Installments plus Service Charges and interest
charges thereon, if any, and of all charges hereunder which are due and owing
by Tenant to Landlord. No payment by Tenant or acceptance by Landlord of an
amount less than the amount owed herein shall be deemed to be other than a
payment on account for the benefit of Landlord, and Landlord may accept such
amount without prejudice to its right to recover the balance of the rent or
other amounts owed, or to pursue any other remedy provided herein in the event
of a Default.
3.05. Security Deposit.
(a) Security Deposit. As a condition precedent to the
enforceability of this Lease by Tenant and the commencement of the Term,
Tenant shall pay to Landlord, upon execution of this Lease, a security deposit
in the amount indicated in Paragraph 1.7 hereof ("Security Deposit"). The
Security Deposit shall be held by Landlord, without interest or
fiduciary duty, to secure the full, faithful and timely performance by Tenant
of each and every term, provision, covenant and condition required to be
observed or performed by Tenant hereunder, including, without limitation, the
payment of Base Rent. If Tenant pays the Security Deposit by check or draft,
such check or draft shall not be deemed payment unless honored and paid by the
drawee bank upon first presentment for payment.
(b) Additional Contribution. In the event Landlord uses, applies or
retains all or any portion of the Security Deposit prior to the expiration of
the Term Tenant shall, immediately upon demand therefor, deposit with Landlord
such additional sums as may be required to reinstate the Security Deposit to
the amount originally required herein.
(c) No Obligation. Anything stated herein to the contrary
notwithstanding, in the event of any Default by Tenant, Landlord shall have no
obligation or duty whatsoever to apply or use all or any portion of the
Security Deposit to cure, satisfy, reduce or mitigate any such Default or
damages caused thereby, and Landlord may pursue any other right or remedy
provided for herein, or otherwise available at law or in equity. The right of
Landlord to retake possession of the Leased Premises for non-payment of Base
Rent, Additional Rent or other charges, or for any other reason shall in no
event be affected by Landlord's possession of the Security Deposit.
(d) Commingled Fund. Landlord shall have no obligation to keep the
Security Deposit as a separate fund. Landlord may mix and commingle the
Security Deposit with such other funds and monies as Landlord deems
appropriate.
(e) Return. Within sixty (60) days after the expiration of the
Term of this Lease, Landlord shall return to Tenant that portion of the
Security Deposit, if any, not otherwise applied or used as permitted herein.
(f) Transfer. If the Leased Premises is sold, Landlord shall
have the right to transfer the Security Deposit to the purchaser(s) of the
Leased Premises, and upon notice of such sale, Landlord shall be released of
all liabilities hereunder, including, but not limited to any such liability for
the return of the Security Deposit.
3.06. U.S. Currency. All sums required to be paid under this Lease
shall be payable in United States Dollars.
ARTICLE IV
INSURANCE AND INDEMNIFICATION
4.01. Insurance. In addition to the Insurance which Tenant is required to
pay for as Additional Rent, Tenant shall at all times during the Term hereof
keep in full force and effect, at its sole cost and expense, the following
types of insurance in the amounts specified:
(a) Comprehensive public liability and property damage insurance
and products liability insurance with limits of liability of not less than
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Three Million ($3,000,000.00) Dollars combined single limits, with deductibles
not greater than $10,000.00 unless approved in writing by Landlord. If, in the
sole opinion of Landlord's lender or in the reasonable business judgment of
Landlord, the amount of such insurance coverage at any is not adequate, Tenant
shall increase the insurance coverage as required by either Landlord's lender
or Landlord, but not more frequently than annually.
(b) Fire and extended coverage insurance covering the Tenant's
personal property, fixtures, improvements and alterations located in and on the
Leased Premises, including all plate and other glass, against such risks as are
from time to time covered under "extended coverage" endorsements, and special
extended coverage endorsements commonly known as "all risks" endorsements in
an amount equal to the full replacement cost but not less than that required by
Landlord's mortgagee from time to time. The proceeds from any such policy
shall be used by Tenant solely for the replacement of personal property or
fixtures or the restoration of Tenant's improvements or alterations.
(c) If the nature of Tenant's business requires that any or all of
its employees be provided coverage under state workers' compensation insurance
or similar statutes, Tenant shall keep in force workers' compensation
insurance or similar statutory coverage containing statutorily prescribed or
greater limits.
(d) All policies of insurance required to be maintained by
Tenant pursuant to this Paragraph (except for workers' compensation insurance)
shall name Landlord and any other parties in interest designated by Landlord
and Tenant as loss payees and co-insureds as their respective interests may
appear, and shall be evidenced by certificates of insurance which specify that
Landlord is an insured party and that the insurer will not cancel or modify
coverage without giving Landlord at least thirty (30) days prior written
notice. Tenant shall furnish to Landlord such certificate or certificates
concurrently with its delivery of this Lease to Landlord and shall also
demonstrate that all premiums for the insurance required by this paragraph
have been paid in full for one year.
It is expressly understood and agreed that the foregoing minimum
limits of insurance coverage shall not limit the liability of Tenant for its
acts or omissions as provided in this Lease. Tenant may provide the foregoing
insurance under a blanket policy, provided that such blanket policy shall have
an endorsement thereto to reflect the required protective coverage for Landlord
and its designees. All insurance required hereunder shall be placed with
companies licensed to do business in the State of Michigan and which companies
are rated A:XII or better in "Best's Key Rating Guide." All such policies shall
be written as primary policies, non-contributing with and in excess of
coverage which Landlord may carry. If Tenant shall fail to procure and/or
maintain the insurance provided for in this Paragraph, Landlord may, but shall
not be obligated to do so, and without waiving any other rights under this
Lease, procure and maintain any one or more portions of Tenant's required
insurance policies, at the expense of Tenant; and Tenant shall reimburse
Landlord therefor within ten (10) days of invoice.
4.02. Waiver of Subrogation. Except in the case of willful actions by
either Landlord or Tenant, each party hereto does hereby remise,
release and discharge the other party hereto, and any officer, agent, employee
or representative of such party, of and from any liability whatsoever hereafter
arising from loss, damage or injury caused by fire or other casualties for
which insurance is carried hereunder by the injured party at the time of such
loss, damage or injury to the extent of any actual recovery by the injured
party under such insurance; provided, however, this release shall be applicable
and in force and effect only with respect to loss or damage occurring during at
such time as the releasing party's policies of insurance contain a clause or
endorsement permitting such waiver of subrogation. Landlord and Tenant shall
each use their best efforts to have their respective insurance policies contain
a provision permitting the foregoing waiver of subrogation, including the
payment of reasonable increased premiums.
4.03. Exculpation of Landlord. Neither Landlord nor its members or
managers shall have any duty or liability to Tenant except as expressly
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provided for in this Lease, and, in the event of any such liability to
Tenant hereunder, or under any law, statutory, common, regulatory or otherwise,
Landlord's liability to Tenant shall, in the event of a judgment against
Landlord, be satisfied only out of the right, title and interest of Landlord in
the Leased Premises and out of the rents or other income to be derived
therefrom after the date of such judgment, or out of the net proceeds received
by Landlord from the sale or other disposition of all or any part of Landlord's
right, title and interest in the Leased Premises. The term "Landlord" as used
in this Lease, shall mean only the owner of the fee title to the Leased
Premises at the time in question, and in the event of any transfer of such
title, Landlord herein named (and in case of any subsequent transfers the then
grantor) shall be relieved from and after the date of such transfer of all
liability in connection with Landlord's obligations thereafter to be performed.
The obligations contained in this Lease to be performed by Landlord shall be
binding on Landlord and on Landlord's successors and assigns, only during
their respective periods of ownership. This Paragraph 4.03 shall survive
termination or expiration of this Lease.
4.04. Indemnification. Tenant shall indemnify, defend and
hold Landlord free and harmless, including without limitation, all members,
managers, employees, and agents of Landlord, and each of their respective
heirs, personal representatives, successors and assigns, from and against any
and all claims, expenses, and liabilities of every kind and nature whatsoever,
including, without limitation, actual attorneys fees, court costs, litigation
expenses, penalties, and all direct, indirect, consequential and incidental
damages of and to Landlord, arising out of, caused by or related to any of the
following:
(a) Lease. The execution of this Lease and the operation
and performance of this Lease by Tenant, or Default or failure of
performance of any term or provision of this Lease, including, but not
limited to, interest, penalties, incidental and/or consequential damages.
(b) Premises. The use (including misuse) or occupancy of the
Leased Premises, by Tenant and its agents and employees.
(c) Visitors. Any act of any customer, business
invitee, supplier, guest or other visitor of Tenant ("Visitors").
(d) Personal Property, Any damage to or destruction
of any property, records, files, equipment, inventory or other personal
property, tangible and intangible, of every nature and description, now owned
or hereafter acquired by Tenant or its employees or Visitors, regardless of the
cause thereof, unless caused by the negligence or willful misconduct of
Landlord or its agents.
(e) Business. Damage to the business or property of Tenant,
regardless of the cause thereof, through the act or omission of any
agent of Landlord (unless such act or omission was negligent or involved
willful misconduct of Landlord or its agent), any other person, or damage
resulting from burst, stopped or leaking water, gas, or sewer pipes, electrical
power outage, loss of heat or air conditioning, and any and every other cause
whatsoever, regardless of whether the same is specifically provided for herein.
(f) Broker. The employment, use or retention of a
broker, finder or other agent by Tenant in connection with the execution of
this Lease, other than claims of Signature Associates and The Strathmore Group.
This Paragraph 4.04 shall survive termination or expiration of this Lease.
ARTICLE V
USE AND MAINTENANCE
5.01. Use. The Leased Premises shall be used by Tenant solely for the
purpose specified in Paragraph 1.08 hereof, office and incidental purposes
related thereto, and for no other use or purpose whatsoever, without Landlord's
prior written consent. Tenant shall not perform any acts or carry on any
practices which may injure the Leased Premises and shall keep the Leased
Premises orderly, neat, safe and clean.
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5.02. Compliance. Tenant, at its sole expense, shall at all times
comply with all, and not make or permit any use of the Leased Premises which
could violate any, zoning ordinance or building and use restriction, public
laws, ordinances or governmental regulations, including, without limitation,
all state and federal environmental laws, rules and regulations. Tenant
shall promptly obtain and continuously maintain during the Term every license
or other governmental permit required by Tenant to lawfully operate its
business. Notwithstanding anything to the contrary in this Lease, any repairs,
additions or alterations to the Leased Premises, including, without limitation,
plumbing, electrical, mechanical, structural or non-structural, which are
required by any law, statute, ordinance, rule, regulation or governmental
authority or insurance carrier, including, without limitation, OSHA, will be
the obligation of Tenant.
5.03. Rules and Regulations. Tenant shall fully and promptly comply
with the rules and regulations attached hereto as Exhibit B and made a part
hereof. Landlord reserves the right to change, modify or amend the Rules and
Regulations if, in its reasonable discretion, Landlord deems such changes
necessary or desirable. Tenant agrees to comply with and abide by the Rules and
Regulations as so amended.
5.04. Insurance. Tenant shall engage in no conduct or activity, nor
permit any use of the Leased Premises, nor cause to be stored thereat or
disposed thereon or thereunder any material or thing which may be dangerous to
life, property or environment, or which may increase the premium of or
invalidate any insurance policy carried with respect to the Leased Premises.
5.05. Improvements. No alteration, addition, or improvements
("Improvements"), to the interior or exterior of the Leased Premises,
including, but not limited to, installation of ventilating, silencing,
air-conditioning, air-circulating, air-compression, refrigeration, electrical
components, systems, conduits and wiring, plumbing, heating, sprinkling
equipment, telephone and other communication conduits and wiring, fixtures and
outlets, and partitions, railings, gates, doors, vaults, paneling, molding,
shelving, flooring and floor covering, shall be made by Tenant to the Leased
Premises without the prior written consent of Landlord, which consent may not
be unreasonably withheld by Landlord. Under no circumstances may Tenant attach
or mount any object or thing to the roof of the Leased Premises, and Tenant
shall not do or cause any act or thing, and shall take all necessary
precautions to prevent from occurring, any puncture, tear, rip, or other injury
the roof. All permitted Improvements made by Tenant shall comply with all
applicable building and use restrictions and codes, zoning ordinances and all
other laws, rules and regulations (federal, state and local), including,
without limitation, the requirements of the Americans with Disabilities Act
(ADA). All Improvements, including attachment of fixtures (other than trade
fixtures of Tenant) made by either of the parties hereto shall immediately
become the property of Landlord and shall be considered as a part of the
Leased Premises; provided, however, that Landlord may, at any time, designate
by written notice to Tenant those Improvements and fixtures which shall be
removed by Tenant at the expiration or termination of this Lease, and Tenant
shall remove the same and repair any damage to the Leased Premises caused by
such removal before the last day of the term of this Lease.
5.06. Signs. Tenant shall not erect or install any free standing sign
upon the Leased Premises without the prior written approval of Landlord, as to
size, design and method of installation, which consent may not be unreasonably
withheld by Landlord. Under no circumstance may Tenant erect or install any
interior or exterior roof, wall, window or door signs or other advertising
media in, on or about the Leased Premises. Notwithstanding the foregoing,
Tenant may place such non-advertising signs inside the Leased Premises as are
necessary for the reasonable operation of its business or to comply with
applicable health and safety laws; provided, however, that any such signs shall
conform to applicable governmental laws and regulations and not be visible from
outside the Leased Premises. Upon expiration or termination of this Lease
Tenant shall, upon demand by Landlord, and at Tenant's sole cost and expense,
remove all signs erected, placed or displayed by it, and repair all damage
caused by such removal.
5.07. Maintenance and Repair. Without limiting Landlord's warranty
obligations for the first year after the Commencement Date under Section
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2.02(b), Tenant, at its sole cost and expense, shall keep the entire Leased
Premises, including any Improvements, structurally sound and in good condition
and repair, and shall keep the electrical, lighting, heating, air conditioning,
plumbing, fire suppression, and any other equipment and systems installed in or
on the Leased Premises in good condition and repair and shall also be
responsible for the replacement of all components to such systems, including
major structural components thereof. Notwithstanding anything herein to
the contrary, Landlord shall be solely responsible for maintaining the
structural soundness of the roof, foundation and outer walls of the Leased
Premises. Further, Tenant shall be responsible to keep all exterior
portions of the Leased Premises, including the parking areas, driveways,
sidewalks and the exterior grounds and landscaping maintained in a safe and
attractive manner, and free of ice and snow. Tenant shall obtain and pay for a
Heating, Ventilating and Cooling (HVAC) system service, maintenance and repair
contract with such maintenance and repair terms, and with such reputable company
or contractor as is acceptable to Landlord in its sole discretion. Tenant shall
be responsible for rubbish and trash removal.
5.08. Emissions. Tenant shall not, without the prior written consent
of Landlord:
(a) Create or permit to be created emissions into the
environment of any Air Contaminants (hereinafter defined) in quantities, or
characteristics and under conditions and circumstances and of a duration which
are or is in violation of any federal or state law, regulation, ordinance,
order or rule, including, but not limited to, the federal Clean Air Act ("CAA"),
42 U.S.C. Section 7401 et seq., as amended now or any time hereafter, or the
regulations promulgated thereunder, and the Michigan Air Pollution Act
("MAPA"), M.C.L. Section 336.11 et seq., as amended now or any time hereafter,
or the regulations promulgated thereunder. "Air Contaminant" shall mean dust,
fume, gas, mist, odor, smoke, vapor or any combination thereof;
(b) Permit any vehicle on the Leased Premises which emits
exhaust which is in violation of any federal, state or local law, ordinance,
order, rule, regulation, code or any other governmental restriction or
requirement;
(c) Create, or permit to be created, any sound level
which could unreasonably interfere with the quiet enjoyment of any real
property or surrounding areas, or which could create a nuisance or violate any
federal, state or local law, ordinance, order, rule, regulation, code or any
other governmental restriction or requirement;
(d) Transmit, receive, or permit to be transmitted or
received, any electromagnetic, microwave or other radiation which is harmful or
hazardous to any person or property in, on or about the Leased Premises, or
which could interfere with the operation of any electrical, electronic,
telephonic or other equipment wherever located, whether on the Leased Premises;
(e) Create, or permit to be created, any ground vibration that
is discernible outside the Leased Premises; or
(f) Produce, or permit to be produced, any intense
glare, light or heat except within an enclosed or screened area and then only
in such manner that the glare, light or heat shall not be discernible outside
the Leased Premises.
5.09. Hazardous Materials.
(a) Prohibition. Tenant shall not permit or cause,
directly, indirectly, intentionally or incidentally, the use, production,
storage, generation, disposal, treatment or other presence in the Leased
Premises of any Hazardous, Material as hereafter defined, whether liquid,
solid, gaseous or otherwise, neither shall Tenant discharge or release on,
under or about the Leased Premises, or permit to be discharged or released on
or about the Leased Premises, or into any drain, toilet, basin or otherwise
into the sanitary or storm sewers servicing the Leased Premises any such
Hazardous Material. Tenant shall during and forever after the term of this
Lease, indemnify, defend and hold Landlord, its successors and assigns
harmless
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from any and all liabilities, clean-up and/or response costs and other damages,
including, without limitation, attorney's and expert consultant's fees,
incurred on account of any breach of this provision by Tenant. Notwithstanding
the termination of this Lease, in the event at any time after the Commencement
Date, Landlord, its successors or assigns discovers the existence of any
environmental hazard caused or created by Tenant, then, in such event, Tenant,
its successors and assigns shall fully clean-up, remove and remediate such
condition, at its sole cost, to the complete satisfaction of Landlord and its
designees. Such liability shall include, without limitation, the cost of
qualified environmental consultants to direct, engineer and perform the
clean-up to Landlord's sole satisfaction, all removal, remediation and
disposal costs, costs of waste handling, packaging, transportation and
disposal at approved, licensed waste disposal sites, all costs of containment
and security as and if necessary, all costs of reclaiming or replacing the land
and/or structures affected by such remediation and removal, and every such
other cost associated with rendering the leased premises completely safe from
environmental hazards. For purposes hereof, "Hazardous Material" includes
without limitation, any flammable, explosive, radioactive, toxic or hazardous
materials, hazardous wastes, hazardous or toxic substances or related
materials, whether liquid, solid, gaseous or otherwise, defined in or regulated
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601 et. seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 108, et. seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et.
seq.), Part 201 of the Michigan Natural Resources and Environmental Protection
Act ("NREPA")(formerly the Environmental Response Act ("Act 307")), as
amended, or in the regulations adopted and publications promulgated
pursuant thereto, or any other federal, state or local governmental law,
ordinance, rule or regulation, and petroleum, including, but not limited to,
crude oil, crude oil fractions, and refined petroleum fractions, including
gasoline, kerosene, heating oils, diesel fuels, and waste oil and related waste
products, including constituent parts of any of the foregoing.
(b) Tenant shall strictly obey and adhere to any and all
Environmental Laws, as hereafter defined. For purposes hereof, the term
"Environmental Laws" means, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et.
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, et. seq.), the Resource Conservation and Recovery Act, as amended
(49 U.S.C. Section 6901, et. seq.), the Michigan Hazardous Waste Management
Act, as amended (MCLA Section 299.501 et. seq.) Part 201 of the Michigan
Natural Resources and Environmental Protection Act ("NREPA")(formerly the
Environmental Response Act ("Act 307")), as amended, and every other Federal,
state, and local law, statute, regulation, rule decisional precedent, order or
otherwise, the actual, effective or intended purpose or unintended effect of
which is the protection or remediation of the environment. Tenant shall
further strictly obey and adhere to the Michigan Occupational Safety and Health
Act ("MIOSHA"), as amended now or at any time hereafter, M.C.L. Section
408.1001 et. seq.
(c) Landlord, its agent or designees and governmental authorities
shall have the right, but not the obligation, from time to time to inspect the
Leased Premises for compliance with the Environmental Laws and to confirm
that Hazardous Materials are not being used, produced, stored, generated,
disposed of, treated or otherwise present in or on the Leased Premises. Any
reasonable costs and expenses associated with such inspections, including at
termination of this Lease, shall be borne exclusive by Tenant, including, but
not limited to, an environmental compliance audit, environmental site
assessment, and engineering, laboratory, sampling, consulting and legal fees
and costs.
(d) The terms and conditions of Paragraphs 5.08 and 5.09 hereof
shall survive termination or expiration of this Lease.
5.10. Net Lease. Without limiting Landlord's warranty obligations for the
first year after the Commencement Date under Section 2.02(b), nor Landlord's
obligations under Section 5.7 regarding Landlord's responsibility for
maintaining the structural soundness of the roof, foundation and outer walls of
the Leased Premises, Tenant acknowledges and agrees that this Lease is a
"totally net lease" to Landlord and that Tenant is fully and solely
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responsible for procurement of and payment for all aspects of the ordinary
and/or extraordinary repair and maintenance of the Leased Premises and
replacement of components and systems thereof, including, without limitation,
building structure, the floor, ceiling, inside walls, windows, doors, HVAC,
plumbing, electrical, and all other building systems, structures and
components, of every nature and description, and the parking lots, sidewalks,
signs, and landscaped areas, and payment of all Applicable Taxes and Insurance.
Landlord shall neither incur nor suffer any obligation, monetary or otherwise,
relative to the Leased Premises during the Term of this Lease, except as
specifically and expressly provided for in this Lease.
ARTICLE VI
ADDITIONAL OBLIGATIONS OF TENANT
6.01. Utilities. Landlord shall cause all usual utilities to be
made available to the Leased Premises as of the Commencement Date. Thereafter,
Tenant shall be solely responsible for maintaining all utilities and promptly
paying when due all charges for water, gas, heat, electricity, sewer and any
other facility used upon or furnished to the Leased Premises. Landlord shall
have no liability to Tenant, its employees or invitees, and there shall be no
abatement or withholding of Base Rent due hereunder by reason of the
unavailability or service interruption of any utility, including without
limitation, fuel and energy conservation programs initiated by any
governmental agency or official. Tenant shall not use any apparatus or
device in, upon or about the Leased Premises which will in any way require an
increase in load upon the amount of such services usually furnished or supplied
to the Leased Premises and Tenant further agrees not to connect any apparatus
or device with wires, conduits, pipes or other means by which such services
are supplied for the purpose of using additional or unusual amounts of such
services without the prior written consent of Landlord. Tenant warrants to
Landlord that it has fully examined the Leased Premises for their adequacy of
the utilities which it may require in connection with its use of the Leased
Premises, that it accepts such utilities "AS IS," and that Landlord makes NO
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, in connection with any such utility
or the fitness of same for Tenant's purposes. The obligation of Tenant to pay
for such utilities shall begin on the Commencement Date. In no event shall
Landlord be responsible to any person or entity (including any governmental or
quasi-governmental unit) for payment of any water bill incurred by reason of
Tenant's use of any water on or for the benefit of the Leased Premises
subsequent to the filing of an affidavit with the appropriate governmental unit
which has jurisdiction over the Leased Premises in accordance with MCLA
123.165(5).
6.02. No Record. Tenant shall not record this Lease or any
memorandum hereof with any recorder or register of deeds or other
governmental office or organization, or create or cause to be created against
the Leased Premises any lien, claim, charge or assessment of any nature
whatsoever.
6.03. Surrender. At the expiration or earlier termination of this
Lease, Tenant shall surrender the Leased Premises, broom clean, and in the same
or better condition as when possession was delivered to Tenant, reasonable
wear and tear excepted, and Tenant shall, at its own expense, repair any
damage occasioned or resulting from its possession of the Leased Premises, and
shall surrender and deliver to Landlord any and all keys, passes,
authorizations, identification cards and any other related items in its
possession or control to the Leased Premises, all of which items shall at all
times be and remain the exclusive property of Landlord. Any personal property
of Tenant remaining in the Leased Premises after the expiration or earlier
termination of this Lease or surrender of the Leased Premises, shall
conclusively be deemed to have been abandoned by Tenant, and may be stored or
disposed of at the cost of Tenant.
6.04. Violations. Tenant shall immediately inform Landlord of any
violation of this Lease, or any rule or regulation promulgated hereunder, if
any, by Tenant.
6.05. Waste. Tenant shall use, maintain and occupy the Leased
Premises in a careful, safe and lawful manner, and shall not commit waste
thereon.
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6.06. Sublease or Assignment. Tenant shall not assign or transfer this
Lease or any interest therein, whether outright or as security, or
hypothecate or mortgage the same or any interest therein or sublet (including
managerial control) the Leased Premises or any part thereof, without the
express prior written approval of Landlord, which approval may not be
unreasonably withheld. The consent by Landlord to an assignment or
subletting shall not relieve Tenant of the obligation to obtain the consent in
writing of Landlord to any further assignment or subletting, neither shall
any such consent relieve any Guarantor of its liabilities under any Guaranty.
The sale, issuance or transfer of any interest in or voting capital stock
of Tenant, if Tenant is a limited liability company, partnership,
corporation, or other entity, which results, through one or more transactions
in a change in voting control of Tenant shall be deemed to be an impermissible
assignment of this Lease. Assignments for the benefit of creditors of Tenant,
or by operation of law, shall not be effective against Landlord, without
Landlord's prior written approval, which approval may be withheld for any
reason. In the event Landlord agrees to any sublease, Landlord
shall be entitled, on a monthly basis, to the net positive difference, if
any, of the amount of rent paid by any sublessee, and the Base Rent due
hereunder.
6.07. Offset Statement; Attornment and Subordination.
(a) Offset Statement. Within fifteen (15) days
after request, from time to time by Landlord, Tenant shall execute and
deliver to Landlord, in a form satisfactory to Landlord, a written statement
certifying (i) that this Lease is in full force and effect, (ii) the
Commencement Date of this Lease, (iii) that rent is paid currently without
any offset or defense thereto, (iv) the amount of rent, if any, paid in
advance, and (v) that there are no uncured defaults by Landlord or stating with
specificity those defaults claimed by Tenant.
(b) Attornment. Tenant shall, in the event of the
sale or assignment of Landlord's interest in all or any portion of the
Leased Premises, or transfer pursuant to proceedings in or a deed in lieu
of foreclosure of such interest under any mortgage made by Landlord of the
Leased Premises, or the eviction of Landlord under any underlying or ground
lease by Landlord, attorn to the purchaser, transferee or foreclosing
mortgagee and recognize such person as the Landlord under this Lease.
Such attornment shall be self-operative without the execution or delivery of
any further instrument by Tenant. No such attornment shall cause such
subsequent landlord to be liable for any act or omission of Landlord, other
than those which are expressly assumed by the subsequent landlord after it
assumes control or takes possession of the Leased Premises, nor subject any
subsequent landlord to any offsets or defenses which Tenant then has against
Landlord or bind it for any rent or additional rent which Tenant may have
paid more than thirty (30) days in advance to Landlord,
(c) Subordination. Tenant agrees that this Lease is and shall
be subject and subordinate at all times to any and all present and future
ground or underlying leases, leasehold mortgages, mortgages and building loan
mortgages, and management contracts affecting the Leased Premises and/or
Landlord's interest therein, or upon any buildings or other improvements
hereafter placed upon the Leased Premises. Tenant covenants and agrees that any
mortgagee, overriding or ground lessor or manager under a management contract
may elect to treat this Lease as prior in time to its interest in the Leased
Premises, and in the event of such election and upon notification to Tenant to
that effect, this Lease shall thereupon be deemed so prior, whether this Lease
is, in fact, dated prior or subsequent to the date of such other interest.
(d) Acknowledgement By Tenant. Tenant covenants and agrees to
execute and deliver within fifteen (15) days after request from Landlord such
further instrument or instruments as may be required to carry out the intentions
of this Paragraph, including a subordination or similar agreement required by
any mortgagee or other person. Tenant does hereby irrevocably appoint
Landlord as its lawful attorney-in-fact, with full authority and right to
execute and deliver any letter of estoppel, offset statement, subordination
agreement or other instrument required to be provided by Tenant pursuant to
this Paragraph, for and in the name of Tenant.
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6.08. Mortgage Protection. If Landlord shall fail to perform any
covenant, term or condition of this Lease upon Landlord's part to be
performed, Tenant shall give prompt written notice thereof to Landlord and to
any mortgagee of the Leased Premises of whom Tenant has been made aware by
prior written notice. In the event Landlord shall have failed to cure a
claimed failure of performance within a reasonable time following Landlord's
receipt of such notice (which time period shall not be less than thirty (30)
days), then the mortgagee shall have an additional period of thirty (30) days
within which to cure such failure of performance, or if same cannot reasonably
be cured within that time, then such additional time as may be necessary,
provided that any such mortgagee has commenced and is diligently pursuing the
remedies necessary to cure such failure of performance by Landlord. Tenant
shall take no action to terminate this Lease in the event Landlord or any such
mortgagee shall have cured such failure of performance or shall be diligently
pursuing cure of the same as aforesaid.
6.09. Financial Statements. Not later than thirty (30) days after
expiration of each fiscal year of Tenant, Tenant shall review with Landlord,
Tenant's financial statement for the preceding fiscal year, detailing Tenant's
then existing financial condition. Tenant represents and warrants to Landlord
that Tenant's fiscal year ends December 31. All financial information provided
by Tenant to Landlord hereunder shall be treated by Landlord as strictly
confidential.
ARTICLE VII
RESERVED RIGHTS
In addition to all of the other rights and privileges of Landlord
hereunder, Landlord specifically reserves unto itself the following rights:
7.01. Entry for Repairs. To enter or cause its agents or designees
to enter the Leased Premises at all times, and without prior notice to Tenant
in cases of emergency but otherwise after at least 24 hour prior notice and
accompanied by an agent of Tenant, for the purpose of making such inspections,
alterations, improvements or repairs which Landlord, in its sole discretion,
deems necessary or desirable. Nothing herein shall be deemed to obligate
Landlord to make any repairs to the Leased Premises.
7.02. Exhibit. To enter or cause its agents or designees to enter the
Leased Premises at all times, upon at least 24 hour prior notice to Tenant and
accompanied by an agent of Tenant, to exhibit and show the Leased Premises
to prospective tenants, purchasers, bank financing officers, construction
contractors and other parties.
7.03. Rules and Regulations. To adopt, amend, revoke and enforce such
rules and regulations as Landlord shall, in its sole discretion, deem
necessary or desirable, and to enforce the provisions thereof as though same
were specifically incorporated as covenants of this Lease.
7.04. Errors and Mistakes. Landlord may, unilaterally, make such
changes, amendments and/or corrections to this Lease as are necessary to
correct any clerical, typographical, arithmetic or other error or mistake in the
preparation and/or execution of this Lease.
ARTICLE VIII
(RESERVED)
ARTICLE IX
CASUALTY
9.01 . Partial Destruction. In the event that, through no fault of
Tenant, the building wherein the Leased Premises are located shall be
partially damaged by fire or other casualty at any time during the Term, and
Landlord in its sole discretion deems the building salvageable, Landlord shall
use its reasonable efforts to have the building promptly repaired or to have
its insurance company repair same, and an abatement of rent, proportionate to
the amount of square footage of building area rendered untenantable, shall be
allowed to Tenant for the time occupied in such repairs; except, (a) if
Tenant can use and occupy the Leased Premises without substantial inconvenience
then there shall be no abatement of rent,
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(b) if the casualty was caused by Tenant's negligence or willful misconduct
there shall be no abatement of rent, and (c) if said repairs are delayed
because of the failure of Tenant to adjust its own insurance (if any) no
reduction shall be made beyond a reasonable time allowed for such adjustment.
9.02. Substantial Destruction. In the event that, through no
fault of Tenant, the building wherein the Leased Premises are located is
totally or substantially (i.e., 25% or more of the useable square footage of
building area) destroyed by fire or other casualty, then this Lease may be
terminated by Landlord or Tenant giving the other written notice of
termination within thirty (30) days after the occurrence of such casualty,
without further liability of Landlord or Tenant with respect to the unexpired
Term, and Landlord and Tenant release each other from any liability for loss,
damage or injury caused by such fire or other casualty for which insurance
(permitting waiver of liability and waiver of insurer's right of subrogation)
is carried by either Landlord or Tenant to the extent of any recovery by them
under such policy.
9.03. Damage to Tenant's Property. In no event shall Landlord be
required to repair or replace Tenant's merchandise, trade fixtures,
furnishings or equipment. If Landlord is required or elects to repair or
rebuild the Leased Premises as herein provided, Tenant shall repair or replace
its merchandise, trade fixtures, furnishings and equipment in a manner and to a
condition at least equal to that prior to its damage or destruction.
9.04. Eminent Domain.
(a) Total Condemnation. If the whole of the Leased
Premises is taken by any public authority under the power of eminent domain,
then, Landlord or Tenant may immediately terminate this Lease. If Landlord or
Tenant decides to immediately terminate this Lease, then the Term of this
Lease shall cease as of the day possession is actually delivered to such public
authority and the Base Rent and Additional Rent shall be paid up to that day
with a proportionate refund by Landlord of such rent as may have been paid for
a period subsequent to the date of the taking.
(b) Partial Condemnation. If only a part of the
Leased Premises is taken by any public authority under the power of eminent
domain, then, Landlord may (i) immediately terminate this Lease, or (ii)
permit this Lease to remain in full force and effect; provided, however, that
from and after the date possession is actually delivered to such public
authority, the Base Rent shall be reduced in the proportion which the building
floor area of the part of the Leased Premises so taken bears to the total floor
area of the building immediately prior to such condemnation. Notwithstanding
the foregoing, if more than twenty five percent (25%) by useable floor area of
the building or value of the Leased Premises is taken under Eminent Domain, and
Landlord decides not to terminate this Lease or relocate Tenant as provided
above, then, in such event, Tenant shall have the right to terminate
this Lease and declare the same null and void, by written notice of such
intention to Landlord on or before the actual date of such taking. In the
event neither party exercises said right of termination, the Lease Term shall
cease only on the part of the Leased Premises so taken as of the day possession
is actually delivered to such public authority and Tenant shall pay Base
Rent and Additional Rent up to that day, with appropriate refund by Landlord of
such rent as may have been paid in advance for a period subsequent to the date
of the taking, and thereafter all the terms herein provided shall continue in
effect, except that the Base Rent shall be reduced in proportion to the amount
of the Leased Premises taken and Landlord shall make all the necessary
repairs or alterations to the remaining Leased Premises and/or the building
wherein same are located so as to create a complete architectural unit.
(c) Awards. All compensation awarded or paid upon a total or
partial taking of the Leased Premises shall belong to and be the property of
Landlord whether such damages shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the Leased Premises;
provided, however, that Landlord shall not be entitled to any award made to
Tenant for depreciation to or cost of removal of, merchandise and trade
fixtures or relocation expenses, to the extent any such award does not
diminish any award otherwise obtainable by Landlord.
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ARTICLE X
LANDLORD'S COVENANT
10.01. Quiet Enjoyment. Landlord covenants and agrees that so long as
Tenant shall promptly pay the Monthly Installments of the Base Rent,
Additional Rent, and the other monies due hereunder, and perform all of the
covenants and agreements set forth herein, Tenant shall have the peaceable and
quiet enjoyment and possession of the Leased Premises during the Term without
any manner of hindrance, subject only to the conditions and restrictions set
forth herein and any applicable rules and regulations.
ARTICLE XI
DEFAULT
11.01. Default. Default under this Lease shall be defined as,
and Tenant shall be conclusively deemed to be in Default hereunder upon the
actual occurrence, or threat, of any one of the following events ("Default"):
(a) Rental Payment. Tenant fails to pay in full and
promptly when due all or any portion of any Monthly Installment of the Base
Rent, or the Security Deposit due hereunder; or
(b) Other Payments. Tenant fails to pay in full and
when due any other moneys, charges or amounts due hereunder, whether payable to
Landlord or another, including, without limitation, Additional Rent,
utilities, Service Charges, interest, and other costs and charges payable by
Tenant hereunder; or
(c) Performance. Tenant breaches or fails to fully and
promptly observe or perform any covenant, term, condition, provision or time
parameter of this Lease, or the rules and regulations promulgated hereunder,
if any, regardless of whether such failure or breach relates to a material
provision of this Lease; provided, however, Landlord shall have first notified
Tenant of such breach and Tenant shall have failed to cure such breach within
thirty (30) days after such notification; or
(d) Insolvency. Tenant or any Guarantor admits in
writing its inability to pay its debts generally as they become due, makes a
general assignment for the benefit of its creditors, applies for or consents
to the appointment of a receiver, trustee or liquidator, or becomes insolvent
or commits an act of insolvency, files a voluntary petition in bankruptcy
or admits any material allegation in any pleading or petition filed against
it in any bankruptcy or insolvency proceeding, or sells or permits the sale
of its interest in the Leased Premises under attachment, execution or similar
legal process, or takes any action for the purpose of effectuating any of the
foregoing; or
(e) Abandonment. Tenant abandons, surrenders or vacates
the Leased Premises prior to the expiration of the Term.
(f) Lien. Any mechanic's or construction lien or
assessment attaches to or is claimed against the Leased Premises on account of
work performed or materials delivered thereto at the request or instruction of
Tenant.
11.02. Rights and Remedies. In the event of a Default, Landlord shall
have no duty to do so, but may, at its sole option and exclusive discretion,
take or exercise any of the following rights and remedies, concurrently,
consecutively, alternatively and as often as the occasion may arise:
(a) Termination. Terminate this Lease and commence
legal process to take exclusive possession and control of the Leased Premises,
and physically put out, and otherwise remove all persons and property
therefrom. Any personal property of Tenant may be stored in a public
warehouse or elsewhere at the cost and for the account of Tenant, or disposed
of at Landlord's election, and without liability to Tenant.
(b) Re-Let. Re-let the Leased Premises to any person or
entity, and at any rental fee or rate, and for any term that Landlord deems
appropriate, make such alterations, repairs or improvements to the Leased
Premises as Landlord deems necessary, and retain or employ the services of
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real estate brokers and attorneys, with Tenant being liable for all costs
incurred therefor.
(c) Acceleration. Accelerate the full payment of the Base
Rent, and any and all other monies due hereunder.
(d) Service Suspension. Terminate, cancel, stop,
cutoff, and otherwise suspend any services, utilities or items otherwise
required to be provided by Landlord to Tenant hereunder, if any.
(e) Court. Commence eviction proceedings and/or file
suit, in the appropriate court for all or any portion of the unpaid Base Rent,
or other monies due and owing hereunder including actual attorneys' fees, court
costs, travel expenses, and litigation expenses, or for any physical damages
caused by Tenant to the Leased Premises, and for all other direct, indirect,
incidental and consequential damages suffered by Landlord.
(f) Performance. Perform, at the expense of Tenant,
any obligation of Tenant under this Lease which Tenant has failed to perform,
the cost of which performance by Landlord, together with interest thereon at
the Lease Rate (Paragraph 3.04) from the date of such expenditure, shall be
payable by Tenant to Landlord upon demand.
(g) Apply Security Deposit. Landlord may, but
without obligation, use, apply or retain all or any portion of the Security
Deposit toward the curing of such Default and any damages, actual,
consequential, incidental or otherwise including, without limitation,
attorneys' fees, court costs, travel expenses, and actual expenses of
litigation incurred by Landlord as a result of such Default. In the event the
Security Deposit is insufficient to cure or fails to fully remedy any Default
or repair any damages caused by Tenant, Tenant shall remain fully liable to the
extent of any such deficiency regardless of whether Landlord applies or uses
the Security Deposit. In no event shall Landlord's application of the Security
Deposit be deemed or construed as a waiver of Default, nor shall such
application limit or prevent Landlord from enforcing any other right or remedy
provided herein,
11.03. Attorneys' fees. In the event of any Default by Tenant, Tenant
shall reimburse Landlord for any and all actual attorneys fees, court costs,
travel expenses and litigation expenses incurred as a result of such Default,
regardless of whether court process is commenced against Tenant by Landlord,
and without regard to any statutory maximum amounts.
11.04. Notice. Upon the occurrence of any event of Default, Landlord
may exercise any of the rights and remedies provided herein without any prior
notice to Tenant, except as otherwise required by law.
11.05. Landlord's Lien. Tenant hereby grants to Landlord a lien and
security interest (herein "Lien") , as security for payment of all
obligations of Tenant hereunder, upon all tangible and intangible personal
property of Tenant, including, without limitation, all equipment, trade
fixtures, raw materials, work-in-process and inventory (and the proceeds
thereof) within the Leased Premises, including all improvements, furniture,
trade fixtures, merchandise and other personal property at any time placed on
or in the Leased Premises, to the full extent of Tenant's interest therein, and
all accounts, chattel paper and other general intangibles of Tenant. The Lien
shall include the right to prevent removal of said property from the Leased
Premises and may be enforced in the event of a Default, by the re-entry,
taking and sale of such property. Sale shall be either public or private after
at least three (3) days notice to Tenant at its last known address, which
notice Tenant acknowledges to be commercially reasonable notice, and Landlord
shall have the right and privilege to be a purchaser at any such sale. Upon
request, Tenant shall provide a complete list of its creditors and indebtedness
or otherwise do whatever may be necessary or appropriate to pass good and legal
title under any such sale. Any and all proceeds obtained therefrom shall be
applied first to the costs of sale, including reasonable attorneys' fees, then
to any interest accrued and payable under the terms of this Lease for
nonpayment of Base Rent, Additional Rent and/or any other charges. Sale or
retention under this Lien shall not be deemed to waive, alter, limit
or affect in any manner whatsoever, but shall be in addition to, any other
remedies available to Landlord upon non-payment of rent or other charges under
this Lease or
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otherwise. Tenant shall execute, from time to time, any financing
statements or other documents requested by Landlord in order to evidence or
perfect the Lien or to assign the Lien to Landlord's mortgagee or mortgagees.
Tenant does hereby irrevocably appoint Landlord as its lawful attorney-in-fact,
with full authority and right to execute and deliver any UCC financing
statement, continuation statement or other document necessary to record,
perfect, and continue the security interest herein granted and to give bills
and/or receipts of sale therefore.
ARTICLE XII
OPTION TO PURCHASE
12.01. Option to Purchase. Provided Tenant has never been in Default
hereunder and has remained in possession of the Leased Premises continuously
through the Lease Term, Tenant shall have the option to purchase the Leased
Premises upon the expiration of the Lease Term (the "Option"). The Option is
not assignable, without Landlord's express prior written consent, which may be
withheld for any reason.
12.02. Exercise. To exercise the Option, Tenant must notify
Landlord in writing of its intention to do so not more than one (1) year nor
less than One Hundred Eighty (180) days prior to the date of expiration of the
Term of this Lease, by delivering a written notice of intention to exercise the
Option to Landlord by any method for delivering notices permitted hereunder.
If Tenant does not timely exercise the Option and notify Landlord, then,
in such event, the Option shall automatically terminate. In the event Tenant
properly exercises the Option as provided herein, the following terms and
conditions shall govern said purchase and sale.
12.03. Purchase Price. The purchase price for the Leased Premises
shall be computed at the time Tenant exercises the Option. The purchase price
shall be Two Million Two Hundred Thousand ($2,200,000.00) Dollars plus (a) an
amount equal to that amount multiplied by the cumulative and annually
compounded (for each year of the Term of the Lease) net percentage increase
(but not decrease) in the CPI from the month in which the Lease commenced and
the CPI on that day which precedes by ninety (90) days the date on which this
Lease expires. For purposes hereof, "CPI" means the Consumer Price Index for
Urban Wage Earners and Clerical Workers, United States", all items, (1982 -
1984 = 100), which index is now published monthly in the "Monthly Labor Review"
of the Bureau of Labor Statistics of the United States Department of Labor, or
its successor index, and (b) the amount of any prepayment fee or premium on any
mortgage note to be paid and discharged at closing, plus any other fees or
expenses of any such mortgagee.
12.04. Title. Landlord shall convey title to the Leased Premises to
Tenant by quitclaim deed.
12.05. Title Insurance. Tenant shall obtain and pay for any title
insurance, survey or other assurance of title desired by tenant. Provided that
Tenant delivers to Landlord a commitment for a policy of title insurance at
least ninety (90) days before closing, Landlord shall do nothing to alter
title from that time until closing.
12.06. Closing. The closing of the transaction shall take place on the
date of expiration of the Term of this Lease, or other day mutually agreeable
to Landlord and Tenant.
12.07. Taxes. Tenant shall pay all transfer taxes and revenue stamps
due upon the sale of the Leased Premises.
12.08. Prorations. There shall be no proration of real estate taxes,
utilities, etc., all of which shall be the responsibility of Tenant.
12.09. Default. In the event Tenant fails or refuses to close
purchase of the Leased Premises after exercising the Option, through no fault
of Landlord, Landlord may retain the Security Deposit as liquidated damages, or
maintain an action for damages or specific performance. In the event Landlord
fails or refuses to close purchase of the Leased Premises after Tenant
exercises the Option, through no fault of Tenant, Tenant shall be entitled to
maintain an action for specific performance.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01. Assignment by Landlord. Landlord may assign, negotiate
or transfer all or any portion of its rights, obligations or interest in, to,
or under this Lease in whole or in part, at any time without notice to or
consent of Tenant, and in such event shall automatically be relieved of any and
all obligations and liabilities on the part of Landlord arising from and after
the date of such transfer.
13.02. Relationship; Construction. Nothing stated or implied
herein is intended to nor shall it be deemed to create any partnership or joint
venture between Landlord and Tenant. The relationship between Landlord and
Tenant does not extend beyond the scope of this Lease. No term or provision
hereof is to be construed adversely against Landlord due to or as a result of
any alleged drafting ambiguity, notwithstanding the fact that Landlord may have
caused this Lease to be prepared or processed. The terms and provisions of
this Lease have been determined by arms-length negotiation by the parties
hereto, who have been represented by separate and independent legal counsel.
13.03. Waiver of Action. No action or omission by Landlord,
including but not limited to, any extension, modification, amendment,
forbearance, delay, indulgence, or concession with regard hereto, with or
without notice to Tenant, is intended as, nor shall it constitute or be deemed
a waiver, discharge or release of Tenant, or of any obligation of Tenant or
right of Landlord established hereby, nor shall such action or omission
constitute an approval of or acquiescence in any breach hereof or Default
hereunder.
13.04. Accord and Satisfaction. No restrictive endorsement or
statement on any check or draft, or letter accompanying any check or draft,
for payment of rent or any other amount owed to Landlord shall be effective to
cause or evidence an accord and satisfaction, or acquiescence by Landlord to
accept a lesser amount than is then due and owing.
13.05. Waiver of Defenses. In the event of any litigation,
Tenant expressly waives the right to a trial by jury and/or to assert any
off-set or counterclaim of any nature or description whatsoever.
13.06. Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the State of Michigan. In the event
of any dispute between the parties hereto, the exclusive jurisdiction and venue
for the resolution and settlement thereof shall be the appropriate district or
circuit court in Oakland County, Michigan.
13.07. Conformity. In the event any term or provision hereof is
held invalid, inoperative, void, or unenforceable by a court of law, the
remaining provisions hereof shall (i) remain in full force; (ii) in no way be
altered, affected, impaired, invalidated, or otherwise changed thereby; and
(iii) be interpreted, construed and applied as though such offensive
provision(s) was not in the first instance contained herein.
13.08. Notices. All notices required hereby or given pursuant
hereto, if any, shall be deemed effective and binding if given in writing by
certified or registered mail, return receipt requested, (regardless of whether
the return receipt is received by sender), or any of the nationally recognized
private next-day delivery carriers, or by telegram, telecopy, or fax, or given
in person, at the addresses provided for herein and shall be deemed effective
on the first business day following dispatch. Business days exclude Sundays
and legal holidays of the United States.
13.09. Captions. Article and paragraph titles, headings and/or
captions contained herein have been inserted solely as a means of reference and
convenience. Such captions shall not affect the interpretation or construction
of this Lease and shall not define, limit, extend or otherwise described the
scope of this Lease or the intent of any provision hereof.
13.10. Gender. Whenever required by the context or use in this
Lease, the singular word shall include the plural word and the masculine gender
shall include the feminine and/or neuter genders, and vice versa.
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13.11. Entire Lease. This Lease, all Exhibits referred to
herein and/or attached hereto and the rules and regulations, if any, constitute
the entire and integrated agreement between Landlord and Tenant and supercedes
and cancels any prior or contemporaneous arrangements, understandings or
agreements, whether written or oral, by and between Landlord and Tenant
relative to the subject matter hereof.
13.12. Binding Effect. All rights and obligations contained
herein shall be binding upon and inure to the benefit of Landlord and Tenant,
and their respective successors, and permitted assigns, if any.
13.13. Intent. Notwithstanding anything to the contrary
contained in this Lease, it is the intent of the parties hereto that this Lease
be a net lease with Landlord incurring no obligation, monetary or otherwise,
which is not specifically and expressly provided for in this Lease.
13.14. Receipt. Landlord and Tenant hereby acknowledge that
they have read, fully understand and agree to all of the above, and that they
have executed and delivered the original of this Lease as of the date first set
forth hereinabove, and accept a copy of this Lease and all Exhibits referenced
herein, appropriately completed.
IN WITNESS WHEREOF, this Lease Agreement shall be deemed entered into
and effective on the last date shown below.
ROCKWELL MEDICAL SUPPLY, L.L.C., a
Michigan limited liability company
BY: /s/ Robert L. Chioini
----------------------------------
Rob Chioini, Member
BY: TK Investment Company, a Michigan
co-partnership Member
BY: Chilakapati Family Limited
Partnership, a Michigan limited
partnership, Partner
BY: /s/ Vijay Kumar Chilakapati
---------------------------------------
Vijay Kumar Chilakapati, General Partner
And: Thavarajah Family Limited Partnership,
a Michigan limited partnership,
Partner
By: /s/ Krishnapillai Thavarajah
---------------------------------------
Krishnapillai Thavarajah, General Partner
Dated: September 6, 1995
"TENANT"
OAKLAND OAKS, L.L.C., a Michigan
limited liability company
By: /s/ Douglas W. Manix
------------------------------------
Douglas W. Manix, Managing Member
Dated: 09/08/95, 1995
----------------
"LANDLORD"
-19-
<PAGE> 20
TENANT'S ACKNOWLEDGEMENT
STATE OF MICHIGAN)
)
COUNTY OF OAKLAND)
This 6th day of September, 1995, before me, a Notary Public in and for
said County, personally appeared Rob Chioini, Vijay Chilakapati, on behalf of
Chilakapati Family Limited Partnership, and Krishnapillai Thavarajah, on behalf
of Thavarajah Family Limited Partnership, co-partners of TK Investment Company,
a Michigan co-partnership, all Members of Rockwell Medical Supply, L.L.C., who
acknowledged that they did sign said instrument as a members on behalf of said
limited liability company, and that said instrument is the voluntary act and
deed of said limited liability company.
/s/ Burton H. Schwartz
-----------------------------------------
Burton H. Schwartz Notary Public
Oakland County, MI
My Commission Expires: 6-8-97
LANDLORD'S ACKNOWLEDGMENT
STATE OF MICHIGAN)
)
COUNTY OF OAKLAND)
This 8th day of September, 1995, before me, a Notary Public in and for
said County, personally appeared Douglas W. Manix,, who acknowledged that he is
the Managing Member of Oakland Oaks, L.L.C., which executed the foregoing
instrument as Landlord, that he did sign said instrument as a manager on behalf
of said limited liability company, and that said instrument is the voluntary
act and deed of said limited liability company.
[sig]
---------------------------------
Notary Public
Oakland County, MI
My Commission Expires: 8-6-96
-20-
<PAGE> 1
EXHIBIT 10.10
ASSIGNMENT AND FIRST AMENDMENT TO
WIXOM BUILDING LEASE
GRAND OAKS INDUSTRIAL PARK
THIS LEASE ASSIGNMENT AND AMENDMENT is made and entered into as of the
date of the last signature shown on the signature page hereof, by and between
OAKLAND OAKS, L.L.C., a Michigan limited liability company, whose address is
21520 Bridge Street, Southfield, Michigan 48034 ("Landlord"), ROCKWELL MEDICAL
SUPPLY, L.L.C., a Michigan limited liability company whose address is 28025
Oakland Oaks, Wixom, Michigan 48393 ("Assignor"), ROCKWELL MEDICAL
TECHNOLOGIES, INC., a Michigan corporation, whose address is 28025 Oakland
Oaks, Wixom, Michigan 48393 ("Assignee"), and by DR. KRISHNAPILLAI THAVARAJAH,
whose address is 15 Pine Gate Drive, Bloomfield Hills, Michigan 48304 and DR.
VIJAY CHILAKAPATI whose address is 18100 Parkridge Drive, Riverview, Michigan
48192, ("Guarantors").
RECITALS:
A. On or about September 8, 1995 Landlord and Assignor entered into a
Wixom Building Lease (the "Lease") regarding the lease by Landlord to Assignor
as "Tenant" of a Free standing light industrial building located at 28025
Oakland Oaks, Wixom, Michigan (the "Leased Premises").
B. The obligations of Tenant under the Lease were unconditionally
guaranteed by the Guarantors, under a Personal Guaranty of Lease, dated
September 6, 1995.
C. Assignor desires herein to assign all of its right, title and
interest in the Lease and Leased Premises to Assignee.
D. Landlord is willing, on the terms specifically provided herein, to
amend the Lease, consent to assignment of Tenants rights to Assignee, and to
discharge the Guarantors.
CONSIDERATION AND AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the sufficiency and adequacy of which are hereby mutually
acknowledged and accepted, and with the intent to be legally bound hereby, the
parties hereby agree as follows:
1. Assignment of Lease. Assignor hereby grants, assigns, transfers,
conveys, sets over and delivers to Assignee all of Assignor's right, title and
interest, as Tenant, in and to the Lease and the Leased Premises, including all
of Assignor's rights, if any, in the Security Deposit. Assignee hereby assumes
and agrees to perform all obligations of Assignor, as Tenant, and Assignee shall
be bound by the terms of the Lease as though a signatory thereto in the first
instance, other than liabilities and obligations arising out of or relating to
any breach or default of Assignor occurring on or prior to the date hereof.
Landlord hereby consents to the foregoing assignment of Lease to Assignee and
agrees that the assignment
<PAGE> 2
of the Lease will not (i) result in a default by the Assignor or Assignee under
the Lease or (ii) terminate or modify any of the rights of Assignee under the
Lease..
2. Amendment of Lease. Simultaneously herewith, Assignee has
deposited with Landlord the sum of $177,937.47, in immediately available funds
(i.e., cashier's or certified check, or wire transfer). Said sum shall be held,
together with the initial Security Deposit of $39,541.66, for a total Security
Deposit, to be held and applied by Landlord in accordance with this paragraph
and Section 3.05 of the Lease, in the amount of $217,479.13. Provided that
Tenant is not then and has not, at any time preceding such date been in default
under the Lease, the Security Deposit will be applied against monthly base
rent, in accordance with the following schedule:
MONTH OF APPLICATION AMOUNT TO BE APPLIED
-------------------- --------------------
January 1998 $19,770.83
February 1998 $19,770.83
January 1999 $19,770.83
February 1999 $19,770.83
January 2000 $19,770.83
February 2000 $19,770.83
March 2000 $19,770.83
Upon application of the Security Deposit as aforesaid, the entire remaining
balance thereof ($79,083.32) shall be held until expiration of the Lease or
applied as otherwise permitted under the terms thereof.
3. Release of Guarantors. Guarantors are hereby released and
discharged of all further liability under the Guaranty.
4. Representation by Landlord. Landlord represents and warrants to
Assignee that (i) Exhibit A attached hereto is a true and correct copy of the
entire Lease and there have been no amendments or modifications thereto, (ii)
the Lease represents a valid and binding obligation of the Landlord in
accordance with its terms, and (iii) except as to payment of the invoice
attached hereto as Exhibit B, which remains outstanding as of the date hereof,
Landlord has no current actual knowledge that there has occurred an event which
would constitute any breach of or default in any provision of the Lease or
which would permit the acceleration or termination of any obligation of any
party thereto, or which would give rise to any of the foregoing upon the
giving of notice or lapse of time or both.
4. Attorneys Fees. Assignee shall be solely responsible to reimburse
Landlord for its attorneys fees and any other costs incurred in connection with
this Agreement, including charges levied against Landlord by its mortgage lender
and such lender's legal counsel.
5. Capitalized Terms. Capitalized terms when used herein shall have
the same meaning as are attributed to them in the Lease, unless a contrary or
different meaning is specifically stated herein.
6. Entire Lease. The Lease, all Exhibits referred therein and/or
attached thereto, the rules and regulations, if any, and this Amendment
constitute the entire and integrated agreement between Landlord and Assignee as
Tenant.
<PAGE> 3
7. Binding Effect. All rights and obligations contained herein shall
be binding upon and inure to the benefit of Landlord and Assignee, and their
respective successors, and permitted assigns, if any.
8. Receipt. The parties hereto each hereby acknowledge that they have
read, fully understand and agree to all of the above, and that they have
executed and delivered the original of this Amendment as of the date first set
forth hereinabove, and accept a copy hereof.
9. Counterparts. This Amendment Agreement may be executed in one or
more counterpart copies, all of which shall constitute and be deemed an
original, but all of which together shall constitute one and the same
instrument binding on all the parties.
IN WITNESS WHEREOF, this Amendment Agreement shall be deemed
entered into and effective on the last date shown below.
ROCKWELL MEDICAL SUPPLY, L.L.C., a
Michigan limited liability company
By: /s/ Robert L. Chioini
-----------------------------------------
Robert L. Chioini, Member
By: TK Investment Company, a Michigan
co-partnership, Member
By: /s/ Vijay Kumar Chilakapati
-----------------------------------------
Chilakapati Family Limited Partnership,
a Michigan limited partnership, Partner
By: /s/ Vijay Kumar Chilakapati
-----------------------------------------
Vijay Chilakapati, General Partner
And: Thavarajah Family Limited Partnership,
a Michigan limited partnership, Partner
By: /s/ Krishnapillai Thavarajah
-----------------------------------------
Krishnapillai Thavarajah, General Partner
Dated: February 19, 1997
"ASSIGNOR:
ROCKWELL MEDICAL TECHNOLOGIES, INC.
a Michigan corporation
By: /s/ Robert L. Chioini
-----------------------------------------
Robert L. Chioini, President
-3-
<PAGE> 4
Dated: February 19, 1997
"ASSIGNEE"
/s/ Krishnapillai Thavarajah
-------------------------------------
Dr. Krishnapillai Thavarajah
/s/ Vijay Kumar Chilakapati
-------------------------------------
Dr. Vijay Kumar Chilakapati
Dated: February 19, 1997
"GUARANTORS"
OAKLAND OAKS, L.L.C., a Michigan
limited liability company
By: /s/ Douglas W. Manix
---------------------------------
Douglas W. Manix, Managing Member
Dated: February 19, 1997
"LANDLORD"
-4-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
Name State of Incorporation
- ---- ----------------------
Rockwell Transportation, Inc. Michigan
<PAGE> 1
[COOPERS & LYBRAND LETTERHEAD]
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion in this registration statement on Form SB-2 of our
report dated July 11, 1997 on our audits of the combined financial statements
of Rockwell Medical Supplies, L.L.C. and Rockwell Transportation, L.L.C. and
our report which includes an explanatory paragraph related to the uncertainty
of the Company's ability to continue as a going concern, dated July 11, 1997,
except for Note 11, as to which the date is July 22, 1997 on our audit of the
consolidated financial statements of Rockwell Medical Technologies, Inc. We
also consent to the reference to our Firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Detroit, Michigan
July 22, 1997
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROCKWELL
MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM SB-2
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-20-1997
<PERIOD-END> MAY-31-1997
<TOTAL-ASSETS> 3,467,257
1,416,664
0
<COMMON> 2,106,350
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,467,257
<TOTAL-REVENUES> 795,271
<INCOME-TAX> 0
<INCOME-CONTINUING> (772,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (772,389)
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROCKWELL
MEDICAL SUPPLIES, LLC AND ROCKWELL TRANSPORTATION, LLC AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH SB-2
</LEGEND>
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> FEB-19-1997
<TOTAL-ASSETS> 1,197,974
0
0
<COMMON> 50,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,197,974
<TOTAL-REVENUES> 343,555
<INCOME-TAX> 0
<INCOME-CONTINUING> (366,019)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (366,019)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROCKWELL
MEDICAL SUPPLIES, LLC AND ROCKWELL TRANSPORTATION LLC AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH SB-2
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<TOTAL-ASSETS> 1,391,659
0
0
<COMMON> 50,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,391,659
<TOTAL-REVENUES> 1,019,856
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,383,485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,383,485)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
