EXHIBIT 1.1
CREATIVE MASTER INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
[Date]
Cruttenden Xxxx Incorporated
As Representative of the
Several Underwriters
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Creative Master International, Inc., a Delaware Corporation (the
"Company"), proposes to issue and sell to the Underwriters named in Section 2(a)
hereof (the "Underwriters"), an aggregate of [2,000,000] shares (the "Firm
Shares") of its authorized but unissued Common Stock, par value $0.0001 per
share (the "Common Stock"). Acma Investments Pte., Ltd. (the "Selling
Stockholder") proposes to grant to the Underwriters the option to purchase up to
[300,000] additional shares of Common Stock (the "Option Shares") for the sole
purpose of covering over-allotments, if any, in connection with the sale of the
Firm Shares. The Firm Shares and any Option Shares purchased pursuant to this
Agreement are referred to in this Agreement as the "Shares." The Company also
proposes to sell to you individually, and not in your capacity as
Representative, five-year warrants (the "Representative's Warrants") to purchase
up to [200,000] shares of Common Stock (the "Representative's Warrant Stock").
The sale of the Representative's Warrants will be consummated in accordance with
the terms and conditions of the form of the Representative's Warrant Agreement
filed as an Exhibit to the Registration Statement. Cruttenden Xxxx Incorporated
is acting as representative of the several Underwriters, and in that capacity is
referred to in this Agreement as the "Representative."
The Company hereby confirms its agreement with the Underwriters as follows:
1. Representations and Warranties of the Company and the Selling
Stockholder.
(a) The Company and the Selling Stockholder each represents and warrants
to, and agrees with, the Underwriters as follows:
(i) The Company meets the requirements for use of Form SB-2 under the
Securities Act of 1933, as amended (the "Securities Act"), and a registration
statement (Registration No. 333-65929) on Form SB-2 relating to the Shares, the
Representative's Warrants and the Representative's Warrant Stock, including such
amendments to such registration statement as may
have been required to the date of this Agreement, has been prepared by the
Company under and in conformity with the provisions of the Securities Act, and
the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. If such registration statement has not become effective upon
execution of this Agreement, a further amendment to such registration statement,
including a form of final prospectus, necessary to permit such registration
statement to become effective will promptly be filed by the Company with the
Commission. If such registration statement has become effective, a final
prospectus containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules and Regulations will promptly be filed
by the Company with the Commission in accordance with Rule 424 of the Rules and
Regulations (and in form and substance reasonably satisfactory to the counsel
for the Underwriters). The term "Registration Statement" as used in this
Agreement shall mean such registration statement, including financial
statements, schedules and exhibits, in the form in which it became or becomes,
as the case may be, effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 430A(b) of the Rules and
Regulations) and, in the event of any amendment thereto after the effective date
of the Registration Statement, shall also mean (from and after the effectiveness
of such amendment) the Registration Statement as so amended. Any registration
statement filed pursuant to Rule 462(b) under the Rules and Regulations is
herein called the "462(b) Registration Statement," and after such filing the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares included in the Registration Statement at the
time it became effective, except that if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the Prospectus on file with the
Commission at the time the Registration Statement became or becomes, as the case
may be, effective, whether or not the revised prospectus is required to be filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations, the
term "Prospectus" shall refer to such revised prospectus from and after the time
it is first provided to the Underwriters for such use.
(ii) No stop order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of the Prospectus has been issued
and no proceedings for that purpose are pending or threatened or, to the best
knowledge of the Company, contemplated by the Commission; no stop order
suspending the sale of the Shares in any jurisdiction has been issued and no
proceedings for that purpose are pending or, to the best knowledge of the
Company, threatened or are contemplated; and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) has been complied with.
(iii) The Company and each of its subsidiaries have been duly
organized and are validly existing in good standing under the laws of their
respective jurisdiction of organization, have full power and authority to own or
lease their respective properties and conduct business as described in the
Registration Statement and the Prospectus and as they are currently conducted
such business, and are duly qualified as a foreign organization and in good
standing in all jurisdictions in which the character of the property owned or
leased or the nature of the business transacted by it makes qualification
necessary (except where the failure to be so qualified would not have a material
adverse
2
effect on the business, properties, condition (financial or otherwise),
prospects or results of operations of the Company and its subsidiaries, taken as
a whole). Except as disclosed in the Registration Statement, the Company and
each of its subsidiaries have obtained, are in possession of, and operating in
compliance with, all authorizations, licenses, certificates, consents, orders
and permits from state, federal and other regulatory authorities (including
foreign governments) that are material to the conduct of their respective
business, all of which are valid and in full force and effect. The Company owns
the percentage of the outstanding capital stock of each of its subsidiaries as
set forth in Note 3 of the Notes to the Consolidated Financial Statements
included in the Registration Statement. The Company holds such outstanding
capital stock of each of its subsidiaries free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest of any type, kind or
nature. All issued and outstanding shares of capital stock or other equity
interest of each such subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, and were not issued in
violation of or subject to any preemptive right, or other rights to subscribe
for or purchase shares or other equity interest.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any court or governmental
action, order or decree, or any changes in the capital stock or long-term debt
of the Company or any of its subsidiaries, or any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company, or any
material adverse change, or a development known to the Company that might cause
or result in a material adverse change, in or affecting the general affairs,
management, business, properties, condition (financial or otherwise), prospects
or results of operations of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
other than as set forth in the Registration Statement and the Prospectus, and
since such dates, except in the ordinary course of business, neither the Company
nor any of its subsidiaries has entered into any material transaction not
described in the Registration Statement and the Prospectus.
(v) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material respects to
the requirement of the Securities Act and the Rules and Regulations; when the
Registration Statement became or becomes, as the case may be, effective (the
"Effective Date"), when any 462(b) Registration Statement became or becomes
effective, and when the Prospectus is first filed (if required) in accordance
with Rule 424(b), and at all times subsequent thereto up to and at the "Closing
Date" (as hereinafter defined) and through any later date on which Option Shares
are to be purchased, as the case may be, the Registration Statement, the Rule
462(b) Registration Statement and the Prospectus, and any amendments or
supplements thereto, will in all material respects conform to the requirements
of the Securities Act and the Rules and Regulations, and the Securities Exchange
Act of 1934, as amended, (the "Exchange Act"), and the rules and regulations of
the Commission thereunder; on the Effective Date, the Registration Statement,
and any 462(b) Registration Statement, on the date it became or becomes
effective, did not or will not contain any untrue statement of a material fact
and did not or will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading; and
3
neither the Registration Statement, any 462(b) Registration Statement, nor the
Prospectus, nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that none of the
representations and warranties in this Section 1(a)(v) shall apply to statements
in, or omissions from, the Registration Statement, and any 462(b) Registration
Statement or the Prospectus made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Underwriters specifically for use in the Registration Statement or the
Prospectus. There is no agreement, contract, license, lease or other document
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement which is not described or
filed as required. The contracts so described in the Prospectus are in full
force and effect on the date hereof, and neither the Company nor any of its
subsidiaries, nor to the best knowledge of the Company, any other party, is in
material breach of or default under any such contracts.
(vi) All of the outstanding shares of capital stock of the Company
(including the shares to be sold by the Selling Shareholder hereunder) have been
duly authorized and validly issued and are fully paid and nonassessable, have
been issued in compliance with all applicable securities laws (including any
applicable United States and state securities laws), were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and the authorized and outstanding capital stock of
the Company conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such statements
correctly state the substance of the instruments defining the capitalization of
the Company). The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted or
exercised thereunder, set forth in the Prospectus accurately and fairly present
the information shown therein with respect to such plans, arrangements, options
and rights. The Common Stock to be sold by the Company hereunder has been duly
authorized for issuance and sale to the Underwriters pursuant to this Agreement
and, when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly issued and
fully paid and nonassessable. Other than this Agreement, the Representative's
Warrants and the options and warrants to purchase the Common Stock described in
the Prospectus, there are no options, warrants or other rights outstanding to
subscribe for or purchase any shares of the Company's capital stock. There are
no preemptive rights or any restrictions upon the voting or transfer of any of
the Shares pursuant to the Company's Certificate of Incorporation or any other
governing document or agreement to which the Company or any of its subsidiaries
is a party or by which any of them may be bound. Neither the filing of the
Registration Statement nor the offering or sale of the Shares 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 of the Shares or any
other capital stock of the Company.
(vii) The Company has full right, power and authority to enter into
and perform its obligations under this Agreement and the Representative's
Warrant Agreement, and to issue, sell and deliver the Firm Shares and the Option
Shares. This Agreement and the Representative's Warrant Agreement have each been
duly authorized, executed and delivered by the Company and
4
constitute the valid and binding agreements of the Company and each is
enforceable against the Company in accordance with their respective terms.
(viii) Neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
Representative's Warrant Agreement, or the consummation of the transactions
contemplated by such agreements result in a violation of or constitute a default
(with the giving of notice, passage of time or otherwise) under the Certificate
of Incorporation or other charter or governing documents of the Company or any
of its subsidiaries, or any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, deed of trust, loan agreement, lease,
license, joint venture or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which it or any of their properties may
be bound or affected, nor will the performance by the Company of its obligations
under this Agreement or the Representative's Warrant Agreement violate any law,
rule, administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company, its subsidiaries or any of
their respective properties, or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of the Company or
any of its subsidiaries. Except for permits and similar authorizations required
under the Securities Act or the Exchange Act, and for such permits and
authorizations that have been obtained, no consent, approval, authorization or
order of any court, governmental agency or body or financial institution is
required in connection with the consummation of the transactions contemplated by
this Agreement or the Representative's Warrant Agreement.
(ix) The Company and each of its subsidiaries owns, or has valid
rights to use, all items of real and personal property which are material to the
business of the Company and its subsidiaries taken as a whole, free and clear of
all liens, encumbrances and claims that might materially interfere with the
business, properties, condition (financial or otherwise) or prospects of the
Company and its subsidiaries, taken as a whole.
(x) Except as described in the Prospectus, there is no litigation
or governmental proceeding to which the Company or any of its subsidiaries is a
party, or to which any property of the Company or any of its subsidiaries is
subject, which is pending, or to the best knowledge of the Company, contemplated
against the Company or any of its subsidiaries, that might have any material
adverse effect on, or might result in any material adverse change in the
business, properties, condition (financial or otherwise), prospects or results
of operations of the Company and its subsidiaries, taken as a whole, or that
might prevent consummation of the transactions contemplated by this Agreement or
the Representative's Warrant Agreement or that are required to be disclosed in
the Registration Statement.
(xi) Neither the Company nor any of its subsidiaries is in violation
of any law, order, ordinance, rule, regulation, writ, injunction, judgment or
decree of any court or governmental agency or body to which it or its properties
(whether owned or leased) may be subject, which violation might have a material
adverse effect on the business, properties, condition (financial or otherwise),
prospects or results of operations of the Company and its subsidiaries, taken as
a whole.
5
(xii) Each of the Company and each of its subsidiaries owns or
possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights described or referred to in the Prospectus as owned by or used by any
of them, or which are necessary for the conduct of their business as described
in the Prospectus; and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
might have a material adverse effect on the business, properties, condition
(financial or otherwise), prospects or results of operations of the Company and
its subsidiaries, taken as a whole.
(xiii) The Company has not taken, and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to cause or result in, under the Exchange
Act, the rules and regulations of the Commission under the Exchange Act, or
otherwise, the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares. No bid or purchase by
the Company, and, to the best knowledge of the Company, no bid or purchase that
could be attributed to the Company (as a result of bids or purchases by an
"affiliated purchaser" within the meaning of Regulation M under the Exchange
Act) for or of the Common Stock, any securities of the same class or series as
the Common Stock or any securities immediately convertible into or exchangeable
for or that represent any right to acquire the Common Stock, is now pending or
in progress or will have commenced at any time prior to the completion of the
distribution of the Shares.
(xiv) Xxxxxx Xxxxxxxx & Co. whose report appears in the Registration
Statement and Prospectus, are, and during the periods covered by their report in
the Registration Statement were, independent accountants as required by the
Securities Act and the Rules and Regulations. The financial statements included
in the Registration Statement, any Preliminary Prospectus or the Prospectus
present fairly the consolidated financial condition, results of operations, cash
flow and changes in stockholders' equity of the Company and its subsidiaries at
the dates and for the periods indicated, and the financial statements included
in the Registration Statement present fairly the information required to be
stated therein. Such financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America,
applied on a consistent basis throughout the periods presented, except as stated
therein. The selected and summary financial and statistical data included in
the Registration Statement and the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with the audited
financial statements presented therein. No other financial statements and no
schedules are required to be included in the Registration Statement.
(xv) The books, records and accounts of the Company and each of its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and each of its
subsidiaries. The systems of internal accounting controls maintained by the
Company and each of its subsidiaries are sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity
6
with generally accepted accounting principles and (B) to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(xvi) The Company has delivered to the Representative the written
agreement of each of its officers and directors and certain beneficial owners of
its Common Stock and/or securities exercisable or exchangeable for, or
convertible into, Common Stock (collectively, "Material Holders") to the effect
that each of the Material Holders will not, for a period of six months following
the Closing Date, offer, sell or contract to sell, or otherwise dispose of, or
announce the offer of, any Common Stock and/or securities exercisable or
exchangeable for, or convertible into, Common Stock other than intra-family
transfers or transfers to trusts for estate planning purposes, without the prior
written consent of the Representative.
(xvii) No labor disturbance by the employees of the Company or any of
its subsidiaries exists or is imminent, nor is the Company aware of any existing
or imminent labor disturbance by the employees of any principal suppliers,
contract manufacturing organizations, manufacturers, authorized dealers or
distributors, in either case, where such labor disturbance might be expected to
result in any material adverse change in the condition (financial or otherwise),
earnings, operations, business or prospects of the Company and its subsidiaries,
considered as a whole. No collective-bargaining agreement exists with any of
the Company's or any of the Company's subsidiaries' employees and, to the best
knowledge of the Company, no such agreement is imminent.
(xviii) Each of the Company and each of its subsidiaries has filed all
United States, state, local, Hong Kong, Peoples' Republic of China and other
foreign tax returns which are respectively required of the Company and each of
its subsidiaries to be filed or has requested extensions thereof and has paid
all taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges to the extent that the same have become due and payable.
No tax assessment or deficiency has been made or proposed against the Company or
any of its subsidiaries nor has the Company or any of its subsidiaries received
any notice of any proposed assessment or deficiency.
(xix) Except as set forth in the Prospectus, there are no
outstanding loans, advances or guaranties of indebtedness by the Company to or
for the benefit of any of its "affiliates," as such term is defined in the Rules
and Regulations, or any of the officers or directors of any of its subsidiaries,
or any of the members of the families of any of them.
(xx) Neither the Company nor any of its subsidiaries has, directly
or indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law; (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by all applicable
laws; or (iii) violated nor is it in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
7
(xxi) Neither the Company nor any of its subsidiaries has any
liability, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, imposed or based upon any provision of, or has received
notice of any potential liability under, any law, rule or regulation, or the
civil or common law, or any tort, nuisance or absolute liability theory,
applicable to the Company or any of its subsidiaries, or under any code, order,
decree, judgment or injunction applicable to the Company or any of its
subsidiaries relating to public health or safety, worker health or safety or
pollution, damage to or protection of the environment, including, without
limitation, laws relating to damage to natural resources, emissions, discharges,
releases or threatened releases of hazardous materials into the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), or otherwise relating to the manufacture,
processing, use, treatment, storage, generation, disposal, transport or handling
of hazardous materials. As used herein, "hazardous material" includes chemical
substances, wastes, pollutants, contaminants, hazardous or toxic substances,
constituents, materials or wastes, whether solid, gaseous or liquid in nature.
(xxii) The Company has not distributed and will not distribute prior
to the Closing Date or on or prior to any date on which the Option Shares are to
be purchased, as the case may be, any prospectus or other offering material in
connection with the offering and sale of the Shares other than the Prospectus,
the Registration Statement and any other material which may be permitted by the
Securities Act and the Rules and Regulations.
(xxiii) The Common Stock has been approved for listing on the
National Market of The Nasaq Stock Market (the "Nasdaq National Market"),
subject to official notice of issuance.
(xxiv) The Company is familiar with and has discussed with its
United States legal counsel the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations thereunder, and has in the past
conducted, and intends in the future to conduct, its affairs in such a manner as
to ensure that it will not become an "investment company" within the meaning of
the 1940 Act and such rules and regulations.
(xxv) The Representative's Warrants have been duly and validly
authorized, and when issued and delivered will be valid and binding obligations
of the Company in accordance with their terms; the Representative's Warrant
Stock has been duly and validly authorized for issuance upon exercise of the
Representative's Warrants, and when so issued will be validly issued, fully paid
and non-assessable; and no stockholder of the Company has any preemptive rights
with respect to the Representative's Warrants or the Representative's Warrant
Stock.
(xxvi) The Company does not know of any facts which may adversely
affect its earnings, prospects or business which have not been fully disclosed
in writing to the Representative.
(b) The Selling Stockholder represents and warrants to and agrees with the
several Underwriters that:
8
(i) The Selling Stockholder has valid and unencumbered title to the
Option Shares to be sold by the Selling Stockholder hereunder and has full
right, power and authority to enter into this Agreement and to sell, assign,
transfer and deliver the Shares to be sold by the Selling Stockholder hereunder.
(ii) The Selling Stockholder has duly executed and delivered, in the
form heretofore furnished to the Representative, an irrevocable Power of
Attorney and Custody Agreement appointing ____________________ as attorney-in-
fact (the "Attorney") with U.S. Stock Transfer Corporation as custodian (the
"Custodian"); the Power of Attorney and Custody Agreement constitutes a valid
and binding agreement on the part of such Selling Stockholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; and such Selling Stockholder's Attorney, acting alone, is
authorized to execute and deliver this Agreement and the certificate referred to
in Section 5(m) hereof on behalf of such Selling Stockholder, to determine the
price to be paid by the several Underwriters to such Selling Stockholder as
provided in Section 2 hereof, to authorize the delivery of the Option Shares to
be sold by such Selling Stockholder under this Agreement and to duly endorse (in
blank or otherwise) the certificate or certificates representing such Shares or
a stock power or powers with respect thereto, to accept payment therefor, and
otherwise to act on behalf of such Selling Stockholder in connection with this
Agreement;
(iii) All authorizations, approvals and consents necessary for the
execution and delivery by the Selling Stockholder of the Power of Attorney and
Custody Agreement, the execution and delivery by or on behalf of the Selling
Stockholder of this Agreement and the sale and delivery of the Option Shares
that may be sold by the Selling Stockholder hereunder, have been obtained and
are in full force and effect; and the Selling Stockholder has full right, power
and authority to enter into this Agreement and such Power of Attorney and
Custody Agreement, and to sell, transfer and deliver the Option Shares that may
be sold by the Selling Stockholder hereunder.
(iv) Certificates in negotiable form for all Option Shares which may
be sold by the Selling Stockholder hereunder have been placed in custody with
the Custodian for the purpose of effecting delivery hereunder.
(v) This Agreement is a valid and binding agreement of the Selling
Stockholder, enforceable against the Selling Stockholder in accordance with its
terms.
(vi) Upon the delivery of and payment for such Option Shares
hereunder, the several underwriters will acquire valid title to the Option
Shares to be sold by the Selling Stockholder free and clear of any encumbrances
created by or known to the Selling Stockholder.
(vii) The consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under, any material agreement,
indenture or other instrument to which the Selling Stockholder is a party or by
which the Selling Stockholder is, or the certificates for the Option
9
Shares to be sold by the Selling Stockholder hereunder are, bound or, to the
best of the knowledge of the Selling Stockholder, any statute, ruling, decree,
judgment, order or regulation of any governmental authority having jurisdiction
over the Selling Stockholder or the property of the Selling Stockholder.
(viii) The Selling Stockholder has not taken, directly or indirectly,
any action designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares pursuant to the
distribution contemplated by this Agreement and, other than as permitted by the
Act, the Selling Stockholder has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and the
sale of the Shares.
(ix) All information furnished by or on behalf of such Selling
Stockholder relating to such Selling Stockholder, its parent and affiliates, the
Common Stock of the Selling Stockholder, the Option Shares that is contained in
the representations and warranties of such Selling Stockholder in such Selling
Stockholder's Power of Attorney or set forth in the Registration Statement and
the Prospectus is, and at the time the Registration Statement became or becomes,
as the case may be, effective and at all times subsequent thereto up to and on
the Closing Date, and on any later date on which Option Shares are to be
purchased, was or will be, true, correct and complete, and does not, and at the
time the Registration Statement became or becomes, as the case may be, effective
and at all times subsequent thereto up to and on the Closing Date and on any
later date on which Option Shares are to be purchased, will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make such information not misleading.
(x) The Selling Stockholder will review the Prospectus and will
comply with all agreements and satisfy all conditions on its part to be complied
with or satisfied pursuant to this Agreement on or prior to the Closing Date and
on any later date on which Option Shares are to be purchased, as the case may
be, and will advise its Attorney and the Representative prior to the Closing
Date and on any later date on which any Option Shares are to be purchased, if
any statement to be made on behalf of such Selling Stockholder in the
certificate contemplated by Section 5(m) would be inaccurate if made as of the
date on which Option Shares are to be purchased.
(xi) The Selling Stockholder does not have, or has waived prior to
the date hereof, any preemptive right, co-sale right or right of first refusal
or other similar right to purchase any of the Firm Shares; such Selling
Stockholder does not have, or has waived prior to the date hereof, any
registration right or other similar right to participate in the offering made by
the Prospectus, other than such rights of participation as have been satisfied
by the participation of such Selling Stockholder in the transactions to which
this Agreement relates in accordance with the terms of this Agreement; and such
Selling Stockholder does not own any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company, other
than those described in the Registration Statement and the Prospectus.
10
(xii) Except for the Option Shares, the Selling Stockholder will not,
for a period of six months following the Closing Date, offer, sell or contract
to sell, or otherwise dispose of, or announce the offer of, any Common Stock
and/or securities exercisable or exchangeable for, or convertible into, Common
Stock without the prior written consent of the Representative
2. Purchase, Sale and Delivery of Shares.
(a) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to the terms and conditions set forth
in this Agreement, the Company agrees to sell to the Underwriters, and the
Underwriters agree to purchase from the Company, at a purchase price of $_____
per Firm Share, the number of Firm Shares set forth opposite such Underwriter's
name in Schedule I hereto.
(b) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to the terms and conditions set forth
in this Agreement, including the terms set forth below, the Selling Stockholder
grants an option to the Underwriters to purchase from the Selling Stockholder
all or any portion of [300,000] Option Shares at the same price per Share as the
Underwriters shall pay for the Firm Shares. Said option may be exercised only to
cover over-allotments in the sale of the Firm Shares by the Underwriters and may
be exercised in whole or in part at any time on or before the 45/th/ business
day after the date of the Prospectus upon written, telecopied or telegraphic
notice by the Representative to the Selling Stockholder setting forth the
aggregate number and class of Option Shares as to which the Underwriters are
exercising the option and the settlement date. The Option Shares shall be
purchased severally, and not jointly, by each Underwriter, if purchased at all,
in the same proportion that the number of Firm Shares to be purchased by such
Underwriter bears to the total number of Firm Shares to be purchased by the
Underwriters under Section 2(a), above, subject to such adjustments as the
Representative in its absolute discretion shall make to eliminate any fractional
shares. Delivery of certificates for the Option Shares, and payment therefor,
shall be made as provided in Section 2(c) and Section 2(d) below.
(c) Delivery of certificates for the Firm Shares and the Option
Shares (if the option granted by the Company in Section 2(b) above shall have
been exercised not later than 10:00 a.m., New York time, on the date two
business days preceding the Closing Date), and payment therefor shall be made at
the office of Cruttenden Xxxx Incorporated ,18301 Xxx Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxx 00000, at 10:00 a.m., New York time, on the later to occur of (i) the
fourth business day after the date of this Agreement, (ii) the third business
day after the date the Firm Shares are first offered to the public, or (iii) as
provided in Section 8 of this Agreement. The date and hour of delivery and
payment for the Firm Shares are referred to in this Agreement as the "Closing
Date." As used in this Agreement, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.
(d) If any of the options granted by the Company in Section 2(b)
above shall be exercised after 10:00 a.m., New York time, on the date two
business days preceding the Closing
11
Date, delivery of certificates for the Option Shares, and payment therefor,
shall be made at the office of Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, at 10:00 a.m., New York time, on the date
specified by the Representative (which shall be shall not be earlier than four
and not later than 10 full business days after the exercise of said option, nor
in any event prior to the Closing Date, and such time and date is referred to
herein as the "Option Closing Date"). Time shall be of the essence and delivery
at the time and place specified in this subsection (d) is a further condition to
your obligations hereunder.
(e) Payment of the purchase price for the Firm Shares and the Option
Shares by the Underwriters, less any reimbursable expenses provided for in
----
Section 4(a) of this Agreement and the non-accountable expense allowance
provided for in Section 4(b) of this Agreement, shall be made by certified or
official bank check or checks drawn in next-day funds, payable to the order of
the Company and the Selling Stockholder, respectively (and the Company and the
Selling Stockholder agree not to deposit or permit deposit of any such check in
the bank on which drawn until the day following the date of its delivery to the
Company). Such payment shall be made upon delivery of certificates for the
Shares to you for the account of the Underwriters. Certificates for the Shares
to be delivered to you shall be registered in such name or names and shall be in
such denominations as the Representative may request at least two business days
before the Closing Date, in the case of Firm Shares, and at least one business
day prior to the Option Closing Date, in the case of the Option Shares. Such
certificates will be made available to the Representative for inspection,
checking and packaging at the offices Cruttenden Xxxx Incorporated, 00000 Xxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, not less than one full business day
prior to the Closing Date or, in the case of the Option Shares, by 3:00 p.m.,
New York time, on the first business day preceding the date of purchase.
(f) It is understood that the Underwriters propose to offer the
Shares for sale to the public as soon as the Representative deems it advisable
to do so (the "Public Offering"). The Firm Shares are to be initially offered to
the public at the public offering price set forth in the Prospectus (the "Public
Offering Price"). The Underwriters may from time to time thereafter change the
public offering price and other selling terms.
(g) The statements in the first, third, seventh and last paragraphs
under the caption "Underwriting" in any Preliminary Prospectus and in the final
form of Prospectus filed pursuant to Rule 424(b) constitute the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement.
3. Further Agreements of the Company. The Company and the Selling
Stockholder covenants and agrees with the Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed (and in form and substance
reasonably
12
satisfactory to counsel for the Underwriters) pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing. The Company will not file the Prospectus,
any amended Prospectus, any amendment of the Registration Statement or
supplement to the Prospectus or make any filing under Rule 462(b) of the Rules
and Regulations without advising the Representative of, and furnishing the
Underwriters with copies thereof a reasonable time prior to the proposed filing
of, such amendment or supplement and without obtaining the prior consent of the
Representative to such filing. The Company will prepare and file with the
Commission, promptly upon the request of the Representative, any amendment to
the Registration Statement or supplement to the Prospectus that may be necessary
or advisable in connection with the distribution of the Shares by you, and use
its best efforts to cause the same to become effective as promptly as possible.
(b) The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any amendment
thereof shall have become effective, (iii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order or suspension and, if
issued, to obtain as soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date, deliver to
each of you and your counsel a conformed copy of the Registration Statement as
filed and of each amendment thereto filed prior to the time the Registration
Statement becomes effective and, promptly upon the filing thereof, a conformed
copy of each 462(b) Registration Statement and post-effective amendment, if any,
to the Registration Statement (together with, in each case, all exhibits thereto
unless previously furnished to you) and all documents filed by the Company with
the Commission under the Exchange Act and deemed to be incorporated by reference
into any Preliminary Prospectus or the Prospectus, and will also deliver to you,
for distribution to the Underwriters, a sufficient number of additional
conformed copies of each of the foregoing (excluding exhibits) so that one copy
of each may be distributed to each Underwriter, (ii) as promptly as possible
deliver to the Underwriters, at such office or offices as you may designate, as
many copies of any Preliminary Prospectus and the Prospectus as you may
reasonably request and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter or a
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of any
amended Prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or a dealer any event shall
occur as a result of which it is necessary to supplement or amend the Prospectus
in order to make the Prospectus not misleading in the light
13
of the circumstances existing at the time it is delivered to a purchaser of the
Shares, or if it shall be necessary to amend or to supplement the Prospectus to
comply with the Securities Act or the Rules and Regulations, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended Prospectus so that the Prospectus as so supplemented or amended will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading, and so that it then will otherwise comply with the
Securities Act and the Rules and Regulations. If, after the public offering of
the Shares by the Underwriters and during such period, the Underwriters shall
propose to vary the terms of offering thereof by reason of changes in general
market conditions or otherwise, you will advise the Company in writing of the
proposed variation, and, if in the opinion either of counsel for the Company or
of counsel for the Underwriters such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended prospectus
setting forth such variation. The Company authorizes the Underwriters and all
dealers to whom any of the Shares may be sold by the Underwriters to use the
Prospectus, as from time to time amended or supplemented, in connection with the
sale of the Shares in accordance with the applicable provisions of the
Securities Act and the Rules and Regulations for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any 462(b) Registration
Statement, post-effective amendment to the Registration Statement and any
supplement to the Prospectus or any amended Prospectus proposed to be filed.
(f) The Company will cooperate with you and your counsel in the
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or a dealer,
in keeping such qualifications in good standing under said securities or Blue
Sky laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will, from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in effect
for so long a period as you may reasonably request for distribution of the
Shares.
(g) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to you, and to each Underwriter who
may so request in writing, copies of all periodic and special reports furnished
to stockholders of the Company, of all information, documents and reports filed
with Commission, any securities exchange or the National Association of
Securities Dealers, Inc. and of all press releases and material news items or
articles in respect of the Company, its products or affairs released or prepared
by the Company (other than promotional and marketing materials disseminated
solely to customers and potential customers of the Company in the ordinary
course of business); and any additional information concerning the Company or
its business which you may reasonably request.
14
(h) As soon as practicable, but not later than the 45th day following
the end of the fiscal quarter first ending after the first anniversary of the
Effective Date, the Company will make generally available to its securities
holders and furnish to the Underwriters an earnings statement or statements in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees that it will cause each of its executive
officers and directors and those other Material Holders designated by the
Representative prior to the date of this Agreement to enter into agreements with
the Representative to the effect that they will not, directly or indirectly,
without your prior written consent, sell, offer, contract to sell, grant any
option to purchase, or otherwise dispose of any shares of Common Stock, or any
securities convertible into, exchangeable for or exercisable for Common Stock,
or any rights to purchase or acquire Common Stock (other than intra-family
transfers or transfers to trusts for estate planning purposes) for a period of
six months after the Closing Date.
(j) The Company will apply the net proceeds from the offering
received by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus and will file such reports with the Commission with respect to
the sale of the Shares and the application of the proceeds therefrom as may be
required pursuant to Rule 463 of the Rules and Regulations.
(k) The Company will, prior to the date of this Agreement, and at all
times thereafter, unless such securities are then listed on a national
securities exchange, cause the Shares and Representative's Warrant Stock to be
included for quotation on the Nasdaq National Market, and the Company will
comply with all registration, filing, reporting and other requirements of the
Exchange Act and the Nasdaq National Market which may from time to time be
applicable to the Company. The Company further agrees not to delist from the
Nasdaq National Market without the Representative's approval, unless required to
do so by the Nasdaq National Market. As soon as practicable after the Shares
become eligible therefor, the Company will apply for listing in one or more
securities manuals (such as Xxxxx'x Over-the-Counter Industrial Manual or
Standard & Poor's Corporation Description Manual).
(l) The Company will use its best efforts to maintain insurance of
the types and in the amounts which it deems adequate for its business and
consistent with insurance coverage maintained by companies of similar size and
engaged in similar businesses, including, but not limited to, general liability
insurance covering all real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against. The Company will use its best efforts to obtain and
maintain a reasonable amount of Directors and Officers liability insurance from
a reputable insurer, and the level of coverage as well as the identity of the
insurer shall be reasonably acceptable to the Representative.
(m) In accordance with the Representative's Warrants, the Company
agrees, upon its receipt from the Representative of the sum of $200.00 in
payment therefor, to deliver to the Representative on the Closing Date upon
completion of the purchase and sale of the Shares pursuant to Section 2 of this
Agreement, the Representative's Warrants representing the right to purchase up
15
to [200,000] shares of Common Stock at a price equal to 120% of the offering
price per share of Common Stock to the public as set forth on the cover page of
the Prospectus.
(n) The Company shall use its best efforts to retain in their current
positions the individuals named as executive officers under the caption
"Management" in the Registration Statement for a reasonable period after the
consummation of the Public Offering.
(o) The Company shall, on or prior to the Closing Date, amend its
Bylaws to provide that it will use its best efforts to at all times maintain at
least two (2) independent directors (that is directors that are not officers of
the Company, who are neither related to its officers nor represent concentrated
or family holdings of the Company's shares, and who, in the view of the
Company's board of directors, are free of any relationship that would interfere
with the exercise of independent judgement (the "Independent Directors"). The
Independent Directors shall constitute a majority of the Company's audit and
compensation committees. Further, the favorable vote of a majority of the
Company's Independent Directors shall be required as to any related party
transaction between the Company and any 5% or more stockholder of the Company
and/or officer or director of the Company (or any affiliates of such
individuals). Any proposed changes in the Company's Bylaws that are not
otherwise approved by the majority vote of the shares held by the Company's non-
management stockholders (i.e., stockholders exclusive of officers and directors
of the Company) shall be approved by a majority of the Company's directors and
not disapproved by a majority of the Company's Independent Directors.
(p) Except in connection with acquisitions or shares of Common Stock
issuable upon exercise of options or warrants outstanding prior to the Closing
Date and except for the grant of options to its officers and employees under the
Company's 1998 Stock Option Plan at an exercise price equal to the Public
Offering Price per share, during the period of the offering, and for a period of
six months from the Closing Date, the Company will not (i) sell or otherwise
dispose of any securities of the Company (except pursuant to the Company's
employee benefit plans described in the Registration Statement) or (ii) purchase
any shares of capital stock of the Company, without your prior written consent.
(q) During the period of two (2) years commencing with the date of
this Agreement, the Company's Chief Executive Officer or Chief Financial Officer
will visit the United States investor community twice each year, stopping once
on the West Coast, once on the East Coast, and once in the Midwest on each trip,
as directed by the Representative in its sole discretion.
(r) The Company will instruct its transfer agent to provide you with
copies of the Depository Trust Company stock transfer sheets on a weekly basis
for a period of six months from the Closing Date and on a monthly basis
thereafter for six additional months.
(s) The Company will reserve and keep available that maximum number
of its authorized but unissued securities which are issuable upon exercise of
the Representative's Warrants.
16
4. Fees and Expenses. The Company agrees with each Underwriter that:
(a) The Company shall pay all costs and expenses incident to the
purchase, sale and delivery of the Shares, including without limitation, all
fees and expenses of filing the Registration Statement with the SEC and the
NASD; all Blue Sky fees and expenses, including legal fees and expenses, if any,
of the Underwriters' counsel (which shall undertake all such Blue Sky matters);
fees and disbursements of counsel and accountants for the Company; printing and
mailing costs, including costs of printing the Registration Statement, any
amendments thereto, all underwriting documents, Blue Sky memoranda and a
reasonable quantity of prospectuses as determined by the Representative; the
Company's road show cost and expenses; and the cost of preparing a total of four
(4) sets of bound volumes of the Public Offering documents for the
Representative and Underwriters' counsel. The Company shall also pay for the
cost of advertising the Public Offering, including the cost of "tombstone ads in
various financial and news publications or other promotional material as
directed by the Representative and shall pay for all other expenses for
advertising undertaken at the Company's request, including graphic slide costs.
The Underwriters shall pay the fees and disbursements of its counsel, with the
exception of the Blue Sky fees described above, and the Representative's road
show costs and expenses.
(b) In addition to its obligations under Section 4(a) above, the
Company and the Selling Stockholder agree to pay the Representative a non-
accountable expense allowance equal to three percent (3%) of the aggregate
Public Offering Price of the Shares respectively sold by them in the Public
Offering. Such allowance, less $50,000 which was paid to the Representative by
the Company as an advance against non-accountable expenses, shall be paid to the
Representative by the Company and Selling Stockholder, as the case may be, as
provided in Section 2(d) of this Agreement. The Representative agrees to repay
to the Company any portion of the $50,000 paid by the Company for non-
accountable expenses that has not been utilized by the Representative in
connection with the Public Offering on an accountable basis.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from any Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless you, and you agree to indemnify and hold
harmless, the Company from and against any losses, claims, damages or
liabilities, (which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), to which the indemnified party may become subject
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) 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 wit the proposed offering by reason of such
person's or entity's influence or prior contact with the indemnifying party.
(d) In addition to its other obligations under Section 7(a) hereof,
the Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding described in Section 7(a)
hereof, it will pay the Underwriters on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
17
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Company's obligation to pay the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters shall
promptly return such payment to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) listed from time to time in
The Wall Street Journal which represents the base rate on corporate loans posted
by a substantial majority of the nation's thirty (30) largest banks (the "Prime
Rate"). Any such interim payments which are not made to the Underwriters within
thirty (30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(e) In addition to its other obligations under Section 7(b) hereof,
the Underwriters agree that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding described in Section
7(b) hereof, it will reimburse the Company on a monthly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
shall promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(f) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 4(d) and (e)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD in Los
Angeles County, California. Any such arbitration may be commenced by service of
a written demand for arbitration or a written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 4(d) and (e) hereof
and will not resolve the ultimate propriety or enforceability of the obligation
to indemnify for expenses which is created by the provisions of Sections 7(a)
and 7(b) hereof or the obligation to contribute to expenses which is created by
the provisions of Section 7(d) hereof.
5. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Shares shall be subject, in the sole
discretion of the Representative, to the accuracy as of the date of execution of
this Agreement, the Closing Date and the date on which the
18
Option Shares are to be purchased, as the case may be, of the representations
and warranties of the Company and the Selling Stockholder set forth in this
Agreement, to the accuracy of the statements of the Company and its officers
made in any certificate delivered pursuant to the terms of this Agreement, to
the performance by the Company and the Selling Stockholder of all of its
obligations to be performed under this Agreement at or prior to the Closing Date
or any later date on which Option Shares are to be purchased, as the case may
be, and to the following additional conditions:
(a) The Registration Statement shall have become effective, (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective and, at the Closing
Date, or, with respect to the Option Shares, the date on which such Option
Shares are to be purchased, no stop order suspending the effectiveness of the
Registration Statement or any qualification or exemption from qualification for
the sale of the Shares in any jurisdiction shall have been issued and no
proceedings for that purpose shall have been instituted or threatened; and any
request for additional information on the part of the Commission shall have been
complied with to the reasonable satisfaction of the Underwriters and their
counsel.
(b) The Underwriters shall have received from Freshman, Marantz,
Orlanski, Xxxxxx & Xxxxx, a law corporation, counsel for the Underwriters, an
opinion dated the Closing Date, with respect to such matters related to the
Public Offering as the Underwriters may reasonably require, and the Company
shall have furnished counsel for the Underwritiers with the legal opinion of its
counsel and all other documents which it may request for the purpose of enabling
it to pass upon such matters.
(c) You shall have received on the Closing Date and on any Option
Closing Date on which Option Shares are purchased, as the case may be, the
opinion of Xxxx & Xxxxx Professional Corporation, United States counsel for the
Company, addressed to the Underwriters and dated the Closing Date or such later
date, to the effect set forth in Annex A to this Agreement.
(d) You shall have received on the Closing Date and on any Option
Closing Date on which Option Shares are purchased, as the case may be, the
opinion of Xxxxxx Xxxx & Co., Hong Kong counsel for the Company, addressed to
the Underwriters and dated the Closing Date or such later date, to the effect
set forth in Annex B to this Agreement.
(e) You shall have received on the Closing Date and on any Option
Closing Date on which Option Shares are purchased, as the case may be, the
opinion of The Fada Law Firm, Peoples' Republic of China counsel for the
Company, addressed to the Underwriters and dated the Closing Date or such later
date, to the effect set forth in Annex C to this Agreement.
(f) In addition, on any Option Closing Date, you shall have received
the opinion of _______________________, counsel for the Selling Stockholder,
addressed to the Underwriters and date the option Closing Date, covering the
matters set forth in Annex D to this Agreement.
(g) You shall be satisfied that there has not been any material
change in the market for securities in general or in political, financial or
economic conditions from those
19
reasonably foreseeable as to render it impracticable in your sole judgment to
make a public offering of the Shares, or a material adverse change in market
levels for securities in general (or those of companies in particular) or
financial or economic conditions which render it inadvisable to proceed.
(h) You shall have received on the Closing Date and on any Option
Closing Date on which Option Shares are purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the Chief
Executive Officer and the Chief Financial Officer of the Company, stating that:
(i) The representations and warranties of the Company set
forth in Section 1 of this Agreement are true and correct with the same force
and effect as if expressly made at and as of such date, and the Company has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to such date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or are threatened under the Securities Act;
(iii) the Common Stock has been duly designated for listing on
the Nasdaq National Market beginning no later than the time Firm Shares are
first offered to the public; and
(iv) (A) they have carefully examined the Registration
Statement in the form in which it originally became effective and the Prospectus
and any supplements or amendments thereto, and that, as of the Effective Date,
the statements made in the Registration Statement and the Prospectus were true
and correct in all material respects, and the Registration Statement did not
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and the Prospectus did not
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstance under which
they were made, not misleading, (B) since the Effective Date, no event has
occurred that should have been set forth in a supplement or amendment to the
Prospectus that has not been set forth in such a supplement or amendment, (C)
since the respective dates as of which information is given in the Registration
Statement in the form in which it originally became effective and the Prospectus
contained therein, there has not been any material adverse change or any
development involving a prospective material adverse change in or affecting the
business, properties, condition (financial or otherwise), capitalization,
prospects or results of operations of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein, (D) there
are not any pending or known threatened legal proceedings to which the Company
or any of its subsidiaries is a party or of which property of the Company or any
of its subsidiaries is the subject which are material and which are not
disclosed in the Registration Statement and the Prospectus, and (E) there are
not any license agreements, contracts, leases or other documents that are
required to be filed as exhibits to the Registration Statement that have not
been filed as required.
20
(i) You shall have received on the Closing Date and on any
Option Closing Date later date on which Option Shares are to be purchased, as
the case may be, a letter from Xxxxxx Xxxxxxxx & Co., addressed to the Company
and the Underwriters, dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published Rules and Regulations
and based upon the procedures described in such letter delivered to you
concurrently with the execution of this Agreement (herein called the "Original
Letter"), but carried out to a date not more than five (5) business days prior
to the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. The Original
Letter from Xxxxxx Xxxxxxxx & Co. shall be addressed to or for the use of the
Underwriters in form and substance satisfactory to the Underwriters and shall
(i) represent, to the extent true, that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations, (ii) set forth its opinion with
respect to its examination of the balance sheet of the Company as of December
31, 1996 and 1997 and related statements of operations, stockholders' equity,
and cash flows for the years ended December 31, 1995, 1996 and 1997, (iii) state
that Xxxxxx Xxxxxxxx & Co. has performed the procedure set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information as described in SAS 71 on the financial statements of the Company
for each of the nine-month periods ended September 30, 1997 and 1998, and (iv)
address other matters agreed upon by Xxxxxx Xxxxxxxx & Co. and you. In addition,
you shall have received from Xxxxxx Xxxxxxxx & Co. a letter addressed to the
Company and made available to the Underwriters stating that its review of the
Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of its examination of the Company's
financial statements as of December 31, 1997 did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(j) The Common Stock has been duly designated for listing on the
Nasdaq National Market effective no later than the time Firm Shares were first
offered to the public
(k) On or prior to the Closing Date, you shall have received
from the Company's officers and directors and all Material Holders executed
lock-up agreements covering the matters described in Section (1)(xvi) of this
Agreement.
21
(l) On the Closing Date, the Company shall have issued the
Representative's Warrant Agreement and Representative's Warrants, substantially
in the form filed as Exhibit 4.2 to the Registration Statement; and on the
Closing Date, concurrently with the purchase and sale of the Shares, the Company
shall have issued, sold and delivered the Representative's Warrants to the
Representative.
(m) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Selling Stockholder or the
Attorney to the effect that, as of the Closing Date, or any later date on which
Option Shares are to be purchased, as the case may be, they have not been
informed that:
(i) The representations and warranties made by such
Selling Stockholder herein are not true or correct in any material respect on
the Closing Date or on any later date on which Option Shares are to be
purchased, as the case may be; or
(ii) The Selling Stockholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on the part of such Selling Stockholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
(n) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company), as to the accuracy of the
representations and warranties of the Company set forth in this Agreement, as to
the performance by the Company of its obligations under this Agreement and as to
the other conditions concurrent and precedent to the obligations of the
Underwriters under this Agreement.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are reasonably satisfactory to Freshman, Marantz,
Orlanski, Xxxxxx & Xxxxx, a law corporation, counsel for the Underwriters. The
Company will furnish you with such number of conformed copies of such opinions,
certificates, letters and documents as you shall reasonably request.
If any of the conditions specified in this Section 5 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriters and its counsel, this Agreement and all
obligations of the Underwriters hereunder may be canceled by the Underwriters
at, or at any time prior to, the Closing Date or (with respect to the Option
Shares) prior to the Option Closing Date upon which the Option Shares are to be
purchased, as the case may be. Notice of such cancellation shall be given to
the Company in writing or by telephone, telecopy or telegraph confirmed in
writing. Any such termination shall be without liability of the Company to the
Underwriters (except as provided in Section 4 or Section 7 of this Agreement)
and without liability of the Underwriters to the Company (except to the extent
provided in Section 7 of this Agreement).
22
6. Conditions of the Obligation of the Company. The obligations of the
Company to sell and deliver the Shares required to be delivered as and when
specified in this Agreement shall be subject to the condition that at the
Closing Date or (with respect to the Option Shares) the date upon which the
Option Shares are to be purchased, no stop order suspending the effectiveness
thereof shall be in effect and no proceedings therefor shall be pending or
threatened by the Commission.
7. Indemnification and Contribution.
(a) The Company, and in the event the option referred to in Section
2(b) is exercised, the Selling Stockholder, agrees to indemnify and hold
harmless the Underwriters against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject under the Act,
the Exchange Act or otherwise, specifically including, but not limited to,
losses, claims, damages or liabilities, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any breach of any representation, warranty, agreement or covenant of the
Company herein contained, (ii) any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each Underwriter for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action, or (iv) any untrue
statement or alleged untrue statement of a material fact contained in any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Shares under the
securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement provided in this
Section 7(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act
23
and the Rules and Regulations, unless such failure is the result of
noncompliance by the Company with Section 4(d) hereof. The indemnity agreements
of the Company contained in this Section 7(a) and the representations and
warranties of the Company and the Selling Stockholder contained in Section 1 of
this Agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Shares.
The indemnity agreement in this Section 7(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any of the Underwriters within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any liabilities
which the Company and Selling Stockholder may otherwise have.
(b) The Underwriters severally agree, each in proportion to the
number of Firm Shares to be purchased by such Underwriter bears to the total
number of Firm Shares to be purchased pursuant to section 2(a) hereof, to
indemnify and hold harmless the Company, and in the event the option referred to
in Section 2(b) is exercised, the Selling Stockholder, against any losses,
claims, damages or liabilities, joint or several, to which the Company and the
Selling Stockholder may become subject under the Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any breach of any representation, warranty,
agreement or covenant of such Underwriter herein contained, (ii) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii) any
untrue statement or alleged untrue statement of any material fact contained in
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in the case of subparagraphs (ii)
and (iii) of this Section 7(b) to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter, directly or through you, specifically for use
in the preparation thereof, and agrees to reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 7(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company and each person, if any, who controls the Company within the meaning of
the Act or the Exchange Act. This indemnity agreement shall be in addition to
any liabilities which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 7, notify the indemnifying party in
24
writing 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 Section 7. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 7(a) or 7(b) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 7
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 7 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters are
responsible for the portion represented by the percentage that the underwriting
discount bears to the initial public offering price, and the Company is
responsible for the remaining portion, provided, however, that (i) the
Underwriters shall not be required to contribute any amount in excess of the
25
underwriting discount applicable to the Shares purchased by such Underwriter in
excess of the amount of damages which such Underwriter has otherwise required to
pay and (ii) 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. The contribution
agreement in this Section 7(d) shall extend upon the same terms and conditions
to, and shall inure to the benefit of, each person, if any, who controls any of
the Underwriters or the Company within the meaning of the Act or the Exchange
Act and each officer of the Company who signed the Registration Statement and
each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 7 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act. The parties are advised that federal or state public policy, as interpreted
by the courts in certain jurisdictions, may be contrary to certain of the
provisions of this Section 7, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a
claim under this Section 7 and further agree not to attempt to assert any such
defense.
8. Effective Date of Agreement and Termination.
(a) If the Registration Statement has not been declared effective
prior to the date of this Agreement, this Agreement shall become effective at
such time, after notification of the effectiveness of the Registration Statement
has been released by the Commission, as you shall release the Shares to the
public. If you shall not have released the Shares prior to 5:00 p.m., New York
time, on the fifth full business day after the Registration Statement shall have
become effective, this Agreement shall thereupon terminate without liability on
the part of the Underwriters to the Company, except as set forth in Section 7 of
this Agreement. By giving notice as set forth in Section 9 of this Agreement
before the time this Agreement becomes effective, you, as Representative, may
prevent this Agreement from becoming effective without liability of any party to
the other party, except that the Company shall remain obligated to pay costs and
expenses to the extent provided in Section 4 and Section 7 of this Agreement. If
the Registration Statement has been declared effective prior to the date of this
Agreement, this Agreement shall become effective upon execution and delivery by
you and the Company.
(b) This Agreement may be terminated by you in your absolute
discretion by giving written notice to the Company at any time on or prior to
the Closing Date or, with respect to the purchase of the Option Shares, on or
prior to any later date on which the Option Shares are to be purchased, as the
case may be, if prior to such time any of the following has occurred or, in your
opinion, is likely to occur: (i) after the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or development involving a prospective adverse change in
or affecting particularly the condition (financial or otherwise) of the
26
Company and its subsidiaries considered as a whole or the earnings, prospects or
business affairs of the Company and its subsidiaries considered as a whole,
whether or not arising in the ordinary course of business, which would
materially impair the investment quality of the offered securities; or (ii) if
there shall have been the engagement in major hostilities or an escalation of
major hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, or any outbreak of
major hostilities or other national or international calamity or crisis or
material adverse change in economic or political conditions, if the effect of
such outbreak, calamity, crisis or material adverse change in economic or
political conditions on the financial markets of the United States would, in
your sole judgment, make the offering or delivery of the Shares impracticable,
or (iii) if there shall have been suspension of trading in securities generally
or a material adverse decline in value of securities generally on the New York
Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system, or (iv) if there
shall have been the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of, or commencement of any
proceeding or investigation by, or change in material substantive policy by, any
court, legislative body, agency or other foreign or domestic governmental
authority which in your sole judgment materially and adversely affects or will
materially adversely affect the business, operations or prospects of the Company
and its subsidiaries considered as a whole, or (v) if there shall have been the
declaration of a banking moratorium by United States, New York or California
state authorities, or (vi) if there shall have been the taking of any action by
any United States, state or local government or agency in respect of its
monetary or fiscal affairs which in your reasonable judgment has a material
adverse effect on the securities markets in the United States or (vii) existing
international monetary conditions shall have undergone a material change which,
in your sole judgment, makes the offering or delivery of the Shares
impracticable. If this Agreement shall be terminated pursuant to this Section 8,
there shall be no liability of the Company to the Underwriters and no liability
of the Underwriters to the Company (except to the extent provided in Section 4
or Section 7 of this Agreement); provided, however, that in the event of any
such termination the Company agrees to indemnify and hold harmless the
Underwriters from all costs or expenses of the Company incident to the
performance of the obligations of the Company under this Agreement, including
all costs, expenses and advances referred to in Section 4 of this Agreement.
9. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by either telecopier or telegraph and, if to
the Underwriters, shall be mailed, telecopied or telegraphed or delivered to
Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000 (telecopier: (000) 000-0000) Attention: Managing Director Corporate
Finance; and if to the Company, shall be mailed, telecopied, telegraphed or
delivered to Xxxxx Ind. Bldg., 0/xx/ Xxxxx, 00 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxx,
Xxxx Xxxx (telecopier: (000) 0000-0000). All notices given by telecopy or
telegraph shall be promptly confirmed by letter.
10. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company and the Underwriters and, with respect to the
provisions of Section 4 and Section 7 of this Agreement, the several parties (in
addition to the Company and the Underwriters) indemnified under the provisions
of said Section 4 and Section 7, and their respective personal representatives,
27
successors and assigns. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Shares from the
Underwriters.
11. Miscellaneous. Notwithstanding any provision of this Agreement to the
contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
their respective directors or officers, and (c) delivery and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which together shall constitute one and
the same instrument.
12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE, AND TO BE PERFORMED, SOLELY WITHIN THAT STATE.
13. Submission to Jurisdiction and Waiver of Immunity and Inconvenient
Forum. Subject to the arbitration provisions of Sections 4(e) and 4(f), the
Company agrees that any and all disputes arising in connection with this
Underwriting Agreement and the transactions contemplated by this Underwriting
Agreement, including the offer and sale of the Firm Shares and the Option
Shares, may be brought in any state or federal court of record located in the
County of Los Angeles, State of California. By its signature to this Agreement,
the Company irrevocably submits to the jurisdiction of the state and federal
courts located in the County of Los Angeles, State of California, in any legal
action or proceeding relating to this Underwriting Agreement and the
transactions contemplated by this Underwriting Agreement, including the offer
and sale of the Firm Shares and the Option Shares.
The Company irrevocably waives all immunity from jurisdiction, attachment
and execution, whether on the basis of sovereignty or otherwise, to which each
of them respectively might otherwise be entitled in any legal action or
proceeding in any state or federal court located in the County of Los Angeles,
State of California. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to any suit,
action or proceeding relating to this Underwriting Agreement and the
transactions contemplated by this Underwriting Agreement, including the offer
and the sale of the Firm Shares and the Option Shares, being brought in the
federal or state courts located in the County of Los Angeles, State of
California, and hereby further irrevocably waive any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
28
If the foregoing correctly sets forth the understanding between the Company
and the Underwriters, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among the
Company and the Underwriters.
Very truly yours,
CREATIVE MASTER INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
ACMA INVESTMENTS PTE., LTD.
By: ______________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date
first above written.
CRUTTENDEN XXXX INCORPORATED
By: ________________________
Name:
Title:
29
ANNEX A
Matters to be Covered in the Opinion of
Xxxx & Xxxxx Professional Corporation
United States Counsel for the Company
(1) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware. Each of
the Company and each of its subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in the United
States, if any, in which the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure so
to qualify would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(2) The Company has the corporate power to own, lease and operate its
properties and to conduct its business as described in the Prospectus.
(3) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein; the issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and such counsels have not been issued in violation of any
preemptive right, co-sale right, right of first refusal or other similar right.
(4) To the best knowledge of such counsel, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to securities of
the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights to
registration of such shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have, with respect to the
offering contemplated hereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the Company's intent to file
the Registration Statement, or have included securities in the Registration
Statement pursuant to the exercise of such rights.
(5) The Shares to be issued and sold by the Company will be, upon issuance
and delivery against payment therefor in accordance with the terms of the
Agreement, duly authorized and validly issued and fully paid and nonassessable
and, will not have been issued in violation of any preemptive right,
registration right, co-sale right, right of first refusal or other similar right
set forth in the Certificate of Incorporation or Bylaws of the Company, or any
other contract agreement or document of which such counsel has knowledge.
(6) The Company has corporate power and authority to enter into the
Agreement and the Representative's Warrant Agreement and to issue, sell and
deliver the Shares to the Underwriters.
A-1
(7) The Agreement and the Representative's Warrant Agreement each has been
duly authorized by all necessary corporate action on the part of the Company and
each has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Representative, are the valid and
binding agreements of the Company, except insofar as the indemnification and
contribution provisions of such agreements may be limited by public policy
concerns, and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles.
(8) The performance of the Agreement and the Representative's Warrant
Agreement and the consummation of the transactions contemplated thereby will
not result in the breach or violation of any of the terms and provisions of the
Company's Certificate of Incorporation or Bylaws, or to the best of such
counsel's knowledge, result in the breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, or any lease, license, contract or other agreement or instrument
known to such counsel to which the Company is a party or by which any of its
properties are bound, or to the best of such counsel's knowledge, (other than
performance of the Company's indemnification and contribution obligations under
such agreements, concerning which no opinion need be expressed) any applicable
statute, rule or regulation or, to the best of such counsel's knowledge, any
order, writ or decree of any court or governmental agency or body having
jurisdiction over the Company or over any of its properties or operations;
provided, however, that no opinion need be rendered concerning state securities
or Blue Sky laws.
(9) No authorization, approval or consent of any governmental authority or
agency of the United States of America is necessary in connection with the
consummation of the transactions contemplated by the Agreement and the
Representative's Warrant Agreement, except such as have been obtained under the
Securities Act or such as may be required under the rules and regulations of the
National Association of Securities Dealers, Inc., or under state securities or
Blue Sky laws in connection with the purchase and the distribution of the Shares
by the Underwriters.
(10) To the best knowledge of such counsel, neither the Company nor any of
its subsidiaries is presently in breach of, or in default under, any bond,
debenture, note or other evidence of indebtedness or any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which any of their properties are bound which is material to the financial
condition, earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise;
(11) The Representative's Warrant Agreement has been duly and validly
authorized and constitutes valid and binding obligation of the Company in
accordance with its terms; the Representative's Warrant Stock has been duly and
validly authorized for issuance upon exercise of the Representative's Warrants
and when so issued will be validly issued, fully paid and non-assessable; and,
no stockholder has any preemptive rights with respect to the Representative's
Warrant Stock.
A-2
(12) All of the information in the Prospectus, to the extent constituting
matters of law or legal conclusion under the laws of the United States of
America or the State of Delaware, has been reviewed by us and are a fair summary
of such matters and conclusions.
(13) The form of certificates evidencing the Common Stock complies with
Delaware law.
(14) The Registration Statement has become effective under the Securities
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for that purpose have been instituted or are
pending or, to the best knowledge of such counsel, threatened under the
Securities Act.
(15) To the best knowledge of such counsel, there are no agreements,
contracts, licenses, leases or documents of a character required to be described
or referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement that are not described or referred to
therein and filed as required.
(16) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements, financial and
statistical data included therein, as to which such counsel need express no
opinion) as of the effective date of the Registration Statement, complied as to
form in all material respects with the requirements of the Securities Act and
the applicable Rules and Regulations.
(17) To the best knowledge of such counsel, the Common Shares conform in
all material respects to all statements in relation thereto contained in the
Prospectus.
(18) The description in the Registration Statement and the Prospectus of
the Certificate of Incorporation and Bylaws of the Company and of statutes and
contracts are accurate in all material respects and fairly present in all
material respects the information required to be presented by the Securities Act
and the Rules and Regulations.
(19) There are no legal or governmental proceedings pending or, to the best
knowledge of such counsel, threatened against the Company or any of its
subsidiaries of a character which are required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act or the applicable
Rules and Regulations, other than those described therein.
(20) The information in the Prospectus under the captions "Description of
Capital Stock" and "Shares Eligible For Future Sale," to the extent that it
constitutes matters of law or legal conclusions, has been reviewed by such
counsel and are a fair summary of such matters and conclusions.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Underwriters, Underwriters' counsel and the independent public accountants of
the Company, at which conferences the contents of the Registration Statement and
the Prospectus and related matters were discussed, and although they
A-3
have not (with the exception of the matters covered in paragraphs (12), (13) and
(20) of their opinion) independently checked or verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to the attention of such counsel
that caused them to believe that, at the time the Registration Statement became
effective, the Registration Statement (except as to financial statements,
financial data and supporting schedules contained therein, as to which such
counsel need express no opinion) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the Closing Date
or any later date on which the Option Shares are to be purchased, as the case
may be, the Prospectus (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or the States of California or Delaware
upon opinions of local counsel, and as to questions of fact upon representations
or certificates of officers of the Company, and of government officials, in
which case their opinion is explicitly to state that they are so relying thereon
and that they have no knowledge of any material misstatement or inaccuracy in
such opinions, representations or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Underwriters, and to Underwriters' Counsel.
A-4
ANNEX B
Matters to be Covered in the Opinion of
Xxxxxx Xxxx & Co.
Hong Kong Counsel for the Company
1. Each of Creative Master Limited, Excel Master Limited, Carison
Engineering Limited, Techtime Industries Limited, Mastercraft Engineering
Limited (formerly Queenex Enterprises Limited) (the "Hong Kong subsidiaries")
has been duly registered and is validly existing as a limited liability company
in good standing under the laws of Hong Kong.
2. Each of the Hong Kong subsidiaries has the corporate power and
authority to own, lease and operate its properties and to conduct its business
in the manner currently conducted and as proposed to be conducted respectively
as described in the Prospectus.
3. The description in the Registration Statement and the Prospectus of
each of the Hong Kong subsidiaries and the relationship between the Company and
the Hong Kong subsidiaries is accurate in all material respects, and fairly
presents in all material respects the information set forth therein.
4. The Company owns all of the outstanding capital stock of each Hong
Kong Subsidiary except for Mastercraft Engineering Limited, Carison Engineering
Limited and Techtime Limited of which it owns 70%, 70% and 55%, respectively.
All of the issued and outstanding capital stock of each of the Hong Kong
subsidiaries has been duly and validly authorized and issued, is fully paid and
nonassessable, is not owned or held and has not been issued in violation of any
preemptive rights contained in the charter documents of the respective Hong Kong
Subsidiary and, to the extent owned by the Company, is owned directly by the
Company free and clear of any lien, encumbrance, claim, security interest,
restriction or transfer.
5. There are no outstanding options, warrants, calls, rights or other
agreements or commitments with respect to the purchase or sale of any capital
stock of any of the Hong Kong subsidiaries.
6. Those contracts which are included as exhibits to the Registration
Statement and which are made or to be performed in, or stated to be governed by
the law of, Hong Kong are valid and enforceable under Hong Kong law.
7. No authorization, approval or consent of any governmental authority or
agency of Hong Kong is necessary in connection with the consummation of the
transactions contemplated by the Agreement and the Representative's Warrant
Agreement.
B-1
8. There are no legal or governmental proceedings pending or, to the best
knowledge of such counsel, threatened against the Company or any of the Hong
Kong subsidiaries other than those, if any, described in the Registration
Statement or the Prospectus.
9. To the best of such counsel's knowledge, none of the Hong Kong
subsidiaries is presently in breach of, or in default under, any bond,
debenture, note or other evidence of indebtedness or any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license or other agreement or
instrument to which each such respective company is a party or by which any of
their respective properties are bound which is material to the financial
condition, earnings, operations, business or business prospects of the Company
and its Hong Kong subsidiaries considered as one enterprise.
10. All of the information in the Prospectus, to the extent constituting
matters of law or legal conclusions under the laws of Hong Kong has been
reviewed by such counsel and are a fair summary of such matters and conclusions.
11. Under the laws of Hong Kong the submission to Jurisdiction and Waiver
of Immunity and Inconvenient Forum clause of section 13 of the Agreement are
valid and binding upon the Company.
12. All translations of documents from Chinese to English which were
provided to counsel for the Underwriters and which are included as exhibits to
the Registration Statement are complete and accurate translations in all
material respects.
In addition, such counsel shall state that although they have not (with the
exception of the matters covered in paragraph 10 of their opinion) independently
checked or verified the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus relating to the
Company and its operations in Hong Kong, nothing has come to the attention of
such counsel that caused them to believe that, at the time the Registration
Statement became effective, the Registration Statement (except as to financial
statements, financial data and supporting schedules contained therein) contained
any untrue statement of a material fact, or omitted to sate a material fact
required to be stated therein or necessary to make such statements not
misleading, or at the Closing Date or any later date on which the Option Shares
are to be purchased, as the case may be, the Prospectus (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact to be stated therein or necessary to make such statements, in light of the
circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of fact
upon representations or certificates of officers of the companies which are the
subject of said opinion, and of government officials in which case their opinion
is explicitly to state that they are so relying thereon and that they have no
knowledge of any material misstatement or inaccuracy in such opinions,
representations or certificate. Copies of any opinion, representation or
certificates so relied upon shall be delivered to you, as Representative of the
Underwriters, and to Underwriters' counsel.
B-2
ANNEX C
Matters to be Covered in the Opinion of
The Fada Law Firm
China Counsel for the Company
1. Dongguan Xxxx Xx Xxxx Trading Company has been duly organized and is
validly existing in good standing under the laws of China.
2. Dongguan Xxxx Xx Zhen Trading Company has the legal capacity,
necessary power and authority to execute and perform its obligations under the
Joint Enterprise Agreement, dated September 10, 1994, the Joint Enterprise
Agreement [that is not dated (exhibit 10.29)], the Supplement, dated April 1,
1996, to the Joint Enterprise Agreement, and the Processing Agreement dated June
18, 1998 (the "Joint Enterprise Agreements").
3. Dongguan Process Assembly Servicing Company has the right and power to
enter into with Creative Master Limited the Processing Agreement, dated June 11,
1995 and the Supplement dated November 11, 1995. Dongguang Process Assembly
Servicing Company has the right and power to enter into with Creative Master
Limited the Import Material & Processing Agreement dated November 10, 1995.
4. The Joint Enterprise Agreements have been validly executed by Dongguan
Xxxx Xx Xxxx Trading Company and Creative Master Limited and duly approved by
the Chinese government which constitute valid and binding obligations of each of
the two parties, enforceable in accordance with their terms and conditions under
the law of China.
5. Each local Chinese government agency has the right and power to enter
into the manufacturing leases, which are filed as exhibits to the Registration
Statement, and each factory and dormitory lease has been validly executed and
constitutes the valid and binding obligations of the parties, enforceable in
accordance with their respective term and conditions under the laws of China.
6. The Dongguan Chuangying Toys Factory Co., Ltd. has been duly organized
as a limited liability company and is validly existing in good standing under
the laws of China.
7. Dongguan Chuangying Toys Factory Co., Ltd. has the right and power to
own, lease and operate its properties and to conduct its business as described
in the Prospectus, including the right and power to [execute] and] perform its
obligations under the Joint Enterprise Agreement, dated September 10, 1994, and
the Joint Enterprise Agreement [that is not dated (exhibit 10.29)].
8. No authorization, approval or consent of any governmental authority or
agency of China is necessary in connection with the consummation of the
transactions contemplated by the Agreement and the Representative's Warrant
Agreement;
C-1
9. The Company and [list subsidiaries party to the factory and dormitory
leases and Joint Enterprise and Processing Agreements] are in possession of, and
operating in China in compliance with such authorizations, licenses,
certificates, orders and permits as may be required from applicable regulatory
authorities in China which are material to the conduct of their business, all of
which are valid and in full force and effect; neither the Company nor [list
subsidiaries party to the factory and dormitory leases and Joint Enterprise and
Processing Agreements] is in default in the performances or observance of any
material obligation, agreement covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company or
[list subsidiaries party to the factory and dormitory leases and Joint
Enterprise and Processing Agreements] is a party or by which any of them or
their properties may be bound; and neither the Company nor [list subsidiaries
party to the factory and dormitory leases and Joint Enterprise and Processing
Agreements] is in material violation of, or liable under, any law, order, rule,
regulation, writ, injunction, judgement or decree of any court, government or
governmental agency or body of China having jurisdiction over the Company or
[list subsidiaries party to the factory and dormitory leases and Joint
Enterprise and Processing Agreements] or over any of their properties;
10. All of the information in the Prospectus, to the extent constituting
matters of law or legal conclusions under the laws of China has been reviewed by
such counsel and is a fair summary of such matters and conclusions;
11. There are no legal or governmental proceedings pending or, to such
counsel's knowledge, threatened against the Company or [list subsidiaries party
to the factory and dormitory leases and Joint Enterprise and Processing
Agreements].
12. Under Chinese law, the submission to Jurisdiction and Waiver of
Immunity and Inconvenient Forum clause of Section 13 of the Agreement is valid
and binding upon the Company.
In addition, such counsel shall state that although they have not (with the
exception of the matters covered in paragraph 9 of their opinion) independently
checked or verified the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus relating to the
Company and its operations in China, nothing has come to the attention of such
counsel that caused them to believe that, at the time the Registration Statement
became effective, the Registration Statement (except as to financial statements,
financial data and supporting schedules contained therein) contained any untrue
statement of a material fact, or omitted to sate a material fact required to be
stated therein or necessary to make such statements not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Prospectus (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact to be stated
therein or necessary to make such statements, in light of the circumstances
under which they were made, not misleading.
C-2
Counsel rendering the foregoing opinion may rely as to questions of fact
upon representations or certificates of officers of the companies which are the
subject of said opinion, and of government officials in which case their opinion
is explicitly to state that they are so relying thereon and that they have no
knowledge of any material misstatement or inaccuracy in such opinions,
representations or certificate. Copies of any opinion, representation or
certificates so relied upon shall be delivered to you, as Representative of the
Underwriters, and to Underwriters' counsel.
C-3
ANNEX D
Opinion of Counsel to
Selling Stockholder
1. The Agreement and the Power of Attorney and the Custody Agreement have
been duly and validly authorized, executed and delivered by the Selling
Stockholder and each is a valid and binding obligation of the Selling
Stockholder, enforceable against it in accordance with its terms except as
rights to indemnity and contribution may be limited by Federal or state
securities laws and except as enforcement (i) may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and (ii) is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
2. To the best knowledge of such counsel, the Selling Stockholder has all
requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses and
permits of and from all courts and all public, governmental or regulatory
agencies and bodies, as required for the execution, delivery and performance of
this Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions contemplated hereby and thereby, except for (A)
such as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters, as to
which counsel need express no opinion and (B) such as have been made or obtained
under the Act.
3. Upon the delivery of and payment for the Option Shares to be sold by
the Selling Stockholder pursuant to the Agreement, you will receive good, valid
and marketable title to the Option Shares purchased from the Selling
Stockholder, free and clear of all liens, encumbrances, claims, security
interests, restrictions on transfer, stockholders' agreements, voting trusts and
other defects in title created by or known to the Selling Stockholder.
4. The execution, delivery and performance of this Agreement, the Power
of Attorney and the Custody Agreement by the Selling Stockholder and the
consummation of the transactions contemplated hereby and thereby will not
violate or conflict with, to the best knowledge of such counsel, any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over any of the
Selling Stockholder or any of their properties or assets.
5. The statements in the Prospectus under the caption "Principal and
Selling Stockholders," insofar as such statements constitute a summary of
matters referred to therein with respect to the Selling Stockholder, fairly
present the information with respect to such matters.
D-1
