1,300,000 Shares(1)
COMPASS PLASTICS AND TECHNOLOGIES, INC.
Common Stock
FORM OF UNDERWRITING AGREEMENT
____________, 1997
CRUTTENDEN XXXX INCORPORATED
As Representative of the several Underwriters
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
COMPASS PLASTICS AND TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), addresses you as the Representative of each of the persons, firms
and corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. Description of Shares. The Company proposes to issue and sell
1,300,000 shares of its authorized and unissued Common Stock, $.001 par value
per share (the "Firm Shares"), to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 195,000
additional shares of the Company's Common Stock, $.001 par value per share (the
"Option Shares"), as provided in Section 7 hereof. In addition, the Company
proposes to sell to you, individually and not in your capacity as
Representative, five-year warrants (the "Representative's Warrants") to purchase
up to 130,000 shares of Common Stock, $.001 par value per share, of the Company
(the "Representative's Warrant Stock"), which sale will be consummated in
accordance with the terms and conditions of the Representative's Warrant
Agreement (the "Representative's Warrant Agreement"), the form of which is filed
as an exhibit to the Registration Statement described below. As used in this
Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. The
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(1) The Plus an option to purchase up to 195,000 additional shares from the
Company to cover over-allotments, if any.
Representative's Warrants shall be exercisable at a price per Share equal to one
hundred twenty percent (120%) of the initial public offering price. All shares
of Common Stock, $.001 par value per share, of the Company to be outstanding
after giving effect to the sales contemplated hereby, including the sale of the
Shares, are hereinafter referred to as "Common Stock." Unless the context
otherwise requires, references herein to the "Company" include Compass Plastics
and Technologies, Inc. together with its subsidiaries described in the
Prospectus (defined in Section 2(a) below.).
2. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to and agrees with each
Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-____)
with respect to the Shares, the Representative's Warrants and the
Representative's Warrant Stock, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement and such amended
prospectuses subject to completion as may have been required prior to the date
hereof have been similarly prepared and filed with the Commission; and the
Company will file such additional amendments to such registration statement and
such amended prospectuses subject to completion as may hereafter be required.
Copies of such registration statement and amendments and of each related
prospectus subject to completion (the "Preliminary Prospectuses") have been
delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information previously omitted from the
registration statement pursuant to Rule 430A(a) of the Rules and Regulations
pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations
or as part of a post-effective amendment to the registration statement
(including a final form of prospectus). If the registration statement relating
to the Shares has not been declared effective under the Act by the Commission,
the Company will prepare and promptly file an amendment to the registration
statement, including a final form of prospectus. 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
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430A(b) of the Rules and Regulations) and, in the event of any amendment thereto
after the effective date of such registration statement, shall also mean (from
and after the effectiveness of such amendment) such registration statement as so
amended. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such Registration Statement at
the time it becomes 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), 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 such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b)(3) 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.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus, at the time of filing
thereof, has conformed in all material respects to the requirements of the Act
and the Rules and Regulations and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; 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 (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act and
the Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, (ii) the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) neither the Registration Statement nor the Prospectus, or
any amendments or supplements thereto, will include any untrue statement of a
material fact or omit to state a material fact necessary 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
contained in this subparagraph (b) shall apply to information contained in or
omitted from the Registration Statement or Prospectus, or any amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
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(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation with full power and authority (corporate and other) to own,
lease and operate its properties and conduct its business as described in the
Prospectus; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
taken as a whole; no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification; the Company is in possession of and
operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities that are material to the conduct of its business, all of which are
valid and in full force and effect; the Company is not in material violation of
its charter or bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any material
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 to which the Company is a party or by
which it or its properties or assets may be bound; and the Company is not in
material violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or over its properties
or assets. The Prospectus accurately describes any corporation, association or
other entity owned or controlled, directly or indirectly, by the Company.
(d) The Company has full legal right, power and authority to
enter into this Agreement and the Representative's Warrant Agreement and to
perform the transactions contemplated hereby and thereby. Each of this Agreement
and the Representative's Warrant Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement on the part of
the Company, enforceable in accordance with its terms, except as rights to
indemnification under this Agreement or the Representative's Warrant Agreement
may be limited by applicable law and except as such enforcement 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; the performance of this Agreement and the Representative's
Warrant Agreement and the consummation of the transactions herein or therein
contemplated will not result in a material breach or violation of any of the
terms and provisions of, or constitute a default under, (i) any bond, debenture,
note or other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company is a party or by which its properties or assets
may be bound, (ii) the charter or bylaws of the Company, or (iii) any law,
order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or
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over its properties or assets. No consent, approval, authorization or order of
or qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or over its properties
or assets is required for the execution and delivery of this Agreement or the
Representative's Warrant Agreement and the consummation by the Company of the
transactions herein and therein contemplated, except such as may be required
under the Act or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(e) There is not any pending or, to the best of the
Company's knowledge, threatened, action, suit, claim or proceeding against the
Company, or any of its officers or any of its properties, assets or rights,
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its officers or properties
or otherwise that (i) is reasonably likely to result in any material adverse
change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company or might materially and adversely affect
its properties, assets or rights, (ii) might prevent consummation of the
transactions contemplated hereby, or (iii) is required to be disclosed in the
Registration Statement or Prospectus and is not so disclosed; and there are no
agreements, contracts, leases or documents of the Company 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 by the Act
or the Rules and Regulations or by the Securities Exchange Act of 1934 (the
"Exchange Act") or the rules and regulations of the Commission thereunder that
have not been accurately described in all material respects in the Registration
Statement or Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal 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 is as set forth in the
Prospectus under the caption "Capitalization" and 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 Firm Shares
and the Option Shares have 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, and will be
sold free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest; and no preemptive right, co-sale right, registration
right, right of first refusal or other similar right of stockholders exists with
respect to any of the Firm Shares or Option Shares or the issuance and sale
thereof other than those that have been expressly waived prior to the date
hereof and those that will automatically
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expire upon the consummation of the transactions contemplated on the Closing
Date. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale or
transfer of the Shares except as may be required under the Act, the Rules and
Regulations or under state or other securities or Blue Sky laws. Except as
disclosed in or contemplated by the Prospectus and the financial statements of
the Company, and the related notes thereto, included in the Prospectus, the
Company has no outstanding options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights under the Act and the Rules and Regulations.
(g) Xxxxxx & Xxxxxxxx LLP, which has examined the financial
statements of the Company, together with the related schedules and notes, as of
October 27, 1996 and October 29, 1995 and for each of the years ended October
27, 1996, October 29, 1995 and October 30, 1994, respectively, filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations; the audited financial statements of the Company, together
with the related schedules and notes, and the unaudited financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and all
audited financial statements of the Company, together with the related schedules
and notes, and the unaudited financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
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 or schedules are required to be included in the
Registration Statement.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (i) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (ii) any
transaction that is material to the Company, (iii) any obligation, direct or
contingent, that is material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of business, (iv) any change in the
capital stock or outstanding indebtedness of the Company that is material to the
Company, (v) any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company,
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or (vi) any loss or damage (whether or not insured) to the property of the
Company which has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) the Company has good and marketable title to all properties and
assets described in the Registration Statement and Prospectus as owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, other than such as would not have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company, (ii) the agreements to which the Company is a
party described in the Registration Statement are valid agreements, enforceable
by the Company in accordance with their 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, to the best of the Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default under any of such agreements, and (iii) the Company has valid
and enforceable leases for all properties described in the Registration
Statement and Prospectus as leased by it, 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. Except as set forth in the Registration Statement
and Prospectus, the Company owns or leases all such properties as are necessary
to its operations as now conducted and as described in the Registration
Statement and the Prospectus.
(j) The Company has timely filed all federal, state, local
and foreign tax returns required to be filed by it and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, is reasonably likely to be asserted against the
Company, which might have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company, and all tax liabilities are adequately provided for on the books of the
Company.
(k) The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed adequate for its business including, but not limited to, insurance
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect; the Company
has not been refused any insurance coverage sought or applied for; and the
Company does have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company.
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(l) No labor disturbance by the employees of the Company
exists or, to the best of the Company's knowledge, is imminent. The Company is
not aware of any existing or imminent labor disturbance by the employees of any
principal suppliers or customers that might be expected to result in any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company. No collective
bargaining agreement exists with any of the Company's employees and, to the best
of the Company's knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to use all
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 it or that are necessary to conduct its businesses as
described in the Registration Statement and Prospectus; the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to any patents,
patent rights, inventions, trade secrets, know-how, trademarks, service marks,
trade names or copyrights described or referred to in the Prospectus as owned by
or used by it; and the Company has not received any notice of, and has no
knowledge of, any 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 described or referred to in
the Prospectus as owned by or used by it or which, singly or in the aggregate,
in the event of an unfavorable decision, ruling or finding, would have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company.
(n) The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act and is approved for quotation on the Nasdaq National Market,
and the Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq National Market, nor has the Company
received any notification that the Commission or the National Association of
Securities Dealers, Inc. ("NASD") is contemplating terminating such registration
or listing.
(o) The Company has been advised concerning 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 is not and will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
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(p) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(q) The Company has not at any time during the last five (5)
years (i) made any unlawful contribution to any candidate for foreign office or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization in violation of law or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(s) Each officer, director and director-nominee of the
Company and each beneficial owner of five (5) percent or more of the Company's
Common Stock has agreed in writing that such person will not, for a period of
365 days from the date that the Registration Statement is declared effective by
the Commission (the "Lock-up Period"), offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, and (ii) with the prior written consent
of Cruttenden Xxxx Incorporated. The foregoing restriction is expressly agreed
to preclude the holder of the Securities from engaging in any hedging or other
transaction that is designed to or reasonably expected to lead to or result in a
Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person will also agree and consent to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a complete
and accurate list of all
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securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the agreements pursuant to which
its officers, directors, director-nominees and stockholders have agreed to such
restrictions (the "Lock-up Agreements"). The Company hereby represents and
warrants that it will not release any of its officers, directors or
director-nominees or other stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of Cruttenden
Xxxx Incorporated.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in material compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
that are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) to its best knowledge, the Company is not
likely to be required to make future material capital expenditures to comply
with Environmental Laws (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601, et seq.), or otherwise designated as a contaminated site
under applicable state or local law, and (v) the Company is not in violation of
any federal or state law or regulation relating to occupational safety or
health.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, including without limitation cash receipts,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers,
directors or director-nominees of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement and
the Prospectus.
(w) The Company has not incurred any liability, direct or
indirect, for finders' or similar fees on behalf of or payable by the Company or
the Underwriters in connection with this or any other transaction involving the
Company and the Underwriters.
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(x) The Representative's Warrants have been duly and validly
authorized by the Company and upon delivery to you in accordance with the
Representative's Warrant Agreement will be duly issued and legal, valid and
binding obligations of the Company.
(y) The Representative's Warrant Stock has been duly
authorized and reserved for issuance upon the exercise of the Representative's
Warrants and when issued upon payment of the exercise price therefor will be
validly issued, fully paid and nonassessable shares of Common Stock of the
Company.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $______ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment of
the purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company (and the Company agrees not to deposit any such check in the bank on
which it is drawn until the day following the date of its delivery to the
Company) at the offices of the Representative or such other place as may be
agreed upon among the Representative and the Company, at ____ A.M., Los Angeles
time, on the third (3rd) full business day following the first day that Shares
are traded (or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 10 hereof), such time and date of payment and
delivery being herein called the "Closing Date." The certificates for the Firm
Shares to be so delivered will be made available to you at such office or such
other location as you may reasonably request for checking at least one (1) full
business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to the Closing Date. If the Representative so elects,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the Representative
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
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After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $______ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), in the first
paragraph on page 2, concerning stabilization and over-allotment by the
Underwriters, in the third paragraph under the caption "Underwriting,"
concerning the manner of offering the Firm Shares and the Option Shares, and in
the seventh paragraph under the caption "Underwriting," concerning the
discretionary accounts controlled by the Underwriters, in each case, in any
Preliminary Prospectus and in the final form of Prospectus filed pursuant to
Rule 424(b) constitutes the only information furnished by the Underwriters to
the Company for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement, and you, on behalf of the respective Underwriters,
represent and warrant to the Company that the statements made therein do not
include any untrue statement of a material fact or omit to state 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.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement or any
subsequent amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of
12
the Registration Statement or the Prospectus or for additional information;
promptly upon your request, it will prepare and file with the Commission any
amendments or supplements to the Registration Statement or Prospectus which, in
the opinion of Troop, Meisinger, Xxxxxxx & Xxxxxx, LLP, counsel for the several
Underwriters ("Underwriters' Counsel"), may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if, at
any time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which the Prospectus
or any other prospectus relating to the Shares as then in effect would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; in case any Underwriter is required
to deliver a prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the Rules and Regulations and the rules and regulations of the
Commission thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares
for offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be reasonably required by the laws of such jurisdiction.
13
(d) The Company will furnish to you, as soon as available, copies
of the Registration Statement (three of which will be signed and which will
include all exhibits), each Preliminary Prospectus, the Prospectus and any
amendments or supplements to such documents, including any prospectus prepared
to permit compliance with Section 10(a)(3) of the Act (three of which will
include all exhibits) all in such quantities as you may from time to time
reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statement.
(f) During a period of five (5) years after the date hereof and
for so long as the Company is subject to Section 13 or 15 of the Exchange Act,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal year,
and will furnish to you and the other several Underwriters hereunder, upon
request (i) concurrently with furnishing such reports to its stockholders,
statements of operations of the Company for each of the first three (3) quarters
in the form furnished to the Company's stockholders, (ii) concurrently with
furnishing to its stockholders, a balance sheet of the Company as of the end of
such fiscal year, together with statements of operations, of stockholders'
equity, and of cash flows of the Company for such fiscal year, accompanied by a
copy of the certificate or report thereon of independent certified public
accountants, (iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders, (iv) as soon as they are available,
copies of all reports and financial statements furnished to or filed with the
Commission, any securities exchange or the NASD, (v) every material press
release and every material news item or article in respect of the Company or its
affairs which was generally released to stockholders or prepared by the Company,
and (vi) any additional information of a public nature concerning the Company or
its business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts of
the Company and its subsidiaries are consolidated, and shall be accompanied by
similar financial statements for any significant subsidiary that is not so
consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
14
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated
by reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, or if the Company shall
terminate this Agreement pursuant to Section 11(a) hereof, or if the
Underwriters shall terminate this Agreement pursuant to Section 11(b)(i), the
Company will pay the several Underwriters for all out-of-pocket expenses
(including fees and disbursements of Underwriters' Counsel) incurred by the
Underwriters in investigating or preparing to market or marketing the Shares.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
if reasonably requested by you, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without the
prior written consent of Cruttenden Xxxx Incorporated, effect the Disposition
of, directly or indirectly, any Securities other than (i) the sale of the Firm
Shares and the Option Shares hereunder, and (ii) the Company's issuance of
options or Common Stock under the Company's presently authorized stock option
plans or restricted stock plans (collectively, the "Option Plans").
(m) During the period commencing on the date of this Agreement
and ending on the date which is nine (9) months after the effective date of the
Registration Statement, or such earlier date as of which the Company or the
Underwriters are no longer required to deliver a Prospectus in connection with
the sale of the Shares, the Company will not issue, release or disseminate any
press release or other material news item or article in respect of the Company
or its affairs without the prior written consent of Cruttenden Xxxx
Incorporated, which consent shall not be unreasonably withheld.
15
5. Expenses.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreement, the Preliminary Blue Sky Survey and any supplemental Blue Sky
Survey, the Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance and delivery of the
Shares hereunder to the several Underwriters, including transfer taxes, if any,
the cost of all certificates representing the Shares and transfer agents' and
registrars' fees; the fees and disbursements of counsel and accountants for the
Company; all fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the several Underwriters copies of
the Registration Statement (including appropriate exhibits), Preliminary
Prospectuses and the Prospectus, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares under the laws
of such jurisdictions as you may designate (including filing fees and fees and
disbursements of counsel for the Underwriters related to such qualification up
to $15,000); the Company's road show costs and expenses, the cost of preparing
bound volumes of the documents relating to the public offering of Common Stock
contemplated hereby; and all other expenses directly incurred by the Company in
connection with the performance of its obligations hereunder.
(ii) In addition to its other obligations under Section
5(a)(i) hereof, the Company will pay to you a nonaccountable expense allowance
equal to 3.0% of the gross sales price of the Shares to the public. This
nonaccountable expense allowance with respect to the Firm Shares shall be paid
to you on the Closing Date and the nonaccountable expenses with respect to the
Option Shares shall be paid to you on the closing of the sale to you of such
Option Shares. The Company has previously paid to you a fee of $50,000 which
shall be credited towards the nonaccountable expense allowance at Closing.
(iii) In addition to its other obligations under Section
8(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 8(a) hereof, it will reimburse the Underwriters 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 Company's obligation to reimburse 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
16
in The Wall Street Journal which represents the base rate on corporate loans
posted by a substantial majority of the nation's five (5) largest banks (the
"Prime Rate"). Any such interim reimbursement 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.
(b) In addition to their other obligations under Section 8(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(b) hereof, they 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.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(iii) and 5(b) 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 Orange County, California (or as close geographically to Orange County,
California as is reasonably practical). Any such arbitration must 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 5(a)(iii) and 5(b)
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 8(a) and 8(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(d) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company
17
to the performance by the Company of its obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., Los Angeles time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issuance, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such documents and information
as they may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date there shall not have been 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.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are purchased, as the case may be, the following
opinion of Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Xxxxxxx, counsel for the
Company, dated the Closing Date or such later date on which Option Shares are
purchased, addressed to the Underwriters (and stating that it may be relied upon
by Troop, Meisinger, Xxxxxxx & Pasich, LLP, Underwriters' Counsel, in rendering
its opinion pursuant to Section 6(e) of this Agreement) and with reproduced
copies or signed counterparts thereof for each of the Underwriters, to the
effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation;
(ii) The Company has the corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus;
18
(iii) The Company is duly qualified to do business
as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be
in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations,
business or business prospects of the Company taken as a whole.
The Prospectus accurately describes any corporation, association
or other entity owned or controlled, directly or indirectly, by
the Company;
(iv) 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 and are fully
paid and nonassessable, and, have not been issued in violation of
or subject to any preemptive right under the Delaware General
Corporation Law ("DGCL"), or to such counsel's knowledge, any
co-sale right, registration right, right of first refusal or
other similar right;
(v) All issued and outstanding shares of capital
stock of AB Plastics Corporation have been duly authorized and
validly issued and are fully paid and nonassessable, and have not
been issued in violation of or subject to any preemptive right
under the [DGCL], or to such counsel's knowledge, any co-sale
right, registration right, right of first refusal or other
similar right and, to such counsel's knowledge, except as
otherwise disclosed in the Prospectus, are owned by the Company
free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest (other than restrictions
on transfer imposed under state and federal securities laws).
(vi) The Firm Shares and the Option Shares, as the
case may be, to be issued by the Company pursuant to the terms of
this Agreement each have been duly authorized and, upon issuance
and delivery against payment therefor in accordance with the
terms hereof, will be duly and validly issued and fully paid and
nonassessable, and, will not have been issued in violation of or
subject to any preemptive right under the DGCL, or to such
counsel's knowledge, any co-sale right, registration right, right
of first refusal or other similar right of stockholders;
(vii) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued and sold by
it hereunder;
19
(viii) The Company has the corporate power and
authority to enter into the Representative's Warrant Agreement
and to issue, sell and deliver to the Representative the
Representative's Warrants to be issued and sold by it thereunder;
(ix) Each of this Agreement and the
Representative's Warrant Agreement has been duly authorized by
all necessary corporate action on the part of the Company and has
been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and
binding agreement of the Company, enforceable in accordance with
its terms, except insofar as indemnification provisions may be
limited by applicable law and to which counsel need not express
any opinion and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors rights generally or by
general equitable principles;
(x) The Registration Statement has become effective
under the Act and, to such counsel's knowledge, 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 threatened under the Act;
(xi) The Registration Statement and the Prospectus,
and each amendment or supplement thereto (other than the
financial statements (including supporting schedules) and
financial and statistical data included in the Registration
Statement 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 Act
and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the
caption (a) "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
complies with all applicable disclosure requirements of
Regulation S-K and is true and correct in all material respects;
(xiii) The forms of certificates evidencing the
Common Stock and filed as exhibits to the Registration Statement
comply with Delaware law;
(xiv) The description in the Registration Statement
and the Prospectus of the charter and bylaws of the Company and
of statutes are accurate and fairly present the information
required to be presented by the Act and the applicable Rules and
Regulations;
20
(xv) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the Company
is a party 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 or filed as required;
(xvi) The performance of this Agreement and the
Representative's Warrant Agreement and the consummation of the
transactions herein and therein contemplated will not (a) result
in any violation of the Company's charter or bylaws or (b) result
in a material breach or violation of any of the terms and
provisions of, or constitute a material default under, any
material bond, debenture, note or other evidence of indebtedness,
or under 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 is a party
or by which its properties are bound, or any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court, government or
governmental agency or body having jurisdiction over the Company
or over any of its properties or operations;
(xvii) No consent, approval, authorization or order
of or qualification with any court, government or governmental
agency or body having jurisdiction over the Company or over any
of its properties or operations is necessary in connection with
the consummation by the Company of the transactions herein
contemplated, except such as have been obtained under the Act or
such as may be required under state or other securities or Blue
Sky laws in connection with the purchase and the distribution of
the Shares by the Underwriters;
(xviii) To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against
the Company of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules
and Regulations or by the Exchange Act or the applicable rules
and regulations of the Commission thereunder, other than those
described therein;
(xvix) The Company is in possession of all material
permits from all governmental agencies or other authorities
having jurisdiction over the Company or AB Plastics Corporation,
or over any of their properties or operations, and to such
counsel's knowledge, neither the Company nor AB Plastics
Corporation is presently (a) in material violation of its
respective charter or bylaws, (b) in material breach of any
applicable permit, statute, rule or regulation known by us to be
applicable to the Company and AB Plastics Corporation, or (c) to
such counsel's knowledge, any
21
order, writ or decree of any California or federal court or
governmental agency or body having jurisdiction over the Company
or AB Plastics Corporation, or over any of their properties or
operations.
(xx) The Representative's Warrants have been duly
and validly authorized by the Company and upon delivery to you in
accordance with the Representative's Warrant Agreement will be
duly issued and legal, valid and binding obligations of the
Company;
(xxi) The Representative's Warrant Stock to be
issued by the Company pursuant to the terms of the
Representative's Warrant has been duly authorized and, upon
issuance and delivery against payment therefor in accordance with
the terms of the Representative's Warrant Agreement, will be duly
and validly issued and fully paid and nonassessable, and to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right under the DGCL, or to such
counsel's knowledge, any co-sale right, registration right, right
of first refusal or other similar right of stockholders;
(xxii) To such counsel's knowledge, no holders of
Common Stock or other securities of the Company have registration
rights with respect to securities of the Company; and
(xxiii) The offer and sale of all securities of the
Company made within the last three years as set forth in Item 15
of the Registration Statement were exempt from the registration
requirements of the Securities Act, pursuant to the provisions
set forth in such Item, and from the registration or
qualification requirements of all relevant state securities laws.
In addition, such counsel shall state that such counsel has participated
in conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which the contents of the Registration Statement
and Prospectus and related matters were discussed, and although (except as
specifically set forth in paragraphs (xi) and (xiii) above) they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel that leads them to believe that, at the time the Registration
Statement became 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,
the Registration Statement and any amendment or supplement, when such documents
became effective or were filed with the Commission (other than the financial
statements including supporting schedules and other financial and statistical
data included in the
22
Registration Statement as to which such counsel need express no comment)
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 Registration Statement, the
Prospectus and any amendment or supplement thereto contained any untrue
statement of a material fact or omitted to state a material fact 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 State of 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 its opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an opinion
of Troop, Meisinger, Xxxxxxx & Xxxxxx, LLP in form and substance satisfactory to
you, with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from Xxxxxx & Kliegman, LLP, 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 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),
23
earnings, operations or business 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 LLP 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 April 27, 1997 and related statements of
operations, stockholders' equity, and cash flows for the years ended October 27,
1996, October 29, 1995 and October 30, 1994, respectively, and (iii) address
other matters agreed upon by Xxxxxx & Kliegman, LLP and you. In addition, you
shall have received from Xxxxxx & Xxxxxxxx, LLP a letter addressed to the
Company and made available to you for the use of 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 _________________, did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the President
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on and
as of the Closing Date or any later date on which Option Shares
are to be purchased, as the case may be, and the Company has
complied, in all material aspects, with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied, at or prior to the Closing Date or any later date on
which Option Shares are to be purchased, as the case may be;
(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 threatened
under the Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the delivery
of such certificate, the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained
all information required to be included therein by the Act and
the Rules
24
and Regulations or the Exchange Act and the applicable rules and
regulations of the Commission thereunder, as the case may be, and
in all respects conformed to the requirements of the Act and the
Rules and Regulations or the Exchange Act and the applicable
rules and regulations of the Commission thereunder, as the case
may be, the Registration Statement, and any amendment or
supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and,
since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, there has not been (a) any material adverse change in
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, (b) any
transaction that is material to the Company, except transactions
entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the
Company, incurred by the Company, except obligations incurred in
the ordinary course of business, (d) any change in the capital
stock or outstanding indebtedness of the Company that is material
to the Company, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company (other
than dividends paid in respect of the Company's preferred stock
outstanding on the date of the Prospectus in amounts not in
excess of those described in the Prospectus), or (f) any loss or
damage (whether or not insured) to the property of the Company
which has a material adverse effect on the condition (financial
or otherwise), earnings, operations or business of the Company.
(h) The Company shall have obtained and delivered to you an
agreement from each officer, director and director-nominee of the Company, and
each beneficial owner of five percent or more of the Common Stock immediately
after the offering contemplated hereby, in writing prior to the date hereof that
such person will not, during the Lock-up Period, effect the Disposition of any
Securities now owned or hereafter acquired directly by such person or with
respect to which such person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, or (ii) with the prior
written consent of Cruttenden Xxxx Incorporated. The foregoing restriction is
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably
25
expected to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than the
such holder. Such prohibited hedging or other transactions would include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
(i) 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, as to the performance by the
Company of its obligations hereunder and as to the other conditions concurrent
and precedent to the obligations of the Underwriters hereunder.
(j) The Representative's Warrant Agreement shall have been
entered into by the Company and you, and the Representative's Warrants shall
have been issued and sold to you pursuant thereto.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the purpose of
covering over-allotments in connection with the distribution and sale of the
Firm Shares only, a nontransferable option to purchase up to an aggregate of
195,000 Option Shares at the purchase price per share for the Firm Shares set
forth in Section 3 hereof. Such option may be exercised by the Representative on
behalf of the several Underwriters on one (1) or more occasions in whole or in
part during the period of forty-five (45) days after the date on which the Firm
Shares are initially offered to the public, by giving written notice to the
Company. The number of Option Shares to be purchased by each Underwriter upon
the exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several
26
Underwriters (set forth in Schedule A hereto), adjusted by the Representative in
such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Company (and the
Company agrees not to deposit any such check in the bank on which it is drawn
until the day following the date of its delivery to the Company). Such delivery
and payment shall take place at the offices of the Representative, or at such
other place as may be agreed upon by the Representative and the Company (i) on
the Closing Date, if written notice of the exercise of such option is received
by the Company at least three (3) full business days prior to the Closing Date,
or (ii) on a date which shall not be later than the fifth (5th) full business
day following the date the Company receives written notice of the exercise of
such option, if such notice is received by the Company less than three (3) full
business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location as you may reasonably
request for inspection at least two (2) full business days prior to the date of
payment and delivery and will be in such names and denominations as you may
request, such request to be made at least three (3) full business days prior to
such date of payment and delivery. If the Representative so elects, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representative
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the condition that all proceedings taken at or
prior to the payment date in connection with the sale and transfer of such
Option Shares shall be reasonably satisfactory in
27
form and substance to you and to Underwriters' Counsel, and you shall have been
furnished with all such documents, certificates and opinions as you may
reasonably request in order to evidence the accuracy and completeness of any of
the representations, warranties or statements, the performance of any of the
covenants or agreements of the Company or the compliance with any of the
conditions herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), 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, in light of the circumstances under which they were made,
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 required to be stated therein or necessary to make the
statements therein, in 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; 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 8(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 and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
28
The indemnity agreement in this Section 8(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the Act or the Exchange Act.
This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) related to negligence on the part of the Company, 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, in light of the
circumstances under which they were made, 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 light of the circumstances under which they
were made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(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 8(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 each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 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 8, notify the indemnifying party in 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 8. In case any such action is brought against
any
29
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 which pose a
conflict of interest for such counsel, 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 8 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 8(a)
or 8(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 indemnification.
(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
8 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 8 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
30
such proportion so that the Underwriters severally and not jointly are
responsible pro rata 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) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter 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 8(d) shall extend upon the same terms and conditions to, and
shall inure to the benefit of, each person, if any, who controls 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 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 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 8, 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 8 and further agree not to attempt to assert any such
defense.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
within the meaning of the Act or the Exchange Act, or by or on behalf of the
Company or any of its officers, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
31
If any Underwriter or Underwriters so default and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Company, be postponed for a further
twenty-four (24) hours, if necessary, to allow the Company the privilege of
finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) the respective number
of Firm Shares to be purchased by the remaining Underwriters and substituted
underwriter or underwriters shall be taken as the basis of their underwriting
obligation. If the remaining Underwriters shall not take up and pay for all such
Firm Shares so agreed to be purchased by the defaulting Underwriter or
Underwriters or substitute another underwriter or underwriters as aforesaid and
the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, the Company shall not be liable to any
Underwriter (except as provided in Sections 4(j), 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
32
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i)
6:30 A.M., Los Angeles time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 before the time this Agreement becomes effective, you, as
Representative of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You, as Representative of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time at or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, (i)
if the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, 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, or (ii) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange or
on the American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your reasonable judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (v) if there shall
33
have been an outbreak or escalation of hostilities or of any other insurrection
or armed conflict or the declaration by the United States of a national
emergency which, in the reasonable opinion of the Representatives, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. Any termination pursuant to any of
subparagraphs (ii) through (v) above shall be without liability of any party to
any other party except as provided in Sections 4(j), 5 and 8 hereof. In the
event of termination pursuant to subparagraph (i) above, the Company shall also
remain obligated to pay costs and expenses pursuant to Sections 4(i), 5 and 8
hereof.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, telecopier number (000) 000-0000,
Attention: Xxxxx X. Xxxxxxx, if sent to the Company, such notice shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to 00000 X. Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000,
(000) 000-0000, Attention: Xxxxxxx X. Xxxxx.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto and their respective executors, administrators,
successors and assigns, and their controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 8 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or corporation. No purchaser
of any of the Shares from any Underwriter shall be construed a successor or
assign by reason merely of such purchase. The Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
hereof.
In all dealings with the Company under this Agreement, you shall act on
behalf of
34
each of the several Underwriters, and the Company shall be entitled to act and
rely upon any statement, request, notice or agreement made or given by you on
behalf of each of the several Underwriters.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original. If the foregoing correctly sets forth
the understanding among the Company and the several 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 several
Underwriters.
Very truly yours,
COMPASS PLASTICS AND TECHNOLOGIES, INC.
By:
Name:
Title:
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
On their behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
By: CRUTTENDEN XXXX INCORPORATED
By:
Name:
Title:
35
SCHEDULE A
Number of Firm Shares
Underwriters To be Purchased
------------ ---------------------
Cruttenden Xxxx Incorporated
--------
Total
========
36
