EXHIBIT 1.1
Orchids Paper Products Company
_________ Shares of Common Stock
UNDERWRITING AGREEMENT
_______, 2005
Taglich Brothers, Inc.
As Representative of the
several Underwriters listed
in Schedule 1 hereto
c/o Taglich Brothers, Inc.
000 Xxxxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Orchids Paper Products Company, a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters listed in Schedule 1
hereto (the "Underwriters"), for whom you are acting as representative (the
"Representative"), an aggregate of ________ shares of common stock, par value
$0.001 per share (the "Stock") of the Company (the "Underwritten Shares") and,
at the option of the Underwriters to cover over-allotments, if any, up to an
additional __________ shares of Stock of the Company (the "Option Shares"). The
Underwritten Shares and the Option Shares are herein referred to as the
"Shares."
The Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Shares, as follows:
1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement on Form S-1 (File
No. 333-124173), including a prospectus, relating to the Shares. Such
registration statement, as amended at the time it becomes effective, including
the information, if any, deemed pursuant to Rule 430A under the Securities Act
to be part of the registration statement at the time of its effectiveness ("Rule
430 Information"), is referred to herein as the "Registration Statement"; and as
used herein, the term "Preliminary Prospectus" means each prospectus included in
such registration statement (and any amendments thereto) before it becomes
effective, any prospectus filed with the Commission pursuant to Rule 424(a)
under the Securities Act and the prospectus included in the Registration
Statement at the time of its effectiveness that omits Rule 430A Information, and
the term "Prospectus" means the prospectus in the form first used to confirm
sales of the Shares. If the Company has filed an abbreviated registration
statement pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement"
shall be deemed to include such Rule 462 Registration Statement.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(a) The Company agrees to issue and sell the Shares to the several
Underwriters as provided in this Agreement, and each Underwriter, on the basis
of the representations, warranties and agreements set forth herein and subject
to the conditions set forth herein, agrees, severally and not jointly, to
purchase from the Company the respective number of Underwritten Shares set forth
opposite such Underwriter's name in Schedule 1 hereto at a price per share (the
"Purchase Price") of $_____. The public offering price of the Shares is not in
excess of the price recommended by Xxxxxxx Xxxxxx Xxxxxx Inc., acting as a
"qualified independent underwriter" within the meaning of Rule 2720 of the Rules
of Conduct of the NASD.
In addition, the Company agrees to issue and sell the Option Shares
to the several Underwriters as provided in this Agreement, and the Underwriters,
on the basis of the representations, warranties and agreements set forth herein
and subject to the conditions set forth herein, shall have the option to
purchase, severally and not jointly, from the Company the Option Shares at the
Purchase Price to cover over-allotments, if any.
If any Option Shares are to be purchased, the number of Option
Shares to be purchased by each Underwriter shall be the number of Option Shares
which bears the same ratio to the aggregate number of Option Shares being
purchased as the number of Underwritten Shares set forth opposite the name of
such Underwriter in Schedule 1 hereto (or such number increased as set forth in
Section 10 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representative in its
sole discretion shall make.
The Underwriters may exercise the option to purchase the Option
Shares at any time in whole, or from time to time, in part, on or before the
thirtieth day following the date of this Agreement, by written notice from the
Representative to the Company. Such notice shall set forth the aggregate number
of Option Shares as to which the option is being exercised and the date and time
when the Option Shares are to be delivered and paid for which may be the same
date and time as the Closing Date (as hereinafter defined) but shall not be
earlier than the Closing Date nor later than the tenth full business day (as
hereinafter defined) after the date of such notice (unless such time and date
are postponed in accordance with the provisions of Section 10 hereof). Any such
notice shall be given at least three business days prior to the date and time of
delivery specified therein, unless otherwise agreed by the parties hereto.
(b) The Company understands that the Underwriters intend to make a
public offering of the Shares as soon after the effectiveness of this Agreement
as in the judgment of the Representative is advisable, and initially to offer
the Shares on the terms set forth in the Prospectus. The Company acknowledges
and agrees that the Underwriters may offer and sell Shares to or through any
affiliate of an Underwriter and that any such affiliate may offer and sell
Shares purchased by it to or through any Underwriter.
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(c) Payment for the Shares shall be made by wire transfer in
immediately available funds to the accounts specified by the Company to the
Representative in the case of the Underwritten Shares, at the offices of Taglich
Brothers, Inc., at 10:00 A.M. New York City time on ____, 2005, or at such other
time or place on the same or such other date, not later than the fifth business
day thereafter, as the Representative and the Company may agree upon in writing
or, in the case of the Option Shares, on the date and at the time and place
specified by the Representative in the written notice of the Underwriters'
election to purchase such Option Shares. The time and date of such payment for
the Underwritten Shares are referred to herein as the "Closing Date" and any
time and date for such payment for the Option Shares, if other than the Closing
Date, are herein referred to as an "Additional Closing Date".
Payment for the Shares to be purchased on the Closing Date or an
Additional Closing Date, as the case may be, shall be made against delivery to
the Representative through the facilities of the Depository Trust Company for
the respective accounts of the several Underwriters of the Shares to be
purchased on such date in definitive form registered in such names and in such
denominations as the Representative shall request in writing not later than two
full business days prior to the Closing Date or an Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the sale of
the Shares duly paid by the Company. The certificates for the Shares will be
made available for inspection and packaging by the Representative at the office
of Taglich Brothers, Inc. set forth above not later than 1:00 P.M., New York
City time, on the business day prior to the Closing Date or an Additional
Closing Date, as the case may be.
(d) In addition to the sums payable to the Representative as
provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, Representative's Warrants for the
purchase of up to ________ Shares at a price of $_____ per Share, upon the terms
and subject to adjustment and conversion as described in the form of
Representative's Warrants filed as an exhibit to the Registration Statement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
(a) Preliminary Prospectus. No order preventing or suspending the
use of any Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of effectiveness, complied in all material
respects with the Securities Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through
the Representative expressly for use in any Preliminary Prospectus.
(b) Registration Statement and Prospectus. The Registration
Statement has been declared effective by the Commission. No order suspending the
effectiveness of the
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Registration Statement has been issued by the Commission and no proceeding for
that purpose has been initiated or threatened by the Commission; as of the
applicable effective date of the Registration Statement and any amendment
thereto, the Registration Statement complied and will comply in all material
respects with the Securities Act, and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and as of the applicable filing date of the Prospectus and any
amendment or supplement thereto and as of the Closing Date and as of each
Additional Closing Date, as the case may be, the Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that the Company makes no representation and warranty with respect to any
statements or omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representative expressly for use in the Registration
Statement and the Prospectus and any amendment or supplement thereto.
(c) Financial Statements. The financial statements and the related
notes thereto included in the Registration Statement and the Prospectus comply
in all material respects with the applicable requirements of the Securities Act
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Exchange Act"), as
applicable, and present fairly the financial position of the Company as of the
dates indicated and the results of its operations and the changes in its cash
flows for the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby, and the supporting schedules
included in the Registration Statement present fairly the information required
to be stated therein; the historical financial information included in the
Registration Statement and the Prospectus has been derived from the accounting
records of the Company and presents fairly the information shown thereby; and
the pro forma financial information and the related notes thereto included in
the Registration Statement and the Prospectus has been prepared in accordance
with the applicable requirements of the Securities Act and the Exchange Act, as
applicable, and the assumptions underlying such pro forma financial information
are reasonable and are set forth in the Registration Statement and the
Prospectus, in each case, in all material respects.
(d) No Material Adverse Change. Except as otherwise disclosed in the
Registration Statement and the Prospectus, since the date of the most recent
financial statements of the Company included in the Registration Statement and
the Prospectus, (i) there has not been any change in the capital stock or
long-term debt of the Company, or any dividend or distribution of any kind
declared, set aside for payment, paid or made by the Company on any class of
capital stock, or any material adverse change, or any development involving a
prospective material adverse change, in the business, properties, management,
financial condition, stockholders' equity or results of operations of the
Company; (ii) the Company has not entered into any transaction or agreement that
is material to the Company or incurred any liability or obligation, direct or
contingent, that is material to the Company, except in the ordinary course of
business; and (iii) the Company has not sustained any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor
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disturbance or dispute or any action, order or decree of any court or arbitrator
or governmental or regulatory authority.
(e) Organization and Good Standing. The Company has been duly
organized and is validly existing and in good standing under the laws of its
jurisdiction of organization, is duly qualified to do business and is in good
standing in each jurisdiction in which its ownership or lease of property or the
conduct of its business requires such qualification, and has all power and
authority necessary to own or hold its properties and to conduct the business in
which it is engaged, except where the failure to be so qualified or have such
power or authority would not, individually or in the aggregate, have a material
adverse effect on the business, properties, management, financial condition,
stockholders' equity, results of operations or prospects of the Company (a
"Material Adverse Effect"). The Company has no subsidiaries and does not own or
control, directly or indirectly, any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity.
(f) Capitalization. The Company has an authorized capitalization as
set forth in the Prospectus under the heading "Capitalization"; all the
outstanding shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and are not subject
to any pre-emptive or similar rights; except as described in or expressly
contemplated by the Prospectus, there are no outstanding rights (including,
without limitation, pre-emptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares of capital stock or
other equity interest in the Company or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any capital
stock of the Company, any such convertible or exchangeable securities or any
such rights, warrants or options; the capital stock of the Company conforms in
all material respects to the description thereof contained in the Registration
Statement and the Prospectus.
(g) Due Authorization. The Company has full right, power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; and all action required to be taken for the due and proper
authorization, execution and delivery by it of this Agreement and the
consummation by it of the transactions contemplated hereby has been duly and
validly taken.
(h) Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(i) The Shares. The Shares to be issued and sold by the Company
hereunder have been duly authorized by the Company and, when issued and
delivered and paid for as provided herein, will be duly and validly issued and
will be fully paid and nonassessable and will conform in all material respects
to the descriptions thereof in the Prospectus; and the issuance of the Shares is
not subject to any preemptive or similar rights.
(j) No Violation or Default. The Company is not (i) in violation of
its charter or by-laws or similar organizational documents; (ii) in default, and
no event has occurred that, with notice or lapse of time or both, would
constitute such a default, in the due performance or
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observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company is bound or to which any of
the property or assets of the Company is subject; or (iii) in violation of any
law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of
clauses (i), (ii) and (iii) above, for any such default or violation that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(k) No Conflicts. The execution, delivery and performance by the
Company of this Agreement, the issuance and sale of the Shares to be sold by the
Company hereunder and the consummation by the Company of the transactions
contemplated hereby will not (i) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the Company
is a party or by which the Company is bound or to which any of the property or
assets of the Company is subject, (ii) result in any violation of the provisions
of the charter or by-laws or similar organizational documents of the Company or
(iii) result in the violation of any law or statute or any judgment, order, rule
or regulation of any court or arbitrator or governmental or regulatory
authority, except (in the case of clauses (i) and (iii) above) as would not
reasonably be expected to have a Material Adverse Effect.
(l) No Consents Required. No consent, approval, authorization,
order, registration or qualification of or with any court or arbitrator or
governmental or regulatory authority is required for the execution, delivery and
performance by the Company of this Agreement, the issuance and sale of the
Shares to be sold by the Company hereunder and the consummation by the Company
of the transactions contemplated hereby, except for the registration of the
Shares under the Securities Act and such consents, approvals, authorizations,
orders and registrations or qualifications as may be required by the American
Stock Exchange or under applicable state securities laws in connection with the
purchase and distribution of the Shares by the Underwriters.
(m) Legal Proceedings. Except as described in the Prospectus, there
are no legal, governmental or regulatory investigations, actions, suits or
proceedings pending to which the Company, or to the best knowledge of the
Company, any of its officers (or former officers) or directors (or former
directors) is or may be a party or to which any property of the Company is or
may be subject that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under this Agreement; no
such investigations, actions, suits or proceedings are threatened or
contemplated by any governmental or regulatory authority or, to the best
knowledge of the Company, threatened by others; and (i) there are no current or
pending legal, governmental or regulatory actions, suits or proceedings that are
required under the Securities Act to be described in the Prospectus that are not
so described and (ii) there are no contracts or other documents that are
required under the Securities Act to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the Prospectus that are
not so filed or described.
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(n) Independent Accountants. Tullius, Xxxxxx Xxxxxxx & Xxxxxxx LLP,
who have certified certain financial statements of the Company included in the
Registration Statement are registered independent public accountants as required
by the Securities Act. Except as described in the Prospectus, Tullius, Xxxxxx
Xxxxxxx & Xxxxxxx LLP has not engaged in any "prohibited activities" (as defined
in Section 10A of the Exchange Act) on behalf of the Company.
(o) Title to Real and Personal Property. Except as disclosed in the
Prospectus, the Company has good and marketable title in fee simple to, or have
valid rights to lease or otherwise use, all items of real and personal property
that are material to the business of the Company, free and clear of all liens,
encumbrances, claims and defects and imperfections of title except those that
(i) do not materially interfere with the use made and proposed to be made of
such property by the Company or (ii) could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(p) Title to Intellectual Property. The Company owns or possesses
adequate rights to use all patents and patent applications, trademarks, service
marks, trade names, trademark registrations, service xxxx registrations,
copyrights, licenses and know-how necessary for the conduct of their business;
and to the best knowledge of the Company, the conduct of its business will not
conflict in any material respect with any such rights of others, and the Company
has not received any notice of any claim of infringement or conflict with any
such rights of others, except those that (i) do not materially interfere with
the business and proposed business of the Company or (ii) could not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(q) No Undisclosed Relationships. No relationship, direct or
indirect, exists between or among the Company, on the one hand, and the
directors, officers, stockholders, customers or suppliers of the Company, on the
other, that is required by the Securities Act to be described in the
Registration Statement and the Prospectus which is not so described or not
described as required in material compliance with such requirement. 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 or directors of the Company or any of
their respective family members, except as disclosed in the Registration
Statement and the Prospectus.
(r) Investment Company Act. The Company is not, and after giving
effect to the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus will not be, required to
register as an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, and the rules and regulations of the Commission
thereunder (collectively, "Investment Company Act").
(s) Taxes. The Company has paid (or established adequate reserves
for) all material federal, state, local and foreign taxes and filed all tax
returns required to be paid or filed through the date hereof; and except as
otherwise disclosed in the Prospectus, there is no material tax deficiency that
has been, or would reasonably be expected to be, asserted against the
7
Company or any of its properties or assets.
(t) Licenses and Permits. The Company possesses all licenses,
certificates, permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or
lease of its properties or the conduct of its business as described in the
Registration Statement and the Prospectus, except where the failure to possess
or make the same would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and except as described in the
Prospectus, the Company has not received notice of any revocation or
modification of any such license, certificate, permit or authorization or has
any reason to believe that any such license, certificate, permit or
authorization will not be renewed in the ordinary course.
(u) No Labor Disputes. No labor disturbance by or dispute with
employees of the Company exists or, to the best knowledge of the Company, is
contemplated or threatened, except for any disturbance or dispute which would
not reasonably be expected to result in a Material Adverse Effect.
(v) Compliance With Environmental Laws. The Company (i) is in
compliance with any and all applicable federal, state, local and foreign laws,
rules, regulations, decisions and orders relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, "Environmental Laws"); (ii) has
received and are in compliance with all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct its business;
and (iii) has not received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, except in any such case for
any such failure to comply, or failure to receive required permits, licenses or
approvals, or liability as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(w) Compliance With ERISA. Except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect:
(i) each employee benefit plan, within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is
maintained, administered or contributed to by the Company or any of its
affiliates for employees or former employees of the Company and its affiliates
has been maintained in compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not limited to
ERISA and the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no
prohibited transaction, within the meaning of Section 406 of ERISA or Section
4975 of the Code, has occurred with respect to any such plan excluding
transactions effected pursuant to a statutory or administrative exemption; and
(iii) for each such plan that is subject to the funding rules of Section 412 of
the Code or Section 302 of ERISA, no "accumulated funding deficiency" as defined
in Section 412 of the Code has been incurred, whether or not waived, and no such
plan has terminated under Title IV of ERISA resulting in any liability with
respect to such termination that remains unsatisfied.
(x) Accounting Controls. The Company maintains systems of internal
8
accounting controls sufficient to provide reasonable assurance 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 asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) Disclosure Controls. The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-14 under the Exchange Act)
that are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Commission, including, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company's management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate to allow timely decisions
regarding required disclosure.
(z) Insurance. The Company has insurance covering its properties,
operations, personnel and businesses, including business interruption insurance,
which insurance is in amounts and insures against such losses and risks as the
Company reasonably believes is adequate to protect the Company and its business
and is in amounts as are customary in the Company's industry; and the Company
has not (i) received notice from any insurer or agent of such insurer that
material capital improvements or other expenditures are required or necessary to
be made in order to continue such insurance or (ii) 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 at market rates from similar
insurers as may be necessary to continue its business.
(aa) No Unlawful Payments. Neither the Company nor, to the best
knowledge of the Company, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company has (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, influence
payment, kickback or other unlawful payment.
(bb) No Broker's Fees. The Company is not a party to any contract,
agreement or understanding with any person (other than this Agreement) that
would give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or like payment in connection with the
offering and sale of the Shares.
(cc) No Registration Rights. No person has the right to require the
Company to register any securities for sale under the Securities Act by reason
of the filing of the Registration Statement with the Commission or the issuance
and sale of the Shares to be sold by the Company hereunder.
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(dd) Statistical and Market Data. The statistical, industry-related
and market-related data included in the Registration Statement and the
Prospectus are based on or derived from sources which the Company reasonably and
in good faith believes are reliable and accurate, and such data agree with the
sources from which they are derived.
(ee) No Stabilization. The Company has not taken, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
(ff) No Violation of Section 402 of Xxxxxxxx-Xxxxx Act. The Company
has not, in violation of Section 402 of the Xxxxxxxx-Xxxxx Act, directly or
indirectly, extended or maintained credit, arranged for the extension of credit,
or renewed an extension of credit, in the form of a personal loan to or for any
director or executive officer of the Company.
(gg) Document Production. The Company has provided to Wildman,
Harrold, Xxxxx & Xxxxx LLP, counsel to the Underwriters, all material documents
reasonably believed to be responsive to the requests made by such counsel in
connection with their due diligence review of the Company.
(hh) No Integration with Prior Offers or Sales of Securities. The
Company has not prior to the date hereof, made any offer or sale of any
securities which could be "integrated" for purposes of the Securities Act and
the Rules and Regulations with the offer and sale of the Shares pursuant to the
Registration Statement. Except as disclosed in the Registration Statement and
the Prospectus, the Company has not sold or issued any securities during the
six-month period preceding the date of the Prospectus, including but not limited
to any sales pursuant to Rule 144A or Regulation D or S under the Securities
Act, other than Stock issued pursuant to employee benefit plans, qualified stock
option plans or the employee compensation plans or pursuant to outstanding
options, rights or warrants as described in the Registration Statement and the
Prospectus.
(ii) Representative's Warrants. The Representative's Warrants have
been authorized for issuance to the Representative or its designees, and will,
when issued, possess rights, privileges, and characteristics as represented in
the most recent form of Representative's Warrants, filed as an exhibit to the
Registration Statement. The securities to be issued upon exercise of
Representative's Warrants, when issued and delivered against payment therefor in
accordance with the terms thereof, will be duly and validly issued, fully paid,
nonassessable and free of preemptive rights, and all corporate action required
to be taken for the authorization and issuance of the Representative's Warrants,
and the securities to be issued upon their exercise, have been validly and
sufficiently taken. The execution by the Company of the Representative's
Warrants has been duly authorized by all required action of the Company and,
when so executed and delivered, will constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
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4. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with each Underwriter that:
(a) Effectiveness of the Registration Statement. If the Registration
Statement is not effective upon execution of this Agreement, the Company will
use its reasonable best efforts to cause the Registration Statement to become
effective at the earliest possible time and, if required, will file the final
Prospectus with the Commission within the time periods specified by Rule 424(b)
and Rule 430A under the Securities Act.
(b) Delivery of Copies. The Company will deliver, without charge,
(i) to the Representative, one signed copy of the Registration Statement as
originally filed and each amendment thereto, in each case including all exhibits
and consents filed therewith; and (ii) to each Underwriter (A) a conformed copy
of the Registration Statement as originally filed and each amendment thereto
(without exhibits) and (B) during the Prospectus Delivery Period, as many copies
of the Prospectus (including all amendments and supplements thereto) as the
Representative may reasonably request. As used herein, the term "Prospectus
Delivery Period" means such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered in
connection with sales of the Shares by any Underwriter or dealer.
(c) Amendments or Supplements. Before filing any amendment or
supplement to the Registration Statement or the Prospectus, the Company will
furnish to the Representative and counsel for the Representative a copy of the
proposed amendment or supplement for review and will not file any such proposed
amendment or supplement to which the Representative reasonably objects based on
the advice of counsel.
(d) Notice to the Representative. The Company will advise the
Representative promptly, and confirm such advice in writing, during the
Prospectus Delivery Period (i) if the Registration Statement is not effective
upon execution of this Agreement, when the Registration Statement has become
effective; (ii) when any amendment to the Registration Statement has been filed
or becomes effective; (iii) when any supplement to the Prospectus or any
amendment to the Prospectus has been filed; (iv) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or the receipt of any comments from the Commission
relating to the Registration Statement or any other request by the Commission
for any additional information; (v) of the issuance by the Commission of any
order suspending the effectiveness of the Registration Statement or preventing
or suspending the use of any Preliminary Prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose; (vi) of the
occurrence of any event within the Prospectus Delivery Period as a result of
which the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing when
the Prospectus is delivered to a purchaser, not misleading; and (vii) of the
receipt by the Company of any notice with respect to any suspension of the
qualification of the Shares for offer and sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and the Company
will use its reasonable best efforts to prevent the issuance of any such order
suspending the effectiveness of the Registration Statement, preventing or
suspending the use of
11
any Preliminary Prospectus or the Prospectus or suspending any such
qualification of the Shares and, if any such order is issued, will obtain as
soon as reasonably possible the withdrawal thereof.
(e) Ongoing Compliance of the Prospectus. If during the Prospectus
Delivery Period (i) any event shall occur or condition shall exist as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances existing when the Prospectus is delivered to a
purchaser, not misleading or (ii) it is necessary to amend or supplement the
Prospectus to comply with law, the Company will immediately notify the
Underwriters thereof and forthwith prepare and, subject to paragraph (c) above,
file with the Commission and furnish to the Underwriters and to such dealers as
the Representative may designate, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances existing
when the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law.
(f) Blue Sky Compliance. The Company will use its reasonable best
efforts to qualify the Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Representative shall reasonably request
and will continue such qualifications in effect so long as required for
distribution of the Shares, provided that in connection therewith, the Company
shall not be required to qualify as a foreign corporation or as a dealer in
securities or to file a general consent to service of process in any
jurisdiction in which it is not otherwise so subject.
(g) Earnings Statement. The Company will make generally available to
its security holders and the Representative as soon as practicable an earning
statement that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder covering a period of at
least twelve months beginning with the first fiscal quarter of the Company
occurring after the "effective date" (as defined in Rule 158) of the
Registration Statement. To the extent that the Company makes such information
available in the Commission's XXXXX filing system, the Company shall be deemed
to have furnished such information for purposes of this Section.
(h) Clear Market. For a period of 180 days after the date of the
initial public offering of the Shares, the Company will not, without the prior
written consent of the Underwriter, (i) offer, pledge, announce the intention to
sell, sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer or dispose of, directly or indirectly, any shares of Stock
or any securities convertible into or exercisable or exchangeable for Stock or
(ii) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Stock or such other securities, in cash or otherwise, without the prior
written consent of the Representative, other than: (A) the Shares to be sold
hereunder; (B) any shares of Stock of the Company issued pursuant to employee
benefit plans, stock option plans, or other employee compensation plans or
employment agreements existing on the effective date of
12
the Registration Statement; (C) any shares of Stock of the Company issued
pursuant to the exercise of options, warrants or rights outstanding on the
effective date of the Registration Statement; (D) grants of options pursuant to
employee benefit plans, stock option plans or other employee compensation plans
or employment agreements existing on the effective date of the Registration
Statement; and (E) any shares of Stock of the Company issued in connection with
a bona fide business acquisition made by the Company which involves a third
party that is not an affiliate of the Company, provided that the recipient of
the shares of Stock agrees to be bound by the terms of the "lock-up" letter
agreement attached as Annex A to this Agreement.
(i) Use of Proceeds. The Company will apply the net proceeds from
the sale of the Shares as described in the Prospectus under the heading "Use of
Proceeds".
(j) No Stabilization. The Company will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares in
violation of applicable law.
(k) Exchange Listing. The Company will use its best efforts to list,
subject only to official notice of issuance, the Shares on the American Stock
Exchange.
(l) Reports. So long as the Shares are outstanding, the Company will
furnish to the Representative, as soon as they are available, copies of all
reports or other communications (financial or other) furnished to holders of the
Shares, and copies of any reports and financial statements furnished to or filed
with the Commission or any national securities exchange or automatic quotation
system (it being understood that filing on XXXXX shall be deemed to constitute
delivery hereunder).
(m) Filings. The Company will file with the Commission such
information on Form 10-Q or Form 10-K as may be required by Rule 463 under the
Securities Act.
(o) Reports and Communications. During a period of three years from
the effective date of the Registration Statement, the Company shall make
available to the Representative copies of all reports or other communications
(financial or other) furnished to stockholders, and to make available to the
Representative (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed;
and (ii) such additional, non-confidential information concerning the business
and financial condition of the Company as the Representative may from time to
time reasonably request (it being understood that filing on XXXXX shall be
deemed to constitute delivery hereunder).
(p) Rule 462(b). If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b), and the Company shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration Statement
or give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Securities Act.
13
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase the Underwritten Shares on the Closing Date or the
Option Shares on an Additional Closing Date, as the case may be, as provided
herein is subject to the performance by the Company of its covenants and other
obligations hereunder and to the following additional conditions:
(a) Registration Compliance; No Stop Order. The Registration
Statement (or if a post-effective amendment thereto is required to be filed
under the Securities Act, such post-effective amendment) shall have become
effective, and the Representative shall have received notice thereof, not later
than 5:00 P.M., New York City time, on the date hereof; no order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceeding for such purpose shall be pending before or threatened by the
Commission; the Prospectus shall have been timely filed with the Commission
under the Securities Act and in accordance with Section 5(a) hereof; and all
requests by the Commission for additional information shall have been complied
with to the reasonable satisfaction of the Representative.
(b) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct on the date
hereof and on and as of the Closing Date or an Additional Closing Date, as the
case may be; and the statements of the Company and its officers made in any
certificates delivered pursuant to this Agreement shall be true and correct on
and as of the Closing Date or an Additional Closing Date, as the case may be.
(c) No Downgrade. Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded any
securities of or guaranteed by the Company by any "nationally recognized
statistical rating organization", as such term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, or has changed its outlook with respect to, its rating of any securities
of or guaranteed by the Company (other than an announcement with positive
implications of a possible upgrading).
(d) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement, no event or condition of a type described in Section
3(d)(i) or (iii) hereof shall have occurred or shall exist, which event or
condition is not described in the Prospectus (excluding any amendment or
supplement thereto) and the effect of which in the judgment of the
Representative is so material and adverse as to make it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Shares on the
Closing Date or an Additional Closing Date, as the case may be, on the terms and
in the manner contemplated by this Agreement and the Prospectus.
(e) Officer's Certificate. The Representative shall have received on
and as of the Closing Date or an Additional Closing Date, as the case may be, a
certificate of the chief financial officer of the Company and the senior
executive officer of the Company (A) confirming that such officers have reviewed
the Registration Statement and the Prospectus and, to the best knowledge of such
officers, the representation of the Company set forth in Section 3(b) hereof is
true and correct, (B) confirming that the other representations and warranties
of the Company in this Agreement are true and correct and that the Company has
complied with all agreements and
14
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to such Closing Date and (C) to the effect set forth in paragraphs (a)
and (d) above.
(f) Comfort Letter. On the date of this Agreement and on the Closing
Date and each Additional Closing Date, as the case may be, Tullius Xxxxxx
Xxxxxxx & Xxxxxxx LLP shall have furnished to the Representative, at the request
of the Company, letters, dated the respective dates of delivery thereof and
addressed to the Underwriters, in form and substance reasonably satisfactory to
the Representative, containing statements and information of the type
customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus; provided, that the letters
delivered on the Closing Date or an Additional Closing Date, as the case may be,
shall use a "cut-off" date no more than three business days prior to such
Closing Date or such Additional Closing Date, as the case may be.
(g) Opinion of Counsel for the Company. Xxxxx Xxxx LLP, counsel for
the Company, shall have furnished to the Representative, at the request of the
Company, their written opinion dated the Closing Date and each Additional
Closing Date, as the case may be, and addressed to the Underwriters, in form and
substance reasonably satisfactory to the Representative, to the effect set forth
in Annex B hereto.
(h) Opinion of Counsel for the Underwriters. The Representative
shall have received on and as of the Closing Date and each Additional Closing
Date, as the case may be, an opinion of Wildman, Harrold, Xxxxx & Xxxxx LLP,
counsel for the Underwriters, with respect to such matters as the Representative
may reasonably request, and such counsel shall have received such documents and
information as they may reasonably request to enable them to pass upon such
matters.
(i) No Legal Impediment to Issuance. No action shall have been taken
and no statute, rule, regulation or order shall have been enacted, adopted or
issued by any federal, state or foreign governmental or regulatory authority
that would, as of the Closing Date or an Additional Closing Date, as the case
may be, prevent the issuance or sale of the Shares; and no injunction or order
of any federal, state or foreign court shall have been issued that would, as of
the Closing Date or an Additional Closing Date, as the case may be, prevent the
issuance or sale of the Shares.
(j) Good Standing. The Representative shall have received on and as
of the Closing Date and each Additional Closing Date, as the case may be,
satisfactory evidence of the good standing of the Company in its jurisdiction of
organization and its good standing as a foreign entity in such other
jurisdictions as the Representative may reasonably request, in each case in
writing or any standard form of telecommunication from the appropriate
governmental authorities of such jurisdictions.
(k) Exchange Listing. The Shares to be delivered on the Closing Date
or an Additional Closing Date, as the case may be, shall have been approved for
listing on the American Stock Exchange, subject to official notice of issuance.
15
(l) Lock-up Agreements. The Company shall have caused (i) each of
the officers and directors of the Company, and (ii) each person who owns,
beneficially or of record, 5% or more of the equity securities of the Company
(including holders of options and warrants to purchase equity securities of the
Company), to furnish to the Representative, on or prior to the date of this
Agreement, a letter or letters, in form and substance satisfactory to the
Representative and attached hereto as Annex A ("Lock-up Agreements").
(m) Qualified Independent Underwriter. The Company and the
Representative shall have received from Xxxxxxx Xxxxxx Xxxxxx Inc. (the "QIU") a
letter, dated as of the Closing Date and in form and substance satisfactory to
the Representative that:
(i) The QIU is a member of the NASD and is qualified to act as
a "qualified independent underwriter" within the meaning of paragraph
(b)(15) of NASD Rule 2720.
(ii) The QIU has participated in the preparation of the
Registration Statement and the Prospectus relating to the offer and sale
of the Shares and has exercised the usual standards of "due diligence" in
respect thereto.
(iii) The QIU has undertaken the legal responsibilities and
liabilities of an underwriter under the Act, specifically including those
inherent in Section 11 of the Act.
(iv) Based upon (A) a review of the Company, including an
examination of the Registration Statement, information regarding the
earnings, assets, capital structure, and growth rate of the Company, and
other pertinent financial and statistical data, (B) inquiries of and
conferences with management of the Company and its counsel and independent
public accountants regarding the business and prospects of the Company,
(C) consideration of the prospects for the industry in which the Company
competes, estimates of the business potential of the Company, assessments
of its management, the general condition of the securities markets, market
prices of the capital stock and debt securities of, and financial and
operating data concerning, companies believed by the QIU to be comparable
to the Company, and the demand for securities of comparable companies
similar to the Shares, and (D) such other studies, analyses, and
investigations as the XXX xxxxx appropriate, and assuming the offering and
sale of the Shares is made as contemplated in the Prospectus, the QIU has
recommended a maximum initial public offering price for the Shares.
(n) Additional Documents. On or prior to the Closing Date and each
Additional Closing Date, as the case may be, the Company shall have furnished to
the Representative such further certificates and documents as the Representative
may reasonably request.
All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
16
6. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters by the Company. The Company
agrees to indemnify and hold harmless each Underwriter, its affiliates,
directors and officers and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, reasonable legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are reasonably incurred), joint or several,
that arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities arise out of, or are based upon, any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with any information relating to any Underwriter furnished to the Company in
writing by such Underwriter through the Representative expressly for use
therein, it being understood and agreed that the only such information furnished
by any Underwriter consists of the information described as such in subsection
(c) below; provided, that the foregoing indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the persons asserting any such losses, claims, damages or liabilities
purchased Stock if, to the extent required by applicable law, a copy of the
Prospectus (as then amended or supplemented) was not sent or given by or on
behalf of such Underwriter to such person at or prior to the written
confirmation of the sale of the Stock to such person and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability, unless such failure to send or give a copy of
the Prospectus is the result of noncompliance by the Company with Section 4
hereof.
(b) Indemnification of the Company. Each Underwriter agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
directors, its officers who signed the Registration Statement and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
indemnity set forth in paragraph (a) above, but only with respect to any losses,
claims, damages or liabilities that arise out of, or are based upon, any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with any information relating to such Underwriter
furnished to the Company in writing by such Underwriter through the
Representative expressly for use in the Registration Statement and the
Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus, it being understood and agreed upon that the only such information
furnished by any Underwriter consists of the following information in the
Prospectus furnished on behalf of each Underwriter: (1) the statements with
respect to the public offering of the Shares on the cover page of the
Prospectus, and (2) under the heading "Underwriting" (A) the sentences related
to concessions and reallowances, and (B) the paragraphs related to
over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids.
17
(c) Notice and Procedures. If any suit, action, proceeding
(including any governmental or regulatory investigation), claim or demand shall
be brought or asserted against any person in respect of which indemnification
may be sought pursuant to the preceding paragraphs of this Section 6, such
person (the "Indemnified Person") shall promptly notify the person against whom
such indemnification may be sought (the "Indemnifying Person") in writing;
provided that the failure to notify the Indemnifying Person shall not relieve
the Indemnifying Person from any liability that it may have under this Section 6
except to the extent that it has been materially prejudiced by such failure; and
provided, further, that the failure to notify the Indemnifying Person shall not
relieve it from any liability that it may have to an Indemnified Person
otherwise than under this Section 6. If any such proceeding shall be brought or
asserted against an Indemnified Person and it shall have notified the
Indemnifying Person thereof, the Indemnifying Person shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others entitled to indemnification pursuant to this Section 6
that the Indemnifying Person may designate in such proceeding and shall pay the
fees and expenses of such counsel related to such proceeding, as incurred. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the contrary; (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person
shall have reasonably concluded that there may be legal defenses available to it
that are different from or in addition to those available to the Indemnifying
Person; or (iv) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood and agreed that the Indemnifying Person shall not, in connection with
any proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be paid or reimbursed as they are incurred. Any such separate firm for any
Underwriter, its affiliates, directors and officers and any control persons of
such Underwriter shall be designated in writing by Taglich Brothers, Inc., any
such separate firm for the Company, its directors, its officers who signed the
Registration Statement and any control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnification could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (y) does not include any statement as to or any admission of
fault, culpability or a failure to act by or on behalf of any Indemnified
Person.
(e) Contribution. If the indemnification provided for in paragraphs
(a) and
18
(b) above is unavailable to an Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters or the
QIU, as the case may be, on the other from the offering of the Shares or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company on the one
hand and the Underwriters or the QIU, as the case may be, on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters or the QIU, as the case may be, on the other shall be
deemed to be in the same respective proportions as the net proceeds (before
deducting expenses) received by the Company from the sale of the Shares and the
total underwriting discounts and commissions received by the Underwriters in
connection therewith, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate offering price of the Shares. The relative
fault of the Company on the one hand and the Underwriters or the QIU, as the
case may be, on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters or the QIU, as the case may be,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(f) Limitation on Liability. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an Indemnified Person as a result of the
losses, claims, damages and liabilities referred to in paragraph (e) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with any such
action or claim. Notwithstanding the provisions of this Section 6, in no event
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total underwriting discounts and commissions received by
such Underwriter with respect to the offering of the Shares exceeds the amount
of any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 6 are several
in proportion to their respective purchase obligations hereunder and not joint.
(g) Non-Exclusive Remedies. The remedies provided for in this
Section 6 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any Indemnified Person at law or in equity.
19
7. QUALIFIED INDEPENDENT UNDERWRITER. The Company hereby confirms that at
its request and pursuant to a letter agreement dated _________, 2005 among the
Company, the Representative and the QIU, the terms of which are incorporated
herein by reference, the QIU acted as "qualified independent underwriter" within
the meaning of Rule 2720 of the Conduct Rules of the NASD in connection with the
public offering of the Shares. The Company will indemnify and hold harmless the
QIU and each person who controls the QIU within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which the QIU may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
QIU's acting (or alleged failing to act) as such "qualified independent
underwriter" and will reimburse the QIU for any legal or other expenses
reasonably incurred by the QIU in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage, or liability results from the gross
negligence or willful misconduct of the QIU or any misrepresentation or breach
of warranty by the QIU under the terms of such letter agreement. As compensation
for the services of the QIU hereunder, the Company agrees to pay the QIU
$100,000 on the Closing Date and to reimburse the QIU for all reasonable
expenses, including fees and disbursements of counsel, incurred by it as the
QIU. The price at which the Shares will be sold to the public shall not be
higher than the maximum price recommended by the QIU.
8. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective upon
the execution and delivery hereof by the parties hereto.
9. TERMINATION. This Agreement may be terminated in the absolute
discretion of the Representative, by notice to the Company, if after the
execution and delivery of this Agreement and prior to the Closing Date or, in
the case of the Option Shares, prior to an Additional Closing Date (i) trading
generally shall have been suspended or materially limited on or by any of the
New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market; (ii) trading of any securities issued or guaranteed by the Company shall
have been suspended on any exchange or in any over-the-counter market; (iii) a
general moratorium on commercial banking activities shall have been declared by
federal or New York State authorities; or (iv) there shall have occurred any
outbreak or escalation of hostilities or act of terrorism or any change in
financial markets or any calamity or crisis, either within or outside the United
States, that, in the judgment of the Representative, is material and adverse and
makes it impracticable or inadvisable to proceed with the offering, sale or
delivery of the Shares on the Closing Date or an Additional Closing Date, as the
case may be on the terms and in the manner contemplated by this Agreement and
the Prospectus.
20
10. DEFAULTING UNDERWRITER.
(a) If, on the Closing Date or an Additional Closing Date, as the
case may be, any Underwriter defaults on its obligation to purchase the Shares
that it has agreed to purchase hereunder on such date, the non-defaulting
Underwriters may in their discretion arrange for the purchase of such Shares by
other persons satisfactory to the Company on the terms contained in this
Agreement. If, within 36 hours after any such default by any Underwriter, the
non-defaulting Underwriters do not arrange for the purchase of such Shares, then
the Company shall be entitled to a further period of 36 hours within which to
procure other persons satisfactory to the non-defaulting Underwriters to
purchase such Shares on such terms. If other persons become obligated or agree
to purchase the Shares of a defaulting Underwriter, either the non-defaulting
Underwriters or the Company may postpone the Closing Date or an Additional
Closing Date, as the case may be, for up to five full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Underwriters may be necessary in the Registration Statement and the
Prospectus or in any other document or arrangement, and the Company agrees to
promptly prepare any amendment or supplement to the Registration Statement and
the Prospectus that effects any such changes. As used in this Agreement, the
term "Underwriter" includes, for all purposes of this Agreement unless the
context otherwise requires, any person not listed in Schedule I hereto that,
pursuant to this Section 10, purchases Shares that a defaulting Underwriter
agreed but failed to purchase.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or an Additional
Closing Date, as the case may be, does not equal or exceed one-tenth of the
aggregate number of Shares to be purchased on such date, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of Shares that such Underwriter agreed to purchase hereunder on such date plus
such Underwriter's pro rata share (based on the number of Shares that such
Underwriter agreed to purchase on such date) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or an Additional
Closing Date, as the case may be, exceeds one-tenth of the aggregate amount of
Shares to be purchased on such date, or if the Company shall not exercise the
right described in paragraph (b) above, then this Agreement or, with respect to
any Additional Closing Date, the obligation of the Underwriters to purchase
Shares on such Additional Closing Date, as the case may be, shall terminate
without liability on the part of the non-defaulting Underwriters. Any
termination of this Agreement pursuant to this Section 10 shall be without
liability on the part of the Company, except that the Company will continue to
be liable for the payment of expenses as set forth in Section 11 hereof and
except that the provisions of Section 6 hereof shall not terminate and shall
remain in effect.
(d) Nothing contained herein shall relieve a defaulting Underwriter
of any
21
liability it may have to the Company or any non-defaulting Underwriter for
damages caused by its default.
11. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company will pay or cause
to be paid all costs and expenses incident to the performance of its obligations
hereunder, including without limitation, (i) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Shares and any
taxes payable in that connection; (ii) the costs incident to the preparation,
printing and filing under the Securities Act of the Registration Statement, the
Preliminary Prospectus and the Prospectus (including all exhibits, amendments
and supplements thereto) and the distribution thereof; (iii) the cost of
printing or producing any agreement among the Underwriters in connection with
this Agreement ("Agreement among Underwriters"), this Agreement, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iv)
the fees and expenses of the Company's counsel and independent accountants; (v)
the fees and expenses incurred in connection with the registration or
qualification and determination of eligibility for investment of the Shares
under the laws of such jurisdictions as the Representative may designate and the
preparation, printing and distribution of a Blue Sky Memorandum (including the
related fees and expenses of counsel for the Underwriters); (vi) the cost of
preparing stock certificates; (vii) the costs and charges of any transfer agent
and any registrar; (viii) all expenses and application fees incurred in
connection with any filing with, and clearance of the offering by, the National
Association of Securities Dealers, Inc.; (ix) all expenses incurred by the
Company in connection with any "road show" presentation to potential investors;
(x) the fees and expenses of the QIU; (xi) all expenses and application fees
related to the listing of the Shares on the American Stock Exchange; and (xii)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section. It
is understood, however, that except as specifically provided in this Section,
the Underwriter will pay all of their own costs and expenses, including the fees
of their counsel and stock transfer taxes on resales of any Shares by them.
(b) If (i) this Agreement is terminated pursuant to Section 9(ii),
(ii) the Company for any reason fails to tender the Shares for delivery to the
Underwriters or (iii) the Underwriters decline to purchase the Shares for any
reason permitted under this Agreement (in the case of clause (ii) or (iii) by
reason of any failure on the part of the Company to perform any obligation to be
performed hereunder or because any other condition to be fulfilled by the
Company is not fulfilled), the Company agrees to reimburse the Underwriters for
all out-of-pocket costs and expenses (including the reasonable fees and expenses
of their counsel) reasonably incurred by the Underwriters in connection with
this Agreement and the offering contemplated hereby.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and any controlling persons referred
to in Section 6 hereof. Nothing in this Agreement is intended or shall be
construed to give any other person any legal or equitable right,
22
remedy or claim under or in respect of this Agreement or any provision contained
herein. No purchaser of Shares from any Underwriter shall be deemed to be a
successor merely by reason of such purchase.
13. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Underwriters
contained in this Agreement or made by or on behalf of the Company or the
Underwriters pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive the delivery of and payment for the Shares and shall remain
in full force and effect, regardless of any termination of this Agreement or any
investigation made by or on behalf of the Company or the Underwriters.
14. CERTAIN DEFINED TERMS. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act; (b) the term "business day" means
any day other than a day on which banks are permitted or required to be closed
in New York City; and (c) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act.
15. MISCELLANEOUS.
(a) Authority of the Representative. Any action by the Underwriters
hereunder may be taken by Taglich Brothers, Inc. on behalf of the Underwriters,
and any such action taken by Taglich Brothers, Inc. shall be binding upon the
Underwriters.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if mailed or transmitted
and confirmed by any standard form of telecommunication. Notices to the
Underwriters shall be given to the Representative c/o Taglich Brothers, Inc.,
000 Xxxxxxxxx Xxx., 00xx Floor (fax: (000) 000-0000); Attention: Syndicate Desk.
Notices to the Company shall be given to it at 0000 Xxxx Xxxxxx, Xxxxx, Xxxxxxxx
00000 (Fax: (000) 000-0000); Attention: Xxxxxxx Xxxx; with a copy to the
Company's counsel at Xxxxx Xxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Xxxxxx X. Xxxxxxxx (Fax: (312)
000-0000).
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(d) Counterparts. This Agreement may be signed in counterparts
(which may include counterparts delivered by any standard form of
telecommunication), each of which shall be an original and all of which together
shall constitute one and the same instrument.
(e) Amendments or Waivers. No amendment or waiver of any provision
of this Agreement, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.
(f) Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
23
If the foregoing is in accordance with your understanding, please indicate
your acceptance of this Agreement by signing in the space provided below.
Very truly yours,
ORCHIDS PAPER PRODUCTS COMPANY
By: _______________________
Name:
Title:
Accepted ________, 2005
TAGLICH BROTHERS, INC.
For itself and on behalf of the
several Underwriters listed
in Schedule 1 hereto.
By: ______________________
Name:
Title:
24
Schedule I
Underwriter Number of Shares
Taglich Brothers, Inc.
______________________
Total ____________
25
ANNEX A
[FORM OF LOCK-UP LETTER]
June __, 2005
Orchids Paper Products Company
0000 Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Taglich Brothers, Inc.
As Representative of the several Underwriters
000 Xxxxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
As an inducement to the Underwriters to execute the Underwriting
Agreement, pursuant to which an offering will be made that is intended to result
in the establishment of a public market for common stock (the "SECURITIES") of
Orchids Paper Products Company, a Delaware corporation (the "COMPANY"), the
undersigned hereby agrees that from the date hereof and until 180 days after the
public offering date set forth on the final prospectus used to sell the
Securities (the "PUBLIC OFFERING DATE") pursuant to the Underwriting Agreement,
the undersigned will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any Securities or securities convertible
into or exchangeable or exercisable for any Securities, enter into a transaction
which would have the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of the Securities, whether any such aforementioned
transaction is to be settled by delivery of the Securities or such other
securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, or to enter into any such transaction,
swap, hedge or other arrangement, without, in each case, the prior written
consent of Taglich Brothers, Inc. In addition, the undersigned agrees that,
without the prior written consent of Taglich Brothers, Inc, it will not, during
the period commencing on the date hereof and ending 180 days after the Public
Offering Date, make any demand for or exercise any right with respect to, the
registration of any Securities or any security convertible into or exercisable
or exchangeable for the Securities.
Any Securities received upon exercise of options granted to the
undersigned will also be subject to this Agreement. The foregoing restrictions
shall not apply to any transfer of Securities (a) as a bona fide gift or gifts;
(b) to any trust for the benefit of the undersigned or to a member
of members of immediate family (i.e., any relation by blood, marriage or
adoption, not more remote than first cousin) of the undersigned; (c) by will or
intestacy to the undersigned's legal representative, heir or legatee; (d) if the
undersigned is a partnership, corporation, limited liability company or similar
entity, (1) to another corporation, partnership or other business entity if the
transferee and the undersigned are "affiliates" as defined in Rule 405
promulgated under the Securities Act of 1933, as amended, or (2) as a
distribution to partners, stockholders or members of the undersigned; (e)
pursuant to an exercise of any options to purchase Securities of the Company; or
(f) acquired in the public market on or after the date of the final prospectus
filed by the Company with the Securities and Exchange Commission in connection
with the Offering, provided, however, that in the case of any disposition
pursuant to the foregoing clauses (a) through (e), it shall be a condition to
the transfer or disposition that such disposition shall not involve a
disposition for value and that the transferee agrees to be bound in writing by
the terms of this Agreement prior to such transfer.
In furtherance of the foregoing, the Company and its transfer agent and
registrar are hereby authorized to decline to make any transfer of shares of
Securities if such transfer would constitute a violation or breach of this
Agreement.
This Agreement shall be binding on the undersigned and the successors,
heirs, personal representatives and assigns of the undersigned. This Agreement
shall lapse and become null and void if (i) the Public Offering Date shall not
have occurred on or before _________, 2005, (ii) the Underwriting Agreement is
terminated in accordance with its terms or (iii) prior to the execution and
delivery of the Underwriting Agreement, the Company notifies you in writing that
it has abandoned the offering of the Securities.
Very truly yours,
27
