__________________________________________________________
CREATIVE MASTER INTERNATIONAL, INC.
and
CRUTTENDEN ▇▇▇▇ INCORPORATED
________________
REPRESENTATIVE'S WARRANT AGREEMENT
Dated as of , 1998
__________________________________________________________
EXHIBIT 4.2
REPRESENTATIVE'S WARRANT AGREEMENT
THIS REPRESENTATIVE'S WARRANT AGREEMENT (the "Agreement"), dated as of
____________ __, 1998 is made and entered into by and between CREATIVE MASTER
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and CRUTTENDEN ▇▇▇▇
INCORPORATED (the "Warrantholder").
The Company agrees to issue and sell to the Warrantholder, and the
Warrantholder agree to purchase, for the price of [$200], warrants, as
hereinafter described (the "Warrants") to purchase up to an aggregate of 200,000
shares (the "Shares") of the Company's Common Stock, $.0001 par value (the
"Common Stock"), in connection with a public offering (the "Public Offering") by
the Company of [2,000,000] shares of Common Stock pursuant to that certain
underwriting agreement (the "Underwriting Agreement"), dated as of
________________, 1998 between and among the Company, ACMA Investments Pte.,
Ltd. (the "Selling Stockholder") and the Warrantholder, as the representative of
the underwriters (the "Underwriters") in the Underwriting Agreement. The
purchase and sale of the Warrants shall occur on the Closing Date, as defined in
the Underwriting Agreement.
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
Section 1. Transferability and Form of Warrants.
1.1 Registration. The Warrants shall be numbered and shall be
registered on the books of the Company when issued.
1.2 Transfer. The Warrants and all rights thereunder shall be
transferable only on the books of the Company maintained for such purpose at its
principal office in Taikoktsui, Kowloon, Hong Kong, or wherever its principal
office may then be located, upon delivery thereof duly endorsed by the
Warrantholder or by its duly authorized attorney or representative, accompanied
by proper evidence of succession, assignment or authority to transfer, and upon
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer. Upon any registration of transfer, the Company shall execute and
deliver new Warrants to the person entitled thereto.
1.3 Limitations on Transfer of the Warrants. Subject to the
provisions of Section 11 hereof, the Warrants shall not be sold, transferred,
assigned or hypothecated by the Warrantholder until ____________ __, 1999,
except (i) to an officer of the transferring Warrantholder, another Underwriter
or member of the selling group or officer of any of them; (ii) a successor to
the transferring Warrantholder in a merger or consolidation with such
transferring Warrantholder; (iii) a purchaser of all or substantially all of the
transferring Warrantholder's assets; or (iv) any person receiving the Warrants
from one or more of the persons listed in this subsection 1.3 at such person's
or persons' death pursuant to will, trust or the laws of intestate succession.
The Warrants may be combined or divided into a certificate or certificates
representing the right to purchase the same aggregate number of Shares, upon
written request to the Company specifying the names and denominations in which
new Warrants are to be issued. Unless the context indicates otherwise, the
terms "Warrantholder" or "Warrantholders" as used herein shall include any
transferee or transferees of the Warrants pursuant to this subsection 1.3, and
the term "Warrants" as used herein shall include any and all warrants
outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to this Agreement.
1.4 Form of Warrants. The text of the Warrants and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit A
attached hereto. The number of Shares issuable upon exercise of the Warrants is
subject to adjustment upon the occurrence of certain events, all as hereinafter
provided. The Warrants
shall be executed on behalf of the Company by its President or by a Vice
President and attested to by its Secretary or an Assistant Secretary. A Warrant
bearing the signature of an individual who was at any time the proper officer of
the Company shall bind the Company, notwithstanding that such individual shall
have ceased to hold such office prior to the delivery of such Warrant or did not
hold such office on the date of this Agreement.
The Warrants shall be dated as of the date of signature thereof by the
Company either upon initial issuance or upon division, exchange, substitution or
transfer.
1.5 Legend on Shares. Each certificate for Shares issued upon
exercise of the Warrants shall bear the following legend, unless, at the time of
exercise, such Shares are subject to a then effective Registration Statement
under the Securities Act of 1933, as amended (the "Act"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT
BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN
COMPLIANCE WITH SECTION 11 OF THE AGREEMENT PURSUANT TO WHICH THEY WERE
ISSUED."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act, of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of the Company's counsel, the securities represented thereby need no
longer be subject to such restrictions.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the Warrantholder
to purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant certificate as so requested.
Section 3. Term of Warrants; Exercise of Warrants.
(a) Subject to the terms of this Agreement, the Warrantholder shall
have the right, at any time during the period commencing at 9:00 a.m.,
California Time, on____________ __, 1999 and ending at 5:00 p.m., California
Time, on _______________ __, 2003 (the "Termination Date"), to purchase from the
Company up to the number of fully paid and nonassessable Shares to which the
Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly filled in and signed, with signatures
guaranteed, and upon payment to the Company of the Warrant Price (as defined in
and determined in accordance with the provisions of Sections 7 and 8 hereof),
for the number of Shares in respect of which such Warrants are then exercised,
but in no event for less than 100 Shares (unless less than an aggregate of 100
Shares are then purchasable under all outstanding Warrants held by a
Warrantholder).
(b) Payment of the aggregate Warrant Price shall be made in cash, by
wire transfer, by certified or official bank check or through the use of
Appreciation Currency (as defined below), or any combination thereof. As soon as
practicable following surrender of the Warrants as described above and payment
of such Warrant Price, the Company shall issue and cause to be delivered to the
Warrantholder and in the name or names of the Warrantholder or, subject to
compliance with the provisions of Section 11(a) hereof, in such name or names as
the Warrantholder
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may designate, a certificate or certificates for the number of full Shares so
purchased upon the exercise of the Warrant, together with cash in lieu of any
fractional Shares otherwise issuable upon such surrender as provided in Section
9 hereof. Such certificate or certificates shall be deemed to have been issued,
and any person so designated to be named therein shall be deemed to have become
a holder of record of such securities as of the date of surrender of the
Warrants and payment of the Warrant Price, as aforesaid, notwithstanding that
the certificate or certificates representing such securities shall not actually
have been delivered or that the stock transfer books of the Company shall then
be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a Warrant is exercised for less than all of the Shares specified therein at
any time prior to the Termination Date, a new certificate evidencing the
remaining portion of the Warrants will be issued by the Company.
(c) As used herein, "Appreciation Currency" shall mean the
consideration given by the surrender of Warrants in exchange for Shares. The
number of Shares to which the holder shall be entitled upon such surrender of
Warrants ("X") shall be determined by applying the following formula: X = N x
(($S - $W)/$S), where "N" is the number of Shares that would be received if the
Warrants surrendered were instead exercised for cash, "$S" is the Current Market
Price (as defined in section 9) per share of Common Stock and "$W" is the
Warrant Price defined in section 7 as adjusted and readjusted as set forth in
Section 8.
Section 4. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of the Warrants or the
securities comprising the Shares; provided, however, the Company shall not be
required to pay any tax which may be payable in respect of any secondary
transfer of the Warrants or the securities comprising the Shares.
Section 5. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant and a bond of indemnity, if
requested, also satisfactory in form and amount at the applicant's cost.
Applicants for such substitute Warrant certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
Section 6. Reservation of Shares. There has been reserved, and the Company
shall at all times keep reserved so long as the Warrants remain outstanding, out
of its authorized Common Stock, such number of shares of Common Stock as shall
be subject to purchase under the Warrants. The Company will supply every
transfer agent for the Common Stock and other securities of the Company issuable
upon the exercise of the Warrants with duly executed stock and other
certificates, as appropriate, for such purpose and will provide or otherwise
make available any cash which may be payable as provided in Section 9 hereof.
Section 7. Warrant Price. The price per Share at which Shares shall be
purchasable upon the exercise of the Warrants (the "Warrant Price") shall be
$______ [insert initial public offering price per Share] subject to further
adjustment pursuant to Section 8 hereof.
Section 8. Adjustment of Number of Shares. The number and kind of
securities purchasable upon the exercise of the Warrants and the Warrant Price
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
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8.1 Adjustments. The number of Shares purchasable upon the exercise
of the Warrants shall be subject to adjustment as follows: In case the Company
shall (i) pay a dividend in Common Stock or make a distribution in Common Stock,
(ii) subdivide its outstanding Common Stock, (iii) combine its outstanding
Common Stock into a smaller number of shares of Common Stock, or (iv) issue by
reclassification of its Common Stock other securities of the Company, the
Warrant Price and the number of Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be proportionately adjusted so that the
Warrantholder shall be entitled to receive the kind and number of Shares or
other securities of the Company which it would have owned or would have been
entitled to receive immediately after the happening of any of the events
described above, had the Warrants been exercised at the Warrant Price
immediately prior to the happening of such event or any record date with respect
thereto. Any adjustment made pursuant to this subsection 8.1 shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
For the purpose of this subsection 8.1, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par
value to par value.
8.2 No Adjustment for Dividends. Except as provided in subsection
8.1, no adjustment in respect of any dividends or distributions out of earnings
shall be made during the term of the Warrants or upon the exercise of the
Warrants.
8.3 Certificate of Adjustment. As soon as practicable following each
adjustment to the number of Shares purchasable upon the exercise of the Warrants
as herein provided, the Company shall cause to be mailed to the Warrantholder by
first class mail, postage prepaid, notice of such adjustment and a certificate
of the chief financial officer of the Company setting forth the number of Shares
purchasable upon the exercise of the Warrants after such adjustment, a brief
statement of the facts requiring such adjustment and the computation by which
such adjustment was made.
8.4 Preservation of Purchase Rights upon Merger, Consolidation, etc.
In case of any consolidation of the Company with or merger of the Company into
another corporation (other than a merger with a subsidiary in which merger the
Company is the surviving corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in case
of any sale or conveyance to another corporation of the property, assets or
business of the Company as an entirety or substantially as an entirety, the
Company or such successor or purchasing corporation, as the case may be, shall
execute with the Warrantholder an agreement that the Warrantholder shall have
the right thereafter upon payment of the Warrant Price in effect immediately
prior to such action to purchase, upon exercise of the Warrants, the kind and
number of shares and other securities and property which it would have owned or
have been entitled to receive after the happening of such consolidation, merger,
sale or conveyance had the Warrants been exercised immediately prior to such
action. In the event of a merger described in Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, in which the Company is the surviving
corporation, the right to purchase Shares under the Warrants shall terminate on
the date of such merger and thereupon the Warrants shall become null and void,
but only if the controlling corporation shall agree to substitute for the
Warrants its warrant which entitles the holder thereof to purchase upon its
exercise the kind and number of shares and other securities and property which
it would have owned or been entitled to receive had the Warrants been exercised
immediately prior to such merger. Any such agreements referred to in this
subsection 8.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 8
hereof. The provisions of this subsection 8.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
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8.5 Par Value of Shares of Common Stock. Before taking any action
which would cause an adjustment effectively reducing the portion of the Warrant
Price allocable to each Share below the then par value per share of the Common
Stock issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Common Stock upon exercise of the Warrants.
8.6 Independent Public Accountants. The Company may retain a firm
of independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this Section 8, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 8.
8.7 Statement on Warrant Certificates. Irrespective of any
adjustments in the number of securities issuable upon exercise of Warrants,
Warrant certificates theretofore or thereafter issued may continue to express
the same number of securities as are stated in the similar Warrant certificates
initially issuable pursuant to this Agreement. However, the Company may, at any
time in its sole discretion (which shall be conclusive), make any change in the
form of Warrant certificate that it may deem appropriate and that does not
affect the substance thereof; and any Warrant certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for, an
outstanding Warrant certificate, may be in the form so changed.
Section 9. Fractional Interests; Current Market Price. The Company shall
not be required to issue fractional Shares on the exercise of the Warrants. If
any fraction of a Share would, except for the provisions of this Section 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the then Current Market Price per
share of Common Stock multiplied by such fraction.
For purposes of this Agreement, the term "Current Market Price" shall mean
(i) if the Common Stock is in the over-the-counter market and not in The Nasdaq
National Market nor on any national securities exchange, the average of the per
share closing bid price on the 30 consecutive trading days immediately preceding
the date in question, as reported by The Nasdaq Small Cap Market (or an
equivalent generally accepted reporting service if quotations are not reported
on The Nasdaq Small Cap Market), or (ii) if the Common Stock is traded in The
Nasdaq National Market or on a national securities exchange, the average for the
30 consecutive trading days immediately preceding the date in question of the
daily per share closing prices in The Nasdaq National Market or on the principal
stock exchange on which it is listed, as the case may be. For purposes of
clause (i) above, if trading in the Common Stock is not reported by The Nasdaq
Small Cap Market, the applicable bid price referred to in said clause shall be
the lowest bid price as reported in The Nasdaq Electronic Bulletin Board or, if
not reported thereon, as reported in the "pink sheets" published by National
Quotation Bureau, Incorporated, and, if such securities are not so reported,
shall be the price of a share of Common Stock determined by the Company's Board
of Directors in good faith. The closing price referred to in clause (ii) above
shall be the last reported sale price or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices, in
either case in The Nasdaq National Market or on the national securities exchange
on which the Common Stock is then listed.
Section 10. No Rights as Stockholder; Notices to Warrantholder. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or its transferees any rights as a stockholder of the
Company, including the right to vote, receive dividends, consent or receive
notices as a stockholder in respect of any meeting of stockholders for the
election of directors of the Company or any other matter. If, however, at any
time prior to the expiration of the Warrants and prior to their exercise, any
one or more of the following events shall occur:
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(a) any action which would require an adjustment pursuant to Section
8.1; or
(b) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property, assets
and business as an entirety or substantially as an entirety) shall be proposed;
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 14 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive such notice
or any defect therein shall not affect the validity of any action taken with
respect thereto.
Section 11. Restrictions on Transfer; Registration Rights.
(a) The Warrantholder agrees that prior to making any disposition of
the Warrants or the Shares, including without limitation, to persons or entities
identified in clauses (i) through (iv), inclusive, of Section 1.3 hereof, other
than pursuant to a registration statement or other notification or post-
effective amendment thereto (hereinafter collectively a "Registration
Statement") filed by the Company with, and declared effective, by, the
Securities and Exchange Commission (the "Commission"), the Warrantholder shall
give written notice to the Company describing briefly the manner in which any
such proposed disposition is to be made and shall provide such other information
as may reasonably be required by the Company and counsel familiar with
securities matters to conclude that no Registration Statement under the Act is
required with respect to such disposition, and no such disposition shall be made
if the Company has notified the Warrantholder that in the opinion of counsel
reasonably satisfactory to the Company a Registration Statement under the Act is
required with respect to such disposition, and no such Registration Statement
has been filed by the Company with, and if necessary, declared effective, by the
Commission.
(b)(i) Whenever during the four-year period beginning on
____________, 1999 and ending on ______________, 2003, the Company proposes to
file with the Commission a Registration Statement under the Act (other than on
Form S-4 or Form S-8), it shall, at least 30 days prior to each such filing,
give written notice of such proposed filing to the Warrantholder, and each
holder of Shares, at his or her respective address as it appears on the records
of the Company, and shall offer to include and shall include in such filing any
proposed disposition of the Warrants and Shares upon receipt by the Company from
such holder, not less than 15 days prior to the proposed filing date, of a
written request therefor setting forth the number of Shares proposed to be
included in such registration and all other information with respect to such
person reasonably necessary to be included in such Registration Statement. In
the event that the managing underwriter for said offering advises the Company in
writing that the inclusion of such securities in the offering would be
detrimental to the offering, such securities shall nevertheless be included in
the Registration Statement, provided that the Warrantholder and each holder of
Warrants and Shares, desiring to have such securities included in the
Registration Statement agrees in writing, for a period of 90 days following such
offering, not to sell or otherwise dispose of such securities pursuant to such
Registration Statement, which Registration Statement the Company shall keep
effective for a period of at least nine months following the expiration of such
90-day period.
(ii) In addition to any Registration Statement pursuant to
subparagraph (i) above, during the four- year period beginning on __________,
1999 and ending on _____________, 2003 the Company will, as promptly as
practicable (but in any event within 60 days), after written request (the
"Request") by Cruttenden ▇▇▇▇ Incorporated, or by a person or persons holding
(or having the right to acquire by virtue of holding the Warrants) at
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least 50% of the shares of Common Stock which have been (or may be) issued upon
exercise of the Warrants, prepare and file at its own expense a Registration
Statement with the Commission and appropriate Blue Sky authorities sufficient to
permit the public offering of the Warrants and Shares, and will use its best
efforts at its own expense through its officers, directors, auditors and
counsel, in all matters necessary or advisable, to cause such Registration
Statement to become effective as promptly as practicable and to maintain such
effectiveness so as to permit resale of the Shares covered by the Request until
the earlier of the time that all such Shares have been sold or the expiration of
one hundred twenty (120) days from the effective date of the Registration
Statement; provided, however, that the Company shall only be obligated to file
one such Registration Statement under this Section 11(b)(ii).
(c) All fees, disbursements and out-of-pocket expenses (other than
Warrantholders' and holders' of Shares brokerage fees and commissions and legal
fees of counsel to the Warrantholder and holders of Shares, if any) in
connection with the filing of any Registration Statement under Section 11 (b)
(or obtaining the opinion of counsel and any no-action position of the
Commission with respect to sales under Rule 144) and in complying with
applicable securities and Blue Sky laws shall be borne by the Company. The
Company at its expense will supply any Warrantholder and any holder of Shares
with copies of such Registration Statement and the prospectus included therein
and other related documents any opinions and no-action letters in such
quantities as may be reasonably requested by the Warrantholder or holder of
Shares.
(d) The Company shall not be required by this Section 11 to file such
Registration Statement if, in the opinion of counsel for the Warrantholder and
holders of Shares and the Company (or, should they not agree, in the opinion of
another counsel experienced in securities law matters acceptable to counsel for
such holders and the Company), the proposed public offering or other transfer as
to which such Registration Statement is requested is exempt from applicable
federal and state securities laws and would result in all purchasers or
transferees obtaining securities which are not "restricted securities," as
defined in Rule 144 under the Act. This Section 11 shall terminate and be of no
further force or effect at the first date as of which all of the Shares then
issuable upon exercise of the Warrants may be sold publicly pursuant to Rule 144
during any single 90-day period.
(e) The provisions of this Section 11 and Section 12 hereof shall
apply to the extent as provided herein if the Company chooses to file an
Offering Statement under Regulation A promulgated under the Act.
(f) The Company agrees that until all Shares have been sold under a
Registration Statement or pursuant to Rule 144 under the Act, it will use its
best efforts to keep current in filing all materials required to be filed with
the Commission in order to permit the holders of such securities to sell the
same under Rule 144.
Section 12. Indemnification.
(a) In the event of the filing of any Registration Statement with
respect to the Shares pursuant to Section 11 hereof, the Company agrees to
indemnify and hold harmless the Warrantholder or any holder of such Shares and
each person, if any, who controls the Warrantholder or any holder of such Shares
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
reasonable attorneys' fees), to which the Warrantholder or any holder of such
Shares or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such Registration
Statement, or any related preliminary prospectus, final prospectus, or amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided, however, that
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the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon
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an untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Warrantholder or the holder
of such Shares or any person who controls the Warrantholder or any holder of
such Shares within the meaning of the Act specifically for use in the
preparation thereof. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) The Warrantholder and the holders of the Shares agree that they
will indemnify and hold harmless the Company, each other person referred to in
subparts (1), (2) and (3) of Section 11(a) of the Act in respect of the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Act, against any losses, claims, damages or liabilities
(which shall, for all purposes of this Agreement, include but not be limited to,
all costs of defense and investigation and all attorneys' fees) to which the
Company or any such director, officer or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement, or any related preliminary prospectus, final
prospectus or amendment or supplement thereto, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, preliminary prospectus, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by the Warrantholder or such holder of Shares specifically for
use in the preparation thereof. This indemnity agreement will be in addition to
any liability which the Warrantholder or such holder of Shares may otherwise
have.
(c) Promptly after receipt by an indemnified party under this Section
12 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 12, 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 12. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 12 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 12(a)
or 12(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
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indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
Section 13. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) a Warrantholder or any
holder of the Shares or controlling person makes a claim for indemnification
pursuant to Section 12 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of Section 12 hereof provide for indemnification in such
case or (ii) contribution under the Act may be required on the part of any
Warrantholder or any holder of the Shares or controlling person, then the
Company and any Warrantholder or any such holder of the Shares or controlling
person shall contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or a Warrantholder or holder of Shares
or controlling person on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and holders of such Shares and such controlling persons
agree that it would not be just and equitable if contribution pursuant to this
Section 13 were determined by pro rata allocation or by any other method which
does not take account of the equitable considerations referred to in this
Section 13. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 13 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Section 14. Notices. Any notice pursuant to this Agreement by the Company
or by a Warrantholder or a holder of Shares shall be in writing and shall be
deemed to have been duly given if delivered or mailed by certified mail, return
receipt requested:
(a) If to a Warrantholder or a holder of Shares addressed to
Cruttenden ▇▇▇▇ Incorporated, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Corporate Finance Department.
(b) If to the Company addressed to it at ▇▇▇▇▇ Ind. Bldg, 8th Floor,
18 Bedford Rd., Taikoktsui, Kowloon, Hong Kong, Attention: ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇,
President and Chief Executive Officer.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
Section 15. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Warrantholder, or the
holders of Shares shall bind and inure to the benefit of their respective
successors and permitted assigns hereunder.
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Section 16. Survival of Representations and Warranties. All statements
contained in any schedule, exhibit, certificate or other instrument delivered by
or on behalf of the parties hereto in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf of
the parties to this Agreement, all representations, warranties and agreements
made by the parties to this Agreement or pursuant hereto shall survive until the
earlier of _____________, 2003 or all Shares underlying Warrants are sold
initially following exercise thereof.
Section 17. Applicable Law. This Agreement shall be deemed to be a
contract made under the laws of the State of California and for all purposes
shall be construed in accordance with the laws of said State.
Section 18. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrantholder and the holders of Shares any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company, the Warrantholder and the holders of Shares.
Section 19. Entire Agreement. This Agreement and the exhibits hereto
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous agreements and
understandings, both written and oral, between the parties with to the subject
matter hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
CREATIVE MASTER INTERNATIONAL, INC..
By________________________________________________
Print name:
Title:
CRUTTENDEN ▇▇▇▇ INCORPORATED
By________________________________________________
Print name:
Title:
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Exhibit A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER
EXCEPT IN COMPLIANCE WITH SECTION 11 OF THE AGREEMENT
PURSUANT TO WHICH THEY WERE ISSUED.
Warrant Certificate No.____
REPRESENTATIVE'S WARRANTS
TO PURCHASE _____ SHARES OF COMMON STOCK
NO PAR VALUE PER SHARE
VOID AFTER 5:00 P.M.,
CALIFORNIA TIME, ON _______, 2003
CREATIVE MASTER INTERNATIONAL, INC..
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that, for value received, ______________, the registered
holder hereof or assigns (the "Warrantholder"), is entitled to purchase from
CREATIVE MASTER INTERNATIONAL, INC.. (the "Company"), at any time during the
period commencing at 9:00 a.m., California Time, ___________, 1999, and before
5:00 p.m., California Time, on ______, 2003, at the purchase price per share of
$_______ (the "Warrant Price"), the number of shares of Common Stock of the
Company set forth above (the "Shares"). The number of shares of Common Stock of
the Company purchasable upon exercise of these Warrants shall be subject to
adjustment from time to time as set forth in the Representative's Warrant
Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided thereon) and simultaneous
payment of the Warrant Price at the principal office of the Company. Payment of
such price shall be made at the option of the Warrantholder cash, by wire
transfer, by certified or official bank check or through the use of
"Appreciation Currency" as defined in the Representative's Warrant Agreement, or
any combination thereof.
The Warrants evidenced hereby represent the right to purchase an aggregate
of up to [200,000] Shares and are issued under and in accordance with a
Representative's Warrant Agreement, dated as of ______, 1998 (the
"Representative's Warrant Agreement"), between the Company and Cruttenden ▇▇▇▇
Incorporated are subject to the terms and provisions contained in the
Representative's Warrant Agreement, to all of which the Warrantholder by
acceptance hereof consents.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder a new Warrant Certificate in respect of
the Shares as to which the Warrants evidenced hereby shall not have been
exercised. These Warrants may be exchanged at the office of the Company by
surrender of this Warrant Certificate properly endorsed for one or more new
Warrants of the same aggregate number of Shares as here evidenced by the Warrant
or Warrants exchanged. No fractional securities will be issued upon the exercise
of rights to purchase hereunder, but the Company shall pay the cash value of any
fraction upon the exercise of one or more Warrants. These Warrants are
transferable at the office of the Company in the manner and subject to the
limitations set forth in the Representative's Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a shareholder of the Company.
CREATIVE MASTER INTERNATIONAL, INC.
By _______________________________________
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
President and Chief Executive Officer
Dated: _____________, 1998
ATTEST: [Seal]
Secretary: ________________________________
CREATIVE MASTER INTERNATIONAL, INC..
PURCHASE FORM
CREATIVE MASTER INTERNATIONAL, INC.
▇▇▇▇▇ Ind. Bldg., ▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
__________ shares of Common Stock (the "Shares") provided for therein and
requests that certificates for the Shares be issued in the name of:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Please Print or Type Name, Address and Social Security Number)
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the Shares purchasable under
the within Warrant Certificate be registered in the name of the undersigned
Warrantholder or his Assignee as below indicated and delivered to the address
stated below.
Dated:____________
Name of Warrantholder or Assignee:_________________________________
(Please Print)
Address: ________________________________________________
________________________________________________
Signature: ________________________________________________
Note: The above signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed: ________________________________________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(Name and Address of Assignee Must Be Printed or Typewritten)
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
the within Warrants, hereby irrevocably constituting and appointing
______________ Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.
Dated:____________ ______________________________________
Signature of Registered Holder
Note: The signature on this assignment must correspond with the name as it
appears upon the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatever.
Signature Guaranteed: _________________________________________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)