Exhibit 1.01
CROMPTON & KNOWLES CORPORATION
1,000,000 Shares
Common Stock
($0.10 par value)
PLACEMENT AGENT AGREEMENT
New York, New York
August , 1996
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Crompton & Knowles Corporation, a Massachusetts corporation (the
"Company"), hereby confirms its agreement with you (the "Placement Agent") with
respect to the issuance and sale by the Company of 1,000,000 shares (the
"Securities") of Common Stock, $0.10 par value, of the Company ("Common Stock").
Subject to the terms and conditions set forth herein, the Placement Agent will
act as exclusive placement agent for the Securities.
1. Representations and Warranties. The Company represents and
-------------------------------
warrants to, and agrees with, the Placement Agent as set forth below in this
Section 1. Certain terms used in this Section 1 are defined in paragraph (c)
hereof.
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (file number 333-09337) on
Form S-1, including a related preliminary prospectus, for the registration
under the Securities Act of 1933, as amended (the "Act") of the offering
and sale of the Securities. The Company may have filed one or more amend-
ments thereto, including the related preliminary prospectus, each of which
has previously been furnished to you. The Company will next file with the
Commission either (A) prior to the effectiveness of such registration
statement, a further amendment to such registration statement (including
the form of final prospectus) or (B) after the effectiveness of such
registration statement, a final prospectus in accor-
2
dance with Rules 430A and 424(b)(1) or (4). In the case of clause (B), the
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information) required
by the Act and the rules thereunder to be included in the Prospectus with
respect to the Securities and the offering thereof. As filed, such
amendment and form of final prospectus, or such final prospectus, shall
contain all Rule 430A Information, together with all other such required
information, with respect to the Securities and the offering thereof and,
except to the extent the Placement Agent shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus)
as the Company has advised you, prior to the Execution Time, will be
included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable require-
ments of the Act and the rules thereunder; on the Effective Date, the
Registration Statement did not or will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any filing
pursuant to Rule 424(b) and on the Closing Date, the Prospectus (together
with any supplement thereto) will not, 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 under which they
were made, not misleading; provided, however, that the Company makes no
-------- -------
representations or warranties as to the information contained in or omitted
from the Registration Statement, or the Prospectus (or any supplement
thereto) in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the Placement Agent specifically
for inclusion in the Registration
3
Statement or the Prospectus (or any supplement thereto).
(c) The terms that follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement, any post-effective amendment or amendments
thereof, and any Rule 462(b) Registration Statement became or become
effective. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in
paragraph (a) above and any preliminary prospectus included in the
Registration Statement at the Effective Date that omits Rule 430A
Information. "Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, shall mean the
form of final prospectus relating to the Securities included in the
Registration Statement at the Effective Date. "Registration Statement"
shall mean the registration statement referred to in paragraph (a) above,
including exhibits and financial statements, as amended at the Execution
Time (or, if not effective at the Execution Time, in the form in which it
shall become effective) and, in the event any post-effective amendment
thereof or any Rule 462(b) Registration Statement becomes effective prior
to the Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended or such Rule 462(b) Registration
Statement, as the case may be. Such term shall include any Rule 430A
Information deemed to be included therein at the Effective Date as provided
by Rule 430A. "Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act. "Rule 430A Information" means information with respect to
the Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration statement
and any amendments thereto filed pursuant to Rule 462(b) relating to the
offering covered by the initial registration statement (file number 333-
09337).
(d) The Company's authorized equity capitalization is as set forth
under the heading "Description of Crompton Capital Stock" in the
4
Prospectus; all the issued and outstanding shares of capital stock,
including Common Stock, of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable; the Company has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is organized, with
full power and authority to own its properties and conduct its business as
described in the Prospectus, and the Company has full corporate power and
authority to execute and deliver this Agreement and to issue and sell the
Securities as herein contemplated.
(e) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of material property or the conduct of material business, and the
Company is in compliance in all material respects with the laws, orders,
rules and regulations issued or administered by such jurisdictions.
(f) Each material subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized
with full power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
material property or the conduct of material business; and all of the
issued and outstanding capital stock of each material subsidiary of the
Company has been duly authorized and validly issued, is fully paid and
nonassessable and the shares of such capital stock owned by the Company are
owned, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
(g) Neither the Company nor any of its material subsidiaries is in
breach of, or in default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach of, or default
under), its charter or by-laws or in the performance or
5
observance of any obligation, agreement, covenant or condition contained in
any material indenture or other material agreement or material instrument
to which the Company or such subsidiary is a party or by which it is bound,
and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
breach of or constitute a default under (nor constitute any event which
with notice, lapse of time, or both would constitute a breach of, or
default under), any provisions of the charter or by-laws of the Company or
any of its material subsidiaries or under any provision of any material
indenture or other material agreement or material instrument to which the
Company or such subsidiary is a party or by which it or its properties may
be bound or affected, or under any Federal, state, local or foreign law,
regulation or rule or any decree, judgment or order applicable to the
Company or any of its material subsidiaries.
(h) This Agreement has been duly authorized, executed, and delivered
by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, or similar laws relating to creditors' rights and
general principles of equity.
(i) The capital stock of the Company, including the Securities,
conforms in all material respects to the description thereof contained in
the Prospectus and the certificates for the Securities are in due and
proper form as required under Massachusetts law.
(j) No approval, authorization, consent or order of or filing with
any national, state or local governmental or regulatory commission, board,
body, authority or agency is required in connection with the issuance and
sale of the Securities as contemplated hereby other than registration of
the Securities under the Act and any necessary qualification as may be
required by the National Association of Securities Dealers, Inc. ("NASD")
rules or under the securities or blue sky laws of the various jurisdictions
in which the Securities are being offered.
(k) Except as is set forth in the Registration Statement or
Prospectus, no person has the right,
6
contractual or otherwise, to cause the Company to issue to it, or register
pursuant to the Act, any shares of capital stock of the Company upon the
issue and sale of the Securities as contemplated hereby, nor does any
person have preemptive rights, rights of first refusal or other rights to
purchase any of the Securities, which rights have not been waived.
(l) KPMG Peat Marwick LLP whose reports on the consolidated financial
statements of the Company are filed with the Commission as part of the
Registration Statement and Prospectus, are independent accountants within
the meaning of the Act and the applicable published rules and regulation
thereunder.
(m) The Company and each of its material subsidiaries has all
necessary licenses, authorizations, consents and approvals and has made all
necessary filings required under any Federal, state, local or foreign law,
regulation or rule, and has obtained all necessary material authorizations,
consents and approvals from other persons, in order to conduct its
business; neither the Company nor any of its material subsidiaries is in
violation of, or in default under, any such license, authorization, consent
or approval or any Federal, state, local or foreign law, regulation or rule
or any decree, order or judgment applicable to the Company or such
subsidiary.
(n) All legal or governmental proceedings, contracts or documents of
a character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement have
been so described or filed as required.
(o) Except as disclosed in the Prospectus, there are no actions,
suits or proceedings pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries or any of its properties, at
law or in equity, or before or by any Federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency
which, individually or in the aggregate, are reasonably likely to result in
a judgment, decree or order.
(p) The financial statements included in the Registration Statement
and the Prospectus present
7
fairly the consolidated financial position of the Company as of the dates
indicated and the consolidated results of operations and changes in
financial position of the Company for the periods specified; such financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis during the periods
involved.
(q) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may be
otherwise stated in the Registration Statement or Prospectus, there has not
been (i) to the knowledge of the Company, any material adverse change, or
any development which reasonably may result in a material adverse change,
in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries taken as a whole, (ii) any
transaction, which is material to the Company and its subsidiaries taken as
a whole, contemplated or entered into by the Company or (iii) any
obligation, contingent or otherwise, directly or indirectly incurred by the
Company or any of its subsidiaries which is material to the Company and its
subsidiaries taken as a whole.
2. Appointment of Placement Agent; Placement of the Securities.
------------------------------------------------------------
(a) Subject to the terms and conditions set forth herein, the Company
hereby authorizes the Placement Agent to act as its exclusive agent to solicit
offers for the purchase of all or part of the Securities from the Company. So
long as this Agreement shall remain in effect, the Company shall not, without
the prior consent of the Placement Agent, solicit or accept offers to purchase
Securities otherwise than through the Placement Agent.
(b) On the basis of the representations and warranties, and subject
to the terms and conditions set forth herein, the Placement Agent agrees, as
agent of the Company, to use its best efforts to solicit offers to purchase the
Securities from the Company on the terms and subject to the conditions set forth
in the Prospectus. The Placement Agent shall make reasonable efforts to assist
the Company in obtaining performance by each purchaser whose offer to purchase
Securities has been solicited by the Placement Agent and accepted by the
Company, but the Placement Agent shall not, except as otherwise provided in this
Agreement, be obligated to disclose the identity of any
8
purchaser or have any liability to the Company in the event any such purchase is
not consummated for any reason. Under no circumstances will the Placement Agent
be obligated to purchase any Securities for its own account, and, in soliciting
purchases of Securities, the Placement Agent shall act solely as the Company's
agent and not as principal. Notwithstanding the foregoing and except as
otherwise provided in Section 2(c), it is understood and agreed that the
Placement Agent may, solely at its discretion and without any obligation to do
so, purchase Securities as principal.
(c) Subject to the provisions of this Section 2, offers for the
purchase of Securities may be solicited by the Placement Agent as agent for the
Company at such times and in such amounts as the Placement Agent deems
advisable. The Placement Agent shall communicate to the Company, orally or in
writing, each reasonable offer to purchase Securities received by it as agent of
the Company. The Company shall have the sole right to accept offers to purchase
the Securities and may reject any such offer, in whole or in part. The
Placement Agent shall have the right, in its discretion reasonably exercised,
without notice to the Company, to reject any offer to purchase Securities
received by it, in whole or in part, and any such rejection shall not be deemed
a breach of its agreement contained herein.
(d) At the time of delivery of, and payment for, any Securities sold
by the Company as a result of a solicitation made by, or offer to purchase
received by, the Placement Agent, acting on an agency basis, whether the
Securities are placed by the Placement Agent or otherwise, the Company agrees to
pay the Placement Agent a placement fee equal to [ ]. Payment shall be made to
or upon the order of the Placement Agent by wire transfer in federal (same-day)
funds to an account designated by the Placement Agent prior to the Closing Date.
The Company agrees that the Placement Agent, when purchasing Securities as
principal for resale, shall receive compensation in the form of a discount in an
aggregate amount equal to [ ].
(e) No Security which the Company has agreed to sell pursuant to this
Agreement shall be deemed to have been purchased and paid for, or sold by the
Company, until such Security shall have been delivered to the purchaser thereof
against payment by such purchaser. If the Company shall default in its
obligations to deliver Securities to a purchaser whose offer it has accepted,
the Company shall
9
indemnify and hold the Placement Agent harmless against any loss, claim or
damage arising from or as a result of such default by the Company.
3. The Closing. The documents required to be delivered by Section 5
------------
hereof shall be delivered to the Placement Agent at the office of Cravath,
Swaine & Moore, counsel for the Placement Agent, at Worldwide Plaza, 825 Eighth
Avenue, New York, New York, on , 1996 (the "Closing Date").
4. Agreements. The Company agrees with the Placement Agent that:
-----------
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectus without the prior consent of the
Placement Agent, which consent may not be unreasonably withheld. Subject
to the foregoing sentence, if the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed with
the Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to the
Placement Agent of such timely filing. The Company will promptly advise
the Placement Agent (i) when the Registration Statement, if not effective
at the Execution Time, and any amendment thereto, shall have become
effective, (ii) when the Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant to Rule 424(b),
(iii) when, prior to termination of the offering of the Securities, any
amendment to the Registration Statement shall have been filed or become
effective, (iv) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any
additional information, (v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (vi) of
the receipt by the Company of any notification with respect
10
to the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the rules thereunder, the Company promptly will (i) prepare and file
with the Commission, subject to the second sentence of paragraph (a) of
this Section 4, an amendment or supplement which will correct such state-
ment or omission or effect such compliance and (ii) supply any supplemented
Prospectus to you in such quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Placement Agent an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act and which
covers a 12-month period following the Effective Date of the Registration
Statement.
(d) The Company will furnish to the Placement Agent and counsel for
the Placement Agent, without charge, signed copies of the Registration
Statement (including exhibits thereto) and as many copies of each
Preliminary Prospectus and the Prospectus and any supplement thereto as the
Placement Agent may reasonably request. The Company will pay the expenses
of printing or other production of all documents relating to the offering.
(e) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Placement Agent may
designate, and will maintain such qualifications in effect so long as
11
required for the distribution of the Securities and will pay the fee of the
National Association of Securities Dealers, Inc., in connection with its
review of the offering. The Company will arrange for the listing of the
Shares on each exchange on which the Common Stock is currently listed.
(f) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of Doing Business with Cuba, and the
---------------------------------------------------------
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Securities and Exchange Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes
in any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
5. Conditions to the Obligations of the Placement Agent. The
-----------------------------------------------------
obligations of the Placement Agent to solicit offers to purchase the Securities
as agent of the Company shall be subject to the accuracy of the representations
and warranties on the part of the Company contained herein as of the Execution
Time and the Closing Date, to the accuracy of the statements of the Company made
in any certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Placement Agent agrees in writing to a later
time, the Registration Statement will become effective not later than
(i) 6:00 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 12:00 Noon on the business day
following the day on which the public offering price was determined, if
such determination occurred after 3:00 PM New York City time on such date;
if filing of the Prospectus, or any supplement thereto,
12
is required pursuant to Rule 424(b), the Prospectus, and any such
supplement, will be filed in the manner and within the time period required
by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the Placement Agent the
opinion of John T. Ferguson, II, General Counsel of the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Massachusetts with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus,
and is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction which requires
such qualification wherein it owns or leases material properties or
conducts material business;
(ii) each material subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized with full power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement and the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of material property or the conduct
of material business; and all of the issued and outstanding capital
stock of each material subsidiary of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and the
shares of such capital stock owned by the Company are owned, directly
or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity;
13
(iii) the Company's authorized equity capitalization is as set
forth in the Prospectus as of the date set forth therein; the capital
stock of the Company conforms to the description thereof contained in
the Prospectus; the outstanding shares of Common Stock have been duly
and validly authorized and issued and are fully paid and
nonassessable; the Securities have been duly and validly authorized,
and, when issued and delivered to and paid for by the purchasers
thereof as contemplated by this Agreement, will be fully paid and
nonassessable; the Securities are duly authorized for listing, on the
New York Stock Exchange; the certificates for the Securities are in
valid and proper form as required under Massachusetts law; and the
holders of outstanding shares of capital stock of the Company are not
entitled to statutory or contractual preemptive rights or other
similar rights to subscribe for the Securities;
(iv) to the best knowledge of such counsel, there is no pending
or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be dis-
closed in the Registration Statement which is not adequately disclosed
in the Prospectus, and there is no franchise, contract, agreement or
other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit,
which is not described or filed as required; and the statements in the
Prospectus under the headings "Risk Factors--Litigation Relating to
Merger" and "Recent Developments--Certain Litigation" fairly summarize
the matters therein described;
(v) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have
14
been instituted or threatened and the Registration Statement and the
Prospectus (other than the financial statements and other financial
and statistical information contained therein as to which such counsel
need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules thereunder;
and such counsel has no reason to believe that at the Effective Date
the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus includes any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) no consents, approvals, authorizations or orders of any
court or governmental agency or body are required for the consummation
by the Company of the transactions contemplated herein, except such as
have been obtained under the Act and such as may be required under
NASD rules or the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities as contemplated by
this Agreement and such other approvals (specified in such opinion) as
have been obtained;
(viii) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation of, or constitute a default under any law or the
charter or by-laws of the Company or any of its material subsidiaries
or the terms of any material indenture or other material agreement or
material instrument known to such counsel and to which the Company or
any of its material subsidiaries is a party or bound or any judgment,
order or decree known to such counsel to be applicable to the
15
Company or any of its material subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its material subsidiaries; and
(ix) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement,
which rights have not been waived.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the laws
of the State of Massachusetts, the General Corporation Law of the State of
Delaware or the federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel of
good standing whom they believe to be reliable and who are reasonably
satisfactory to counsel for the Placement Agent and (B) as to matters of
fact, to the extent deemed proper by such counsel, on certificates of
responsible officers of the Company and public officials. References to
the Prospectus in this paragraph (b) include any supplements thereto at the
Closing Date.
(c) The Company shall have furnished to the Placement Agent a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Registration Statement, the Prospectus, any
supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been
16
instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto), to
the knowledge of such officers, there has been no material adverse
change in the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(d) At the Execution Time and at the Closing Date, KPMG Peat Marwick
LLP, shall have furnished to the Placement Agent a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance reasonably satisfactory to the Placement Agent, confirming
that they are independent accountants within the meaning of the Act and the
applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion the audited financial statements and
financial statement schedules and any pro forma financial statements
included in the Registration Statement and the Prospectus and reported
on by them comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; their
limited review in accordance with standards established by the
American Institute of Certified Public Accountants of the unaudited
interim financial information for the quarters ended March 30, 1996
and April 1, 1995, and as at March 30, 1996, as indicated in their
report dated , 1996; carrying out certain specified procedures
(but not an examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of significance
with respect to the comments set forth in such letter;
17
a reading of the minutes of the meetings of the stockholders and board
of directors (and committees thereof) of the Company and its
subsidiaries; and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of the
Company and its subsidiaries as to transactions and events subsequent
to March 30, 1996, nothing came to their attention which caused them
to believe that:
(1) any unaudited financial statements included in the
Registration Statement and the Prospectus do not comply in
form in all material respects with applicable accounting
requirements of the Act and with the published rules and
regulations of the Commission with respect to registration
statements on Form S-1; or said unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Registration Statement and the Prospectus;
(2) with respect to the period subsequent to March 30,
1996, there were any changes, at a specified date not more
than five business days prior to the date of the letter, in
the long-term debt of the Company and its subsidiaries or
capital stock of the Company or decreases in the
stockholders' equity of the Company or net assets of the
Company or decreases in working capital of the Company and
its subsidiaries, in each case as compared with the amounts
shown on the March 30, 1996, consolidated balance sheet
included in the Registration Statement and the Prospectus,
or for the period from April 1, 1996, to such specified date
there were any decreases, as compared with the corresponding
period in the preceding year; in net sales or earnings
before income taxes or in total or per share
18
amounts of net earnings of the Company and its subsidiaries,
except in all instances for changes or decreases set forth
in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Placement Agent; or
(3) the information included or incorporated by
reference in the Registration Statement and the Prospectus
in response to Regulation S-K, Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information) and
Item 402 (Executive Compensation) is not in conformity with
the applicable disclosure requirements of Regulation S-K;
and
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Prospectus, including the
information set forth under the captions "Selected Historical
Financial Data of Crompton", "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Crompton",
"Historical and Unaudited Pro Forma Combined Capitalization" and
"Unaudited Pro Forma Combined Financial Information" in the
Prospectus, agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation; and
(iv) on the basis of a reading of the unaudited pro forma
financial statements included in the Registration Statement and the
Prospectus (the "pro forma financial statements"); carrying out
certain specified procedures; inquiries of certain officials of the
Company who have responsibility for financial and accounting
19
matters; and proving the arithmetic accuracy of the application of the
pro forma adjustments to the historical amounts in the pro forma
financial statements, nothing came to their attention which caused
them to believe that the pro forma financial statements do not comply
in form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts
in the compilation of such statements.
References to the Prospectus in this paragraph (d) include any
supplement thereto at the date of the letter.
(e) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in
the letter or letters referred to in paragraph (d) of this Section 4 or
(ii) any change, or any development involving a prospective change, in or
affecting the business or properties of the Company and its subsidiaries
the effect of which, in any case referred to in clause (i) or (ii) above,
is, in the judgment of the Placement Agent, so material and adverse as to
make it impractical or inadvisable to proceed with the offering or delivery
of the Securities as contemplated by the Registration Statement (exclusive
of any amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(f) There shall not have occurred (i) any downgrading in the rating
of any debt securities of the Company by any nationally recognized
statistical rating organization, or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (ii) any suspension or limitation of trading
in securities generally on the New York Stock Exchange, or any setting of
minimum prices for trading on such exchange, or any suspension of trading
of any securities of the Company on any
20
exchange or in the over-the-counter market; (iii) any banking moratorium
declared by United States Federal or New York authorities; or (iv) any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the Placement
Agent's judgment, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
solicitations of offers to purchase, or sales of the Securities.
(g) Prior to the Closing Date, the Company shall have furnished to
the Placement Agent such further information, certificates and documents as
the Placement Agent may reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Placement Agent and counsel for the Placement Agent, this
Agreement and all obligations of the Placement Agent hereunder may be canceled
at, or at any time prior to, the Closing Date by the Placement Agent. Notice of
such cancelation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
6. Additional Covenants of the Company. The Company covenants and
------------------------------------
agrees with you that:
(a) Each acceptance by the Company of an offer for the purchase of
Securities solicited by you in your capacity as Placement Agent, and each sale
of Securities to you as principal, shall be deemed to be an affirmation that the
representations and warranties of the Company contained in this Agreement and in
any certificate of the Company delivered to you pursuant hereto are true and
correct at the time of such acceptance or sale, as the case may be, and an
undertaking that such representations and warranties will be true and correct at
the time of delivery to the purchaser or his agent, or you, of the Securities
relating to such acceptance or sale, as the case may be, as though made at and
as of each such time (and it is understood that such representations and
warranties shall relate to the Prospectus as amended or supplemented to each
such time).
21
(b) Each time that the Prospectus shall be amended or supplemented,
unless otherwise advised by the Placement Agent, the Company shall furnish or
cause to be furnished to you forthwith (i) a certificate of the Chief Financial
Officer and the Treasurer or the Assistant Treasurer of the Company, (ii) the
legal opinion of John T. Ferguson, General Counsel of the Company, and (iii) the
letter of KPMG Peat Marwick LLP, in forms reasonably satisfactory to you to the
effect that the statements contained in the certificate referred to in
Section 5(c) hereof, the legal opinions referred to in Sections 5(b) hereof, and
the letter referred to in Section 5(d) hereof, as the case may be, which was
last furnished to you are true and correct at the time of such amendment or
supplement or sale, as the case may be, as though made at and as of such time
(except that such statements shall be deemed to relate to the Prospectus as
amended and supplemented to such time) or, in lieu of such certificate, legal
opinions, and letter, as the case may be, a certificate, legal opinions, and
letter, as the case may be, of the same tenor as the certificate, legal opinions
or letter, as the case may be, referred to in said Section 5(b), (c) or (d), as
the case may be, modified as necessary to relate to the Prospectus as amended
and supplemented to the time of delivery of such certificate, legal opinions or
letter, as the case may be.
(c) The Company agrees that any obligation of any person who has
agreed to purchase Securities to make payment for and take delivery of Security
on the applicable settlement date therefor shall be subject to (i) the accuracy
of the Company's representations and warranties deemed to be made to the
Placement Agent pursuant to Section 6(a) and (ii) satisfaction of the conditions
set forth in Sections 5(a) and 5(f), it being understood that under no
circumstances shall the Placement Agent have any duty or obligation to exercise
the judgment permitted under Section 5(f) on behalf of any such purchaser.
7. Reimbursement of Placement Agent's Expenses. If the sale of the
--------------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Placement Agent set forth in Section 5 hereof is not
satisfied, because of any termination pursuant to Section 9 hereof or because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Placement Agent, the Company will reimburse the Placement Agent
upon demand for all out-of-pocket
22
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by the Placement Agent in connection with the proposed
purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
---------------------------------
indemnify and hold harmless the Placement Agent, the directors, officers,
employees and agents of the Placement Agent and each person who controls the
Placement Agent within the meaning of either the Act or the Securities Exchange
Act of 1934 (the "Exchange Act") against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law 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 a material fact contained in
the Registration Statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof 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, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
-------- -------
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Placement Agent specifically for inclusion therein. This indemnity agree-
ment will be in addition to any liability which the Company may otherwise have.
(b) The Placement Agent severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Placement Agent, but only with
reference to written information relating to the Placement Agent furnished to
the Company by or on behalf of the Placement Agent specifically
23
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which the Placement
Agent may otherwise have. The Company acknowledges that the statements set
forth in the last paragraph of the cover page and under the heading "Plan of
Distribution" in any Preliminary Prospectus and the Prospectus constitute the
only information furnished in writing by or on behalf of the Placement Agent for
inclusion in any Preliminary Prospectus or the Prospectus, and you, as the
Placement Agent, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below); provid-
-------
ed, however, that such counsel shall be satisfactory to the indemnified party.
- -- -------
Notwithstanding the indemnifying party's election to appoint counsel to repre-
sent the indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the indemnifying
party shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the indem-
nified 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
24
the indemnifying party, (iii) 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 the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Placement Agent agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and the Placement
Agent may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company and by the Placement Agent from the
offering of the Securities; provided, however, that in no case shall the
-------- -------
Placement Agent be responsible for any amount in excess of the placement fee,
discount or commission applicable to the Securities placed or purchased by the
Placement Agent hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Placement
Agent shall contribute in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and of the
Placement Agent in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and benefits received by the
Placement Agent shall be deemed to be equal to the total placement fees,
discounts and commissions, in each case as set forth on the cover page of the
Prospectus. Relative fault shall be determined by reference to whether any
alleged untrue statement or
25
omission relates to information provided by the Company or the Placement Agent.
The Company and the Placement Agent agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), 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. For purposes of this
Section 8, each person who controls the Placement Agent within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of the Placement Agent shall have the same rights to contribution as the
Placement Agent, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Termination. The Placement Agent's engagement hereunder may be
------------
terminated by either the Company or the Placement Agent at any time, with or
without cause, upon 5 days' written advice to the other party; provided,
--------
however, that the Placement Agent will be entitled to reimbursement of expenses
- -------
as provided in Section 7 hereof.
10. Representations and Indemnities to Survive. The respective
-------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Placement Agent set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Placement Agent or the Company or any
of the officers, directors or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Securities. The
provisions of Section 7 and 8 hereof shall survive the termination or
cancelation of this Agreement.
11. Notices. All communications hereunder will be in writing and
--------
effective only on receipt, and, if sent to the Placement Agent, will be mailed,
delivered or faxed (212-783-7000) and confirmed to it at Salomon Brothers Inc,
at Seven World Trade Center, New York, New York, 10048; or, if sent to the
Company, will be mailed, delivered or faxed
26
(203- ) and confirmed to it at One Station Place, Metro Center, Stamford,
Connecticut 06902, attention: President.
12. Successors. This Agreement will inure to the benefit of and be
-----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of New York.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the Placement Agent.
Very truly yours,
CROMPTON & KNOWLES CORPORATION,
By:
----------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC,
By:
---------------------
Name:
Title: