UNDERWRITING AGREEMENT between CHINA SHANDONG INDUSTRIES, INC. and RODMAN & RENSHAW, LLC as Representative
between
and
XXXXXX
& XXXXXXX, LLC
as
Representative
[●],
2010
Xxxxxx
& Xxxxxxx, LLC
1251
Avenue of the Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
The
undersigned, China Shandong Industries, Inc., a company formed under the laws of
Delaware (collectively with its Subsidiaries (as defined herein) and affiliates,
including, without limitation, all entities disclosed or described in the
Registration Statement (as hereinafter defined) as being Subsidiaries or
affiliates of the Company, the “Company”), hereby confirms its
agreement with Xxxxxx & Xxxxxxx, LLC (hereinafter referred to as “you” (including its
correlatives) or the “Representative”) and with the
other underwriters named on Schedule 1 hereto for which the Representative is
acting as representative (the Representative and such other underwriters being
collectively called the “Underwriters” or,
individually, an “Underwriter”) as
follows:
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1.
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Purchase
and Sale of Securities.
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1.1 Firm
Securities.
1.1.1. Nature and Purchase of Firm
Securities.
(i) On
the basis of the representations and warranties herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to issue and sell,
severally and not jointly, to the several Underwriters, an aggregate of [●] shares (“Firm Shares”) of the Company’s
Common Stock, par value $0.0001 per share (the “Shares”).
(ii) The
Underwriters, severally and not jointly, agree to purchase from the Company the
number of Firm Shares set forth opposite their respective names on Schedule 1
attached hereto and made a part hereof at a purchase price (net of discounts and
commissions) of $[●] per Firm Share
(92.0% of the per Firm Share offering price). The Firm Shares are to be offered
initially to the public (the “Offering”) at the offering
price set forth on the cover page of the Prospectus (as defined in Section 2.1.1
hereof).
1.1.2. Shares Payment and
Delivery.
(i) Delivery
and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on
the third (3rd)
Business Day following the Effective Date (as defined in Section 2.1.1 below)
(or the fourth (4th)
Business Day following the Effective Date, if the Applicable Time (as defined in
Section 2.1.1)
is later than 5:00 p.m. Eastern time) or at such earlier time as shall be agreed
upon by the Representative and the Company at the offices of Loeb & Loeb
LLP, counsel to the Underwriters (“Loeb”), or at such other place
(or remotely by facsimile or other electronic transmission) as shall be agreed
upon by the Representative and the Company. The hour and date of delivery and
payment for the Firm Shares is called the “Closing
Date.”
(ii) Payment
for the Firm Shares shall be made on the Closing Date by wire transfer in
Federal (same day) funds, payable to the order of the Company upon delivery of
the certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Shares (or upon delivery of the Firm Shares through the
facilities of the Depository Trust Company (“DTC”)) for the account of the
Underwriters. The Firm Shares shall be registered in such name or names and in
such authorized denominations as the Representative may request in writing at
least two (2) full Business Days prior to the Closing Date. The Company shall
not be obligated to sell or deliver any of the Firm Shares except upon tender of
payment by the Representative for all the Firm Shares. The term “Business Day” means any day
other than a Saturday, a Sunday or a legal holiday or a day on which banking
institutions are authorized or obligated by law to close in New York
City.
1.2 Over-allotment
Option.
1.2.1. Option Shares. For
the purposes of covering any over-allotments in connection with the distribution
and sale of the Firm Shares, the Underwriters are hereby granted, an option to
purchase up to [●] Shares
representing fifteen percent(15%) of the Firm Shares sold in the offering from
the Company (the “Over-allotment Option”). Such
additional [●]
Shares, the net proceeds of which will be deposited with the Company’s account,
are hereinafter referred to as “Option Shares.” The purchase
price to be paid for the Option Shares will be the same price per Option Share
as the price per Firm Shares set forth in Section 1.1.1 hereof. The Firm Shares
and the Option Shares are hereinafter referred to collectively as the “Public
Securities.”
1.2.2. Exercise of Option.
The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be
exercised by the Representative as to all (at any time) or any part (from time
to time) of the Option Shares within forty-five (45) days after the Effective
Date. The Underwriters will not be under any obligation to purchase any Option
Shares prior to the exercise of the Over-allotment Option. The Over-allotment
Option granted hereby may be exercised by the giving of oral notice to the
Company from the Representative, which must be confirmed in writing by overnight
mail or facsimile or other electronic transmission setting forth the number of
Option Shares to be purchased and the date and time for delivery of and payment
for the Option Shares (each such date, an “Option Closing Date”), which
will not be later than five (5) full Business Days after the date of the oral
notice or such other time as shall be agreed upon by the Company and the
Representative, at the offices of Loeb or at such other place (including
remotely by facsimile or other electronic transmission) as shall be agreed upon
by the Company and the Representative. If such delivery and payment for the
Option Shares does not occur on the Closing Date, the Option Closing Date will
be as set forth in the written notice. Upon exercise of the Over-allotment
Option, the Company will become obligated to convey to the Underwriters, and,
subject to the terms and conditions set forth herein, the Underwriters will
become obligated to purchase, the number of Option Shares specified in such
notice.
1.2.3. Payment and Delivery.
Payment for the Option Shares shall be made on the applicable Option Closing
Date by wire transfer in Federal (same day) funds payable to the order of the
Company upon delivery to you of the certificates (in form and substance
satisfactory to the Underwriters) representing the Option Shares (or upon
delivery of the Option Shares through the facilities of DTC) for the account of
the Underwriters. The Option Shares shall be registered in such name or names
and in such authorized denominations as the Representative may request in
writing at least two (2) full Business Days prior to the applicable Option
Closing Date. The Company shall not be obligated to sell or deliver the Option
Shares except upon tender of payment by the Representative for the applicable
Option Shares.
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1.3 Representative’s
Option.
1.3.1. Purchase Option. The
Company hereby agrees to issue and sell to the Representative (and/or its
designees) on the Closing Date an option (the “Representative’s Option”) for
the purchase of an aggregate of [●] shares of Common
Stock (5% of the Firm Shares) for an aggregate purchase price of $100.00. The
Representative’s Option Agreement in the form attached hereto as Exhibit A shall
be exercisable, in whole or in part, commencing on a date which is one year from
the Effective Date and expiring on the five-year anniversary of the Effective
Date at an initial exercise price per Share of $[●], which is equal
to 125% of the initial public offering price of the Firm Shares. The
Representative’s Option Agreement and the shares of Common Stock issuable upon
exercise thereof are sometimes hereinafter referred to collectively as the
“Representative’s
Securities,” and the Public Securities and Underwriter Securities are
hereinafter referred to collectively as the “Securities.” The
Representative understands and agrees that there are significant restrictions
pursuant to FINRA Rule 5110 against transferring the Representative’s Option
Agreement and the underlying shares of Common Stock during the first year after
the Effective Date and by its acceptance thereof shall agree that it will not,
sell, transfer, assign, pledge or hypothecate the Representative’s Option
Agreement, or any potion thereof, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of such securities for a period of one year following the Effective
Date to anyone other than (i) an Underwriter or a selected dealer in connection
with the Offering, or (ii) a bona fide officer or partner of the Representative
or of any such Underwriter or selected dealer; and only if any such transferee
agrees to the foregoing lock-up restrictions.
1.3.2. Delivery and Payment.
Delivery and payment for the Representative’s Option Agreement shall be made on
the Closing Date. The Company shall deliver to the Representative, upon payment
therefor, certificate(s) representing the Representative’s Option in the name or
names and in such authorized denominations as the Representative may
request.
2. Representations and
Warranties of the Company. The Company represents and warrants to the
Underwriters as of the Applicable Time (as defined below), as of the Closing
Date and as of each Option Closing Date, if any, as follows:
2.1 Filing
of Registration Statement.
2.1.1. Pursuant to the Act.
The Company has filed with the U.S. Securities and Exchange Commission (the
“Commission”) a
registration statement on Form S-1 (File No. 333-166172), and one or more
amendments thereto, and related preliminary prospectuses for the registration
under the Securities Act of 1933, as amended (the “Act”), of the offering and
sale of the Securities, which registration statement, as so amended (including
post-effective amendments, if any), has been declared effective by the
Commission and copies of which have heretofore been delivered to the
Underwriters. The conditions for use of Form S-1 to register the Offering under
the Act, as set forth in the General Instructions to such Form, have been
satisfied. The registration statement, as amended at the time it became
effective, including the prospectus, financial statements, schedules, exhibits
and other information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the “Registration Statement.” If
the Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional Securities of any type (a “Rule 462(b) Registration
Statement”), then, unless otherwise specified, any reference herein to
the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration
Statement. Other than a Rule 462(b) Registration Statement, which, if filed,
becomes effective upon filing, no other document with respect to the
Registration Statement has heretofore been filed with the Commission. The
offering and sale of all of the Securities have been registered under the
Securities Act pursuant to the Registration Statement or, if any Rule 462(b)
Registration Statement is filed, will be duly registered under the Act with the
filing of such Rule 462(b) Registration Statement. The Company, if required by
the Securities Act and the rules and regulations of the Commission (the “Regulations”), proposes to
file the Prospectus with the Commission pursuant to Rule 424(b) under the
Securities Act (“Rule
424(b)”). The prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b), or, if the prospectus is not to be filed
with the Commission pursuant to Rule 424(b), the prospectus in the form included
as part of the Registration Statement at the time the Registration Statement
became effective, is hereinafter referred to as the “Prospectus,” except that if
any revised prospectus or prospectus supplement shall be provided to the
Underwriters by the Company for use in connection with the Offering which
differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to Rule
424(b)), the term “Prospectus” shall also refer
to such revised prospectus or prospectus supplement, as the case may be, from
and after the time it is first provided to the Underwriters for such use. Any
preliminary prospectus or prospectus subject to completion included in the
Registration Statement or filed with the Commission pursuant to Rule 424 under
the Act (including, without limitation, the Sale Preliminary Prospectus (as
hereinafter defined)) is hereafter called a “Preliminary Prospectus.” The
prospectus, subject to completion, dated ________, 2010, is hereinafter referred
to as the “Sale
Preliminary Prospectus.” Any reference
herein to the Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the exhibits and other
documents (if any) incorporated by reference therein pursuant to the Regulations
on or before the effective date of the Registration Statement, the date of such
Preliminary Prospectus or the date of the Prospectus, as the case may be. Any
reference herein to the terms “amend”, “amendment” or “supplement” with respect to
the Registration Statement, any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include: (i) the filing of any document under the
Securities Exchange Act of 1934, as amended (together with the Rules and
Regulations promulgated thereunder (the “Exchange Act”)), after the
effective date of the Registration Statement, the date of such Preliminary
Prospectus or the date of the Prospectus, as the case may be, which is
incorporated therein by reference, and (ii) any such document so filed. All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus and the Prospectus, or any
amendments or supplements to any of the foregoing shall be deemed to include any
copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System (“XXXXX”). The Registration
Statement has been declared effective by the Commission on the date hereof (the
“Effective Date”).
“Applicable Time” means
[●]
[a.m./p.m.] on [●], on the Effective
Date or such other time as agreed to by the Company and the
Representative.
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2.1.2. Pursuant to the Exchange
Act. The Company has filed with the Commission a registration statement
on Form 8-A (File Number 001-[●]) providing for
the registration under Section 12(b) of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), of the Public Securities. The registration of the Public
Securities under the Exchange Act has been declared effective by the Commission
on the date hereof.
2.1.3. Registration under the
Exchange Act and Stock Exchange Listing. As of the Effective Date, the
Public Securities have been registered pursuant to Section 12(b) of the Exchange
Act and have been authorized for listing on the NASDAQ Capital Market (“NASDAQ”), and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Public Securities under the Exchange Act or delisting the
Public Securities from NASDAQ, nor has the Company received any notification
that the Commission or NASDAQ is contemplating terminating such registration or
listing except as described in the Registration Statement and
Prospectus.
2.2 No Stop Orders, etc.
Neither the Commission nor, to the best of the Company’s knowledge, any state
regulatory authority has issued any order preventing or suspending the use of
the Prospectus or the Registration Statement or has instituted or, to the best
of the Company’s knowledge, threatened to institute any proceedings with respect
to such an order.
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2.3 Disclosures in Registration
Statement.
2.3.1. 10b-5 Representation.
At the respective times the Registration Statement, the Prospectus and any
post-effective amendments thereto become effective (and at the Closing Date and
each Option Closing Date, if any):
(i) The
Registration Statement, the Prospectus and any post-effective amendments thereto
did and will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the
Regulations;
(ii) Neither
the Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, do or will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
for the registration of the Securities or any amendment thereto or pursuant to
Rule 424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will have been corrected
in the Prospectus to comply with the applicable provisions of the Act and the
Regulations and did not and will not contain an 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, in light of the circumstances
under which they were made, not misleading. The representation and warranty made
in this Section 2.3.1(ii) does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by the Representative expressly for
use in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto. The parties acknowledge and agree that such information
provided by or on behalf of any Underwriter consists solely of the name of the
Underwriters and the information with respect to dealer’s concessions and
reallowances contained in the section of the Prospectus entitled “Underwriting” and the identity
of counsel to the Underwriters contained in the section of the Prospectus
entitled “Legal Matters”
(the ”Underwriters’
Information”).
2.3.2. Disclosure of
Agreements. The agreements and documents described in the Prospectus and
the Registration Statement conform to the descriptions thereof contained therein
and there are no agreements or other documents required by the Act and the
Regulations to be described in the Prospectus, the Registration Statement or to
be filed with the Commission as exhibits to the Registration Statement, that
have not been so described or filed. Each agreement or other instrument (however
characterized or described) to which the Company is a party or by which it is or
may be bound or affected and (i) that is referred to in the Prospectus, or (ii)
is material to the Company’s business, has been duly authorized and validly
executed by the Company, is in full force and effect in all material respects
and is enforceable against the Company and, to the Company’s knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought. None of such agreements or instruments has been
assigned by the Company, and neither the Company nor, to the best of the
Company’s knowledge, any other party is in breach or default thereunder and, to
the best of the Company’s knowledge, no event has occurred that, with the lapse
of time or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company’s knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and
regulations.
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2.3.3. Prior Securities
Transactions. No securities of the Company have been sold by the Company
or by or on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company since its formation,
except as disclosed in the Registration Statement.
2.3.4. Regulations. The
disclosures in the Registration Statement concerning the effects of Federal,
State, local and all foreign regulation on the Company’s business as currently
conducted or contemplated are correct in all material respects and do not omit
to state a material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
2.4 Changes After Dates in
Registration Statement.
2.4.1. No Material Adverse
Change. Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise specifically
stated therein: (i) there has been no material adverse change in the condition,
financial or otherwise, or business prospects of the Company and its
Subsidiaries, individually or taken as a whole; (ii) there have been no material
transactions entered into by the Company, other than as contemplated pursuant to
this Agreement; (iii) no officer or director of the Company has resigned from
any position with the Company or any of its Subsidiaries; and (iv) no event or
occurrence has taken place which materially impairs, or would likely materially
impair, with the passage of time, the ability of the officers and directors of
the Company to act in their capacities with the Company as described in the
Registration Statement, the Sale Preliminary Prospectus and the
Prospectus.
2.4.2. Recent Transactions,
etc. Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as may otherwise be
indicated or contemplated herein or disclosed in the Registration Statement and
the Prospectus, the Company has not: (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; (ii) entered
into any transaction other than in the ordinary course of business, (iii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock, or (iv) modified any grants under any stock compensation
plan.
2.4.3. Recent Events. The
Company has not sustained, since the date of its most recent audited financial
statements included or incorporated by reference in the Registration Statement
and the Prospectus, any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since such
date, there has not been any change in the capital stock or long-term debt of
the Company or any of its Subsidiaries, or any material adverse changes, or any
development involving a prospective material adverse change, in or affecting the
business, assets, general affairs, management, financial position, prospects,
stockholders’ equity or results of operations of the Company and its
Subsidiaries, individually or taken as a whole, in each case otherwise than as
set forth or contemplated in the Registration Statement and the
Prospectus.
2.5 Disclosures in Commission
Filings. Since _____________, (i) none of the Company’s filings with the
Commission contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading; and (ii) the Company
has timely made all filings with the Commission required under the Exchange
Act.
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2.6 Independent
Accountants. To the knowledge of the Company, Xxxxxxxxxxx &
Associates (“Xxxxxxxxxxx”), whose report is
filed with the Commission as part of the Registration Statement, are independent
registered public accountants as required by the Act and the Regulations.
Xxxxxxxxxxx has not, during the periods covered by the financial statements
included in the Prospectus, provided to the Company any non-audit services, as
such term is used in Section 10A(g) of the Exchange Act.
2.7 Financial Statements,
etc. The financial statements, including the notes thereto and supporting
schedules included in the Registration Statement and Prospectus fairly present
the financial position, the results of operations and the cash flows of the
Company and its Subsidiaries at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States (“GAAP”), consistently applied
throughout the periods involved; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. The Registration Statement discloses all material off-balance sheet
transactions, arrangements, obligations (including contingent obligations), and
other relationships of the Company with unconsolidated entities or other persons
that may have a material current or future effect on the Company’s financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses. Except as disclosed in the Registration Statement and the
Prospectus: (a) neither the Company nor any of its direct and indirect
subsidiaries, including each entity disclosed or described in the Registration
Statement as being a subsidiary of the Company (each a “Subsidiary” and together the
“Subsidiaries”), has
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions other than in the ordinary course of
business; (b) neither the Company nor any of its Subsidiaries has declared or
paid any dividends or made any distribution of any kind with respect to its
capital stock; (c) there has not been any change in the capital stock of the
Company or any of its Subsidiaries or any grants under any stock compensation
plan; and (d) there has not been any material adverse change in the long-term or
short-term debt of the Company or any of its Subsidiaries. There are no pro
forma or as adjusted financial statements that are required to be included in
the Sale Preliminary Prospectus and the Prospectus in accordance with the
Regulations that have not been included as so required.
2.8 Authorized Capital; Options,
etc. The Company had, at the date or dates indicated in the Prospectus,
the duly authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. Based on the assumptions stated in
the Registration Statement and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as set
forth in, or contemplated by, the Registration Statement and the Prospectus, on
the Effective Date there were not and on the Closing Date, there will not be any
outstanding options, warrants, or other rights to purchase or otherwise acquire
any authorized, but unissued Shares of the Company or any security convertible
into Shares of the Company, or any contracts or commitments to issue or sell
Shares or any such options, warrants, rights or convertible
securities.
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2.9 Valid Issuance of
Securities, etc.
2.9.1. Outstanding
Securities. All issued and outstanding securities of the Company issued
prior to the transactions contemplated by this Agreement have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The authorized Shares conform in all material respects to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Shares were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky laws or, based in part on the representations and warranties of the
purchasers of such Shares, exempt from such registration
requirements.
2.9.2. Securities Sold Pursuant to
this Agreement. The Public Securities and Representative’s Securities
have been duly authorized for issuance and sale and, when issued and paid for,
will be validly issued, fully paid and non-assessable; the holders thereof are
not and will not be subject to personal liability by reason of being such
holders; the Public Securities and Representative’s Securities are not and will
not be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company; and all corporate
action required to be taken for the authorization, issuance and sale of the
Public Securities and Representative’s Securities has been duly and validly
taken. The Public Securities and Representative’s Securities conform in all
material respects to all statements with respect thereto contained in the
Registration Statement. The Representative’s Securities and Representative’s
Option Agreement constitute valid and binding obligations of the Company to
issue and sell, upon exercise thereof and payment of the exercise price
therefore, the number and type of securities of the Company called for thereby
in accordance with the terms thereof and such Representative’s Options and
Representative’s Option Agreement are enforceable against the Company in
accordance with their respective terms, except: (i) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally; (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws; and (iii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefore may be brought.
The shares of Common Stock issuable upon exercise of the Representative’s
Options have been reserved for issuance upon exercise of the Representative’s
Options, and when paid for and issued in accordance with the Representative’s
Option Agreement such shares of Common Stock will be validly issued, fully paid
and non-assessable; the holders thereof are not and will not be subject to
personal liability by reason of being such holders; the underlying shares of
Common Stock are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Representative’s Option Agreement has
been duly and validly taken.
2.9.3. No Integration.
Neither the Company nor any of its affiliates has, prior to the date hereof,
made any offer or sale of any securities which are required to be “integrated” pursuant to the
Act or the Regulations with the offer and sale of the Securities pursuant to the
Registration Statement.
2.10 Registration Rights of Third
Parties. Except as set forth in the Registration Statement and the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
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2.11 Validity and Binding Effect
of Agreements. This Agreement and the Representative’s Option Agreement
have been duly and validly authorized by the Company, and, when executed and
delivered, will constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except: (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally; (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefore may be brought.
2.12 No Conflicts, etc.
The execution, delivery, and performance by the Company of this Agreement, the
Representative’s Option Agreement and all ancillary documents, the consummation
by the Company of the transactions herein and therein contemplated and the
compliance by the Company with the terms hereof and thereof do not and will not,
with or without the giving of notice or the lapse of time or both: (i) result in
a breach of, or conflict with any of the terms and provisions of, or constitute
a default under, or result in the creation, modification, termination or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any agreement or instrument to which the
Company is a party; (ii) result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company (as the same may be
amended from time to time, collectively the “Organizational Documents”); or
(iii) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business constituted
as of the date hereof.
2.13 No Defaults;
Violations. No default exists in the due performance and observance of
any term, covenant or condition of any material license, contract, indenture,
mortgage, deed of trust, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the properties or assets of the Company is
subject. The Company is not in violation of any: (i) term or provision of its
Organizational Documents; or (ii) franchise, license, permit, applicable law,
rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or businesses.
9
2.14 Corporate Power; Licenses;
Consents.
2.14.1. Conduct of Business.
The Company has all requisite corporate power and authority, and has all
necessary authorizations, approvals, orders, licenses, certificates and permits
of and from all governmental regulatory officials and bodies that it needs as of
the date hereof to conduct its business as described in the Prospectus. The
disclosures in the Registration Statement and the Prospectus concerning the
effects of federal, state, local and foreign regulation on this Offering and the
Company’s business as currently conducted or contemplated are correct in all
material respects.
2.14.2. Transactions Contemplated
Herein. The Company has all requisite corporate power and authority to
enter into this Agreement and to carry out the provisions and conditions hereof,
and all consents, authorizations, approvals and orders required in connection
therewith have been obtained. No consent, authorization or order of, and no
filing with, any court, government agency or other body is required for the
valid issuance, sale and delivery of the Public Securities and the
Representative’s Securities and the consummation of the transactions and
agreements contemplated by this Agreement and the Representative’s Option
Agreement and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws and the rules and regulations of
the Financial Industry Regulatory Authority, Inc. (“FINRA”).
2.15 D&O
Questionnaires. To the Company’s knowledge, all information contained in
the questionnaires (the “Questionnaires”) completed by
each of the Company’s directors and officers immediately prior to the Offering
(collectively, the “Insiders,” and each
individually, an “Insider”) as well as in the
Lock-Up Agreement provided to the Underwriters is true and correct in all
respects and the Company has not become aware of any information which would
cause the information disclosed in the questionnaires completed by each Insider
to become inaccurate and incorrect.
2.16 Litigation; Governmental
Proceedings. There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company’s knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any executive officer or director which has not been
disclosed in the Registration Statement and the Prospectus or in connection with
the Company’s listing application for the listing of the Shares on the NASDAQ
Capital Market (“NASDAQ”).
2.17 Good Standing. The
Company has been duly organized and is validly existing as a corporation and is
in good standing under the laws of the State of Delaware as of the date hereof,
and is duly qualified to do business and is in good standing in each
jurisdiction in which its ownership or lease of property or the conduct of
business requires such qualification, except where the failure to qualify would
not have a material adverse effect on the assets, business or operations of the
Company and its Subsidiaries, individually or taken as a whole.
2.18 Stop Orders. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or any part thereof.
10
2.19 Transactions Affecting
Disclosure to FINRA.
2.19.1. Finder’s Fees. Except
as described in the Registration Statement and the Prospectus, there are no
claims, payments, arrangements, contracts, agreements or understandings relating
to the payment of a brokerage commission or finder’s, consulting, origination or
similar fee by the Company or any Insider with respect to the sale of the Public
Securities hereunder or any other arrangements, agreements or understandings of
the Company or, to the Company’s knowledge, any of its shareholders that may
affect the Underwriters’ compensation, as determined by FINRA.
2.19.2. Payments Within Twelve
Months. Except as described in the Registration Statement and the
Prospectus, the Company has not made any direct or indirect payments (in cash,
securities or otherwise), and has not entered into any arrangements with respect
thereto, to: (i) any person, as a finder’s fee, consulting fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who raised or provided capital to the Company; (ii) to any
FINRA member; or (iii) to any person or entity that has any direct or indirect
affiliation or association with any FINRA member, in each case within twelve
(12) months prior to the Effective Date, other than the prior payment of $25,000
to Xxxxxx & Xxxxxxx LLC, the Representative, and payment to the Underwriters
as provided hereunder in connection with the Offering.
2.19.3. Use of Proceeds. None
of the net proceeds of the Offering will be paid by the Company to any
participating FINRA member or its affiliates, except as specifically authorized
herein.
2.19.4. FINRA Affiliation. No
officer, director or any 5% or greater beneficial owner of the Company’s
unregistered securities has any direct or indirect affiliation or association
with any FINRA member (as determined in accordance with the rules and
regulations of FINRA). The Company has advised the Representative and Loeb of
any officer, director or owner of at least 5% of the Company’s outstanding
Shares (or securities convertible into Shares) that is or becomes an affiliate
or associated person of a FINRA member participating in the
Offering.
2.19.5. No
Company Affiliate is an owner of ordinary shares or other securities of any
member of FINRA (other than securities purchased on the open
market).
2.19.6. No
affiliate of the Company has made a subordinated loan to any member of
FINRA.
2.19.7. No
proceeds from the sale of the Securities will be paid to any FINRA member, or
any persons associated or affiliated with a member of FINRA, except as
specifically authorized herein.
2.19.8. The
Company has not issued any warrants or other securities, or granted any options,
directly or indirectly, to anyone who is a potential underwriter in the Offering
or a related person (as defined by FINRA rules) of such an underwriter within
the 180-day period prior to the initial filing date of the Registration
Statement.
2.19.9. No
person to whom securities of the Company have been privately issued within the
180-day period prior to the initial filing date of the Registration Statement
has any relationship or affiliation or association with any member of
FINRA.
2.19.10. No
FINRA member intending to participate in the Offering has a conflict of interest
with the Company. For this purpose, a “conflict of interest” exists
when a member of FINRA and/or its associated persons, parent or affiliates in
the aggregate beneficially own 10% or more of the Company’s outstanding
subordinated debt or common equity, or 10% or more of the Company’s preferred
equity. “Members participating
in the Offering” include managing agents, syndicate group members and all
dealers which are members of FINRA.
11
2.19.11. The
Company has not entered into any agreement or arrangement (including, without
limitation, any consulting agreement or any other type of agreement) during the
180-day period prior to the initial filing date of the Registration Statement,
which arrangement or agreement provides for the receipt of any item of value
and/or the transfer of any warrants, options, or other securities from the
Company to a FINRA member, any person associated with a member (as defined by
FINRA rules), any potential underwriters in the Offering and/or any related
persons, other than the arrangements the Company has entered into with Xxxxxx in
connection with the Offering and the Private Placement.
2.20 Foreign Corrupt Practices
Act. Neither the Company nor any of the directors , employees or officers
of the Company or any other person acting on behalf of the Company has, directly
or indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company (or assist it in connection with any actual
or proposed transaction) that (i) might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (ii) if
not given in the past, might have had a material adverse effect on the assets,
business or operations of the Company as reflected in any of the financial
statements contained in the Prospectus or (iii) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Company. The Company has taken reasonable steps to ensure that its accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
2.21 Officers’
Certificate. Any certificate signed by any duly authorized officer of the
Company and delivered to you or to Loeb shall be deemed a representation and
warranty by the Company to the Underwriters as to the matters covered
thereby.
2.22 Lock-Up
Period.
2.22.1. Each
of the Company’s officers and directors holding Shares (or securities
convertible into Shares) have agreed pursuant to executed Lock-Up Agreements in
the form attached hereto as Exhibit B-1 that for a period of 180 days from the
effective date of the Registration Statement (the “D&O Lock-Up Period”), and
each owner of at least 5% of the Company outstanding Shares (or securities
convertible into Shares) (together with the Company’s officers and directors the
“Lock-Up Parties”) have
agreed pursuant to executed Lock-Up Agreements in the form attached hereto as
Exhibit B-2 that for a period commencing on the effective date of the Prospectus
and ending on the earlier of (i) 120 days thereafter, or (ii) [DATE] (the “5% Shareholder Lock-Up Period”
and together with the D&O Lock-Up Period, the “Lock-Up Period”), such persons
and their affiliated parties shall not offer, pledge, sell, contract to sell,
grant, lend or otherwise transfer or dispose of, directly or indirectly, any
Shares, or any securities convertible into or exercisable or exchangeable for
Shares, without the consent of the Representative. The Representative may
consent to an early release from the applicable Lock-Up period if, in its
opinion, the market for the Shares would not be adversely impacted by sales and
in cases of financial emergency of an officer, director or other stockholder.
The Company has caused each of the Lock-Up Parties to deliver to the
Representative the agreements of each of the Lock-Up Parties to the foregoing
effect prior to the date that the Company requests that the Commission declare
the Registration Statement effective under the Act.
12
2.22.2. The
Company, on behalf of itself and any successor entity, has agreed that, without
the prior written consent of the Underwriter, it will not, for a period of 180
days from the effective date of the Registration Statement, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
capital stock of the Company or any securities convertible into or exercisable
or exchangeable for shares of capital stock of the Company; (ii) file or caused
to be filed any registration statement with the Commission relating to the
offering of any shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for shares of capital stock of
the Company or (iii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
capital stock of the Company, whether any such transaction described in clause
(i), (ii) or (iii) above is to be settled by delivery of shares of capital stock
of the Company or such other securities, in cash or otherwise. The restrictions
contained in this paragraph 2.22.2 shall not apply to (i) the Shares to be sold
hereunder, (ii) the issuance by the Company of shares of common stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof of which the Representative has been advised in writing or (iii)
the issuance by the Company of option or shares of capital stock of the Company
under any stock compensation plan of the Company.
2.22.3. Notwithstanding
the foregoing, if (i) the Company issues an earnings release or material news,
or a material event relating to the Company occurs, during the last 17 days of
the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period, the
Company announces that it will release earnings results during the 16-day period
beginning on the last day of the Lock-Up Period, the restrictions imposed by
paragraph 2.22 shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the
material news or material event, unless the Representative waives such
extension.
2.23 Subsidiaries. Annex I
to this Agreement sets forth the ownership of all direct and indirect
subsidiaries of the Company, including each entity disclosed or described in the
Registration Statement as being a subsidiary of the Company (each a “Subsidiary” and together the
“Subsidiaries”). All
direct and indirect Subsidiaries of the Company are duly organized and in good
standing under the laws of their respective jurisdictions of organization or
incorporation, and each Subsidiary is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of business requires
such qualification, except where the failure to be in good standing would not
have a material adverse effect on the assets, business or operations of the
Company and its Subsidiaries, individually or taken as a whole. The Company’s
ownership and control of each Subsidiary is as described in the Registration
Statement and Prospectus. The Company’s ownership and control of each Subsidiary
is as described in the Registration Statement and the Prospectus.
2.24 Related Party
Transactions. No relationship, direct or indirect, exists between or
among any of the Company or any affiliate of the Company, on the one hand, and
any director, officer, shareholder, customer or supplier of the Company or any
affiliate of the Company, on the other hand, which is required by the Act, the
Exchange Act or the Regulations to be described in the Registration Statement,
the Sale Preliminary Prospectus or the Prospectus which is not so described and
described as required. There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus. The Company has not extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or officer of the Company.
2.25 Board of Directors.
The Board of Directors of the Company is comprised of the persons set forth
under the heading of the Prospectus captioned “Management.” The
qualifications of the persons serving as board members and the overall
composition of the board comply with the Xxxxxxxx-Xxxxx Act of 2002 and the
rules promulgated thereunder applicable to the Company and the rules of NASDAQ.
At least one member of the Board of Directors of the Company qualifies as a
“financial expert” as
such term is defined under the Xxxxxxxx-Xxxxx Act of 2002 and the rules
promulgated thereunder and the rules of NASDAQ. In addition, at least a majority
of the persons serving on the Board of Directors qualify as “independent” as defined under
the rules of NASDAQ.
13
2.26 Xxxxxxxx-Xxxxx
Compliance.
2.26.1. Disclosure Controls.
The Company has developed and currently maintains disclosure controls and
procedures that will comply with Rule 13a-15 or 15d-15 of the Exchange Act, and
such controls and procedures are effective to ensure that all material
information concerning the Company will be made known on a timely basis to the
individuals responsible for the preparation of the Company’s Exchange Act
filings and other public disclosure documents.
2.26.2. Compliance. The
Company is in compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
applicable to it, and has implemented or will implement such programs and taken
reasonable steps to ensure the Company’s future compliance (not later than the
relevant statutory and regulatory deadlines therefore) with all the material
provisions of the Xxxxxxxx-Xxxxx Act of 2002.
2.27 Representations and
Warranties of the Company Regarding the People’s Republic of China
(“PRC”).
2.27.1. PRC Subsidiaries. The
Company conducts substantially all of its operations and generates substantially
all of its revenue through its indirect wholly-owned subsidiary, Shandong Caopu
Arts & Crafts Co., Ltd. (“SCAC”), which conducts its
operations through its subsidiaries and affiliates listed on Annex II hereto and
listed and described in the Registration Statement and the Prospectus (such
subsidiaries and affiliates, together with SCAC, collectively shall be referred
to herein as the “PRC
Subsidiaries”).
2.27.2. Each
PRC Subsidiary organized in the PRC has been duly established, is validly
existing as a company in good standing under the laws of the PRC, has the
corporate power and authority to own, lease and operate its property and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not reasonably be likely
to result in a material adverse effect on the assets, business or financial
condition of the Company and its Subsidiaries, individually or taken as a whole.
Each of the PRC Subsidiaries has applied for and obtained all requisite business
licenses, clearance and permits required under the laws and regulations of the
PRC as necessary for the conduct of its businesses, and each of the PRC
Subsidiaries has complied in all material respects with all laws and regulations
of the PRC in connection with foreign exchange. All fillings and applications
necessary to the conduct of each PRC Subsidiary’s business have been made to the
applicable PRC authorities, including without limitation the State
Administration for Industry and Commerce of the PRC, and such filings and
applications are true and correct in all material respects. The registered
capital of each of the PRC Subsidiaries has been fully paid up in accordance
with the schedule of payment stipulated in its respective articles of
association, approval document, certificate of approval and legal person
business license (hereinafter referred to as the “Establishment Documents”) and
in compliance with the PRC laws and regulations, and there is no outstanding
capital contribution commitment for any of the PRC Subsidiaries. The
Establishment Documents of the PRC Subsidiaries have been duly approved in
accordance with the laws of the PRC and are valid and enforceable. The business
scope specified in the Establishment Documents of each of the PRC Subsidiaries
complies with the requirements of all relevant the PRC laws and regulations. The
outstanding equity interests of each of the PRC Subsidiaries is owned of record
by the Company or a wholly owned subsidiary, except for such specific entities
or individuals identified as the registered holders thereof in the Registration
Statement and the Prospectus. The Company possesses, directly or indirectly, the
power to direct, or cause the direction of, the management and policies of the
PRC Subsidiaries.
14
2.27.3. Dividends. No PRC
Subsidiary is currently prohibited, directly or indirectly, from paying any
dividends to the Company (or the Company’s subsidiary that holds the outstanding
equity interest of such PRC Subsidiary). No PRC Subsidiary is prohibited,
directly or indirectly, from making any other distribution on such PRC
Subsidiary’s equity capital, from repaying to the Company any loans or advances
to such the PRC Subsidiary from the Company or any of the Company’s
Subsidiaries.
2.27.4. Immunity. None of the
PRC Subsidiaries nor any of their properties, assets or revenues are entitled to
any right of immunity on the grounds of sovereignty from any legal action, suit
or proceeding, from set-off or counterclaim, from the jurisdiction of any court,
from services of process, from attachment prior to or in aid of execution of
judgment, or from any other legal process or proceeding for the giving of any
relief or for the enforcement of any judgment.
2.27.5. Filing with the PRC.
It is not necessary that this Agreement, the Registration Statement, the
Prospectus or any other document be filed or recorded with any governmental
agency, court or other authority in the PRC.
2.27.6. Transfer Taxes. No
transaction, stamp, capital or other issuance, registration, transaction,
transfer or withholding taxes or duties are payable in the PRC by or on behalf
of the Underwriters to any the PRC taxing authority in connection with (i) the
issuance, sale and delivery of any Shares by the Company and the delivery of any
Shares to or for the account of the Underwriter, (ii) the purchase from the
Company and the initial sale and delivery by the Underwriters of any Shares to
purchasers thereof, or (iii) the execution and delivery of this
Agreement.
2.27.7. Compliance. The
Company has taken all necessary steps to ensure compliance by each of its
shareholders, option holders, directors, officers and employees that is, or is
directly or indirectly owned or controlled by, a the PRC resident or citizen
with any applicable rules and regulations of the relevant the PRC government
agencies.
2.27.8. PRC Approvals. The
issuance and sale of the Public Securities and Representative’s Securities to
the underwriters, the listing and trading of the Public Securities on the NASDAQ
and the consummation of the other transactions contemplated by this Agreement,
the Representative’s Options, the Registration Statement and the Prospectus are
not and will not be, as of the date hereof and on the Closing Date and each
Option Closing Date, if any, subject to any approval by any the PRC governmental
or regulatory authority.
2.27.9. PRC Tax Benefits,
etc. The PRC governmental tax benefits, exemptions, waivers, or other
relief, enjoyed by any PRC Subsidiary as described in the Registration Statement
and the Prospectus are valid, binding and enforceable and in accordance with PRC
law and regulations and no PRC Subsidiary has received any notice of any
deficiency in its applications for such tax benefits, exemptions, waivers or
other relief as so described.
2.28 No Investment Company
Status. The Company is not and, after giving effect to the Offering and
sale of the Firm Shares and the application of the proceeds thereof as described
in the Registration Statement and the Prospectus, will not be, required to
register as an “investment
company” as defined in the Investment Company Act of 1940, as
amended.
15
2.29 No Labor Disputes. No
labor dispute with the employees of the Company or any of its Subsidiaries
exists or, to the knowledge of the Company, is imminent.
2.30 Intellectual
Property. The Company and each Subsidiary owns or possesses or has valid
right to use all patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service xxxx registrations, copyrights,
licenses, inventions, trade secrets and similar rights (“Intellectual Property”)
necessary for the conduct of the business of the Company and its Subsidiaries as
currently carried on and as described in the Registration Statement and the
Prospectus. To the knowledge of the Company, no action or use by the Company or
any of its Subsidiaries will involve or give rise to any infringement of, or
license or similar fees for, any Intellectual Property of others. Neither the
Company nor any of its Subsidiaries has received any notice alleging any such
infringement or fee.
2.31 Taxes. Each of the
Company and its Subsidiaries has duly and timely filed all tax returns (as
hereinafter defined) required to be filed prior to the with taxing authorities
prior to the date hereof or has duly obtained extensions of time for the filing
thereof. Such returns that were filed are true, correct and complete in all
material respects. Each of the Company and its Subsidiaries has duly and timely
paid all taxes (as hereinafter defined) due and payable with respect to such
returns, except as are being contested in good faith and by appropriate
proceedings and for which the Company or the applicable Subsidiary has
established reserves that are adequate for the payment thereof and are in
conformity with GAAP. The provisions for taxes payable, if any, shown on the
financial statements filed with or as part of the Registration Statement are
sufficient for all accrued and unpaid taxes, whether or not disputed, and for
all periods to and including the dates of such consolidated financial
statements. Except as otherwise disclosed in writing to the Representative or
in, the Registration Statement and the Prospectus: (i) there is no tax
deficiency that has been, or would reasonably be expected to be, asserted
against the Company or any of the Subsidiaries or any of their respective
properties or assets; (ii) no issues have been raised (and are currently
pending) by any taxing authority in connection with any of the returns or taxes
asserted as due from the Company or any of its Subsidiaries, and (iii) no
waivers of statutes of limitation with respect to the returns or collection of
taxes have been given by or requested from the Company or any of its
Subsidiaries. The term “taxes” means all federal,
state, local, foreign, and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments, or charges of any kind whatever, together with any interest
and any penalties, additions to tax, or additional amounts with respect thereto.
The term “returns” means
any and all returns, declarations, reports, statements, or other documents
required to be filed with respect to taxes with any taxing or other governmental
authority, including, without limitation, any information returns on Internal
Revenue Service Form 5471, Information Return of U.S. Persons With Respect to
Certain Foreign Corporations, and information reports concerning interests in
foreign bank and financial accounts on TD F 90-22.1, Report of Foreign Bank and
Financial Accounts.
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3.
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Covenants of the
Company. The Company covenants and agrees as
follows:
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3.1 Amendments to Registration
Statement. The Company will deliver to the Representative, prior to
filing, any amendment or supplement to the Registration Statement or Prospectus
proposed to be filed after the Effective Date and not file any such amendment or
supplement to which the Representative shall reasonably object.
16
3.2 Federal Securities
Laws.
3.2.1. Compliance. During
the time when a Prospectus is required to be delivered under the Act, the
Company will use its best efforts to comply with all requirements imposed upon
it by the Act, the Regulations and the Exchange Act and by the regulations under
the Exchange Act, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Public Securities in accordance
with the provisions hereof and the Prospectus. If at any time when a Prospectus
relating to the Public Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriters, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Representative promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the
Act.
3.2.2. Filing of Final
Prospectus. The Company will file the Prospectus (in form and substance
satisfactory to the Representative) with the Commission pursuant to the
requirements of Rule 424 of the Regulations.
3.2.3. Exchange Act
Registration. For a period of three years from the Effective Date, the
Company will use its best efforts to maintain the registration of the Public
Securities and the Representative’s Securities under the provisions of the
Exchange Act. The Company will not deregister the Public Securities under the
Exchange Act without the prior written consent of the
Representative.
3.2.4. Free Writing
Prospectuses. The Company represents and agrees that it has not made and
will not make any offer relating to the Public Securities that would constitute
an issuer free writing prospectus, as defined in Rule 433 of the 0000
Xxx.
3.3 Delivery to the Underwriters
of Prospectuses. The Company will deliver to each of the Underwriters,
without charge, from time to time during the period when the Prospectus is
required to be delivered under the Act or the Exchange Act such number of copies
of each Prospectus as such Underwriters may reasonably request and, as soon as
the Registration Statement or any amendment or supplement thereto becomes
effective, deliver to you two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all
exhibits filed therewith or incorporated therein by reference and all original
executed consents of certified experts.
3.4 Effectiveness and Events
Requiring Notice to the Representative. The Company shall use its best
efforts to cause the Registration Statement to remain effective with a current
prospectus for at least nine (9) months from the Effective Date, and notify the
Representative immediately and confirm the notice in writing: (i) of the
effectiveness of the Registration Statement and any amendment thereto; (ii) of
the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose; (iii) of the issuance by any
state securities commission of any proceedings for the suspension of the
qualification of the Public Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose;
(iv) of the mailing and delivery to the Commission for filing of any amendment
or supplement to the Registration Statement or Prospectus; (v) of the receipt of
any comments or request for any additional information from the Commission; and
(vi) of the happening of any event during the period described in this Section
3.4 hereof that, in the judgment of the Company, makes any statement of a
material fact made in the Registration Statement or the Prospectus untrue or
that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
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3.5 Review of Financial
Statements. For a period of five (5) years from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit) the Company’s financial statements
for each of the first three fiscal quarters prior to the announcement of
quarterly financial information.
3.6 Financial Public Relations
Firm. As of the Effective Date, the Company shall have retained a
financial public relations firm reasonably acceptable to the Representative and
the Company, which shall initially be [_________________], which firm will be
experienced in assisting issuers in public offerings of securities and in their
relations with their security holders, and shall retain such firm or another
firm reasonably acceptable to the Representative for a period of not less than
two (2) years after the Effective Date.
3.7 Reports
to the Representative.
3.7.1. Periodic Reports,
etc. For a period of three years from the Effective Date, the Company
will furnish to the Representative copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities and also promptly furnish to
the Representative: (i) a copy of each periodic report the Company shall be
required to file with the Commission; (ii) a copy of every press release and
every news item and article with respect to the Company or its affairs which was
released by the Company; (iii) a copy of each Form 8-K prepared and filed by the
Company; (iv) five copies of each registration statement filed by the Company
under the Act; (v) such additional documents and information with respect to the
Company and the affairs of any future Subsidiaries of the Company as the
Representative may from time to time reasonably request; provided the
Representative shall sign, if requested by the Company, a Regulation FD
compliant confidentiality agreement which is reasonably acceptable to the
Representative and Loeb in connection with the Representative’s receipt of such
information. Documents filed with the Commission pursuant to its XXXXX system
shall be deemed to have been delivered to the Representative pursuant to this
Section.
3.7.2. Transfer Sheets. For
a period of three (3) years from the Effective Date, the Company shall retain a
transfer and registrar agent acceptable to the Representative (the ”Transfer Agent”) and will
furnish to the Representative at the Company’s sole cost and expense such
transfer sheets of the Company’s securities as the Representative may reasonably
request, including the daily and monthly consolidated transfer sheets of the
Transfer Agent and DTC. Colonial Stock Transfer Company, Inc. is acceptable to
the Representative to act as Transfer Agent for the Company’s
Shares.
3.7.3. Trading Reports.
During such time as the Public Securities are listed on NASDAQ the Company shall
provide to the Representative, at the Company’s expense, such reports published
by the NASDAQ relating to price trading of the Public Securities, as the
Representative shall reasonably request.
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3.8 Payment of
Expenses.
3.8.1. General Expenses Related to
the Offering. The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date, if any, to the extent not paid at the Closing
Date, all expenses incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to: (a) all filing fees and
communication expenses relating to the registration of the Shares to be sold in
the Offering (including the Over-allotment Shares) with the Commission; (b) all
COBRADesk filing fees associated with the review of the Offering by FINRA; all
fees and expenses relating to the listing of such Shares on the NASDAQ Capital
Market, the NASDAQ National Market or the NYSE Amex and on such other stock
exchanges as the Company and the Representative together determine; (c) all
fees, expenses and disbursements relating to background checks of the Company’s
officers and directors in an amount not to exceed $5,000 per individual; (d) all
fees, expenses and disbursements relating to the registration or qualification
of such Shares under the “blue
sky” securities laws of such states and other jurisdictions as the
Underwriters may reasonably designate (including, without limitation, all filing
and registration fees, and the reasonable fees and disbursements of “blue sky” counsel); (e) all
fees, expenses and disbursements relating to the registration, qualification or
exemption of such Shares under the securities laws of such foreign jurisdictions
as the Representative may reasonably designate; (f) the costs of all mailing and
printing of the underwriting documents (including, without limitation, the
Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement
Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and
Power of Attorney), Registration Statements, Prospectuses and all amendments,
supplements and exhibits thereto and as many preliminary and final Prospectuses
as the Representative may reasonably deem necessary, (g) the costs and expenses
of the public relations firm referred to in Section 3.6 hereof; (h) the costs of
preparing, printing and delivering certificates representing the Shares; (i)
fees and expenses of the Transfer Agent; (j) stock transfer and/or stamp taxes,
if any, payable upon the transfer of securities from the Company to the
Underwriters; (k) the costs associated with post-Closing advertising the
Offering in the national editions of the Wall Street Journal and New York Times;
(1) the costs associated with bound volumes of the public offering materials as
well as commemorative mementos and lucite tombstones, each of which the Company
or its designee will provide within a reasonable time after the Closing in such
quantities as the Representative may reasonably request; (m) the fees and
expenses of the Company’s accountants; (n) the fees and expenses of the
Company’s legal counsel and other agents and representatives; (o) the $16,000
cost associated with the Underwriters’ use of i-Deal’s book-building, prospectus
tracking and compliance software for the Offering; and (p) up to $10,000 of the
Underwriters’ actual accountable “road show” expenses for the
offering. The Underwriters may also deduct from the net proceeds of the Offering
payable to the Company on the Closing Date, or the Option Closing Date, if any,
the expenses set forth herein to be paid by the Company to the
Underwriters.
3.8.2. Non-accountable
Expenses. The Company further agrees that, in addition to the expenses
payable pursuant to Section 3.9.1, on the Closing Date it will pay to the
Representative a non-accountable expense allowance equal to one percent (1.00%)
of the gross proceeds received by the Company from the sale of the Firm Shares
by deduction from the proceeds of the Offering contemplated herein.
3.9 Application of Net
Proceeds. The Company will apply the net proceeds from the Offering
received by it in a manner consistent with the application described under the
caption “Use Of
Proceeds” in the Prospectus.
3.10 Delivery of Earnings
Statements to Security Holders. The Company will make generally available
to its security holders as soon as practicable, but not later than the first day
of the fifteenth full calendar month following the Effective Date, an earnings
statement (which need not be certified by independent public or independent
certified public accountants unless required by the Act or the Regulations, but
which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the
Act) covering a period of at least twelve consecutive months beginning after the
Effective Date.
3.11 Stabilization.
Neither the Company, nor, to its knowledge, any of its employees, directors or
shareholders (without the consent of the Underwriter) has taken or will take,
directly or indirectly, any action designed to or that has constituted or that
might reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public
Securities.
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3.12 Internal Controls.
The Company will maintain a system of internal accounting controls sufficient to
provide reasonable assurances that: (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary in order to permit preparation of financial statements in
accordance with GAAP and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.13 Accountants. As of
the Effective Date, the Company shall retain an independent public accountants
reasonably acceptable to the Representative, and the Company shall continue to
retain a nationally recognized independent certified public accounting firm for
a period of at least three years after the Effective Date. The Representative
acknowledges that Xxxxxxxxxxx is acceptable to the Representative.
3.14 FINRA. The Company
shall advise the Representative (who shall make an appropriate filing with
FINRA) if it is aware that any 5% or greater shareholder of the Company becomes
an affiliate or associated person of an FINRA member participating in the
distribution of the Company’s Public Securities.
3.15 No Fiduciary Duties.
The Company acknowledges and agrees that the Underwriters’ responsibility to the
Company is solely contractual in nature and that none of the Underwriters or
their affiliates shall be deemed to be acting in a fiduciary capacity, or
otherwise owes any fiduciary duty to the Company or any of its affiliates in
connection with the Offering and the other transactions contemplated by this
Agreement.
3.16 Electronic
Prospectus. The Company shall cause to be prepared and delivered to the
Representative, at the Company’s expense, within one Business Day from the
effective date of this Agreement, an Electronic Prospectus to be used by the
Underwriters in connection with the Offering. As used herein, the term “Electronic Prospectus” means a
form of prospectus, and any amendment or supplement thereto, that meets each of
the following conditions: (i) it shall be encoded in an electronic format,
satisfactory to the Representative, that may be transmitted electronically by
the Underwriters to offerees and purchasers of the Securities for at least the
period during which a prospectus relating to the Securities is required to be
delivered under the Securities Act; (ii) it shall disclose the same information
as the paper prospectus and prospectus filed pursuant to XXXXX, except to the
extent that graphic and image material cannot be disseminated electronically, in
which case such graphic and image material shall be replaced in the electronic
prospectus with a fair and accurate narrative description or tabular
representation of such material, as appropriate; and (iii) it shall be in or
convertible into a paper format or an electronic format, satisfactory to the
Representative, that will allow recipients thereof to store and have
continuously ready access to the prospectus at any future time, without charge
to such recipients (other than any fee charged for subscription to the Internet
as a whole and for on-line time). The Company hereby confirms that it has
included or will include in the Prospectus filed pursuant to XXXXX or otherwise
with the Commission and in the Registration Statement at the time it was
declared effective an undertaking that, upon receipt of a request by an investor
or his or her representative within the period when a prospectus relating to the
Securities is required to be delivered under the Securities Act, the Company
shall transmit or cause to be transmitted promptly, without charge, a paper copy
of the Prospectus.
3.17 Reservation of
Shares. The Company will reserve and keep available that maximum number
of its authorized but unissued securities which are issuable upon exercise of
any of the Securities outstanding from time to time.
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3.18 NASDAQ. The Company
will use its best efforts to maintain the quotation of the Public Securities on
NASDAQ or a national securities exchange acceptable to the Representative for a
period of at least three (3) years from the date of this Agreement, unless the
Company fails to consummate a Business Combination and is required to liquidate
its assets pursuant to its Memorandum and Articles of Association.
4. Conditions of Underwriters’
Obligations. The obligations of the Underwriters to purchase and pay for
the Public Securities, as provided herein, shall be subject to the continuing
accuracy of the representations and warranties of the Company as of the date
hereof and as of each of the Closing Date and the Option Closing Date, if any,
to the accuracy of the statements of officers of the Company made pursuant to
the provisions hereof and to the performance by the Company of its obligations
hereunder and to the following conditions:
4.1 Regulatory
Matters.
4.1.1. Effectiveness of
Registration Statement. The Registration Statement shall have become
effective not later than 5:00 P.M., Eastern time, on the date of this Agreement
or such later date and time as shall be consented to in writing by you, and, at
each of the Closing Date and the Option Closing Date, 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 shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Loeb.
4.1.2. FINRA Clearance. By
the Effective Date, the Representative shall have received clearance from FINRA
as to the amount of compensation allowable or payable to the Underwriters as
described in the Registration Statement.
4.1.3. NASDAQ Stock Market
Clearance. On the Closing Date, the Company’s Shares, including the Firm
Shares shall have been approved for listing on NASDAQ.
4.1.4. Free Writing
Prospectuses. The Representative covenants with the Company that the
Underwriters will not use, authorize the use of, refer to, or participate in the
planning for the use of a “free
writing prospectus” as defined in Rule 405 under the 1933 Act, which term
includes use of any written information furnished by the Commission to the
Company and not incorporated by reference into the Registration Statement,
without the prior written consent of the Company.
4.1.5. No Commission Stop
Order. As of the Closing Date and each Option Closing Date, the
Commission shall not have issued any order or threatened to issue any order
preventing or suspending the use of any Preliminary Prospectus, the Prospectus
or any part thereof, and shall not have instituted or threatened to institute
any proceedings with respect to such an order.
4.2 Company Counsel
Matters.
4.2.1. Closing Date Opinion of
Counsel. On the Closing Date, the Representative shall have received the
favorable opinion of Gusrae, Xxxxxx, Xxxxx & Xxxxxxx PLLC, counsel to the
Company, dated the Closing Date, addressed to the Representative covering the
following:
(i) The
Company and each Subsidiary formed under the laws of the State of Delaware has
been duly organized and is validly existing as a corporation and is in good
standing under the laws of the State of Delaware with the requisite corporate
power to own or lease, as the case may be, and operate its respective
properties, and to conduct its business, as described in the Registration
Statement and the Prospectus. The Company and each such Subsidiary is duly
registered or qualified to do business as a foreign corporation and is in good
standing under the laws of the States of Delaware, Oregon and [●].
21
(ii) All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and none of such securities
were issued in violation of the preemptive rights of any stockholder of the
Company arising by operation of law or under the Organizational Documents. The
offers and sales of the outstanding securities were at all relevant times either
registered under the Act or exempt from such registration requirements. The
authorized and, outstanding Shares of the Company is as set forth in the
Prospectus.
(iii) The
Public Securities have been duly authorized and, when issued and paid for, will
be validly issued and to our knowledge, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability solely by
reason of being such holders. The Public Securities are not and will not be
subject to the preemptive rights of any holders of any security of the Company
arising by operation of law or under the Certificate of Incorporation and Bylaws
of the Company. The Over-allotment Option and Representative’s Option constitute
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefore, the number of Shares called for thereby, and the
Over-allotment Option and the Representative’s Option are enforceable against
the Company in accordance with their respective terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally; (b) as enforceability of any
indemnification or contribution provision may be limited under the Federal and
state securities laws and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought.
(iv)
The issuance of the Firm Shares has been
duly authorized and, when issued and paid for by you pursuant to this Agreement,
the Firm Shares will be validly issued, fully paid and nonassessable. The
holders of outstanding shares of capital of the Company are not entitled to any
preemptive right, right of first offer or right of first refusal (i) set forth
in or provided for by the Company’s currently effective Certificate of
Incorporation and Bylaws (the “Organizational Documents”), or
(ii) granted by the Company in any currently effective written agreement. The
certificates representing the Firm Shares are in due and proper
form.
(v) This
Agreement and the Representative’s Option Agreement have been duly and validly
authorized and executed by the Company and constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally, (b) as enforceability of any indemnification or contribution
provisions may be limited under the Federal and state securities laws, and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefore may be brought.
(vi) The
execution, delivery and performance of this Agreement, the Lock-Up Agreements,
and the Lock-Up Period restrictions on the Company and the Representative’s
Option Agreement, and compliance by the Company with the terms and provisions
thereof and the consummation of the transactions contemplated thereby, and the
issuance and sale of the Public Securities thereunder, do not and will not, with
or without the giving of notice or the lapse of time, or both, (a) conflict
with, or result in a breach of, any of the terms or provisions of, or constitute
a default under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of, any mortgage, deed of trust, note, indenture,
loan, contract, commitment or other agreement or instrument filed as an exhibit
to the Registration Statement, (b) result in any violation of the provisions of
the Organizational Documents, or (c) violate any statute or any judgment, order
or decree, rule or regulation applicable to the Company of any court, domestic
or foreign, or of any federal, state or other regulatory authority or other
governmental body having jurisdiction over the Company, its properties or
assets.
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(vii) The
Registration Statement and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements included therein, as to
which no opinion need be rendered) each as of their respective dates complied as
to form in all material respects with the requirements of the Act and
Regulations. The Shares offered pursuant to the Prospectus conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. No United States or state statute or regulation
required to be described in the Prospectus is not described as required (except
as to the Blue Sky laws of the various states, as to which such counsel
expresses no opinions), nor are any contracts or documents of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement not so described or filed as
required.
(viii) The
Registration Statement has been declared effective by the Commission. We have
been orally advised by the Staff of the Commission that no stop order suspending
the effectiveness of the Registration Statement has been issued, and to our
knowledge, no proceedings for that purpose have been instituted or overtly
threatened by the Commission. Any required filing of the Prospectus, and any
required supplement thereto, pursuant to Rule 424(b) under the Securities Act,
has been made in the manner and within the time period required by Rule
424(b).
(ix) The
Company is not and, after giving effect to the Offering and sale of the
Securities and the application of the proceeds thereof as described in the
Registration Statement and the Prospectus, will not be, an “investment company” as defined
in the Investment Company Act of 1940, as amended.
(x) No
consent, approval, authorization or filing with or order of the NASDAQ Stock
Market, any U.S. Federal, State of New York or State of Delaware court or
governmental agency or body having jurisdiction over the Company is required,
under the laws, rules and regulations of the United States of America and the
States of Delaware and New York for the consummation by the Company of the
transactions contemplated by the Agreement, except (i) such as have been made
with or obtained by the NASDAQ Stock Market (ii) such as have been made or
obtained under the Securities Act and (iii) such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Shares by you in the manner contemplated in the Agreement
and in the Prospectus, as to which we express no opinion.
(xi) The
Shares have been approved for listing on the NASDAQ Stock Market upon official
notice of issuance.
(xii) To
our knowledge, the Company is not a party to any written agreement granting any
holders of securities of the Company rights to require the registration under
the Securities Act of resales of such securities.
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4.2.2. Oregon Opinion. On
the Closing Date, the Representative shall have received the favorable opinion
of [Oregon Counsel], Oregon counsel to the Company, related to, among other
things, the organization of Tianwei International Development Corporation,
affiliates and ownership structure, dated the Closing Date and addressed to the
Representative in form satisfactory to the Representative.
4.2.3. PRC Opinion. On the
Closing Date, the Representative shall have received the favorable opinion of
B&D Law Firm, PRC counsel to the Company, related to, among other things,
the descriptions of laws of the PRC and the organization of the Company’s PRC
Subsidiaries, affiliates and ownership structure, dated the Closing Date and
addressed to the Representative covering the following:
(i) [Insert
for each the PRC Subsidiary] [●] has been duly
organized and is validly existing as a [●] under the laws
and regulations of the PRC; [●]’s business
license is in full force and effect; [●] of the equity
interests of [●] are owned by
[●], and to
our Knowledge, such equity interests are free and clear of all liens,
encumbrances, equities or claims; and the articles of association, the business
license and other constituent documents of [●] comply with the
requirements of applicable the PRC laws and regulations and are in full force
and effect.
(ii) Except
as set forth in the Registration Statement and the Prospectus, each of the PRC
Subsidiaries, has full corporate right, power and authority and has all
necessary governmental authorizations of and from, and has made all necessary
declarations and filings with, all governmental agencies to own, lease, license
and use its properties, assets and conduct its business, and such governmental
authorizations contain no materially burdensome restrictions or conditions; to
our Knowledge, none of the PRC Subsidiaries has any reason to believe that any
regulatory body is considering modifying, suspending, revoking or not renewing
any such governmental authorizations; and each of the PRC Subsidiaries is in
compliance in all material respects with the provisions of all such governmental
authorizations and conducts its business in all material respects in accordance
with any the PRC laws and regulations to which it is subject or by which it is
bound.
(iii) Except
as set forth in the Registration Statement and the Prospectus, none of the PRC
Subsidiaries has taken any action nor have any steps been taken or legal or
administrative proceedings been commenced or threatened for the winding up,
dissolution or liquidation of any of the PRC Subsidiaries or for the suspension,
withdrawal, revocation or cancellation of any of their respective business
license.
(iv) The
ownership structure of the PRC Subsidiaries does not violate any prohibitory
provisions of the applicable the PRC laws and regulations and the transactions
conducted in the PRC involving the PRC Subsidiaries relating to the
establishment of such ownership structure, in each case, did not and do not
violate any explicit provisions of the applicable the PRC laws and
regulations.
(v) Except
as set forth in the Registration Statement and the Prospectus, each of the PRC
Subsidiaries owns or otherwise has the legal right to use, or can acquire on
reasonable terms, the intellectual property (“Intellectual Property”) as
currently used or as currently contemplated to be used by the PRC
Subsidiaries.
(vi) Except
as set forth in the Registration Statement and the Prospectus, to our Knowledge,
none of the PRC Subsidiaries is infringing, misappropriating or violating any
intellectual property right of any third party in the PRC; no Intellectual
Property is subject to any outstanding decree, order, injunction, judgment or
ruling restricting the use of such Intellectual Property in the PRC that would
impair the validity or enforceability of such Intellectual Property; and none of
the Company or any of the PRC Subsidiaries has received any notice of any claim
of infringement or conflict with any such rights of others.
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(vii) Except
as set forth in the Registration Statement and the Prospectus, there are no
legal, arbitration or governmental proceedings in progress or pending or, to our
Knowledge, threatened, in the PRC to which the Company, or any the PRC
Subsidiary is a party or of which any property of any the PRC Subsidiary is
subject.
(viii) As
a matter of the laws and regulations of the PRC, none of the PRC Subsidiaries or
their properties, assets or revenues has any right of immunity, on any grounds,
from any legal action, suit or proceeding, from the giving of any relief in any
such legal action, suit or proceeding, from setoff or counterclaim, from the
jurisdiction of any court, from service of process, attachment upon or prior to
judgment, or attachment in aid of execution of judgment, or from execution of a
judgment, or other legal process or proceeding for the giving of any relief with
respect to their respective obligations, liabilities or any other matter under
or arising out of or in connection with the transactions contemplated by the
Agreement.
(ix) The
sale of the Public Securities and Underwriter’s Securities and the compliance by
the Company with all of the provisions of the Agreement and the Representative’s
Options and the consummation of the transactions contemplated thereby do not
result in any violation of the provisions of the articles of association,
business license or any other constituent documents of any of the PRC
Subsidiaries or any applicable statute or any order, rule or regulation, of any
governmental agency having jurisdiction over any of the PRC Subsidiaries or any
of its properties. No governmental authorization of any governmental agency in
the PRC is required for the consummation of the transactions contemplated by the
Agreement and the Representative’s Options, other than those already
obtained.
(x) No
stamp or other issuance or transfer taxes or duties and no capital gains,
income, withholding or other taxes are payable by the Underwriters to the
government of the PRC or to any political subdivision or taxing authority
thereof or therein in connection with the execution and delivery of the
Agreement, the sale and delivery by the Company of the Firm Shares to or for the
account of the Underwriter, the sale and delivery outside the PRC by the
Underwriters of the Firm Shares to the purchasers thereof in the manner
contemplated in the Agreement, or the consummation of any other transaction
contemplated in the Agreement.
(xi) Although
we do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement, or the Prospectus, we
have no reason to believe, that (a) when it became of effective, any part of the
Registration Statement (other than the financial statements and related
schedules therein, as to which we express no opinion) describing or summarizing
the PRC laws and regulations or documents, agreements or proceedings governed by
the PRC laws and regulations contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein not
misleading; (b) as of the date of the Agreement and the date hereof, any part of
the Prospectus (other than the financial statements and related schedules
therein, as to which we express no opinion) describing or summarizing the PRC
laws and regulations or documents, agreements or proceedings governed by the PRC
laws and regulations contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
therein not misleading; or (c) at the time the Prospectus was filed with the
Commission or at the date hereof, any part of the Prospectus (other than the
financial statements and related schedules therein, as to which we express no
opinion) describing or summarizing the PRC laws and regulations or documents,
agreements or proceedings governed by the PRC laws and regulations contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein not misleading. The term
“Knowledge” as used in
this opinion shall mean the actual knowledge of the attorneys who have been
involved in representing the Company after due and reasonable
inquiry.
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4.2.4. Negative Assurance.
The opinions of Gusrae, Xxxxxx, Xxxxx & Xxxxxxx PLLC, [OREGON COUNSEL] and
B&D Law Firm shall each include a statement to the effect that such counsel
has participated in conferences with officers and other representatives of the
Company, the Underwriters and the independent registered public accounting firm
of the Company, at which conferences the contents of the Registration Statement
and the Prospectus contained therein and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus contained therein, solely on the basis
of the foregoing without independent check and verification, no facts have come
to the attention of such counsel which lead them to believe that the
Registration Statement or any amendment thereto, at the time the Registration
Statement or amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or the Prospectus or
any amendment or supplement thereto, at the time they were filed pursuant to
Rule 424(b) or at the date of such counsel’s opinion, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need express no view and shall not be deemed to have rendered an
opinion with respect to the financial information, statistical data and
information and matters regarding non-United States laws, rules and regulations
included in the Registration Statement or the Prospectus). The Registration
Statement and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements including notes and schedules,
financial data, statistical data and non-United States laws, rules and
regulations included in the Registration Statement or the Prospectus, included
therein, as to which no opinion need be rendered) each as of their respective
dates complied as to form in all material respects with the requirements of the
Act and Regulations.
4.2.5. Option Closing Date Opinions
of Counsel. On each Option Closing Date, if any, the Representative shall
have received the favorable opinions of each counsel listed in Sections 4.2.1
through 4.2.3, dated the applicable Option Closing Date, addressed to the
Representative and in form and substance reasonably satisfactory to the
Representative, confirming as of the applicable Option Closing Date, the
statements made by such counsels in their respective opinions delivered on the
Closing Date.
4.2.6. Reliance. In
rendering such opinions, such counsel may rely: (i) as to matters involving the
application of laws other than the laws of the United States and jurisdictions
in which they are admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion or opinions (in
form and substance reasonably satisfactory to the Representative) of other
counsel reasonably acceptable to the Representative, familiar with the
applicable laws; and (ii) as to matters of fact, to the extent they deem proper,
on certificates or other written statements of officers of the Company and
officers of departments of various jurisdiction having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to Loeb if
requested. The opinions of Gusrae, Xxxxxx, Xxxxx & Xxxxxxx PLLC and B&D
Law Firm and any opinion relied upon by Gusrae, Xxxxxx, Xxxxx & Xxxxxxx PLLC
and B&D Law Firm shall include a statement to the effect that it may be
relied upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.
4.3 Cold Comfort Letter.
At the time this Agreement is executed, and at each of the Closing Date and each
Option Closing Date, if any, you shall have received a cold comfort letter,
addressed to the Representative and in form and substance satisfactory in all
respects to you and to Loeb from Xxxxxxxxxxx, dated, respectively, as of the
date of this Agreement and as of the Closing Date and each Option Closing Date,
if any.
26
4.4 Officers’
Certificates.
4.4.1. Officers’
Certificate. At each of the Closing Date and each Option Closing Date, if
any, the Representative shall have received a certificate of the Company signed
by the Chairman of the Board and Chief Executive Officer of the Company, dated
the Closing Date or the applicable Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the
applicable Option Closing Date, as the case may be, and that the conditions set
forth in Section 4.5 hereof have been satisfied as of such date and that, as of
the Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct. In addition, the Representative will have received such other
and further certificates of officers of the Company as the Representative may
reasonably request.
4.4.2. Secretary’s
Certificate. At each of the Closing Date and each Option Closing Date, if
any, the Representative shall have received a certificate of the Company signed
by the Secretary of the Company, dated the Closing Date or the applicable Option
Closing Date, as the case may be, respectively, certifying: (i) that the
Organizational Documents are true and complete, have not been modified and are
in full force and effect; (ii) that the resolutions of the Company’s Board of
Directors relating to the public offering contemplated by this Agreement are in
full force and effect and have not been modified; (iii) as to the accuracy and
completeness of all correspondence between the Company or its counsel and the
Commission; and (iv) as to the incumbency of the officers of the Company. The
documents referred to in such certificate shall be attached to such
certificate.
4.5 No Material Changes.
Prior to and on each of the Closing Date and the Option Closing Date, if any:
(i) there shall have been no material adverse change or development involving a
prospective material adverse change in the condition or prospects or the
business activities, financial or otherwise, of the Company and its
Subsidiaries, individually or taken as a whole, from the latest dates as of
which such condition is set forth in the Registration Statement and Prospectus;
(ii) no action suit or proceeding, at law or in equity, shall have been pending
or threatened against the Company or any Insider before or by any court or
federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus; (iii) no stop
order shall have been issued under the Act and no proceedings therefore shall
have been initiated or threatened by the Commission; and (iv) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations and shall conform in all material
respects to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
27
4.6 Delivery of
Agreements.
4.6.1. Effective Date
Deliveries. On the Effective Date, the Company shall have delivered to
the Representative executed copies of this Agreement and the Lock-Up
Agreements.
4.6.2. Closing Date
Deliveries. On the Closing Date, the Company shall have delivered to the
Representative executed copies of the Representative’s Option
Agreement.
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5.
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Indemnification.
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5.1 Indemnification of the
Underwriters.
5.1.1. General. Subject to
the conditions set forth below, the Company agrees to indemnify and hold
harmless each of the Underwriters, and each dealer selected by the
Representative that participates in the offer and sale of the Public Securities
(each a “Selected
Dealer”) and each of their respective directors, officers and employees
and each person, if any, who controls any such Underwriter (“Controlling Person”) within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against
any and all loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any action between
any of the Underwriters and the Company or between any of the Underwriters and
any third party or otherwise) to which they or any of them may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) any Preliminary Prospectus, the Registration Statement or the Prospectus (as
from time to time each may be amended and supplemented); (ii) any materials or
information provided to investors by, or with the approval of, the Company in
connection with the marketing of the offering of the Securities, including any
“road show” or investor
presentations made to investors by the Company (whether in person or
electronically); or (iii) any application or other document or written
communication (in this Section 5, collectively called “application”) executed by the
Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Public Securities and Representative’s
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, NASDAQ or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, unless in each case
such statement or omission was made in reliance upon and in conformity with
Underwriters’ Information. With respect to any untrue statement or omission or
alleged untrue statement or omission made in the Preliminary Prospectus, the
indemnity agreement contained in this Section 5.1.1 shall not inure to the
benefit of any Underwriter to the extent that any loss, liability, claim, damage
or expense of such Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Public Securities to such person as required by the Act and the Regulations,
and if the untrue statement or omission has been corrected in the Prospectus,
unless such failure to deliver the Prospectus was a result of non-compliance by
the Company with its obligations under Section 3.3 hereof. The Company agrees
promptly to notify the Representative of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or Controlling
Persons in connection with the issue and sale of the Public Securities or in
connection with the Registration Statement or Prospectus.
28
5.1.2. Procedure. If any
action is brought against an Underwriter, a Selected Dealer or a Controlling
Person in respect of which indemnity may be sought against the Company pursuant
to Section 5.1.1, such Underwriter, such Selected Dealer or Controlling Person,
as the case may be, shall promptly notify the Company in writing of the
institution of such action and the Company shall assume the defense of such
action, including the employment and fees of counsel (subject to the reasonable
approval of such Underwriter or such Selected Dealer, as the case may be) and
payment of actual expenses. Such Underwriter, such Selected Dealer or
Controlling Person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of such Underwriter, such Selected Dealer or Controlling Person unless (i) the
employment of such counsel at the expense of the Company shall have been
authorized in writing by the Company in connection with the defense of such
action, or (ii) the Company shall not have employed counsel to have charge of
the defense of such action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the reasonable fees and expenses of not more than one additional firm of
attorneys selected by the Underwriters (in addition to local counsel), Selected
Dealer and/or Controlling Person shall be borne by the Company. Notwithstanding
anything to the contrary contained herein, if any Underwriter, Selected Dealer
or Controlling Person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 Indemnification of the
Company. Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors, officers and employees and agents
who control the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act against any and all loss, liability, claim, damage and
expense described in the foregoing indemnity from the Company to the several
Underwriters, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made with respect to
Underwriters’ Information in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment or supplement thereto or in any
application. In case any action shall be brought against the Company or any
other person so indemnified based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
any application, and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the several Underwriters by the provisions of Section
5.1.2.
29
5.3 Contribution.
5.3.1. Contribution Rights.
In order to provide for just and equitable contribution under the Act in any
case in which (i) any person entitled to indemnification under this Section 5
makes a claim for indemnification pursuant hereto but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Act, the Exchange Act or otherwise may
be required on the part of any such person in circumstances for which
indemnification is provided under this Section 5, then, and in each such case,
the Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company and the Underwriters, as incurred,
in such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial offering price appearing
thereon and the Company is responsible for the balance; provided, that, no
person guilty of a fraudulent misrepresentation (within the meaning of Section
11 (f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding the provisions of
this Section 5.3.1, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
an Underwriter or the Company, as applicable, and each person, if any, who
controls an Underwriter or the Company, as applicable, within the meaning of
Section 15 of the Act shall have the same rights to contribution as such
Underwriter or the Company, as applicable.
5.3.2. Contribution
Procedure. Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (“contributing party”), notify
the contributing party of the commencement thereof, but the failure to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution on account of any
settlement of any claim, action or proceeding affected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5.3.2 are intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the Exchange Act or otherwise available.
5.3.3. Each
Underwriter’s obligations to contribute pursuant to this Section 5.3 are several
and not joint.
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6.
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Default by an
Underwriter.
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6.1 Default Not Exceeding 10% of
Firm Shares or Option Shares. If any Underwriter or Underwriters shall
default in its or their obligations to purchase the Firm Shares or the Option
Shares, if the Over-allotment Option is exercised, hereunder, and if the number
of the Firm Shares or Option Shares with respect to which such default relates
does not exceed in the aggregate 10% of the number of Firm Shares or Option
Shares that all Underwriters have agreed to purchase hereunder, then such Firm
Shares or Option Shares to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to their respective commitments
hereunder.
30
6.2 Default Exceeding 10% of
Firm Shares or Option Shares. In the event that the default addressed in
Section 6.1 relates to more than 10% of the Firm Shares or Option Shares, you
may in your discretion arrange for yourself or for another party or parties to
purchase such Firm Shares or Option Shares to which such default relates on the
terms contained herein. If, within one (1) Business Day after such default
relating to more than 10% of the Firm Shares or Option Shares, you do not
arrange for the purchase of such Firm Shares or Option Shares, then the Company
shall be entitled to a further period of one (1) Business Day within which to
procure another party or parties satisfactory to you to purchase said Firm
Shares or Option Shares on such terms. In the event that neither you nor the
Company arrange for the purchase of the Firm Shares or Option Shares to which a
default relates as provided in this Section 6, this Agreement will automatically
be terminated by you or the Company without liability on the part of the Company
(except as provided in Sections 3.10 and 5 hereof) or the several Underwriters
(except as provided in Section 5 hereof); provided, however, that if such
default occurs with respect to the Option Shares, this Agreement will not
terminate as to the Firm Shares; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other
Underwriters and to the Company for damages occasioned by its default
hereunder.
6.3 Postponement of Closing
Date. In the event that the Firm Shares or Option Shares to which the
default relates are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or parties as aforesaid, you or the Company
shall have the right to postpone the Closing Date or Option Closing Date for a
reasonable period, but not in any event exceeding five (5) Business Days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment to the
Registration Statement or the Prospectus that in the opinion of counsel for the
Underwriters may thereby be made necessary. The term “Underwriter” as used in this
Agreement shall include any party substituted under this Section 6 with like
effect as if it had originally been a party to this Agreement with respect to
such Securities.
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7.
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Additional
Covenants.
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7.1 Board Composition and Board
Designations. The Company shall ensure that: (i) the qualifications of
the persons serving as board members and the overall composition of the board
comply with the Xxxxxxxx-Xxxxx Act of 2002 and the rules promulgated thereunder
and with the listing requirements of NASDAQ or any other national securities
exchange or national securities association, as the case may be, in the event
the Company seeks to have its Public Securities listed on another exchange or
quoted on an automated quotation system, and (ii) if applicable, at least one
member of the board of directors qualifies as a “financial expert” as such term
is defined under the Xxxxxxxx-Xxxxx Act of 2002 and the rules promulgated
thereunder.
31
7.2 Right of First
Refusal. The Company agrees that if the Public Securities are sold in
accordance with the terms of this Agreement, the Representative shall have an
irrevocable preferential right for a period of twelve (12) months from the date
the Offering is completed to purchase for its account or to sell for the account
of the Company, or any subsidiary of or successor to the Company any securities
(whether debt or equity or any combination thereof) of the Company or any such
subsidiary or successor which the Company or any such subsidiary or successor
may seek to sell whether with or without or through an underwriter, placement
agent or broker-dealer and whether pursuant to registration under the Act or
otherwise. The Company and any such subsidiary or successor will consult the
Representative with regard to any such proposed financing and will offer the
Representative the opportunity to purchase or sell any such securities on terms
not more favorable to the Company or any such subsidiary or successor, as the
case may be, than it or they can secure elsewhere. If the Representative fails
to accept such offer within ten (10) business days after the mailing of a notice
containing the material terms of the proposed financing proposal by registered
mail or overnight courier service addressed to the Representative, then the
Representative shall have no further claim or right with respect to the
financing proposal contained in such notice. If, however, the terms of such
financing proposal are subsequently modified in any material respect, the
preferential right referred to herein shall apply to such modified proposal as
if the original proposal had not been made. The Representative’s failure to
exercise its preferential right with respect to any particular proposal shall
not affect its preferential rights relative to future proposals. The Company
shall have the right, at its option, to designate the Representative as lead
underwriter or co-manager of any underwriting group or co-placement agent of any
proposed financing in satisfaction of its obligations hereunder, and the
Representative shall be entitled to receive as its compensation fifty percent
(50%) of the compensation payable to the underwriting or placement agent group
when serving as co-manager or co-placement agent and thirty-three (33%) of the
compensation payable to the underwriting or placement agent group when serving
as co-manager or co-placement agent with respect to a proposed financing in
which there are three co-managing or lead underwriters or co-placement
agents.
7.3 Prohibition on Press
Releases and Public Announcements. The Company will not issue press
releases or engage in any other publicity without the Representative’s prior
written consent (which may be in the form of an e-mail or other form of
electronic transmission from a representative or employee of the Underwriter),
for a period ending at 5:00 p.m. Eastern time on the first business day
following the 40th day following the Closing Date, other than normal and
customary releases issued in the ordinary course of the Company’s
business.
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8.
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Effective Date of this
Agreement and Termination
Thereof.
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8.1 Effective Date. This
Agreement shall become effective when both the Company and the Representative
have executed the same and delivered counterparts of such signatures to the
other party.
8.2 Termination. You
shall have the right to terminate this Agreement at any time prior to any
Closing Date, (i) if any domestic or international event or act or occurrence
has materially disrupted, or in your opinion will in the immediate future
materially disrupt, general securities markets in the United States; or (ii) if
trading on the New York Stock Exchange, the NASDAQ, the NASDAQ Global Market or
the NASDAQ Capital Market shall have been suspended or materially limited, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required by FINRA or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a new war or an increase in
major hostilities, or (iv) if a banking moratorium has been declared by a New
York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared which materially adversely impacts the United States
securities markets, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Firm Shares or Option Shares, or (vii) if the Company is in material
breach of any of its representations, warranties or covenants hereunder, or
(viii) if the Representative shall have become aware after the date hereof of
such a material adverse change in the conditions or prospects of the Company and
its Subsidiaries, individually, or taken as a whole, or such adverse material
change in general market conditions as in the Representative’s judgment would
make it impracticable to proceed with the offering, sale and/or delivery of the
securities or to enforce contracts made by the Underwriters for the sale of the
securities.
32
8.3 Expenses. In the
event that this Agreement shall not be carried out for any reason whatsoever,
within the time specified herein or any extensions thereof pursuant to the terms
herein, the Company shall be obligated to pay to the Underwriters their actual
and accountable out of pocket expenses related to the transactions contemplated
herein then due and payable up to a maximum of $50,000 (including the fees and
disbursements of Loeb; provided, however, that such expense cap in no way limits
or impairs the indemnification and contribution provisions of this
Agreement).
8.4 Indemnification.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 shall not be in
any way affected by, such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
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9.
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Miscellaneous.
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9.1 Notices. All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed (registered or certified mail, return
receipt requested), personally delivered or sent by facsimile transmission and
confirmed and shall be deemed given when so delivered or faxed and confirmed or
if mailed, two days after such mailing.
If to the
Representative:
Xxxxxx
& Xxxxxxx, LLC
0000
Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000
Attn:
General Counsel
Fax No.:
000-000-0000
Copy
to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxxxx X. Xxxxxxxx,
Esq.
Fax:
000-000-0000
If to the
Company:
No. 0000 Xxxxxx
Xxxx
Development Zone Cao
County
Xxxxxxxx
Xxxxxxxx, 000000 Xxxxx
Attn: Xx.
Xxxxxxxx Xx, Chief Executive Officer
Copy
to:
Gusrae, Xxxxxx, Xxxxx & Xxxxxxx
PLLC
000 Xxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx, Xxx Xxxx
00000
Attn: Xx. Xxxxxxxx X. Xxxxxxx,
Esq.
Fax:
(000) 000-0000
33
9.2 Headings. The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.
9.3 Amendment. This
Agreement may only be amended by a written instrument executed by each of the
parties hereto.
9.4 Entire Agreement.
This Agreement (together with the other agreements and documents being delivered
pursuant to or in connection with this Agreement) constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof, and supersedes all prior agreements and understandings of the parties,
oral and written, with respect to the subject matter hereof.
9.5 Binding Effect. This
Agreement shall inure solely to the benefit of and shall be binding upon the
Representative, the Underwriters, the Company and the Controlling Persons,
directors and officers referred to in Section 5 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained.
The term “successors and
assigns” shall not include a purchaser, in its capacity as such, of
securities from any of the Underwriters.
9.6 Governing Law. This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to conflict of laws
principles thereof. The Company hereby agrees that any action, proceeding or
claim against it arising out of, or relating in any way to this Agreement shall
be brought and enforced in New York Supreme Court, County of New York or in
United States District Court for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum. Any such process or summons to be
served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 9.1 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the Company
in any action, proceeding or claim. The Company agrees that the prevailing
party(ies) in any such action shall be entitled to recover from the other
party(ies) all of its reasonable attorneys’ fees and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
9.7 Execution in
Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement, and shall become effective when one or
more counterparts has been signed by each of the parties hereto and delivered to
each of the other parties hereto. Delivery of a signed counterpart of this
Agreement by facsimile or email/pdf transmission shall constitute valid and
sufficient delivery thereof.
9.8 Waiver, etc. The
failure of any of the parties hereto to at any time enforce any of the
provisions of this Agreement shall not be deemed or construed to be a waiver of
any such provision, nor to in any way affect the validity of this Agreement or
any provision hereof or the right of any of the parties hereto to thereafter
enforce each and every provision of this Agreement. No waiver of any breach,
non-compliance or non-fulfillment of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought; and
no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
[SIGNATURE
PAGE FOLLOWS]
34
If the
foregoing correctly sets forth the understanding between the Underwriters and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between
us.
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Very
truly yours,
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By:
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|
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Name:
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|
|
Title:
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Accepted
on the date first above written.
XXXXXX
& XXXXXXX, LLC
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By:
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Name:
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Title:
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35
SCHEDULE
I
Underwriters
36
EXHIBIT
A
Form
of Representative’s Option Agreement
37
EXHIBIT
B-1
Lock-Up
Agreement
___________
____, 2010
Xxxxxx
& Xxxxxxx, LLC
0000
Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000
Ladies
and Gentlemen:
The
undersigned understands that Xxxxxx & Xxxxxxx, LLC (the “Representative”) proposes to
enter into an Underwriting Agreement (the “Underwriting Agreement”) with
[NAME OF COMPANY]., a [TYPE OF COMPANY] (the “Company”), providing for the
public offering (the “Public
Offering”) by the Representative of [_____] shares of common stock
(“Firm Shares”), par
value $_____ per share, of the Company (the “Shares”).
To induce
the Representative to continue its efforts in connection with the Public
Offering, the undersigned hereby agrees that, without the prior written consent
of the Representative, it will not, during the period commencing on the date
hereof and ending 180 days
after the date of the final prospectus (the “Prospectus”) relating to the
Public Offering (the “Lock-Up
Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or
otherwise transfer or dispose of, directly or indirectly, any Shares or any
securities convertible into or exercisable or exchangeable for Shares, or (2)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Shares, whether
any such transaction described in clause (1) or (2) above is to be settled by
delivery of Shares or such other securities, in cash or otherwise.
Notwithstanding the foregoing, the undersigned may transfer Shares without the
prior consent of the Representative in connection with (a) transactions relating
to Shares or other securities acquired in open market transactions after the
completion of the Public Offering, provided that no filing
under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), shall
be required or shall be voluntarily made in connection with subsequent sales of
Shares or other securities acquired in such open market transactions, (b)
transfers of Shares or any security convertible into Shares as a bona fide gift,
by will or intestacy or to a family member or trust for the benefit of a family
member; provided that
in the case of any transfer or distribution pursuant to clause (b), (i) each
donee or distributee shall sign and deliver a lock-up letter substantially in
the form of this letter agreement and (ii) no filing under Section 16(a) of the
Exchange Act, reporting a reduction in beneficial ownership of Shares, shall be
required or shall be voluntarily made during the Lock-up Period, (c) transfer of
Shares to a charity or educational institution, or (d) if the undersigned,
directly or indirectly, controls a corporation, partnership, limited liability
company or other business entity, any transfers of Shares to any shareholder,
partner or member of, or owner of similar equity interests in, the undersigned,
as the case may be, if, in any such case, such transfer is not for value. In
addition, the undersigned agrees that during the Lock-Up Period, without the
prior written consent of the Representative, it will not make any demand for or
exercise any right with respect to the registration of any Shares or any
security convertible into or exercisable or exchangeable for Shares. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
undersigned’s Shares except in compliance with this Agreement.
If (i)
the Company issues an earnings release or material news, during the last 17 days
of the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period,
the Company announces that it will release earnings results during the 16-day
period beginning on the last day of the Lock-Up Period, the restrictions imposed
by this agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release, unless the
Representative waives such extension.
No
provision in this agreement shall be deemed to restrict or prohibit the exercise
or exchange by the undersigned of any option or warrant to acquire Shares, or
securities exchangeable or exercisable for or convertible into Shares, provided that the undersigned
does not transfer the Shares acquired on such exercise or exchange during the
Lock-Up Period, unless otherwise permitted pursuant to the terms of this letter
agreement. In addition, no provision herein shall be deemed to restrict or
prohibit the entry into or modification of a so-called “10b5-1” plan at any time
(other than the entry into or modification of such a plan in such a manner as to
cause the sale of any Shares or any securities convertible into or exercisable
or exchangeable for Shares within the Lock-Up Period).
The
undersigned understands that the Company and the Representative are relying upon
this letter agreement in proceeding toward consummation of the Public Offering.
The undersigned further understands that this agreement is irrevocable and shall
be binding upon the undersigned’s heirs, legal representatives, successors and
assigns.
The
undersigned understands that, if the Underwriting Agreement is not executed by
____________, or if the Underwriting Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Shares to be sold thereunder this agreement
shall be void and of no further force or effect.
Whether
or not the Public Offering actually occurs depends on a number of factors,
including market conditions. Any Public Offering will only be made pursuant to
an Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Representative.
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Very
truly yours,
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[LOCKED
UP PARTY]
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By:
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Name:
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Title:
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EXHIBIT
B-2
Lock-Up
Agreement
___________
____, 2010
Xxxxxx & Xxxxxxx,
LLC
0000 Xxxxxx xx Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
XX 00000
Ladies
and Gentlemen:
The
undersigned understands that Xxxxxx & Xxxxxxx, LLC (the “Representative”) proposes to
enter into an Underwriting Agreement (the “Underwriting Agreement”) with
[NAME OF COMPANY]., a [TYPE OF COMPANY] (the “Company”), providing for the
public offering (the “Public
Offering”) by the Representative of [_____] shares of common stock
(“Firm Shares”), par
value $____ per share, of the Company (the “Shares”).
To induce
the Representative to continue its efforts in connection with the Public
Offering, the undersigned hereby agrees that, without the prior written consent
of the Representative, it will not, during the period commencing on the date
hereof and ending on the earlier of (1) 120 days after the date of the final
prospectus relating to the Public Offering (the “Prospectus”) and (2) [DATE]
(the “Lock-Up Period”),
(1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or
dispose of, directly or indirectly, any Shares or any securities convertible
into or exercisable or exchangeable for Shares, or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Shares, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Shares or
such other securities, in cash or otherwise. Notwithstanding the foregoing, the
undersigned may transfer Shares without the prior consent of the Representative
in connection with (a) transactions relating to Shares or other securities
acquired in open market transactions after the completion of the Public
Offering, provided that
no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”),
shall be required or shall be voluntarily made in connection with subsequent
sales of Shares or other securities acquired in such open market transactions,
(b) if the undersigned is an individual, transfers of Shares or any security
convertible into Shares as a bona fide gift, by will or intestacy or to a family
member or trust for the benefit of a family member; provided that in the case of
any transfer or distribution pursuant to clause (b), (i) each donee or
distributee shall sign and deliver a lock-up letter substantially in the form of
this letter agreement and (ii) no filing under Section 16(a) of the Exchange
Act, reporting a reduction in beneficial ownership of Shares, shall be required
or shall be voluntarily made during the Lock-up Period, (c) transfer of Shares
to a charity or educational institution, (d) if the undersigned is, or directly
or indirectly controls, a corporation, partnership, limited liability company or
other business entity, any transfers of Shares to any shareholder, partner or
member of, or owner of similar equity interests in, the undersigned, as the case
may be, if, in any such case, such transfer is not for value, or (e) if the
undersigned is a corporation, partnership, limited liability company or other
business entity, any transfer of Shares made by the undersigned (i) in
connection with the sale or other bona fide transfer in a single transaction of
all or substantially all of the undersigned’s capital stock, partnership
interests, membership interests or other similar equity interests, as the case
may be, or all or substantially all of the undersigned’s assets, in any such
case not undertaken for the purpose of avoiding the restrictions imposed by this
agreement or (ii) to another corporation, partnership, limited liability company
or other business entity so long as the transferee is an affiliate of the
undersigned and such transfer is not for value. [In addition, the undersigned
agrees that during the Lock-Up Period and except for the registration statement
relating to the Public Offering or any registration statement filed on Form S-3
contemplated by the Registration Rights Agreement, dated ____________, between
the Company and, among others, the undersigned, without the prior written
consent of the Representative, it will not make any demand for or exercise any
right with respect to the registration of any Shares or any security convertible
into or exercisable or exchangeable for Shares.] The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company’s transfer
agent and registrar against the transfer of the undersigned’s Shares except in
compliance with this Agreement.
If (i)
the Company issues an earnings release or material news, during the last 17 days
of the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period,
the Company announces that it will release earnings results during the 16-day
period beginning on the last day of the Lock-Up Period, the restrictions imposed
by this agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release, unless the
Representative waives such extension.
No
provision in this agreement shall be deemed to restrict or prohibit the exercise
or exchange by the undersigned of any option or warrant to acquire Shares, or
securities exchangeable or exercisable for or convertible into Shares, provided that the undersigned
does not transfer the Shares acquired on such exercise or exchange during the
Lock-Up Period, unless otherwise permitted pursuant to the terms of this letter
agreement. In addition, no provision herein shall be deemed to restrict or
prohibit the entry into or modification of a so-called “10b5-1” plan at any time
(other than the entry into or modification of such a plan in such a manner as to
cause the sale of any Shares or any securities convertible into or exercisable
or exchangeable for Shares within the Lock-Up Period).
The
undersigned understands that the Company and the Representative are relying upon
this letter agreement in proceeding toward consummation of the Public Offering.
The undersigned further understands that this agreement is irrevocable and shall
be binding upon the undersigned’s heirs, legal representatives, successors and
assigns.
The
undersigned understands that, if the Underwriting Agreement is not executed by
_____________, or if the Underwriting Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Shares to be sold thereunder this agreement
shall be void and of no further force or effect.
Whether
or not the Public Offering actually occurs depends on a number of factors,
including market conditions. Any Public Offering will only be made pursuant to
an Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Representative.
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Very
truly yours,
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[LOCKED
UP PARTY]
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By:
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Name:
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Title:
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ANNEX
I
Subsidiaries
ANNEX
II
PRC
Subsidiaries
