5,000,000 shares of SmartHeat Inc. Common Stock UNDERWRITING AGREEMENT
5,000,000
shares of
Common
Stock
November
18, 2010
Barclays
Capital Inc.
As
Representative of the several
Underwriters
named in Schedule 1 attached hereto,
c/o
Barclays Capital Inc.
000
Xxxxxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
SmartHeat
Inc., a Nevada corporation (the “Company”) proposes to sell
5,000,000 shares (the “Firm
Stock”) of the Company’s common stock, par value $0.001 per share (the
“Common Stock”). In
addition, the Company proposes to grant to the underwriters (the “Underwriters”) named in Schedule 1 attached
to this agreement (this “Agreement”) an option to
purchase up to 750,000 additional shares of the Common Stock on the terms set
forth in Section 2 (the “Option
Stock”). The Firm Stock and the Option Stock, if purchased,
are hereinafter collectively called the “Stock.” This is to
confirm the agreement concerning the purchase of the Stock from the Company and
by the Underwriters.
1. Representations, Warranties and
Agreements of the Company. The Company represents,
warrants and agrees that:
(a) A
registration statement on Form S-3 relating to the Stock has (i) been prepared
by the Company in conformity with the requirements of the Securities Act of
1933, as amended (the “Securities Act”), and the
rules and regulations (the “Rules and Regulations”) of the
Securities and Exchange Commission (the “Commission”) thereunder;
(ii) been filed with the Commission under the Securities Act; and
(iii) become effective under the Securities Act. Copies of such
registration statement and any amendment thereto have been delivered by the
Company to you as the representative (the “Representative”) of the
Underwriters. As used in this Agreement:
(i) “Applicable Time” means 8.40
a.m. (New York City time) on the date of this Agreement;
(ii) “Effective Date” means the date
and time as of which such registration statement was declared effective by the
Commission;
(iii) “Issuer Free Writing
Prospectus” means each “free writing prospectus” (as defined in Rule 405
of the Rules and Regulations) prepared by or on behalf of the Company or used or
referred to by the Company in connection with the offering of the
Stock;
(iv) “Preliminary Prospectus” means
any preliminary prospectus relating to the Stock included in such registration
statement or filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations;
(v) “Pricing Disclosure Package”
means, as of the Applicable Time, the most recent Preliminary Prospectus,
together with the information included in Schedule 4 hereto and each Issuer Free
Writing Prospectus filed or used by the Company on or before the Applicable
Time, other than a road show that is an Issuer Free Writing Prospectus under
Rule 433 of the Rules and Regulations;
(vi) “Prospectus” means the final
prospectus relating to the Stock, as filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations; and
(vii) “Registration Statement” means
such registration statement, as amended as of the Effective Date, including any
Preliminary Prospectus or the Prospectus and all exhibits to such registration
statement.
Any
reference to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any documents incorporated by reference therein pursuant to
Form S-3 under the Securities Act as of the date of such Preliminary Prospectus
or the Prospectus, as the case may be. Any reference to the “most recent Preliminary
Prospectus” shall be deemed to refer to the latest Preliminary Prospectus
included in the Registration Statement or filed pursuant to Rule 424(b) prior to
or on the date hereof (including, for purposes hereof, any documents
incorporated by reference therein prior to or on the date
hereof). Any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
any document filed under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), after
the date of such Preliminary Prospectus or the Prospectus, as the case may be,
and incorporated by reference in such Preliminary Prospectus or the Prospectus,
as the case may be; and any reference to any amendment to the Registration
Statement shall be deemed to include any annual report of the Company on Form
10-K filed with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act after the Effective Date that is incorporated by reference in the
Registration Statement. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending the effectiveness of the Registration Statement, and no proceeding
or examination for such purpose has been instituted or threatened by the
Commission.
(b) The
Company was not at the time of initial filing of the Registration Statement and
at the earliest time thereafter that the Company or another offering participant
made a bona fide offer
(within the meaning of Rule 164(h)(2) of the Rules and Regulations) of the
Stock, is not on the date hereof and will not be on the applicable Delivery Date
an “ineligible issuer” (as defined in Rule 405). The Company has been since the
time of initial filing of the Registration Statement and continues to be
eligible to use Form S-3 for the offering of the Stock.
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(c) The
Registration Statement conformed and will conform in all material respects on
the Effective Date and on the applicable Delivery Date, and any amendment to the
Registration Statement filed after the date hereof will conform in all material
respects when filed, to the requirements of the Securities Act and the Rules and
Regulations. The most recent Preliminary Prospectus conformed, and
the Prospectus will conform, in all material respects when filed with the
Commission pursuant to Rule 424(b) and on the applicable Delivery Date to the
requirements of the Securities Act and the Rules and Regulations. The
documents incorporated by reference in any Preliminary Prospectus or the
Prospectus conformed, and any further documents so incorporated will conform,
when filed with the Commission, in all material respects to the requirements of
the Exchange Act or the Securities Act, as applicable, and the rules and
regulations of the Commission thereunder.
(d) The
Registration Statement did not, as of the Effective Date, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; provided that no
representation or warranty is made as to information contained in or omitted
from the Registration Statement in reliance upon and in conformity with written
information furnished to the Company through the Representative by or on behalf
of any Underwriter specifically for inclusion therein, which information is
specified in Section 8(e).
(e) The
Prospectus will not, as of its date and on the applicable Delivery Date, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that no
representation or warranty is made as to information contained in or omitted
from the Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representative by or on behalf of any
Underwriter specifically for inclusion therein, which information is specified
in Section 8(e).
(f) The
documents incorporated by reference in any Preliminary Prospectus or the
Prospectus did not, and any further documents filed and incorporated by
reference therein will not, when filed with the Commission, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) The
Pricing Disclosure Package did not, as of the Applicable Time, contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided that no
representation or warranty is made as to information contained in or omitted
from the Pricing Disclosure Package in reliance upon and in conformity with
written information furnished to the Company through the Representative by or on
behalf of any Underwriter specifically for inclusion therein, which information
is specified in Section 8(e).
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(h) Each
Issuer Free Writing Prospectus (including, without limitation, any road show
that is a free writing prospectus under Rule 433), when considered together with
the Pricing Disclosure Package as of the Applicable Time, did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(i) Each
Issuer Free Writing Prospectus conformed or will conform in all material
respects to the requirements of the Securities Act and the Rules and Regulations
on the date of first use, and the Company has complied with any filing
requirements applicable to such Issuer Free Writing Prospectus pursuant to the
Rules and Regulations. The Company has not made any offer relating to the Stock
that would constitute an Issuer Free Writing Prospectus without the prior
written consent of the Representative. The Company has retained in
accordance with the Rules and Regulations all Issuer Free Writing Prospectuses
that were not required to be filed pursuant to the Rules and
Regulations.
(j) The
Company’s subsidiaries are Shenyang Taiyu Machinery, Electronic Equipment Co.,
Ltd., SmartHeat Siping Beifang Energy Technology Co., Ltd., SanDeKe Co., Ltd.,
Beijing SmartHeat Jinhui Energy Technology Co., Ltd. and Smartheat (China)
Investment Co., Ltd, and the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
aforementioned subsidiaries. Each of the Company and its subsidiaries (as
defined in Section 17) has been duly incorporated or formed and are validly
existing as corporations, limited liability companies, or similar People’s
Republic of China (“PRC”) equivalent entities in
good standing to do business and in good standing as a foreign corporation,
limited liability company, or PRC equivalent entity in each jurisdiction in
which its ownership or lease of property, having an office or the conduct of its
businesses requires such qualification, except where the failure to be so
qualified or in good standing could not, in the aggregate, reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), results of operations, stockholders’ equity, properties, business or
prospects of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”) and
no proceeding of which the Company has knowledge has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries has all power and authority necessary to own or hold its properties
and to conduct the businesses as described in the Prospectus under
“Business.” Each of Shenyang Taiyu Machinery, Electronic Equipment
Co., Ltd., SmartHeat Siping Beifang Energy Technology Co., Ltd., SanDeKe Co.,
Ltd.(collectively, the “Significant Subsidiaries”)) is
a “significant subsidiary” (as defined in Rule 405).
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(k) The
Company has an authorized capitalization as set forth in the most recent
Preliminary Prospectus under the caption “Capitalization,” and all of the issued
shares of capital stock of the Company have been duly authorized and validly
issued, are fully paid and non-assessable, conform to the description thereof
contained in the most recent Preliminary Prospectus and were issued in
compliance with federal and state securities laws and not in violation of any
preemptive right, resale right, right of first refusal or similar
right. All of the Company’s options, warrants and other rights to
purchase or exchange any securities for shares of the Company’s capital stock
have been duly authorized and validly issued, conform to the description thereof
contained in the most recent Preliminary Prospectus and were issued in
compliance with federal and state securities laws. All of the issued
shares of capital stock or other ownership interest of each subsidiary of the
Company have been duly authorized and validly issued, are fully paid and
non-assessable and except for directors’ qualifying shares or interests and
shares or interests held by persons other than the Company in jurisdictions
requiring that such subsidiary have more than one holder of shares or interests
are owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, except for such liens, encumbrances, equities
or claims as could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(l) The
Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement. This Agreement has been
duly and validly authorized, executed and delivered by the Company.
(m) The
execution, delivery and performance of this Agreement by the Company, the
consummation of the transactions contemplated hereby and the application of the
proceeds from the sale of the Stock as described under “Use of Proceeds” in the
most recent Preliminary Prospectus will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, impose any lien,
charge or encumbrance upon any property or assets of the Company and its
subsidiaries, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, license or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject; (ii) result in any violation of
the provisions of the charter or by-laws (or similar organizational documents)
of the Company or any of its subsidiaries; or (iii) result in any violation of
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets.
(n) No
consent, approval, authorization or order of, or filing or registration with,
any court or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties or assets is required for the
execution, delivery and performance of this Agreement by the Company, the
consummation of the transactions contemplated hereby, the application of the
proceeds from the sale of the Stock as described under “Use of Proceeds” in the
most recent Preliminary Prospectus, except for the registration of the Stock
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange Act and
applicable state or foreign, including PRC, securities laws in connection with
the purchase and sale of the Stock by the Underwriters.
(o) Except
as described in the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.
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(p) The
Company has not sold or issued any securities that would be integrated with the
offering of the Stock contemplated by this Agreement pursuant to the Securities
Act, the Rules and Regulations or the interpretations thereof by the
Commission.
(q) Neither
the Company nor any of its subsidiaries has sustained, since the date of the
latest audited financial statements included or incorporated by reference in the
most recent Preliminary Prospectus, any 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, and since such date, there has not been any change in the capital stock,
long-term debt, net current assets or short- term debt, of the Company or any of
its subsidiaries or any adverse change, or any development involving a
prospective adverse change, in or affecting the condition (financial or
otherwise), results of operations, stockholders’ equity, properties, management,
business or prospects of the Company and its subsidiaries taken as a whole, in
each case except as could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(r) Since
the date as of which information is given in the most recent Preliminary
Prospectus, the Company has not (i) incurred any liability or obligation, direct
or contingent, other than liabilities and obligations that were incurred in the
ordinary course of business, (ii) entered into any material transaction not in
the ordinary course of business or (iii) declared or paid any dividend on its
capital stock.
(s) The
historical financial statements (including the related notes and supporting
schedules) included or incorporated by reference in the most recent Preliminary
Prospectus comply as to form in all material respects with the requirements of
Regulation S-X under the Securities Act and present fairly the financial
condition, results of operations and cash flows of the entities purported to be
shown thereby at the dates and for the periods indicated and have been prepared
in conformity with accounting principles generally accepted in the United States
applied on a consistent basis throughout the periods involved.
(t) Goldman
Xxxxxxx Xxxxxxx, LLP, who have certified certain financial statements of the
Company and its consolidated subsidiaries, whose report appears in the most
recent Preliminary Prospectus or is incorporated by reference therein and who
have delivered the initial letter referred to in Section 7(h) hereof, are
independent public accountants as required by the Securities Act and the Rules
and Regulations.
(u) The
statistical and market-related date included under the captions “Summary,”
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” “Industry Overview,” “Business” in the most recent Preliminary
Prospectus and the documents incorporated by reference therein and the
consolidated financial statements of the Company and its subsidiaries included
or incorporated by reference in the most recent Preliminary Prospectus are based
on or derived from sources that the Company believes to be reliable and accurate
in all material respects.
6
(v) Neither
the Company nor any subsidiary is, and as of the applicable Delivery Date and,
after giving effect to the offer and sale of the Stock and the application of
the proceeds therefrom as described under “Use of Proceeds” in the most recent
Preliminary Prospectus and the Prospectus, none of them will be, (i) an
“investment company” within the meaning of such term under the Investment
Company Act of 1940, as amended (the “Investment Company Act”), and
the rules and regulations of the Commission thereunder or (ii) a “business
development company” (as defined in Section 2(a)(48) of the Investment Company
Act).
(w) There
are no legal or Governmental Body (as defined in (gg) below) proceedings
material to the Company and its subsidiaries, taken as a whole, which are
pending, or to the Company’s knowledge, threatened or contemplated, to which the
Company or any subsidiary is or may be a party or of which material property
owned or leased by the Company or any subsidiary is or may be the subject, or
related to environmental or discrimination matters that are not disclosed in the
Preliminary Prospectus or Prospectus under “Business–Governmental and
Environmental Regulation,” or that could, in the aggregate, reasonably be
expected to have a Material Adverse Effect or could, in the aggregate,
reasonably be expected to have a material adverse effect on the performance of
this Agreement or the consummation of the transactions contemplated
hereby.
(x) No
relationship, direct or indirect, exists between or among the Company, on the
one hand, and the directors, officers, stockholders, customers or suppliers of
the Company, on the other hand, that is required to be described in the the
Registration Statement and the most recent Preliminary Prospectus which is not
so described.
(y) None
of the Company nor any subsidiary is involved in any labor disputes with any of
its employees and, to the knowledge of the Company, no employee has threatened
the commencement of any labor disputes with the Company or any subsidiary,
which, in either case, would reasonably be expected to result in a Material
Adverse Effect, nor has the Company or any subsidiary received any notice of any
bankruptcy, labor disturbance or other event affecting any of its principal
suppliers or customers, which would reasonably be expected to result in a
Material Adverse Effect. Each of the Company and each subsidiary is
in compliance in all material respects with all Legal Requirements (as defined
in Section 1(ff)) respecting employment and employment practices, terms and
conditions of employment and wages and hours that are applicable to
them. Neither the Company nor any subsidiary has received notice of
any pending investigations involving the Company or any subsidiary by the U.S.
Department of Labor, any PRC labor bureau or any other Governmental Body
responsible for the enforcement of such Legal Requirements. There is
no unfair labor practice charge or complaint against the Company or any
subsidiary pending before the National Labor Relations Board, any PRC labor
bureau, or any applicable foreign labor administration agencies, or any strike,
picketing, boycott, labor dispute, slowdown or stoppage pending or, to the
knowledge of the Company, threatened against or involving the Company or any
subsidiary. No collective bargaining agreement exists among the
employees of the Company or any subsidiary, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or any subsidiary. Neither the Company nor any subsidiary has
received notice that any grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the Company or any
subsidiary. The Company and its subsidiaries are in compliance with
employee social security contribution requirements, including, without
limitation, the social security and pension contribution programs in the
PRC.
7
(z) (i)
Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee
Retirement Security Act of 1974, as amended (“ERISA”)) for which the Company
or any member of its “Controlled Group” (defined as any organization which is a
member of a controlled group of corporations within the meaning of Section 414
of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any
liability (each a “Plan”) has been maintained in
compliance with its terms and with the requirements of all applicable statutes,
rules and regulations including ERISA and the Code; (ii) with respect to each
Plan subject to Title IV of ERISA (a) no “reportable event” (within the meaning
of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur,
(b) no “accumulated funding deficiency” (within the meaning of Section 302 of
ERISA or Section 412 of the Code), whether or not waived, has occurred or is
reasonably expected to occur, (c) the fair market value of the assets under each
Plan exceeds the present value of all benefits accrued under such Plan
(determined based on those assumptions used to fund such Plan) and (d) neither
the Company or any member of its Controlled Group has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA (other than
contributions to the Plan or premiums to the PBGC in the ordinary course and
without default) in respect of a Plan (including a “multiemployer plan”, within
the meaning of Section 4001(c)(3) of ERISA); and (iii) each Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(aa) The
Company and each of its subsidiaries have filed all U.S., PRC and other
applicable national, provincial, federal, state, local and foreign income and
franchise tax returns required to be filed through the date hereof, subject to
permitted extensions, and have paid all taxes due thereon, and no tax deficiency
has been determined adversely to the Company or any of its subsidiaries, nor
does the Company have any knowledge of any tax deficiencies that could, in the
aggregate, reasonably be expected to have a Material Adverse Effect; all
national, provincial and local PRC governmental tax relief, concessions,
waivers, holidays and preferential treatments claimed or obtained by the Company
and its subsidiaries are valid, binding and enforceable and do not violate any
PRC law.
(bb) No
transaction, stamp, capital or other issuance, registration, transaction,
transfer or withholding taxes or duties are payable in any jurisdiction,
including without limitation, the PRC, by or on behalf of the Underwriters to
any PRC taxing authority in connection with (1) the issuance, sale and delivery
of the Stock to the Underwriters and the delivery of such Stock to or for the
account of the Underwriters, (ii) the initial sale and delivery by the
Underwriters of such Stock to purchasers thereof, or (iii) the execution and
delivery of this Agreement.
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(cc) Neither
the Company nor any of its subsidiaries (i) is in violation of its charter,
by-laws (or similar organizational documents), (ii) is in default, and no event
has occurred that, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, license or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (iii) is in violation of
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over it or its property or assets or has failed to
obtain any license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or to the
conduct of its business, except in the case of clauses (ii) and (iii), to the
extent any such conflict, breach, violation or default could not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(dd) The
Company and to the Company’s knowledge any of its directors or officers, in
their capacities as such, are in material compliance with the provisions of the
Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations promulgated in
connection therewith.
(ee) The
Company’s board of directors has validly appointed an audit committee whose
composition satisfies the requirements of the Exchange Act and Rules 5601 and
5605 of the NASDAQ Global Market. The Company’s audit committee has
adopted a charter that satisfies the Exchange Act and Rules 5601 and 5605 of the
NASDAQ Global Market.
(ff) The
conduct of the business of the Company and each of its subsidiaries is in
compliance in all respects with applicable federal, national, provincial, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, pronouncement, requirement,
specification, determination, decision, opinion or interpretation issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Body (“Legal Requirements”), except
where the failure to be in compliance with any Legal Requirements would not have
a Material Adverse Effect.
9
(gg) The
Company and each of its subsidiaries have materially complied with, are not in
material violation of, and have not received any written notices of violation
with respect to any Legal Requirements applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, reimbursement, storage, import,
export or disposal of any product manufactured or distributed by the Company or
the subsidiaries (“Applicable
Laws”), or any license, patent, franchise, certificates of need,
approval, clearance, authorization, permit, supplement, or amendment required by
any Applicable Laws or necessary to own their properties and conduct their
business as described in the Registration Statement and most recent Preliminary
Prospectus (“Authorizations”); each of the
Company and its subsidiaries has fulfilled and performed all of its obligations
with respect to the Authorizations, and no event has occurred that allows, or
after notice or lapse of time would allow, revocation or termination thereof or
results in any other impairment of the rights of the holder or any such
Authorizations, except for any of the foregoing that could not reasonably be
expected to have a Material Adverse Effect. The Company and its
subsidiaries possess all material Authorizations and such material
Authorizations are in full force and effect. The Company and its
subsidiaries are, and their products are, in compliance in all material respects
with all Authorizations and Applicable Laws, including, but not limited to, all
Legal Requirements administered, issued or enforced by any (a) nation, including
without limitation, the United States and the PRC, principality, state,
commonwealth, province territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental authority or quasi-governmental authority of
any nature (including any governmental division, subdivision, department,
agency, bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or entity and any
court or other tribunal); (d) multi-national organization or body; or (e)
individual, entity or body exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military or taxing
authority or power of any nature having authority over the Company, its
subsidiaries or any of their products or other governmental authority having
authority over the Company, its subsidiaries or any of their products or
property (“Governmental
Body”). The Company and its subsidiaries have not received
notice of any claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other similar action from any Governmental Body
alleging that any product, operation or activity is in material violation of any
Applicable Laws or Authorizations and, to the knowledge of the Company, no such
Governmental Body is considering any such claim, litigation, arbitration,
action, suit, investigation or proceeding. Each regulatory submission
for the Company’s or its subsidiaries’ products has been filed, cleared,
approved and maintained in compliance in all material respects with all
Applicable Laws and Authorizations, including without limitation, applicable
Legal Requirements of PRC. To the knowledge of the Company, there are
no facts which are reasonably likely to cause (A) the withdrawal, or recall of
any products sold or intended to be sold by the Company or its subsidiaries, or
(B) a suspension or revocation of any of the Company’s or subsidiaries’
Authorizations. The Company and its subsidiaries have not received
notice (whether complete or pending) of any proceeding seeking recall,
suspension or seizure of any products sold or intended to be sole by the Company
or its subsidiaries.
10
(hh) The
Company and each of its subsidiaries own or possess adequate rights to use all
material patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights, licenses,
know-how, software, systems and technology (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) (“Trade
Rights”) material for the conduct of their respective businesses and have
no reason to believe that the conduct of their respective businesses will
conflict with, and have not received any notice of any claim of conflict with,
any such rights of others. Neither the Company nor any of its
subsidiaries has received any written notice of infringement, misappropriation
or conflict from any third party as to such material Trade Rights which has not
been resolved or disposed of and neither the Company nor any of its subsidiaries
has infringed, misappropriated or otherwise conflicted with material Trade
Rights of any third parties, which infringement, misappropriation or conflict
could reasonably be expected to have a Material Adverse Effect. All
assignments by the Company or its subsidiaries of any Trade Rights have been
properly executed and are valid and enforceable against all such assignees of
the Trade Rights. Any licensing or assignment of the Trade Rights by
the Company or its subsidiaries has been properly consummated and properly
recorded with the appropriate governmental agency, including the appropriate PRC
Governmental Body. The Company or its subsidiaries are entitled to
use all Trade Rights in the continued operation of their business without
limitation, subject only to the terms of the licenses relating to the licensed
Trade Rights. The Trade Rights have not been adjudged invalid or
unenforceable in whole or in part, and are valid and enforceable. The
expiration of any patents, patent rights, trademarks, service marks, trade names
or copyrights would not result in a Material Adverse Effect that is not
otherwise disclosed in the most recent Preliminary Prospectus and the
Prospectus.
(ii)
The Company and each of its subsidiaries (i) are, and at all
times prior hereto were, in compliance with all laws, regulations, ordinances,
rules, orders, judgments, decrees, permits or other legal requirements of any
governmental authority, including without limitation any international,
national, state, provincial, regional, or local authority, relating to the
protection of human health or safety, the environment, or natural resources, or
to hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”)
applicable to such entity, which compliance includes, without limitation,
obtaining, maintaining and complying with all permits and authorizations and
approvals required by Environmental Laws to conduct their respective businesses,
and (ii) have not received notice of any actual or alleged violation of
Environmental Laws, or of any potential liability for or other obligation
concerning the presence, disposal or release of hazardous or toxic substances or
wastes, pollutants or contaminants, except in the case of clause (i) or (ii)
where such non-compliance, violation, liability, or other obligation could not,
in the aggregate, reasonably be expected to have a Material Adverse
Effect. Except as described in the most recent Preliminary
Prospectus, (A) there are no proceedings that are pending, or known to be
contemplated, against the Company or any of its subsidiaries under Environmental
Laws in which a governmental authority is also a party, other than such
proceedings regarding which it is reasonably believed no monetary sanctions of
$100,000 or more will be imposed, (B) the Company and its subsidiaries are not
aware of any issues regarding compliance with Environmental Laws, or liabilities
or other obligations under Environmental Laws or concerning hazardous or toxic
substances or wastes, pollutants or contaminants, that could reasonably be
expected to have a material effect on the capital expenditures, earnings or
competitive position of the Company and its subsidiaries, and
(C) none of the Company and its subsidiaries anticipates material
capital expenditures relating to Environmental Laws.
11
(jj) Except
as described in the Registration Statement and the most recent Preliminary
Prospectus, none of the Company’s subsidiaries are currently prohibited,
directly or indirectly, from paying any dividends to their respective
shareholders (including the Company), nor are they so prohibited from making any
other distribution on their respective share capital, from repaying to their
respective shareholders (including the Company) any loans or advances to such
subsidiary from the Company or from transferring any of their respective
property or assets to their respective shareholders (including the Company) or
to any other subsidiary of the Company. Except as described in the
Registration Statement and the most recent Preliminary Prospectus, any dividends
and other distributions declared with respect to after-tax retained earnings on
the equity interests of any of the Company’s subsidiaries may lawfully be paid
to the their respective shareholders in Renminbi that may be converted into U.S.
dollars and freely transferred out of the PRC, and all such dividends and other
distributions are not and will not be subject to withholding or other taxes in
the PRC, are otherwise free and clear of any other tax, withholding or deduction
in the PRC, and without the necessity of obtaining any governmental
authorization in the PRC except for routine PRC foreign exchange procedures and
tax withholding procedures.
(kk)
Except as described in the Registration Statement and the most
recent Preliminary Prospectus, all dividends and other distributions declared
and payable on the Stock may under current Legal Requirements of the PRC be paid
to the holders of the Stock in U.S. dollars and may be converted into foreign
currency that may be transferred out of the PRC, and all such payments made to
holders thereof or therein who are non-residents of the PRC will not be subject
to income, withholding or other taxes under the Legal Requirements of the PRC or
any political subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in the PRC or any
political subdivision or taxing authority thereof or therein.
(ll) Neither
the Company nor any of its subsidiaries, nor, to the knowledge of the Company,
any director, officer, agent, employee or other person associated with or acting
on behalf of the Company or any of its subsidiaries, has (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(mm)
The operations of the Company and its subsidiaries are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all jurisdictions, the rules
and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company, threatened, except, in each case,
as would not reasonably be expected to have a Material Adverse
Effect.
12
(nn) Neither
the Company nor any of its subsidiaries nor, to the knowledge of the Company,
any director, officer, agent, employee or affiliate of the Company or any of its
subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds to any subsidiary, joint venture
partner or other person or entity, for the purpose of financing the activities
of any person currently subject to any U.S. sanctions administered by
OFAC.
(oo) The
Company has not distributed and, prior to the later to occur of any Delivery
Date and completion of the distribution of the Stock, will not distribute any
offering material in connection with the offering and sale of the Stock other
than any Preliminary Prospectus, the Prospectus, any Issuer Free Writing
Prospectus to which the Representative have consented in accordance with Section
1(i) or 5(a)(vi) and any Issuer Free Writing Prospectus set forth on Schedule 2
hereto.
(pp) The
Company has not taken and will not take, directly or indirectly, any action
designed to or that has constituted or that could reasonably be expected to
cause or result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the shares of the
Stock.
(qq) The
Common Stock is listed on the NASDAQ Global Market and the Stock has been
approved for inclusion, subject to official notice of issuance, in the NASDAQ
Global Market. The Company has not received any notification of
delisting or that the Commission or NASDAQ is contemplating initiating delisting
procedures of the Common Stock.
(rr) A
registration statement pursuant to Section 12(g) of the Exchange Act to register
the Common Stock thereunder has been declared effective by the Commission
pursuant to the Exchange Act, and the Common Stock is duly registered thereunder
and the Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Stock under the Exchange Act and the
Company has not received any notification of termination of such registration
from the Commission.
(ss)
There are no holders of securities of the Company having rights to
registration thereof or preemptive rights to purchase Common Stock, except as
disclosed in the most recent Preliminary Prospectus.
(tt) The
Company and each of its subsidiaries have good and marketable title to all the
properties and assets reflected as owned in the consolidated financial
statements incorporated by reference into the most recent Preliminary
Prospectus, including, but not limited to, all tangible and intangible assets
acquired by the Company or any of its subsidiaries in any asset or equity
acquisition, which are subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those, if any, reflected in such consolidated
financial statements (or elsewhere in the Prospectus) or that are not material
to the Company and its subsidiaries taken as a whole, other than assets disposed
of since the date of such balance sheet in the ordinary course of
business. The Company and each of its subsidiaries hold their
respective leased properties that are material to the Company and its
subsidiaries taken as a whole under valid and binding leases.
13
(uu) There
is no material document of a character required to be described in the
Registration Statement or the most recent Preliminary Prospectus or to be filed
as an exhibit to the Registration Statement which is not described or filed as
required.
(vv) All
offers and sales of the Company’s issued and outstanding capital stock prior to
the date hereof were either (1) made pursuant to an effective registration
statement filed by the Company with the Commission under the Securities Act or
(2) at all relevant times exempt from the registration requirements of the
Securities Act and, in each case, were duly registered with or the subject of an
available exemption from the registration requirements of the applicable state
and local securities or blue sky laws.
(ww) The
Company and its subsidiaries are insured in the U.S., PRC and any other relevant
jurisdiction to the Company’s and its subsidiaries’ business by insurers of
national standing against such losses and risks and in such amounts as are
customary in the business in which they engage or propose to engage after giving
effect to the transactions as described in the most recent Preliminary
Prospectus. To the knowledge of the Company, all policies of
insurance and fidelity or surety bonds insuring the Company, its subsidiaries
and their respective businesses, assets, employees, officers and directors are
in full force and effect; and the Company and its subsidiaries are in compliance
with the terms of such policies and instruments in all material
respects.
(xx) The
Company has established and maintains disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Exchange Act) and such controls and
procedures are effective in ensuring that material information relating to the
Company, including its subsidiaries, is made known to the principal executive
officer and the principal financial officer. The Company has utilized
such controls and procedures in preparing and evaluating the disclosures
included or incorporated by reference in the Registration Statement and
Prospectus.
(yy) The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) amounts
reflected on the Company’s consolidated balance sheet for assets are compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(zz) Each
of the Company and its subsidiaries complies in all respects with PRC
advertising laws and related Legal Requirements, except where the failure to
comply with such Legal Requirements would not individually or in the aggregate
have a Material Adverse Effect.
14
(aaa) The
choice of laws of the State of New York as the governing law of this Agreement
is a valid choice under the laws of the PRC and will be honored by courts in the
PRC. The Company has the power to submit, and pursuant to Section 19
of this Agreement, has legally, validly, effectively and irrevocably submitted
to, the personal jurisdiction of the courts of the State of New York or the
courts of the United States of America located in the State of New York, in each
case, located in the Borough of Manhattan, City of New York, State of New
York.
(bbb) Neither
the Company, nor any subsidiary nor any of their respective properties, assets
or revenues has any right of immunity under PRC law, from any legal action, suit
or proceeding, from the giving of any relief in any such legal action, suit or
proceeding, from set-off or counterclaim, from the jurisdiction of any PRC,
state or U.S. federal 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 or
for the enforcement of a judgment, in any such court, with respect to its
obligations, liabilities or any other matter under or arising out of or in
connection with this Agreement; and, to the extent that the Company, or any
subsidiary or any of their respective properties, assets or revenues may have or
may hereafter become entitled to any such right of immunity in any such court in
which proceedings may at any time be commenced, each of the Company and the
subsidiaries waives or will waive such right to the extent permitted by law and
has consented to such relief and enforcement as provided in Section 20 of this
Agreement.
(ccc) It
is not necessary that this Agreement, the Registration Statement, the most
recent Preliminary Prospectus, the Prospectus or any other document be filed or
recorded with any Governmental Body in the PRC.
(ddd) The
Company (A) is in compliance, in all material respects, with any and all
applicable Legal Requirements promulgated by any and all Governmental Bodies
relating to the protection of human health and safety in the workplace (“Occupational Laws”); (B) has
received all material permits, licenses or other approvals required of it under
applicable Occupational Laws to conduct its business as currently conducted; and
(C) is in compliance, in all material respects, with all terms and conditions of
such permit, license or approval. No action, proceeding, revocation
proceeding, writ, injunction or claim is pending or, to the Company’s knowledge,
threatened against the Company relating to Occupational Laws, and to the
Company’s knowledge there are no facts, circumstances or developments relating
to its operations or cost accounting practices that could reasonably be expected
to form the basis for or give rise to such actions, suits, investigations or
proceedings.
15
(eee) The
Company and each of its subsidiaries has taken or is in the process of taking
all reasonable steps (to the extent required of the Company and each such
subsidiary under Legal Requirements of the PRC) to comply with, and to ensure
compliance by each of (i) its principal shareholders as disclosed in the
Registration Statement and Prospectus, and (ii) any other persons known to the
Company that are required to comply (in connection with their interests in the
Company) with applicable Legal Requirements of the relevant Governmental Body of
the PRC (including, without limitation, the Ministry of Commerce, National
Development and Reform Commission and the State Administration of Foreign
Exchange (“SAFE”))
relating to overseas investment by PRC residents and citizens or overseas
listings by offshore special purpose vehicles controlled directly or indirectly
by PRC companies and individuals, such as the Company (the “PRC Overseas Investment and Listing
Regulations”), including, without limitation, requesting such persons to
complete any registration and other procedures required under applicable PRC
Overseas Investment and Listing Regulations.
(fff) Each
of the Company and each of the Company’s directors that signed the Registration
Statement is aware of and has been advised as to, the content of the Rules on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors jointly
promulgated by the Ministry of Commerce (the “MOFCOM”), the State Assets
Supervision and Administration Commission, the State Tax Administration, the
State Administration of Industry and Commerce, the China Securities Regulatory
Commission (the “CSRC”)
and SAFE of the PRC on August 8, 2006 (the “M&A Rules”), in particular
the relevant provisions thereof which purport to require offshore special
purpose vehicles, or SPVs, formed for listing purposes and controlled directly
or indirectly by PRC companies or individuals, to obtain the approval of the
CSRC prior to the listing and trading of their securities on an overseas stock
exchange, and the relevant provisions thereof which purport to require foreign
companies acquiring PRC companies to obtain the approval of MOFCOM prior to the
acquisition by the foreign company of such PRC company; the Company has received
legal advice specifically with respect to the M&A Rules from its PRC counsel
and the Company understands such legal advice; and the Company has fully
communicated such legal advice from its PRC counsel to each of its directors
that signed the Registration Statement and each director has confirmed that he
or she understands such legal advice; and as of the date of the most recent
Preliminary Prospectus and as of the date of this Agreement, the M&A Rules
did not and do not apply to the issuance and sale of the Stock, the listing and
trading of the Stock on the NASDAQ Global Market, the consummation of the
transactions contemplated by this Agreement, nor is the CSRC, MOFCOM or other
PRC governmental approval required in connection with the above. The
Company and its subsidiaries have received all proper and necessary approvals,
permits and authorizations from government bodies for its business transactions,
including, without limitation, the Taiyu Transaction.
(ggg) The
entry into, and performance or enforcement of the this Agreement in accordance
with its terms will not subject the Underwriters to any requirement to be
licensed or otherwise qualified to do business in the PRC, nor will the
Underwriters be deemed to be resident, domiciled, carrying on business through
an establishment or place in the PRC or in breach of any laws or regulations in
the PRC by reason of entry into, performance or enforcement of this
Agreement.
16
(hhh) The
statements under the captions “Risk Factors—Risks Related to Doing Business in
China;” “Risk Factors—Risks Related to this Offering and Ownership of our Common
Stock;” “Risk Factors—Risks Related to our Business;” and “Description of
Securities and Securities We May Offer” in the Preliminary Prospectus and the
documents incorporated by reference therein and under Item 15 in the
Registration Statement, insofar as such statements constitute a summary of
documents referred to therein or matters of law or legal conclusions or
proceedings, are fair and accurate summaries of the matters described therein,
and (i) no material information has been omitted from such summaries which would
make the same misleading in any material respect, and (ii) nothing has come to
the attention of the Company that would lead it to believe that the CSRC is
taking any action to require the Company to seek its approval for the
consummation of the transactions contemplated under this Agreement or that would
otherwise have a Material Adverse Effect.
(iii) Except
as disclosed in the Registration Statement and the most recent Preliminary
Prospectus, there is neither pending nor, to the knowledge of the Company,
threatened, against the Company or any subsidiary any claim, action, suit, or
proceeding at all or in equity, arbitration, investigation or inquiry to which
the Company or any of its respective officers, directors or 5% or greater
security holder is a party and involving the Company’s or any subsidiary’s
properties or businesses, before or by any court, arbitration tribunal or
governmental instrumentality, agency, or body.
(jjj) The
Company has no debt securities or preferred stock that is rated by any
“nationally recognized statistical rating organization” (as that term is defined
by the Commission for purposes of Rule 436(g)(2) of the Rules and
Regulations).
(kkk) The
Company had a reasonable basis for, and made in good faith, each
“forward-looking statement” (within the meaning of Section 27A of the Act or
Section 21E of the Exchange Act) contained or incorporated by reference in the
Registration Statement and the most recent Preliminary Prospectus.
Any
certificate signed by any officer of the Company and delivered to the
Representative or counsel for the Underwriters in connection with the offering
of the Stock shall be deemed a representation and warranty by the Company, as to
matters covered thereby, to each Underwriter.
2. Purchase of the Stock by the
Underwriters. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Company agrees to sell 5,000,000 shares of the Firm Stock to the
several Underwriters, and each of the Underwriters, severally and not jointly,
agrees to purchase the number of shares of the Firm Stock set forth opposite
that Underwriter’s name in Schedule 1
hereto. The respective purchase obligations of the Underwriters with
respect to the Firm Stock shall be rounded among the Underwriters to avoid
fractional shares, as the Representative may determine.
In
addition, the Company grants to the Underwriters an option to purchase up to
750,000 additional shares of Option Stock. Such option is exercisable
in the event that the Underwriters sell more shares of Common Stock than the
number of Firm Stock in the offering and as set forth in Section 4
hereof. Each Underwriter agrees, severally and not jointly, to
purchase the number of shares of Option Stock (subject to such adjustments to
eliminate fractional shares as the Representative may determine) that bears the
same proportion to the total number of shares of Option Stock to be sold on such
Delivery Date as the number of shares of Firm Stock set forth in Schedule 1 hereto
opposite the name of such Underwriter bears to the total number of shares of
Firm Stock.
17
The price
to the public of both the Firm Stock and any Option Stock purchased by the
Underwriters shall be $5.00 per share.
The
Company shall not be obligated to deliver any of the Firm Stock or Option Stock
to be delivered on the applicable Delivery Date, except upon payment for all
such Stock to be purchased on such Delivery Date as provided
herein.
As
compensation to the Underwriters for their commitments hereunder, the Company,
will, on the applicable Delivery Date, pay to the Representative, for the
accounts of the several Underwriters, an amount equal to $0.25 per share for the
Stock to be delivered by the Company hereunder on such Delivery
Date.
3. Offering
of Stock by the Underwriters. Upon authorization by the
Representative of the release of the Firm Stock, the several Underwriters
propose to offer the Firm Stock for sale upon the terms and conditions to be set
forth in the Prospectus.
4. Delivery of and Payment for
the Stock. Delivery of and
payment for the Firm Stock shall be made at 10:00 A.M., New York City time, on
the third full business day following the date of this Agreement or at such
other date or place as shall be determined by agreement between the
Representative and the Company. This date and time are sometimes
referred to as the “Initial
Delivery Date.” Delivery of the Firm Stock shall be made to
the Representative for the account of each Underwriter against payment by the
several Underwriters through the Representative and of the respective aggregate
purchase prices of the Firm Stock being sold by the Company to or upon the order
of the Company of the purchase price by wire transfer in immediately available
funds to the accounts specified by the Company. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter
hereunder. The Company shall deliver the Firm Stock through the
facilities of DTC unless the Representative shall otherwise
instruct.
The
option granted in Section 2 will expire 30 days after the date of this Agreement
and may be exercised in whole or from time to time in part by written notice
being given to the Company proposes by the Representative; provided that if such date
falls on a day that is not a business day, the option granted in Section 2 will
expire on the next succeeding business day. Such notice shall set
forth the aggregate number of shares of Option Stock as to which the options is
being exercised, the names in which the shares of Option Stock are to be
registered, the denominations in which the shares of Option Stock are to be
issued and the date and time, as determined by the Representative, when the
shares of Option Stock are to be delivered; provided, however, that this
date and time shall not be earlier than the Initial Delivery Date nor earlier
than the second business day after the date on which the option shall have been
exercised nor later than the fifth business day after the date on which the
option shall have been exercised. Each date and time the shares of
Option Stock are delivered is sometimes referred to as an “Option Stock Delivery Date,”
and the Initial Delivery Date and any Option Stock Delivery Date are sometimes
each referred to as a “Delivery
Date.”
18
Delivery
of the Option Stock by the Company proposes and payment for the Option Stock by
the several Underwriters through the Representative shall be made at 10:00 A.M.,
New York City time, on the date specified in the corresponding notice described
in the preceding paragraph or at such other date or place as shall be determined
by agreement between the Representative and the Company. On the
Option Stock Delivery Date, the Company proposes shall deliver or cause to be
delivered the Option Stock to the Representative for the account of each
Underwriter against payment by the several Underwriters through the
Representative and of the respective aggregate purchase prices of the Option
Stock being sold by the Company proposes to or upon the order of the Company
proposes of the purchase price by wire transfer in immediately available funds
to the accounts specified by the Company proposes. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter
hereunder. The Company proposes shall deliver the Option Stock
through the facilities of DTC unless the Representative shall otherwise
instruct.
5. Further Agreements of the Company
and the Underwriters. (a) The Company agrees:
(i)
To prepare the Prospectus in a form approved by the Representative and to
file such Prospectus pursuant to Rule 424(b) under the Securities Act not later
than the Commission’s close of business on the second business day following the
execution and delivery of this Agreement; to make no further amendment or any
supplement to the Registration Statement or the Prospectus prior to the last
Delivery Date except as provided herein; to advise the Representative, promptly
after it receives notice thereof, of the time when any amendment or supplement
to the Registration Statement or the Prospectus has been filed and to furnish
the Representative with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Stock; to advise the Representative, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of the Prospectus or any Issuer Free Writing
Prospectus, of the suspension of the qualification of the Stock for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding or
examination for any such purpose or of any request by the Commission for the
amending or supplementing of the Registration Statement, the Prospectus or any
Issuer Free Writing Prospectus or for additional information; and, in the event
of the issuance of any stop order or of any order preventing or suspending the
use of the Prospectus or any Issuer Free Writing Prospectus or suspending any
such qualification, to use promptly its best efforts to obtain its
withdrawal;
(ii) To
furnish promptly to the Representative and to counsel for the Underwriters a
signed copy of the Registration Statement as originally filed with the
Commission, and each amendment thereto filed with the Commission, including all
consents and exhibits filed therewith;
19
(iii) To
deliver promptly to the Representative such number of the following documents as
the Representative shall reasonably request: (A) conformed copies of
the Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits other than this Agreement and
the computation of per share earnings), (B) each Preliminary Prospectus, the
Prospectus and any amended or supplemented Prospectus, (C) each Issuer Free
Writing Prospectus and (D) any document incorporated by reference in any
Preliminary Prospectus or the Prospectus; and, if the delivery of a prospectus
is required at any time after the date hereof in connection with the offering or
sale of the Stock or any other securities relating thereto and if at such time
any events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus or to file under the Exchange
Act any document incorporated by reference in the Prospectus in order to comply
with the Securities Act or the Exchange Act, to notify the Representative and,
upon their request, to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies as the
Representative may from time to time reasonably request of an amended or
supplemented Prospectus that will correct such statement or omission or effect
such compliance;
(iv) To
file promptly with the Commission any amendment or supplement to the
Registration Statement or the Prospectus that may, in the judgment of the
Company or the Representative, be required by the Securities Act or requested by
the Commission;
(v) Prior
to filing with the Commission any amendment or supplement to the Registration
Statement or the Prospectus, any document incorporated by reference in the
Prospectus or any amendment to any document incorporated by reference in the
Prospectus, to furnish a copy thereof to the Representative and counsel for the
Underwriters and obtain the consent of the Representative to the
filing;
(vi) Not
to make any offer relating to the Stock that would constitute an Issuer Free
Writing Prospectus without the prior written consent of the
Representative.
(vii) To
comply with all applicable requirements of Rule 433 with respect to any Issuer
Free Writing Prospectus; and if at any time after the date hereof any events
shall have occurred as a result of which any Issuer Free Writing Prospectus, as
then amended or supplemented, would conflict with the information in the
Registration Statement, the most recent Preliminary Prospectus or the Prospectus
or would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or, if for any
other reason it shall be necessary to amend or supplement any Issuer Free
Writing Prospectus, to notify the Representative and, upon their request, to
file such document and to prepare and furnish without charge to each Underwriter
as many copies as the Representative may from time to time reasonably request of
an amended or supplemented Issuer Free Writing Prospectus that will correct such
conflict, statement or omission or effect such compliance;
20
(viii) As
soon as practicable after the Effective Date and in any event not later than 16
months after the date hereof, to make generally available to the Company’s
security holders and to deliver to the Representative an earnings statement of
the Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations;
(ix) Promptly
from time to time to take such action as the Representative may reasonably
request to qualify the Stock for offering and sale under the securities laws of
Canada and such other jurisdictions as the Representative may request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Stock; provided that in connection
therewith the Company shall not be required to (i) qualify as a foreign
corporation in any jurisdiction in which it would not otherwise be required to
so qualify, (ii) file a general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any jurisdiction in which it
would not otherwise be subject;
(x) For
a period commencing on the date hereof and ending on the 90th day after the date
of the Prospectus (the “Lock-Up
Period”), not to, directly or indirectly, (1) offer for sale, sell,
pledge or otherwise dispose of (or enter into any transaction or device that is
designed to, or could be expected to, result in the disposition by any person at
any time in the future of) any shares of Common Stock or securities convertible
into or exchangeable for Common Stock (other than the Stock and shares issued
pursuant to employee benefit plans, qualified stock option plans or other
employee compensation plans existing on the date hereof or pursuant to currently
outstanding options, warrants or rights not issued under one of those plans), or
sell or grant options, rights or warrants with respect to any shares of Common
Stock or securities convertible into or exchangeable for Common Stock (other
than the grant of options pursuant to option plans existing on the date hereof),
(2) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of ownership
of such shares of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, (3) file or cause to be filed a registration
statement, including any amendments, with respect to the registration of any
shares of Common Stock or securities convertible, exercisable or exchangeable
into Common Stock or any other securities of the Company (other than any
registration statement on Form S-8) or (4) publicly disclose the intention to do
any of the foregoing, in each case without the prior written consent of Barclays
Capital Inc. on behalf of the Underwriters, and to cause each officer, director
and stockholder of the Company set forth on Schedule 3 hereto to
furnish to the Representative, prior to the Initial Delivery Date, a letter or
letters, substantially in the form of Exhibit A hereto (the
“Lock-Up Agreements”);
notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up
Period, the Company issues an earnings release or material news or a material
event relating to the Company occurs or (2) 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, then
the restrictions imposed in this paragraph shall continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings
release or the announcement of the material news or the occurrence of the
material event, unless Barclays Capital Inc., on behalf of the Underwriters,
waive such extension in writing;
21
(xi) To
apply the net proceeds from the sale of the Stock being sold by the Company as
set forth in the Prospectus;
(b) Each
Underwriter severally agrees that such Underwriter shall not include any “issuer
information” (as defined in Rule 433) in any “free writing prospectus” (as
defined in Rule 405) used or referred to by such Underwriter without the prior
consent of the Company (any such issuer information with respect to whose use
the Company has given its consent, “Permitted Issuer
Information”); provided that (i) no such
consent shall be required with respect to any such issuer information contained
in any document filed by the Company with the Commission prior to the use of
such free writing prospectus and (ii) “issuer information,” as used in this
Section 5(b), shall not be deemed to include information prepared by or on
behalf of such Underwriter on the basis of or derived from issuer
information.
6. Expenses. The
Company agrees, whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, to pay all costs, expenses,
fees and taxes incident to and in connection with (a) the authorization,
issuance, sale and delivery of the Stock and any stamp duties or other taxes
payable in that connection, and the preparation and printing of certificates for
the Stock; (b) the preparation, printing and filing under the Securities Act of
the Registration Statement (including any exhibits thereto), any Preliminary
Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any amendment
or supplement thereto; (c) the distribution of the Registration Statement
(including any exhibits thereto), any Preliminary Prospectus, the Prospectus,
any Issuer Free Writing Prospectus and any amendment or supplement thereto, or
any document incorporated by reference therein, all as provided in this
Agreement; (d) the production and distribution of this Agreement, any
supplemental agreement among Underwriters, and any other related documents in
connection with the offering, purchase, sale and delivery of the Stock; (f) any
required review by the Financial Industry Regulatory Authority
(“FINRA”) of the terms
of sale of the Stock (including related fees and expenses of counsel to the
Underwriters); (g) the inclusion of the Stock on The NASDAQ Global
Market; (h) the qualification of the Stock under the securities laws of the
several jurisdictions as provided in Section 5(a)(ix) and the preparation,
printing and distribution of any Blue Sky Memorandum (including related fees and
expenses of counsel to the Underwriters); (i) the preparation, printing and
distribution of one or more versions of the Preliminary Prospectus and the
Prospectus for distribution in Canada, often in the form of a Canadian “wrapper”
(including related fees and expenses of Canadian counsel to the Underwriters);
(k) the investor presentations on any “road show” undertaken in connection with
the marketing of the Stock, including, without limitation, expenses associated
with any electronic roadshow, travel and lodging expenses of the the Company’s
representatives and officers; and (l) all other costs and expenses incident to
the performance of the obligations of the Company.
22
7.
Conditions of Underwriters’
Obligations. The respective obligations of the
Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and
conditions:
(a) The
Prospectus shall have been timely filed with the Commission in accordance with
Section 5(a)(i); the Company shall have complied with all filing requirements
applicable to any Issuer Free Writing Prospectus used or referred to after the
date hereof; no stop order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of the Prospectus or any Issuer
Free Writing Prospectus shall have been issued and no proceeding or examination
for such purpose shall have been initiated or threatened by the Commission; and
any request of the Commission for inclusion of additional information in the
Registration Statement or the Prospectus or otherwise shall have been complied
with.
(b) No
Underwriter shall have discovered and disclosed to the Company on or prior to
such Delivery Date that the Registration Statement, the Prospectus or the
Pricing Disclosure Package, or any amendment or supplement thereto, contains an
untrue statement of a fact which, in the opinion of Xxxxxxxx & Xxxxxxxx LLP,
counsel for the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All
corporate proceedings and other legal matters incident to the authorization,
form and validity of this Agreement, the Stock, the Registration Statement, the
Prospectus and any Issuer Free Writing Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the
Underwriters, and the Company shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass upon
such matters.
(d) The
Xxxxxx Law Firm, PLLC shall have furnished to the Representative its written
opinion, as counsel to the Company, addressed to the Underwriters and dated such
Delivery Date, in form and substance reasonably satisfactory to the
Representative, substantially in the form attached hereto as Exhibit
B-1.
(e) Holland
& Xxxx LLP, shall have furnished to the Representative its written opinion,
as special Nevada counsel for the Company, addressed to the Underwriters and
dated such Delivery Date, in form and substance reasonably satisfactory to the
Representative, substantially in the form attached hereto as Exhibit
B-2
(f) Bejing
Rhondos Law Firm, PRC, shall have furnished to the Representative its written
opinion, as PRC counsel for the Company, addressed to the Underwriters and dated
such Delivery Date, in form and substance reasonably satisfactory to the
Representative, substantially in the form attached hereto as Exhibit
B-3.
23
(g) The
Representative shall have received from Xxxxxxxx & Xxxxxxxx LLP, counsel for
the Underwriters, such opinion or opinions, dated such Delivery Date, with
respect to the issuance and sale of the Stock, the Registration Statement, the
Prospectus and the Pricing Disclosure Package and other related matters as the
Representative may reasonably require, and the Company shall have furnished to
such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(h) At
the time of execution of this Agreement, the Representative shall have received
from Goldman Xxxxxxx Xxxxxxx, LLP a letter, in form and substance satisfactory
to the Representative, addressed to the Underwriters and dated the date hereof
(i) confirming that they are independent public accountants within the meaning
of the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, and (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the most recent Preliminary
Prospectus, as of a date not more than three days prior to the date hereof), the
conclusions and findings of such firm with respect to the financial information
and other matters ordinarily covered by accountants’ “comfort letters” to
underwriters in connection with registered public offerings.
(i)
With respect to the letter of Goldman Xxxxxxx Xxxxxxx,
LLP referred to in the preceding paragraph and delivered to the Representative
concurrently with the execution of this Agreement (the “initial letter”), the Company
shall have furnished to the Representative a letter (the “bring-down letter”) of such
accountants, addressed to the Underwriters and dated such Delivery Date (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than three days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii) confirming
in all material respects the conclusions and findings set forth in the initial
letter.
(j) The
Company shall have furnished to the Representative a certificate, dated such
Delivery Date, of its Chief Executive Officer and its Chief Financial Officer
stating that:
(i) The
representations, warranties and agreements of the Company in Section 1 are true
and correct on and as of the such Delivery Date, and the Company has complied
with all its agreements contained herein and satisfied all the conditions on its
part to be performed or satisfied hereunder at or prior to such Delivery
Date;
24
(ii) No
stop order suspending the effectiveness of the Registration Statement has been
issued; and no proceedings or examination for that purpose have been instituted
or, to the knowledge of such officers, threatened; and
(iii) They
have carefully examined the Registration Statement, the Prospectus and the
Pricing Disclosure Package, and, in their opinion, (A) (1) the Registration
Statement, as of the Effective Date, (2) the Prospectus, as of its date and on
the applicable Delivery Date, or (3) the Pricing Disclosure Package, as of the
Applicable Time, did not and do not contain any untrue statement of a material
fact and did not and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (except in the case of the
Registration Statement, in the light of the circumstances under which they were
made) not misleading, and (B) since the Effective Date, no event has occurred
that should have been set forth in a supplement or amendment to the Registration
Statement, the Prospectus or any Issuer Free Writing Prospectus that has not
been so set forth;
(k) (i)
neither the Company nor any of its subsidiaries shall have sustained, since the
date of the latest audited financial statements included or incorporated by
reference in the most recent Preliminary Prospectus, any 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 or (ii) since such date there shall not have been any change in
the capital stock, long-term debt, net current assets or short-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, stockholders’ equity, properties, management, business or
prospects of the Company and its subsidiaries taken as a whole, the effect of
which, in any such case described in clause (i) or (ii), is, in the judgment of
the Representative, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Stock
being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(l)
Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the Nasdaq Global Market or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or
materially limited or the settlement of such trading generally shall have been
materially disrupted or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by federal or state authorities, (iii) the
United States shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv) there
shall have occurred such a material adverse change in general economic,
political or financial conditions, including, without limitation, as a result of
terrorist activities after the date hereof (or the effect of international
conditions on the financial markets in the United States shall be such), as to
make it, in the judgment of the Representative, impracticable or inadvisable to
proceed with the public offering or delivery of the Stock being delivered on
such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
25
(m) The
NASDAQ Global Market shall have approved the Stock for inclusion, subject only
to official notice of issuance.
(n) The
Lock-Up Agreements between the Representative and the officers, directors and
stockholders of the Company set forth on Schedule 3, delivered
to the Representative on or before the date of this Agreement, shall be in full
force and effect on such Delivery Date.
All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to
counsel for the Underwriters.
8.
Indemnification and
Contribution.
(a) The
Company and its subsidiaries shall indemnify and hold harmless each Underwriter,
its directors, officers and employees and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Stock), to which that
Underwriter, director, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in (A) any
Preliminary Prospectus, the Registration Statement, the Prospectus or in any
amendment or supplement thereto, (B) any Issuer Free Writing Prospectus or in
any amendment or supplement thereto or (C) any Permitted Issuer Information used
or referred to in any “free writing prospectus” (as defined in Rule 405) used or
referred to by any Underwriter, (D) any “road show” (as defined in Rule 433) not
constituting an Issuer Free Writing Prospectus (a “Non-Prospectus Road Show”) or
(E) any Blue Sky application or other document prepared or executed by the
Company (or based upon any written information furnished by the Company for use
therein) specifically for the purpose of qualifying any or all of the Stock
under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a “Blue Sky Application”) or (ii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in
any amendment or supplement thereto or in any Permitted Issuer Information, any
Non-Prospectus Road Show or any Blue Sky Application, any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Underwriter and each such director, officer, employee
or controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, director, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company and
its subsidiaries shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement, the Prospectus,
any Issuer Free Writing Prospectus or in any such amendment or supplement
thereto or in any Permitted Issuer Information, any Non-Prospectus Road Show or
any Blue Sky Application, in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company through the
Representative by or on behalf of any Underwriter specifically for inclusion
therein, which information consists solely of the information specified in
Section 8(e). The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Underwriter or to any
director, officer, employee or controlling person of that
Underwriter.
26
(b) Each
Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, its directors, officers and employees, and each person, if any, who
controls the Company within the meaning of Section 15 of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer, employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in
any amendment or supplement thereto or in any Non-Prospectus Road Show or Blue
Sky Application, or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer
Free Writing Prospectus or in any amendment or supplement thereto or in any
Non-Prospectus Road Show or Blue Sky Application, any material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Underwriter furnished to the
Company through the Representative by or on behalf of that Underwriter
specifically for inclusion therein, which information is limited to the
information set forth in Section 8(e). The foregoing indemnity
agreement is in addition to any liability that any Underwriter may otherwise
have to the Company or any such director, officer, employee or controlling
person.
27
(c) Promptly
after receipt by an indemnified party under this Section 8 of notice of any
claim or the commencement of any action, the indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the claim or the
commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section
8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the
indemnified party shall have the right to employ counsel to represent jointly
the indemnified party and those other indemnified parties and their respective
directors, officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
under this Section 8 if (i) the indemnified party and the indemnifying party
shall have so mutually agreed; (ii) the indemnifying party has failed within a
reasonable time to retain counsel reasonably satisfactory to the indemnified
party; (iii) the indemnified party and its directors, officers, employees and
controlling persons shall have reasonably concluded that there may be legal
defenses available to them that are different from or in addition to those
available to the indemnifying party; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the indemnified
parties or their respective directors, officers, employees or controlling
persons, on the one hand, and the indemnifying party, on the other hand, and
representation of both sets of parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, and
in any such event the fees and expenses of such separate counsel shall be paid
by the indemnifying party. No indemnifying party shall (i) without
the prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and does not include any
findings of fact or admissions of fault or culpability as to the indemnified
party, or (ii) be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
28
(d) If
the indemnification provided for in this Section 8 shall for any reason be
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a), 8(b) or 8(c) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Underwriters, on the other, from the offering
of the Stock or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand, and the Underwriters, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other, with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Stock purchased under this Agreement (before
deducting expenses) received by the Company, as set forth in the table on the
cover page of the Prospectus, on the one hand, and the total underwriting
discounts and commissions received by the Underwriters with respect to the
shares of the Stock purchased under this Agreement, as set forth in the table on
the cover page of the Prospectus, on the other hand. The relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriters, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 8(d)
shall be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8(d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the net proceeds from the
sale of the Stock underwritten by it exceeds the amount of any damages that such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The
Underwriters’ obligations to contribute as provided in this Section 8(d) are
several in proportion to their respective underwriting obligations and not
joint.
(e) The
Underwriters severally confirm and the Company acknowledges and agrees that the
statements regarding delivery of shares by the Underwriters set forth on the
cover page of, and the concession and reallowance figures and the paragraph
relating to stabilization by the Underwriters appearing under the caption
“Underwriting” in, the most recent Preliminary Prospectus and the Prospectus are
correct and constitute the only information concerning such Underwriters
furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in any Preliminary Prospectus, the Registration
Statement, the Prospectus, any Issuer Free Writing Prospectus or in any
amendment or supplement thereto or in any Non-Prospectus Road
Show.
29
9.
Defaulting
Underwriters. If, on any Delivery Date, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Stock
that the defaulting Underwriter agreed but failed to purchase on such Delivery
Date in the respective proportions which the number of shares of the Firm Stock
set forth opposite the name of each remaining non-defaulting Underwriter in
Schedule 1
hereto bears to the total number of shares of the Firm Stock set forth opposite
the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that
the remaining non-defaulting Underwriters shall not be obligated to purchase any
of the Stock on such Delivery Date if the total number of shares of the Stock
that the defaulting Underwriter or Underwriters agreed but failed to purchase on
such date exceeds 9.09% of the total number of shares of the Stock to be
purchased on such Delivery Date, and any remaining non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the number of shares of the
Stock that it agreed to purchase on such Delivery Date pursuant to the terms of
Section 2. If the foregoing maximums are exceeded, the remaining
non-defaulting Underwriters, or those other underwriters satisfactory to the
Representative who so agree, shall have the right, but shall not be obligated,
to purchase, in such proportion as may be agreed upon among them, all the Stock
to be purchased on such Delivery Date. If the remaining Underwriters
or other underwriters satisfactory to the Representative do not elect to
purchase the shares that the defaulting Underwriter or Underwriters agreed but
failed to purchase on such Delivery Date, this Agreement (or, with respect to
any Option Stock Delivery Date, the obligation of the Underwriters to purchase,
and of the Company to sell, the Option Stock) shall terminate without liability
on the part of any non-defaulting Underwriter or the Company, except that the
Company will continue to be liable for the payment of expenses to the extent set
forth in Sections 6 and 11. As used in this Agreement, the term
“Underwriter” includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto
that, pursuant to this Section 9, purchases Stock that a defaulting Underwriter
agreed but failed to purchase.
Nothing
contained herein shall relieve a defaulting Underwriter of any liability it may
have to the Company for damages caused by its default. If other
Underwriters are obligated or agree to purchase the Stock of a defaulting or
withdrawing Underwriter, either the Representative or the Company may postpone
the Delivery Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. Termination. The
obligations of the Underwriters hereunder may be terminated by the
Representative by notice given to and received by the Company prior to delivery
of and payment for the Firm Stock if, prior to that time, any of the events
described in Sections 7(k) and 7(l) shall have occurred or if the Underwriters
shall decline to purchase the Stock for any reason permitted under this
Agreement.
11. Reimbursement of Underwriters’
Expenses. If the Company shall fail to tender the Stock
for delivery to the Underwriters for any reason or (b) the Underwriters shall
decline to purchase the Stock for any reason permitted under this Agreement, the
Company will reimburse the Underwriters for all reasonable out-of-pocket
expenses (including fees and disbursements of counsel) incurred by the
Underwriters in connection with this Agreement and the proposed purchase of the
Stock, and upon demand the Company shall pay the full amount thereof to the
Representative. If this Agreement is terminated pursuant to Section 9
by reason of the default of one or more Underwriters, the Company shall not be
obligated to reimburse any defaulting Underwriter on account of those
expenses.
30
12. Research Analyst Independence.
The Company acknowledges that the Underwriters’ research analysts and
research departments are required to be independent from their respective
investment banking divisions and are subject to certain regulations and internal
policies, and that such Underwriters’ research analysts may hold views and make
statements or investment recommendations and/or publish research reports with
respect to the Company and/or the offering that differ from the views of their
respective investment banking divisions. The Company hereby waives
and releases, to the fullest extent permitted by law, any claims that the
Company may have against the Underwriters with respect to any conflict of
interest that may arise from the fact that the views expressed by their
independent research analysts and research departments may be different from or
inconsistent with the views or advice communicated to the Company by such
Underwriters’ investment banking divisions. The Company acknowledges
that each of the Underwriters is a full service securities firm and as such from
time to time, subject to applicable securities laws, may effect transactions for
its own account or the account of its customers and hold long or short positions
in debt or equity securities of the companies that may be the subject of the
transactions contemplated by this Agreement.
13. No Fiduciary
Duty. The Company acknowledge and agree that in connection
with this offering, sale of the Stock or any other services the Underwriters may
be deemed to be providing hereunder, notwithstanding any preexisting
relationship, advisory or otherwise, between the parties or any oral
representations or assurances previously or subsequently made by the
Underwriters: (i) no fiduciary or agency relationship between the
Company and any other person, on the one hand, and the Underwriters, on the
other, exists; (ii) the Underwriters are not acting as advisors, expert or
otherwise, to the Company including, without limitation, with respect to the
determination of the public offering price of the Stock, and such relationship
between the Company on the one hand, and the Underwriters, on the other, is
entirely and solely commercial, based on arms-length negotiations; (iii) any
duties and obligations that the Underwriters may have to the Company shall be
limited to those duties and obligations specifically stated herein; and (iv) the
Underwriters and their respective affiliates may have interests that differ from
those of the Company. The Company hereby waives any claims that the
Company may have against the Underwriters with respect to any breach of
fiduciary duty in connection with this offering.
14. Notices,
Etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if
to the Underwriters, shall be delivered or sent by mail or facsimile
transmission to Barclays Capital Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Syndicate Registration (Fax: 000-000-0000), with a
copy, in the case of any notice pursuant to Section 8(c), to the Director of
Litigation, Office of the General Counsel, Barclays Capital Inc., 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; and
(b) if
to the Company, shall be delivered or sent by mail or facsimile transmission to
the address of the Company set forth in the Registration Statement, Attention:
Chief Executive Officer (Fax: 00 00 00000000), with a copy, which shall not
constitute notice, to Xxxxxx Xxxxxx, The Xxxxxx Law Firm, PLLC, 00 Xxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, XX 00000 (Fax: 000-000-0000).
31
Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof. The Company shall be entitled to act and rely upon
any request, consent, notice or agreement given or made on behalf of the
Underwriters by Barclays Capital Inc. on behalf of the
Representative.
15. Persons Entitled to Benefit of
Agreement. This Agreement shall inure to the benefit of
and be binding upon the Underwriters, the Company, and their respective
successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that (A) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the directors, officers
and employees of the Underwriters and each person or persons, if any, who
control any Underwriter within the meaning of Section 15 of the Securities Act
and (B) the indemnity agreement of the Underwriters contained in Section 8(b) of
this Agreement shall be deemed to be for the benefit of the directors of the
Company, the officers of the Company who have signed the Registration Statement
and any person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
15, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
16. Survival. The
respective indemnities, representations, warranties and agreements of the
Company and the Underwriters contained in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall survive the delivery of
and payment for the Stock and shall remain in full force and effect, regardless
of any investigation made by or on behalf of any of them or any person
controlling any of them.
17. Definition of the Terms “Business
Day” and “Subsidiary”. For purposes of this Agreement,
(a) “business day” means
each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close and (b) “subsidiary” has the meaning
set forth in Rule 405.
18. Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
19. Submission to Jurisdiction, Etc.
The Company hereby submits to the non-exclusive jurisdiction of the U.S.
federal and New York state courts in the Borough of Manhattan, The City of New
York in any suit or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby. The parties hereby irrevocably
and unconditionally waive any objection to the laying of venue of any lawsuit,
action or other proceeding in such courts, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such lawsuit, action or other proceeding brought in any such court has been
brought in an inconvenient forum. The Company and irrevocably
appoints CT Corporation System, 000 Xxxxxx Xxxxxx, Xxx Xxxx, X.X. 00000, as its
authorized agent in the Borough of Manhattan, The City of New York, New York
upon which process may be served in any such suit or proceeding, and agrees that
service of process upon such agent, and written notice of said service to the
Company, by the person serving the same to the address provided in Section 14
shall be deemed in every respect effective service of process upon the Company
in any such suit or proceeding. The Company further agrees to take
any and all actions as may be necessary to maintain such designation and
appointment of such agent in full force and effect for a period of seven years
from the date of this Agreement.
32
20. Waiver of
Immunity. With respect to any suit or proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled, and with respect to any such suit or
proceeding, each party waives any such immunity in any court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any such
immunity at or in respect of any such suit or proceeding, including, without
limitation, any immunity pursuant to the U.S. Foreign Sovereign Immunities Act
of 1976, as amended.
21. Judgment Currency. The obligation of the
Company in respect of any sum due to any Underwriter under this Agreement shall,
notwithstanding any judgment in a currency other than U.S. dollars or any other
applicable currency (the “Judgment Currency”), not be
discharged until the first business day, following receipt by such Underwriter
of any sum adjudged to be so due in the Judgment Currency, on which (and only to
the extent that) such Underwriter may in accordance with normal banking
procedures purchase U.S. dollars or any other applicable currency with the
Judgment Currency; if the U.S. dollars or other applicable currency so purchased
are less than the sum originally due to such Underwriter hereunder, the Company
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Underwriter against such loss. If the U.S. dollars or
other applicable currency so purchased are greater than the sum originally due
to such Underwriter hereunder, such Underwriter agrees to pay to the Company an
amount equal to the excess of the U.S. dollars or other applicable currency so
purchased over the sum originally due to such Underwriter
hereunder.
22. Counterparts. This
Agreement may be executed in one or more counterparts and, if executed in more
than one counterpart, the executed counterparts shall each be deemed to be an
original but all such counterparts shall together constitute one and the same
instrument.
23. Headings. The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
33
If the
foregoing correctly sets forth the agreement between among the Company and the
Underwriters, please indicate your acceptance in the space provided for that
purpose below.
|
Very
truly yours,
|
||
|
SMARTHEAT,
INC.
|
||
|
By:
|
/s/ Xxx Xxxx
|
|
|
Name:
Xxxxx Xxx Xxxx
|
||
|
Title:
Chief Executive Officer
|
||
34
Accepted:
Barclays
Capital Inc.
For
themselves and as Representative
of the
several Underwriters named
in
Schedule 1 hereto
|
By
Barclays
Capital Inc.
|
|
|
By:
|
/s/ Xxxxxxx Xxxxxxx
|
|
Authorized
Representative
|
|
35
SCHEDULE
1
|
Underwriters
|
Number of Shares of
Firm Stock
|
|||
|
Barclays
Capital Inc.
|
3,500,000 | |||
|
Xxxxxxxxxxx
& Co. Inc.
|
1,500,000 | |||
|
Total
|
5,000,000 | |||
SCHEDULE
2
Issuer
Free Writing Prospectus:
Electronic
Investor Presentation, dated November 2010.
SCHEDULE
3
PERSONS
DELIVERING LOCK-UP AGREEMENTS
Directors
Xxxxxx
Xxxxxxx
Xxxxxx
Xxxx
Xxxxxx
Xxx
Xxx
Xx
Officers
Xxx
Xxxx
Xxxxxxx
Xxx
Huajun
Ai
Xxxxxx
Xxxx
Stockholders
Beijing
YSKN Machinery & Electronic Equipment Co. Ltd.
Yang In
Cheol
ShenYang
ZhiCe Investment Co., Ltd
SCHEDULE
4
ORALLY
CONVEYED PRICING INFORMATION
1. Public offering price: $5.00
per share
2. Number of shares offered:
5,000,000 shares
Exhibit
A
LOCK-UP
LETTER AGREEMENT
Barclays
Capital Inc.
As
Representative of the several
Underwriters
named in Schedule 1,
c/o
Barclays Capital Inc.
000
Xxxxxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
The
undersigned understands that you and certain other firms (the “Underwriters”) propose to
enter into an Underwriting Agreement (the “Underwriting Agreement”)
providing for the purchase by the Underwriters of shares (the “Stock”) of Common Stock, par
value $0.001 per share (the “Common Stock”), of SmartHeat
Inc., a Nevada corporation (the “Company”), and that the
Underwriters propose to reoffer the Stock to the public (the “Offering”).
In
consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that, without the prior written consent of Barclays
Capital Inc. on behalf of the Underwriters, the undersigned will not, directly
or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected
to, result in the disposition by any person at any time in the future of) any
shares of Common Stock (including, without limitation, shares of Common Stock
that may be deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange Commission and
shares of Common Stock that may be issued upon exercise of any options or
warrants) or securities convertible into or exercisable or exchangeable for
Common Stock, (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or risks
of ownership of shares of Common Stock, whether any such transaction described
in clause (1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, (3)
make any demand for or exercise any right or cause to be filed a registration
statement, including any amendments thereto, with respect to the registration of
any shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock or any other securities of the Company or (4)
publicly disclose the intention to do any of the foregoing, for a period
commencing on the date hereof and ending on the 90th day after the date of the
Prospectus relating to the Offering (such 90-day period, the “Lock-Up
Period”).
The
foregoing shall not apply to bona fide gifts, sales or other dispositions of
shares of any class of the Company’s capital stock, in each case that are made
exclusively between and among the undersigned or members of the undersigned’s
family, or affiliates of the undersigned, including its partners (if a
partnership) or members (if a limited liability company); provided that it shall
be a condition to any such transfer that (i) the transferee/donee agrees to be
bound by the terms of the lock-up letter agreement (including, without
limitation, the restrictions set forth in the preceding sentence) to the same
extent as if the transferee/donee were a party hereto, (ii) no filing by any
party (donor, donee, transferor or transferee) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), shall be
required or shall be voluntarily made in connection with such transfer or
distribution (other than a filing on a Form 5, Schedule 13D or Schedule 13G (or
13D-A or 13G-A) made after the expiration of the 90-day period referred to
above), (iii) each party (donor, donee, transferor or transferee)
shall not be required by law (including without limitation the disclosure
requirements of the Securities Act of 1933, as amended, and the Exchange Act) to
make, and shall agree to not voluntarily make, any public announcement of the
transfer or disposition, and (iv) the undersigned notifies Barclays Capital Inc.
at least two business days prior to the proposed transfer or
disposition.
Notwithstanding
the foregoing, if (1) during the last 17 days of the Lock-Up Period, the Company
issues an earnings release or material news or a material event relating to the
Company occurs or (2) 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, then the restrictions imposed
by this Lock-Up Letter Agreement shall continue to apply until the expiration of
the 18-day period beginning on the issuance of the earnings release or the
announcement of the material news or the occurrence of the material event,
unless Barclays Capital Inc. waives such extension in writing. The
undersigned hereby further agrees that, prior to engaging in any transaction or
taking any other action that is subject to the terms of this Lock-Up Letter
Agreement during the period from the date of this Lock-Up Letter Agreement to
and including the 34th day
following the expiration of the Lock-Up Period, it will give notice thereof to
the Company and will not consummate such transaction or take any such action
unless it has received written confirmation from the Company that the Lock-Up
Period (as such may have been extended pursuant to this paragraph) has
expired.
In
furtherance of the foregoing, the Company and its transfer agent are hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Lock-Up Letter Agreement.
It is
understood that, if the Company notifies the Underwriters that it does not
intend to proceed with the Offering, if the Underwriting Agreement does not
become effective, 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 Stock, the undersigned will be released from its
obligations under this Lock-Up Letter Agreement.
The
undersigned understands that the Company and the Underwriters will proceed with the Offering
in reliance on this Lock-Up Letter Agreement.
2
Whether
or not the Offering actually occurs depends on a number of factors, including
market conditions. Any Offering will only be made pursuant to an
Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Underwriters.
[Signature
page follows]
3
The
undersigned hereby represents and warrants that the undersigned has full power
and authority to enter into this Lock-Up Letter Agreement and that, upon
request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
|
Very
truly yours,
|
||
|
By:
|
|
|
|
Name:
|
||
|
Title:
|
||
Dated: _______________
4
[REMAINDER
OF EXHIBITS INTENTIONALLY OMITTED FROM FILING]
