4,000,000 Shares of Common Stock
ASIA ELECTRONICS HOLDING CO., INC.
UNDERWRITING AGREEMENT
________ __, 1997
Barington Capital Group, L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigneds, Asia Electronics Holding Co. Inc., a British
Virgin Islands corporation (the "Company"), and Quingsong Du ("Mr. Du") hereby
confirm their agreement with you (the "Underwriter") in connection with the
proposed offering of certain of the Company's securities to the public (the
"Offering") as follows:
1. Introductory. The Company proposes to issue and sell to the
Underwriter 4,000,000 shares of Common Stock par value $.01 per share, of the
Company (the "Common Stock"). In addition, solely for the purpose of covering
over-allotments, the Company proposes to grant the Underwriter the option to
purchase from the Company up to an additional 600,000 shares of Common Stock
(the "Additional Stock") identical to the Common Stock. The Common Stock is more
fully described in the Prospectus referred to below.
2. Representations and Warranties of the Company, the Subsidiaries and
Mr. Du. The Company, each of the Subsidiaries (as defined below) and Mr. Du,
jointly and severally, represent and warrant to, as of the date hereof, the
Closing Date and the Additional Closing Date (as defined below in Section 3),
and agree with, the Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), a registration statement, and may have filed one
or more amendments thereto, on Form F-1 (Registration No. _________),
including in such registration statement and each such amendment and
related preliminary prospectus (a "Preliminary Prospectus"), the
registration of (i) the 4,000,000 shares of Common Stock
(the "Firm Stock"), (ii) the Additional Stock, (iii) the Common Stock
purchase options referred to in Section 5(u) (the "Underwriter's
Options"), (iv) the shares of Common Stock (the "Underwriter's Stock")
issuable upon exercise of the Underwriter's Options, (v) the options to
purchase Common Stock referred to in Section 5(v) (the "Advisor's
Options") and the shares of Common Stock (the "Advisor's Stock")
issuable upon exercise of the Advisor's Options (the Firm Stock, the
Additional Stock, the Underwriter's Options, the Underwriter's Stock,
the Advisor's Options and the Advisor's Stock are collectively referred
to as the "Securities"). The Company may also file a related
registration statement with the Commission pursuant to Rule 462(b)
under the Act for the purpose of registering certain additional shares
of Common Stock, which Rule 462(b) Registration Statement (as
hereinafter defined) shall be effective upon filing with the
Commission. As used in this Agreement, the term "Original Registration
Statement" means the registration statement referred to in the first
sentence of this paragraph 2(a), as amended, on file with the
Commission at the time such registration statement becomes effective
(including the prospectus, financial statements, exhibits, and all
other documents filed as a part thereof), provided that such Original
Registration Statement, at the time it becomes effective, may omit such
information as is permitted to be omitted from the Original
Registration Statement when it becomes effective pursuant to Rule 430A
of the General Rules and Regulations promulgated under the Act (the
"Regulations"), which information ("Rule 430A Information") shall be
deemed to be included in such Original Registration Statement when a
final prospectus is filed with the Commission in accordance with Rules
430A and 424(b)(1) or (4) of the Regulations; the term "Rule 462(b)
Registration Statement" means any registration statement filed with the
Commission pursuant to Rule 462(b) under the Act (including the
Preliminary Prospectus or Prospectus included therein at the time the
Original Registration Statement becomes effective); the term
"Registration Statement" includes both the Original Registration
Statement and any Rule 462(b) Registration Statement; the term
"Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes
effective under the Act, the form of prospectus omitting Rule 430A
Information included in the Registration Statement when it becomes
effective, if applicable (the "Rule 430A Prospectus"), and any
prospectus filed by the Company with your consent pursuant to Rule
424(a) of the Regulations; and the term "Prospectus" means the final
prospectus included as part of the Registration Statement, except that
if the prospectus relating to the securities covered by the
Registration Statement in the form first filed on behalf of the Company
with the Commission pursuant to Rule 424(b) of the Regulations shall
differ from such final prospectus, the term "Prospectus" shall mean the
2
prospectus as filed pursuant to Rule 424(b) from and after the date on
which it shall have first been used.
(b) When the Registration Statement becomes effective, and at
all times subsequent thereto and including the Closing Date (as defined
in Section 3) and each Additional Closing Date (as defined in Section
3), and during such longer period as the Prospectus may be required to
be delivered in connection with sales by the Underwriter or a dealer,
and during such longer period until any post-effective amendment
thereto shall become effective, the Registration Statement (and any
post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any
amendment or supplement to the Registration Statement or the
Prospectus) will contain all statements which are required to be stated
therein in accordance with the Act and the Regulations, will comply
with the Act and the Regulations, and will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and no event will have occurred which should
have been set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not then been set forth in such
an amendment or supplement; if a Rule 430A Prospectus is included in
the Registration Statement at the time it becomes effective, the
Prospectus filed pursuant to Rules 430A and 424 (b) (1) or (4) will
contain all Rule 430A Information and all statements which are required
to be stated therein in accordance with the Act or the Regulations,
will comply with the Act and the Regulations, and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; and each Preliminary Prospectus, as of the date
filed with the Commission, did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
except that no representation or warranty is made in this Section 2(b)
with respect to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company as stated
in Section 8(b) with respect to the Underwriter by the Underwriter
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto.
(c) Neither the Commission nor any "blue sky" or securities
authority of any jurisdiction has issued an order (a "Stop Order")
suspending the effectiveness of the Registration Statement, preventing
or suspending the use of any Preliminary Prospectus, the Prospectus,
the Registration Statement, or any amendment or supplement thereto,
refusing to permit the effectiveness of the Registration Statement,
3
or suspending the registration or qualification of any of the
Securities, nor has any of such authorities instituted or threatened to
institute any proceedings with respect to a Stop Order.
(d) Any contract, agreement, instrument, lease, or license
required to be described in the Registration Statement or the
Prospectus has been properly described therein. Any contract,
agreement, instrument, lease, or license required to be filed as an
exhibit to the Registration Statement has been filed with the
Commission as an exhibit to the Registration Statement.
(e) The Company has no subsidiaries (as defined in the
Regulations) other than Xianyang Daming Electronics Co. Ltd.
("Daming"), Xianyang Yongxin Electronics Co. Ltd. ("Yongxin"), and as
of the Closing Date, Yantai Daewoo Electronics Components Co., Ltd.
("Yantai") and Dnon Tech Special Electronic Technical Co., Ltd. ("Dnon
Tech") (each individually, a "Subsidiary", and collectively, the
"Subsidiaries"). The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation. Each of the Subsidiaries is a joint venture duly
organized, validly existing and in good standing in its jurisdiction of
organization. Each of the Subsidiaries is a legal person with limited
liability and the liability of the Company in respect of such person is
limited to its investment therein. The Company and each Subsidiary has
full corporate power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits
of and from, and declarations and filings with, all national,
provincial, municipal, local, foreign and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals (including, without limitation, the State Land Administration
Bureau, the Trademark Administration Bureau, the Patent Bureau, the
State Administration of Taxation and the ________), to own, lease,
license, and use their respective properties and assets and to carry on
their respective business in the manner described in the Prospectus and
such consents, authorizations, approvals, orders, licenses,
certificates and permits contain no materially burdensome restrictions
not described in the Prospectus. Neither the Company nor any Subsidiary
has any reason to believe that any regulatory body is considering
modifying, suspending or revoking any such licenses, consents,
authorizations, approvals, orders, certificates or permits, and the
Company and each Subsidiary is in compliance with the provisions of all
such licenses, consents, authorizations, approvals, orders,
certificates or permits and the Company and each Subsidiary has paid
all relevant taxes and fees required to be paid by the Company and such
Subsidiary by the relevant taxing or other governmental authority. The
Company and each Subsidiary is
4
duly qualified to do business and is in good standing in every
jurisdiction in which its ownership, leasing, licensing, or use of
property and assets or the conduct of its business makes such
qualification necessary.
(f) As of the Closing Date, the authorized capital stock of
the Company consists of 30,000,000 shares of Common Stock, of which
4,850,000 shares are outstanding. The ownership of each Subsidiary is
as set forth in the Registration Statement. Each outstanding share of
Common Stock and each outstanding share of capital stock or equity
interest of each Subsidiary is duly authorized, validly issued, fully
paid, and nonassessable, without any personal liability attaching to
the ownership thereof, and has not been issued and is not owned or held
in violation of any preemptive rights of stockholders, or in the case
of each of the Subsidiaries, any joint venture partner. There is no
commitment, plan, or arrangement to issue, and no outstanding option,
warrant, or other right calling for the issuance of, any share of
capital stock of the Company or any equity interest in any Subsidiary,
any security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for, capital stock of the
Company or any equity interest in any Subsidiary except as may be
properly described in the Prospectus. There is outstanding no security
or other instrument which by its terms is convertible into or
exchangeable for capital stock of the Company or any equity interest in
any Subsidiary, except as may have been properly described in the
Prospectus. There is outstanding no indebtedness owed by either the
Company or any Subsidiary other than (i) trade payables incurred in the
ordinary course of business, (ii) certain capital lease obligations and
(iii) an aggregate principal amount of $_________ currently outstanding
on _________ entered into as of ___________, all as properly described
in the Prospectus.
(g) The financial statements of the Company and each
Subsidiary included in the Registration Statement and the Prospectus
fairly present the financial position, the results of operations, and
the other information purported to be shown therein at the respective
dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") (except
to the extent that certain footnote disclosures regarding any period
may have been omitted in accordance with the applicable rules of the
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) consistently applied throughout the periods involved,
and are in accordance with the books and records of the Company and
each Subsidiary, respectively. The accountants whose report on the
audited financial statements is filed with the Commission as a part of
the Registration
5
Statement are, and during the periods covered by their report(s)
included in the Registration Statement and the Prospectus were,
independent certified public accountants within the meaning of the Act
and the Regulations. No other financial statements are required by Form
F-1 or otherwise to be included in the Registration Statement or the
Prospectus. There has at no time been a material adverse change in the
financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company or any
Subsidiary from the latest information set forth in the Registration
Statement or the Prospectus, except as may be properly described in the
Prospectus.
(h) There is no litigation, arbitration, claim, governmental
or other proceeding (formal or informal), or investigation pending,
threatened or in prospect (or any basis therefor) with respect to the
Company or any Subsidiary, or any of their respective operations,
businesses, properties, assets, liabilities or future prospects.
Neither the Company nor any Subsidiary is or is expected to be in
violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in
the future have, individually or in the aggregate, a material adverse
effect upon the operations, business, properties, assets, liabilities
or future prospects, of the Company or any Subsidiary; nor is the
Company or any Subsidiary required to take any action in order to avoid
any such violation or default.
(i) The Company and each Subsidiary has good and marketable
title in fee simple to all real properties and good title to all other
properties and assets which the Prospectus indicates are owned by it,
free and clear of all liens, security interests, pledges, charges,
encumbrances, and mortgages (except as may be properly described in the
Prospectus). The Company and each Subsidiary has valid leases for all
real property which it leases and such leases are adequately and
accurately described in the Prospectus. No real property owned, leased,
licensed, or used by the Company or any Subsidiary lies in an area
which is, or to the knowledge of the Company, any Subsidiary or Mr. Du,
will be, subject to zoning, use, or building code restrictions which
would prohibit, and no state of facts relating to the actions or
inaction of another person or entity or his or its ownership, leasing,
licensing, or use of any real or personal property exists or will exist
which would prevent, the continued effective ownership, leasing,
licensing, or use of such real property in the business of the Company
or any Subsidiary as presently conducted or as the Prospectus indicates
it contemplates conducting (except as may be properly described in the
Prospectus).
6
(j) Neither the Company nor any Subsidiary is, nor to the
knowledge of the Company or any Subsidiary is, any other party, now or
expected by the Company or any Subsidiary to be in violation or breach
of, or in default with respect to, complying with any material
provision of any contract, agreement, instrument, lease, license,
arrangement, or understanding which is material to the Company or any
Subsidiary, and each such contract, agreement, instrument, lease,
license, arrangement, and understanding is in full force and is the
legal, valid, and binding obligation of the parties thereto and is
enforceable as to them in accordance with its terms. The Company and
each Subsidiary enjoys peaceful and undisturbed possession under all
leases and licenses under which it is operating. Neither the Company
nor any Subsidiary is a party to or bound by any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject
to any charter or other restriction, which has had or may in the future
have, individually or in the aggregate, a material adverse effect on
the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company or any
Subsidiary. Neither the Company nor any Subsidiary is in violation or
breach of, or in default with respect to, any term of its articles of
incorporation (or other charter document), by-laws, similar
constitutive document, as amended, or any required governmental
licenses or required governmental approvals.
(k) All patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, franchises, and
other intangible properties and assets (all of the foregoing being
herein called "Intangibles") that the Company or any Subsidiary owns or
has pending, or under which it is licensed, are in good standing and
uncontested. The "______________" and "______________", names and their
related logos are trademarks and service marks used by the Company to
identify its products, and such trademarks and service marks are
protected by registration in the name of the Company on the principal
register in ______________. There is no right under any Intangible
necessary to the business of the Company or any Subsidiary as presently
conducted or as the Prospectus indicates it contemplates conducting
except as may be so described in the Prospectus. Neither the Company
nor any Subsidiary has infringed, is infringing, or has received notice
of infringement with respect to asserted Intangibles of others. To the
knowledge of the Company, any subsidiary of Mr. Du, there is no
infringement by others of Intangibles of the Company. To the knowledge
of the Company, any Subsidiary or Mr. Du, there is no Intangible of
others which has had or may in the future have, individually or in the
aggregate, a materially adverse effect on the financial condition,
results of operations, business,
7
properties, assets, liabilities, or future prospects of the Company or
any Subsidiary.
(l) Neither the Company, any Subsidiary or any director,
officer, agent, employee, or other person associated with or acting on
behalf of the Company or any Subsidiary has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment.
(m) The Company and each Subsidiary has all requisite
corporate power and authority to execute, deliver, and perform its
obligations under each of (i) this Agreement; (ii) the certificate
evidencing the Underwriter's Options (the "Underwriter's Option
Agreement"); (iii) the Employment Agreement between the Company and Mr.
Du (the "Employment Agreement"); (iv) the Shareholder Agreement between
Mr. Du and To Xxxxx Xxx (the "Shareholder Agreement"); and (v) the
Agreement between the members of the Pianzhuan Group and the Company
(the "Pianzhuan Group Agreement") (this Agreement together with the
Underwriter's Option Agreement, the Employment Agreement, the
Shareholder Agreement and the Pianzhuan Group Agreement, the "Company
Documents"). All necessary corporate proceedings of the Company and
each Subsidiary have been duly taken to authorize the execution,
delivery and performance of each of the Company Documents by the
Company and each Subsidiary party thereto; all necessary corporate
proceedings of the Company and each Subsidiary have been duly taken to
authorize the execution of all the documents necessary and to take all
action necessary for the consummation of the acquisitions of Yantai and
Dnon Tech as contemplated in the Prospectus (together, the
"Acquisitions"). This Agreement has been duly authorized, executed, and
delivered by the Company, each Subsidiary and Mr. Du, is the legal,
valid and binding obligation of the Company, each Subsidiary and Mr.
Du, and is enforceable as to the Company, each Subsidiary and Mr. Du in
accordance with its terms. Each of the other Company Documents and each
Acquisition Agreement has been duly authorized by the Company, each
Subsidiary and each other party thereto, and is or, when executed and
delivered by the Company, each such Subsidiary and each other party
thereto, will be the legal, valid, and binding obligation of the
Company, each such Subsidiary and each other party thereto, enforceable
against the Company, each such Subsidiary and each other party thereto
in accordance with its terms. No consent, authorization, approval,
order, license, certificate, or
8
permit of or from, or declaration or filing with, any national,
provincial, municipal, local, foreign or other governmental authority,
any self-regulatory organization or any court or other tribunal is
required by the Company, any Subsidiary or Mr. Du for the execution,
delivery, or performance by the Company, any such Subsidiary or Mr. Du
of any of the Company Documents (except filings under the Act which
have been or will be made before the Closing Date and such consents
consisting only of consents under "blue sky" or state securities laws)
or for the consummation by the Company of the Acquisitions. No consent
of any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company or any Subsidiary is
a party, or to which any of their respective properties or assets are
subject, is required for the execution, delivery, or performance of the
Company Documents or for the consummation of the Acquisitions; and the
execution, delivery, and performance of any of the Company Documents
and the consummation of the Acquisitions will not violate, result in a
breach of, conflict with, or (with or without the giving of notice or
the passage of time or both) entitle any party to terminate or call a
default under any such contract, agreement, instrument, lease, license,
arrangement, or understanding, or violate or result in a breach of any
term of the articles of incorporation (or other charter document) or
by-laws or similar constitutive document or business license of the
Company or any Subsidiary, as amended, or violate, result in a breach
of, or conflict with any law, rule, regulation, order, approval,
judgment, or decree binding on the Company or any Subsidiary or to
which any of their respective operations, businesses, properties, or
assets are subject.
(n) The Firm Stock and the Additional Stock are validly
authorized and, when issued and delivered in accordance with this
Agreement, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof, and
will not be issued in violation of any preemptive rights of
stockholders. The Underwriter will receive good title to the Firm Stock
and Additional Stock purchased by it free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders'
agreements and voting trusts.
(o) The Underwriter's Stock is validly authorized and reserved
for issuance and, when issued and delivered upon exercise of the
Underwriter's Options in accordance with the Underwriter's Option
Agreement will be validly issued, fully paid and nonassessable, without
any personal liability attaching to the ownership thereof, and will not
be issued in violation of any preemptive rights of stockholders; and
the holders of the Underwriter's Options will receive good title to the
securities purchased by them, respectively, free and clear of all
liens, security interests, pledges,
9
charges, encumbrances, stockholders' agreements, and voting trusts.
(p) The Securities conform to all statements relating thereto
contained in the Registration Statement or the Prospectus.
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as may otherwise be properly described in the Prospectus, neither the
Company nor any Subsidiary has (i) issued any securities or incurred
any liability or obligation, primary or contingent, for borrowed money,
(ii) entered into any transaction not in the ordinary course of
business, or (iii) declared or paid any dividend on its capital stock.
(r) Neither the Company, any Subsidiary or any of their
respective officers, directors, or affiliates (as defined in the
Regulations), has taken or will take, directly or indirectly, prior to
the termination of the underwriting syndicate contemplated by this
Agreement, any action designed to stabilize or manipulate the price of
any security of the Company, or which has caused or resulted in, or
which could in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of any of the Firm Stock or
Additional Stock.
(s) The Company has obtained from each of its directors,
officers and affiliates (as defined in the Regulations), and from each
other person or entity who beneficially owned as of the effective date
of the Registration Statement, any unregistered shares of Common Stock
(an "Original Stockholder") an enforceable written agreement, in form
and substance satisfactory to counsel for the Underwriter, that for a
period of 24 months from the effective date of the Offering he will
not, without your prior written consent, offer, issue, sell, contract
to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any security of
the Company or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock or other
securities of the Company, including, without limitation, any shares of
Common Stock issuable under any outstanding stock options. Such
agreements may provide that commencing 12 months after the offering is
completed, any stockholder may sell their shares of Common Stock in the
event that the last sales price for the Common Stock on _______, its
principal exchange, has been at least 250% of the initial public
offering price per share hereunder for a period of 20 consecutive
trading days ending within 5 days of the date of such sale, and such
sale
10
is completed at a price in excess of 250% of such initial public
offering price.
(t) Except as may have been registered in the Registration
Statement or already been exercised or waived, no person or entity has
the right to require registration of shares of Common Stock or other
securities of the Company because of the filing or effectiveness of the
Registration Statement.
(u) Except as may be set forth in the Prospectus, neither the
Company nor any Subsidiary has incurred any liability for a fee,
commission, or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement.
(v) Neither the Company nor any Subsidiary nor any of their
affiliates is presently doing business with the government of Cuba or
with any person or entity located in Cuba. If, at any time after the
date that the Registration Statement is declared effective with the
Commission or with the Florida Department of Banking and Finance (the
"Florida Department"), whichever date is later, and prior to the end of
the period referred to in the first clause of Section 2(b), the Company
or any Subsidiary commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba, the Company or
such Subsidiary will so inform the Florida Department within ninety
days after such commencement of business in Cuba, and during the period
referred to in Section 2(b) will inform the Florida Department within
ninety days after any change occurs with respect to previously reported
information.
(w) The Securities have been approved for quotation on the
Nasdaq National Market ("NASDAQ"), subject to official notice of
issuance.
(x) Except as contemplated herein or therein or as may have
been waived, no person or entity has any right of first refusal,
preemptive right, right to any compensation, or other similar right or
option, in connection with the Offering, this Agreement, the
Underwriter's Options, or any of the transactions contemplated hereby
or thereby.
(y) The application of the net proceeds from the Offering, as
set forth in and contemplated by the Prospectus and the Registration
Statement, will not contravene any provision of applicable law,
governmental approval, rule or regulation or the articles of
association, other constitutive documents or the business license of
the Company or any Subsidiary or contravene the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement, note, lease,
11
agreements governing the acquisitions of Yantai and Dnon Tech (the
"Acquisition Agreements") or other agreement or instrument binding upon
the Company or any Subsidiary or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company
or any Subsidiary.
(z) No stamp or other issuance or transfer taxes or duties and
no capital gains, income, withholding or other taxes are payable to the
People's Republic of China ("China"), the government of the British
Virgin Islands (the "BVI") or any political subdivision or taxing
authority thereof or therein by or on behalf of the Underwriter in
connection with the issuance of the Securities, and the Underwriter
will not be deemed resident, domiciled, carrying on business or subject
to taxation in the BVI or China by reason of the execution, delivery,
performance or enforcement of this Agreement.
(aa) There is no requirement under the laws of the BVI for the
Company or any Subsidiary to obtain any license, consent or approval in
connection with any payment of cash dividends, in connection with any
conversion of foreign currency required to make such payment to remit
such foreign currency to holders of the Securities, or to trade the
Securities. Except as disclosed in the Registration Statement and the
Prospectus, under the existing laws of the BVI, holders of the
Securities are not subject to withholding tax, income tax or any other
taxes or duties imposed by any governmental authority in respect of:
(i) any payments, dividends or other distributions made on the
Securities; or (ii) gains made on sales of the Securities between
non-residents of the BVI consummated outside the BVI, unless the holder
thereof is subject to such taxes in respect of such Securities by
reason of his being connected with the BVI otherwise than by reason
only of the holding of the Securities or receiving payments thereon.
(bb) The Company and each Subsidiary (i) is in compliance with
any and all published applicable national, provincial, municipal, local
and foreign laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
obtained all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of
any such permit, license or approval.
(cc) The Company has reasonably concluded that the costs and
liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or
12
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) would not, individually or in the
aggregate, have a material adverse effect on the Company or any
Subsidiary.
(dd) The description of the capital contributions made to each
of the Subsidiaries, respectively, and the dates of each of such
contributions, in the Prospectus, Registration Statement and the
financial statements and notes relating thereto is true and correct and
each of such contributions were effected in compliance with all
applicable national, provincial, municipal and local laws and all
necessary governmental or other approvals and licenses relating thereto
have been obtained.
(ee) The description of the Acquisitions in the Prospectus
and the Registration Statement is true and correct in all material
respects.
(ff) The Acquisitions and any related transactions were
effected in compliance and do not contravene, in any material respect,
any provision of applicable law (national, provincial, municipal and
local), rule or regulation and do not contravene the articles of
association, other constitutive documents or the business license of
the Company or any Subsidiary or contravene the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument binding
upon the Company or any Subsidiary that, individually or in the
aggregate, is material to the Company or any Subsidiary or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any Subsidiary and will not
result in the creation or imposition of any lien, charge, encumbrance
or other restriction upon any assets of the Company or any Subsidiary.
(gg) All consents, approvals, authorizations, orders,
registrations and qualifications required in China in connection with
the Acquisitions have been made or obtained in writing (including,
without limitation, all actions necessary for the approval of the
Acquisitions by the State Assets Administration Bureau, the State
Restructuring Commission, the Land Administration Bureau and
__________) and no such consent, approval, authorization, order,
registration or qualification is subject to any condition precedent
which has not been fulfilled or performed.
(hh) There are no legal or governmental proceedings pending in
China challenging the effectiveness or validity of the Acquisitions
and, to the Company's, each Subsidiary's or Mr. Du's knowledge, no such
proceedings are threatened or
13
contemplated by any governmental authorities in China or elsewhere.
(ii) The Company and each Subsidiary maintains insurance of
the types and in the amounts that the Company and such Subsidiary
reasonably believes to be adequate for their respective businesses and
consistent with insurance coverages maintained by Chinese or BVI
companies in similar businesses. Neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage from similar insurers as may be
necessary to continue its business at a cost that would not,
individually or in the aggregate, materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of the Company or any Subsidiary, except as described in or
contemplated by the Prospectus. The description of the Company's and
any Subsidiary's insurance coverages contained in the Prospectus is
true and correct in all material respects.
(jj) The Company is not, and upon consummation of the
transactions contemplated by this Agreement and the Prospectus, will
not be treated for U.S. tax purposes as a "passive foreign investment
company" as defined in the U.S. Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
(kk) The Company and each Subsidiary has devised and maintains
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 U.S. GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences; each of the Company and each Subsidiary has made and
keeps books, records and accounts, which, in reasonable detail
accurately and fairly reflect the transactions and dispositions of
assets of such entity.
(ll) Under the laws of China, neither the Company, any
Subsidiary nor any of their respective properties, assets or revenues
are entitled to any right of immunity on the grounds of sovereignty
from any legal action, suit or proceeding, from set-off or
counterclaim, from the
14
jurisdiction of any court, from services of process, from attachment
prior to or in aid of execution and judgment, or from other legal
process or proceeding for the giving of any relief or for the
enforcement of any judgment. The irrevocable and unconditional waiver
and agreement of the Company and each Subsidiary in Article 15 hereof
not to plead or claim any such immunity in any legal action, suit or
proceeding based on the Underwriting Agreement is valid and binding
under the laws of China.
(mm) Under the laws of China, the courts of China recognize
and give effect to the choice of law provisions set forth in Article 15
hereof and enforce judgments of U.S. courts obtained against the
Company or any Subsidiary to enforce this Agreement, provided that the
judgment: (i) was not obtained by fraud; (ii) was final and conclusive;
(iii) in the opinion of the relevant Chinese court after its review of
such judgment pursuant to international treaties concluded or acceded
to by China or in accordance with the principle of reciprocity, did not
contradict the basic principles of Chinese law; (iv) in the opinion of
the relevant Chinese court after its review of such judgment pursuant
to international treaties concluded or acceded to by China or in
accordance with the principle of reciprocity, did not violate state
sovereignty, security or public interest; and (v) was for a definite
sum of money.
(nn) There are no relationships or transactions between the
Company or any Subsidiary, on the one hand and Mr. Du (or any member of
his immediate family), their respective affiliates, officers and
directors or their shareholders, customers or suppliers on the other
hand which, although required to be so disclosed, are not disclosed or
reflected in the Prospectus or which have not been disclosed in writing
to the Underwriter.
(oo) Each document provided by the Company, the Subsidiaries
or Mr. Du to the Underwriter and/or counsel to the Underwriter that has
been translated into english, is an accurate and complete translation
of the original version of such document.
3. Purchase, Sale, and Delivery of the Firm Stock and the
Additional Stock. On the basis of the representations, warranties,
covenants, and agreements of the Company herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to sell
to the Underwriter, and the Underwriter agrees to purchase from the
Company all of the shares of Firm Stock.
15
The purchase price per share of Firm Stock to be paid by the
Underwriter shall be $____. The initial public offering price per share of Firm
Stock shall be $____.
Payment for the Firm Stock by the Underwriter shall be made by
certified or official bank check in New York Clearing House funds payable to the
order of the Company at the offices of Barington Capital Group, L.P., 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place in New York
City as you shall determine and advise the Company by at least two full days'
notice in writing, upon delivery of the Firm Stock to you for the account of the
Underwriter. Such delivery and payment shall be made at 10:00 A.M., New York
City Time, on the third business day following the commencement of the initial
public offering, as defined in Section 11(a), or at such other time as shall be
agreed upon between you and the Company. The time and date of such delivery and
payment are herein called the "Closing Date."
Certificates for the Firm Stock shall be registered in such name or
names and in such authorized denominations as you may request in writing at
least two full business days prior to the Closing Date. The Company shall permit
you to examine and package such certificates for delivery at least one full
business day prior to the Closing Date.
In addition, the Company hereby grants to the Underwriter the option to
purchase all or a portion of the Additional Stock as may be necessary to cover
over-allotments, at the same purchase price per share to be paid by the
Underwriter to the Company for the Firm Stock as provided for in this Section 3.
This option may be exercised only to cover over-allotments in the sale of shares
of Common Stock by the Underwriter. This option may be exercised by you on the
basis of the representations, warranties, covenants, and agreements of the
Company herein contained, but subject to the terms and conditions herein set
forth, at any time and from time to time on or before the forty-fifth day
following the effective date of the Registration Statement, by written notice by
you to the Company. Such notice shall set forth the aggregate number of
Additional Stock as to which the option is being exercised and the time and
date, as determined by you, when such Additional Stock is to be delivered (such
time and date are herein called an "Additional Closing Date"); provided,
however, that no Additional Closing Date shall be earlier than the Closing Date
nor earlier than the second business day after the date on which the notice of
the exercise of the option shall have been given nor later than the eighth
business day after the date on which such notice shall have been given.
16
Payment for the Additional Stock by the Underwriter shall be made by
certified or official bank check in New York Clearing House funds payable to the
order of the Company at the offices of Barington Capital Group, L.P., 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place in New York
City as you shall determine and advise the Company by at least two full days'
notice in writing, upon delivery of the Additional Stock to you for the account
of the Underwriter.
Certificates for the Additional Stock shall be registered in such name
or names and in such authorized denominations as you may request in writing at
least two full business days prior to the Additional Closing Date with respect
thereto. The Company shall permit you to examine and package such certificates
for delivery at least one full business day prior to the Additional Closing Date
with respect thereto.
4. Offering. The Underwriter is to make a public offering of the Firm
Stock as soon, on or after the effective date of the Registration Statement, as
you deem it advisable so to do. The Firm Stock is to be initially offered to the
public at the initial public offering price as provided for in Section 3 (such
price being herein called the "public offering price"). After the initial public
offering, you may from time to time increase or decrease the public offering
price, in your sole discretion, by reason of changes in general market
conditions or otherwise.
5. Covenants of the Company each Subsidiary and Mr. Du. Each of the
Company, each Subsidiary and Mr. Du covenants that it will:
(a) Use its or their best efforts to cause the Registration
Statement to become effective as promptly as possible. If the
Registration Statement has become or becomes effective with a form of
prospectus omitting Rule 430A Information, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the
Prospectus, properly completed, pursuant to Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to you of such
timely filing.
(b) Notify you immediately, and confirm such notice in
writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective, (ii) of the receipt of any comments
from the Commission or the "blue sky" or securities authority of any
jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the Prospectus, or any amendment or supplement
thereto, and (iii) of the receipt of any notification with respect to a
Stop Order or the initiation or threatening of any proceeding with
respect to a Stop Order. The Company will use its best efforts to
prevent the issuance of any Stop Order and, if any Stop Order is
issued, to obtain the lifting thereof as promptly as possible.
17
(c) During the time when a prospectus relating to the Firm
Stock and the Additional Stock is required to be delivered hereunder or
under the Act or the Regulations, comply so far as it is able with all
requirements imposed upon it by the Act, as now existing and as
hereafter amended, and by the Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or
dealings in the Firm Stock or the Additional Stock, as the case may be,
in accordance with the provisions hereof and the Prospectus. If, at any
time when a prospectus relating to the Firm Stock and the Additional
Stock is required to be delivered hereunder or under the Act or the
Regulations, any event shall have occurred as a result of which, in the
reasonable opinion of counsel for the Company or counsel for the
Underwriter, the Registration Statement or the Prospectus as then
amended or supplemented contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or if, in
the opinion of either of such counsel, it is necessary at any time to
amend or supplement the Registration Statement or the Prospectus to
comply with the Act or the Regulations, the Company will immediately
notify you and promptly prepare and file with the Commission an
appropriate amendment or supplement (in form and substance satisfactory
to you) which will correct such statement or omission or which will
effect such compliance and will use its best efforts to have any such
amendment declared effective as soon as possible.
(d) Deliver without charge to the Underwriter such number of
copies of each Preliminary Prospectus as may reasonably be requested by
the Underwriter and, as soon as the Registration Statement, or any
amendment thereto, becomes effective or a supplement is filed, deliver
without charge to you two signed copies of the Registration Statement,
including exhibits, or such amendment thereto, as the case may be, and
two copies of any supplement thereto, and deliver without charge to the
Underwriter such number of copies of the Prospectus, the Registration
Statement, and amendments and supplements thereto, if any, without
exhibits, as you may request for the purposes contemplated by the Act.
(e) Endeavor in good faith, in cooperation with you, at or
prior to the time the Registration Statement becomes effective, to
qualify the Firm Stock and the Additional Stock for offering and sale
under the "blue sky" or securities laws of such jurisdictions as you
may designate; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation as a
foreign corporation doing business in such jurisdiction to which it is
not then subject. In each
18
jurisdiction where such qualification shall be effected, the Company
will, unless you agree in writing that such action is not at the time
necessary or advisable, file and make such statements or reports at
such times as are or may be required by the laws of such jurisdiction.
(f) Use its best efforts to keep the Prospectus and the
Registration Statement current and effective by filing post-effective
amendments, as necessary.
(g) Make generally available (within the meaning of Section
11(a) of the Act and the Regulations) to its security holders as soon
as practicable, but not later than _______________, an earnings
statement (which need not be certified by independent certified public
accountants unless required by the Act or the Regulations, but which
shall satisfy the provisions of Section 11(a) of the Act and the
Regulations) covering a period of at least twelve months beginning
after the effective date of the Registration Statement.
(h) For a period of twelve months after the effective date of
the Offering, the Company and each of the Subsidiaries shall, not,
without your prior written consent, offer, issue, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities
of the Company or any Subsidiary (or any security or other instrument
which by its terms is convertible into, exercisable for, or
exchangeable for shares of Common Stock or other securities of the
Company or any Subsidiary) except as provided in Section 3 and except
for (i) the grant of options to purchase no more than 300,000 shares of
Common Stock pursuant to the 1997 employee stock option plan (the
"Plan"), which is properly described in the Prospectus, (ii) the
issuance of Common Stock issuable upon the exercise of stock options
and warrants outstanding on the date hereof and fully and properly
described in the Prospectus and pursuant to the Plan described in
clause (i) hereof, (iii) the issuance of the Securities and (iv) the
issuance of any shares in connection with any acquisition provided such
acquisition is approved by the independent directors of the Company's
Board of Directors.
(i) For a period of five years after the effective date of the
Registration Statement, furnish you, without charge, the following:
(i) within 90 days after the end of each fiscal year,
three copies of financial statements certified by independent
certified public accountants, including a balance sheet,
statement of income, and statement of cash flows of the
Company and its then existing subsidiaries, with supporting
schedules, prepared in
19
accordance with generally accepted accounting principles, as
at the end of such fiscal year and for the 12 months then
ended, which may be on a consolidated basis;
(ii) as soon as practicable after they have been sent
to stockholders of the Company or filed with the Commission,
three copies of each annual and interim financial and other
report or communication sent by the Company to its
stockholders or filed with the Commission;
(iii) as soon as practicable, two copies of every
press release and every material news item and article in
respect of the Company or its affairs which was released by
the Company; and
(iv) such additional documents and information with
respect to the Company and its affairs and the affairs of any
of its subsidiaries as you may from time to time reasonably
request.
(j) Files its annual reports with the Commission and publicly
release quarterly financial reports within the same time periods as
United States companies are required to file such reports with the
Commission or publicly release quarterly financial reports.
(k) Apply the net proceeds received by it from the offering
in the manner set forth under "Use of Proceeds" in the Prospectus.
(l) Furnish to you as early as practicable prior to the
Closing Date and any Additional Closing Date, as the case may be, but
no less than two full business days prior thereto, a copy of the latest
available unaudited financial statements of the Company and the
Subsidiaries which have been read by the Company's independent
certified public accountants, as stated in their letters to be
furnished pursuant to Section 7(e).
(m) File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the
effective date of the Registration Statement, unless such filing shall
comply with the Act and the Regulations and unless you shall previously
have been advised of such filing and furnished with a copy thereof, and
you and counsel for the Underwriter shall have approved such filing in
writing.
(n) Comply with all registration, filing, and reporting
requirements of the Exchange Act which may from time to time be
applicable to the Company.
20
(o) Comply with all provisions of all undertakings contained
in the Registration Statement.
(p) Prior to the Closing Date or any Additional Closing Date,
as the case may be, issue no press release or other communication,
directly or indirectly, and hold no press conference with respect to
the Company, the financial conditions, results of operations, business,
properties, assets, liabilities of the Company, or this offering,
without your prior written consent.
(q) File timely with the Commission an appropriate form to
register the Common Stock pursuant to Section 12(b) under the Exchange
Act.
(r) File timely and accurate reports on Form SR with the
Commission in accordance with Rule 463 of the Regulations or any
successor provision.
(s) Use its best efforts to cause the application for
quotation of the Firm Stock and any Additional Stock on NASDAQ to be
approved as soon as possible.
(t) [Reserved]. [Other exchanges]
(u) On or prior to the Closing Date, sell to the Underwriter
(or its designees) the Underwriter's Options to purchase an aggregate
of 330,000 shares of Common Stock, which Underwriter's Options shall be
evidenced by the Underwriter's Option Agreement in the form set forth
as an exhibit to the Registration Statement.
(v) On or prior to the Closing Date, sell to First Pacific
Rim, Inc. (the "Advisor") (or its designees) the Advisor's Options to
purchase an aggregate of 70,000 shares of Common Stock, which Advisor's
Options shall be evidenced by the Advisor's Option Agreement in the
form set forth as an exhibit to the Registration Statement.
(w) Until expiration of the Underwriter's Options and the
Advisor's Options, keep reserved sufficient shares of Common Stock for
issuance upon exercise of the Underwriter's Options and the Advisor's
Options.
(x) Until the expiration of three years from the Closing Date,
the Company shall permit one representative selected from time to time
by Barington Capital Group, L.P. to be present at and observe all Board
of Directors meetings of the Company, which representative shall be
entitled to receive reimbursement for all reasonable costs incurred in
attending such meetings, and which representative shall receive all
written notices and other materials provided to directors of the
Company no later than it gives such notice and provides such material
to other directors.
21
(y) Deliver to you, without charge, within a reasonable period
after the last Additional Closing Date or the expiration of the period
in which the Underwriter may exercise the over-allotment option, three
bound volumes of the Registration Statement and all related materials.
(z) For a period of five years after the Closing Date, supply
to the appropriate parties such information as may be necessary or
desirable, and otherwise use its best efforts, so that the Company will
be registered and will maintain its registration in one or more of the
securities manuals publishes by Standard & Poor's Corporation and
Xxxxx'x Investor Service, Inc. and that at all times during such period
such listing will, at a minimum, contain the names of the Company's
officers and directors, a balance sheet as of a date not more than 18
months prior to such time, and a statement of operations for either the
fiscal year preceding such date or the most recent fiscal year of
operations.
(aa) Use its best efforts to maintain the quotation on NASDAQ
of price information for the Common Stock issued hereunder.
(bb) Procure prior to, and make effective as of the effective
date of this Offering, and maintain Director and Officer liability
insurance with a reputable insurance carrier acceptable to the
Underwriter.
(cc) From the Closing Date, retain a transfer agent acceptable
to the Underwriter. Upon reasonable notice from the Underwriter, the
Company shall provide the Underwriter with copies of the Company's
daily stock transfer sheets and lists of the beneficial and record
holders of the Company's securities, from such transfer agent and from
the Depository Trust Company, at the Company's sole cost and expense.
The Underwriter acknowledges hereby that the Continental Stock Transfer
and Trust Company shall be acceptable as such transfer agent.
(dd) From the date the Registration Statement becomes
effective, the Company shall retain an investor relations firm or
engage an in-house investor relations officer, in either case
reasonably acceptable to the Underwriter.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(other than fees of counsel for the Underwriter, except as provided in Sections
6(c) and 6(e)) in connection with (a) the preparation, printing, filing,
distribution, and mailing of the Registration Statement and the Prospectus and
the printing, filing, distribution, and mailing of this Agreement, any Blue Sky
Surveys, and if appropriate, any Underwriter's Questionnaire and Power of
Attorney, and related documents, including the cost of all copies thereof and of
the Preliminary Prospectuses and of the Prospectus and any amendments or
22
supplements thereto supplied to the Underwriter in quantities as hereinabove
stated, (b) the issuance, sale, transfer, and delivery of the Firm Stock and the
Additional Stock, including any transfer or other taxes payable thereon, (c) the
qualification of the Firm Stock and the Additional Stock under state or foreign
"blue sky" or securities laws, including the costs of printing and mailing the
preliminary and final "Blue Sky Survey" and the fees of counsel for the
Underwriter and the disbursements in connection therewith, (d) the filing fees
payable to the Commission, the National Association of Securities Dealers (the
"NASD"), and the jurisdictions in which such qualification is sought, (e) the
reasonable fees and disbursements of the Underwriter relating to all filings
with the NASD, (f) the quotation of the Common Stock on NASDAQ, (g) the fees and
expenses of the Company's transfer agent and registrar, (h) the fees and
expenses of the Company's legal counsel and accountants, (i) the fees of an
investigative search firm designated by the Underwriter to conduct a background
check of the principals of the Company, (j) the costs of placing "tombstone"
advertisements in the national edition of The Wall Street Journal and other
publications selected by the Underwriter, and (k) the costs of preparing a
reasonable number of transaction "bibles" or "mementos." In addition, the
Company hereby agrees to pay to the Underwriter a non-accountable expense
allowance equal to 3% of the aggregate gross proceeds received by the Company
from the sale of the Firm Stock and any Additional Stock which amounts (less
$50,000 previously paid to you in respect of such non-accountable expense
allowance) shall be paid to you on the Closing Date (with respect to Common
Stock sold by the Company on the Closing Date) and, if applicable, on the
Closing Date and any Additional Closing Date (with respect to Additional Stock
sold by the Company on the Closing Date or such Additional Closing Date).
7. Conditions of Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Firm Stock and the Additional Stock, as
provided herein, shall be subject, in its discretion, to the continuing accuracy
of the representations and warranties of the Company, each Subsidiary and Mr. Du
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to you, as of the date hereof and as of the Closing
Date (or the Additional Closing Date, as the case may be), to the performance by
the Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective not
later than 6:00 P.M., New York City Time, on the date of this Agreement
or such later date and time as shall be consented to in writing by you.
(b) At the Closing Date and any Additional Closing Date, as
the case may be, you shall have received the favorable opinion of
Proskauer Rose LLP, counsel for the Company, dated the date of
delivery, addressed to the
23
Underwriter, and in form and scope satisfactory to counsel for the
Underwriter, with such number of reproduced copies or signed
counterparts thereof for the Underwriter as shall be reasonably
requested by the Underwriter, to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of its
jurisdiction of incorporation. Each of the Subsidiaries is a
joint venture duly organized, validly existing and in good
standing in its jurisdiction of organization. Each of the
Subsidiaries is a legal person with limited liability and the
liability of the Company in respect of such person is limited
to its investment therein. The Company and each Subsidiary has
full corporate power and authority, and all necessary
consents, authorizations, approvals, orders, licenses,
certificates, and permits of and from, and declarations and
filings with, all national, provincial, municipal, local,
foreign and other governmental authorities, all
self-regulatory organizations and all courts and other
tribunals (including, without limitation, the State Land
Administration Bureau, the Trademark Administration Bureau,
the Patent Bureau, the State Administration of Taxation and
the ________), to own, lease, license, and use their
respective properties and assets and to carry on their
respective business in the manner described in the Prospectus
and such consents, authorizations, approvals, orders,
licenses, certificates and permits contain no materially
burdensome restrictions not described in the Prospectus. To
the best of such counsels' knowledge, neither the Company, any
Subsidiary nor Mr. Du, has any reason to believe that any
regulatory body is considering modifying, suspending or
revoking any such licenses, consents, authorizations,
approvals, orders, certificates or permits and the Company and
each Subsidiary is in compliance with the provisions of all
such licenses, consents, authorizations, approvals, orders,
certificates or permits, and the Company and each Subsidiary
has paid all relevant taxes and fees required to be paid by
the Company and such Subsidiary by the relevant taxing or
other governmental authority. The Company and each Subsidiary
is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership, leasing, licensing,
or use of property and assets or the conduct of its business
makes such qualification necessary;
(ii) the authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, of which
4,850,000 shares are outstanding. Each outstanding share of
Common Stock and each outstanding share of
24
capital stock of each Subsidiary is duly authorized, validly
issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, and has not been
issued and is not owned or held in violation of any preemptive
rights of stockholders. There is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or
other right calling for the issuance of, any share of capital
stock of the Company or any Subsidiary or any security or
other instrument which by its terms is convertible into,
exercisable for, or exchangeable for, capital stock of the
Company or any Subsidiary except as may be properly described
in the Prospectus;
(iii) to the knowledge of such counsel, there is no
litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending,
threatened or in prospect (or any basis therefor) with respect
to the Company or any Subsidiary, or any of their respective
operations, businesses, properties, assets, liabilities or
future prospects such as individually or in the aggregate do
not now have and cannot be expected in the future to have,
individually or in the aggregate, a material adverse effect
upon the operations, business, properties, or assets of the
Company or any Subsidiary. [To the knowledge of such counsel,]
Neither the Company nor any Subsidiary is or is expected to be
in violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree except as may be
properly described in the Prospectus or such as in the
aggregate do not now have and will not in the future have,
individually or in the aggregate, a material adverse effect
upon the operations, business, properties, assets, liabilities
or future prospects, of the Company or any Subsidiary; nor is
the Company or any Subsidiary required to take any action in
order to avoid any such violation or default;
(iv) Neither the Company nor any Subsidiary is in
violation or breach of, or in default with respect to,
complying with any material provision of any contract,
agreement, instrument, lease, license, arrangement, or
understanding which is filed as an exhibit to the Registration
Statement or is otherwise material to the Company or any
Subsidiary, and each such contract, agreement, instrument,
lease, license, arrangement, and understanding is in full
force and is the legal, valid, and binding obligation of the
parties thereto and is enforceable as to them in accordance
with its terms;
(v) neither the Company nor any Subsidiary is in
violation or breach of, or in default with respect to,
25
any term of its articles of incorporation (or other charter
document), by-laws, similar constitutive document, as
amended[, or business license];
(vi) the Company and each Subsidiary party thereto
has all requisite corporate power and authority to execute,
deliver and perform each of the Company Documents and the
Acquisition Agreement. All necessary corporate proceedings of
the Company and each Subsidiary have been duly taken to
authorize the execution, delivery and performance of each of
the Company Documents by the Company and each Subsidiary party
thereto and the consummation of the Acquisitions. Each Company
Document and each Acquisition Agreement has been duly executed
and delivered by the Company and each Subsidiary and each
other party thereto. Each Company Document and each
Acquisition Agreement has been duly authorized by the Company,
each Subsidiary and each other party thereto, and is or, when
executed and delivered by the Company, each such Subsidiary
and each such other party, will be the legal, valid, and
binding obligation of the Company, each such Subsidiary and
each such other party, enforceable against the Company, each
such Subsidiary and each such other party, in accordance with
its terms. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or
filing with, any national, provincial, municipal, local,
foreign or other governmental authority, any self-regulatory
organization or any court or other tribunal is required by the
Company or any Subsidiary party thereto for the execution,
delivery, or performance by the Company or any such Subsidiary
of any of the Company Documents (except filings under the Act
which have been or will be made before the Closing Date and
such consents consisting only of consents under "blue sky" or
state securities laws) or for the consummation of the
Acquisitions. No consent of any party (governmental or
otherwise) to any contract, agreement, instrument, lease,
license, arrangement, or understanding to which the Company or
any Subsidiary is a party, or to which any of their respective
properties or assets are subject, is required for the
execution, delivery, or performance of the Company Documents
or for the consummation of the Acquisitions; and the
execution, delivery, and performance of any of the Company
Documents and the consummation of the Acquisitions will not
violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under any
such contract, agreement, instrument, lease, license,
arrangement, or understanding, or violate or result in a
breach of any term of the articles of incorporation (or other
charter document),
26
by-laws or similar constitutive document, as amended, or
governmental approval or business license of the Company or
any Subsidiary, or violate, result in a breach of, or conflict
with any law, rule, regulation, order, judgment, or decree
binding on the Company or any Subsidiary or to which any of
their respective operations, businesses, properties, or assets
are subject;
(vii) the Firm Stock and the Additional Stock are
validly authorized. Such opinion delivered at the Closing Date
or any Additional Closing Date shall state that each share of
Firm Stock or Additional Stock, as the case may be, to be
delivered against payment therefore in accordance with this
Agreement, on that date is validly issued, fully paid, and
nonassessable, with no personal liability attaching to the
ownership thereof, and is not issued in violation of any
preemptive rights of stockholders, and the Underwriter has
received good title to the Firm Stock and Additional Stock
purchased by it, from the Company, free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts;
(viii) the Underwriter's Stock has been duly and
validly reserved for issuance. Such opinion delivered at the
Closing Date shall state that the Underwriter's Options have
been duly and validly issued and delivered. The Underwriter's
Stock, when issued and delivered in accordance with the terms
of the Underwriter's Option Agreement will be validly
authorized, validly issued, fully paid, and nonassessable,
with no personal liability attaching to the ownership thereof,
and will not have been issued in violation of any preemptive
rights of stockholders; and such holders will receive good
title to the securities purchased by them, respectively, free
and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts;
(ix) the Securities conform to all statements
relating thereto contained in the Registration Statement or
the Prospectus;
(x) the application of the net proceeds from the
Offering, as set forth in and contemplated by the Prospectus
or the Registration Statement, will not contravene any
provision of applicable law, rule or regulation or the
articles of association, other constitutive documents,
governmental approval or the business license of the Company
or any Subsidiary or contravene the terms or provisions of, or
constitute a
27
default under, any indenture, mortgage, deed of trust, loan
agreement, note, lease, Acquisition Agreement or other
agreement or instrument binding upon the Company or any
Subsidiary that, individually or in the aggregate, is material
to the Company or any Subsidiary, or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company or any Subsidiary.
(xi) no stamp or other issuance or transfer taxes or
duties and no capital gains, income, withholding or other
taxes are payable to the BVI or any political subdivision or
taxing authority thereof or therein by or on behalf of the
Underwriter in connection with the issuance of the Securities,
and the Underwriter will not be deemed resident, domiciled,
carrying on business or subject to taxation in the BVI by
reason of the execution, delivery, performance or enforcement
of this Agreement.
(xii) there is no requirement under the laws of the
BVI for the Company or any Subsidiary to obtain any license,
consent or approval in connection with any payment of cash
dividends, in connection with any conversion of foreign
currency required to make such payment to remit such foreign
currency to holders of the Securities, or to trade the
Securities. Except as disclosed in the Registration Statement
and the Prospectus, under the existing laws of the BVI,
holders of the Securities are not subject to withholding tax,
income tax or any other taxes or duties imposed by any
governmental authority in the BVI in respect of: (i) any
payments, dividends or other distributions made on the
Securities; or (ii) gains made on sales of the Securities
between non-residents of the BVI consummated outside the BVI,
unless the holder thereof is subject to such taxes in respect
of such Securities by reason of his being connected with the
BVI otherwise than by reason only of the holding of the
Securities or receiving payments thereon.
(xiii) the Company and each Subsidiary (i) is in
compliance with any and all Environmental Laws, (ii) has
obtained all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their
respective businesses and (iii) is in compliance with all
terms and conditions of any such permit, license or approval,
except where, in respect of (i), (ii) and (iii), such
noncompliance with Environmental Laws, failure to obtain
required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses
or approvals would not, individually or in the aggregate,
28
have a material adverse effect on the Company or any
Subsidiary.
(xiv) the Company has reasonably concluded that the
costs and liabilities associated with Environmental Laws
(including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and
any potential liabilities to third parties) would not,
individually or in the aggregate, have a material adverse
effect on the Company or any Subsidiary.
(xv) the descriptions of the capital contributions
made to each of the Subsidiaries respectively, and the dates
of each of such contributions, in the Prospectus, Registration
Statement and the financial statements and notes relating
thereto is true and correct and each of such contributions
were effected in compliance with all applicable national,
provincial,
29
municipal and local laws and all necessary governmental or
other approvals and licenses relating thereto have been
obtained.
(xvi) the descriptions of the Acquisitions in the
Prospectus and the Registration Statement are true and correct
in all material respects. The Acquisitions and any related
transactions have been effected in compliance with all
applicable national, provincial, municipal and local laws.
(xvii) the Acquisitions and any related transactions
do not contravene, in any material respect, any provision of
applicable law, rule or regulation and do not contravene the
articles of association, other constitutive documents or the
business license of the Company or any Subsidiary or
contravene the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument binding upon the
Company or any Subsidiary that, individually or in the
aggregate, is material to the Company or any Subsidiary or any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any Subsidiary
and will not result in the creation or imposition of any lien,
charge, encumbrance or other restriction upon any assets of
the Company or any Subsidiary.
(xviii) all consents, approvals, authorizations,
orders, registrations and qualifications required in China in
connection with the Acquisitions have been made or obtained in
writing (including, without limitation, all actions necessary
for the approval of the Acquisitions by the State Assets
Administration Bureau, the State Restructuring Commission, the
Land Administration Bureau and _______) no such consent,
approval, authorization, order, registration or qualification
is subject to any condition precedent which has not been
fulfilled or performed.
30
(xix) there are no legal or governmental proceedings
pending in China challenging the effectiveness or validity of
the Acquisitions and, to such counsel's knowledge, no such
proceedings are threatened or contemplated by any governmental
authorities in China or elsewhere.
(xx) the Company and each Subsidiary maintains
insurance of the types and in the amounts that the Company and
such Subsidiary reasonably believes to be adequate for their
respective businesses and consistent with insurance coverages
maintained by Chinese or BVI companies in similar businesses.
Neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing
insurance coverage from similar insurers as may be necessary
to continue its business at a cost that would not,
individually or in the aggregate, materially and adversely
affect the condition, financial or otherwise, or the earnings,
business or operations of the Company or any Subsidiary,
except as described in or contemplated by the Prospectus. The
descriptions of the Company's and any Subsidiary's insurance
coverages contained in the Prospectus are true and correct in
all material respects.
(xxi) the Company is not, and upon consummation of
the transactions contemplated by this Agreement and the
Prospectus, will not be treated for U.S. tax purposes as a
"passive foreign investment company" as defined in the U.S.
Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
(xxii) the Company and each Subsidiary has devised
and maintains 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 U.S. GAAP and to maintain
accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences;
each of the Company and each Subsidiary has made and keeps
books, records and accounts, which, in reasonable detail
accurately and fairly reflect the transactions and
dispositions of assets of such entity.
31
(xxiii) under the laws of China, neither the Company,
any Subsidiary nor any of their respective properties, assets
or revenues are entitled to any right of immunity on the
grounds of sovereignty from any legal action, suit or
proceeding, from set-off or counterclaim, from the
jurisdiction of any court, from services of process, from
attachment prior to or in aid of execution and judgment, or
from other legal process or proceeding for the giving of any
relief or for the enforcement of any judgment. The irrevocable
and unconditional waiver and agreement of the Company and each
Subsidiary in Article 15 hereof not to plead or claim any such
immunity in any legal action, suit or proceeding based on the
Underwriting Agreement is valid and binding under the laws of
China.
(xxiv) under the laws of China, the courts of China
recognize and give effect to the choice of law provisions set
forth in Article 15 hereof and enforce judgments of U.S.
courts obtained against the Company or any Subsidiary to
enforce this Agreement, provided that the judgment: (i) was
not obtained by fraud; (ii) was final and conclusive; (iii) in
the opinion of the relevant Chinese court after its review of
such judgment pursuant to international treaties concluded or
acceded to by China or in accordance with the principle of
reciprocity, did not contradict the basic principles of
Chinese law; (iv) in the opinion of the relevant Chinese court
after its review of such judgment pursuant to international
treaties concluded or acceded to by China or in accordance
with the principle of reciprocity, did not violate state
sovereignty, security or public interest; and (v) was for a
definite sum of money.
(xxv) there are no relationships or transactions
between the Company or any Subsidiary on the one hand and Mr.
Du (and any members of his immediate family), their respective
affiliates, officers and directors or their shareholders,
customers or suppliers on the other hand which, although
required to be so disclosed, are not disclosed or reflected in
the Prospectus or which have not been disclosed in writing to
the Underwriter.
(xxvi) each document provided by the Company, the
Subsidiaries or Mr. Du to the Underwriter and/or counsel to
the Underwriter that has been translated into english, is an
accurate and complete translation of the original version of
such document.
(xxvii) the statements in the Prospectus and the
Registration Statement under the captions [ ] in each
case insofar as such statements constitute summaries of
Chinese legal matters,
32
documents or proceedings referred to therein, fairly and
adequately present the information called for with respect to
such legal matters, documents and proceedings and fairly and
accurately summarize the matters referred to therein. In
addition, the descriptions in the Prospectus and the
Registration Statement of relevant Chinese laws, the Company's
and each Subsidiary's articles of association or other
constitutive document, relevant governmental approvals,
authorizations, consents, legal and governmental proceedings,
descriptions of [ ] and the establishment of the Company
and each Subsidiary, are accurate in all material respects and
fairly present in all respects all information disclosed
therein.
(xxviii) the choice of law provisions set forth in
the Company Documents (except for the Shareholder Agreement
which is to be governed by BVI law) will be recognized by
China courts; the Company can xxx and be sued in its owns
name; under the laws of China, the irrevocable submission of
the Company to the nonexclusive jurisdiction of the State of
New York and of any federal court located in such State (each
a "New York court"), the waiver of the Company of any
objection to the venue of a proceeding in a New York court,
the waiver and agreement not to plead an inconvenient forum,
the waiver of sovereign immunity and the agreement of the
Company and each Subsidiary that the Company Documents (except
for the Shareholder Agreement which is to be governed by BVI
Law)shall be construed in accordance with and governed by the
laws of the State of New York are legal, valid and binding
under the laws of China and will be respected by the courts in
China; service of process effected in the manner set forth in
the Company Documents (except for the Shareholder Agreement
which is to be governed by BVI Law), provided it is delivered
by a court-appointed officer and assuming its validity under
New York law, will be effective, insofar as Chinese law is
concerned, to confer valid personal jurisdiction over the
Company; and any judgment obtained in a New York court arising
out of or in relation to the obligations of the Company under
this Agreement will be recognized by China;
(xxix) insofar as matters of Chinese law are
concerned, the indemnification and contribution provisions set
forth in Article 8 of this Agreement constitute the legal,
valid and binding obligations of the Company enforceable in
accordance with the terms therein, subject, as to enforcement,
to bankruptcy,
33
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights;
(xxx) each of the Company Documents and the
Acquisition Agreements is in proper legal form under the laws
of China or the BVI for the enforcement thereof against the
Company in China or the BVI without further action on the part
of the Underwriters and to ensure the legality, validity,
enforceability or admissibility in evidence of any of such
agreements, it is not necessary that any such document be
filed or recorded with any court or other authority in China
or the BVI or that any stamp or similar tax be paid on or in
respect of any such document or the Securities;
(xxxi) the Company is subject to Chinese income tax
at the rate of ____ percent, in accordance with the
[Provisional Rules of China on Enterprise Income Tax]
specifying for such income tax rate of ____ percent with
effect from ____________ the Company is not aware of any event
or circumstance which may result in such order being invalid
or ineffective or capable of being revoked. The Company is not
otherwise subject to Chinese tax on its income;
(xxxii) the entry into, and performance or
enforcement of this Agreement in accordance with its
respective terms will not subject the Underwriter to a
requirement to be licensed or otherwise qualified to do
business in China, nor will the Underwriter be deemed to be
resident, domiciled, carrying on business through an
establishment or place in China or the BVI or in breach of any
laws or regulations in China or the BVI by reason of entry
into, performance or enforcement of this Agreement;
(xxxiii) to the knowledge of such counsel, any
contract, agreement, instrument, lease, or license required to
be described in the Registration Statement or the Prospectus
are correct and complete in all material respects. To the
knowledge of such counsel, upon due inquiry, any contract,
agreement, instrument, lease, or license required to be filed
as an exhibit to the Registration Statement has been filed
with the Commission as an exhibit to the Registration
Statement;
(xxxiv) insofar as statements in the Prospectus
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases, or
licenses, such statements have been prepared or reviewed by
such counsel and accurately reflect the
34
status of such litigation and provisions purported to be
summarized and are correct in all material respects;
(xxxv) the conditions for use of Form F-1 have been
satisfied with respect to the Registration Statement;
(xxxvi) the Common Stock has been approved for
quotation on NASDAQ, subject to official notice of issuance;
(xxxvii) [Reserved];
(xxxviii) to the knowledge of such counsel, no person
or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement;
(xxxix) the Registration Statement has become
effective under the Act. To the knowledge of such counsel, no
Stop Order has been issued and no proceedings for that purpose
have been instituted or threatened;
(xl) the Registration Statement, any Rule 430A
Prospectus, and the Prospectus, and any amendment or
supplement thereto (other than financial statements and other
financial data and schedules contained therein, as to which
such counsel need express no opinion), comply as to form in
all material respects with the requirements of the Act and the
Regulations;
(xli) such counsel has no reason to believe that any
of the Registration Statement, any Rule 430A Prospectus, or
the Prospectus, or any amendment or supplement thereto (other
than financial statements and other financial data and
schedules which are or should be contained therein, as to
which such counsel need express no opinion), contains any
untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading;
(xlii) to the knowledge of such counsel, upon due
inquiry, since the effective date of the Registration
Statement, no event has occurred which was required by the Act
and the Regulations to be set forth in an amendment or
supplement to the Registration Statement or the Prospectus
which was not set forth in such an amendment or supplement;
and
(xliii) nothing has come to the attention of such
counsel that would lead them to believe that the Registration
Statement or any amendment or supplement
35
thereto, at the time it became effective or at the Closing
Date or Additional Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading or that the
Prospectus or any amendment or supplement thereto, or the Rule
430A Prospectus or any amendment or supplement thereto, at the
Closing Date or Additional Closing Date, as the case may be
(unless the term "Prospectus" refers to a Prospectus which has
been provided to the Underwriter by the Company for use in
connection with the offering of the Securities which differs
from the Prospectus on file at the Commission at the Closing
Date or Additional Closing Date, as the case may be, in which
case at the time it is first provided to the Underwriter for
such use), included or includes an untrue statement of a
material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (in each case other than the financial statements
and supporting schedules and notes thereto and other financial
or statistical information included therein, as to which no
opinion need be rendered).
In rendering such opinion, counsel for the Company may rely (A) as to matters
involving the application of laws other than the laws of the United States, the
laws of the State of Delaware and the laws of the State of New York, to the
extent counsel for the Company deems proper and to the extent specified in such
opinion, upon an opinion or opinions (in form and substance satisfactory to
counsel for the Underwriter) of other counsel, acceptable to counsel for the
Underwriter, familiar with the applicable laws, in which case the opinion of
counsel for the Company shall state that the opinion or opinions of such other
counsel are satisfactory in scope, form, and substance to counsel for the
Company and that reliance thereon by counsel for the Company and the Underwriter
is reasonable; (B) may rely as to matters of fact, to the extent they deem
proper, on certificates of Mr. Du, responsible officers of the Company or any
Subsidiary; and (C) may rely to the extent they deem proper, upon written
statements or certificates of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company or any Subsidiary, provided that copies of any such statements or
certificates shall be delivered to counsel for the Underwriter.
(c) On or prior to the Closing Date and any Additional Closing
Date, as the case may be, the Underwriter shall have been furnished
such information, documents, certificates, and opinions as it may
reasonably require for the purpose of enabling it to review the matters
referred to in Section
36
7(b), and in order to evidence the accuracy, completeness, or
satisfaction of any of the representations, warranties, covenants,
agreements, or conditions herein contained, or as you may reasonably
request.
(d) At the Closing Date and any Additional Closing Date, as
the case may be, you shall have received certificates of the chief
executive officer and of the chief financial officer of the Company,
the Chief Executive Officer and Chief Financial Officer of each
Subsidiary and Mr. Du and , dated the Closing Date or such Additional
Closing Date, as the case may be, to the effect that the condition set
forth in Section 7(a) has been satisfied, that as of the date of this
Agreement and as of the Closing Date or such Additional Closing Date,
as the case may be, the representations and warranties of the Company,
each Subsidiary and Mr. Du contained herein were and are accurate, and
that as of the Closing Date or such Additional Closing Date, as the
case may be, the obligations to be performed by the Company, each
Subsidiary and Mr. Du hereunder on or prior thereto have been fully
performed.
(e) At the time this Agreement is executed and at the Closing
Date and any Additional Closing Date, as the case may be, you shall
have received a comfort letter from Xxxxxx Xxxxxxxx & Co., certified
public accountants, dated the date of delivery, and addressed to the
Underwriter, and in form and substance satisfactory to you, with
reproduced copies or signed counterparts thereof for the Underwriter.
(f) There shall not have occurred any change, or any
development involving a prospective change in the condition, financial,
economic or political, that, in your judgment, is material and adverse
and that makes it, in your judgement, impracticable to market the
securities on the terms and in the manner contemplated in the
Prospectus and the Registration Statement.
(g) All proceedings taken in connection with the issuance,
sale, transfer, and delivery of the Firm Stock and the Additional Stock
shall be reasonably satisfactory in form and substance to you and to
counsel for the Underwriter, and the Underwriter shall have received
from such counsel for the Underwriter a favorable opinion, dated as of
the Closing Date and the Additional Closing Date, as the case may be,
with respect to such of the matters set forth under Section 7(b), and
with respect to such other related matters, as you may reasonably
request.
(h) The NASD, upon review of the terms of the public offering
of the Firm Stock and any Additional Stock, shall not have objected to
the Underwriter's participation in such offering.
37
(i) Prior to or on the Closing Date, the Company shall have
entered into the Underwriter's Option Agreement.
(j) Prior to or on the Closing Date, the Acquisitions shall be
or have been consummated.
(k) Prior to or on the Closing Date, the Company shall have
provided to you copies of the agreements referred to in Section 2(s).
Any certificate or other document signed by any officer of the Company
or any Subsidiary and delivered to you or to counsel for the Underwriter shall
be deemed a representation and warranty by such officer individually and by the
Company or such Subsidiary hereunder to the Underwriter as to the statements
made therein. If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or any Additional Closing Date, as the
case may be, is not so fulfilled, you may terminate this Agreement or, if you so
elect, in writing waive any such conditions which have not been fulfilled or
extend the time for their fulfillment.
8. Indemnification and Contribution. (a) Subject to the conditions set
forth below, the Company agrees to indemnify and hold harmless the
Underwriter, its officers, directors, partners, employees, agents, and
counsel, and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 8,
but not be limited to, attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever and
any and all amounts paid in settlement of any claim or litigation) as
and when incurred arising out of, based upon, or in connection with (i)
any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, any Rule 430A Prospectus,
the Registration Statement, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto or
(B) in any application or other document or communication (in this
Section 8 collectively called an "application") executed behalf of the
Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify any of the
Securities under the "blue sky" or securities laws thereof or filed
with the Commission or any securities exchange; or any omission or
alleged omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Company as stated in Section 8(b)
with respect to any Underwriter by or on behalf
38
of such Underwriter through the Underwriter expressly for inclusion in
any Preliminary Prospectus, any Rule 430A Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto,
or in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company
contained in this Agreement. In no event shall the indemnification
agreement contained in this Section 8 inure to the benefit of the
Underwriter on account of any losses, claims, damages, liabilities or
actions arising from the sale by the Underwriter of the Firm Stock or
Additional Stock upon the public offering to any person if such losses,
claims, damages, liabilities or actions arise out of, or are based
upon, a statement or omission or alleged omission in a Preliminary
Prospectus and if, in respect to such statement, omission or alleged
omission, the Prospectus differs in a material respect from such
Preliminary Prospectus and a copy of the Prospectus was not sent or
given to such person at or prior to the confirmation of such sale to
such person as required by law. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have,
including liabilities arising under this Agreement.
If any action is brought against the Underwriter or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of the Underwriter (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company in writing
of the institution of such action (but the failure so to notify shall not
relieve the Company from any liability it may have other than pursuant to this
Section 8(a), except to the extent it may have been prejudiced in any material
respect by such failure) and the Company shall promptly assume the defense of
such action, including the employment of counsel (satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel satisfactory to
such indemnified party or parties to have charge of the defense of such action
or such indemnified party or parties shall have reasonably concluded that there
may be one or more legal defenses available to it or them or to other
indemnified parties which are different from or additional to those available to
the Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this paragraph
to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which shall not
39
be unreasonably withheld. The Company shall not, without the prior written
consent of each indemnified party that is not released as described in this
sentence, settle or compromise any action, or permit a default or consent to the
entry of judgment in or otherwise seek to terminate any pending or threatened
action, in respect of which indemnity may be sought hereunder (whether or not
any indemnified party is a party thereto), unless such settlement, compromise,
consent, or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Underwriter of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with the
sale of the Firm Stock or the Additional Stock, any Preliminary Prospectus, any
Rule 430A Prospectus, the Registration Statement, or the Prospectus, or any
amendment or supplement thereto, or any application.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who
shall have signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter in Section
8(a), but only with respect to statements or omissions, if any, made in
any Preliminary Prospectus, any Rule 430A Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any
application in reliance upon and in conformity with written information
furnished to the Company as stated in this Section 8(b) with respect to
any Underwriter by or on behalf of such Underwriter through the
Underwriter expressly for inclusion in any Preliminary Prospectus, any
Rule 430A Prospectus, the Registration Statement, or the Prospectus, or
any amendment or supplement thereto, or in any application, as the case
may be; provided, however, that the obligation of the Underwriter to
provide indemnity under the provisions of this Section 8(b) shall be
limited to the amount which represents the underwriting discounts
received by the Underwriter hereunder. For all purposes of this
Agreement, the amounts of the selling concession and reallowance and
the name of the Underwriter set forth in the Prospectus constitute the
only information furnished in writing by or on behalf of the
Underwriter expressly for inclusion in any Preliminary Prospectus, any
Rule 430A Prospectus, the Registration Statement, or the Prospectus (as
from time to time amended or supplemented), or any amendment or
supplement thereto, or in any application, as the case may be. If any
action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, any Rule 430A
Prospectus, the Registration Statement, or the Prospectus, or any
amendment or supplement thereto, or in any application, and in respect
40
of which indemnity may be sought against the Underwriter pursuant to
this Section 8(b), the Underwriter shall have the rights and duties
given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section
8(a) or 8(b) (subject to the limitations thereof) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case or (ii)
any indemnified or indemnifying party seeks contribution under the Act,
the Exchange Act, or otherwise, then the Company (including for this
purpose any contribution made by or on behalf of any director of the
Company, any officer of the Company who signed the Registration
Statement, and any controlling person of the Company), as one entity,
and the Underwriter (including for this purpose any contribution by or
on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages, and expenses
whatsoever to which any of them may be subject, so that the Underwriter
is responsible for the proportion thereof equal to the percentage which
the underwriting discount per share of Firm Stock set forth on the
cover page of the Prospectus represents of the initial public offering
price per share set forth on the cover page of the Prospectus and the
Company is responsible for the remaining portion; provided, however,
that if applicable law does not permit such allocation, then other
relevant equitable considerations such as the relative fault of the
Company and the Underwriter in connection with the facts which resulted
in such losses, liabilities, claims, damages, and expenses shall also
be considered. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission, or alleged omission, shall be
determined by, among other things, whether such statement, alleged
statement, omission, or alleged omission relates to information
supplied by the Company or by the Underwriter, and the parties'
relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement, alleged statement, omission, or
alleged omission. The Company and the Underwriter agree that it would
be unjust and inequitable if the respective obligations of the Company
and the Underwriter for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims,
damages, and expenses (even if the Underwriter and the other
indemnified parties were treated as one entity for such purpose) or by
any other method of allocation that does not reflect the equitable
considerations referred to in this Section 8(c). No person guilty of a
fraudulent
41
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 8(c),
each person, if any, who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee, agent, and counsel of the
Underwriter shall have the same rights to contribution as the
Underwriter and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed the Registration
Statement, and each director of the Company shall have the same rights
to contribution as the Company, subject in each case to the provisions
of this Section 8(c). In no case shall the Underwriter be liable or
responsible for any amount in excess of the Underwriting discount
applicable to the Firm Stock and Additional Stock purchased by such
Underwriter hereunder. Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written
consent. This Section 8(c) is intended to supersede any right to
contribution under the Act, the Exchange Act, or otherwise.
9. [Reserved]
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriter, the
Company, each Subsidiary and Mr. Du, including the indemnity and contribution
agreements contained in Section 8, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 8(b), and shall survive
termination of this Agreement or the delivery of the Firm Stock and the
Additional Stock to the Underwriter. In addition, the provisions of Sections 6,
8, 10, 11, and 13 shall survive termination of this Agreement, whether such
termination occurs before or after the Closing Date or any Additional Closing
Date.
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 9:30 A.M., New
York City Time, on the first full business day following the day on
which the Registration Statement becomes effective or at the time of
the initial public offering by the Underwriter of the Firm Stock,
whichever is
42
earlier. The time of the initial public offering shall mean the time,
after the Registration Statement becomes effective, of the release by
you for publication of the first newspaper advertisement which is
subsequently published relating to the Firm Stock or the time, after
the Registration Statement becomes effective, when the Firm Stock are
first released by you for offering by the Underwriter or dealers by
letter or telegram, whichever shall first occur. You or the Company may
prevent this Agreement from becoming effective without liability of any
party to any other party, except as noted below in this Section 11, by
giving the notice indicated in Section 11(c) before the time this
Agreement becomes effective.
(b) In addition to the right to terminate this Agreement
pursuant to Section 7 hereof, you shall have the right to terminate
this Agreement at any time prior to the Closing Date or any Additional
Closing Date, as the case may be, by giving notice to the Company if
any domestic or international event, act, or occurrence has materially
disrupted, or in your opinion will in the immediate future materially
disrupt, the securities markets; or if there shall have been a general
suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange, NASDAQ, the American Stock
Exchange or in the over-the-counter market; or if there shall have been
an outbreak of major hostilities or other national or international
calamity; or if a banking moratorium has been declared by a state or
federal authority; or if a moratorium in foreign exchange trading by
major international banks or persons has been declared; or if there
shall have been a material interruption in the mail service or other
means of communication within the United States; or if the Company
shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage, or other calamity or
malicious act which, whether or not such loss shall have been insured,
will, in your opinion, make it inadvisable to proceed with the
offering, sale, or delivery of the Firm Stock or the Additional Stock,
as the case may be; or if there shall have been such change in the
market for securities in general or in political, financial, or
economic conditions as in your judgment makes it inadvisable to proceed
with the offering, sale, and delivery of the Firm Stock or the
Additional Stock, as the case may be, on the terms contemplated by the
Prospectus.
(c) If you elect to prevent this Agreement from becoming
effective, as provided in this Section 11, or to terminate this
Agreement pursuant to Section 7, or this Section 11, you shall notify
the Company promptly by telephone, telex, facsimile or telegram,
confirmed by letter. If the Company elects to prevent this Agreement
from becoming effective, as provided in this Section 11, the
43
Company shall notify you promptly by telephone, telex, facsimile, or
telegram, confirmed by letter.
(d) Anything in this Agreement to the contrary notwithstanding
other than Section 11(e), if this Agreement shall not become effective
by reason of an election pursuant to this Section 11 or if this
Agreement shall terminate or shall otherwise not be carried out within
the time specified herein by reason of any failure on the part of the
Company to perform any covenant or agreement or satisfy any condition
of this Agreement by it to be performed or satisfied, the sole
liability of the Company to the Underwriter, in addition to the
obligations the Company assumed pursuant to Section 6, will be to (i)
reimburse the Underwriter for such out-of-pocket expenses (including
the fees and disbursements of its counsel) as shall have been incurred
by them in connection with this Agreement or the proposed offer, sale,
and delivery of the Firm Stock and any Additional Stock, and the
Company agrees to pay promptly upon demand the full amount thereof to
you, up to an aggregate of $125,000, less amounts previously paid to
you in reimbursement of such expenses, and (ii) if the Company has
elected to prevent this Agreement from becoming effective or if you
terminate this Agreement pursuant to Section 7, for a period of one
year subsequent to such termination, if the Company or any Subsidiary
is involved in any public offering, private placement, merger,
acquisition or sale of securities, joint venture or other similar
transaction (any of the foregoing, a "Subsequent Transaction"), the
Company shall pay to the Underwriter an investment banking fee in
connection therewith equal to 5% of any consideration received by the
Company or any of its subsidiaries, affiliates or shareholders;
provided, however, that the foregoing sentence shall not apply (i) to
any Subsequent Transaction consummated between the Company and any
company or entity affiliated with the Company as of the date hereof or
(ii) in the event that the Underwriter has not been able to bring the
deal to market within three months after the Preliminary Prospectus is
ready for circulation, provided there have been no material adverse
changes to the Company or its business.
(e) Notwithstanding any election hereunder or any termination
of this Agreement, and whether or not this Agreement is otherwise
carried out, the provisions of Sections 6, 8, 10, 13 and 15 shall not
be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to Barington Capital Group, L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx
44
10019, Attention: Xxxx Xxxxxx; or if sent to the Company, shall be mailed,
delivered, or telexed or telegraphed and confirmed by letter, to the Company,
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, Attention: Qingsong Du.
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriter, the Company, each Subsidiary, Mr. Du and
the persons and entities referred to in Section 8 who are entitled to
indemnification or contribution, and their respective successors, legal
representatives, and assigns (which shall not include any buyer, as such, of the
Firm Stock or any Additional Stock), and no other person shall have or be
construed to have any legal or equitable right, remedy, or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. This Agreement shall be construed in accordance with
the laws of the State of New York, without giving effect to conflict of laws.
TIME IS OF THE ESSENCE IN THIS AGREEMENT.
15. Consent to Jurisdiction. The Company, each Subsidiary and Mr. Du,
hereby irrevocably consent to the jurisdiction of the courts of the State of New
York and of any federal court located in such State in connection with any
action or proceeding arising out of or relating to this Agreement, any document
or instrument delivered pursuant to, in connection with or simultaneously with
this Agreement, or a breach of this Agreement or any such document or
instrument, and irrevocably waive, to the fullest extent permitted by law, any
objection which it or they may now or hereafter have to the laying of the venue
of any such suit, action or proceeding and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum, and
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding. The Company, each Subsidiary and Mr. Du agree
that a final judgment in any such suit, action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law in accordance with applicable law. The Company,
each Subsidiary and Mr. Du hereby irrevocably waive any right to invoke
jurisdiction it may have to any court by virtue of the laws of China or the BVI.
In any such action or proceeding, the Company waives personal service or any
summons, complaint or other process and agrees that service thereof may be made
in accordance with Section 12. Within 30 days after such service, or such other
time as may be mutually agreed upon in writing by the attorneys for the parties
to such action or proceeding, the Company shall appear or answer such summons,
complaint or other process.
45
The Company has appointed ___________ (the "Process Agent") for a
period of ______ years from the date hereof, as its agent to receive on its
behalf service of copies of the summons and complaints and any other process
which may be served in any suit, action or proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby brought in such New
York State or federal court sitting in The City of New York. Such service may be
made by delivering a copy of such process to the Company in care of the Process
Agent as the address specified above for the Process Agent and obtaining a
receipt therefor, and the Company hereby irrevocably authorizes and directs such
Process Agent to accept such service on its behalf. The Company represents and
warrants that the Process Agent has agreed to act as said agent for service of
process, and agrees that service of process in such manner upon the Process
Agent shall be deemed in every respect effective service of process upon the
Company in any such suit, action or proceeding.
The Company, in respect to itself and its properties and revenues,
expressly and irrevocably waives, to the fullest extent permitted by law, any
right of immunity on the grounds of sovereignty (including any immunity from the
jurisdiction of any court or from service of process or from any execution of
judgment or from attachment prior to judgment or in aid of execution or
otherwise) or claim thereto which may now or hereafter exist, and agrees not to
assert any such right or claim in any such action or proceeding, whether in the
United States or otherwise.
If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due hereunder into any currency other than United States
dollars, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be the rate at which in
accordance with normal banking procedures [ ] could purchase United States
dollars with such other currency in The City of New York on the business day
preceding that on which final judgment is given. The obligation of the Company
in respect of any sum due from it to any Underwriter shall, notwithstanding any
judgment in a currency other than United States dollars, not be discharged until
the first business day, following receipt by such Underwriter of any sum
adjudged to be so due in such other currency, on which (and only to the extent
that) such Underwriter may in accordance with normal banking procedures purchase
United States dollars with such other currency; if the United States dollars to
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 United States
dollars 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 dollars so purchased over the sum originally due to such
Underwriter hereunder.
46
47
If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
ASIA ELECTRONICS HOLDING CO., INC.
By:____________________________________
Name: Qingsong Du
Title: Chairman and Chief
Executive Officer
XIANYANG DAMING ELECTRONICS CO. LTD.
By:____________________________________
Name:
Title
XIANYANG YONGXIN ELECTRONICS CO. LTD.
By:____________________________________
Name:
Title:
YANTAI DAEWOO ELECTRONICS
COMPONENTS CO., LTD.
By:____________________________________
Name:
Title:
DNON TECH SPECIAL ELECTRONICS
TECHNICAL CO., LTD.
By:____________________________________
Name:
Title:
48
QINGSONG DU
---------------------------------------
Accepted as of the date first above written.
New York, New York
BARINGTON CAPITAL GROUP, L.P.
By: LNA CAPITAL CORP.,
General Partner
By:_____________________________
Xxxx Xxxxxx,
Executive Vice President
49
