UNDERWRITING AGREEMENT between LIHUA INTERNATIONAL, INC. and RODMAN & RENSHAW, LLC as Representative of the Underwriters named in Schedule A
between
LIHUA
INTERNATIONAL, INC.
and
XXXXXX
& XXXXXXX, LLC
as
Representative of the Underwriters named in Schedule A
1
LIHUA
INTERNATIONAL, INC.
April 8,
2010
Xxxxxx
& Xxxxxxx, LLC
As
Representative of the Underwriters
c/o
Rodman & Xxxxxxx, LLC
1251
Avenue of the Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
The
undersigned, Lihua International, Inc., a company formed under the laws of
Delaware (collectively, with its subsidiaries , including, without limitation,
all entities disclosed or described in the Registration Statement (as
hereinafter defined) as being subsidiaries of the Company, the “Company”), hereby confirms its
agreement with Xxxxxx & Xxxxxxx, LLC, who has agreed to act as
representative of the underwriters named in Schedule A (hereinafter referred to
as “you” (including its correlatives) or the “Underwriter”) as
follows:
1.
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Purchase
and Sale of Securities.
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1.1 Firm
Securities.
1.1.1. Nature and Purchase of Firm
Securities.
(i) On
the basis of the representations and warranties herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to issue and sell,
to the Underwriter, an aggregate of 3,726,709 shares of the Company’s common
stock (“Firm Shares”),
par value $0.0001 per share (the “Shares”).
(ii) The
Underwriter agrees to purchase from the Company the Firm Shares at a purchase
price (net of discounts and commissions) of $7.6475 per Firm Share (the “Purchase Price”), representing
a five percent (5%) discount to the $8.05 per Firm Share offering price to the
public. The Firm Shares are to be offered initially to the public (the “Offering”) at the offering
price set forth on the cover page of the Prospectus (as defined in Section 2.1.1
hereof).
1.1.2. Shares Payment and
Delivery.
(i) Delivery
and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on
the fourth (4th)
Business Day following the date hereof or at such earlier time as shall be
agreed upon by the Underwriter and the Company at the offices of Sichenzia Xxxx
Xxxxxxxx Xxxxxxx LLP, counsel to the Underwriter (“SRFF”), or at such other place
(or remotely by facsimile or other electronic transmission) as shall be agreed
upon by the Underwriter and the Company. The hour and date of delivery and
payment for the Firm Shares is called the “Closing
Date.”
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(ii) Payment
for the Firm Shares shall be made on the Closing Date by wire transfer in
Federal (same day) funds, payable to the order of the Company upon delivery of
the certificates (in form and substance satisfactory to the Underwriter)
representing the Firm Shares (or through the facilities of the Depository Trust
Company (“DTC”)) for the
account of the Underwriter. The Firm Shares shall be registered in such name or
names and in such authorized denominations as the Underwriter may request in
writing at least two (2) full Business Days prior to the Closing Date. The
Company shall not be obligated to sell or deliver the Firm Shares except upon
tender of payment by the Underwriter for all the Firm Shares. The term “Business Day” means any day
other than a Saturday, a Sunday or a legal holiday or a day on which banking
institutions are authorized or obligated by law to close in New York
City.
1.2 Over-allotment
Option.
1.2.1. Option
Shares. For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares, the Underwriter is
hereby granted, an option to purchase up to 559,006 Shares representing 15% of
the Firm Shares sold in the Offering (the “Over-allotment Option”). Such
additional 559,006 Shares, the net proceeds of which will be deposited with the
Company’s account, are hereinafter referred to as “Option Shares.” The Purchase
Price to be paid for the Option Shares will be the same price per Option Share
as the Purchase Price set forth in Section 1.1.1 hereof. The Firm Shares and the
Option Shares are hereinafter referred to collectively as the
“Public Securities.”
1.2.2. Exercise of
Option. The Over-allotment Option granted pursuant to Section
1.2.1 hereof may be exercised by the Underwriter as to all (at any time) or any
part (from time to time) of the Option Shares within 45 days after the date
hereof. The Underwriter will not be under any obligation to purchase any Option
Shares prior to the exercise of the Over-allotment Option. The Over-allotment
Option granted hereby may be exercised by the giving of oral notice to the
Company from the Underwriter, which must be confirmed in writing by overnight
mail or facsimile or other electronic transmission setting forth the number of
Option Shares to be purchased and the date and time for delivery of and payment
for the Option Shares (the “Option Closing Date”), which
will not be later than five (5) full Business Days after the date of the notice
or such other time as shall be agreed upon by the Company and the Underwriter,
at the offices of SRFF or at such other place (including remotely by facsimile
or other electronic transmission) as shall be agreed upon by the Company and the
Underwriter. If such delivery and payment for the Option Shares does not occur
on the Closing Date, the Option Closing Date will be as set forth in the notice.
Upon exercise of the Over-allotment Option, the Company will become obligated to
convey to the Underwriter, and, subject to the terms and conditions set forth
herein, the Underwriter will become obligated to purchase, the number of Option
Shares specified in such notice.
1.2.3. Payment and
Delivery. Payment for the Option Shares will be made on the
Option Closing Date by wire transfer in Federal (same day) funds payable to the
order of the Company upon delivery of the certificates (in form and substance
satisfactory to the Underwriter) representing the Option Shares (or through the
facilities of DTC) for the account of the Underwriter. The Option Shares shall
be registered in such name or names and in such authorized denominations as the
Underwriter may request in writing at least two (2) full Business Days prior to
the Option Closing Date. The Company shall not be obligated to sell or deliver
the Option Shares except upon tender of payment by the Underwriter for the
applicable Option Shares.
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2.
Representations
and Warranties of the Company. The Company represents and
warrants to the Underwriter as of the Applicable Time (as defined below), as of
the Closing Date and as of the Option Closing Date, if any, as
follows:
2.1
Filing of Registration
Statement.
2.1.1. Pursuant to the
Act. The Company filed with the Securities and Exchange
Commission (the “Commission”) a shelf
registration statement and an amendment or amendments thereto, on Form S-3 (File
No. 333-164269), including any related prospectus or prospectuses, for the
registration of the Public Securities under the Securities Act of 1933, as
amended (the “Act”),
which registration statement and amendment or amendments have been prepared by
the Company in all material respects in conformity with the requirements of the
Act and the rules and regulations of the Commission under the Act (the “Regulations”). Except as the
context may otherwise require, such registration statement on file with the
Commission at the time it became effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein and all information deemed to be a part thereof as of
the effective date of such registration statement pursuant to paragraph (b) of
Rule 430A of the Regulations), is referred to herein as the “Registration Statement.” The
final prospectus, including the base prospectus and the final prospectus
supplement furnished to the Underwriter for use in the Offering and filed with
the Commission, is hereinafter called the “Prospectus.” The Registration
Statement was declared effective by the Commission on March 12, 2010. “Applicable Time” means 4:00 pm
on the date hereof.
2.1.2. Registration under the
Exchange Act and Stock Exchange Listing. The Shares are
registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and are listed on the NASDAQ Capital Market, and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Shares under the Exchange Act or delisting
the Common Shares from the NASDAQ Capital Market, nor has the Company received
any notification that the Commission or the NASDAQ Capital Market is
contemplating terminating such registration or listing.
2.2
No Stop Orders,
etc. Neither the Commission nor, to the best of the Company’s
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of the Prospectus or the Registration Statement or has
instituted or, to the best of the Company’s knowledge, threatened to institute
any proceedings with respect to such an order.
2.3
Disclosures in Registration
Statement.
2.3.1. 10b-5
Representation. At the respective times the Registration
Statement and any post-effective amendments thereto become effective, and at the
time the Prospectus is filed (and at the Closing Date and the Option Closing
Date, if any):
(i) The
Registration Statement, and any post-effective amendments thereto and the
Prospectus, did and will contain all material statements that are required to be
stated therein in accordance with the Act and the Regulations, and will in all
material respects conform to the requirements of the Act and the
Regulations;
(ii) Neither
the Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, do or will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The representation and warranty made in
this Section 2.3.1(ii) does not apply to statements made or statements omitted
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
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2.3.2. Disclosure of
Agreements. The agreements and documents described in the
Prospectus and the Registration Statement conform to the descriptions
thereof contained therein and there are no agreements or other documents
required by the Act and the Regulations to be described in the Prospectus, the
Registration Statement or to be filed with the Commission as exhibits to the
Registration Statement, that have not been so described or filed. Each agreement
or other instrument (however characterized or described) to which the Company is
a party or by which it is or may be bound or affected and (i) that is
referred to in the Prospectus, or (ii) is material to the Company’s
business, has been duly authorized and validly executed by the Company, is in
full force and effect in all material respects and is enforceable against the
Company and, to the Company’s knowledge, the other parties thereto, in
accordance with its terms, except (x) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally, (y) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws or the laws of any foreign jurisdiction and (z) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefore may be brought. None of such agreements or
instruments has been assigned by the Company, and neither the Company nor, to
the best of the Company’s knowledge, any other party is in default thereunder
and, to the best of the Company’s knowledge, no event has occurred that, with
the lapse of time or the giving of notice, or both, would constitute a default
thereunder. To the best of the Company’s knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and
regulations.
2.3.3. Regulations. The
disclosures in the Registration Statement concerning the effects of Federal,
State, local and all foreign regulation on the Company’s business as currently
contemplated are correct in all material respects.
2.4
Changes After Dates in
Registration Statement.
2.4.1. No Material Adverse
Change. Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
specifically stated therein: (i) there has been no material adverse change
in the condition, financial or otherwise, or business prospects of the Company;
(ii) there have been no material transactions entered into by the Company,
other than as contemplated pursuant to this Agreement; and (iii) no officer
or director of the Company has resigned from any position with the
Company.
2.4.2. Recent Securities
Transactions, etc. Subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus, and
except as may otherwise be indicated or contemplated herein or disclosed in the
Registration Statement and the Prospectus, the Company has not: (i) issued
any securities (except pursuant to an equity incentive plan that has been
adopted by the Board of Directors) or incurred any liability or obligation,
direct or contingent, for borrowed money; or (ii) declared or paid any
dividend or made any other distribution on or in respect to its capital
stock.
2.5
Disclosures in Commission
Filings. None of the Company’s filings with the Commission
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading; and (ii) the Company
has made all filings with the Commission required under the Exchange
Act.
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2.6 Independent
Accountants. To the knowledge of the Company, XXXX, Inc.
(“XXXX”), who has consented to the incorporation by reference of its audit
report for the Company’s financial statements as of and for the years ended
December 31, 2009 and 2008 in the Registration Statement, are independent
registered public accountants as required by the Act and the Regulations. XXXX
has not, during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Exchange Act.
2.7 Financial Statements,
etc. The financial statements, including the notes thereto and
supporting schedules included in the Registration Statement and Prospectus
fairly present the financial position and the results of operations of the
Company at the dates and for the periods to which they apply; and such financial
statements have been prepared in conformity with generally accepted accounting
principles (“GAAP”),
consistently applied throughout the periods involved. The Registration Statement
discloses all material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company with
unconsolidated entities or other persons to the extent such relationships are
required to be disclosed that may have a material current or future effect on
the Company’s financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses. Except as disclosed in the
Registration Statement and the Prospectus, (a) neither the Company nor any of
its direct and indirect subsidiaries, including each entity disclosed or
described in the Registration Statement as being a subsidiary of the Company
(each a “Subsidiary” and
together the “Subsidiaries”), has incurred
any material liabilities or obligations, direct or contingent, or entered into
any material transactions other than in the ordinary course of business, (b) the
Company has not declared or paid any dividends or made any distribution of any
kind with respect to its capital stock; (c) there has not been any change in the
capital stock of the Company or any of its Subsidiaries and, (d) there has not
been any material adverse change in the Company’s long-term or short-term
debt.
2.8 Authorized Capital; Options,
etc. The Company had, at the date or dates indicated in the
Prospectus, the duly authorized, issued and outstanding capitalization as set
forth in the Registration Statement and the Prospectus. Based on the assumptions
stated in the Prospectus, the Company will have on the Closing Date the adjusted
stock capitalization set forth therein. Except as set forth in, or contemplated
by, the Registration Statement and the Prospectus, on the Effective Date and on
the Closing Date, there will be no options, warrants, or other rights to
purchase or otherwise acquire any authorized, but unissued Shares of the Company
or any security convertible into Shares of the Company, or any contracts or
commitments to issue or sell Shares or any such options, warrants, rights or
convertible securities.
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2.9
Valid Issuance of
Securities, etc.
2.9.1. Outstanding
Securities. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this Agreement have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect
thereto, and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The authorized Shares conform in all
material respects to all statements relating thereto contained in the
Registration Statement and the Prospectus. To the Company’s
knowledge, the offers and sales of the outstanding Shares were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky laws or, based in part on the representations and warranties of the
purchasers of such Shares, exempt from such registration
requirements.
2.9.2. Securities Sold Pursuant to
this Agreement. The Public Securities have been duly
authorized for issuance and sale and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the Public Securities are not and will
not be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company; and all corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken. The Public Securities conform in all
material respects to all statements with respect thereto contained in the
Registration Statement.
2.10
Registration Rights of Third
Parties. Except as set forth in the Registration Statement and
the Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.11
Validity
and Binding Effect of Agreement. This Agreement has been duly
and validly authorized by the Company, and, when executed and delivered, will
constitute, the valid and binding agreement of the Company, enforceable against
the Company in accordance with its respective terms, except: (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally; (ii) as enforceability
of any indemnification or contribution provision may be limited under the
federal and state securities laws or laws of any foreign jurisdiction; and
(iii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefore may be
brought.
2.12
No
Conflicts, etc. The execution, delivery, and performance by
the Company of this Agreement and all ancillary documents, the consummation by
the Company of the transactions herein and therein contemplated and the
compliance by the Company with the terms hereof and thereof do not and will not,
with or without the giving of notice or the lapse of time or both:
(i) result in a material breach of, or conflict with any of the terms and
provisions of, or constitute a material default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of
any agreement or instrument to which the Company is a party; (ii) result in
any violation of the provisions of the Certificate of Incorporation (as the same
may be amended from time to time; or (iii) violate any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties or business constituted as of the date hereof.
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2.13
No
Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation, or in violation of
any franchise, license, permit, applicable law, rule, regulation, judgment or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or
businesses.
2.14
Corporate Power; Licenses;
Consents.
2.14.1. Conduct of
Business. Except as described in the Registration Statement
and the Prospectus, the Company has all requisite corporate power and authority,
and has all necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory officials and bodies that it
needs as of the date hereof to conduct its business purpose as described in the
Prospectus.
2.14.2. Transactions Contemplated
Herein. The Company has all corporate power and authority to
enter into this Agreement and to carry out the provisions and conditions hereof,
and all consents, authorizations, approvals and orders required in connection
therewith have been obtained. No consent, authorization or order of, and no
filing with, any court, government agency or other body is required for the
valid issuance, sale and delivery of the Securities and the consummation of the
transactions and agreements contemplated by this Agreement and as contemplated
by the Prospectus, except with respect to applicable federal and state
securities laws and the rules and regulations of the Financial Industry
Regulatory Authority, Inc. (“FINRA”).
2.15
D&O
Questionnaires. To the Company’s knowledge, all information
contained in the questionnaires (the “Questionnaires”) completed by each of the
Company’s directors and officers immediately prior to the Offering (the
“Insiders”) as well as in the Lock-Up Agreement provided to the Underwriter is
true and correct in all respects and the Company has not become aware of any
information which would cause the information disclosed in the questionnaires
completed by each Insider to become inaccurate and incorrect.
2.16
Litigation; Governmental
Proceedings. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding pending or, to
the Company’s knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any executive officer or director which has not been
disclosed in the Registration Statement and the Prospectus.
2.17
Good
Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the State of
Delaware as of the date hereof, and is duly qualified to do business and is in
good standing in each jurisdiction in which its ownership or lease of property
or the conduct of business requires such qualification, except where the failure
to qualify would not have a material adverse effect on the assets, business or
operations of the Company.
2.18
Transactions Affecting
Disclosure to FINRA.
2.18.1. Finder’s
Fees. Except as described in the Registration Statement and
the Prospectus, there are no claims, payments, arrangements, agreements or
understandings relating to the payment of a finder’s, consulting or origination
fee by the Company or any Insider with respect to the sale of the Securities
hereunder or any other arrangements, agreements or understandings of the Company
or, to the Company’s knowledge, any of its shareholders that may affect the
Underwriter’s compensation, as determined by FINRA.
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2.18.2. Payments Within Twelve
Months. Except as described in the Registration Statement and
the Prospectus, the Company has not made any direct or indirect payments (in
cash, securities or otherwise) to: (i) any person, as a finder’s fee,
consulting fee or otherwise, in consideration of such person raising capital for
the Company or introducing to the Company persons who raised or provided capital
to the Company; (ii) to any FINRA member; or (iii) to any person or
entity that has any direct or indirect affiliation or association with any FINRA
member, within the twelve months prior to the Effective Date, other than the
prior payment of an aggregate amount of $736,000 to Broadband Capital Management
and Xxxxxx & Xxxxxxx LLC in connection with the initial public offering of
the Company consummated in September 2009.
2.18.3. Use of
Proceeds. None of the net proceeds of the Offering will be
paid by the Company to any participating FINRA member or its affiliates, except
as specifically authorized herein.
2.18.4. FINRA
Affiliation. No officer, director or any beneficial owner of
the Company’s unregistered securities has any direct or indirect affiliation or
association with any FINRA member (as determined in accordance with the rules
and regulations of FINRA).
2.19
Foreign
Corrupt Practices Act. Neither the Company nor any of the
directors , employees or officers of the Company or any other person acting on
behalf of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist it
in connection with any actual or proposed transaction) that (i) might
subject the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, might
have had a material adverse effect on the assets, business or operations of the
Company as reflected in any of the financial statements contained in the
Prospectus or (iii) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company. The Company has
taken reasonable steps to ensure that its accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
2.20
Officers’
Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to SRFF shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
2.21
Lock-Up
Period.
2.21.1. Each
of the Company’s executive officers and directors holding Shares (or securities
convertible into Shares) have agreed, and each owner of at least 10% of the
Company outstanding Shares (or securities convertible into Shares) (together
with the Company’s executive officers and directors the “Lock-Up Parties”), have agreed
pursuant to executed Lock-Up Agreements in the form attached hereto as Exhibit A
that, for a period of three months after the date of the Prospectus (the “Lock-Up Period”), such persons
and their affiliated parties shall not offer, pledge, sell, contract to sell,
grant, lend or otherwise transfer or dispose of, directly or indirectly, any
Shares, or any securities convertible into or exercisable or exchangeable for
Shares, without the consent of the Underwriter. The Underwriter may consent to
an early release from the applicable Lock-Up period if, in its opinion, the
market for the Shares would not be adversely impacted by sales and in cases of
financial emergency of an officer, director or other stockholder. The Company
has caused each of the Lock-Up Parties to deliver to the Underwriter the
agreements of each of the Lock-Up Parties to the foregoing effect prior to the
date hereof.
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2.21.2. The
Company, on behalf of itself and any successor entity, has agreed that, without
the prior written consent of the Underwriter, it will not, for a period of three
months after the date of the Prospectus, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of capital stock of
the Company or any securities convertible into or exercisable or exchangeable
for shares of capital stock of the Company; (ii) file or caused to be filed any
registration statement with the Commission relating to the offering of any
shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of capital stock of the Company or (iii)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of capital stock of the
Company, whether any such transaction described in clause (i), (ii) or (iii)
above is to be settled by delivery of shares of capital stock of the Company or
such other securities, in cash or otherwise.
The
restrictions contained in this paragraph 2.22.2 shall not apply to (i) the
Shares to be sold hereunder, (ii) the issuance by the Company of shares of
common stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriter has been
advised in writing or (iii) the issuance by the Company of option or shares of
capital stock of the Company under any stock compensation plan of the
Company.
2.21.3. Notwithstanding
the foregoing, if (i) the Company issues an earnings release or material news,
or a material event relating to the Company occurs, during the last 17 days of
the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period, the
Company announces that it will release earnings results during the 16-day period
beginning on the last day of the Lock-Up Period, the restrictions imposed by
paragraph 2.22 shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the
material news or material event, unless the Underwriter waives such
extension.
2.22 Subsidiaries. Annex
1 to this agreement sets forth the ownership of all Subsidiaries. All direct and
indirect Subsidiaries of the Company are duly organized and in good standing
under the laws of the place of organization or incorporation, and each such
Subsidiary is in good standing in each jurisdiction in which its ownership or
lease of property or the conduct of business requires such qualification, except
where the failure to qualify would not have a material adverse effect on the
assets, business or operations of the Company taken as a whole. The
Company’s ownership and control of each Subsidiary is as described in the
Registration Statement and the Prospectus. The Company’s ownership
and control of each Subsidiary is as described in the Registration Statement and
the Prospectus.
2.23 Related Party
Transactions. Except as disclosed in the Registration
Statement and the Prospectus, there are no business relationships or related
party transactions involving the Company or any other person required to be
described in the Prospectus that have not been described as
required.
2.24 Board of
Directors. The Board of Directors of the Company is comprised
of the persons set forth under the heading of the Prospectus captioned
“Management.” The qualifications of the persons serving as board members and the
overall composition of the board comply with the Xxxxxxxx-Xxxxx Act of 2002 and
the rules promulgated thereunder applicable to the Company and the NASDAQ rules.
At least one member of the Board of Directors of the Company qualifies as a
“financial expert” as such term is defined under the Xxxxxxxx-Xxxxx Act of 2002
and the rules promulgated thereunder and the NASDAQ rules. In addition, at least
a majority of the persons serving on the Board of Directors qualify as
“independent” as defined under the NASDAQ rules.
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2.25 Xxxxxxxx-Xxxxx
Compliance.
2.25.1. Disclosure
Controls. The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15
of the Exchange Act, and such controls and procedures are effective to ensure
that all material information concerning the Company will be made known on a
timely basis to the individuals responsible for the preparation of the Company’s
Exchange Act filings and other public disclosure documents.
2.25.2. Compliance. The
Company is in material compliance with the provisions of the Xxxxxxxx-Xxxxx Act
of 2002 applicable to it, and has implemented or will implement such programs
and taken reasonable steps to ensure the Company’s future compliance (not later
than the relevant statutory and regulatory deadlines therefore) with all the
material provisions of the Xxxxxxxx-Xxxxx Act of 2002.
2.26 No Investment Company
Status. The Company is not and, after giving effect to the
Offering and sale of the Firm Shares and the application of the proceeds thereof
as described in the Registration Statement and the Prospectus, will not be, an
“investment company” as defined in the Investment Company Act of 1940, as
amended.
2.27 No Labor
Disputes. No labor dispute with the employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the Company, is
imminent.
2.28 Intellectual
Property The Company and each of its Subsidiaries owns or
possesses or has valid right to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service xxxx
registrations, copyrights, licenses, inventions, trade secrets and similar
rights (“Intellectual
Property”) necessary for the conduct of the business of the Company and
its Subsidiaries as currently carried on and as described in the Registration
Statement and the Prospectus. To the knowledge of the Company, no
action or use by the Company or any of its Subsidiaries will involve or give
rise to any infringement of, or license or similar fees for, any Intellectual
Property of others. Neither the Company nor any of its Subsidiaries
has received any notice alleging any such infringement or fee.
2.29 Taxes Each
of the Company and its Subsidiaries has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. Each
of the Company and its Subsidiaries has paid all taxes (as hereinafter defined)
shown as due on such returns that were filed and has paid all taxes imposed on
or assessed against the Company or such respective subsidiary. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. Except as disclosed in writing
to the Underwriter, (i) no issues have been raised (and are currently pending)
by any taxing authority in connection with any of the returns or taxes asserted
as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of
limitation with respect to the returns or collection of taxes have been given by
or requested from the Company or its Subsidiaries. The term “taxes” mean all
federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments, or charges of any kind whatever, together with any
interest and any penalties, additions to tax, or additional amounts with respect
thereto. The term “returns” means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.,
3.
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Covenants of the
Company. The Company covenants and agrees as
follows:
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3.1 Amendments to Registration
Statement. The Company will deliver to the Underwriter, prior
to filing, any amendment or supplement to the Registration Statement or
Prospectus proposed to be filed after the date hereof and not file any such
amendment or supplement to which the Underwriter shall reasonably object in
writing.
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3.2 Federal Securities
Laws.
3.2.1. Compliance. During
the time when a Prospectus is required to be delivered under the Act, the
Company will use its best efforts to comply with all requirements imposed upon
it by the Act, the Regulations and the Exchange Act and by the regulations under
the Exchange Act, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Public Securities in accordance
with the provisions hereof and the Prospectus. If at any time when a Prospectus
relating to the Public Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriter, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the
Act.
3.2.2. Filing of Final
Prospectus. The Company will file the Prospectus (in form and
substance satisfactory to the Underwriter) with the Commission pursuant to the
requirements of Rule 424 of the Regulations.
3.2.3. Exchange Act
Registration. For a period of three years from the date
hereof, the Company will use its best efforts to maintain the registration of
the Shares. The Company will not deregister the Shares under the Exchange Act
without the prior written consent of the Underwriter.
3.3 Delivery to the Underwriter
of Prospectuses. The Company will deliver to the Underwriter,
without charge, from time to time during the period when the Prospectus is
required to be delivered under the Act or the Exchange Act such number of copies
of each Prospectus as the Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.4 Effectiveness and Events
Requiring Notice to the Underwriter. The Company will use its
best efforts to cause the Registration Statement to remain effective with a
current prospectus for at least nine (9) months from the Applicable Time. and
will notify the Underwriter immediately and confirm the notice in writing:
(i) of the effectiveness of the Registration Statement and any amendment
thereto; (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose;
(iii) of the issuance by any state securities commission of any proceedings
for the suspension of the qualification of the Securities for offering or sale
in any jurisdiction or of the initiation, or the threatening, of any proceeding
for that purpose; (iv) of the mailing and delivery to the Commission for
filing of any amendment or supplement to the Registration Statement or
Prospectus; (v) of the receipt of any comments or request for any
additional information from the Commission; and (vi) of the happening of
any event during the period described in this Section 3.4 hereof that, in the
judgment of the Company, makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Commission or any state securities commission shall enter
a stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such
order.
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3.5 Review of Financial
Statements. For a period of five (5) years from the Effective
Date, the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company’s financial
statements for each of the first three fiscal quarters prior to the announcement
of quarterly financial information.
3.6 Secondary Market Trading and
Standard & Poor’s. The Company will apply to be
included in Standard & Poor’s Daily News and Corporation Records Corporate
Descriptions for a period of five (5) years after the date hereof.
3.7 Financial Public Relations
Firm. The Company shall continue to retain The Xxxxxxxx Group,
or other financial public relations firm reasonably acceptable to the
Underwriter and the Company, which firm will be experienced in assisting issuers
in public offerings of securities and in their relations with their security
holders, and shall retain such firm or another firm reasonably acceptable to the
Underwriter for a period of not less than two (2) years after the date
hereof.
3.8 Reports to the
Underwriter.
3.8.1 Periodic Reports,
etc. For a period of three years from the date hereof, the
Company will furnish to the Underwriter copies of such financial statements and
other periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities and also promptly furnish to
the Underwriter: (i) a copy of each periodic report the Company shall be
required to file with the Commission; (ii) a copy of every press release and
every news item and article with respect to the Company or its affairs which was
released by the Company; (iii) a copy of each Form 8-K prepared and filed by the
Company; (iv) five copies of each registration statement filed by the Company
under the Act; (v) such additional documents and information with respect to the
Company and the affairs of any future Subsidiaries of the Company as the
Underwriter may from time to time reasonably request; provided the Underwriter
shall sign, if requested by the Company, a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to the Underwriter and
SRFF in connection with the Underwriter’s receipt of such information. Documents
filed with the Commission pursuant to its XXXXX system shall be deemed to have
been delivered to the Underwriter pursuant to this Section.
3.8.2. Transfer
Sheets. The Company shall continue to retain Corporate Stock
Transfer & Trust Company, or other transfer agent and registrar agent
acceptable to the Underwriter (the “Transfer Agent”) or a
period of three (3) years from the date hereof, and will furnish to the
Underwriter at the Company’s sole cost and expense such transfer sheets of the
Company’s securities as the Underwriter may reasonably request, including the
daily and monthly consolidated transfer sheets of the Transfer Agent and
DTC.
3.8.3. Trading
Reports. During such time as the Public Securities are listed
on the NASDAQ Capital Market the Company shall provide to the Underwriter, at
the Company’s expense, such reports published by the NASDAQ Capital Market
relating to price trading of the Public Securities, as the Underwriter shall
reasonably request.
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3.9 Payment of
Expenses.
3.9.1. General Expenses Related to
the Offering. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not paid at the
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement, including, but not limited to: (a) all filing fees
and communication expenses relating to the registration of the Shares to be sold
in the Offering (including the Over-allotment Shares) with the Commission; (b)
all COBRADesk filing fees associated with the review of the Offering by FINRA
and all fees and expenses relating to the listing of such Shares on the NASDAQ
Capital Market, and such other stock exchanges as the Company and the
Underwriter together determine; (c) all fees, expenses and disbursements
relating to background checks of the Company’s officers and directors
in an amount not to exceed $4,000 per individual; (d) all fees, expenses and
disbursements relating to the registration, qualification or exemption of such
Shares under the securities laws of such foreign jurisdictions as the
Underwriter may reasonably designate; (e) the costs and expenses of
the public relations firm; (f) the costs of preparing, printing and delivering
certificates representing the Shares; (g) fees and expenses of the transfer
agent for the Shares; (h) stock transfer and/or stamp taxes, if any, payable
upon the transfer of securities from the Company to the Underwriter; (i) the
fees and expenses of the Company’s accountants; and (j) the fees and expenses of
the Company’s legal counsel and other agents and representatives; . The Company
shall pay all expenses (including, without limitation actual “road show”
expenses) incurred by the Underwriter in connection with this Offering up
to but no more than $100,000, less the $25,000 advance, which was
previously paid to the Underwriter. Any remaining balance in expenses
related to the Offering will be borne by the Underwriter.
3.10 Application of Net
Proceeds. The Company will apply the net proceeds from the
Offering received by it in a manner consistent with the application described
under the caption “Use Of Proceeds” in the Prospectus.
3.11 Delivery of Earnings
Statements to Security Holders. The Company will make
generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.12 Stabilization. Neither
the Company, nor, to its knowledge, any of its employees, directors or
shareholders (without the consent of the Underwriter) has taken or will take,
directly or indirectly, any action designed to or that has constituted or that
might reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
3.13 Internal
Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with GAAP and
to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
3.14 Accountants. The
Company shall continue to retain XXXX, or another nationally recognized
independent certified public accounting firm reasonably acceptable to
the Underwriter and the Company for a period of at least three (3) years from
the date hereof.
3.15 FINRA. The
Company shall advise the Underwriter (who shall make an appropriate filing with
FINRA) if it is aware that any 5% or greater shareholder of the Company becomes
an affiliate or associated person of an FINRA member participating in the
distribution of the Company’s Public Securities.
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3.16 No Fiduciary
Duties. The Company acknowledges and agrees that the
Underwriter’s responsibility to the Company is solely contractual in nature and
that neither the Underwriter nor its affiliates or any agents shall be deemed to
be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the
Company or any of its affiliates in connection with the Offering and the other
transactions contemplated by this Agreement
3.17 Approvals by Governmental
Agencies. The Company and its subsidiaries shall (a) properly register
all capital contributions received by Danyang Lihua Electron Co., Ltd. with the
Danyang Bureau and (b) make all required filings with the Danyang Environment
Protection Bureau for Danyang Lihua Electron Co., Ltd. to receive its Pollution
Discharge Permit.
4. Conditions of Underwriter’s
Obligations. The obligations of the Underwriter to purchase
and pay for the Shares, as provided herein, shall be subject to (i) the
continuing accuracy of the representations and warranties of the Company as of
the date hereof and as of each of the Closing Date and the Option Closing Date,
if any; (ii) the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof; (iii) the performance by the Company of its
obligations hereunder and (iv) the following conditions:
4.1 Regulatory
Matters.
4.1.1. Effectiveness of
Registration Statement. At each of the Closing Date and the
Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
SRFF.
4.1.2. FINRA
Clearance. The Underwriter shall have received clearance from
FINRA as to the amount of compensation allowable or payable to the Underwriter
as described in the Registration Statement.
4.1.3. NASDAQ Capital Market Stock
Market Clearance. On the Closing Date, the Firm
Shares shall have been approved for listing on the NASDAQ Capital
Market.
4.2 Company Counsel
Matters.
4.2.1. Closing Date Opinion of
Counsel. On the Closing Date, the Underwriter shall have
received the favorable opinion of Loeb & Loeb LLP (“Loeb”), counsel to the
Company, dated the Closing Date, addressed to the Underwriter covering the
following:
(i) The
Company has been organized and is validly existing as a corporation and is in
good standing under the laws of the State of Delaware as of the date hereof, and
is qualified to do business and is in good standing as a foreign corporation in
each U.S. state in which its ownership or lease of property or the conduct of
business requires such qualification, except where the failure to qualify would
not have a material adverse effect on the assets, business or operations of the
Company.
15
(ii) All
issued and outstanding securities of the Company have been duly authorized and
validly issued and to Loeb’s knowledge, are fully paid and non-assessable and to
Loeb’s knowledge, none of such securities were issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of law
or under the Certificate of Incorporation. The offers and sales of the
outstanding securities were at all relevant times either registered under the
Act or exempt from such registration requirements. The authorized, and to the
extent of Loeb’s knowledge, outstanding Shares of the Company is as
described in the Prospectus.
(iii) The
Public Securities have been duly authorized and, when issued and paid for, will
be validly issued, fully paid and non-assessable; and the holders thereof are
not and will not be subject to personal liability solely by reason of being such
holders. The Public Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company arising by
operating of law or under the Certificate of Incorporation. The
Over-allotment Option constitutes valid and binding obligations of the Company
to issue and sell, upon exercise thereof and payment therefore, the number of
Shares called for thereby, and the Over-allotment Option is enforceable against
the Company in accordance with its terms, except (a) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (b) as enforceability of any indemnification or
contribution provision may be limited under the Federal and state securities
laws and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefore may be
brought.
(iv) This
Agreement has been duly and validly authorized and executed by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its respective terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally, (b) as enforceability of any
indemnification or contribution provisions may be limited under the Federal and
state securities laws or the laws of a foreign jurisdiction, and (c) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefore may be brought.
(v) The
execution, delivery and performance of this Agreement (other than performance by
the Company of its obligations under the indemnification section of this
Agreement, as to which no opinion is rendered) and, the Lock-Up Agreements and
the Lock-Up Period restrictions on the Company, and compliance by the Company
with the terms and provisions thereof and the consummation of the transactions
contemplated thereby, and the issuance and sale of the Public Securities, do not
and will not, with or without the giving of notice or the lapse of time, or
both, (a) conflict with, or result in a breach of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
modification of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company pursuant to the terms of, any mortgage,
deed of trust, note, indenture, loan, contract, commitment or other agreement or
instrument filed as an exhibit to the Registration Statement, (b) result in
any violation of the provisions of the Certificate of Incorporation or By-laws
of the Company, or (c) violate any statute (except we express no opinion on
federal securities laws) or any judgment, order or decree, rule or regulation
applicable to the Company of any court, domestic or foreign, or of any federal,
state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets.
(vi) The
Registration Statement and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements included therein, as to
which no opinion need be rendered) each as of their respective dates complied as
to form in all material respects with the requirements of the Act and
Regulations. The Shares offered pursuant to the Prospectus conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. To our knowledge, no United States or state
statute or regulation required to be described in the Prospectus is not
described as required (except as to the Blue Sky laws of the various states, as
to which we express no opinion), nor are any contracts or documents known to us
of a character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement not so
described or filed as required.
16
(vii) The
Registration Statement has been declared effective by the
Commission. We have been orally advised by the Staff of the
Commission that no stop order suspending the effectiveness of the Registration
Statement has been issued, and to our knowledge, no proceedings for that purpose
have been instituted or overtly threatened by the Commission. Any
required filing of the Prospectus, and any required supplement thereto, pursuant
to Rule 424(b) under the Securities Act, has been made in the manner and within
the time period required by Rule 424(b).
(viii) The
Company is not and, after giving effect to the Offering and sale of the
Securities and the application of the proceeds thereof as described in the
Registration Statement and the Prospectus, will not be, an “investment company”
as defined in the Investment Company Act of 1940, as amended.
(ix) No
consent, approval, authorization or filing with or order of the NASDAQ Capital
Market, any U.S. Federal, State of New York or State of Delaware court or
governmental agency or body having jurisdiction over the Company is required,
under the laws, rules and regulations of the United States of America and the
States of Delaware for the consummation by the Company of the transactions
contemplated by the Agreement, except (i) such as have been made with or
obtained by the NASDAQ Capital Market (ii) such as have been made or obtained
under the Securities Act and (iii) such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and distribution of the
Shares by you in the manner contemplated in the Agreement and in the Prospectus,
as to which we express no opinion.
(x) The
Public Shares have been approved for inclusion on the NASDAQ Capital
Market.
(xi) To
our knowledge, the Company is not a party to any written agreement granting any
holders of securities of the Company rights to require the registration under
the Securities Act of resales of such securities.
4.2.2. The
opinion of Loeb shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriter and the independent registered public accounting
firm of the Company, at which conferences the contents of the Registration
Statement and the Prospectus contained therein and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein,
solely on the basis of the foregoing without independent check and verification,
no facts have come to the attention of such counsel which lead them to believe
that the Registration Statement or any amendment thereto, at the time the
Registration Statement or amendment became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or the
Prospectus or any amendment or supplement thereto, at the time they were filed
pursuant to Rule 424(b) or at the date of such counsel’s opinion, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need express no view and shall not be deemed to have rendered an
opinion with respect to the financial information, statistical data and
information and matters regarding non-United States laws, rules and regulations
included in the Registration Statement or the Prospectus). The
Registration Statement and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements including notes and
schedules, financial data, statistical data and non-United States laws, rules
and regulations included in the Registration Statement or the Prospectus,
included therein, as to which no opinion need be rendered) each as of their
respective dates complied as to form in all material respects with the
requirements of the Act and Regulations.
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4.2.3. On
the Closing Date, the Underwriter shall have received the favorable opinion of
Han Kun Law Offices (“Han Kun”), counsel to the Company, reasonably acceptable
to the Underwriter, related to, among other things, the descriptions of laws of
the People’s Republic of China and the organization of the Company’s
subsidiaries incorporated in the People’s Republic of China and such
subsidiaries’ ownership structure, dated the Closing Date and addressed to the
Underwriter.
4.2.4. Option Closing Date Opinions
of Counsel. On the Option Closing Date, if any, the Underwriter shall
have received the favorable opinions of each counsel listed in Sections 4.2.1
through 4.2.3, dated the Option Closing Date, addressed to the Underwriter and
in form and substance reasonably satisfactory to the Underwriter, confirming as
of the Option Closing Date, the statements made by such counsels in their
respective opinions delivered on the Closing Date.
4.2.5. Reliance. In
rendering such opinions, such counsel may rely: (i) as to matters involving
the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to the Underwriter)
of other counsel reasonably acceptable to the Underwriter, familiar with the
applicable laws; and (ii) as to matters of fact, to the extent they deem
proper, on certificates or other written statements of officers of the Company
and officers of departments of various jurisdiction having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to SRFF,
if requested. The opinions of Loeb and Han Kun shall include a statement to the
effect that it may be relied upon by counsel for the Underwriter in its opinion
delivered to the Underwriter.
4.3 Cold Comfort
Letter. At the time this Agreement is executed, and at each of
the Closing Date and the Option Closing Date, if any, you shall have received a
cold comfort letter, addressed to the Underwriter and in form and substance
satisfactory in all respects to you and to SRFF from XXXX dated, respectively,
as of the date of this Agreement and as of the Closing Date and the Option
Closing Date, if any.
4.4 Officers’
Certificates.
4.4.1. Officers’
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Underwriter shall have received a certificate of the
Company signed by the Chairman of the Board and Chief Executive Officer of the
Company, dated the Closing Date or the Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of the Closing Date
and the Option Closing Date, as the case may be, the representations and
warranties of the Company set forth in Section 2 hereof are true and correct. In
addition, the Underwriter will have received such other and further certificates
of officers of the Company as the Underwriter may reasonably
request.
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4.4.2. Secretary’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Underwriter shall have received a certificate of the
Company signed by the Secretary or Assistant Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying:
(i) that the Certificate of Incorporation are true and complete, have not
been modified and are in full force and effect; (ii) that the resolutions
of the Company’s Board of Directors relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified; (iii)
as to the accuracy and completeness of all correspondence between the Company or
its counsel and the Commission; and (iv) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5 No Material
Changes. Prior to and on each of the Closing Date and the
Option Closing Date, if any: (i) there shall have been no material adverse
change or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) no action suit or proceeding,
at law or in equity, shall have been pending or threatened against the Company
or any Insider before or by any court or federal or state commission, board or
other administrative agency wherein an unfavorable decision, ruling or finding
may materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; (iii) no stop order shall have been issued under
the Act and no proceedings therefore shall have been initiated or threatened by
the Commission; and (iv) the Registration Statement and the Prospectus and
any amendments or supplements thereto shall contain all material statements
which are required to be stated therein in accordance with the Act and the
Regulations and shall conform in all material respects to the requirements of
the Act and the Regulations, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.6 Delivery of
Agreements.
4.6.1. Deliveries. The
Company shall have delivered to the Underwriter executed copies of this
Agreement and the Lock-Up Agreements.
19
5.
|
Indemnification.
|
5.1 Indemnification of the
Underwriter.
5.1.1 General. Subject
to the conditions set forth below, the Company agrees to indemnify and hold
harmless the Underwriter, and each dealer selected by the Underwriter that
participates in the offer and sale of the Securities (each a “Selected Dealer”)
and each of their respective directors, officers and employees and each person,
if any, who controls the Underwriter (“Controlling Person”) within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, whether arising out of any action between the Underwriter and
the Company or between the Underwriter and any third party or otherwise) to
which they or any of them may become subject under the Act, the Exchange Act or
any other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in (i) the Registration Statement or the
Prospectus (as from time to time each may be amended and supplemented); (ii) any
materials or information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the Public
Securities, including any “road show” or investor presentations made to
investors by the Company (whether in person or electronically); or (iii) any
application or other document or written communication (in this Section 5,
collectively called “application”) executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Public Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NASDAQ Capital Market or
any securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in the
Registration Statement or Prospectus, or any amendment or supplement thereof, or
in any application, as the case may be.. With respect to any untrue statement or
omission or alleged untrue statement or omission made in the Prospectus, the
indemnity agreement contained in this Section 5.1.1 shall not inure to the
benefit of any Underwriter to the extent that any loss, liability, claim, damage
or expense of the Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Securities to such person as required by the Act and the Regulations, and if
the untrue statement or omission has been corrected in the Prospectus, unless
such failure to deliver the Prospectus was a result of non-compliance by the
Company with its obligations under Section 3.3 hereof. The Company agrees
promptly to notify the Underwriter of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or Controlling
Persons in connection with the issue and sale of the Public Securities or in
connection with the Registration Statement or Prospectus.
5.1.2.
Procedure. If
any action is brought against the Underwriter, a Selected Dealer or a
Controlling Person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, the Underwriter, such Selected Dealer or
Controlling Person, as the case may be, shall promptly notify the Company in
writing of the institution of such action and the Company shall assume the
defense of such action, including the employment and fees of counsel (subject to
the reasonable approval of the Underwriter or such Selected Dealer, as the case
may be) and payment of actual expenses. Such Underwriter, such Selected Dealer
or Controlling Person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of the Underwriter, such Selected Dealer or Controlling Person unless (i) the
employment of such counsel at the expense of the Company shall have been
authorized in writing by the Company in connection with the defense of such
action, or (ii) the Company shall not have employed counsel to have charge of
the defense of such action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the reasonable fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter (in addition to local counsel), Selected
Dealer and/or Controlling Person shall be borne by the Company. Notwithstanding
anything to the contrary contained herein, if any Underwriter, Selected Dealer
or Controlling Person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 Indemnification of the
Company. The Underwriter agrees to indemnify and hold harmless
the Company, its directors, officers and employees and agents who control the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense
described in the foregoing indemnity from the Company to the Underwriter, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions made in the Registration Statement or Prospectus
or any amendment or supplement thereto or in any application, in reliance upon,
and in strict conformity with, written information furnished to the Company with
respect to the Underwriter and by or on behalf of the Underwriter expressly for
use in such Registration Statement or Prospectus or any amendment or supplement
thereto or in any such application. In case any action shall be brought against
the Company or any other person so indemnified based on the Registration
Statement or Prospectus or any amendment or supplement thereto or any
application, and in respect of which indemnity may be sought against the
Underwriter, 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 Underwriter by the provisions of Section
5.1.2.
20
5.3 Contribution.
5.3.1. Contribution
Rights. In order to provide for just and equitable
contribution under the Act in any case in which (i) any person entitled to
indemnification under this Section 5 makes claim for indemnification pursuant
hereto but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Act, the Exchange
Act or otherwise may be required on the part of any such person in circumstances
for which indemnification is provided under this Section 5, then, and in each
such case, the Company and the Underwriter shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
said indemnity agreement incurred by the Company and the Underwriter, as
incurred, in such proportions that the Underwriter is responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the initial offering price
appearing thereon and the Company is responsible for the balance; provided,
that, no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11 (f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 5.3.1, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Public
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that the Underwriter has otherwise been
required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
the Underwriter or the Company, as applicable, and each person, if any, who
controls the Underwriter or the Company, as applicable, within the meaning of
Section 15 of the Act shall have the same rights to contribution as the
Underwriter or the Company, as applicable.
5.3.2. Contribution
Procedure. Within fifteen days after receipt by any party to
this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (“contributing party”),
notify the contributing party of the commencement thereof, but the failure to so
notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or its representative of the commencement thereof
within the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution on account of any
settlement of any claim, action or proceeding affected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 5.3.2 are intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the Exchange Act or otherwise available.
21
6.
|
Intentionally
Omitted.
|
7.
|
Additional
Covenants.
|
7.1 Board Composition and Board
Designations. The Company shall ensure that: (i) the
qualifications of the persons serving as board members and the overall
composition of the board comply with the Xxxxxxxx-Xxxxx Act of 2002 and the
rules promulgated thereunder and with the listing requirements of the NASDAQ
Capital Market or any other national securities exchange or national securities
association, as the case may be, in the event the Company seeks to have its
Public Securities listed on another exchange or quoted on an automated quotation
system, and (ii) if applicable, at least one member of the board of
directors qualifies as a “financial expert” as such term is defined under the
Xxxxxxxx-Xxxxx Act of 2002 and the rules promulgated thereunder.
7.2 Prohibition on Press
Releases and Public Announcements. The Company will not issue
press releases or engage in any other publicity, without the Underwriter’s prior
written consent, commencing on the date hereof and continuing for a period of
forty (40) days from the Closing Date of the Offering, other than normal and
customary releases issued in the ordinary course of the Company’s business. The
Company covenants to adhere to all “gun jumping” and “quiet period” rules and
regulations of the Commission.
8.
|
Effective
Date of this Agreement and Termination
Thereof.
|
8.1 Effective
Date. This Agreement shall become effective when both the
Company and the Underwriter have executed the same and delivered counterparts of
such signatures to the other party.
8.2 Termination. You
shall have the right to terminate this Agreement at any time prior to any
Closing Date, (i) if any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, general securities markets in the United States; or
(ii) if trading on the New York Stock Exchange, the NASDAQ, the NASDAQ
Global Market or the NASDAQ Capital Market shall have been suspended or
materially limited, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required by
FINRA or by order of the Commission or any other government authority having
jurisdiction, or (iii) if the United States shall have become involved in a
new war or an increase in major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or
(v) if a moratorium on foreign exchange trading has been declared which
materially adversely impacts the United States securities markets, or
(vi) if the Company shall have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
opinion, make it inadvisable to proceed with the delivery of the Firm Shares or
Option Shares, or (vii) if the Company is in material breach of any of its
representations, warranties or covenants hereunder, or (viii) if the
Underwriter shall have become aware after the date hereof of such a material
adverse change in the conditions or prospects of the Company, or such adverse
material change in general market conditions as in the Underwriter’s judgment
would make it impracticable to proceed with the offering, sale and/or delivery
of the securities or to enforce contracts made by the Underwriter for the sale
of the securities.
8.3 Expenses. In
the event that this Agreement shall not be carried out for any reason
whatsoever, within the time specified herein or any extensions thereof pursuant
to the terms herein, the Company shall be obligated to pay to the Underwriter
full amount of its actual accountable expenses incurred through the termination
date up to a maximum of $100,000 for all such expenses (which expenses will
include, but will not be limited to, all reasonable fees and disbursements of
the Underwriter’s counsel, travel, lodging and other “road show” expenses,
mailing, printing and reproduction expenses, and any expenses incurred by the
Underwriter in conducting its due diligence, including background checks of the
Company’s officers and directors), less amounts, if any, previously paid to the
Underwriter in reimbursement for such expenses or as an
advance.
22
8.4 Indemnification. Notwithstanding
any contrary provision contained in this Agreement, any election hereunder or
any termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 shall not be in any way
effected by, such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
9.
|
Miscellaneous.
|
9.1 Notices. All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed (registered or certified mail, return
receipt requested), personally delivered or sent by facsimile transmission and
confirmed and shall be deemed given when so delivered or faxed and confirmed or
if mailed, two days after such mailing.
If to the
Underwriter:
Xxxxxx
& Xxxxxxx, LLC
0000
Xxxxxx xx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000
Attn:
General Counsel
Fax No.:
000-000-0000
Copy
to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx
Xxx Xxxx,
XX 00000
Attn:
Xxxxxxx Xxxxxxxxx
Fax No.:
000-000-0000
If to the
Company:
Lihua
International, Inc.
Houxiang
Five Star Industry District
Danyang
City, Jiangsu Province, PR China 212312
Attn: Xx.
Xxxxxxx Xxx
Fax No.:
00-000-0000-0000
Copy
to:
Loeb
& Loeb LLP
000 Xxxx
Xxxxxx
Xxx Xxxx,
XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Fax No.:
000-000-0000
9.2 Headings. The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.
23
9.3 Amendment. This
Agreement may only be amended by a written instrument executed by each of the
parties hereto.
9.4 Entire
Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
9.5 Binding
Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon the Underwriter, the Company and the Controlling
Persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. The term “successors and assigns” shall not include a purchaser, in
its capacity as such, of securities from the Underwriter.
9.6 Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws principles thereof. The Company hereby agrees that
any action, proceeding or claim against it arising out of, or relating in any
way to this Agreement shall be brought and enforced in the New York Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
9.1 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The Company agrees
that the prevailing party(ies) in any such action shall be entitled to recover
from the other party(ies) all of its reasonable attorneys’ fees and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefore.
9.7 Execution in
Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Delivery of a signed counterpart of this
Agreement by facsimile or email/pdf transmission shall constitute valid and
sufficient delivery thereof.
9.8 Waiver,
etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
[SIGNATURE
PAGE FOLLOWS]
24
If the
foregoing correctly sets forth the understanding between the Underwriter 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,
|
|||
LIHUA
INTERNATIONAL, INC.
|
|||
By:
|
/s/ Xxxxxxx Xxx
|
||
Name:
|
Xxxxxxx
Xxx
|
||
Title:
|
Chairman
and Chief Executive Officer
|
Accepted
on the date first above written.
|
||
XXXXXX
& XXXXXXX, LLC
|
||
By:
|
/s/ Xxxx Xxxxx
|
|
Name: Xxxx
Xxxxx
|
||
Title:
Senior Managing Director
|
25
EXHIBIT
A
Lock-Up
Agreement
April 8,
2010
The
undersigned understands that Xxxxxx & Xxxxxxx, LLC (the “Underwriter”) proposes to
enter into an Underwriting Agreement (the “Underwriting Agreement”) with
Lihua International,
Inc., a company formed under the laws of Delaware (the “Company”), providing for the
public offering (the “Public
Offering”) by the Underwriter of 3,726,709 shares of common stock (“Firm Shares”), par value
$0.0001 per share, of the Company (the “Shares”).
To induce
the Underwriter to continue its efforts in connection with the Public Offering,
the undersigned hereby agrees that, without the prior written consent of the
Underwriter, it will not, during the period commencing on the date hereof and
ending on three months after the date of the final prospectus (the “Prospectus”) relating to the
Public Offering (the “Lock-Up
Period”), (1) offer, pledge, sell, contract to sell, grant any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any Shares or any securities convertible into or
exercisable or exchangeable for Shares; or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Shares, whether any such transaction
described in clause (1),or (2) above is to be settled by delivery of shares of
Shares or such other securities, in cash or
otherwise. Notwithstanding the foregoing, the undersigned may
transfer Shares without the prior consent of the Underwriter in connection with
(a) transactions relating to Shares or other securities acquired in open market
transactions after the completion of the Public Offering, provided that no filing
under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), shall
be required or shall be voluntarily made in connection with subsequent sales of
Shares or other securities acquired in such open market transactions, (b) if the
undersigned is an individual, transfers of Shares or any security convertible
into Shares as a bona fide gift, by will or intestacy or to a family member or
trust for the benefit of a family member; provided that in the case of
any transfer or distribution pursuant to clause (b), (i) each donee or
distributee shall sign and deliver a lock-up letter substantially in the form of
this letter agreement and (ii) no filing under Section 16(a) of the
Exchange Act, reporting a reduction in beneficial ownership of Shares, shall be
required or shall be voluntarily made during the Lock-up Period, (c) transfer of
Shares to a charity or educational institution, (d) if the undersigned is, or
directly or indirectly controls, a corporation, partnership, limited liability
company or other business entity, any transfers of Shares to any shareholder,
partner or member of, or owner of similar equity interests in, the undersigned,
as the case may be, if, in any such case, such transfer is not for value, or (e)
if the undersigned is a corporation, partnership, limited liability company or
other business entity, any transfer of Shares made by the undersigned (i) in
connection with the sale or other bona fide transfer in a single transaction of
all or substantially all of the undersigned’s capital stock, partnership
interests, membership interests or other similar equity interests, as the case
may be, or all or substantially all of the undersigned’s assets, in any such
case not undertaken for the purpose of avoiding the restrictions imposed by this
agreement or (ii) to another corporation, partnership, limited liability company
or other business entity so long as the transferee is an affiliate of the
undersigned and such transfer is not for value. The undersigned also
agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the undersigned’s
Shares except in compliance with this Agreement.
If (i)
the Company issues an earnings release or material news, during the last 17 days
of the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period,
the Company announces that it will release earnings results during the 16-day
period beginning on the last day of the Lock-Up Period, the restrictions imposed
by this agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release, unless the Underwriter
waives such extension.
No
provision in this agreement shall be deemed to restrict or prohibit the exercise
or exchange by the undersigned of any option or warrant to acquire Shares, or
securities exchangeable or exercisable for or convertible into Shares, provided that the undersigned
does not transfer the Shares acquired on such exercise or exchange during the
Lock-Up Period, unless otherwise permitted pursuant to the terms of this letter
agreement. In addition, no provision herein shall be deemed to
restrict or prohibit the entry into or modification of a so-called “10b5-1” plan
at any time (other than the entry into or modification of such a plan in such a
manner as to cause the sale of any Shares or any securities convertible into or
exercisable or exchangeable for Shares within the Lock-Up Period).
The
undersigned understands that the Company and the Underwriter are relying upon
this letter agreement in proceeding toward consummation of the Public
Offering. The undersigned further understands that this agreement is
irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.
The
undersigned understands that, if the Underwriting Agreement is not executed on
or before April 8, 2010, or if the Underwriting Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Shares to be sold thereunder this
agreement shall be void and of no further force or effect.
Whether
or not the Public Offering actually occurs depends on a number of factors,
including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriter.
Very
truly yours,
|
|
(Name):
|
|
(Address)
|
2
SCHEDULE
A
Underwriters
Xxxxxx
& Xxxxxxx, LLC
Chardan
Capital Markets, LLC
Xxxxx
Xxxxxx, Carret & Co., LLC
ANNEX 1
Ally
Profit Investments Xxxxxxx
|
XXX
|
000
|
|||
Xxxxx
Xxxxxxxx Xxxxxxx
|
Xxxx
Xxxx
|
100
|
|||
Danyang
Lihua Electron Co., Ltd
|
XXX
|
000
|
|||
Xxxxxxx
Xxxxx Xxxxxx Xxxxxxxx Xx., Xxx.
|
XXX
|
000
|
0