FUQI INTERNATIONAL, INC. 4,855,000 Shares of Common Stock (Plus an Option to Acquire Up to 726,395 Shares to Cover Overallotments) Underwriting Agreement
4,855,000
Shares of Common Stock
(Plus an
Option to Acquire Up to 726,395 Shares to Cover Overallotments)
July 31,
2009
Xxxxxxx
Xxxxx & Company, L.L.C.
Xxxxxxxxxxx
& Co. Inc.
Xxxxx and
Company, LLC
As
Representatives of the Several
Underwriters
Named in Schedule A
c/o
Xxxxxxx Xxxxx & Company, L.L.C.
000 Xxxx
Xxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
Ladies
and Gentlemen:
Section
1. Introductory. Fuqi
International, Inc., a Delaware corporation (“Company”), has an authorized
capital stock consisting of five million (5,000,000) shares of preferred stock,
par value $0.001 per share (“Preferred Stock”), of which
no shares will be outstanding as of the First Closing Date, hereinafter defined,
and one hundred million (100,000,000) shares of common stock, par value $0.001
per share (“Common
Stock”), of which 22,047,261 shares were outstanding as of July 29, 2009,
and no other shares of Common Stock will have been issued as of the First
Closing Date, hereinafter defined, except for shares of Common Stock issued upon
the exercise of stock options outstanding as of the date hereof, shares of
Common Stock issued pursuant to the Company’s director compensation policies or
shares of Common Stock issued pursuant to this Agreement. The Company
proposes to issue and sell 4,855,000 shares of its authorized but unissued
Common Stock (“Firm
Shares”) to the several underwriters named in Schedule A as it may be
amended by the Pricing Agreement hereinafter defined (“Underwriters”), who are
acting severally and not jointly, and for whom Xxxxxxx Xxxxx & Company,
L.L.C., Xxxxxxxxxxx & Co. Inc. and Xxxxx and Company, LLC are acting as
representatives (“Representatives”). In
addition, the Company proposes to grant to the Underwriters options to purchase
up to an aggregate of 726,395 additional shares of Common Stock (“Option Shares”) as provided
in Section 4 hereof (collectively, the “Overallotment
Option”). The Firm Shares and, to the extent such
Overallotment Option is exercised in whole or in part, the Option Shares, are
hereinafter collectively referred to as the “Shares.”
You have
advised the Company that the Underwriters propose to make a public offering of
the Shares as soon as you deem advisable and the Pricing Agreement hereinafter
defined has been executed and delivered.
Prior to
the purchase and public offering of the Shares by the several Underwriters, the
Company and the Representatives, acting on behalf of the several Underwriters,
shall enter into an agreement substantially in the form of Exhibit A hereto (“Pricing
Agreement”). The offering of the Shares will be governed by
this Underwriting Agreement (this “Agreement”), as supplemented
by the Pricing Agreement. From and after the time of the execution
and delivery of the Pricing Agreement, this Agreement shall be deemed to
incorporate the Pricing Agreement.
The
Company hereby confirms its agreement with the Underwriters as
follows:
Section
2. Representations and
Warranties of the Company. The
Company represents and warrants to the several Underwriters that:
(a) A
shelf registration statement on Form S-3 (File No. 333-160210), has been
prepared and filed with the Securities and Exchange Commission (the “Commission”) by the Company
in conformity with the requirements of the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder (collectively, the
“1933 Act”; unless
otherwise indicated all references herein to specific rules are rules
promulgated under the 0000 Xxx) relating to securities of the Company, including
Common Stock, to be issued from time to time by the Company; and the Company has
so prepared and has filed such amendments thereto, if any, as may have been
required to the date hereof and will file such additional amendments thereto as
may hereafter be required. Such registration statement has been
declared effective by the Commission. Such registration statement,
including the exhibits thereto and the other information and documents deemed
pursuant to Rule 430B under the 1933 Act to be part thereof as amended to (and
including) the date of this Agreement, is hereinafter referred to as the “Registration
Statement”. The term “Base Prospectus” means the
prospectus, dated July 22, 2009, included in the Registration
Statement. The Company shall prepare and file with the Commission
pursuant to Rule 424(b) under the 1933 Act a prospectus supplement or
supplements to the Base Prospectus that discloses the information previously
omitted from the Base Prospectus in reliance on Rule 430B with respect to the
offering and sale of the Shares and such further information with respect to the
Company as the Company has previously advised you. The Base
Prospectus, as supplemented by such prospectus supplement including pricing
information specifically relating to the Shares in the form in which it shall be
filed with the Commission pursuant to Rule 424(b) under the 1933 Act is
hereinafter called the “Prospectus”. Any
preliminary form of Prospectus relating to the Shares including the “subject to
completion” legend required by Item 501(b)(10) under Regulation S-K that has
heretofore been filed pursuant to Rule 424 under the 1933 Act is hereinafter
called a “Preliminary
Prospectus”. Any reference herein to the Registration
Statement, the Base Prospectus, any Preliminary Prospectus or the Prospectus
includes, in each case, the information, if any, deemed to be part thereof
pursuant to Rule 430B under the 1933 Act and the documents incorporated by
reference therein, including periodic reports under the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission thereunder
(collectively, the “Exchange
Act”). The terms “supplement,” “amendment,” and “amend” as
used herein with respect to the Registration Statement, the Base Prospectus, any
Preliminary Prospectus, or the Prospectus shall be deemed to refer to and
include the filing of any documents under the Exchange Act that are deemed to be
incorporated therein by reference. Any registration statement (including any
amendment or supplement thereto or information which is deemed part thereof)
filed by the Company under Rule 462(b) (“Rule 462(b) Registration
Statement”) shall be deemed to be part of the “Registration Statement” as
defined herein, and any prospectus (including any amendment or supplement
thereto or information which is deemed part thereof) included in such
registration statement shall be deemed to be part of the “Prospectus” as defined
herein, as appropriate.
2
(b) The
Commission has not issued any order preventing or suspending the use of the Base
Prospectus or any Preliminary Prospectus, and each of the Base Prospectus and
each Preliminary Prospectus has conformed in all material respects with the
requirements of the 1933 Act and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; and when the Registration Statement became effective, and
at all times subsequent thereto, up to the First Closing Date or the Second
Closing Date, hereinafter defined, as the case may be, the Registration
Statement, including the information deemed to be part of the Registration
Statement at the time specified in Rule 430B, if applicable, and the Prospectus
and any amendments or supplements thereto, in all material respects conformed or
will in all material respects conform to the requirements of the 1933 Act, and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a material
fact or omitted or will omit to state a material fact, in the case of the
Registration Statement or any amendment or supplement thereto, required to be
stated therein or necessary to make the statements therein not misleading and,
in the case of the Prospectus, or any amendment or supplement thereto, necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
As used
in this subsection and elsewhere in this Agreement:
“Applicable Time” means 6:30
a.m., Chicago Time, on the date of the Pricing Agreement.
“Time of Sale Prospectus”
means the Base Prospectus, as supplemented by the Preliminary Prospectus last
filed before the Applicable Time, including any document incorporated by
reference therein as of the Applicable Time.
Notwithstanding
the foregoing, the representations and warranties of the Company set forth in
this Section 2(b) shall not apply to information contained in or omitted from
the Registration Statement, the Prospectus, any Preliminary Prospectus, or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives specifically for use in the preparation
thereof.
(c) The
documents incorporated or deemed to be incorporated by reference in the
Registration Statement and the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all material respects
with the requirements of the 1933 Act or the Exchange Act, as applicable, and,
when read together with the other information in the Prospectus, (i) at the time
the Registration Statement became effective, (ii) at the earlier of the time the
Prospectus was first used and the Applicable Time and (iii) at the First Closing
Date, hereinafter defined, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
3
(d) As
used herein, the term “subsidiary” shall mean a subsidiary of the Company having
financial statements that are consolidated with those of the Company for
purposes of the Company’s audited consolidated financial
statements. The Company has no subsidiaries other than those
subsidiaries set forth on Exhibit 21.1 of its Annual Report on Form 10-K filed
on March 31, 2009. The Company and its subsidiaries have been duly
incorporated or formed and are validly existing as corporations, limited
liability companies, or similar People’s Republic of China (“PRC”) equivalent entities in
good standing under the laws of their respective places of incorporation or
formation, as the case may be, with requisite power and authority to own their
properties and conduct their business as described in the Prospectus; the
Company and each of its subsidiaries are duly qualified to do business as
foreign corporations, limited liability companies, or PRC equivalent entities
under the laws of, and are in good standing as such in, each jurisdiction in
which they own or lease substantial properties, have an office, or in which
substantial business is conducted and such qualification is required except in
any such case where the failure to so qualify or be in good standing would not
have a material adverse effect upon the Company and its subsidiaries taken as a
whole (a “Material Adverse
Effect”); and no proceeding of which the Company has knowledge has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification.
(e) Except
as disclosed in the Registration Statement (including Exhibit 21.1 to the
Company’s Annual Report on Form 10-K filed on March 31, 2009, as incorporated by
reference therein), and other than director qualifying shares or interests and
shares or interests held by persons other than the Company in jurisdictions
requiring that such entity have more than one holder of shares or interests, the
Company owns directly or indirectly 100 percent of the issued and outstanding
capital stock or other ownership interest of each of its subsidiaries, free and
clear of any claims, liens, encumbrances or security interests, and all of such
capital stock has been duly authorized and validly issued and is fully paid and
nonassessable.
(f) The
issued and outstanding shares of capital stock of the Company as set forth in
the Prospectus have been duly authorized and validly issued, are fully paid and
nonassessable, and conform to the description thereof contained in the
Prospectus.
(g) The
Shares to be sold by the Company have been duly authorized and when issued,
delivered and paid for pursuant to this Agreement, will be validly issued, fully
paid and nonassessable, and (i) will conform to the description thereof
contained in the Prospectus, (ii) will be free of any lien, security
interest, mortgage, pledge, charge or encumbrance of any kind or preemptive
rights, rights of first refusal, rights of co-sale or similar rights in favor of
stockholders with respect to any of the Shares, or the issuance or sale thereof,
whether pursuant to the Company’s certificate of incorporation or bylaws, any
Legal Requirement (as hereinafter defined), contract or otherwise, and
(iii) will not be subject to any voting trust arrangements.
4
(h) The
execution of this Agreement and the Pricing Agreement and the performance of the
Company’s obligations thereunder have been duly authorized by all necessary
corporate action and will not (i) violate any provision of the Company’s charter
or bylaws and (ii) result in the breach, or be in violation, of any of the terms
and provisions of, or constitute a default or change of control under (A) any
agreement, franchise, license, indenture, mortgage, deed of trust, or other
instrument to which the Company or any subsidiary is a party or by which the
Company, any subsidiary or the property of any of them may be bound or affected,
or (B) any Legal Requirement, hereinafter defined, applicable to the Company or
any subsidiary of any Governmental Body, hereinafter defined, or any order of
any Governmental Body, hereinafter defined, entered in any proceeding to which
the Company or any subsidiary was or is now a party or by which it is
bound. No consent, approval, authorization or other order of any
Governmental Body, hereinafter defined, is required for the execution and
delivery of this Agreement or the Pricing Agreement or the consummation of the
transactions contemplated herein or therein, except for (i) compliance with the
1933 Act and blue sky laws applicable to the public offering of the Shares by
the several Underwriters, (ii) clearance of such offering with the Financial
Industry Regulatory Authority (“FINRA”) and (iii) compliance
with the rules and requirements of The Nasdaq Stock Market, as applicable to the
Company. This Agreement and the Pricing Agreement (upon the execution
and delivery thereof) have been duly executed and delivered by the Company, and
are legal, valid and binding agreements of the Company, except to the extent
that enforceability of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights and
by the exercise of judicial discretion in accordance with general principles
applicable to equitable and similar remedies and except as to those provisions
relating to indemnities for liabilities arising under the 1933 Act.
(i) The
accountants who have expressed their opinions with respect to certain of the
financial statements and schedules included or incorporated by reference in the
Registration Statement are an independent registered public accounting firm as
required by the 1933 Act and the Exchange Act, and such accountants are not in
violation of the auditor independence requirements of the Xxxxxxxx-Xxxxx Act of
2002 (the “Xxxxxxxx-Xxxxx
Act”).
(j) The
consolidated financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus present fairly the
consolidated financial position of the Company as of the respective dates of
such financial statements, and the consolidated results of operations and cash
flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed in the Registration
Statement or the Prospectus. The financial information set forth in
the Prospectus under “Selected Consolidated Financial Data” presents fairly, on
the basis stated in the Prospectus, the information set forth therein as of the
respective dates and for the respective periods set forth
therein. All disclosures contained in the Registration Statement and
the Prospectus regarding “non-GAAP financial measures” (as such term is defined
by the Commission’s rules and regulations) comply with Regulation G of the
Exchange Act and Item 10 of Regulation S-K under the 1933 Act, to the extent
applicable.
5
(k) Neither
the Company nor any subsidiary (i) is in violation of its charter or other
organizational documents, or (ii) is in default (A) under any consent decree, or
(B) with respect to any material provision of any lease, loan agreement,
franchise, license, permit or other contract obligation to which it is a party;
and there does not exist any state of facts which constitutes an event of
default as defined in such documents or which, with notice or lapse of time or
both, would constitute such an event of default, except in each such case in
this clause (B) for violations or defaults that neither singly nor in the
aggregate could reasonably be expected to have a Material Adverse
Effect.
(l) There
are no Governmental Body proceedings material to the Company and its
subsidiaries, taken as a whole, which are pending, or to the Company’s
knowledge, threatened, to which the Company or any subsidiary is or may be a
party or of which material property owned or leased by the Company or any
subsidiary is or may be the subject, or related to environmental or
discrimination matters that are not disclosed in the Prospectus, or that
question the validity of this Agreement or the Pricing Agreement or any action
taken or to be taken pursuant hereto or thereto.
(m) There
are no holders of securities of the Company having rights to registration
thereof or preemptive rights to purchase Common Stock, except as disclosed in
the Prospectus.
(n) The
Company and each of its subsidiaries have good and marketable title to all the
properties and assets reflected as owned in the consolidated financial
statements incorporated by reference into the Prospectus, including, but not
limited to, all tangible and intangible assets acquired by the Company or any of
its subsidiaries in any asset or equity acquisition, including, but not limited
to, the acquisition by the Company’s subsidiary of the assets of Shanghai
TianMei Jewelry Co., Ltd. and Beijing Yinzhong TianMei Jewelry Co., Ltd. (the
“Temix Transaction”),
which are subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those, if any, reflected in such consolidated financial statements
(or elsewhere in the Prospectus) or that are not material to the Company and its
subsidiaries taken as a whole, other than assets disposed of since the date of
such balance sheet in the ordinary course of business. The Company
and each of its subsidiaries hold their respective leased properties that are
material to the Company and its subsidiaries taken as a whole under valid and
binding leases.
(o) The
Company has not taken and will not take prior to the earlier of the Second
Closing Date or the expiration of the Overallotment Option (including any time
after the effective date of the Registration Statement during which the
Underwriters may be deemed to be making a public offering), directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
6
(p) Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as contemplated by the Prospectus, the
Company and its subsidiaries, taken as a whole, have not incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business and there has not been any
material adverse change in their condition (financial or otherwise) or results
of operations nor any material change in their capital stock, short-term debt or
long-term debt.
(q) There
is no material document of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required.
(r) The
Company, together with its subsidiaries, owns and possesses all right, title and
interest in and to, or has duly licensed from third parties, all patents, patent
rights, trade secrets, inventions, know-how, trademarks, trade names,
copyrights, service marks and other proprietary rights (“Trade Rights”), material to
the business of the Company and each of its subsidiaries taken as a
whole. Neither the Company nor any of its subsidiaries has received
any written notice of infringement, misappropriation or conflict from any third
party as to such material Trade Rights which has not been resolved or disposed
of and, to the Company’s knowledge, neither the Company nor any of its
subsidiaries has infringed, misappropriated or otherwise conflicted with
material Trade Rights of any third parties, which infringement, misappropriation
or conflict could reasonably be expected to have a Material Adverse
Effect. All assignments by the Company or its subsidiaries of any
Trade Rights have been properly executed and are valid and enforceable against
all such assignees of the Trade Rights. Any licensing or assignment
of the Trade Rights by the Company or its subsidiaries has been properly
consummated and properly recorded with the appropriate governmental agency,
including the appropriate PRC Governmental Body, hereinafter
defined.
(s) The
conduct of the business of the Company and each of its subsidiaries is in
compliance in all respects with applicable federal, national, provincial, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, pronouncement, requirement,
specification, determination, decision, opinion or interpretation issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Body, hereinafter
defined (“Legal
Requirements”), except where the failure to be in compliance with any
Legal Requirements would not have a Material Adverse Effect.
(t) All
offers and sales of the Company’s issued and outstanding capital stock prior to
the date hereof were either (1) made pursuant to a registration statement filed
by the Company with the Commission under the 1933 Act or (2) at all relevant
times exempt from the registration requirements of the 1933 Act and, in each
case, were duly registered with or the subject of an available exemption from
the registration requirements of the applicable state and local securities or
blue sky laws.
7
(u) No
transaction, stamp, capital or other issuance, registration, transaction,
transfer or withholding taxes or duties are payable in any jurisdiction,
including without limitation, the PRC or the British Virgin Islands (the “BVI”), by or on behalf of the
Underwriters to any PRC or BVI taxing authority in connection with (1) the
issuance, sale and delivery of the Shares to the Underwriters and the delivery
of such Shares to or for the account of the Underwriters, (ii) the initial sale
and delivery by the Underwriters of such Shares to purchasers thereof, or (iii)
the execution and delivery of this Agreement.
(v) The
Company has filed all necessary national, provincial, federal and state and
local income and franchise tax returns and has paid all taxes shown as due
thereon, and there is no tax deficiency that has been, or to the knowledge of
the Company might be, asserted against the Company or any of its properties or
assets that would or could be expected to have a Material Adverse Effect; all
national, provincial and local PRC governmental tax relief, concessions,
waivers, holidays and preferential treatments claimed or obtained by the Company
and its subsidiaries are valid, binding and enforceable and do not violate any
PRC or BVI law.
(w) A
registration statement pursuant to Section 12(g) of the Exchange Act to register
the Common Stock thereunder has been declared effective by the Commission
pursuant to the Exchange Act, and the Common Stock is duly registered thereunder
and the Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Shares under the Exchange Act and the
Company has not received any notification of termination of such registration
from the Commission.
(x) The
Common Stock is listed on the NASDAQ Global Market (“NASDAQ”). The
Company has filed an additional listing application with the NASDAQ relating to
obtaining listing for the Shares, when issued, and to the Company’s knowledge,
including discussions with staff of the NASDAQ, the NASDAQ will allow the Shares
to be traded thereon upon issuance. The Company has not received any
notification of delisting or that NASDAQ is contemplating initiating delisting
procedures of the Common Stock.
(y) None
of the Company nor any subsidiary is involved in any labor disputes with any of
its employees and, to the knowledge of the Company, no employee has threatened
the commencement of any labor disputes with the Company or any subsidiary,
which, in either case, would reasonably be expected to result in a Material
Adverse Effect, nor has the Company or any subsidiary received any notice of any
bankruptcy, labor disturbance or other event affecting any of its principal
suppliers or customers, which would reasonably be expected to result in a
Material Adverse Effect. Each of the Company and each subsidiary is
in compliance in all material respects with all Legal Requirements respecting
employment and employment practices, terms and conditions of employment and
wages and hours that are applicable to them. Neither the Company nor
any subsidiary has received notice of any pending investigations involving the
Company or any subsidiary by the U.S. Department of Labor, any PRC labour
bureau, or any other Governmental Body, hereinafter defined, responsible for the
enforcement of such Legal Requirements. There is no unfair labor
practice charge or complaint against the Company or any subsidiary pending
before the National Labor Relations Board, any PRC labour bureau, or any
applicable foreign labor administration agencies, or to the knowledge of the
Company, any strike, picketing, boycott, labor dispute, slowdown or stoppage
pending or threatened against or involving the Company or any
subsidiary. No collective bargaining agreement exists among the
employees of the Company or any subsidiary, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or any subsidiary. Neither the Company nor any subsidiary has
received notice that any grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the Company or any
subsidiary. The Company and its subsidiaries are in compliance with
employee social security contribution requirements, including, without
limitation, the social security and pension contribution programs in the
PRC.
8
(z) The
Company is not, and does not intend to conduct its business in a manner in which
it would become, an “investment company” as defined in Section 3(a) of the
Investment Company Act of 1940, as amended (“Investment Company
Act”).
(aa) No
transaction has occurred between or among the Company or its subsidiaries and
any of its officers or directors, stockholders or any affiliate or affiliates of
any such officer or director or stockholder that is required to be and is not
described in the Registration Statement and the Prospectus.
(bb) The
Company is in compliance in all material respects with all applicable provisions
of the Xxxxxxxx-Xxxxx Act.
(cc) The
Company’s board of directors has validly appointed an audit committee whose
composition satisfies the requirements of the Exchange Act and Rules 5601 and
5605 of the rules of the NASDAQ. The Company’s audit committee has
adopted a charter that satisfies the Exchange Act and Rules 5601 and 5605 of the
NASDAQ.
(dd) The
Company and its subsidiaries are insured against such losses and risks and in
such amounts as are customary in the business in which they engage or propose to
engage after giving effect to the transactions as described in the Prospectus,
as such business is customarily conducted in the PRC. To the
knowledge of the Company, all policies of insurance and fidelity or surety bonds
insuring the Company, its subsidiaries and their respective businesses, assets,
employees, officers and directors are in full force and effect and the Company
and its subsidiaries are in compliance with the terms of such policies and
instruments in all material respects.
(ee) The
Company has established and maintains disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Exchange Act) that are effective in
ensuring (except to the extent disclosed by the Company in Exchange Act reports
filed with the Commission prior to the date hereof) that material information
relating to the Company, including its subsidiaries, is made known to the
principal executive officer and the principal financial officer. The
Company has utilized such controls and procedures in preparing and evaluating
the disclosures included or incorporated by reference in the Registration
Statement and Prospectus.
9
(ff) The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient (except to the extent disclosed by the Company in Exchange
Act reports filed with the Commission prior to the date hereof) to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management’s
general or specific authorization; and (iv) amounts reflected on the Company’s
consolidated balance sheet for assets are compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(gg) Each
of the Company and its subsidiaries complies in all respects with PRC
advertising laws and related Legal Requirements, except where the failure to
comply with such Legal Requirements would not individually or in the aggregate
have a Material Adverse Effect.
(hh) To
the Company’s knowledge, the choice of laws of the State of Illinois as the
governing law of this Agreement is a valid choice under the laws of the BVI and
the PRC and will be honored by courts in the BVI and PRC. The Company
has the power to submit, and pursuant to Section 20 of this Agreement, has
legally, validly, effectively and irrevocably submitted to, the personal
jurisdiction of the State courts of the State of Illinois County of Xxxx and the
United States District Court for the Northern District of Illinois.
(ii) To
the Company’s knowledge, neither the Company, nor any subsidiary nor any of
their respective properties, assets or revenues has any right of immunity under
BVI or PRC law, from any legal action, suit or proceeding, from the giving of
any relief in any such legal action, suit or proceeding, from set-off or
counterclaim, from the jurisdiction of any BVI, PRC, Illinois or U.S. federal
court, from service of process, attachment upon or prior to judgment, or
attachment in aid of execution of judgment, or from execution of a judgment, or
other legal process or proceeding for the giving of any relief or for the
enforcement of a judgment, in any such court, with respect to its obligations,
liabilities or any other matter under or arising out of or in connection with
this Agreement; and, to the extent that the Company, or any subsidiary or any of
their respective properties, assets or revenues may have or may hereafter become
entitled to any such right of immunity in any such court in which proceedings
may at any time be commenced, each of the Company and the subsidiaries waives or
will waive such right to the extent permitted by law and has consented to such
relief and enforcement as provided in Section 20 of this Agreement.
(jj) None
of the Company or its subsidiaries, and to the knowledge of the Company, any of
its respective officers, directors, managers, agents or employees have, directly
or indirectly, made or authorized any contribution, payment or gift of funds, or
property to any official, employee or agent of any governmental agency,
authority or instrumentality in the PRC or the BVI or any other jurisdiction
where either the payment or gift or the purposes of such contribution, payment
or gift was, is, or will be prohibited under the applicable Legal
Requirements of any relevant locality at the time of such contribution, payment
or gift, including without limitation, the U.S. Foreign Corrupt Practices Act of
1977, as amended, or the rules and regulations promulgated
thereunder.
10
(kk) Except
as set forth in the Registration Statement, the Company’s indirect wholly-owned
subsidiary, Shenzhen Fuqi Jewelry Co., Ltd., a company established under the
laws of the PRC (“Fuqi
China”) is not currently prohibited, directly or indirectly, from paying
any dividends to its sole shareholder, Fuqi International Holdings Co, Ltd., a
BVI company, (“Fuqi
BVI”), nor is it so prohibited, from making any other distribution on
Fuqi China’s share capital, from repaying to Fuqi BVI or the Company any loans
or advances to Fuqi China or from transferring any of Fuqi China’s property or
assets to the Company or to any other subsidiary of the
Company. Except as set forth in the Registration Statement and the
Time of Sale Prospectus, any dividends and other distributions declared with
respect to after-tax retained earnings on the equity interests of Fuqi China may
lawfully be paid to Fuqi BVI in Renminbi that may be converted into U.S. dollars
and freely transferred out of the PRC, and all such dividends and other
distributions are not and will not be subject to withholding or other taxes in
the PRC, are otherwise free and clear of any other tax, withholding or deduction
in the PRC, and without the necessity of obtaining any governmental
authorization in the PRC except for routine PRC foreign exchange procedures and
tax withholding procedures.
(ll) Except
as set forth in the Prospectus, all dividends and other distributions declared
and payable on the Shares may under current BVI and PRC Legal Requirements be
paid to the holders of the Shares in U.S. dollars and may be converted into
foreign currency that may be transferred out of the BVI or PRC, and all such
payments made to holders thereof or therein who are non-residents of the BVI or
PRC will not be subject to income, withholding or other taxes under the Legal
Requirements of the BVI or the PRC or any political subdivision or taxing
authority thereof or therein and without the necessity of obtaining any
governmental authorization in the BVI or PRC or any political subdivision or
taxing authority thereof or therein.
(mm) It
is not necessary that this Agreement, the Registration Statement, the Prospectus
or any other document be filed or recorded with any court or other authority in
the BVI or the PRC.
11
(nn) The
Company and the subsidiaries have materially complied with, are not in material
violation of, and have not received any written notices of violation with
respect to any Legal Requirements applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, reimbursement, storage, import,
export or disposal of any product manufactured or distributed by the Company or
the subsidiaries (“Applicable
Laws”), or any license, certificate, approval, clearance, authorization,
permit, supplement, or amendment required by any Applicable Laws to conduct its
business as described in the Prospectus (“Authorizations”). The
Company and its subsidiaries possess all material Authorizations and such
material Authorizations are in full force and effect. The Company and
its subsidiaries are, and their products are, in compliance in all material
respects with all Authorizations and Applicable Laws, including, but not limited
to, all Legal Requirements administered, issued or enforced by any (a) nation,
including without limitation, the United States and the PRC, principality,
state, commonwealth, province territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental authority or quasi-governmental authority of
any nature (including any governmental division, subdivision, department,
agency, bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or entity and any
court or other tribunal); (d) multi-national organization or body; or (e)
individual, entity or body exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military or taxing
authority or power of any nature having authority over the Company, its
subsidiaries or any of their products or other governmental authority having
authority over the Company, its subsidiaries or any of their products or
property (“Governmental
Body”). The Company and its subsidiaries have not receive
notice of any claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other similar action from any Governmental Body
alleging that any product, operation or activity is in material violation of any
Applicable Laws or Authorizations and, to the knowledge of the Company, no such
Governmental Body is considering any such claim, litigation, arbitration,
action, suit, investigation or proceeding. Each regulatory submission
for the Company’s or its subsidiaries’ products has been filed, cleared,
approved and maintained in compliance in all material respects with all
Applicable Laws and Authorizations, including without limitation, applicable PRC
Legal Requirements. To the knowledge of the Company, there are no
facts which are reasonably likely to cause (A) the withdrawal, or recall of any
products sold or intended to be sold by the Company or its subsidiaries, or (B)
a suspension or revocation of any of the Company’s or subsidiaries’
Authorizations. The Company and its subsidiaries have not received
notice (whether complete or pending) of any proceeding seeking recall,
suspension or seizure of any products sold or intended to be sole by the Company
or its subsidiaries.
(oo) The
Company (A) is in compliance, in all material respects, with any and all
applicable Legal Requirements promulgated by any and all Governmental Bodies
relating to the protection of human health and safety in the workplace (“Occupational Laws”); (B) has
received all material permits, licenses or other approvals required of it under
applicable Occupational Laws to conduct its business as currently conducted; and
(C) is in compliance, in all material respects, with all terms and conditions of
such permit, license or approval. No action, proceeding, revocation
proceeding, writ, injunction or claim is pending or, to the Company’s knowledge,
threatened against the Company relating to Occupational Laws, and to the
Company’s knowledge there are no facts, circumstances or developments relating
to its operations or cost accounting practices that could reasonably be expected
to form the basis for or give rise to such actions, suits, investigations or
proceedings.
12
(pp) The
Company and each of its subsidiaries has taken or is in the process of taking
all reasonable steps (to the extent required of the Company and each such
subsidiary under PRC Legal Requirements) to comply with, and to ensure
compliance by each of (i) its principal shareholders as disclosed in the
Registration Statement and Prospectus, and (ii) any other persons known to the
Company that are required to comply (in connection with their interests in the
Company) with applicable Legal Requirements of the relevant PRC Governmental
Body (including, without limitation, the Ministry of Commerce, National
Development and Reform Commission and the State Administration of Foreign
Exchange (“SAFE”))
relating to overseas investment by PRC residents and citizens or overseas
listings by offshore special purpose vehicles controlled directly or indirectly
by PRC companies and individuals, such as the Company (the “PRC Overseas Investment and Listing
Regulations”), including, without limitation, requesting such persons to
complete any registration and other procedures required under applicable PRC
Overseas Investment and Listing Regulations.
(qq) Each
of the Company and each of the Company’s directors that signed the Registration
Statement is aware of and has been advised as to, the content of the Rules on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors jointly
promulgated by the Ministry of Commerce (the “MOFCOM”), the State Assets
Supervision and Administration Commission, the State Tax Administration, the
State Administration of Industry and Commerce, the China Securities Regulatory
Commission (the “CSRC”)
and SAFE of the PRC on August 8, 2006 (the “M&A Rules”), in
particular the relevant provisions thereof which purport to require offshore
special purpose vehicles, or SPVs, formed for listing purposes and controlled
directly or indirectly by PRC companies or individuals, to obtain the approval
of the CSRC prior to the listing and trading of their securities on an overseas
stock exchange, and the relevant provisions thereof which purport to require
foreign companies acquiring PRC companies to obtain the approval of MOFCOM prior
to the acquisition by the foreign company of such PRC company; the Company has
received legal advice specifically with respect to the M&A Rules from its
PRC counsel and the Company understands such legal advice; and the Company has
fully communicated such legal advice from its PRC counsel to each of its
directors that signed the Registration Statement and each director has confirmed
that he or she understands such legal advice; and as of the date of the
Prospectus and as of the date of this Agreement, the M&A Rules did not and
do not apply to the issuance and sale of the Shares, the listing and trading of
the Shares on the NASDAQ, the consummation of the transactions contemplated by
this Agreement, nor is the CSRC, MOFCOM or other PRC governmental approval
required in connection with the above. The Company and its
subsidiaries have received all proper and necessary approvals, permits and
authorizations from government bodies for its business transactions, including,
without limitation, the Temix Transaction.
13
(rr) The
statements under the captions “Risk Factors - Risks Related to Doing Business in
China - Recent PRC regulations relating to acquisitions of PRC companies by
foreign entities may create regulatory uncertainties that could restrict or
limit our ability to operate. Our failure to obtain the prior approval of the
China Securities Regulatory Commission, or the CSRC, for the listing and trading
of our common stock could have a material adverse effect on our business,
operating results, reputation and trading price of our common stock, and may
also create uncertainties in the future”, "Risk Factors - Risks Related to Doing
Business in China - Failure to comply with the United States Foreign Corrupt
Practices Act could subject us to penalties and other adverse consequences";
"Risk Factors - Risks Related to Doing Business in China - Because our business
is located in the PRC, we may have difficulty establishing adequate management,
legal and financial controls, which we are required to do in order to comply
with U.S. securities laws"; "Risk Factors - Risks Related to this Offering and
our Capital Structure - The sale or availability for sale of substantial amounts
of our common stock could adversely affect its market price"; "Risk Factors -
Risks Related to this Offering and our Capital Structure - If we fail to
maintain effective internal controls over financial reporting, the price of our
common stock may be adversely affected. We have recently identified
significant deficiencies and structural weaknesses in our internal controls";
"Description of Common Stock"; "Description of Preferred Stock"; "Description of
Warrants"; "Description of Debt Securities"; "Description of Units"; "Delaware
Anti-Takeover Law and Charter Provisions" in the Preliminary Prospectus as of
the Applicable Time and in the Prospectus and under Item 15 in the Registration
Statement, insofar as such statements constitute a summary of documents referred
to therein or factual matters of the Company, are fair and accurate summaries of
the matters described therein, and (i) no material information has been omitted
from such summaries which would make the same misleading in any material
respect, and (ii) nothing has come to the attention of the Company that would
lead it to believe that the CSRC is taking any action to require the Company to
seek its approval for the consummation of the transactions contemplated under
this Agreement or that would otherwise have a Material Adverse
Effect.
(ss) Except
as disclosed in the Registration Statement and Time of Sale Prospectus, there is
neither pending nor, to the knowledge of the Company, threatened in writing,
against the Company or any subsidiary any claim, action, suit, or proceeding at
all or in equity, arbitration, investigation or inquiry to which the Company or
any of its respective officers, directors or 5% or greater security holder is a
party and involving the Company’s or any subsidiary’s properties or businesses,
before or by any court, arbitration tribunal or governmental instrumentality,
agency, or body.
(a)
The Representatives, on behalf of the several Underwriters, represent and
warrant to the Company that the information set forth (a) on the cover page of
the Prospectus with respect to price, underwriting discount and terms of the
offering and (b) in all paragraphs under “Underwriting” in the Prospectus,
except for paragraphs six, seven, eight, nine and fifteen, comprises the
information furnished to the Company by and on behalf of the Underwriters for
use in connection with the preparation of the Registration Statement and the
Prospectus and is correct and complete in all material respects.
(b)
The Representatives, on behalf of the several Underwriters, represent and
warrant to the Company that each of the Underwriters is aware that the Company
is an “ineligible issuer” and may not make any offer relating to the Shares that
would constitute a “free writing prospectus” (as defined in Rule 433) or that
would otherwise constitute a “free writing prospectus” (as defined in Rule 405),
and as such, no Underwriter has taken any action or prepared or distributed any
materials that could be deemed a “free writing prospectus” of the Company, nor
will any Underwriter take any action or prepare or distribute any materials that
could be deemed a “free writing prospectus” of the Company.
14
Section
4. Purchase, Sale
and Delivery of Shares. On
the basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, the Company agrees to
sell to the Underwriters named in Schedule A hereto, and the
Underwriters agree, severally and not jointly, to purchase the Firm Shares from
the Company at the price per share set forth in Section 2 of the Pricing
Agreement. The obligation of each Underwriter to the Company shall be
to purchase from the Company that number of Firm Shares set forth opposite the
name of such Underwriter in Schedule A
hereto. The public offering price and the purchase price shall be set
forth in the Pricing Agreement.
At 9:00
A.M., Chicago Time, on the fourth business day, if permitted under Rule 15c6-1
under the Exchange Act, (or the third business day if required under Rule 15c6-1
under the Exchange Act or unless postponed in accordance with the provisions of
Section 12) following execution of the Pricing Agreement, or such other time not
later than ten business days after such date as shall be agreed upon by the
Representative and the Company, the Company will deliver to you, by credit
through the full fast transfer facilities of The Depository Trust Company to the
account(s) designated by the Representatives on behalf of the several
Underwriters, the Firm Shares to be sold by it, against payment of the purchase
price therefor by delivery of federal or other immediately available funds, by
wire transfer or otherwise, to the Company and subject to any applicable Legal
Requirements. Such time of delivery and payment is herein referred to
as the “First Closing Date.” In lieu of such electronic delivery of
some or all of the Firm Shares, one or more certificates for the portion of Firm
Shares requested to be delivered in certificated form at the First Closing Date
will be delivered in such denominations and registered in such names as you
request by notice to the Company prior to 10:00 A.M., Chicago Time, on the
second business day preceding the First Closing Date, and will be made available
at the Company’s expense for checking and packaging by the Representative at
10:00 A.M., Chicago Time, on the business day preceding the First Closing
Date. Subject to any applicable Legal Requirements, payment for the
Shares so to be delivered shall be made at the time and in the manner described
above to an account designated by the Company prior to the First Closing
Date.
In
addition, on the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby grants the Overallotment Option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 726,395 Option Shares, at the
same purchase price per share to be paid for the Firm Shares, for use solely in
covering any overallotments made by the Underwriters in the sale and
distribution of the Firm Shares. The Overallotment Option granted
hereunder may be exercised at any time (but not more than once) within 30 days
after the date of this Agreement upon notice by you to the Company setting forth
the aggregate number of Option Shares as to which the Underwriters are
exercising the Overallotment Option, the time of delivery of the Option Shares
(as specified below) and, if some or all of the Option Shares are to be
delivered in certificated form, the names and denominations in which the
certificates for such shares are to be registered and the place at which such
certificates shall be delivered. Such time of delivery of the Option
Shares (which may not be earlier than the First Closing Date), being herein
referred to as the “Second
Closing Date,” shall be determined by you, but if at any time other than
the First Closing Date, shall not be earlier than three nor later than 10 full
business days after delivery of such notice of exercise. The number
of Option Shares to be purchased by each Underwriter shall be determined by
multiplying the number of Option Shares to be sold by a fraction, the numerator
of which is the number of Firm Shares to be purchased by such Underwriter as set
forth opposite its name in Schedule A and the denominator of which is the total
number of Firm Shares (subject to such adjustments to eliminate any fractional
share purchases as you in your absolute discretion may make). The
manner of payment for and delivery of the Option Shares shall be the same as for
the Firm Shares as specified in the preceding paragraph.
15
You have
advised the Company that each Underwriter has authorized you to accept delivery
of its Shares, to make payment and to receipt therefor. You,
individually and not as the Representatives of the Underwriters, may make
payment for any Shares to be purchased by any Underwriter whose funds shall not
have been received by you by the First Closing Date or the Second Closing Date,
as the case may be, for the account of such Underwriter, but any such payment
shall not relieve such Underwriter from any obligation hereunder.
Section
5. Covenants of
the Company. The
Company covenants and agrees that:
(a)
The Company will advise you promptly of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement relating to the Shares or of the institution of any proceedings for
that purpose, or of any notification of the suspension of qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceedings for that purpose or of any examination pursuant to Section 8(e) of
the 1933 Act concerning the Registration Statement and if the Company becomes
the subject of a proceeding under Section 8A of the 1933 Act in connection with
the offering of the Shares, and will also advise you promptly of any request of
the Commission for amendment or supplement of the Registration Statement, any
new registration statement relating to the Shares, of any Preliminary Prospectus
or of the Prospectus, or for additional information.
(b)
The Company will give you notice of its intention to file or prepare any
amendment to the Registration Statement (including any post-effective
amendment), any new registration statement relating to the Shares or any Rule
462(b) Registration Statement or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs from
the prospectus on file at the Commission at the time the Registration Statement
became or becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b)) and will furnish you with copies of any
such amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which you or counsel for the
Underwriters shall reasonably and timely object.
16
(c) If
at any time when a prospectus relating to the Shares is required to be delivered
under the 1933 Act any event occurs as a result of which the Prospectus,
including any amendments or supplements, would include an 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 the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend the Registration Statement or to file a new registration statement or
amend or supplement the Prospectus, including any amendments or supplements
thereto and including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Shares which differs
from the prospectus on file with the Commission at the time of effectiveness of
the Registration Statement, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) to comply with the 1933 Act or the 1933 Act
Regulations, the Company promptly will advise you thereof and will promptly
prepare and file with the Commission an amendment, supplement or new
registration statement which will correct such statement or omission or an
amendment which will effect such compliance.
(d)
At the time of filing the Registration Statement and at the date hereof, the
Company was and is an "ineligible issuer," as defined in Rule 405 under the
1933 Act. The Company has not made and will not make any offer relating to the
Shares that would constitute an "issuer free writing prospectus," as defined in
Rule 433, or that would otherwise constitute a "free writing prospectus,"
as defined in Rule 405.
(e) The
Company will effect the filings required under Rule 424(b), in the manner and
within the time period required by Rule 424(b) (without reliance on Rule
424(b)(8)). The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment. The Company has paid
all requisite filing fees in accordance with Rule 457 of the 1933
Act.
(f) Neither
the Company nor any of its subsidiaries will, prior to the First Closing Date,
incur any liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, except as
contemplated by the Prospectus.
(g) Neither
the Company nor any of its subsidiaries will acquire any capital stock of the
Company prior to the earlier of the Second Closing Date or termination or
expiration of the Overallotment Option, nor will the Company declare or pay any
dividend or make any other distribution upon the Common Stock payable to
stockholders of record on a date after the date hereof and prior to the First
Closing Date or Second Closing Date, as the case may be, except in either case
as contemplated by the Prospectus.
(h) Within
the time period prescribed by the Exchange Act, the Company will make generally
available to its security holders an earnings statement (which need not be
audited) covering a period of at least 12 months beginning after the effective
date of the Registration Statement, which will satisfy the provisions of the
last paragraph of Section 11(a) of the 1933 Act.
17
(i) During
such period as a prospectus is required by law to be delivered in connection
with offers and sales of the Shares by an Underwriter or dealer, the Company
will furnish to you at its expense, subject to the provisions of subsection (b)
hereof, copies of the Registration Statement, the Prospectus, each Preliminary
Prospectus, any documents incorporated by reference therein and all amendments
and supplements to any such documents, in each case as soon as available and in
such quantities as you may reasonably request, for the purposes contemplated by
the 1933 Act.
(j) The
Common Stock, including the Shares, is a "covered security" as defined in
Section 18 of the 1933 Act. If the Common Stock ceases to be a “covered
security”, the Company will cooperate with the Underwriters in qualifying or
registering the Shares for sale under the blue sky or similar laws of such
jurisdictions as you designate, and will continue such qualifications in effect
so long as reasonably required for the distribution of the
Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not currently qualified or where it would be subject to
taxation as a foreign corporation.
(k) During
the period of two years hereafter, upon your written request, furnish you with a
copy (i) as soon as practicable after the filing thereof, of any required report
filed by the Company with the Commission, any securities exchange or FINRA that
is not otherwise publicly available from the Commission, such securities
exchange or FINRA; and (ii) as soon as available, of each report of the Company
mailed to stockholders that is not otherwise filed with and publicly available
from the Commission.
(l) The
Company will use the proceeds received by it from the sale of the Shares being
sold by it in the manner specified in the Prospectus.
(m) Promptly
following the execution of the Pricing Agreement, the Company will prepare, and
file or transmit for filing with the Commission in accordance with Rule 430B and
Rule 424(b), copies of the Prospectus, or, if required by Rule 430B, a
post-effective amendment to the Registration Statement, containing all
information omitted from the Registration Statement at time of effectiveness in
reliance on Rule 430B. If required and not yet filed, the Company
will also prepare and file, or transmit for filing, a Rule 462(b) Registration
Statement immediately after the execution of the Pricing Agreement and no later
than 6 a.m. Eastern Time the next business day. If a Rule 462(b)
Registration Statement is filed, the Company shall make payment of, or arrange
for payment of, the additional registration fee owing to the Commission required
by Rule 111.
(n) The
Company will comply with all registration, filing and reporting requirements of
the Exchange Act and the NASDAQ.
18
(o)
The Company agrees not to, directly or indirectly, (i) offer, sell
(including “short” selling), assign, transfer, encumber, pledge, contract to
sell, grant an option to purchase, establish an open “put equivalent position”
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose
of any shares of Common Stock or securities convertible or exchangeable into, or
exercisable for, Common Stock held of record or beneficially owned (within the
meaning of Rule 13d-3 under the Exchange Act); or (ii) enter any swap or other
arrangement that transfers all or a portion of the economic consequences
associated with the ownership of any Common Stock (except, in each case, Common
Stock issued pursuant to currently outstanding options, warrants or convertible
securities and except for options to be granted under the Company’s existing
employee benefit plans in the ordinary course or as disclosed in the Prospectus)
during the period ending 90 days after this Agreement becomes effective (the
“Lock-Up Period”)
without the prior written consent of Xxxxxxx Xxxxx & Company, L.L.C., provided, that the foregoing
restrictions shall not apply to (w) the Shares to be sold hereunder, (x) the
issuance by the Company of any shares of Common Stock upon the exercise of
options, warrants or other convertible instruments outstanding or other
pre-existing issuance obligations, if any, as of the date of this Agreement, and
(y) the issuance by the Company of options or other equity awards under the
Company’s incentive plans as disclosed and described in the Prospectus or the
documents incorporated by reference therein and consistent with past
practices. Notwithstanding the foregoing, for the purpose of allowing
the Underwriters to comply with NASD Rule 2711(f)(4), or the applicable
successor FINRA Rule when published, if (1) during the last 17 days of the
Lock-Up Period, the Company releases earnings results or publicly announces
other material news or a material event or (2) prior to the expiration of the
Lock-Up Period, the Company announces that it will release earnings results
during the 16 day period beginning on the last day of the Lock-Up Period, then
in each case the Lock-Up Period will be extended until the expiration of the 18
day period beginning on the date of release of the earnings results or the
public announcement regarding the material news or the occurrence of the
material event, as applicable, unless Xxxxxxx Xxxxx & Company, L.L.C.
waives, in writing, such extension. Xxxxxxx Xxxxx &
Company, L.L.C. agrees to waive such extension if the provisions of NASD Rule
2711(f)(4) are not applicable to the release(s) or announcement(s) noted
above.
(p)
The Company and its subsidiaries will maintain such controls and other
procedures, including, without limitation, those required by Sections 302 and
906 of the Xxxxxxxx-Xxxxx Act and the applicable regulations thereunder, that
are designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company’s management, including its
principal executive officer and its principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure, to ensure that material information relating to Company,
including its subsidiaries, is made known to them by others within those
entities.
19
(q)
The Company and its subsidiaries will maintain a system of internal accounting
controls designed to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) amounts
reflected on the Company’s consolidated balance sheet for assets are compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(r) The
Company and its subsidiaries will comply in all material respects with all
applicable provisions of the Xxxxxxxx-Xxxxx Act.
(s)
The Company will comply with the SAFE rules and
regulations (the “SAFE Rules
and Regulations”) in all material respects, and will use commercially
reasonable efforts to cause its shareholders that are, or that are directly or
indirectly owned or controlled by, PRC residents or PRC citizens to comply with
the SAFE Rules and Regulations applicable to them in connection with the
Company, including, without limitation, requesting each shareholder that is, or
is directly or indirectly owned or controlled by, a PRC resident or PRC citizen
to complete any registration or procedures required under the applicable SAFE
Rules and Regulations.
Section
6. Payment of
Expenses. Whether
or not the transactions contemplated hereunder
are consummated or this Agreement becomes effective as to all of its provisions
or is terminated, the Company agrees to pay (i) all costs, fees and expenses
(other than legal fees and disbursements of counsel for the Underwriters and the
expenses incurred by the Underwriters, except as otherwise provided below)
incurred in connection with the performance of the Company’s obligations
hereunder, including, without limiting the generality of the foregoing, all fees
and expenses of legal counsel for the Company and of the Company’s independent
accountants, all costs and expenses incurred in connection with the preparation,
printing, filing and distribution of the Registration Statement, each
Preliminary Prospectus and the Prospectus (including all documents incorporated
by reference therein, exhibits and financial statements) and all amendments and
supplements provided for herein and any costs associated with the delivery of
any of the foregoing to the Underwriter and dealers and by the Underwriters to
investors, compliance with the rules and regulations of The Nasdaq Stock Market
(including with respect to the listing of the Shares), with this Agreement, the
Pricing Agreement and other documents in connection with the closing of the
offering of the Shares contemplated thereby; (ii) all costs, fees and
expenses (including legal fees and disbursements of counsel for the Underwriters
not to exceed $35,000 in the aggregate) incurred by the Underwriters in
connection with clearance of the offering of the Shares with FINRA and, if the
Common Stock ceases to be a “covered security” within the meaning of Section 18
of the 1933 Act, qualifying or registering all or any part of the Shares for
offer and sale under blue sky laws; (iii) the costs and expenses of the Company
and the Underwriter in connection with the production of road show slides and
graphics, fees and expenses of any consultants engaged with the written consent
of the Company in connection with the road show presentations, road show-related
travel, lodging and other expenses incurred in connection with the offering
contemplated hereby by the officers of the Company and any such consultants, and
the cost of any aircraft or other transportation chartered or used by the
Company in connection with the road show; (iv) all fees and expenses of the
Company’s transfer agent, including, but not limited to, printing of any
certificates for the Shares and all transfer taxes, if any, with respect to the
sale and delivery of the Shares to the several Underwriters, (v) up to an
additional $600,000 of costs, fees and expenses of any nature incurred by the
Underwriters in connection with the offering of the Shares not provided for
above, and (vi) all other reasonable costs and expenses incident to the
performance of the Company’s obligations hereunder and under the Pricing
Agreement which are not otherwise specifically provided for in this
Section. It is understood that except as expressly provided in this
Section 6, in Section 8 and in Section 10 below, the Underwriters shall pay all
of their own expenses.
20
Section
7. Conditions of
the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date shall
be subject to the accuracy of the representations and warranties on the part of
the Company herein set forth as of the First Closing Date or the Second Closing
Date, as the case may be, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following additional
conditions:
(a)
Prior to the First Closing Date or Second Closing Date, as the case may be, 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, to the knowledge of the Company or you, shall be
contemplated by the Commission.
(b) The
Prospectus, including information concerning the public offering price of the
Shares and price-related information and such other information omitted from the
Registration Statement in reliance on Rule 430B, shall have been filed with the
Commission pursuant to Rule 424(b) in the manner and within the prescribed time
period (without reliance on Rule 424(b)(8)) and the Company will provide
evidence satisfactory to the Representatives of such timely filing (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rules 430B and
424(b)).
(c)
If a Rule 462(b) Registration Statement is required, such Registration Statement
shall have been transmitted to the Commission for filing and become effective
within the prescribed time period and, prior to the First Closing Date, the
Company shall have provided evidence of such filing and effectiveness in
accordance with Rule 462(b).
(d)
The Common Stock, including the Shares, shall remain a "covered security" as
defined in Section 18 of the 1933 Act, and shall remain listed for trading on
the NASDAQ.
(e)
The legality and sufficiency of the authorization, issuance and sale or transfer
and sale of the Shares hereunder, the validity and form of the Shares (if
certificated), the execution and delivery of this Agreement and the Pricing
Agreement, and all corporate proceedings and other legal matters incident
thereto, and the form of the Registration Statement, any Preliminary Prospectus
and the Prospectus (except financial statements) shall have been approved by
counsel for the Underwriters exercising reasonable judgment.
21
(f)
You shall not have objected in writing to the Registration Statement, any
Preliminary Prospectus or the Prospectus, or you shall not have advised the
Company that the Registration Statement, any Preliminary Prospectus or the
Prospectus contains an untrue statement of fact, which, in the opinion of
counsel for the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or
necessary to make the statements therein not misleading.
(g)
Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a prospective
change, in or affecting particularly the business or properties of the Company
or its subsidiaries, whether or not arising in the ordinary course of business,
which, in the judgment of the Representatives, makes it impractical or
inadvisable to proceed with the public offering or purchase of the Shares as
contemplated hereby and in the Prospectus.
(h)
There shall have been furnished to you, as Representatives of the Underwriters,
on the First Closing Date or the Second Closing Date, as the case may be, except
as otherwise expressly provided below:
(i) An
opinion of K&L Gates LLP, counsel for the Company, addressed to the
Underwriters and dated the First Closing Date or the Second Closing Date, as the
case may be, in form and substance reasonably satisfactory to you.
(ii) An
opinion of Shujin Law Firm, PRC counsel for the Company, addressed to the
Underwriters and dated the First Closing Date or the Second Closing Date, as the
case may be, in form and substance reasonably satisfactory to you.
(iii) Such
opinion or opinions of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP, counsel for the
Underwriters and Xxx Xx Law Offices, PRC counsel for the Underwriters, dated the
First Closing Date or the Second Closing Date, as the case may be, with respect
to the existence of the Company, the validity of the Shares, the Prospectus and
other related matters as you may reasonably require, and the Company shall have
furnished to such counsel such documents and shall have exhibited to them such
papers and records as they request for the purpose of enabling them to pass upon
such matters.
(iv) A
certificate of the chief executive officer and the principal financial officer
of the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, to the effect that:
(1) the
representations and warranties of the Company set forth in Section 2 of this
Agreement are true and correct as of the date of this Agreement and as of the
First Closing Date or the Second Closing Date, as the case may be, and the
Company has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to such Closing
Date;
22
(2) the
Commission has not issued an order preventing or suspending the use of the
Prospectus or any Preliminary Prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to the best knowledge of the
respective signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act; and
(3) subsequent
to the date of the most recent financial statements included in the Registration
Statement and Prospectus, and except as set forth or contemplated in the
Prospectus, (A) none of the Company and its subsidiaries has incurred any
material liabilities or obligations, direct or contingent, or entered into any
material transactions not in the ordinary course of business, and (B) there has
not been any material adverse change in the condition (financial or otherwise),
business, assets or operations of the Company and its subsidiaries, taken as a
whole, or any change in the capital stock or any material change in their
short-term debt or long-term debt.
The
delivery of the certificate provided for in this subparagraph shall be and
constitute a representation and warranty of the Company as to the facts required
in the immediately foregoing clauses (1), (2) and (3) of this subparagraph to be
set forth in said certificate.
(v) A
certificate of the chief executive officer and the principal financial officer
of the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, verifying that the specific statistical or financial figures
included in the Prospectus which have not been otherwise verified by the letters
referred to in subsection (i) below are accurate in all material respects, such
verification to include the provision of documentary evidence supporting any
such statistical or financial figures.
(vi) Such
further certificates and documents as you may reasonably request.
(i)
Concurrent with execution of this Agreement, there shall be delivered to
you a letter addressed to the Underwriters, from Stonefield Xxxxxxxxx, Inc.,
independent registered public accountant firm, to be dated as of the Applicable
Time, which letter shall cover, without limitation, the various financial
disclosures, if any, contained in the Registration Statement and Prospectus as
of such date and shall contain statements and information of the type
customarily included in accountants’ “comfort letters” to underwriters,
delivered according to Statement of Auditing Standards No. 72 and Statement of
Auditing Standard No. 100 (or successor bulletins), with respect to the audited
and unaudited financial statements and certain financial information contained
in or incorporated by reference into the Registration Statement and the
Prospectus (the “Original
Letter”). At the First Closing Date and, if the Overallotment
Option is exercised, the Second Closing Date, as applicable, you shall have
received from Stonefield Xxxxxxxxx, Inc., a letter, dated the First Closing Date
or the Second Closing Date, as applicable, which shall confirm, on the basis of
a review in accordance with the procedures set forth in the Original Letter,
that nothing has come to their attention during the period from the date of the
Original Letter referred to in the prior sentence to a date (specified in the
letter) not more than three days prior to the First Closing Date or the Second
Closing Date, as applicable, which would require any change in the Original
Letter if it were required to be dated and delivered at the First Closing Date,
or the Second Closing Date, as applicable. There shall not have been
any change specified in the letters referred to in this paragraph which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase of the Shares as contemplated
hereby.
23
(j)
Prior to the time the Pricing Agreement is executed, there shall be
delivered to you a lock-up letter substantially in the form of Exhibit B hereto
from each of the Company’s executive officers and directors.
(k)
FINRA shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and compensation
arrangements relating to the issuance and sale of the Shares; provided that if
any such objection is raised prior to the issuance of a 415 Takedown No
Objections Notice from FINRA, whether before or after the First Closing Date,
the Company and the Underwriters shall negotiate, promptly and in good faith, to
take reasonable steps in order to satisfy such objections.
All such
opinions, certificates, letters and documents shall be in compliance with the
provisions hereof only if they are satisfactory to you and to Xxxxxxxxxxxx Xxxx
& Xxxxxxxxx LLP, counsel for the Underwriters, which approval shall not be
unreasonably withheld. The Company shall furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request.
If any
condition to the Underwriters’ obligations hereunder to be satisfied prior to or
at the First Closing Date is not so satisfied, this Agreement at your election
will terminate upon notification to the Company without liability on the part of
any Underwriter or the Company, except for the expenses to be paid or reimbursed
by the Company pursuant to Sections 6 and 8 hereof and except to the extent
provided in Section 10 hereof.
Section
8. Reimbursement
of Underwriters’ Expenses. If
the sale to the Underwriters of the Firm Shares on the First Closing Date is not
consummated because any condition of the Underwriters’ obligations hereunder is
not satisfied or timely waived in writing or because of any refusal, inability
or failure on the part of the Company to perform any agreement herein or to
comply with any provision hereof, unless such failure to satisfy such condition
or to comply with any provision hereof is due to the default or omission of any
Underwriter, the Company agrees to reimburse you and the other Underwriters upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been reasonably incurred by you and
them in connection with the proposed purchase and the sale of the
Shares. Any such termination shall be without liability of any party
to any other party except that the provisions of this Section, Section 6
and Section 10 shall at all times be effective and shall apply.
Section
9. Effectiveness
of Registration Statement. You
and the Company will use your and
its best efforts to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.
24
(a) The
Company agrees to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of the 1933 Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become subject
under the 1933 Act, the Exchange Act or other Legal Requirements (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, including the information deemed to be part of the
Registration Statement at the time specified in Rule 430B, if applicable, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse each Underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished by the Company by or on behalf of any Underwriter,
specifically for use therein. In addition to their other obligations
under this Section 10(a), the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section 10(a), it will, subject to potential
repayment to the extent required in accordance with the proviso to this
sentence, reimburse the Underwriters on a monthly basis for all reasonable legal
and other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Company’s obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction, provided, however, to the
extent that any such interim reimbursement payment is so held by a court of
competent jurisdiction to have been improper in a final judgment, not subject to
appeal, each Underwriter shall promptly return any such payment to the
Company. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
25
(b) Each
Underwriter will severally indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of the 1933 Act or
the Exchange Act, against any losses, claims, damages or liabilities to which
the Company, or any such director, officer, or controlling person may become
subject under the 1933 Act, the Exchange Act or other Legal Requirements
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Underwriter), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with the information with
respect to which the Underwriters have made representations and warranties in
Section 3 of this Agreement; and will reimburse any legal or other expenses
reasonably incurred by the Company, or any such director, officer, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action. In addition to their other
obligations under this Section 10(b), the Underwriters agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 10(b), they will
reimburse, subject to potential repayment to the extent required in accordance
with the proviso to this sentence, the Company on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters’ obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction, provided, however, to the
extent that any such interim reimbursement payment is so held by a court of
competent jurisdiction to have been improper in a final judgment, not subject to
appeal, to have been improper, the Company shall promptly return any such
payment to the Underwriters. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
26
(c) Promptly
after receipt by an indemnified party under this Section 10 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 10,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party except to the extent that the indemnifying
party was prejudiced by such failure to notify. In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it inappropriate for the same counsel to
represent both of them, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defense and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 10 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defense in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a)
representing all indemnified parties not having different or additional defenses
or potential conflicting interest among themselves who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding. Any indemnifying party shall not be liable for
any settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld.
(d) If
the indemnification provided for in this Section 10 is unavailable to an
indemnified party under paragraphs (a) or (b) hereof in respect of any losses,
claims, damages or liabilities referred to therein (including in settlement of
litigation, if such settlement is effected with the consent of the contributing
party), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Underwriters from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The respective relative benefits received
by the Company and the Underwriters shall be deemed to be in the same proportion
in the case of the Company, as the total price paid to the Company for the
Shares by the Underwriters (net of underwriting discount but before deducting
expenses), bears to, and in the case of the Underwriters, as the underwriting
discount received by them bears to, the total of such amounts paid to the
Company and received by the Underwriters as underwriting discount in each case
as contemplated by the Prospectus. The relative fault of the Company
and the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
27
The
Company and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 10(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 10(d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters’
obligations to contribute pursuant to this Section 10 are several in proportion
to their respective underwriting commitments and not joint.
(e) The
provisions of this Section shall survive any termination of this Agreement and
the issuance and delivery of the Shares hereunder.
Section
11. Default of
Underwriters. It
shall be a condition to the Agreement and obligation of the Company to sell and
deliver the Shares hereunder, and of each Underwriter to purchase the Shares
hereunder, that, except as hereinafter in this paragraph provided, each of the
Underwriters shall purchase and pay for all Shares agreed to be purchased by
such Underwriter hereunder upon tender to the Representatives of all such Shares
in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Shares hereunder on the
First Closing Date and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10
percent of the total number of Shares which the Underwriters are obligated to
purchase on the First Closing Date, the nondefaulting Underwriters may make
arrangements satisfactory to the Company for the purchase of such Shares by
other persons, including any of the Underwriters, but if no such arrangements
are made by such date, the nondefaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Shares which such defaulting Underwriters agreed but failed to purchase on
such date. If any Underwriter or Underwriters so default and the
aggregate number of Shares with respect to which such default or defaults occur
is more than the above percentage and arrangements satisfactory to the
nondefaulting Underwriters and the Company for the purchase of such Shares by
other persons are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any nondefaulting Underwriter or
the Company, except for the expenses to be paid by the Company pursuant to
Section 6 hereof and except to the extent provided in Section 10
hereof.
28
In the
event that Shares to which a default relates are to be purchased by the
nondefaulting Underwriters or by another party or parties, the nondefaulting
Underwriters or the Company shall have the right to postpone the First Closing
Date for not more than seven business days in order that the necessary changes
in the Registration Statement, Prospectus and any other documents, as well as
any other arrangements, may be effected. As used in this Agreement,
the term “Underwriter” includes any person substituted for an Underwriter under
this Section. Nothing herein will relieve a defaulting Underwriter
from liability for its default.
Section
12. Effective
Date. This
Agreement shall become effective immediately as to Sections 6, 8, 10 and 13 and
as to all other provisions upon the execution of the Pricing Agreement, unless
such a day is a Saturday, Sunday or holiday (and in that event this Agreement
shall become effective on the business day next succeeding such Saturday, Sunday
or holiday).
Section
13. Termination. Without
limiting the right to terminate this Agreement pursuant to any other provision
hereof:
(a) This Agreement may be
terminated by the Company by notice to you, or by you by notice to the Company
at any time prior to the time this Agreement shall become effective as to all
its provisions, and any such termination shall be without liability on the part
of the Company to any Underwriter (except for the expenses to be paid or
reimbursed pursuant to Section 6 hereof and except to the extent provided in
Section 10 hereof) or of any Underwriter to the Company.
(b) This Agreement may be
terminated by you prior to the First Closing Date, and the options referred to
in Section 4, if exercised, may be cancelled at any time prior to the Second
Closing Date, if (i) trading in any securities of the Company shall have been
suspended or materially limited by the Commission, the New York Stock Exchange
or The Nasdaq Stock Market or minimum or maximum prices shall have been
established or maximum ranges for prices shall have been required on such
exchange or market, or (ii) a banking moratorium shall have been declared by
Illinois, New York, or United States authorities or a material disruption shall
have occurred in commercial banking or securities settlement or clearance
services in the United States, or (iii) there shall have been any adverse change
in financial markets or in political, economic or financial conditions which, in
the opinion of the Representatives, either renders it impracticable or
inadvisable to proceed with the offering and sale of the Shares on the terms set
forth in the Prospectus or materially and adversely affects the market for the
Shares, or (iv) there shall have been an outbreak or escalation of major armed
hostilities between the United States or China and any foreign power or
terrorist organization or other calamity or crisis or change or development
involving a prospective change in political, economic or financial conditions
which in the opinion of the Representatives makes it impractical or inadvisable
to offer or sell the Shares. Any termination pursuant to this
paragraph (b) shall be without liability on the part of any Underwriter to the
Company (except to the extent provided in Section 10 hereof) or on the part of
the Company to any Underwriter (except for expenses to be paid or reimbursed
pursuant to Section 8 hereof and except to the extent provided in Section 10
hereof).
29
Section
14. Representations and
Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, principals, members, officers or
directors or any controlling person, and will survive delivery of and payment
for the Shares sold hereunder.
Section
15. Notices. All
communications hereunder will be in writing and, if sent to the Underwriters
will be mailed, delivered or emailed and confirmed to you c/o Xxxxxxx Xxxxx
& Company, L.L.C., 000 Xxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, with a
copy to Xxxxxxx X. Xxxx c/o Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP, 000 Xxxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000; if sent to the Company will
be mailed, delivered or emailed and confirmed to the Company at its corporate
headquarters with a copy to Xxxxxx X. Xxxxxxx c/o K&L Gates LLP, 00000 Xxxxx
Xxxxxx Xxxx., 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
Section
16. No
Advisory or Fiduciary Relationship. The
Company acknowledges and agrees that (a) the purchase and sale of the Shares
pursuant to this Agreement, including the determination of the public offering
price of the Shares and any related discounts and commissions, is an
arm’s-length commercial transaction between the Company, on the one hand, and
the several Underwriters, on the other hand, (b) in connection with the offering
of the Shares contemplated by this Agreement and the process leading to such
transaction each Underwriter is and has been acting solely as a principal and is
not the agent or fiduciary of the Company, or its respective stockholders,
creditors, employees or any other party, (c) no Underwriter has assumed or will
assume an advisory or fiduciary responsibility in favor of the Company with
respect to the offering of the Shares contemplated by this Agreement or the
process leading thereto (irrespective of whether such Underwriter has advised or
is currently advising the Company on other matters) and no Underwriter has any
obligation to the Company with respect to the offering of the Shares
contemplated by this Agreement except the obligations expressly set forth in
this Agreement, (d) the Underwriters and their respective affiliates may be
engaged in a broad range of transactions that involve interests that differ from
those of the Company and (e) the Underwriters have not provided any legal,
accounting, regulatory or tax advice with respect to the offering of the Shares
contemplated by this Agreement and the Company has consulted its own legal,
accounting, regulatory and tax advisors to the extent it deemed
appropriate.
Section
17. Successors. This
Agreement and the Pricing Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors, personal
representatives and assigns, and to the benefit of the officers and directors
and controlling persons referred to in Section 10, and no other person will have
any right or obligation hereunder. The term “successors” shall not
include any purchaser of the Shares as such from any of the Underwriters merely
by reason of such purchase.
Section
18. Representation of
Underwriters. You
will act as Representatives for the several Underwriters in connection with this
financing, and any action under or in respect of this Agreement taken by you
will be binding upon all the Underwriters.
30
Section
19. Partial
Unenforceability. If
any section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other section, paragraph or provision
hereof.
Section
20. Applicable
Law. This
Agreement and the Pricing Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. Each party hereby
irrevocably submits to the jurisdiction of the state courts sitting in Xxxx
County in the State of Illinois and the federal courts in the Northern District
of Illinois for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by
law.
[Signature Page
Follows]
31
If the
foregoing is in accordance with your understanding of our agreement, kindly sign
and return to us the enclosed duplicates hereof, whereupon it will become a
binding agreement among the Company and the several Underwriters including you,
all in accordance with its terms.
Very
truly yours,
|
||
By:
|
||
Name:
Yu Xxxx Xxxxx
|
||
Title:
Chief Executive Officer and
Chairman
|
The
foregoing Agreement is hereby
confirmed
and accepted as of
the date
first above written.
XXXXXXX
XXXXX & COMPANY, L.L.C.
XXXXXXXXXXX
& CO. INC.
XXXXX AND
COMPANY, LLC
Acting as
Representatives of the
several
Underwriters named in Schedule A
By: Xxxxxxx
Xxxxx & Company, L.L.C.
|
|
By:
|
|
Name:
|
|
Title:
|
32
Schedule
A
Underwriter
|
Number of Firm Shares
to be Purchased
|
|||
Xxxxxxx
Xxxxx & Company, L.L.C.
|
2,791,625 | |||
Xxxxxxxxxxx
& Co. Inc.
|
1,456,500 | |||
Xxxxx
and Company, LLC
|
606,875 | |||
Total
|
4,855,000 |
33
Exhibit
A
4,855,000
Shares of Common Stock
(Plus an
Option to Acquire up to 726,395 Shares to Cover Overallotments)
Pricing
Agreement
July 31,
2009
Xxxxxxx
Xxxxx & Company, L.L.C.
Xxxxxxxxxxx
& Co. Inc.
Xxxxx and
Company, LLC
As
Representatives of the Several
Underwriters
Named in Schedule A
c/o
Xxxxxxx Xxxxx & Company, L.L.C.
000 Xxxx
Xxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
Ladies
and Gentlemen:
Reference
is made to the Underwriting Agreement dated July 31, 2009 (the “Underwriting Agreement”)
relating to the sale by the Company and the purchase by the several Underwriters
for whom Xxxxxxx Xxxxx & Company, L.L.C., Xxxxxxxxxxx & Co. Inc. and
Xxxxx and Company, LLC are acting as representatives (the “Representatives”) of the
above Shares. All terms herein shall have the definitions contained
in the Underwriting Agreement except as otherwise defined herein.
Pursuant
to Section 4 of the Underwriting Agreement, the Company agrees with the
Representatives as follows:
1. The
public offering price per share for the Shares shall be $21.50.
2. The
purchase price per share for the Shares to be paid by the several Underwriters
shall be $20.42, being an amount equal to the public offering price set forth
above less $1.08 per share.
34
If the
foregoing is in accordance with your understanding of our agreement, kindly sign
and return to us the enclosed duplicates hereof, whereupon it will become a
binding agreement among the Company and the several Underwriters, including you,
all in accordance with its terms.
Very
truly yours,
|
||
By:
|
/s/ Yu
Xxxx Xxxxx
|
|
Name:
Yu Xxxx Xxxxx
|
||
Title:
Chief Executive Officer and
Chairman
|
The
foregoing Agreement is hereby
confirmed
and accepted as of
the date
first above written.
XXXXXXX
XXXXX & COMPANY, L.L.C.
XXXXXXXXXXX
& CO. INC.
XXXXX AND
COMPANY, LLC
Acting as
Representatives of the
several
Underwriters named in Schedule A
By: Xxxxxxx
Xxxxx & Company, L.L.C.
|
|
By:
|
/s/ Xxxxxxx X.
Xxxx
|
Name:
Xxxxxxx X. Xxxx
|
|
Title:
Principal
|
35
Schedule
to Pricing Agreement
Pricing
Term Sheet
Issuer:
|
||
Title
of Securities:
|
Common
Stock, $.001 par value
|
|
Stock
Symbol/Exchange:
|
FUQI
/ NASDAQ Global Market
|
|
Format:
|
SEC
Registered
|
|
Trade
Date:
|
July
31, 2009
|
|
Closing
Date:
|
August
5, 2009
|
|
Total
Number of Firm Shares Offered and Sold:
|
4,855,000
shares
|
|
Over-Allotment
Option to Purchase Additional Shares
|
726,395
shares
|
|
Price
to the Public:
|
$21.50
per share; $104,382,500 total (or $119,999,993 if the Underwriters’
Over-Allotment Option is exercised in full)
|
|
Underwriting
Discounts and Commissions:
|
$1.08
per share; $5,243,400 total (or $6,027,907 if the Underwriters’
Over-Allotment Option is exercised in full)
|
|
Sole
Book-Running Manager
|
Xxxxxxx
Xxxxx & Company, L.L.C.
|
|
Co-Lead
Manager
|
Xxxxxxxxxxx
& Co. Inc.
|
|
Co-Manager
|
Xxxxx
and Company, LLC
|
36
Exhibit
B
Form
of Lock-Up Agreement
Lock-Up
Agreement
July ___,
2009
Xxxxxxx
Xxxxx & Company, L.L.C.
000
Xxxx Xxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
|
0/X.,
Xxxxx 0, Xxx Xxx Xxxxxxxxxx Xxxx
Xxx
Xxx Road North
Shenzhen,
518019
People’s
Republic of China
|
Re: Fuqi International,
Inc. — Lock-Up Agreement
Ladies
and Gentlemen:
The
undersigned understands that Xxxxxxx Xxxxx & Company, L.L.C. (“Xxxxxxx
Xxxxx”), as representative of the underwriters to be named therein (the
“Underwriters”), propose to enter into an Underwriting Agreement (the
“Underwriting Agreement”) with Fuqi International, Inc., a Delaware corporation
(the “Company”) providing for a public offering (the “Offering”) of shares (the
“Offered Shares”) of the Company’s common stock (“Common Stock”) pursuant to a
registration statement on Form S-3 (as amended, the “Registration Statement”)
that was filed with the Securities and Exchange Commission (the “SEC”) on June
24, 2009 and declared effective on July 22, 2009.
Pursuant
to this agreement (the “Agreement”), to induce the Underwriters to enter into
the Underwriting Agreement and in consideration of the agreement by the
Underwriters to offer and sell the Offered Shares and in recognition of the
benefit that the Offering will confer upon the undersigned, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees that, during the period beginning from the
date of the final prospectus covering the public offering of the Offered Shares
and continuing to and including the date 90 days after the date of such final
Prospectus (the “Lock-up Period”), the undersigned will not, without the prior
written consent of Xxxxxxx Xxxxx, directly or indirectly, (i) offer, sell,
contract to sell, assign, transfer, distribute, encumber, pledge, grant any
option to purchase, make any short sale or otherwise dispose of any shares of
the Company’s common stock (“Common Stock”), or any options or warrants to
purchase any shares of Common Stock of the Company or any securities convertible
into, exchangeable for or that represent the right to receive shares of Common
Stock of the Company (collectively, “Common Stock Equivalents”) held of record
by the undersigned (including holding as a custodian) or with respect to which
the undersigned has beneficial ownership within the rules and regulations of the
SEC as of the date of the final prospectus or, in the case of Common Stock,
issued pursuant to a Common Stock Equivalent held of record by the undersigned
(including holding as a custodian) or with respect to which the undersigned has
beneficial ownership within the rules and regulations of the SEC as of the date
of the final prospectus or acquired by the undersigned in the Offering
(collectively the “Lock-up Shares”), (ii) enter into or establish any
arrangement constituting a “put equivalent position,” as defined by Rule
16a-1(h) promulgated under the Securities Exchange Act of 1934, as amended,
(iii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of the Lock-up
Shares, (iv) exercise any registration rights with respect to any Common Stock
or Common Stock Equivalents or (v) announce an intent to do any of the forgoing,
provided, however, that for the purpose of allowing the Underwriters to comply
with NASD Rule 2711(f)(4), or the applicable successor FINRA Rule when
published, if (1) during the last 17 days of the initial Lock-Up Period, the
Company releases earnings results or material news or a material event relating
to the Company occurs or (2) prior to the expiration of the initial Lock-Up
Period, the Company announces that it will release earnings results during the
16-day period beginning on the last day of the initial Lock-Up Period, then in
either case the Lock-Up Period will be extended until the expiration of the
18-day period beginning on the date of release of the earnings results or the
occurrence of the material news or material event, as applicable, unless Xxxxxxx
Xxxxx waives, in writing, such extension. Xxxxxxx Xxxxx agrees to
waive such extension if the provisions of NASD Rule 2711(f)(4) (or any
applicable successor rule) are not applicable to the subject transaction to be
undertaken by the undersigned.
37
The
foregoing restriction is expressly agreed to preclude the undersigned from
engaging in any hedging or other transaction which is designed to or which
reasonably could be expected to lead to or result in a sale or disposition of
the Lock-up Shares even if the Lock-up Shares would be disposed of by someone
other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to any of the Lock-up Shares or with respect to any security that
includes, relates to, or derives any significant part of its value from such of
the Lock-up Shares.
The
restrictions in this Agreement shall not apply to transactions relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the Offering.
Notwithstanding
the foregoing, the undersigned may transfer any or all Lock-up Shares (i) as a
bona fide gift or
gifts, provided that the donee or donees thereof have executed and delivered to
Xxxxxxx Xxxxx a written agreement providing their agreement to be bound by the
restrictions set forth herein, (ii) to any trust, partnership, limited liability
company or other legal entity commonly used for estate planning purposes which
is established for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned, provided that the trustee, general partner,
manager or other administrator, as the case may be, has executed and delivered
to Xxxxxxx Xxxxx a written agreement providing their agreement to be bound by
the restrictions set forth herein, and provided further that any such transfer
shall not involve a disposition for value, or (iii) with the prior written
consent of Xxxxxxx Xxxxx on behalf of the Underwriters. For purposes
of this Agreement, “immediate family” shall mean any relationship by blood,
marriage or adoption, not more remote than first cousin. In addition,
notwithstanding the foregoing, if the undersigned is a corporation, the
corporation may transfer the capital stock of the Company to any wholly-owned
subsidiary of such corporation; provided, however, that in any such
case, it shall be a condition to the transfer that the transferee has executed
and delivered to Xxxxxxx Xxxxx a written agreement stating that the transferee
is receiving and holding such capital stock subject to the provisions of this
Agreement and there shall be no further transfer of such capital stock except in
accordance with this Agreement, and provided further that any such transfer
shall not involve a disposition 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 Lock-up
Shares except in compliance with the foregoing
restrictions. Following expiration of the Lock-up Period, it is
understood and agreed that the undersigned may dispose of the Lock-up Shares
free of any contractual obligation hereunder. Notwithstanding the
foregoing, if, options for Common Stock held by the undersigned that are
exercisable shall expire during the Lock-Up Period, unless exercised, the
undersigned may exercise such options and sell the shares received upon
exercise, to the extent necessary to satisfy obligations under a cashless
exercise arrangement, without the consent of the Underwriters, provided the
shares issued upon the exercise of such options shall be subject the terms of
this Agreement and deemed Lock-up Shares except to the extent sold pursuant to
such cashless exercise.
38
The
undersigned understands that the Company and the Underwriters are relying upon
this Agreement in proceeding toward consummation of the Offering and the
proposed public offering is still confidential. The undersigned
further understands that this Agreement is irrevocable and shall be binding upon
the undersigned’s heirs, legal representatives, successors, and
assigns. If for any reason the Underwriting Agreement shall be
terminate or be terminated prior to payment for and delivery of the Offered
Shares on the closing date (as contemplated by the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Very
truly yours,
|
|||
Name
- Please Print or Type
|
|||
[SIGN
HERE]:
|
|||
By:
|
|||
Title,
if any: ______________________________
|
|||
Date
Signed: ________________________, 2009
|
39