2,456,800 SHARES OF COMMON STOCK SHENGKAI INNOVATIONS, INC. UNDERWRITING AGREEMENT
2,456,800 SHARES
OF COMMON STOCK
November
19,
2010
MAXIM
GROUP LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Global
Hunter Securities, LLC
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representatives of the Underwriters
named
on Schedule A
hereto
Ladies
and Gentlemen:
Shengkai
Innovations, Inc., a Florida corporation (the “Company”), confirms its
agreement, subject to the terms and conditions set forth herein, with each of
the underwriters listed on Exhibit A hereto
(collectively, the “Underwriters”), for whom each
of Maxim Group LLC and Global Hunter Securities, LLC is acting as representative
(each, a “Representative,” and
collectively, the “Representatives”), to sell
and issue to the Underwriters an aggregate of 2,456,800 shares of common stock,
$0.001 par value per share (the “Common Shares”) of the Company
(the “Shares”). The
Shares are more fully described in the Registration Statement and Prospectus
referred to below.
The
offering and sale of the Common Shares contemplated by this underwriting
agreement (this “Agreement”) is referred to
herein as the “Offering.”
1. Shares.
(a) Purchase of
Shares. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell, severally and not jointly, to the several
Underwriters, an aggregate of 2,456,800 Shares of the Company at a purchase
price (net of discounts and commissions) of $5.17 per Share. The
Underwriters, severally and not jointly, agree to purchase from the Company the
number of Shares set forth opposite their respective names on Schedule A attached hereto
and made a part hereof at a purchase price (net of discounts and commissions) of
$5.17 per Share. In addition, the Company shall pay the Underwriters
a corporate finance fee equal to one percent (1%), or $0.055 per
Share. The corporate finance fee shall be paid to the Underwriters
for the structuring of the terms of the Offering.
(b) Payment and
Delivery. Delivery and payment for the Shares shall be made
at 9:15 A.M., New York time, on the third Business Day following the
effective date (the “Effective
Date”) of this Underwriting Agreement (or the fourth Business Day
following the Effective Date, if the Shares are priced after 4:30 p.m.) or at
such earlier time as shall be agreed upon by the Representatives and the Company
at the offices of Maxim Group LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ or
at such other place as shall be agreed upon by the Representative and the
Company. The hour and date of delivery and payment for the Shares is
called the “Closing
Date.” The payment of the purchase price for, and delivery the
Shares is referred to herein as the “Closing.” Payment for the
Shares (less commissions, expense allowance and actual expense payments or other
fees payable pursuant to this Agreement) shall be made on the Closing Date at
the Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House
funds. Delivery of the Shares to the Underwriters may be made by
means of delivery of certificates (in form and substance satisfactory to the
Underwriters) representing the Shares or through the full fast transfer
facilities of the Depository Trust Company (the “DTC”) for the account of the
Underwriters. The Shares shall be registered in such name or names
and in such authorized denominations as the Representatives may request in
writing at least two Business Days prior to the Closing Date. The
Company will permit the Representatives to examine and package the Shares for
delivery, at least one full Business Day prior to the Closing
Date. The Company shall not be obligated to sell or deliver the
Shares except upon tender of payment by the Representatives for all the
Shares.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 2 of
34
(c) Representative’s
Warrants. As additional consideration, the Company hereby
agrees to issue and sell to each Representative (and/or their respective
designees) on the Effective Date warrants (the “Representative’s Warrants”)
for the purchase of an aggregate of 122,840 Common Shares (2.5% of the number of
Shares or 5% in the aggregate) for an aggregate purchase price of
$100.00. The Representative’s Warrants shall be exercisable, in whole
or in part, commencing on the date that is six (6) months from the
Effective Date and expiring on the three-year anniversary of the Effective Date
at an initial exercise price per share of $6.875, which is equal to one hundred
and twenty-five percent (125%) of the public offering price of a
Share. The Representatives’ Warrants and the Common Shares issuable
upon exercise of the Representatives’ Warrants are hereinafter referred to
collectively as the “Representatives’
Securities.” The Shares and the Representatives’ Securities
are referred to as the “Securities.”
2. Representations and
Warranties of the Company.
2.1
The Company represents, warrants and covenants to, and agrees with, each
of the Underwriters that, as of the date hereof and as of the Closing
Date:
(a) The
Company filed with the Securities and Exchange Commission (the “Commission”) on
June 3, 2010 a registration statement on Form S-3 (Registration File No.
333-167276) under the Securities Act of 1933, as amended (the “Securities Act”) and was
declared effective on October 25, 2010 for the registration under the Securities
Act of the Securities. At the time of such filing, the Company met the
requirements of Form S-3 under the Securities Act. Such registration statement
meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act
and complies with said Rule. The Company will file with the Commission pursuant
to Rule 424(b) under the Securities Act, and the rules and regulations (the
“Rules and Regulations”)
of the Commission promulgated thereunder, a supplement to the form of
prospectus included in such registration statement relating to the placement of
the Securities and the plan of distribution thereof and has advised the
Representatives of all further information (financial and other) with respect to
the Company required to be set forth therein. Such registration statement,
including the exhibits thereto, as amended at the date of this agreement, is
hereinafter called the “Registration Statement”; such prospectus in the form in
which it appears in the Registration Statement is hereinafter called the “Base Prospectus”; the
supplemented form of prospectus, in the form in which it will be filed with the
Commission pursuant to Rule 424(b) (including the Base Prospectus as so
supplemented) is hereinafter called the “Prospectus Supplement”; and
the Base Prospectus, any Preliminary Prospectus and any amendments or further
supplements to such prospectus, and including, without limitation, the
final Prospectus Supplement, filed pursuant to and within the limits
described in Rule 424(b) with the Commission in connection with the proposed
sale of the Shares contemplated by this Agreement through the date of such
Prospectus Supplement, is hereinafter called the “Prospectus.” If the
Company has filed, or is required to file, an abbreviated registration statement
to register additional shares pursuant to Rule 462(b) under the Rules and
Regulations (the “Rule 462(b)
Registration Statement”), then any reference herein to the Registration
Statement shall also be deemed to include such Rule 462(b) Registration
Statement. Any reference in this
Agreement to the Registration Statement, the Base Prospectus or the Prospectus
Supplement shall be deemed to refer to and include the documents incorporated by
reference therein (the “Incorporated Documents”)
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), on or before
the date of this Agreement, or the issue date of the Base Prospectus or the
Prospectus Supplement, as the case may be; and any reference in this Agreement
to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Base Prospectus or the Prospectus Supplement shall
be deemed to refer to and include the filing of any document under the Exchange
Act after the date of this Agreement, or the issue date of the Base Prospectus
or the Prospectus Supplement, as the case may be, deemed to be incorporated
therein by reference. All references in this Agreement to financial statements
and schedules and other information which is “contained, “included,”
“described,” “referenced,” “set forth” or “stated” in the Registration
Statement, the Base Prospectus or the Prospectus Supplement (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement, the Base
Prospectus or the Prospectus Supplement, as the case may be. No stop order
suspending the effectiveness of the Registration Statement or the use of the
Base Prospectus or the Prospectus Supplement has been issued, and no proceeding
for any such purpose is pending or has been initiated or, to the Company’s
knowledge, is threatened by the Commission.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 3
of 34
(b) The
Registration Statement (and any further documents to be filed with the
Commission) contains all exhibits and schedules as required by the Securities
Act. Each of the Registration Statement and any post-effective amendment
thereto, at the time it became effective, complied in all material respects with
the Securities Act and the Exchange Act and the applicable Rules and Regulations
and did not and, as amended or supplemented, if applicable, will not, contain
any 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. The Base Prospectus and the Prospectus Supplement, each as of its
respective date, comply, or will comply, as the case may be, in all material
respects with the Securities Act and the Exchange Act and the applicable Rules
and Regulations. Each of the Base Prospectus and the Prospectus Supplement, as
amended or supplemented, did not and will not contain as of the date thereof any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Incorporated Documents, when they were
filed with the Commission, conformed in all material respects to the
requirements of the Exchange Act and the applicable Rules and Regulations, and
none of such documents, when they were filed with the Commission, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein (with respect to Incorporated Documents
incorporated by reference in the Base Prospectus or Prospectus Supplement), in
light of the circumstances under which they were made not misleading; and any
further documents so filed and incorporated by reference in the Base Prospectus
or Prospectus Supplement, when such documents are filed with the Commission,
will conform in all material respects to the requirements of the Exchange Act
and the applicable Rules and Regulations, as applicable, and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No post-effective amendment to the
Registration Statement reflecting any facts or events arising after the date
thereof which represent, individually or in the aggregate, a fundamental change
in the information set forth therein is required to be filed with the
Commission. There are no documents required to be filed with the Commission in
connection with the transaction contemplated hereby that (x) have not been filed
as required pursuant to the Securities Act or (y) will not be filed within the
requisite time period. There are no contracts or other documents required to be
described in the Base Prospectus or Prospectus Supplement, or to be filed as
exhibits or schedules to the Registration Statement, which have not been
described or filed as required.
(c) No
representation and warranty is made in this Agreement, however, with respect to
any information contained in or omitted from the Registration Statement or the
Prospectus or any related Preliminary Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Underwriter through the
Representatives specifically for use therein. The parties acknowledge
and agree that such information provided by or on behalf of any Underwriter
consists solely of the subsections of the “Underwriting” section of the
Prospectus captioned “Stabilization,” “Pricing of Securities,” the last sentence
of “Other Matters” and the penultimate paragraph on the cover page of the
Preliminary Prospectus and the Prospectus (the “Underwriters’
Information”).
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 4
of 34
(d) Neither:
(i) any Issuer-Represented General Free Writing Prospectus(es) (as defined
below) issued at or prior to the Time of Sale (as defined below) and the
Statutory Prospectus (as defined below), all considered together (collectively,
the “General Disclosure
Package”), nor (ii) any individual Issuer-Represented Limited-Use Free
Writing Prospectus(es) (as defined below), when considered together with the
General Disclosure Package, includes or included as of the Time of Sale, any
untrue statement of a material fact or omits or omitted as of the Time of Sale
to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from any General
Disclosure Package, Issuer-Represented Free Writing Prospectus or any
Issuer-Represented Limited-Use Free Writing Prospectus (as defined below) based
upon and in conformity with written information furnished to the Company by the
Representatives specifically for use therein.
(e) Each
Issuer-Represented Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the
Securities or until any earlier date that the Company notified or notifies the
Representatives as described in the next sentence, did not, does not and will
not include any information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement, any Statutory Prospectus or
the Prospectus. If at any time following issuance of an
Issuer-Represented Free Writing Prospectus there occurred or occurs an event or
development as a result of which such Issuer-Represented Free Writing Prospectus
conflicted or would conflict with the information contained in the Registration
Statement, any Statutory Prospectus or the Prospectus relating to the Securities
or included or would include an untrue statement of a material fact or omitted
or would omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances prevailing at that subsequent time,
not misleading, the Company has notified or will notify promptly the
Representatives so that any use of such Issuer-Represented Free Writing
Prospectus may cease until it is promptly amended or supplemented by the
Company, at its own expense, to eliminate or correct such conflict, untrue
statement or omission. The foregoing two sentences do not apply to
statements in or omissions from any Issuer-Represented Free Writing Prospectus
based upon and in conformity with written information furnished to the Company
by the Representatives specifically for use therein.
(f) The
Company has not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the Securities
other than the General Disclosure Package or the Prospectus or other materials
permitted by the Securities Act to be distributed by the
Company. Unless the Company obtains the prior consent of the
Representatives, the Company has not made and will not make any offer relating
to the Securities that would constitute an “issuer free writing prospectus,” as
defined in Rule 433 under the Securities Act, or that would otherwise constitute
a “free writing prospectus,” as defined in Rule 405 under the Securities Act,
required to be filed with the Commission. The Company has complied
and will comply with the requirements of Rules 164 and 433 under the Securities
Act applicable to any Issuer-Represented Free Writing Prospectus as of its issue
date and at all subsequent times through the completion of the public offer and
sale of the Securities, including timely filing with the Commission where
required, legending and record keeping. The Company has satisfied and
will satisfy the conditions in Rule 433 under the Securities Act to avoid a
requirement to file with the Commission any electronic road show.
(g) Each
Underwriter agrees that, unless it obtains the prior written consent of the
Company, it will not make any offer relating to the Securities that would
constitute an Issuer-Represented Free Writing Prospectus (as defined below) or
that would otherwise (without taking into account any approval, authorization,
use or reference thereto by the Company) constitute a “free writing prospectus”
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Securities Act; provided that the prior written
consent of the Company hereto shall be deemed to have been given in respect of
any Issuer-Represented General Free Writing Prospectuses referenced on Schedule C attached
hereto
As used
in this Agreement, the terms set forth below shall have the following
meanings:
(i) “Time of Sale” means 4:30 P.M.
(Eastern time) on the date of this Agreement.
(ii) “Statutory Prospectus” as of
any time means the prospectus that is included in the Registration Statement
immediately prior to that time. For purposes of this definition,
information contained in a form of prospectus that is deemed retroactively to be
a part of the Registration Statement pursuant to Rule 430A or 430B shall be
considered to be included in the Statutory Prospectus as of the actual time that
form of prospectus is filed with the Commission pursuant to Rule 424(b) under
the Securities Act.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 5
of 34
(iii) “Issuer-Represented Free Writing
Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433 under the Act, relating to the Securities that (A) is required to be
filed with the Commission by the Company, or (B) is exempt from filing pursuant
to Rule 433(d)(5)(i) under the Securities Act because it contains a description
of the Securities or of the offering that does not reflect the final terms or
pursuant to Rule 433(d)(8)(ii) because it is a “bona fide electronic road show,”
as defined in Rule 433 of the Regulations, in each case in the form filed or
required to be filed with the Commission or, if not required to be filed, in the
form retained in the Company’s records pursuant to Rule 433(g) under the
Securities Act.
(iv) “Issuer-Represented General Free
Writing Prospectus” means any Issuer-Represented Free Writing Prospectus
that is intended for general distribution to prospective investors, as evidenced
by its being specified in Schedule C to this Agreement.
(v) “Issuer-Represented Limited-Use Free
Writing Prospectus” means any Issuer-Represented Free Writing Prospectus
that is not an Issuer-Represented General Free Writing
Prospectus. The term Issuer-Represented Limited-Use Free Writing
Prospectus also includes any “bona fide electronic road show,” as defined in
Rule 433 of the Regulations, that is made available without restriction pursuant
to Rule 433(d)(8)(ii), even though not required to be filed with the
Commission.
(h) ▇▇▇▇▇▇
▇▇▇▇ & Co. (“AWC”)
and BDO China ▇▇ ▇▇▇ Da Hua (“BDO”), whose reports relating
to the Company are included in the Registration Statement, are independent
public accountants as required by the Securities Act, the Exchange Act and the
Rules and Regulations and, to the Company’s knowledge, such accountants are not
in violation of the auditor independence requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002 (“Sarb-Ox”).
(i) Subsequent
to the respective dates as of which information is presented in the Registration
Statement, the General Disclosure Package and the Prospectus, and except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus: (i) the Company has not declared, paid or made any dividends or
other distributions of any kind on or in respect of its capital stock, and (ii)
there has been no material adverse change (or, to the knowledge of the Company,
any development which has a high probability of involving a material adverse
change in the future), whether or not arising from transactions in the ordinary
course of business, in or affecting: (A) the business, condition (financial or
otherwise), results of operations, shareholders’ equity, properties or prospects
of the Company and its Subsidiaries (as defined below), taken as a whole; (B)
the long-term debt or capital stock of the Company or any of its Subsidiaries;
or (C) the Offering or consummation of any of the other transactions
contemplated by this Agreement, the Registration Statement, the General
Disclosure Package and the Prospectus (a “Material Adverse
Change”). Since the date of the latest balance sheet presented
in the Registration Statement, the General Disclosure Package and the
Prospectus, neither the Company nor any Subsidiary has incurred or undertaken
any liabilities or obligations, whether direct or indirect, liquidated or
contingent, matured or unmatured, or entered into any transactions, including
any acquisition or disposition of any business or asset, which are material to
the Company and the Subsidiaries taken as a whole, except for liabilities,
obligations and transactions which are disclosed in the Registration Statement
and the Prospectus.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 6
of 34
(j) As
of the dates indicated in the Registration Statement, the General Disclosure
Package and the Prospectus, the authorized, issued and outstanding shares of
capital stock of the Company were as set forth in the Registration Statement,
the General Disclosure Package and the Prospectus in the column headed “Actual”
under the section thereof captioned “Capitalization” and, after giving effect to
the Offering and the other transactions contemplated by this Agreement, the
Registration Statement, the General Disclosure Package and the Prospectus, will
be as set forth in the column headed “As Adjusted” in such
section. All of the issued and outstanding shares of capital stock of
the Company, including the outstanding Warrants of the Company, are fully paid
and non-assessable and have been duly and validly authorized and issued, in
compliance with all applicable state, federal and foreign securities laws and
not in violation of or subject to any preemptive or similar right that does or
will entitle any Person (as defined below), upon the issuance or sale of any
security, to acquire from the Company or any Subsidiary any Relevant
Security. As used herein, the term “Relevant Security” means any
Common Shares or other security of the Company or any Subsidiary that is
convertible into, or exercisable or exchangeable for Common Shares or equity
securities, or that holds the right to acquire any Common Shares or equity
securities of the Company or any Subsidiary or any other such Relevant Security,
except for such rights as may have been fully satisfied or waived prior to the
effectiveness of the Registration Statement. As used herein, the term
“Person” means any
foreign or domestic individual, corporation, trust, partnership, joint venture,
limited liability company or other entity. Except as set forth in, or
contemplated by, the Registration Statement, the General Disclosure Package and
the Prospectus, on the Effective Date and on the Closing Date, there will be no
options, warrants, or other rights to purchase or otherwise acquire any
authorized, but unissued Common Shares or any security convertible into Common
Shares, or any contracts or commitments to issue or sell Common Shares or any
such options, warrants, rights or convertible securities.
(k) The
Shares have been duly and validly authorized and, when issued, delivered and
paid for in accordance with this Agreement on the Closing Date, will be duly and
validly issued, fully paid and non-assessable, will have been issued in
compliance with all applicable state, federal and foreign securities laws and
will not have been issued in violation of or subject to any preemptive or
similar right that does or will entitle any Person to acquire any Relevant
Security from the Company or any Subsidiary upon issuance or sale of the Shares
in the Offering. The Common Shares conform to the descriptions
thereof contained in the Registration Statement, the General Disclosure Package
and the Prospectus. Except as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, neither the
Company nor any Subsidiary has outstanding warrants, options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, or any
contracts or commitments to issue or sell, any Relevant Security.
(l) The
Common Shares underlying the Representatives’ Warrants have been duly authorized
for issuance, will conform to the description thereof in the Registration
Statement and in the Prospectus and have been validly reserved for future
issuance and will, upon exercise of the Representatives’ Warrants and payment of
the exercise price thereof, be duly and validly issued, fully paid and
non-assessable and will not have been issued in violation of or subject to
preemptive or similar rights to subscribe for or purchase securities of the
Company. The issuance of such securities is not subject to any
statutory preemptive rights under the laws of the State of Florida or the
Company’s organization documents as in effect at the time of issuance, rights of
first refusal or other similar rights of any securityholder of the Company
(except for such preemptive or contractual rights as were waived).
(m) The
subsidiaries of the Company (the “Subsidiaries”) are Shen Kun International
Limited, a company organized under the laws of British Virgin Islands (“Shen Kun”), which is owned
100% by the Company, and Shengkai (Tianjin) Limited (“SK Ceramic Valves”), a company
organized under the laws of the People’s Republic of China (the “PRC”), which is owned 100% by
Shen Kun. Shen Kun and SK Ceramic Valves are the only subsidiaries of
the Company within the meaning of Rule 405 under the Securities
Act. SK Ceramic Valves has entered into a series of agreements with
Tianjin Shengkai Industrial Technology Development Co., Ltd. (“Shengkai”) giving
SK Ceramic Valves control over Shengkai, the operating company of the
Company. Except for the Subsidiaries, the Company holds no ownership
or other interest, nominal or beneficial, direct or indirect, in any
corporation, partnership, joint venture or other business
entity. Except as disclosed in the Registration Statement, the
General Disclosure Package and the Prospectus, all of the issued and outstanding
shares of capital stock of, or other ownership interests in, each Subsidiary
have been duly and validly authorized and issued and are fully paid and
non-assessable and are owned, directly or indirectly, by the Company, free and
clear of any lien, charge, mortgage, pledge, security interest, claim, equity,
trust or other encumbrance, preferential arrangement, defect or restriction of
any kind whatsoever (any “Lien”). No
director, officer or key employee of the Company named in the Prospectus holds
any direct equity, debt or other pecuniary interest in any Subsidiary or any
Person with whom the Company or any Subsidiary does business or is in privity of
contract with, other than, in each case, indirectly through the ownership by
such individuals of Common Shares.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 7
of 34
(n) Each
of the Company and the Subsidiaries has been duly incorporated, formed or
organized, and validly exists as a corporation, partnership or limited liability
company in good standing under the laws of its jurisdiction of incorporation,
formation or organization. Each of the Company and the Subsidiaries
has all requisite power and authority to carry on its business as it is
currently being conducted and as described in the Registration Statement, the
General Disclosure Package and the Prospectus, and to own, lease and operate its
respective properties. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation,
partnership or limited liability company in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary, except, in
each case, for those failures to be so qualified or in good standing which
(individually and in the aggregate) would not reasonably be expected to have a
material adverse effect on: (i) the business, condition (financial or
otherwise), results of operations, shareholders’ equity, properties or prospects
of the Company and the Subsidiaries, taken as a whole; (ii) the long-term debt
or capital stock of the Company or any Subsidiary; or (iii) the Offering or
consummation of any of the other transactions contemplated by this Agreement,
the Registration Statement, the General Disclosure Package and the Prospectus
(any such effect being a “Material Adverse
Effect”).
(o) Neither
the Company nor any Subsidiary: (i) is in violation of its certificate or
articles of incorporation, memorandum and articles of association, by-laws,
certificate of formation, limited liability company agreement, joint venture
agreement, partnership agreement or other organizational documents, (ii) is in
default under, and no event has occurred which, with notice or lapse of time or
both, would constitute a default under or result in the creation or imposition
of any Lien upon any of its property or assets pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its property or
assets is subject or (iii) is in violation in any material respect of any law,
rule, regulation, ordinance, directive, judgment, decree or order of any
judicial, regulatory or other legal or governmental agency or body applicable to
the Company or any Subsidiaries, except (in the case of clause (ii) above) for
any Lien disclosed in the Registration Statement, the General Disclosure Package
and the Prospectus.
(p) The
Company has full right, power and authority to execute and deliver this
Agreement, the Representatives’ Warrants, the intellectual property development
protection service agreement executed between the Company and ▇▇▇▇ ▇▇▇▇,
substantially in the form attached hereto as Annex I (the “Intellectual Property Development
Protection Service Agreement”), the trade secret identification and
confirmatory assignment and all attachments thereto executed between the Company
and ▇▇▇▇ ▇▇▇▇, substantially in the form attached hereto as Annex II (the “Trade Secret Identification and
Confirmatory Assignment”) and all other agreements, documents,
certificates and instruments required to be delivered pursuant to this Agreement
(collectively, the “Transaction
Documents”). The Company has duly and validly authorized the
Transaction Documents. The Transaction Documents have been duly and
validly executed and delivered by the Company and constitute the legal, valid
and binding obligations of the Company and are enforceable against the Company
in accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(q) The
description of the corporate structure of the Company and the various contracts
between the Company and the Subsidiaries set forth in the Registration
Statement, the General Disclosure Package and the Prospectus in the section
entitled “Corporate Structure and Organization” is accurate, complete and fair
in all material respects; and each of the events and transactions set forth
therein has been duly authorized and does not (A) to the knowledge of the
Company, contravene any provision of applicable law or statute, rule or
regulation of any governmental agency having jurisdiction over the Company or
any Subsidiaries or any of their properties (including but not limited to the
Ministry of Commerce, the State Administration of Industry and Commerce and the
State Administration of Foreign Exchange of the PRC) to the extent that such
contravention is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect, (B) contravene the articles of association, business
license or other constitutive documents of the Company or any Subsidiaries, or
(C) conflict with
or result in a breach of violation of any of the terms or provisions of, or
constitute a default under, any license, indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument to which the
Company or any Subsidiaries is a party or by which the Company or any
Subsidiaries is bound or to which any of the property or assets of the Company
or any Subsidiaries is subject to the extent that such conflict or breach is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 8
of 34
(r) The
execution, delivery, and performance of the Transaction Documents, and
consummation of the transactions contemplated by this Agreement do not and will
not: (i) conflict with, require consent under or result in a breach of any of
the terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or result
in the creation or imposition of any Lien upon any property or assets of the
Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust,
loan agreement or other agreement, instrument, franchise, license or permit to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or their respective properties, operations or assets may be bound or
(ii) violate or conflict with any provision of the certificate or articles of
incorporation, by-laws, certificate of formation, limited liability company
agreement, partnership agreement or other organizational documents of the
Company or any Subsidiary, or (iii) violate or conflict with any law, rule,
regulation, ordinance, directive, judgment, decree or order of any judicial,
regulatory or other legal or governmental agency or body, domestic or foreign
(including but not limited to the Ministry of Commerce, the State Administration
of Industry and Commerce and the State Administration of Foreign Exchange of the
PRC), except in the case of subsections (i) and (iii) for any default, conflict
or violation that would not have or reasonably be expected to have a Material
Adverse Effect.
(s) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, each of the Company and the Subsidiaries has all consents,
approvals, authorizations, orders, registrations, qualifications, licenses,
filings and permits of, with and from all judicial, regulatory and other legal
or governmental agencies and bodies and all third parties, foreign and domestic
(collectively, the “Consents”), to own, lease and
operate its properties and conduct its business as it is now being conducted and
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, and each such Consent is valid and in full force and
effect. Neither the Company nor any Subsidiary has received notice of
any investigation or proceedings which results in or, if decided adversely to
the Company or any Subsidiary, could reasonably be expected to result in, the
revocation of, or imposition of a materially burdensome restriction on, any
Consent. No Consent contains a materially burdensome restriction not
adequately disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus.
(t) Each
of the Company and the Subsidiaries is in compliance with all applicable laws,
rules, regulations, ordinances, directives, judgments, decrees and orders,
foreign and domestic, except for any non-compliance the consequences of which
would not have or reasonably be expected to have a Material Adverse
Effect. Neither the Company, nor any of its Affiliates (within the
meaning of Rule 144 under the Securities Act) (“Affiliates”) has received any
notice or other information from any regulatory or other legal or governmental
agency which could reasonably be expected to result in any default or potential
decertification by the Company, or any of its Affiliates.
(u) No
Consent of, with or from any judicial, regulatory or other legal or governmental
agency or body or any third party, foreign or domestic is required for the
execution, delivery and performance of the Transaction Documents or consummation
of each of the transactions contemplated by this Agreement, including the
issuance, sale and delivery of the Securities to be issued, sold and delivered
hereunder, except the registration under the Securities Act of the Securities,
which has become effective, and such Consents as may be required under state
securities or blue sky laws or the by-laws and rules of the Nasdaq Global
Market, where the Common Shares have been approved for listing, and the
Financial Industry Regulatory Authority, Inc. (“FINRA”) in connection with the
purchase and distribution of the Securities by the Underwriters, each of which
has been obtained and is in full force and effect.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 9
of 34
(v) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, there is no judicial, regulatory, arbitral or other legal or
governmental proceeding or other litigation or arbitration, domestic or foreign,
pending to which the Company or any Subsidiary is a party or of which any
property, operations or assets of the Company or any Subsidiary is the subject
which, individually or in the aggregate, if determined adversely to the Company
or any Subsidiary, would reasonably be expected to have a Material Adverse
Effect. To the Company’s knowledge, no such proceeding, litigation or
arbitration is threatened or contemplated.
(w) The
financial statements, including the notes thereto, and the supporting schedules
included in the Registration Statement, the General Disclosure Package and the
Prospectus comply in all material respects with the requirements of the
Securities Act, the Exchange Act and present fairly the financial position as of
the dates indicated and the cash flows and results of operations for the periods
specified of the Company and its consolidated Subsidiaries. Except as
otherwise stated in the Registration Statement, the General Disclosure Package
and the Prospectus, said financial statements have been prepared in conformity
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except in the case of
unaudited financials which are subject to normal year end adjustments and do
not contain certain footnotes. The supporting schedules
included in the Registration Statement, the General Disclosure Package and the
Prospectus present fairly the information required to be stated
therein. No other financial statements or supporting schedules are
required to be included or incorporated by reference in the Registration
Statement, the General Disclosure Package or the Prospectus. The
other financial and statistical information included in the Registration
Statement, the General Disclosure Package and the Prospectus present fairly the
information included therein and have been prepared on a basis consistent with
that of the financial statements that are included in the Registration
Statement, the General Disclosure Package and the Prospectus and the books and
records of the respective entities presented therein.
(x) There
are no pro forma or as adjusted financial statements which are required to be
included in the Registration Statement, the General Disclosure Package and the
Prospectus in accordance with Regulation S-X which have not been included as so
required. The pro forma and pro forma as adjusted financial
information included in the Registration Statement, the General Disclosure
Package and the Prospectus has been properly compiled and prepared in accordance
with the applicable requirements of the Securities Act and the Rules and
Regulations and include all adjustments necessary to present fairly in
accordance with generally accepted accounting principles the pro forma and as
adjusted financial position of the respective entity or entities presented
therein at the respective dates indicated and their cash flows and the results
of operations for the respective periods specified. The assumptions
used in preparing the pro forma and pro forma as adjusted financial information
included in the Registration Statement, the General Disclosure Package and the
Prospectus provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described
therein. The related pro forma and pro forma as adjusted adjustments
give appropriate effect to those assumptions; and the pro forma and pro forma as
adjusted financial information reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
(y) The
statistical, industry-related and market-related data included in the
Registration Statement, the General Disclosure Package and the Prospectus are
based on or derived from sources which the Company reasonably and in good faith
believes are reliable and accurate, and such data agree with the sources from
which they are derived.
(z)
The Company is subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act and files reports with the Commission on the ▇▇▇▇▇
system. The Common Shares are registered pursuant to Section 12(b) or
12(g) of the Exchange Act and the outstanding Common Shares are listed on the
Nasdaq Global Market. The Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common Shares
under the Exchange Act or de-listing the Common Shares from the Nasdaq Global
Market, nor has the Company received any notification that the Commission or
Nasdaq Stock Exchange is contemplating terminating such registration or listing.
The Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act (all of the foregoing, and all other
documents and registration statements heretofore filed by the Company with the
Commission being hereinafter referred to as the “SEC
Documents”). None of the SEC Documents, at the time they were
filed with the Commission (except those SEC Documents that were subsequently
amended), contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial
statements of the Company included (or incorporated by reference) in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto
(except those SEC Documents that were subsequently amended).
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 10
of 34
(aa) The
Company has established and maintains disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Exchange Act) and such controls and
procedures are effective in ensuring that material information relating to the
Company, including its subsidiaries, is made known to the principal executive
officer and the principal financial officer. The Company has utilized
such controls and procedures in preparing and evaluating the disclosures in the
Registration Statement, in the General Disclosure Package and in the
Prospectus.
(bb) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management’s general or specific
authorization; (B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with United States generally accepted
accounting principles and to maintain accountability for assets; (C) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 under the Exchange Act)
that are effective in ensuring 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 rules and forms of the Commission, 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 or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions
regarding required disclosure. Except as described in the Registration
Statement, the General Disclosure Package or in the Prospectus, since the
Company’s date of formation, there has been no change in the Company’s internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
(cc) No
forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in the General Disclosure
Package or the Prospectus has been made or reaffirmed without a reasonable basis
or has been disclosed other than in good faith.
(dd) The
Company’s Board of Directors has validly appointed an audit committee whose
composition satisfies the requirements of the rules and regulations of the
Nasdaq Global Market and the Board of Directors and/or audit committee has
adopted a charter that satisfies the requirements of the rules and regulations
of the Nasdaq Global Market. The audit committee has reviewed the
adequacy of its charter within the past twelve months. Except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus, the Board of Directors nor the audit committee has been informed,
nor is any director of the Company aware, of: (i) any significant deficiencies
and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company’s ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal control over financial reporting.
(ee) Neither
the Company nor any of its Affiliates has taken, directly or indirectly, any
action which constitutes or is designed to cause or result in, or which could
reasonably be expected to constitute, cause or result in, the stabilization or
manipulation of the price of any security to facilitate the sale or resale of
the Securities.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 11
of 34
(ff) Neither
the Company nor any of its Affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules and Regulations with the offer and sale of
the Securities pursuant to the Registration Statement. Except as
disclosed in the Registration Statement, the General Disclosure Package, the
Prospectus, neither Company nor any of its Affiliates has sold or issued any
Relevant Security during the six-month period preceding the date of the
Prospectus, including but not limited to any sales pursuant to Rule 144A or
Regulation D or S under the Securities Act, other than Common Shares issued
pursuant to employee benefit plans, qualified stock option plans or the employee
compensation plans or pursuant to outstanding options, rights or warrants as
described in the Registration Statement, the General Disclosure Package and the
Prospectus.
(gg) All
information contained in the questionnaires completed by each of the Company’s
officers and directors immediately prior to the Offering and provided to the
Representative as well as the biographies of such individuals in the
Registration Statement are true and correct in all material respects and the
Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by the directors and
officers to become inaccurate and incorrect.
(hh) No
director or officer of the Company is subject to any non-competition agreement
or non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be and act in his respective capacity of the
Company.
(ii) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, no holder of any Relevant Security has any rights to require
registration of any Relevant Security as part or on account of, or otherwise in
connection with, the offer and sale of the Securities contemplated hereby, and
any such rights so disclosed have either been fully complied with by the Company
or effectively waived by the holders thereof, and any such waivers remain in
full force and effect.
(jj) The
conditions for use of Form S-3 to register the Offering under the Securities
Act, as set forth in the General Instructions to such Form, have been
satisfied.
(kk) The
Company is not and, at all times up to and including consummation of the
transactions contemplated by this Agreement, and after giving effect to
application of the net proceeds of the Offering, will not be, subject to
registration as an “investment company” under the Investment Company Act of
1940, as amended, and is not and will not be an entity “controlled” by an
“investment company” within the meaning of such act.
(ll) No
relationship, direct or indirect, exists between or among any of the Company or
any Affiliate of the Company, on the one hand, and any director, officer,
shareholder, customer or supplier of the Company or any affiliate of the
Company, on the other hand, which is required by the Securities Act, the
Exchange Act or the Rules and Regulations to be described in the Registration
Statement or the Prospectus which is not so described as
required. There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
described in the Registration Statement, the General Disclosure Package and the
Prospectus. The Company has not, in violation of the Sarb-Ox directly
or indirectly, including through a Subsidiary (other than as permitted under the
Sarb-Ox for depositary institutions), extended or maintained credit, arranged
for the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the
Company.
(mm) The
Company is in material compliance with the provisions of Sarb-Ox and the Rules
and Regulations promulgated thereunder and related or similar rules and
regulations promulgated by the Nasdaq Global Market or any other governmental or
self regulatory entity or agency, except for such violations which, singly or in
the aggregate, would not have a Material Adverse Effect. Without
limiting the generality of the foregoing: (i) all members of the Company’s board
of directors who are required to be “independent” (as that term is defined under
applicable laws, rules and regulations), including, without limitation, all
members of the audit committee of the Company’s board of directors, meet the
qualifications of independence as set forth under applicable laws, rules and
regulations and (ii) the audit committee of the Company’s board of directors has
at least one member who is an “audit committee financial expert” (as that term
is defined under applicable laws, rules and regulations).
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 12
of 34
(nn) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, there are no contracts, agreements or understandings between the
Company and any Person that would give rise to a valid claim against the Company
or any Underwriter for a brokerage commission, finder’s fee or other like
payment in connection with the transactions contemplated by this Agreement or,
to the Company’s knowledge, any arrangements, agreements, understandings,
payments or issuance with respect to the Company or any of its officers,
directors, shareholders, partners, employees, Subsidiaries or Affiliates that
may affect the Underwriters’ compensation as determined by FINRA.
(oo) The
Company and each Subsidiary owns or leases all such properties as are necessary
to the conduct of its business as presently operated and as proposed to be
operated as described in the Registration and the Prospectus. The
Company and the Subsidiaries have good and marketable title in fee simple, or
have been validly granted long term land use rights, to all real property and
good and marketable title to all personal property owned by them, in each case
free and clear of all Liens except such as are described in the Registration
Statement, the General Disclosure Package and the Prospectus or such as do not
(individually or in the aggregate) materially affect the business or prospects
of the Company or any of the Subsidiaries. Any real property and
buildings held under lease or sublease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material to, and do not interfere with, the use made and proposed to
be made of such property and buildings by the Company and the
Subsidiaries. Neither the Company nor any Subsidiary has received any
notice of any claim adverse to its ownership of any real or personal property or
of any claim against the continued possession of any real property, whether
owned or held under lease or sublease by the Company or any
Subsidiary.
(pp) The
Company and each Subsidiary: (i) owns or possesses adequate right to use all
patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, licenses, formulae,
customer lists, and know-how and other intellectual property (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, “Intellectual Property”)
necessary for the conduct of their respective businesses as being conducted and
as described in the Registration Statement, the General Disclosure and
Prospectus and (ii) have no knowledge that the conduct of their respective
businesses do or will conflict with, and they have not received any notice of
any claim of conflict with, any such right of others. Except as set
forth in the Registration Statement, the General Disclosure Package or the
Prospectus, neither the Company nor any Subsidiary has granted or assigned to
any other Person any right to sell the current products and services of the
Company and its Subsidiaries or those products and services described in the
Registration Statement and Prospectus. To the knowledge of the
Company, there is no infringement by third parties of any such Intellectual
Property; there is no pending or threatened action, suit, proceeding or claim by
others challenging the Company’s or any Subsidiary’s rights in or to any such
Intellectual Property, and the Company is unaware of any facts which would form
a reasonable basis for any such claim; and there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others that
the Company or any Subsidiary infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights of others, and
the Company is unaware of any other fact which would form a reasonable basis for
any such claim. To the Company’s knowledge, all material technical
information developed by and belonging to the Company or any Subsidiary which
has not been patented (including, without limitation, the technical know-how of
Mr. ▇▇▇▇ ▇▇▇▇, including the “recipe” referred to in the Prospectus) has been
kept confidential so as, among other things, all such information may be deemed
proprietary to the Company. Except under confidentiality obligations, there has
been no material disclosure of any of the Company’s or its Subsidiaries’
Confidential Information to any third party. Except as set forth in the
Registration Statement, the General Disclosure Package, or the Prospectus,
neither the Company nor any Subsidiary has granted or assigned to any other
Person any right to sell the current products and services of the Company and
its Subsidiaries or those products and services described in the Registration
Statement and Prospectus.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 13
of 34
(qq) The
agreements and documents described in the Registration Statement, the General
Disclosure Package and the Prospectus conform to the descriptions thereof
contained therein and there are no agreements or other documents required to be
described in the Registration Statement, the General Disclosure Package or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement
or other instrument (however characterized or described) to which the Company is
a party or by which its property or business is or may be bound or affected and
(i) that is referred to in the Registration Statement, the General Disclosure
Package or the Prospectus or attached as an exhibit thereto, or (ii) is material
to the Company’s business, has been duly and validly executed by the Company, is
in full force and effect in all material respects and is enforceable against the
Company and, to the Company’s knowledge, the other parties thereto, in
accordance with its terms, except (x) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally, (y) as enforceability of any indemnification or contribution
provision may be limited under the foreign, federal and state securities laws,
and (z) that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought, and
none of such agreements or instruments has been assigned by the Company, and
neither the Company nor, to the Company’s knowledge, any other party is in
breach or default thereunder and, to the Company’s knowledge, no event has
occurred that, with the lapse of time or the giving of notice, or both, would
constitute a breach or default thereunder. To the Company’s
knowledge, performance by the Company of the material provisions of such
agreements or instruments will not result in a violation of any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its assets or businesses, including, without limitation, those relating
to environmental laws and regulations.
(rr) No
securities of the Company have been sold by the Company or by or on behalf of,
or for the benefit of, any person or persons controlling, controlled by, or
under common control with the Company since the date of the Company’s formation,
except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus.
(ss) The
disclosures in the Registration Statement, the General Disclosure Package and
the Prospectus concerning the effects of foreign, federal, state and local
regulation on the Company’s business as currently contemplated are correct in
all material respects and do not omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading.
(tt) Each
of the Company and the Subsidiaries has accurately prepared and timely filed all
federal, state, foreign, including the PRC, and other tax returns that are
required to be filed by it and has paid or made provision for the payment of all
taxes, assessments, governmental or other similar charges, including without
limitation, all sales and use taxes and all taxes which the Company or any
Subsidiary is obligated to withhold from amounts owing to employees, creditors
and third parties, with respect to the periods covered by such tax returns
(whether or not such amounts are shown as due on any tax return). No
deficiency assessment with respect to a proposed adjustment of the Company’s or
any Subsidiary’s federal, state, local or foreign, including the PRC, taxes is
pending or, to the Company’s knowledge, threatened. The accruals and
reserves on the books and records of the Company and the Subsidiaries in respect
of tax liabilities for any taxable period not finally determined are adequate to
meet any assessments and related liabilities for any such period and, since the
date of the Company’s most recent audited financial statements, the Company and
the Subsidiaries have not incurred any liability for taxes other than in the
ordinary course of its business. There is no tax lien, whether
imposed by any federal, state, foreign or other taxing authority, outstanding
against the assets, properties or business of the Company or any
Subsidiary. Neither the Company nor any Subsidiary is required to
make any tax filings in the British Virgin Islands.
(uu) No
labor disturbance by the employees of the Company or any Subsidiary currently
exists or, to the Company’s knowledge, is likely to occur.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 14
of 34
(vv) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, the Company and each Subsidiary have at all times operated their
respective businesses in material compliance with all Environmental Laws, and no
material expenditures are or will be required in order to comply
therewith. Neither the Company nor any Subsidiary has received any
notice or communication that relates to or alleges any actual or potential
violation or failure to comply with any Environmental Laws that will result in a
Material Adverse Effect. As used herein, the term “Environmental Laws” means all
applicable laws and regulations, including any licensing, permits or reporting
requirements, and any action by a federal state or local government entity
pertaining to the protection of the environment, protection of public health,
protection of worker health and safety, or the handling of hazardous materials,
including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et seq., the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. §
1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et seq.,
and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq. or similar laws
and regulations, to the extent applicable, under the laws and regulations of the
PRC.
(ww) The
PRC government has not imposed any restriction on power consumption on the
Company or any Subsidiary and, to the knowledge of the Company, no restriction
on power consumption is likely to be imposed on the Company or any
Subsidiary. The Company and the Subsidiaries are not high energy
consumption enterprises and the past and current power consumption of the
Company and the Subsidiaries has been within the range permitted under the laws
and regulations of the PRC.
(xx) Except
as set forth in the Registration Statement, the General Disclosure Package or
the Prospectus, neither the Company nor any Subsidiary is a party to an
“employee benefit plan,” as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 (“ERISA”) or similar rules and
regulations of the PRC which: (i) is subject to any provision of ERISA or such
rules and regulations of the PRC and (ii) is or was at any time maintained,
administered or contributed to by the Company or any Subsidiary and covers any
employee or former employee of the Company or any Subsidiary or any ERISA
Affiliate (as defined hereafter). These plans are referred to
collectively herein as the “Employee
Plans.” For purposes of this Section, “ERISA Affiliate” of any person
or entity means any other person or entity which, together with that person or
entity, could be treated as a single employer under Section 414(m) of the
Internal Revenue Code of 1986, as amended (the “Code”), or is an “affiliate,”
whether or not incorporated, as defined in Section 407(d)(7) of ERISA, of the
person or entity.
(yy)
The Registration Statement, the General Disclosure Package and the Prospectus
identify each employment, severance or other similar agreement, arrangement or
policy and each material plan or arrangement providing for insurance coverage
(including any self-insured arrangements), workers’ compensation, disability
benefits, severance benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or other forms of incentive
compensation, or post-retirement insurance, compensation or benefits which: (i)
is not an Employee Plan, (ii) is entered into, maintained or contributed to, as
the case may be, by the Company or any Subsidiary or any of their respective
ERISA Affiliates, and (iii) covers any employee or former employee of the
Company or any Subsidiary or any of their respective ERISA
Affiliates. These contracts, plans and arrangements are referred to
collectively in this Agreement as the “Benefit Arrangements.” Each
Benefit Arrangement has been maintained in substantial compliance with its terms
and with requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to that Benefit Arrangement.
(zz) Except
as set forth in the Registration Statement, the General Disclosure Package or
the Prospectus, there is no liability in respect of post-retirement health and
medical benefits for retired employees of the Company or any Subsidiary or any
of their respective ERISA Affiliates other than medical benefits required to be
continued under applicable law, determined using assumptions that are reasonable
in the aggregate, over the fair market value of any fund, reserve or other
assets segregated for the purpose of satisfying such liability (including for
such purposes any fund established pursuant to Section 40 1(h) of the
Code). With respect to any of the Company’s or any Subsidiaries’
Employee Plans which are “group health plans” under Section 4980B of the Code
and Section 607(1) of ERISA, there has been material compliance with all
requirements imposed there under such that the Company or any Subsidiary or
their respective ERISA Affiliates have no (and will not incur any) loss,
assessment, tax penalty, or other sanction with respect to any such
plan.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
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(aaa) As
set forth in the Registration Statement, the General Disclosure Package or the
Prospectus, neither the Company nor any Subsidiary is a party to or subject to
any employment contract or arrangement providing for annual future compensation,
or the opportunity to earn annual future compensation (whether through fixed
salary, bonus, commission, options or otherwise) of more than $120,000 to any
officer, consultant, director or employee.
(bbb) The
execution of the Transaction Documents or consummation of the Offering does not
constitute a triggering event under any Employee Plan or any other employment
contract, whether or not legally enforceable, which (either alone or upon the
occurrence of any additional or subsequent event) will or may result in any
payment (of severance pay or otherwise), acceleration, increase in vesting, or
increase in benefits to any current or former participant, employee or director
of the Company or any Subsidiary other than an event that is not material to the
financial condition or business of the Company or any Subsidiary, either
individually or taken as a whole.
(ccc) No
“prohibited transaction” (as defined in either Section 406 of the ERISA or
Section 4975 of Code), “accumulated funding deficiency” (as defined in Section
302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company or any Subsidiary would have any liability;
each employee benefit plan of the Company or any Subsidiary is in compliance in
all material respects with applicable law, including (without limitation) ERISA
and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from any “pension plan”; and each employee benefit plan of the
Company or any Subsidiary that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or by
failure to act, which could cause the loss of such qualification.
(ddd) Neither
the Company, any Subsidiary nor, to the Company’s knowledge, any of their
respective employees or agents has at any time during the last five (5) years:
(i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any federal or state governmental officer or official, including
government officers or officials in the PRC, or other Person charged with
similar public or quasi-public duties, other than payments that are not
prohibited by the laws of the United States of any jurisdiction
thereof.
(eee) The
Company has not offered, or caused the Underwriters to offer, the Shares to any
Person or entity with the intention of unlawfully influencing: (i) a customer or
supplier of the Company or any Subsidiary to alter the customer’s or supplier’s
level or type of business with the Company or any Subsidiary or (ii) a
journalist or publication to write or publish favorable information about the
Company, any Subsidiary or its products or services.
(fff) As
of the date hereof and as of the Closing Date, and except as contemplated by
this Agreement, neither the Company nor any Subsidiary operates within the
United States or any state or territory thereof in such a manner so as to
subject the Company or its operations or businesses to registration as a foreign
company doing business in any state within the United States or to any of the
following laws in any material respect: (i) the Bank Secrecy Act, as amended,
(ii) the Uniting and Strengthening of America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, as amended, (iii) the
Foreign Corrupt Practices Act of 1977, as amended, (iv) the Currency and Foreign
Transactions Reporting Act of 1970, as amended, (v) the Employee Retirement
Income Security Act of 1974, as amended, (vi) the Money Laundering Control Act
of 1986, as amended (vii) the rules and regulations promulgated under any such
law, or any successor law, or any judgment, decree or order of any applicable
administrative or judicial body relating to such law and (viii) any
corresponding law, rule, regulation, ordinance, judgment, decree or order of any
state or territory of the United States or any administrative or judicial body
thereof.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 16
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(ggg) The
operations of the Company and its Subsidiaries are and have been conducted at
all times in compliance with applicable financial record keeping and reporting
requirements and money laundering statutes of the PRC and the United States and,
to the Company’s knowledge, all other jurisdictions to which the Company and its
Subsidiaries are subject, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered or enforced by
any applicable governmental agency (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened.
(hhh) Except
as set forth in the Registration Statement and the Prospectus, no holders of any
securities of the Company or any rights exercisable for or convertible or
exchangeable into securities of the Company have the right to require the
Company to register any such securities of the Company under the Securities Act
or to include any such securities in a registration statement to be filed by the
Company.
(iii) Neither
the Company nor, to the knowledge of the Company, any director, officer, agent,
employee or affiliate of the Company (as such term is defined under Rule 144
under the Securities Act, an “Affiliate”) is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds to any joint venture partner or other
person or entity, for the purpose of
financing the activities of any person currently subject
to any U.S. sanctions administered by OFAC.
(jjj) Except
as disclosed in the Registration Statement, the General Disclosure Package and
the Prospectus, the establishment of SK Ceramic Valves and the acquisition of
the equity interest of SK Ceramic Valves by Shen Kun fully complied with the PRC
laws and regulations and all the necessary approvals and registrations for Shen
Kun’s acquisition of the equity interest in SK Ceramic Valves had been
obtained.
(kkk) All
dividends and other distributions declared and payable on the Shares may under
the current laws and regulations of the State of Florida be paid to the holders,
and all such dividends and other distributions will not be subject to
withholding or other taxes under the laws and regulations of the State of
Florida and are otherwise free and clear of any other tax, withholding or
deduction in the State of Florida and without the necessity of obtaining any
consents, approvals, authorizations, orders, registrations, clearances or
qualifications of or with any court or governmental agency having jurisdiction
over the Company or any of its subsidiaries or any of their respective
properties in the State of Florida.
(lll) Except
as described in the Registration Statement, the General Disclosure Package, all
dividends and other distributions declared and payable on the share capital of
any of the PRC Subsidiaries and their subsidiaries may, under the current laws
and regulations of the PRC, be freely transferred out of the PRC and may be paid
in U.S. dollars subject to the completion of the relevant procedural
formalities, such as providing the evidence of tax payment issued by the
competent tax authority of the PRC, and subject to the potential withholding
tax.
(mmm) Any
previous restructuring (i.e. equity transfer) of the Company and the
Subsidiaries will not (i) conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of the property or assets of the Company or
any Subsidiary is subject to the extent that such conflict or breach is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect; (ii) result in any violation of the provisions of the Certificate of
Incorporation, By-laws or other constituent documents of the Company or any
Subsidiary; or (iii) result in any violation of any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company or any Subsidiary or any of their properties (including but not
limited to the Ministry of Commerce, the State Administration of Industry and
Commerce and the State Administration of Foreign Exchange of the PRC) to the
extent that such violation is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 17
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(nnn)
The Company 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 State Assets Supervision and
Administration Commission, the State Tax Administration, the State
Administration of Industry and Commerce, the China Securities Regulatory
Commission (“CSRC”) and
the State Administration of Foreign Exchange 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; 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. 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.
(ooo) The
issuance and sale of the Shares, the listing and trading of the Shares on the
Nasdaq Global Market or the consummation of the transactions contemplated by
this Agreement is not and will not be, as of the date hereof adversely affected
by the M&A Rules or any official clarifications, guidance, interpretations
or implementation rules in connection with or related to the M&A Rules
(collectively, the “M&A
Rules and Related Clarifications”).
(ppp) Each
of the Company and Subsidiaries that were incorporated outside of the PRC has
taken, or is in the process of taking, reasonable steps to ensure compliance by
each of its shareholders, option holders, directors, officers, and employees
that is, or is directly or indirectly owned or controlled by, a PRC resident or
citizen with any applicable rules and regulations of the relevant PRC government
agencies (including but not limited to the Ministry of Commerce, the National
Development and Reform Commission and the State Administration of Foreign
Exchange) relating to overseas investment by PRC residents and citizens or the
repatriation of the proceeds from overseas offering and listing 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 each shareholder,
option holder, director, officer, and employees that is, or is directly or
indirectly owned or controlled by, a PRC resident or citizen to complete any
registration and other procedures required under applicable PRC Overseas
Investment and Listing Regulations.
(qqq) The
Company has taken all reasonable steps to comply with, and to ensure compliance
by all of the Company’s shareholders who are PRC residents with any applicable
SAFE Rules and Regulations, including without limitation, taking reasonable
steps to require each of its shareholders and option holders that is, or is
directly or indirectly owned or controlled by, a PRC resident to complete any
registration and other procedures required under applicable SAFE Rules and
Regulations.
(rrr) As
used in this Agreement, references to matters being “material” with respect to
the Company or its Subsidiaries shall mean a material event, change, condition,
status or effect related to the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, prospects,
operations or results of operations of the Company or the applicable
Subsidiaries, either individually or taken as a whole, as the context
requires.
(sss) As
used in this Agreement, the term “knowledge of the Company” (or similar
language) shall mean the knowledge of the officers and directors of the Company
and the applicable Subsidiaries who are named in the Prospectus, with the
assumption that such officers and directors shall have made reasonable and
diligent inquiry of the matters presented (with reference to what is customary
and prudent for the applicable individuals in connection with the discharge by
the applicable individuals of their duties as officers, directors or managers of
the Company or the applicable Subsidiaries).
Any
certificate signed by or on behalf of the Company and delivered to the
Underwriters or to ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP (“Underwriters’ Counsel”) shall
be deemed to be a representation and warranty by the Company to each Underwriter
listed on Schedule
A hereto as to the matters covered thereby.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 18
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3. Reserved.
4. Offering. Upon
satisfaction of the conditions set forth in Section 7 hereof and the
authorization of the release of the Shares by the Representatives, the
Underwriters propose to offer the Shares for sale to the public upon the terms
and conditions set forth in the Prospectus.
5. Covenants of the
Company. The Company acknowledges, covenants and agrees with
the Underwriters that:
(a) The
Registration Statement and any amendments thereto have been declared effective,
and if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus (properly completed if
Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time
period and will provide evidence satisfactory to the Representatives of such
timely filing.
(b) During
the period beginning on the date hereof and ending on the later of the Closing
Date or such date, as in the opinion of counsel for the Underwriters, the
Prospectus is no longer required by law to be delivered (or in lieu thereof the
notice referred to in Rule 173(a) under the Securities Act is no longer required
to be provided), in connection with sales by an underwriter or dealer (the
“Prospectus Delivery
Period”), prior to amending or supplementing the Registration Statement,
the General Disclosure Package or the Prospectus, the Company shall furnish to
the Underwriters for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Underwriters reasonably object within 36 hours of
delivery thereof to the Underwriters and its counsel.
(c) After
the date of this Agreement, the Company shall promptly advise the Underwriters
in writing (i) of the receipt of any comments of, or requests for additional or
supplemental information from, the Commission, (ii) of the time and date of any
filing of any post-effective amendment to the Registration Statement or any
amendment or supplement to any Prospectus, the General Disclosure Package or the
Prospectus, (iii) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of any order preventing or
suspending its use or the use of any Prospectus, the General Disclosure Package,
the Prospectus or any Issuer-Represented Free Writing Prospectus, or of any
proceedings to remove, suspend or terminate from listing the Common Stock from
any securities exchange upon which it is listed for trading, or of the
threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any
time, the Company will use its reasonable efforts to obtain the lifting of such
order at the earliest possible moment. Additionally, the Company
agrees that it shall comply with the provisions of Rules 424(b), 430A and 430B,
as applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under Rule 424(b) or Rule 433 were
received in a timely manner by the Commission (without reliance on Rule
424(b)(8) or Rule 164(b)).
(d) (i) During
the Prospectus Delivery Period, the Company will comply as far as it is able
with all requirements imposed upon it by the Securities Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, and by the Exchange Act so far as necessary to permit the continuance of
sales of or dealings in the Securities as contemplated by the provisions hereof,
the General Disclosure Package, and the Registration Statement and the
Prospectus. If during such period any event occurs as a result of
which the Prospectus (or if the Prospectus is not yet available to prospective
purchasers, the General Disclosure Package ) would include an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary or appropriate in the
opinion of the Company or its counsel or the Underwriters or counsel to the
Underwriters to amend the Registration Statement or supplement the Prospectus
(or if the Prospectus is not yet available to prospective purchasers, the
General Disclosure Package ) to comply with the Securities Act or to file under
the Exchange Act any document which would be deemed to be incorporated by
reference in the Prospectus in order to comply with the Securities Act or the
Exchange Act, the Company will promptly notify the Underwriters and will amend
the Registration Statement or supplement the Prospectus (or if the Prospectus is
not yet available to prospective purchasers, the General Disclosure Package) or
file such document (at the expense of the Company) so as to correct such
statement or omission or effect such compliance.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 19
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(ii)
If at any time following issuance of an Issuer-Represented Free Writing
Prospectus there occurred or occurs an event or development as a result of which
such Issuer-Represented Free Writing Prospectus conflicted or would conflict
with the information contained in the Registration Statement, the Statutory
Prospectus or the Prospectus or included or would include an untrue statement of
a material fact or omitted or would omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
prevailing at that subsequent time, not misleading, the Company has promptly
notified or promptly will notify the Underwriters and has promptly amended or
will promptly amend or supplement, at its own expense, such Issuer-Represented
Free Writing Prospectus to eliminate or correct such conflict, untrue statement
or omission.
(e) The
Company will promptly deliver to the Underwriters and Underwriters’ Counsel a
signed copy of the Registration Statement, as initially filed and all amendments
thereto, including all consents and exhibits filed therewith, and will maintain
in the Company’s files manually signed copies of such documents for at least
five (5) years after the date of filing thereof. The Company will
promptly deliver to each of the Underwriters such number of copies of any
Preliminary Prospectus, the Prospectus, the Registration Statement, and all
amendments of and supplements to such documents, if any, and all documents which
are exhibits to the Registration Statement and Prospectus or any amendment
thereof or supplement thereto, as the Underwriters may reasonably
request. Prior to 10:00 A.M., New York time, on the business day next
succeeding the date of this Agreement and from time to time thereafter, the
Company will furnish the Underwriters with copies of the Prospectus in New York
City in such quantities as the Underwriters may reasonably request.
(f) The
Company consents to the use and delivery of the Preliminary Prospectus by the
Underwriters in accordance with Rule 430 and Section 5(b) of the Securities
Act.
(g) If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with Rule
111 of the Act by the earlier of: (i) 10:00 p.m., New York City time, on the
date of this Agreement, and (ii) the time that confirmations are given or sent,
as specified by Rule 462(b)(2).
(h) The
Company will use its best efforts, in cooperation with the Representatives, at
or prior to the time of effectiveness of the Registration Statement, to qualify
the Securities for offering and sale under the securities laws relating to the
offering or sale of the Securities of such jurisdictions, domestic or foreign,
as the Representatives may designate and to maintain such qualification in
effect for so long as required for the distribution thereof; except that in no
event shall the Company be obligated in connection therewith to qualify as a
foreign corporation or to execute a general consent to service of process or to
subject itself to taxation if it is otherwise not so subject.
(i) The
Company will make generally available to its security holders as soon as
practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period that shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the Rules and
Regulations.
(j) Except
with respect to (i) securities of the Company which may be issued in connection
with an acquisition of another entity (or the assets thereof) or (ii)
the issuance of securities of the Company intended to provide the Company with
proceeds to acquire another entity (or the assets thereof), during the nine (9)
months following the Closing Date, the Company or any successor to the Company
shall not undertake any public or private offerings of any equity securities of
the Company (including equity-linked securities) or adopt an employee stock
option plan without the written consent of the Representatives, which consent
shall not be unreasonably withheld.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 20
of 34
(k) Except
with respect to (i) securities of the Company which may be issued in connection
with an acquisition of another entity (or the assets thereof), or (ii) the
issuance of securities of the Company intended to provide the Company with
proceeds to acquire another entity (or the assets thereof), during the nine (9)
months following the Closing Date, without the consent of the Representative
which shall not be unreasonably withheld: the Company will not file any
registration statement relating to the offer or sale of any of the Company’s
securities.
(l) Following
the Closing Date, the Company and any of the individuals listed on Schedule B hereto
(the “Lock-Up Parties”)
shall not sell or otherwise dispose of any securities of the Company, whether
publicly or in a private placement during the period that their respective
lock-up agreements are in effect. The Company will deliver to the
Representative the agreements of Lock-Up Parties to the foregoing effect prior
to the Closing Date, which agreements shall be substantially in the form
attached hereto as Annex IV.
(m) Intentionally
Omitted.
(n) Intentionally
Omitted.
(o) If
the Company fails to maintain the listing of its Common Shares on a nationally
recognized exchange, for a period of three (3) years from the effective date of
the Registration Statement, the Company, at its expense, shall obtain and keep
current a listing in the Standard & Poor’s Corporation Records Services or
the ▇▇▇▇▇’▇ Industrial Manual; provided that ▇▇▇▇▇’▇ OTC Industrial Manual is
not sufficient for these purposes.
(p) During
the period of three (3) years from the effective date of the Registration
Statement, the Company will make available to the Underwriters copies of all
reports or other communications (financial or other) furnished to security
holders or from time to time published or publicly disseminated by the Company,
and will deliver to the Underwriters: (i) as soon as they are available, copies
of any reports, financial statements and proxy or information statements
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the Company as
the Representatives may from time to time reasonably request (such financial
information to be on a consolidated basis to the extent the accounts of the
Company and the Subsidiaries are consolidated in reports furnished to its
security holders generally or to the Commission) provided that Underwriters
agree to a duty of confidentiality and provide an undertaking not to trade any
of the Company’s securities if such additional information is confidential
and/or qualifies as “material non-public” information.
(q) The
Company will not issue press releases or engage in any other publicity, without
the Representatives’ prior written consent, for a period ending at 5:00 p.m.
Eastern time on the first business day following the forty-fifth (45th) day
following the Closing Date, other than normal and customary releases issued in
the ordinary course of the Company’s business.
(r) The
Company has or will retain StockTrans Inc. (or a transfer agent of similar
competence and quality) as transfer agent for the Securities and shall continue
to retain such transfer agent for a period of three (3) years following the
Closing Date.
(s) The
Company will apply the net proceeds from the sale of the Securities as set forth
under the caption “Use of Proceeds” in the Prospectus. Without the
written consent of the Representatives, no proceeds of the Offering will be used
to pay outstanding loans from officers, directors or shareholders or to pay any
accrued salaries or bonuses to any employees or former employees.
(t) The
Company will use its best efforts to effect and maintain the listing of the
Securities on the Nasdaq Global Market or any U.S. national exchange for at
least three (3) years after the Closing Date.
(u) The
Company, during the period when the Prospectus is required to be delivered under
the Securities Act or the Exchange Act, will file all documents required to be
filed with the Commission pursuant to the Securities Act, the Exchange Act and
the Rules and Regulations within the time periods required thereby.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 21
of 34
(v) The
Company will use its best efforts to do and perform all things required to be
done or performed under this Agreement by the Company prior to the Closing Date,
and to satisfy all conditions precedent to the delivery of the
Shares.
(w) The
Company will not take, and will cause its Affiliates not to take, directly or
indirectly, any action which constitutes or is designed to cause or result in,
or which could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Securities.
(x) The
Company shall cause to be prepared and delivered to the Representatives, at its
expense, within one (1) business day from the effective date of this Agreement,
an Electronic Prospectus to be used by the Underwriters in connection with the
Offering. As used herein, the term “Electronic Prospectus” means a
form of prospectus, and any amendment or supplement thereto, that meets each of
the following conditions: (i) it shall be encoded in an electronic format,
satisfactory to the Representatives, that may be transmitted electronically by
the other Underwriters to offerees and purchasers of the Securities for at least
the period during which a Prospectus relating to the Securities is required to
be delivered under the Securities Act; (ii) it shall disclose the same
information as the paper prospectus and prospectus filed pursuant to ▇▇▇▇▇,
except to the extent that graphic and image material cannot be disseminated
electronically, in which case such graphic and image material shall be replaced
in the electronic prospectus with a fair and accurate narrative description or
tabular representation of such material, as appropriate; and (iii) it shall be
in or convertible into a paper format or an electronic format, satisfactory to
the Representatives, that will allow recipients thereof to store and have
continuously ready access to the prospectus at any future time, without charge
to such recipients (other than any fee charged for subscription to the Internet
as a whole and for on-line time). The Company hereby confirms that it
has included or will include in the Prospectus filed pursuant to ▇▇▇▇▇ or
otherwise with the Commission and in the Registration Statement at the time it
was declared effective an undertaking that, upon receipt of a request by an
investor or his or her representative within the period when a prospectus
relating to the Securities is required to be delivered under the Securities Act,
the Company shall transmit or cause to be transmitted promptly, without charge,
a paper copy of the Prospectus.
(y) The
Company represents and agrees that, unless it obtains the prior written consent
of each Representative, and each Representative represents and agrees that,
unless it obtains the prior written consent of the Company, it has not made and
will not make any offer relating to the Securities that would constitute an
“issuer free writing prospectus,” as defined in Rule 433 under the Securities
Act, or that would otherwise constitute a “free writing prospectus,” as defined
in Rule 405 under the Securities Act, required to be filed with the Commission;
provided that the prior written consent of the parties hereto shall be deemed to
have been given in respect of the free writing prospectuses included in Schedule
C. Any such free writing prospectus consented to by the
Company and the Representatives is hereinafter referred to as a “Permitted
Free Writing
Prospectus.” The Company represents that it has treated or agrees
that it will treat each Permitted Free Writing Prospectus as an “issuer free
writing prospectus,” as defined in Rule 433, and has complied and will comply
with the requirements of Rule 433 applicable to any Permitted Free Writing
Prospectus, including timely Commission filing where required, legending and
record keeping.
6. Consideration; Payment of
Expenses.
(a) In
consideration of the services to be provided for hereunder, the Company shall
pay to the Representatives or their respective designees an equal portion, on a
50/50 basis, of the following compensation with respect to the Shares which they
are offering:
(i)
An underwriting discount of six percent (6%) as set forth in Section
1.1(a) and (c);
(ii) A
corporate finance fee of one percent (1%) as set forth in Section 1(a);
and
(iii) The
Representatives’ Warrants.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
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(b) The
Company grants the Representatives the right of participation to act as lead
underwriter or minimally as a co-manager for a period of twelve (12) months from
the Closing Date, for any and all public and private equity and debt offerings,
excluding ordinary course of business financings such as bank lines of credit,
accounts receivable, factoring and financing generated by the Company or any
successor to or any subsidiary of the Company. The Company shall provide written
notice to Representatives with terms of such offering and if Representatives
fail to accept in writing any such proposal for such public or private sale
within 20 days after receipt of a written notice from the Company containing
such proposal, then the Representatives will have no claim or right with respect
to any such sale contained in any such notice.
(c) The
Representatives reserve the right to reduce any item of compensation or adjust
the terms thereof as specified herein in the event that a
determination shall be made by FINRA to the effect that the Underwriters’
aggregate compensation is in excess of FINRA Rules or that the terms thereof
require adjustment.
(d) Whether
or not the transactions contemplated by this Agreement, the Registration
Statement and the Prospectus are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of its obligations hereunder, including the following:
(i) all
expenses in connection with the preparation, printing, formatting for ▇▇▇▇▇ and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and any and all amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers;
(ii) all
fees and expenses in connection with the filing of Corporate Offerings Business
& Regulatory Analysis (“COBRADesk”) filings with
FINRA;
(iii) all
fees and expenses in connection with filing of the Registration Statement and
Prospectus with the Commission;
(iv) the
fees, disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Securities under the Securities Act and
the Offering;
(v) all
expenses in connection with the qualifications of the Shares for offering and
sale under state or foreign securities or blue sky laws, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with any blue by survey undertaken by such
counsel;
(vi) all
fees and expenses in connection with listing the Securities on the Nasdaq Global
Market;
(vii) all
travel expenses of the Company’s officers and employees and any other expense of
the Company incurred in connection with attending or hosting meetings with
prospective purchasers of the Shares (“Road Show
Expenses”);
(viii) any
stock transfer taxes incurred in connection with this Agreement or the
Offering
(ix) the
cost of preparing stock certificates representing the Securities;
(x) the
cost and charges of any transfer agent or registrar for the
Securities;
(xi) any
cost and expenses in conducting satisfactory due diligence investigation and
analysis of the Company’s officers, directors, employees, and
affiliates;
(xii) all
fees and disbursements of counsel to the Underwriters; and
Maxim
Group LLC
Global
Hunter Securities, LLC
November
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(xiii) all
other costs and expenses incident to the performance of the Company obligations
hereunder which are not otherwise specifically provided for in this Section
6.
(e) In
addition to the costs and expenses set forth in Section 6(c), the Company will
be responsible for: (i) the cost of two (2) “tombstone” advertisements to be
placed in appropriate daily or weekly periodicals of the Representatives’ choice
(i.e., The Wall Street Journal and The New York Times); and (ii) the cost of
five (5) bound volumes of the Offering documents and eight (8) Offering
commemorative lucite (or other reasonable form) memorabilia, both to be supplied
to the Representatives.
(f) Notwithstanding
anything to the contrary in this Section 6, in the event that this Agreement is
terminated pursuant to Section 6 or 12(b) hereof, or subsequent to a Material
Adverse Change, the Company will pay, up to $100,000 (less any advances
previously paid (the “Advances”)), all out-of-pocket
expenses of the Underwriters (including but not limited to fees and
disbursements of counsel to the Underwriters) incurred in connection herewith
which shall be limited to expenses which are actually incurred as allowed under
FINRA Rule 5110. In the event the Offering is completed, any Advances
received by Maxim shall be reimbursed to the Company at the
Closing.
7. Conditions of Underwriters’
Obligations. The obligations of the Underwriters to purchase
and pay for the Shares as provided herein shall be subject to: (i) the accuracy
of the representations and warranties of the Company herein contained, as of the
date hereof and as of the Closing Date (ii) the absence from any certificates,
opinions, written statements or letters furnished to the Underwriters or to
Underwriters’ Counsel pursuant to this Section 7 of any misstatement or omission
(iii) the performance by the Company of its obligations hereunder, and (iv) each
of the following additional conditions. For purposes of this Section
7, the terms “Closing Date” and “Closing” shall refer to the Closing Date for
the Shares and each of the foregoing and following conditions must be satisfied
as of each Closing.
(a) The
Registration Statement shall have become effective and all necessary regulatory
or listing approvals shall have been received not later than 5:30 P.M., New York
time, on the date of this Agreement, or at such later time and date as shall
have been consented to in writing by the Representatives. If the
Company shall have elected to rely upon Rule 430A under the Securities Act, the
Prospectus shall have been filed with the Commission in a timely fashion in
accordance with the terms hereof and a form of the Prospectus containing
information relating to the description of the Securities and the method of
distribution and similar matters shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period; and, at or prior to
the Closing Date or the actual time of the Closing, no stop order suspending the
effectiveness of the Registration Statement or any part thereof, or any
amendment thereof, nor suspending or preventing the use of the General
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall
have been issued; no proceedings for the issuance of such an order shall have
been initiated or threatened; any request of the Commission for additional
information (to be included in the Registration Statement, the General
Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or
otherwise) shall have been complied with to the Representatives’ satisfaction;
and FINRA shall have raised no objection to the fairness and reasonableness of
the underwriting terms and arrangements.
(b) The
Representatives shall not have reasonably determined, and advised the Company,
that the Registration Statement, the General Disclosure Package or the
Prospectus, or any amendment thereof or supplement thereto, or any Issuer Free
Writing Prospectus, contains an untrue statement of fact which, in the
Representatives’ reasonable opinion, is material, or omits to state a fact
which, in the Representatives’ reasonable opinion, is material and is required
to be stated therein or necessary to make the statements therein not
misleading.
(c) The
Representatives shall have received (i) the favorable written opinion of
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, United States legal counsel for the Company
in the form attached hereto as Annex V and the favorable written opinion ▇▇▇▇▇▇
Westwood & Riegels, British Virgin Islands counsel for the Company in the
form attached hereto as Annex VI, each dated as of the Closing Date addressed to
the Representatives of the Underwriters and (ii) the favorable written opinion
of Deheng Law Offices, legal counsel for the Company with respect to the laws of
the PRC dated as of the Closing Date, addressed to the Representatives of the
Underwriters in the form attached hereto as Annex VII.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
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(d) Intentionally
Omitted.
(e) The
Representatives shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of each Closing Date to the
effect that: (i) the condition set forth in subsection (a) of this Section 7 has
been satisfied, (ii) as of the date hereof and as of the applicable Closing
Date, the representations and warranties of the Company set forth in Sections 1
and 2 hereof are accurate, (iii) as of the applicable Closing Date, all
agreements, conditions and obligations of the Company to be performed or
complied with hereunder on or prior thereto have been duly performed or complied
with, (iv) the Company and the Subsidiaries have not sustained any material loss
or interference with their respective businesses, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding,
(v) no stop order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereof has been issued and no proceedings therefor
have been initiated or threatened by the Commission, (vi) there are no pro forma
or as adjusted financial statements that are required to be included or
incorporated by reference in the Registration Statement and the Prospectus
pursuant to the Rules and Regulations which are not so included or incorporated
by reference and (vii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus there has
not been any Material Adverse Change or any development involving a prospective
Material Adverse Change, whether or not arising from transactions in the
ordinary course of business.
(f) On
the date of this Agreement and on the Closing Date, the Underwriters shall have
received a “cold comfort” letter from AWC and BDO as of the date of the date of
delivery and addressed to the Underwriters and in form and substance
satisfactory to the Underwriters and Underwriters’ Counsel, confirming that they
are independent certified public accountants with respect to the Company and its
Subsidiaries within the meaning of the Securities Act and the Rules and
Regulations, and stating, as of the date of delivery (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five (5) days prior to the date of such letter), the conclusions and
findings of such firm with respect to the financial information and other
matters relating to the Registration Statement covered by such
letter.
(g) Subsequent
to the execution and delivery of this Agreement or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been any change in the capital stock or long-term debt of
the Company or any Subsidiary or any change or development involving a change,
whether or not arising from transactions in the ordinary course of business, in
the business, condition (financial or otherwise), results of operations,
shareholders’ equity, properties or prospects of the Company and the
Subsidiaries, taken as a whole, including but not limited to the occurrence of
any fire, flood, storm, explosion, accident, act of war or terrorism or other
calamity, the effect of which, in any such case described above, is, in the sole
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the Offering on the terms and in
the manner contemplated in the Prospectus (exclusive of any
supplement).
(h) The
Representatives shall have received from the Company a copy of that certain
Intellectual Property Development Protection Service Agreement, substantially in
the form attached hereto as Annex I, duly executed by the Company, evidencing
that the Company has deposited in escrow written documentation containing the
technical know-how of Mr. ▇▇▇▇ ▇▇▇▇, including the “recipe” referred to in the
Prospectus, including any necessary diagrams, drawings, formulae, descriptions
of manufacturing processes, and all other material necessary to utilize such
trade secrets.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
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(i) The
Representatives shall have received from the Company a copy of that certain
Trade Secret Identification and Confirmatory Assignment, substantially in the
form attached hereto as Annex II, including a copy of that certain ▇▇▇ ▇▇▇
Confidentiality and Rights Agreement, duly executed by the Company and ▇▇▇ ▇▇▇;
a copy of that certain ▇▇▇▇ ▇▇▇▇ Confidentiality and Rights Agreement, duly
executed by the Company and ▇▇▇▇ ▇▇▇▇; a copy of that certain Guo Chuanye
Non-Disclosure Letter Agreement, duly executed by the Company and Guo Chuanye
and shall have received Employee Confidentiality and Rights Agreements,
substantially in the form attached hereto as Annex III, duly executed by the
Company and the Company’s executive officers and all other personnel of the
Company who have access to the technical know-how of Mr. ▇▇▇▇ ▇▇▇▇, including
the “recipe” referred to in the Prospectus, including any necessary diagrams,
drawings, formulae, descriptions of manufacturing processes, and all other
material necessary to utilize such trade secrets.
(j) The
Representatives shall have received a lock-up agreement from each Lock-Up Party,
duly executed by the applicable Lock-Up Party, in each case substantially in the
form attached as Annex IV.
(k) The
Shares shall have been approved for quotation on the Nasdaq Global
Market.
(l) FINRA
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and
arrangements.
(m) No
action shall have been taken and no statute, rule, regulation or order shall
have been enacted, adopted or issued by any federal, state or foreign
governmental or regulatory authority that would, as of the Closing Date, prevent
the issuance or sale of the Securities; and no injunction or order of any
federal, state or foreign court shall have been issued that would, as of the
Closing Date, prevent the issuance or sale of the Securities.
(n) The
Company shall have furnished the Underwriters and Underwriters’ Counsel with
such other certificates, opinions or other documents as they may have reasonably
requested.
If any of
the conditions specified in this Section 7 shall not have been fulfilled when
and as required by this Agreement, or if any of the certificates, opinions,
written statements or letters furnished to the Underwriters or to Underwriters’
Counsel pursuant to this Section 7 shall not be reasonably satisfactory in form
and substance to the Underwriters and to Underwriters’ Counsel, all obligations
of the Underwriters hereunder may be cancelled by the Underwriters at, or at any
time prior to, the consummation of the Closing. Notice of such
cancellation shall be given to the Company in writing, or by
telephone. Any such telephone notice shall be confirmed promptly
thereafter in writing.
8. Indemnification.
(a) The
Company agrees to indemnify and hold harmless the Underwriters and each Person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which such party may become subject, under the
Securities Act or otherwise (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 (i) an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, including the information
deemed to be a part of the Registration Statement at the time of effectiveness
and at any subsequent time pursuant to Rules 430A and 430B of the Rules and
Regulations, the General Disclosure Package, the Prospectus, or any amendment or
supplement thereto (including any documents filed under the Exchange Act and
deemed to be incorporated by reference into the Prospectus), any Issuer Free
Writing Prospectus or in any materials or information provided to investors by,
or with the approval of, the Company in connection with the marketing of the
offering of the Shares (“Marketing Materials”),
including any roadshow or investor presentations made to investors by the
Company (whether in person or electronically) 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 such indemnified party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending against such loss,
claim, damage, liability or action; or (ii) in whole or in part upon any
inaccuracy in the representations and warranties of the Company contained
herein; or (iii) in whole or in part upon any failure of the Company to perform
its obligations hereunder or under law; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the General Disclosure
Package, the Prospectus, or any such amendment or supplement, any Issuer Free
Writing Prospectus or in any Marketing Materials, in reliance upon and in
conformity with the Underwriters’ Information.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
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(b) Each
Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, and each other Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
or the Prospectus, or in any amendment thereof 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
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with the
Underwriters’ Information; provided, however, that in no
case shall any Underwriter be liable or responsible for any amount in excess of
the underwriting discount applicable to the Shares to be purchased by such
Underwriter hereunder. The parties agree that such information
provided by or on behalf of any Underwriter through a Representative consists
solely of the material referred to in the last sentence of Section 1(b)
hereof.
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the claim or the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 8 to the extent
that it is not materially prejudiced as a result thereof and in any event shall
not relieve it from any liability that such indemnifying party may have
otherwise than on account of the indemnity agreement hereunder). In
case any such claim or 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, at its own expense in the defense of such
action, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party; provided however, that counsel to the indemnifying party
shall not (except with the written consent of the indemnified party) also be
counsel to the indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the action,
(iii) the indemnifying party does not diligently defend the action after
assumption of the defense, or (iv) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. No indemnifying party shall, without the prior
written consent of the indemnified parties, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened claim, investigation, action or proceeding in respect of which
indemnity or contribution may be or could have been sought by an indemnified
party under this Section 8 or Section 9 hereof (whether or not the indemnified
party is an actual or potential party thereto), unless (x) such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such claim, investigation, action or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or any failure to act, by or on behalf of the indemnified party, and
(y) the indemnifying party confirms in writing its indemnification obligations
hereunder with respect to such settlement, compromise or
judgment.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
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9. Contribution. In
order to provide for contribution in circumstances in which the indemnification
provided for in Section 8 hereof is for any reason held to be unavailable from
any indemnifying party or is insufficient to hold harmless a party indemnified
thereunder, the Company and the Underwriters shall contribute to the aggregate
losses, claims, damages, liabilities and expenses of the nature contemplated by
such indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, claims, damages, liabilities and expenses suffered by the
Company, any contribution received by the Company from Persons, other than the
Underwriters, who may also be liable for contribution, including Persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company) as incurred to which the
Company and one or more of the Underwriters may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company and
the Underwriters from the Offering or, if such allocation is not permitted by
applicable law, in such proportions as are appropriate to reflect not only the
relative benefits referred to 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, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits
received by the Company and the Underwriters shall be deemed to be in the same
proportion as (x) the total proceeds from the Offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
bears to (y) the underwriting discount or commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of each of the Company and of 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 or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this
Section. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this
Section 9 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any judicial,
regulatory or other legal or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the
provisions of this Section 9: (i) no Underwriter shall be required to contribute
any amount in excess of the amount by which the discounts and commissions
applicable to the Shares underwritten by it and distributed 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 and (ii) no Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each Person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) of the immediately preceding sentence. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 9 or
otherwise. The obligations of the Underwriters to contribute pursuant
to this Section 9 are several in proportion to the respective number of Shares
to be purchased by each of the Underwriters hereunder and not
joint.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
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10. Underwriter
Default.
(a) If
any Underwriter or Underwriters shall default in its or their obligation to
purchase Shares hereunder, and if the Shares with respect to which such default
relates (the “Default
Shares”) do not (after giving effect to arrangements, if any, made by the
Representatives pursuant to subsection (b) below) exceed in the aggregate 10% of
the number of Shares, each non-defaulting Underwriter, acting severally and not
jointly, agrees to purchase from the Company that number of Default Shares that
bears the same proportion of the total number of Default Shares then being
purchased as the number of Shares set forth opposite the name of such
Underwriter on Schedule A hereto
bears to the aggregate number of Shares set forth opposite the names of the
non-defaulting Underwriters, subject, however, to such adjustments to eliminate
fractional shares as the Representatives in their sole discretion shall
make.
(b) In
the event that the aggregate number of Default Shares exceeds 10% of the number
of Shares, the Representatives may in their discretion arrange for themselves or
for another party or parties (including any non-defaulting Underwriter or
Underwriters who so agree) to purchase the Default Shares on the terms contained
herein. In the event that within five calendar days after such a
default the Representatives do not arrange for the purchase of the Default
Shares as provided in this Section 10, this Agreement shall thereupon terminate,
without liability on the part of the Company with respect thereto (except in
each case as provided in Sections 5, 7, 8, 10 and 12(d)) or the Underwriters,
but nothing in this Agreement shall relieve a defaulting Underwriter or
Underwriters of its or their liability, if any, to the other Underwriters and
the Company for damages occasioned by its or their default
hereunder.
(c) In
the event that any Default Shares are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representatives or the Company shall have the right to postpone the Closing
Date for a period, not exceeding five (5) business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus or in any other documents and arrangements, and the Company
agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the reasonable opinion of Underwriters’
Counsel, may thereby be made necessary or advisable. The term
“Underwriter” as used in this Agreement shall include any party substituted
under this Section 10 with like effect as if it had originally been a party to
this Agreement with respect to such Shares.
11. Survival of Representations
and Agreements. All representations and warranties, covenants
and agreements of the Company and the Underwriters contained in this Agreement
or in certificates of officers of the Company or any Subsidiary submitted
pursuant hereto, including the agreements contained in Section 6, the indemnity
agreements contained in Section 8 and the contribution agreements contained in
Section 9 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter or any controlling
Person thereof or by or on behalf of the Company, any of its officers and
directors or any controlling Person thereof, and shall survive delivery of and
payment for the Shares to and by the Underwriters. The
representations contained in Section 2 hereof and the covenants and agreements
contained in Sections 5, 6, 8, 9, this Section 11 and Sections 15 and 16 hereof
shall survive any termination of this Agreement, including termination pursuant
to Section 10 or 12 hereof.
12. Effective Date of Agreement;
Termination.
(a) This
Agreement shall become effective upon the later of: (i) receipt by the
Representatives and the Company of notification of the effectiveness of the
Registration Statement or (ii) the execution of this
Agreement. Notwithstanding any termination of this Agreement, the
provisions of this Section 12 and of Sections 1, 5, 7, 8 and 12 through 17,
inclusive, shall remain in full force and effect at all times after the
execution hereof.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 29
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(b) The
Representatives shall have the right to terminate this Agreement at any time
prior to the consummation of the Closing if: (i) any domestic or international
event or act or occurrence has materially disrupted, or in the opinion of the
Representatives will in the immediate future materially disrupt, the market for
the Company’s securities or securities in general; or (ii) trading on the New
York Stock Exchange, the NASDAQ or the AMEX shall have been suspended or been
made subject to material limitations, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required, on the New York Stock Exchange, the Nasdaq Global Market or the
NYSE AMEX or by order of the Commission or any other governmental authority
having jurisdiction; or (iii) a banking moratorium has been declared by any
state or federal authority or if any material disruption in commercial banking
or securities settlement or clearance services shall have occurred; (iv) any
downgrading shall have occurred in the Company’s corporate credit rating or the
rating accorded the Company’s debt securities or trust preferred stock by any
“nationally recognized statistical rating organization” (as defined for purposes
of Rule 436(g) under the Securities Act) or if any such organization shall have
been publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company’s debt securities; or
(v) (A) there shall have occurred any outbreak or escalation of hostilities or
acts of terrorism involving the United States or there is a declaration of a
national emergency or war by the United States or (B) there shall have been any
other calamity or crisis or any change in political, financial or economic
conditions if the effect of any such event in (A) or (B), in the judgment of the
Representatives, is so material and adverse that such event makes it
impracticable or inadvisable to proceed with the offering, sale and delivery of
the Shares on the terms and in the manner contemplated by the
Prospectus.
(c) Any
notice of termination pursuant to this Section 12 shall be in
writing.
(d) If
this Agreement shall be terminated pursuant to any of the provisions hereof
(other than pursuant to Section 10(b) hereof), or if the sale of the Shares
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by the
Representatives, reimburse the Underwriters for only those out-of-pocket
expenses (including the fees and expenses of their counsel), actually incurred
by the Underwriters in connection herewith up to $150,000 less any amounts
previously paid by the Company.
13. Notices. All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing, and:
(a) if
sent to the Representatives or any Underwriter, shall be mailed, delivered, or
faxed and confirmed in writing, to Maxim Group LLC, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Director of Investment Banking, or Global Hunter Securities, LLC is ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to
Underwriters’ Counsel at ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
and
(b) if
sent to the Company, shall be mailed, delivered, or faxed and confirmed in
writing to the Company and its counsel at the addresses set forth in the
Registration Statement,.
provided, however, that any
notice to an Underwriter pursuant to Section 8 shall be delivered or sent by
mail or facsimile transmission to such Underwriter at its address set forth in
its acceptance facsimile to the Representatives, which address will be supplied
to any other party hereto by the Representatives upon request. Any
such notices and other communications shall take effect at the time of receipt
thereof.
14. Parties; Limitation of
Relationship. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the Underwriters, the Company and the controlling
Persons, directors, officers, employees and agents referred to in Sections 7 and
8 hereof, and their respective successors and assigns, and no other Person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof
are intended to be for the sole and exclusive benefit of the parties hereto and
said controlling Persons and their respective successors, officers, directors,
heirs and legal representative, and it is not for the benefit of any other
Person. The term “successors and assigns” shall not include a
purchaser, in its capacity as such, of Units from any of the
Underwriters.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 30
of 34
15. Governing
Law. This Agreement shall be deemed to have been executed and
delivered in New York and both this Agreement and the transactions contemplated
hereby shall be governed as to validity, interpretation, construction, effect,
and in all other respects by the laws of the State of New York, without regard
to the conflicts of laws principals thereof (other than Section 5-1401 of The
New York General Obligations Law). Each of the Underwriters and the
Company: (a) agrees that any legal suit, action or proceeding arising out of or
relating to this Agreement and/or the transactions contemplated hereby shall be
instituted exclusively in the Supreme Court of the State of New York, New York
County, or in the United States District Court for the Southern District of New
York, (b) waives any objection which it may have or hereafter to the venue of
any such suit, action or proceeding, and (c) irrevocably consents to the
jurisdiction of Supreme Court of the State of New York, New York County, or in
the United States District Court for the Southern District of New York in any
such suit, action or proceeding. Each of the Underwriters and the
Company further agrees to accept and acknowledge service of any and all process
which may be served in any such suit, action or proceeding in the Supreme Court
of the State of New York, New York County, or in the United States District
Court for the Southern District of New York and agrees that service of process
upon the Company mailed by certified mail to the Company’s address or delivered
by Federal Express via overnight delivery shall be deemed in every respect
effective service of process upon the Company, in any such suit, action or
proceeding, and service of process upon the Underwriters mailed by certified
mail to the Underwriters’ address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service process upon the
Underwriter, in any such suit, action or proceeding. THE COMPANY (ON
BEHALF OF ITSELF, THE SUBSIDIARIES AND, TO THE FULLEST EXTENT PERMITTED BY LAW,
ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVE ANY RIGHT
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, THE REGISTRATION STATEMENT AND THE PROSPECTUS.
16. Entire
Agreement. This Agreement, together with the schedule and
exhibits attached hereto and as the same may be amended from time to time in
accordance with the terms hereof, contains the entire agreement among the
parties hereto relating to the subject matter hereof and there are no other or
further agreements outstanding not specifically mentioned herein.
17. Severability. If
any term or provision of this Agreement or the performance thereof shall be
invalid or unenforceable to any extent, such invalidity or unenforceability
shall not affect or render invalid or unenforceable any other provision of this
Agreement and this Agreement shall be valid and enforced to the fullest extent
permitted by law.
18. Amendment. This
Agreement may only be amended by a written instrument executed by each of the
parties hereto.
19. Waiver,
etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Agreement shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 31
of 34
20. No Fiduciary
Relationship. The Company hereby acknowledges that the Underwriters are
acting solely as underwriters in connection with the offering of the Company’s
securities. The Company further acknowledge that the Underwriters are acting
pursuant to a contractual relationship created solely by this Agreement entered
into on an arm’s length basis and in no event do the parties intend that the
Underwriters act or be responsible as a fiduciary to the Company, its
management, shareholders, creditors or any other person in connection with any
activity that the Underwriters may undertake or have undertaken in furtherance
of the offering of the Company’s securities, either before or after the date
hereof,. The Underwriters hereby expressly disclaim any fiduciary or similar
obligations to the Company, either in connection with the transactions
contemplated by this Agreement or any matters leading up to such transactions,
and the Company hereby confirms its understanding and agreement to that effect.
The Company hereby further confirms its understand that no Underwriter has
assumed an advisory or fiduciary responsibility in favor of the Company with
respect to the Offering contemplated hereby or the process leading thereto,
including any negotiation related to the pricing of the Units; and the Company
has consulted its own legal and financial advisors to the extent it has deemed
appropriate in connection with this Agreement and the Offering. The Company and
the Underwriters agree that they are each responsible for making their own
independent judgments with respect to any such transactions, and that any
opinions or views expressed by the Underwriters to the Company regarding such
transactions, including but not limited to any opinions or views with respect to
the price or market for the Company’s securities, do not constitute advice or
recommendations to the Company. The Company hereby waives and releases, to the
fullest extent permitted by law, any claims that the Company may have against
the Underwriters with respect to any breach or alleged breach of any fiduciary
or similar duty to the Company in connection with the transactions contemplated
by this Agreement or any matters leading up to such transactions.
21. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Delivery of a signed counterpart of this
Agreement by facsimile transmission shall constitute valid and sufficient
delivery thereof.
22. Headings. The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 32
of 34
23. Time is of the
Essence. Time shall be of the essence of this
Agreement. As used herein, the term “business day” shall mean any day
other than a Saturday, Sunday or any day on which the major stock exchanges in
New York, New York are not open for business.
[Signature
Pages Follow]
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 33
of 34
If the
foregoing correctly sets forth your understanding, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
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Very
truly yours,
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||
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By:
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/s/ ▇▇▇▇ ▇▇▇▇
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Name:
▇▇▇▇ ▇▇▇▇
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Title:
Chairman and CEO
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||
Maxim
Group LLC
Global
Hunter Securities, LLC
November
19, 2010
Page 34
of 34
Accepted
by the Representative, acting for themselves and as
Representative
of the Underwriters named on Schedule A attached
hereto,
as
of the date first written above:
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MAXIM
GROUP LLC
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By:
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|||
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Name:
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/s/
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
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||
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Title:
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Executive
Managing Director — Investment Banking
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GLOBAL
HUNTER SECURITIES, LLC
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By:
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|||
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Name:
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/s/
▇▇▇
▇▇▇▇▇▇▇
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||
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Title:
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Managing Director | ||
ANNEX
I
Form
of Intellectual Property Development Protection Service Agreement
V-1
Intellectual
Property Development Protection Agreement
Deposit Account Number:
____________________
|
1.
|
Introduction.
|
This
Intellectual Property Development
Protection Service Agreement (the
“Agreement”) is entered
into by and between Shengkai
Innovations, Inc., a Florida corporation, located at
_____________________________ (the “Depositor”) and by Iron
Mountain Intellectual Property Management, Inc. (“Iron Mountain”) on this __ day
of __________, 2010 (the “Effective
Date”). Depositor and Iron Mountain may be referred to
individually as a "Party" or collectively as the "Parties" throughout this
Agreement.
The use
of the term “Services”
in this Agreement shall refer to Iron Mountain Services that facilitate the
creation, management, and enforcement of escrow accounts. A Party
shall request Services under this Agreement (i) by submitting a work request
associated for certain Iron Mountain Escrow Services via the online portal
maintained at the Website located at ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ or
any other Websites or Web pages owned or controlled by Iron Mountain that are
linked to that Website (collectively the “Iron Mountain Website”), or
(ii) by submitting a written work request attached hereto as Exhibit A (each,
individually, a “Work
Request”).
|
2.
|
Depositor
Responsibilities.
|
|
(a)
|
Depositor
must authorize and designate one or more persons whose action(s) will
legally bind the Depositor (“Authorized Person(s)”
who shall be identified in the Authorized Person(s)/Notices Table of this
Agreement) and who may manage
the Iron Mountain escrow account through the Iron Mountain Website or via
written Work Request. Authorized Person(s) will maintain the
accuracy of their name and contact information provided to Iron Mountain
during the Term of this Agreement (the “Depositor
Information”).
|
|
(b)
|
Depositor
will make an initial deposit of proprietary technology and/or other
materials (“Deposit
Material”) to Iron Mountain within ninety (90) days of the
Effective Date. Depositor may also update Deposit Material from
time to time during the Term of this Agreement provided a minimum of one
(1) complete copy of Deposit Material is deposited with Iron Mountain at
all times. At the time of each deposit or update, Depositor
will provide an accurate and complete description of all Deposit Material
sent to Iron Mountain via the Iron Mountain Website or using the form
attached hereto as Exhibit B.
|
|
(d)
|
Depositor
represents that it lawfully possesses all Deposit Material provided to
Iron Mountain under this Agreement free of any liens or encumbrances as of
the date of their deposit. Any Deposit Material liens or
encumbrances made after their deposit will not prohibit, limit, or alter
the rights and obligations of Iron Mountain under this
Agreement.
|
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3.
|
Iron Mountain
Responsibilities.
|
|
(a)
|
Iron
Mountain agrees to use commercially reasonable efforts to provide the
Services requested by authorized Depositor representatives in a Work
Request. Iron Mountain may reject a Work Request (in whole or
in part) that does not contain information that Iron Mountain deems
necessary to perform the Services.
|
|
(b)
|
Iron
Mountain will conduct a deposit inspection upon receipt of any Deposit
Material and associated Exhibit B, solely to confirm that the Deposit
Material generally fits the description provided in Exhibit B, i.e. floppy
drive; or collection of diagrams and instructions. Iron
Mountain will not review the contents of Deposit Materials. If
Iron Mountain determines that the Deposit Material does not match the
description provided by Depositor represented in Exhibit B attached
hereto, Iron Mountain will provide Depositor with notice by electronic
mail, telephone, or regular mail of such discrepancies. Iron
Mountain will work directly with the Depositor to resolve any such
discrepancies prior to accepting Deposit Material. Iron
Mountain will provide Depositor with notice from time to time during the
first ninety (90) days from the Effective date as a reminder that
submission of initial Deposit Material is
required.
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|
I09
May
|
Page
1 of 8
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(c)
|
Iron
Mountain will hold and protect all Deposit Material as confidential
information, in physical and/or electronic vaults that are either owned or
under the direct control of Iron Mountain, and will not disclose or use,
or permit access to, the Deposit Materials or copies thereof, except as
expressly permitted herein.
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(d)
|
Iron
Mountain shall comply with written request of Depositor to access copies
of the Deposit Material pursuant to Section
11(c).
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4.
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Payment.
|
Depositor
shall pay to Iron Mountain all fees as set forth in the Work Request form
attached hereto as Exhibit A (“Service
Fees”). Except as set forth below, all Service Fees are due to
Iron Mountain within thirty (30) calendar days from the date of invoice in U.S.
currency and are non-refundable (except as expressly provided
herein). Iron Mountain may update Service Fees with a ninety (90)
calendar day written notice to Depositor during the Term of this Agreement.
Depositor is liable for any taxes related to Services purchased under this
Agreement or shall present to Iron Mountain an exemption certificate acceptable
to the taxing authorities. Applicable taxes shall be billed as a
separate item on the invoice, to the extent possible. Any Service
Fees not collected by Iron Mountain when due shall bear interest until paid at a
rate of 1.25% per month (15% per annum) or the maximum rate permitted by law,
whichever is less. Delinquent accounts may be referred to a
collection agency at the sole discretion of Iron
Mountain. Notwithstanding, the non-performance of any obligations of
Depositor to deliver Deposit Material under the License Agreement or this
Agreement, Iron Mountain is entitled to be paid all Service Fees that accrue
during the Term of this Agreement. All Service Fees will not be
subject to offset except as specifically provided hereunder.
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5.
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Term and
Termination.
|
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(a)
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The
initial “Term” of
this Agreement is for a period of one (1) year from the Effective Date and
will automatically renew for additional one (1) year Terms and continue in
full force and effect until one of the following events occur: (i)
Depositor provides written instructions of its intent to cancel this
Agreement within sixty (60) days to Iron Mountain; or (ii) Iron Mountain
provides a sixty (60) day written notice to the Depositor Authorized
Persons that it can no longer perform the Services under this Agreement;
in which event, Iron Mountain shall refund any Service Fees paid for the
then current annual period in which such a termination occurs, pro rata,
based on the period of time remaining in such annual period from the date
of such termination.
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(b)
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Subject
to the foregoing termination provisions, and upon termination of this
Agreement, Iron Mountain shall return, destroy, or otherwise deliver the
Deposit Materials in accordance with Depositor’s instructions as provided
in a Work Request. If there are no instructions, Iron Mountain
may, at its sole discretion, destroy the Deposit Materials or return them
to Depositor.
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(c)
|
In
the event this Agreement is terminated under Sections 5(a)(ii) above,
Depositor may provide Iron Mountain with written instructions authorizing
Iron Mountain to forward the Deposit Material to another escrow company
and/or agent or other designated recipient. If Iron Mountain
does not receive written instructions within sixty (60) calendar days
after the date of the notice of termination, Iron Mountain shall return or
destroy the Deposit Material.
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(d)
|
In
the event of the nonpayment of Service Fees owed to Iron Mountain, Iron
Mountain shall provide Depositor with notice by electronic mail and/or
regular mail. If the past due payment is not received in full
by Iron Mountain within thirty (30) calendar days of the date of such
notice, then Iron Mountain shall have the right to terminate this
Agreement at any time thereafter by sending notice by electronic mail
and/or regular mail of termination to Depositor. Iron Mountain
shall have no obligation to take any action under this Agreement so long
as any Iron Mountain invoice issued for Services rendered under this
Agreement remains
uncollected.
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6.
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Infringement
Indemnification.
|
Anything
in this Agreement to the contrary notwithstanding, Depositor, at its own
expense, shall defend and hold Iron Mountain (the “Indemnified Party”) fully
harmless against any claim or action asserted against the Indemnified Party
(specifically including costs and reasonable attorneys’ fees associated with any
such claim or action) to the extent such claim or action is based on an
assertion that the Deposit Material as provided by Depositor infringes any
patent, copyright, license or other proprietary right of any third
party. When the Indemnified party has notice of a claim or action, it
shall promptly notify Depositor in writing. At its option, Depositor
may elect to control defense of such claim or action and may elect to enter into
a settlement agreement, provided that no such settlement or defense shall
include any admission or implication of wrongdoing on the part of the
Indemnified Party without such Party’s prior written consent, which consent
shall not be unreasonably delayed or withheld. Iron Mountain shall
have the right to employ separate counsel and participate in the defense of any
claim at its own expense.
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I09
May
|
Page 2
of 8
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7.
|
Warranties.
|
|
(a)
|
Iron
Mountain. ANY AND ALL SERVICES PROVIDED HEREUNDER SHALL
BE PERFORMED IN A WORKMANLIKE MANNER. EXCEPT AS SPECIFIED IN
THIS SECTION, ALL EXPRESS OR IMPLIED CONDITIONS, REPRESENTATIONS, AND
WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OR
CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
SATISFACTORY QUALITY, AGAINST INFRINGEMENT OR ARISING FROM A COURSE OF
DEALING, USAGE, OR TRADE PRACTICE, ARE HEREBY EXCLUDED TO THE EXTENT
ALLOWED BY APPLICABLE LAW. AN AGGRIEVED PARTY MUST NOTIFY IRON
MOUNTAIN PROMPTLY OF ANY CLAIMED BREACH OF ANY WARRANTIES. THIS
DISCLAIMER AND EXCLUSION SHALL APPLY EVEN IF THE EXPRESS WARRANTY AND
LIMITED REMEDY SET FORTH ABOVE FAILS OF ITS ESSENTIAL
PURPOSE. THE WARRANTY PROVIDED IS SUBJECT TO THE LIMITATION OF
LIABILITY SET FORTH IN SECTION 9
HEREIN.
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|
(b)
|
Depositor. Depositor
warrants that all Depositor Information provided hereunder is accurate and
reliable and undertakes to promptly correct and update such Depositor
Information during the Term of this
Agreement.
|
|
8.
|
Confidential
Information.
|
Iron
Mountain shall have the obligation to reasonably protect the confidentiality of
the Deposit Material. Except as provided in this Agreement Iron
Mountain shall not disclose, transfer, make available or use the Deposit
Material. Iron Mountain shall not disclose the terms of this
Agreement to any third Party. If Iron Mountain receives a subpoena or
any other order from a court or other judicial tribunal pertaining to the
disclosure or release of the Deposit Material, Iron Mountain will immediately
notify the Parties to this Agreement unless prohibited by law. It
shall be the responsibility of Depositor to challenge any such order; provided,
however, that Iron Mountain does not waive its rights to present its position
with respect to any such order. Iron Mountain will not be required to
disobey any order from a court or other judicial tribunal.
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9.
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Limitation of
Liability.
|
EXCEPT
FOR: (I) PROVEN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; OR (II) THE INFRINGEMENT
INDEMNIFICATION OBLIGATIONS OF SECTION 6, ALL OTHER LIABILITY RELATED TO THIS
AGREEMENT, IF ANY, WHETHER ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR
OTHERWISE, OF ANY PARTY TO THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNT EQUAL
TO ONE YEAR OF FEES PAID TO IRON MOUNTAIN UNDER THIS AGREEMENT. IF
CLAIM OR LOSS IS MADE IN RELATION TO A SPECIFIC DEPOSIT OR DEPOSITS, SUCH
LIABILITY SHALL BE LIMITED TO THE FEES RELATED SPECIFICALLY TO SUCH
DEPOSITS.
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10.
|
Consequential Damages
Waiver.
|
IN NO
EVENT SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE TO ANOTHER PARTY FOR ANY
INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST PROFITS, ANY COSTS
OR EXPENSES FOR THE PROCUREMENT OF SUBSTITUTE SERVICES (EXCLUDING SUBSTITUTE
ESCROW SERVICES), OR ANY OTHER INDIRECT DAMAGES, WHETHER ARISING IN CONTRACT,
TORT (INCLUDING NEGLIGENCE) OR OTHERWISE EVEN IF THE POSSIBILITY THEREOF MAY BE
KNOWN IN ADVANCE TO ONE OR MORE PARTIES.
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11.
|
General.
|
|
(a)
|
Incorporation of Work
Requests. All Depositor Work Requests which are accepted
by Iron Mountain will be incorporated into this
Agreement.
|
|
(b)
|
Purchase
Orders. The terms and conditions of this Agreement
prevail regardless of any conflicting or additional terms on any Purchase
Order or other correspondence. Any contingencies or additional
terms contained on any Purchase Order are not binding upon Iron
Mountain. All Purchase Orders are subject to approval and
acceptance by Iron Mountain.
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I09
May
|
Page 3
of 8
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(c)
|
Copies. Iron
Mountain shall have the right to make copies of all Deposit Material as
required by a Work Request. Iron Mountain shall copy all
copyright, nondisclosure, and other proprietary notices and titles
contained on Deposit Material onto any such copies made by Iron
Mountain. Any copying expenses incurred by Iron Mountain as a
result of a Work Request to copy will be borne by the Party requesting the
copies. Iron Mountain may request Depositor’s reasonable
cooperation in promptly copying Deposit Material in order for Iron
Mountain to perform this Agreement. During the Term of the Agreement,
upon written request by Depositor, Depositor
shall be entitled to receive one or more copies of the Deposit Materials
as long as the original Deposit Materials remain in Iron Mountain's
possession.
|
|
(d)
|
Choice of
Law. The validity, interpretation, and performance of
this Agreement shall be controlled by and construed under the laws of the
State of New York, as if performed wholly within the state and without
giving effect to the principles of conflicts of
laws.
|
|
(e)
|
Right to Rely on
Instructions. Iron Mountain may act in reliance upon any
instruction, instrument, or signature given in accordance with the Work
Request or by an Authorized Person. Iron Mountain will not be
required to inquire into the truth or evaluate the merit of any statement
or representation contained in any notice or document. Iron
Mountain shall not be responsible for failure to act as a result of causes
beyond the reasonable control of Iron
Mountain.
|
|
(f)
|
Force
Majeure. Except for the obligation to pay monies due and
owing, no Party shall be liable for any delay or failure in performance
due to events outside the defaulting Party’s reasonable control, including
without limitation acts of God, earthquake, labor disputes, shortages of
supplies, riots, war, acts of terrorism, fire, epidemics, or delays of
common carriers or other circumstances beyond its reasonable
control. The obligations and rights of the excused Party shall
be extended on a day-to-day basis for the time period equal to the period
of the excusable delay.
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|
(g)
|
Notices. All
correspondence, including invoices, payments, and other documents and
communications, shall be sent by (i) electronic mail; (ii) via regular
mail to the Parties at the addresses specified in the Authorized
Persons/Notices Table which shall include the title(s) of the
individual(s) authorized to receive notices; or (iii) via the online
portal maintained at the Iron Mountain Website. It shall be the
responsibility of the Parties to notify each other as provided in this
Section in the event of a change of physical or e-mail
addresses. The Parties shall have the right to rely on the last
known address of the other Parties. Any correctly addressed
notice or last known address of the other Parties that is relied on herein
that is refused, unclaimed, or undeliverable because of an act or omission
of the Party to be notified as provided herein shall be deemed effective
as of the first date that said notice was refused, unclaimed, or deemed
undeliverable by electronic mail, the postal authorities by mail, through
messenger or commercial express delivery
services.
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|
(h)
|
No
Waiver. No waiver of rights under this Agreement by any
Party shall constitute a subsequent waiver of this or any other right
under this Agreement.
|
|
(i)
|
Assignment. No assignment of
this Agreement by Depositor or any rights or obligations of under this
Agreement is permitted without the written consent of Iron Mountain, which
shall not be unreasonably withheld or
delayed.
|
|
(j)
|
Severability. In
the event any of the terms of this Agreement become or are declared to be
illegal or otherwise unenforceable by any court of competent jurisdiction,
such term(s) shall be null and void and shall be deemed deleted from this
Agreement. All remaining terms of this Agreement shall remain
in full force and effect. Notwithstanding the foregoing, if
this paragraph becomes applicable and, as a result, the value of this
Agreement is materially impaired for either Party, as determined by such
Party in its sole discretion, then the affected Party may terminate this
Agreement by notice to the others.
|
|
(k)
|
Independent Contractor
Relationship. Depositor understands, acknowledges, and
agrees that Iron Mountain’s relationship with Depositor will be that of an
independent contractor and that nothing in this Agreement is intended to
or should be construed to create a partnership, joint venture, or
employment relationship.
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|
I09
May
|
Page 4
of 8
|
|
(l)
|
Attorneys'
Fees. In any suit or proceeding between the Parties
relating to this Agreement, the prevailing Party will have the right to
recover from the other(s) it’s costs and reasonable fees and expenses of
attorneys, accountants, and other professionals incurred in connection
with the suit or proceeding, including costs, fees and expenses upon
appeal, separately from and in addition to any other amount included in
such judgment. This provision is intended to be severable from
the other provisions of this Agreement, and shall survive and not be
merged into any such judgment.
|
|
(m)
|
No
Agency. No Party has the right or authority to, and
shall not, assume or create any obligation of any nature whatsoever on
behalf of the other Parties or bind the other Parties in any respect
whatsoever.
|
|
(n)
|
Disputes. Any
dispute, difference or question relating to or arising among any of the
Parties concerning the construction, meaning, effect or implementation of
this Agreement or any Party hereof will be submitted to, and settled by
arbitration by a single arbitrator chosen by the New York Regional Office
of the American Arbitration Association in accordance with the Commercial
Rules of the American Arbitration Association. The arbitrator
shall apply New York law. Unless otherwise agreed by the
Parties, arbitration will take place in New York City, New York,
U.S.A. Any court having jurisdiction over the matter may enter
judgment on the award of the arbitrator. Service of a petition
to confirm the arbitration award may be made by regular mail or by
commercial express mail, to the attorney for the Party or, if
unrepresented, to the Party at the last known business
address.
|
|
(o)
|
Regulations. Depositor
is responsible for and warrants, to the extent of its individual actions
or omissions, compliance with all applicable laws, rules and regulations,
including but not limited to: customs laws; import; export and re-export
laws; and government regulations of any country from or to which the
Deposit Material may be delivered in accordance with the provisions of
this Agreement.
|
|
(p)
|
Counterparts. This
Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
|
|
(q)
|
Survival. Sections
5 (Term and Termination), 6 (Infringement Indemnity), 7 (Warranties), 8
(Confidential Information), 9 (Limitation of Liability), 10 (Consequential
Damages Waiver), and 11 (General) of this Agreement shall survive
termination of this Agreement or any Exhibit attached
hereto.
|
The
Parties agree that this Agreement is the complete agreement between the Parties
hereto concerning the subject matter of this Agreement and replaces any prior or
contemporaneous oral or written communications between the
Parties. There are no conditions, understandings, agreements,
representations, or warranties, expressed or implied, which are not specified
herein. Each of the Parties herein represents and warrants that the
execution, delivery, and performance of this Agreement has been duly authorized
and signed by a person who meets statutory or other binding approval to sign on
behalf of its business organization as named in this Agreement. This
Agreement may only be modified by mutual written agreement of the
Parties.
DEPOSITOR
|
Signature:
|
||
|
Print
Name:
|
||
|
Title:
|
||
|
Date:
|
||
|
Email
Address
|
IRON
MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.
|
Signature:
|
||
|
Print
Name:
|
||
|
Title:
|
||
|
Date:
|
||
|
Email
Address:
|
▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
|
I09
May
|
Page 5
of 8
|
Authorized
Persons/Notices Table
Please
provide the name and contact information of the Authorized Persons under this
Agreement. All Notices will be sent to these individuals at the
addresses set forth below.
DEPOSITOR
Authorized
Person(s)/Notices Table
Please
provide the name(s) and contact information of the Authorized Person(s) under
this Agreement. All Notices will be sent electronically and/or
through regular mail to the appropriate address set forth below.
|
Print
Name:
|
Print
Name:
|
|||
|
Title:
|
Title:
|
|||
|
Email
Address
|
Email
Address
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|||
|
Province/City/State
|
Province/City/State
|
|||
|
Postal/Zip
Code
|
Postal/Zip
Code
|
|||
|
Phone
Number
|
Phone
Number
|
|||
|
Fax
Number
|
Fax
Number
|
IRON
MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.
All
notices should be sent to ▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ OR Iron
Mountain, Attn: Contract Administration, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇.
|
I09
May
|
Page 6
of 8
|
Exhibit
A
Escrow
Service Work Request
|
Service
Check
box (es) to order service
|
Service
Description
|
One-Time
Fees
|
Annual
Fees
|
Paying
Party
Check
box to identify the
Paying Party for each service below. |
||||
|
x
Add and Manage
New Escrow Account
|
Iron
Mountain will open a new escrow deposit account that includes a minimum of
one (1) Depositor and one (1) complete set of Deposit Material. All
Deposit Material will be securely stored in controlled vaults that are
owned and/or operated by Iron Mountain. Account services include unlimited
deposits, electronic vaulting, access to Iron Mountain Connect™ Escrow
Management Center for secure online account management and submission of
electronic Work Requests, and secure destruction of deposit materials upon
account termination.
Iron
Mountain will assign a Client Manager for each escrow account. These
Managers will provide client training from time to time to facilitate
secure Internet access to escrow account(s). Assigned Managers will also
ensure timely fulfillment of client Work Requests (e.g., deposit updates)
and communication of status.
|
$1500
|
$1000
|
x Depositor
|
||||
|
¨
Add Deposit
Tracking Notification
|
Iron
Mountain will send periodic notices to Depositor related to Deposit
Material as specified within the terms of the agreement
|
N/A
|
$
|
¨ Depositor
|
||||
|
¨
Add Dual
Vaulting
|
Iron
Mountain will fulfill a Work Request to store deposit materials in one
additional location as defined within the Service Agreement. Duplicate
storage request may be in the form of either physical media or electronic
storage.
|
N/A
|
$
|
¨ Depositor
|
||||
|
¨
Add Custom
Services
|
Iron
Mountain will provide its Escrow Expert™ consulting Services (e.g.,
licensing escrow strategy development, dual/remote vaulting, account
consolidation) based on a custom SOW mutually agreed to by all
Parties.
|
$150/hour
|
N/A
|
¨ Depositor
|
||||
|
¨
Delete
Account
|
Iron
Mountain will fulfill a Work Request to terminate an existing escrow
account by removing Deposit Material from the vault and then either
securely destroying or returning the Deposit Material via commercial
express mail carrier as instructed. All accrued Services Fees must be
collected by Iron Mountain prior to completing fulfillment to terminate an
existing escrow account.
|
No
Charge
|
No
Charge
|
No
Charge
|
||||
|
¨
Replace/Delete
Deposit Materials
|
Iron
Mountain will replace/delete deposit material in accordance with the terms
of the agreement. Materials will be returned as directed by Depositor or
destroyed using Iron Mountain Secure Shredding
|
No
Charge
|
No
Charge
|
No
Charge
|
Upon
Escrow Service Agreement execution, please provide your initials below in the
appropriate location to indicate your acceptance of this Escrow Services Work
Request inclusive of agreed Services pricing and indication that Depositor
acknowledges that it is financially responsible for payment of specific
Services.
Depositor
Initials__________
Note:
Clients may submit Work Requests electronically through their escrow account
online OR may complete this form along with any other supporting exhibits
required and email and/or fax this Work Request to their assigned Client Manager
at Iron Mountain for fulfillment.
|
I09
May
|
Page 7
of 8
|
Exhibit
B
Deposit
Material Description
Deposit Account Number:
__________________
Company
Name: _____________________________
Deposit Name
________________________ and
Deposit Version _____
(Deposit Name will appear in account history reports)
Deposit
Media (Please Label All Media with the Deposit Name Provided Above)
|
Media
Type
|
Quantity
|
Media
Type
|
Quantity
|
|||
|
¨ Internet File
Transfer
|
N/A
|
¨ 3.5” Floppy
Disk
|
||||
|
¨ CD-ROM /
DVD
|
¨
Documentation
|
|||||
|
¨ DLT
Tape
|
¨ Hard Drive /
CPU
|
|||||
|
¨ DAT
Tape
|
¨ Circuit
Board
|
|
¨ Other (describe
here):
|
Deposit
Encryption (Please check either “Yes” or “No” below and complete as
appropriate)
If
yes, please include any passwords and decryption tools description
below. Please also deposit all necessary encryption software with
this deposit.
Encryption
tool name____________________________________
Version______________________________
Hardware
required___________________________________________________________________________
Software
required____________________________________________________________________________
Other
required
information_____________________________________________________________________
Deposit
Certification (Please check the box below to Certify and Provide your
Contact Information)
|
¨ I
certify for Depositor that the above described Deposit Material has been
transmitted electronically or sent via commercial express mail carrier to
Iron Mountain at the address below.
|
¨ Iron
Mountain has inspected and accepted the above described Deposit Material
either electronically or physically. Iron Mountain will notify
Depositor of any discrepancies.
|
|
|
Name:
|
Name:
|
|
|
Date:
|
Date:
|
|
|
Email
Address:
|
||
|
Telephone
Number:
|
||
|
Fax
Number:
|
Note: If
Depositor is physically sending Deposit Material to Iron Mountain, please label
all media and mail all Deposit Material with the appropriate Exhibit B via
commercial express carrier to the following address:
Iron
Mountain Intellectual Property Management, Inc.
Attn:
Vault Administration
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
I09
May
|
Page 8
of 8
|
ANNEX
II
Form
of Trade Secret Identification and Confirmatory Assignment
V-2
TRADE SECRETS IDENTIFICATION
AND CONFIRMATORY ASSIGNMENT
This
Trade Secrets Identification and Confirmatory Assignment (“Agreement”) is
entered into effective as of November __, 2010 (the “Effective
Date”), by and between ▇▇▇▇ ▇▇▇▇, an individual with an address at Room 204-209,
▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ District, Tianjin, People’▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (“Wang”), and Shengkai Innovations, Inc., a Florida
corporation having an office at ▇▇. ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇)
Economic and Technology Development Area, Tianjin, People’s Republic of China
30035 (“Company”; Company and Wang each individually a “Party”, and collectively
the “Parties”).
RECITALS
A. WHEREAS,
Wang is and has been employed by the Company, currently, as of the Effective
Date, as the Chief Executive Officer and Chairman of the Board of Directors of
the Company;
B. WHEREAS,
Wang developed or otherwise knows or has in his possession certain Trade Secrets
(as hereinafter defined) of the Company, including knowledge, information,
specifications, procedures, know how and trade secrets relating to the products
of the Company including the recipe, formulation, processing and manufacture of
products of the Company;
C. WHEREAS,
to facilitate the stock offering contemplated by that certain Underwriting
Agreement dated November 19, 2010, Wang has agreed to provide an identification
and explanation of the Trade Secrets, including Trade Secret Material, as
hereinafter defined to include diagrams, drawing, specifications and other
materials and information as necessary to enable the Company to understand and
use such Trade Secrets;
D. WHEREAS,
Company and Wang will cause the Trade Secret Material to be deposited in escrow
pursuant to the escrow agreement between Shengkai Innovations, Inc. and Iron Mountain Intellectual Property
Management, Inc., the form of which is attached hereto as Exhibit A (“Escrow
Agreement”); and
E. WHEREAS,
Wang desires to confirm that all rights, title and interest in and to the Trade
Secrets are owned by the Company.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing Recitals, the terms and conditions
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each Party hereto hereby agrees as
follows:
1. Trade Secrets
Definition. For purposes of this Agreement, the term “Trade
Secrets” means all of the following:
(a) all
knowledge, information, specifications, procedures, techniques, technology,
concepts, know how and creativity that relate to the products of the Company, or
that relate to or arise from the formulation, design, preparation, mixing,
processing, manufacturing, cooking, testing, quality control, packaging,
promotion, marketing, distribution, sales, timing of activities, composition,
ingredients, quantities, qualities, recipes, formulas, supplies, equipment,
sources of the foregoing, characteristics or nature of the products of the
Company, known to, owned, held, acquired, obtained or developed by
Wang;
(b)
all samples, prototypes, models,
inventions, products, test results, data, written information, documents,
programs, diskettes, notes, memoranda, instructions, proposals, copies,
drawings, diagrams, sketches, pictures, prints, photographs, designs,
depictions, graphics, and other materials, items, elements, assets and
properties, that relate to or arise from the foregoing, known to, owned, held,
acquired, obtained or developed by Wang; and
(c) all
trade secret rights, confidential information rights, copyrights, patents,
patent rights, shop rights, trademarks, service marks, trade names, goodwill
pertaining to the foregoing, rights under the laws of the United States, the
Peoples Republic of China, and other countries and international conventions,
registration rights, pending application rights, renewals, assignments and
extensions of the foregoing, and all rights under all contracts, agreements,
licenses and leases, and other rights, that relate to or arise from any of the
foregoing.
For the
avoidance of doubt, and further to and not in limitation of the foregoing, the
“recipe” to the unique method for creating structural ceramic valves referred to
in that certain Preliminary Prospectus Supplement of the Company dated November
18, 2010, is a Trade Secret of the Company, and the Company owns all rights,
title and interest in and to this recipe, and any and all modifications,
additions or improvements in or related thereto.
2. Acknowledgement and
Confirmatory Assignment. For the avoidance of doubt, and
further to and not in limitation of the definition of Trade Secrets above, the
“recipe” to the unique method for creating structural ceramic valves referred to
in that certain Preliminary Prospectus Supplement of the Company dated November
18, 2010, is a Trade Secret of the Company, and Wang hereby acknowledges and
agrees that the Company owns all rights, title and interest in and to this
recipe, and any and all modifications, additions or improvements in or related
thereto. To confirm Company’s ownership of the Trade Secrets
including this recipe, and in addition to his acknowledgement and agreement
above, Wang hereby unconditionally assigns, transfers, grants, conveys to
Company, forever, and Company hereby receives, and acquires , all right, title,
interest, tangible and intangible property, benefits, powers and privileges, of
every kind and nature, whatsoever, throughout the world, now and in the future,
in and to the Trade Secrets, including the recipe, individually and
collectively, without the necessity of any further consideration. To
the extent the foregoing assignment may, for any reason, be invalid or
unenforceable with respect to any of the Trade Secrets, all such Trade Secrets
shall be considered works made for hire by Wang for Company within the meaning
of Title 17 of the United States Code, or its successor provision, and all such
Trade Secrets shall be owned by and remain exclusively the property of
Company.
3. Identification, Disclosure
and Delivery to Escrow of the Trade Secrets. Upon execution of
this Agreement, Wang shall identify in tangible form, whether written or
electronic, all Trade Secrets. Wang shall execute and deliver all
documents and other items and materials to, and cooperate with and undertake to
perform all tasks reasonably requested by, Company, to make the confirmatory
assignment and disclosure herein effective, and to allow Company to perfect or
improve Company’s rights in the Trade Secrets. Further and not in
limitation of the foregoing, upon execution of this Agreement, Wang
shall:
- 2
-
(a) identify
the Trade Secrets in writing or in an electronic medium, including any diagrams,
drawings, specifications, ingredients, timing of events, characteristics or
quality of material or ingredients, processes or methods of production and any
other information or material that is necessary for the Company to utilize such
Trade Secrets (such materials, “Trade Secret Material”);
(b) fully
cooperate with the Company to confirm the completeness and accuracy of the
identified and disclosed Trade Secret Material, including allowing different
employees responsible for discrete parts of the process or recipe to review that
portion of the Trade Secret Material to confirm that such portion is complete
and accurate;
(c) assist
Company in causing a complete and accurate copy of the Trade Secret Material to
be delivered and deposited in escrow pursuant to the Escrow Agreement;
and
(d) assist
Company in causing any updates, improvements, versions or other changes to the
Trade Secret Material to be deposited from time to time pursuant to the Escrow
Agreement to ensure that the Trade Secret Material remains current, and
accurately reflects the Trade Secrets in use by the Company from time to
time.
4. Confidentiality and Rights
Agreements. In connection with the identification, disclosure
and delivery to escrow of the Trade Secrets pursuant to Section 3, and as of the
Effective Date of this Agreement, Company shall ensure that any employee of
Company with access to any part of the Trade Secret Material executes
Confidentiality and Rights Agreement substantially in the form attached hereto
as Exhibit B. Further, upon execution of the Agreement,
(a) Company
will cause ▇▇▇ ▇▇▇ to execute the Confidentiality and Rights Agreement attached
hereto as Exhibit C;
(b) Wang
will execute the Confidentiality and Rights Agreement attached hereto as Exhibit
D; and
(c) Wang
will have his mother, Guo Chuanye, execute the Non-Disclosure Letter Agreement
attached hereto as Exhibit E.
5. Representations.
(a) Wang
represents and warrants that:
(i) Other
than ▇▇▇ ▇▇▇ and Guo Chuanye, Wang has not disclosed the Trade Secrets to any
other person or entity, and to Wang’s best knowledge, no other person
or entity other than Ms. ▇▇▇ ▇▇▇ and ▇▇. ▇▇▇ Chuanye have knowledge of the Trade
Secrets;
- 3
-
(ii) The
Trade Secrets are free and clear of all claims, liens and
encumbrances;
(iii) Company
is, and the confirmatory assignment herein confirms that Company is and shall
be, the exclusive owner of all right, title and interest in the Trade
Secrets;
(iv) Wang
has not granted and will not grant any assignments, licenses, sublicenses,
transfers of ownership or other rights in or encumbrances of the Trade Secrets,
and has not and will not use, apply, register or disclose the Trade Secrets,
except as set forth in this Agreement;
(v) the
Trade Secrets do not infringe the copyrights, patents, trademarks, service
marks, trade names, trade secret rights or other rights of any third
party;
(vi) there
are no third parties who now claim or have ever claimed rights in, have
threatened suit concerning, or otherwise taken any action to enforce any claimed
rights in, the Trade Secrets; and
(vii) Company
is not assuming any liabilities whatsoever under this Agreement.
(b) Each
Party represents and warrants to the other that it has full power and authority
to enter into and perform its obligations under this Agreement.
6. Entire Agreement. This Agreement
may not be altered, modified, amended or changed, in whole or in part, except by
a writing executed by the Parties. The headings herein are for
reference only and shall not define or limit the provisions
hereof. The Parties acknowledge and agree that this Agreement
constitutes the entire agreement between Wang and Company with respect to the
subject matter addressed herein, and all prior or contemporaneous agreements,
whether written or oral, as may relate to the same, are hereby superseded by
this Agreement.
7. Severability. In the event that
any paragraph or provision of this Agreement shall be held to be illegal or
unenforceable, such paragraph or provisions shall be severed or otherwise
modified as may best preserve the intention of the parties hereto, and the
Agreement as so modified shall remain in full force and effect.
8. Successors and
Assigns. This Agreement
shall be binding upon the Parties and their heirs, successors, assigns,
transferees, grantees, executors and administrators.
9. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
- 4
-
IN
WITNESS WHEREOF, each Party hereto has caused this Trade Secrets Identification
and Confirmatory Assignment to be executed as of the Effective
Date.
|
By:
|
|||
|
▇▇▇▇
▇▇▇▇
|
|||
|
Address:
|
Address:
|
||
|
▇▇.
▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
|
|||
|
▇▇▇
▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇) Economic and
|
|||
|
Technology
Development Area,
|
|||
|
Tianjin,
People’s Republic of China
300350
|
|||
- 5
-
Exhibit
A
Escrow
Agreement
(see
attached)
- 6
-
Exhibit
B
EMPLOYEE
CONFIDENTIALITY AND RIGHTS AGREEMENT
THIS AGREEMENT (“Agreement”) is made by
and between ________. (“Company”) and ____________________
(“Employee”).
1. Definitions.
a. “Company”
means the Company and any corporation or other business enterprise directly or
indirectly controlling, controlled by or under common control with Tianjin
Shengkai Industrial Development Company, Ltd., whether before or after the
execution of this Agreement.
b. “Customer”
means customers, clients, licensors, licensees, agents, consultants, suppliers
and contractors of the Company.
c. “Confidential
Information” means all information, whether or not reduced to writing, possessed
by the Company, or relating to the business of the Company or its Customers, or
any actual or demonstrably anticipated research and development of the Company
or its Customers, which is not generally known in the trade, including, but not
limited to, trade secrets, proprietary information, know-how, formulae, methods,
processes, mixtures, customer lists, computer programs and software, and
including Inventions (as hereinafter defined), and information conceived,
originated or developed by Employee during any period of employment with the
Company, whether alone or with others.
d. “Inventions”
means all discoveries, inventions, improvements, innovations, ideas, concepts
and other developments, including, but not limited to, methods, processes,
computer programs and software, relating to the business of the Company, or any
actual or demonstrably anticipated research or development of the Company, made
or conceived by Employee in whole or in part during any period of employment
with the Company, whether alone or with others, and whether or not patentable or
reduced to practice.
2. Consideration. This
Agreement is entered in consideration of the hiring or continued employment of
Employee by the Company.
3. Confidentiality. Employee
agrees to maintain the confidentiality of all Confidential Information, both
during and subsequent to any periods of employment with the Company, and
Employee will not, without express written authorization by the Company,
directly or indirectly reveal or cause to be revealed any such Confidential
Information to any person other than to Company employees who are authorized to
receive such Confidential Information in order to perform their duties for the
Company, nor will Employee use any such Confidential Information to the
detriment of the Company or its Customers, or other than in the course of
Employee’s employment with the Company.
- 7
-
4. Return of Confidential
Material. In the event that Employee’s employment with the
Company is terminated for any reason whatsoever, Employee agrees promptly to
deliver to the Company all Confidential Information Employee possess, and
Employee will not take or keep any Confidential Information, whether in its
original form or as copies, upon and following the termination of Employee’s
employment.
5. Return of
Documents. All memoranda, notes, notebooks, reports, drawings,
photographs, plans, papers, recordings, tapes, computer discs or other forms of
records, made or compiled by, or made available to, the Employee during the
course of Employee’s employment, and any abstracts thereof, whether or not they
contain Confidential Information, are and shall be the property of the Company
and shall be immediately delivered by Employee to the Company at its request or
upon termination of Employee’s employment.
6. Rights In and To
Inventions.
a. Employee
hereby assigns and transfers to the Company without further consideration
Employee’s entire right, title and interest in and to all
Inventions.
b. Employee
shall disclose any Invention promptly and fully in writing to Employee’s
immediate supervisor at the Company, with a copy to the President of the
Company, to enable the Company to determine whether the Invention is subject to
this Agreement, regardless of whether Employee believes the Invention belongs to
him. To the extent that such an Invention may belong to the Employee,
the Company shall protect such disclosures to the same extent that it protects
its own similar proprietary information. The Company, however, shall
have no such obligations to the extent such an Invention is owned by the
Company.
c. Employee
will, at the Company’s request, promptly execute a written assignment of title
to the Company for any Invention required to be assigned by this Agreement, and
will preserve any such Invention as Confidential Information of the
Company.
d. Employee
shall, upon request by the Company, assist the Company or its designee (at
Company’s expense) in every reasonable way during and at any time after
Employee’s employment to patent and defend the Company’s or its designee’s title
to any Inventions in any and all countries, which patents shall be and remain
the sole and exclusive property of the Company or its nominee.
7. Other Rights.
a. It
is understood and agreed that any photographs, illustrations, writings, designs,
software, code or other material eligible for copyright protection, created by
Employee during Employee’s employment by the Company, whether created solely by
Employee or with others, and whether created on or off the Company’s premises,
for the Company and/or submitted to the Company, shall be works-made-for-hire
within the meaning of the United States Copyright Act. In the event
any such materials are determined not to be a work-made-for-hire, or any other
issue arises affecting the Company’s right and title in and to such materials,
Employee hereby transfers and assigns to the Company, without further
consideration, Employee’s entire right, title and interest in and to all such
materials.
- 8
-
b. Employee
will, at the Company’s request, promptly execute a written assignment of title
to the Company for any such materials required to be assigned by this Agreement,
and will preserve any such materials as Confidential Information of the
Company.
c. Employee
acknowledges and agrees that the Company may modify, crop, retouch, edit, revise
or otherwise alter such materials, and that publication, sale, distribution,
and/or usage of any such material is at the Company’s sole
discretion.
8. Employees Name and
Likeness. Employee acknowledges and agrees that the Company
may use Employee’s name and likeness in its publications, and in connection with
the business of Company, including but not limited to, the promotion,
advertisement, marketing and sale of Company’s products and
services.
9. Extension of Obligations and
Agreement to Previous and Future Employment. Employee
understands and agrees that the provisions of this Agreement extend to all
previous and future periods of Employee’s employment by the Company, and this
Agreement shall continue to be in full force and effect without re-execution in
the event Employee transfers between different employers within the Company,
whether or not there are periods between such transfers during which the
Employee is not employed by any employer within the Company.
10. Trade Secrets and Confidential
Information of Others. Employee represents and warrants that
Employee’s performance of all the terms of this Agreement, and as an employee of
the Company, does not and shall not breach any agreement with any other party,
including but not limited to, agreements regarding non-competition or to keep in
confidence proprietary or confidential information of another party, and that
Employee shall not disclose to the Company, or induce the Company to use, any
proprietary or confidential information belonging to any other party including
but not limited to a previous employer.
11. Non-limitation of
Rights. This Agreement shall not be construed to limit in any
way any “shop rights” or other common law or contractual right of the Company by
virtue of its relationship with the Employee.
12. Modification. This
Agreement may only be modified or terminated by an instrument in writing, signed
by the Employee and the Company; provided, however, that Company may from time
to time publish and adopt supplementary policies with respect to the subject
matter of this Agreement, and Employee agrees that such supplemental policies
shall be binding upon Employee.
13. Remedies. Employee
and Company acknowledge and stipulate that the covenants and agreements
contained in this Agreement are of a special nature, and that any breach,
violation or evasion by Employee of the terms of this Agreement will result in
immediate and irreparable injury and harm to the Company, and will cause damage
to the Company in amounts difficult to ascertain. Accordingly, the
Company shall be entitled to the remedies of injunction and specific
performance, or either of such remedies, as well as to all other legal or
equitable remedies to which the Company may be entitled, including, without
limitation, termination of the employment of Employee.
- 9
-
14. Entire
Agreement. Employee hereby acknowledges receipt of a signed
counterpart of this Agreement, and acknowledges that it is Employee’s entire
Agreement with the Company with respect to the subject matter hereof, thereby
superseding any previous oral or written understanding or agreements with the
Company or any officer or representative of the Company. Nothing in
this Agreement shall be deemed to be a contract of employment for a definite
period of time, or to limit the right of the Company to terminate the employment
of the Employee, with or without cause.
15. Severability. In
the event that any paragraph or provision of this Agreement shall be held to be
illegal or unenforceable, such paragraph or provisions shall be severed or
otherwise modified as may best preserve the intention of the parties hereto, and
the Agreement as so modified shall remain in full force and effect.
16. Successors and
Assigns. This Agreement shall be binding upon Employee’s
heirs, executors, administrators and other legal representatives, and is for the
benefit of the Company, it successors and assigns.
17. Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
___________ without regard to its choice of law provisions. The
parties hereby irrevocably consent to the jurisdiction of the _____ courts
located in _____.
IN WITNESS WHEREOF, the parties hereby
set their hands as of this _____ day of ____________________,
200_.
| ________________________. | ||||
|
Employee
|
Company
|
|||
|
Address:
|
By:
|
|||
|
Name:
|
||||
|
Street
|
||||
|
Title:
|
||||
|
City,
State and Zip Code
|
||||
- 10
-
Exhibit
C
▇▇▇ ▇▇▇ CONFIDENTIALITY AND RIGHTS
AGREEMENT
THIS AGREEMENT (“Agreement”) is made by
and between Shengkai Innovations, Inc. (“Company”) and ▇▇▇ ▇▇▇
(“Wei”).
1. Definitions.
a. “Company”
means the Company and any corporation or other business enterprise directly or
indirectly controlling, controlled by or under common control with Shengkai
Innovations, Inc., whether before or after the execution of this
Agreement.
b. “Customer”
means customers, clients, licensors, licensees, agents, consultants, suppliers
and contractors of the Company.
c. “Confidential
Information” means all information, whether or not reduced to writing, possessed
by the Company, or relating to the business of the Company or its Customers, or
any actual or demonstrably anticipated research and development of the Company
or its Customers, which is not generally known in the trade, including, but not
limited to, trade secrets, proprietary information, know-how, formulae, recipes,
methods, processes, mixtures, customer lists, computer programs and software,
and including Inventions (as hereinafter defined), and information conceived,
originated or developed by Wei during any period of employment with the Company,
whether alone or with others.
d. “Inventions”
means all discoveries, inventions, improvements, innovations, ideas, concepts
and other developments, including, but not limited to, methods, recipes,
processes, computer programs and software, relating to the business of the
Company, or any actual or demonstrably anticipated research or development of
the Company, made or conceived by Wei in whole or in part during any period of
employment with the Company, whether alone or with others, and whether or not
patentable or reduced to practice.
2. Consideration. This
Agreement is entered in consideration of the employment of Wei by the Company,
who currently serves as of the date hereof as a director of the
Company.
- 11
-
3. Confidentiality. Wei
agrees to maintain the confidentiality of all Confidential Information, both
during and subsequent to any periods of employment with the Company, and Wei
will not, without express written authorization by the Company, directly or
indirectly reveal or cause to be revealed any such Confidential Information to
any person other than to Company employees who are authorized to receive such
Confidential Information in order to perform their duties for the Company, nor
will Wei use any such Confidential Information to the detriment of the Company
or its Customers, or other than in the course of Wei’s employment with the
Company. For the avoidance of doubt, and further to and not in
limitation of the foregoing, the “recipe” to the unique method for creating
structural ceramic valves referred to in that certain Preliminary Prospectus
Supplement of the Company dated November 18, 2010, is Confidential Information
of the Company, and the Company owns all rights, title and interest in and to
this recipe, and any and all modifications, additions or improvements in or
related thereto.
4. Return of Confidential
Material. In the event that Wei’s employment with the Company
is terminated for any reason whatsoever, Wei agrees promptly to deliver to the
Company all Confidential Information Wei possess, and Wei will not take or keep
any Confidential Information, whether in its original form or as copies, upon
and following the termination of Wei’s employment.
5. Return of
Documents. All memoranda, notes, notebooks, reports, drawings,
photographs, plans, papers, recordings, tapes, computer discs or other forms of
records, made or compiled by, or made available to, the Wei during the course of
Wei’s employment, and any abstracts thereof, whether or not they contain
Confidential Information, are and shall be the property of the Company and shall
be immediately delivered by Wei to the Company at its request or upon
termination of Wei’s employment.
6. Rights In and To
Inventions.
a. Wei
hereby assigns and transfers to the Company without further consideration Wei’s
entire right, title and interest in and to all Inventions.
▇. ▇▇▇
shall disclose any Invention promptly and fully in writing to Wei’s immediate
supervisor at the Company, with a copy to the President of the Company, to
enable the Company to determine whether the Invention is subject to this
Agreement, regardless of whether Wei believes the Invention belongs to
him. To the extent that such an Invention may belong to the Wei, the
Company shall protect such disclosures to the same extent that it protects its
own similar proprietary information. The Company, however, shall have
no such obligations to the extent such an Invention is owned by the
Company.
▇. ▇▇▇
will, at the Company’s request, promptly execute a written assignment of title
to the Company for any Invention required to be assigned by this Agreement, and
will preserve any such Invention as Confidential Information of the
Company.
▇. ▇▇▇
shall, upon request by the Company, assist the Company or its designee (at
Company’s expense) in every reasonable way during and at any time after Wei’s
employment to patent and defend the Company’s or its designee’s title to any
Inventions in any and all countries, which patents shall be and remain the sole
and exclusive property of the Company or its nominee.
- 12
-
7. Other Rights.
a. It
is understood and agreed that any photographs, illustrations, writings, designs,
software, code or other material eligible for copyright protection, created by
Wei during Wei’s employment by the Company, whether created solely by Wei or
with others, and whether created on or off the Company’s premises, for the
Company and/or submitted to the Company, shall be works-made-for-hire within the
meaning of the United States Copyright Act. In the event any such
materials are determined not to be a work-made-for-hire, or any other issue
arises affecting the Company’s right and title in and to such materials, Wei
hereby transfers and assigns to the Company, without further consideration,
Wei’s entire right, title and interest in and to all such
materials.
▇. ▇▇▇
will, at the Company’s request, promptly execute a written assignment of title
to the Company for any such materials required to be assigned by this Agreement,
and will preserve any such materials as Confidential Information of the
Company.
▇. ▇▇▇
acknowledges and agrees that the Company may modify, crop, retouch, edit, revise
or otherwise alter such materials, and that publication, sale, distribution,
and/or usage of any such material is at the Company’s sole
discretion.
8. Wei’s Name and
Likeness. Wei acknowledges and agrees that the Company may use
Wei’s name and likeness in its publications, and in connection with the business
of Company, including but not limited to, the promotion, advertisement,
marketing and sale of Company’s products and services.
9. Extension of Obligations and
Agreement to Previous and Future Employment. Wei understands
and agrees that the provisions of this Agreement extend to all previous and
future periods of Wei’s employment by the Company, and this Agreement shall
continue to be in full force and effect without re-execution in the event Wei
transfers between different employers within the Company, whether or not there
are periods between such transfers during which the Wei is not employed by any
employer within the Company.
10. Trade Secrets and Confidential
Information of Others. Wei represents and warrants that Wei’s
performance of all the terms of this Agreement, and as an employee of the
Company, does not and shall not breach any agreement with any other party,
including but not limited to, agreements regarding non-competition or to keep in
confidence proprietary or confidential information of another party, and that
Wei shall not disclose to the Company, or induce the Company to use, any
proprietary or confidential information belonging to any other party including
but not limited to a previous employer.
11. Non-limitation of
Rights. This Agreement shall not be construed to limit in any
way any “shop rights” or other common law or contractual right of the Company by
virtue of its relationship with the Wei.
12. Modification. This
Agreement may only be modified or terminated by an instrument in writing, signed
by the Wei and the Company; provided, however, that Company may from time to
time publish and adopt supplementary policies with respect to the subject matter
of this Agreement, and Wei agrees that such supplemental policies shall be
binding upon Wei.
- 13
-
13. Remedies. Wei and
Company acknowledge and stipulate that the covenants and agreements contained in
this Agreement are of a special nature, and that any breach, violation or
evasion by Wei of the terms of this Agreement will result in immediate and
irreparable injury and harm to the Company, and will cause damage to the Company
in amounts difficult to ascertain. Accordingly, the Company shall be
entitled to the remedies of injunction and specific performance, or either of
such remedies, as well as to all other legal or equitable remedies to which the
Company may be entitled, including, without limitation, termination of the
employment of Wei.
14. Entire
Agreement. Wei hereby acknowledges receipt of a signed
counterpart of this Agreement, and acknowledges that it is Wei’s entire
Agreement with the Company with respect to the subject matter hereof, thereby
superseding any previous oral or written understanding or agreements with the
Company or any officer or representative of the Company. Nothing in
this Agreement shall be deemed to be a contract of employment for a definite
period of time, or to limit the right of the Company to terminate the employment
of the Wei, with or without cause.
15. Severability. In
the event that any paragraph or provision of this Agreement shall be held to be
illegal or unenforceable, such paragraph or provisions shall be severed or
otherwise modified as may best preserve the intention of the parties hereto, and
the Agreement as so modified shall remain in full force and effect.
16. Successors and
Assigns. This Agreement shall be binding upon Wei’s heirs,
executors, administrators and other legal representatives, and is for the
benefit of the Company, it successors and assigns.
17. Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of New
York without regard to its choice of law provisions.
IN WITNESS WHEREOF, the parties hereby
set their hands as of this _____ day of ____________________,
2010.
|
Shengkai
Innovations, Inc
|
|||
|
By:
|
|||
|
▇▇▇
▇▇▇
|
|||
|
Address:
|
Address:
|
||
|
▇▇.
▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
|
|||
|
▇▇▇
▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇) Economic and
|
|||
|
Technology
Development Area,
|
|||
|
Tianjin,
People’s Republic of China
300350
|
|||
- 14
-
Exhibit
D
▇▇▇▇
▇▇▇▇ CONFIDENTIALITY AND RIGHTS AGREEMENT
THIS AGREEMENT (“Agreement”) is made by
and between Shengkai Innovations, Inc. (“Company”) and ▇▇▇▇ ▇▇▇▇
(“Wang”).
|
|
1.
|
Definitions.
|
a. “Company”
means the Company and any corporation or other business enterprise directly or
indirectly controlling, controlled by or under common control with Shengkai
Innovations, Inc., whether before or after the execution of this
Agreement.
b. “Customer”
means customers, clients, licensors, licensees, agents, consultants, suppliers
and contractors of the Company.
c. “Confidential
Information” means all information, whether or not reduced to writing, possessed
by the Company, or relating to the business of the Company or its Customers, or
any actual or demonstrably anticipated research and development of the Company
or its Customers, which is not generally known in the trade, including, but not
limited to, trade secrets, proprietary information, know-how, formulae, recipes,
methods, processes, mixtures, customer lists, computer programs and software,
and including Inventions (as hereinafter defined), and information conceived,
originated or developed by Wang during any period of employment with the
Company, whether alone or with others. For the avoidance of doubt,
and further to and not in limitation of the foregoing, the “recipe” to the
unique method for creating structural ceramic valves referred to in that certain
Preliminary Prospectus Supplement of the Company dated November 18, 2010, is
Confidential Information of the Company, and the Company owns all rights, title
and interest in and to this recipe, and any and all modifications, additions or
improvements in or related thereto.
d. “Inventions”
means all discoveries, inventions, improvements, innovations, ideas, concepts
and other developments, including, but not limited to, methods, recipes,
processes, computer programs and software, relating to the business of the
Company, or any actual or demonstrably anticipated research or development of
the Company, made or conceived by Wang in whole or in part during any period of
employment with the Company, whether alone or with others, and whether or not
patentable or reduced to practice.
2. Consideration. This
Agreement is entered in consideration of the employment of Wang by the Company,
who currently serves as of the date hereof as the Chief Executive Officer and
Chairman of the Board of Directors of the Company.
- 15
-
3. Confidentiality. Wang
agrees to maintain the confidentiality of all Confidential Information, both
during and subsequent to any periods of employment with the Company, and Wang
will not, without express written authorization by the Company, directly or
indirectly reveal or cause to be revealed any such Confidential Information to
any person other than to Company employees who are authorized to receive such
Confidential Information in order to perform their duties for the Company, nor
▇▇▇▇ ▇▇▇▇ use any such Confidential Information to the detriment of the Company
or its Customers, or other than in the course of Wang’s employment with the
Company.
4. Return of Confidential
Material. In the event that Wang’s employment with the Company
is terminated for any reason whatsoever, Wang agrees promptly to deliver to the
Company all Confidential Information Wang possess, and Wang will not take or
keep any Confidential Information, whether in its original form or as copies,
upon and following the termination of Wang’s employment.
5. Return of
Documents. All memoranda, notes, notebooks, reports, drawings,
photographs, plans, papers, recordings, tapes, computer discs or other forms of
records, made or compiled by, or made available to, the Wang during the course
of Wang’s employment, and any abstracts thereof, whether or not they contain
Confidential Information, are and shall be the property of the Company and shall
be immediately delivered by Wang to the Company at its request or upon
termination of Wang’s employment.
|
|
6.
|
Rights In and To
Inventions.
|
▇. ▇▇▇▇
hereby assigns and transfers to the Company without further consideration Wang’s
entire right, title and interest in and to all Inventions.
▇. ▇▇▇▇
shall disclose any Invention promptly and fully in writing to Wang’s immediate
supervisor at the Company, with a copy to the President of the Company, to
enable the Company to determine whether the Invention is subject to this
Agreement, regardless of whether Wang believes the Invention belongs to
him. To the extent that such an Invention may belong to the Wang, the
Company shall protect such disclosures to the same extent that it protects its
own similar proprietary information. The Company, however, shall have
no such obligations to the extent such an Invention is owned by the
Company.
▇. ▇▇▇▇
will, at the Company’s request, promptly execute a written assignment of title
to the Company for any Invention required to be assigned by this Agreement, and
will preserve any such Invention as Confidential Information of the
Company.
▇. ▇▇▇▇
shall, upon request by the Company, assist the Company or its designee (at
Company’s expense) in every reasonable way during and at any time after Wang’s
employment to patent and defend the Company’s or its designee’s title to any
Inventions in any and all countries, which patents shall be and remain the sole
and exclusive property of the Company or its nominee.
- 16
-
|
|
7.
|
Other
Rights.
|
a. It
is understood and agreed that any photographs, illustrations, writings, designs,
software, code or other material eligible for copyright protection, created by
Wang during Wang’s employment by the Company, whether created solely by Wang or
with others, and whether created on or off the Company’s premises, for the
Company and/or submitted to the Company, shall be works-made-for-hire within the
meaning of the United States Copyright Act. In the event any such
materials are determined not to be a work-made-for-hire, or any other issue
arises affecting the Company’s right and title in and to such materials, Wang
hereby transfers and assigns to the Company, without further consideration,
Wang’s entire right, title and interest in and to all such
materials.
▇. ▇▇▇▇
will, at the Company’s request, promptly execute a written assignment of title
to the Company for any such materials required to be assigned by this Agreement,
and will preserve any such materials as Confidential Information of the
Company.
▇. ▇▇▇▇
acknowledges and agrees that the Company may modify, crop, retouch, edit, revise
or otherwise alter such materials, and that publication, sale, distribution,
and/or usage of any such material is at the Company’s sole
discretion.
8. Wang’s Name and
Likeness. Wang acknowledges and agrees that the Company may
use Wang’s name and likeness in its publications, and in connection with the
business of Company, including but not limited to, the promotion, advertisement,
marketing and sale of Company’s products and services.
9. Extension of Obligations and
Agreement to Previous and Future Employment. Wang understands
and agrees that the provisions of this Agreement extend to all previous and
future periods of Wang’s employment by the Company, and this Agreement shall
continue to be in full force and effect without re-execution in the event Wang
transfers between different employers within the Company, whether or not there
are periods between such transfers during which the Wang is not employed by any
employer within the Company.
10. Trade Secrets and Confidential
Information of Others. Wang represents and warrants that
Wang’s performance of all the terms of this Agreement, and as an employee of the
Company, does not and shall not breach any agreement with any other party,
including but not limited to, agreements regarding non-competition or to keep in
confidence proprietary or confidential information of another party, and that
Wang shall not disclose to the Company, or induce the Company to use, any
proprietary or confidential information belonging to any other party including
but not limited to a previous employer.
11. Non-limitation of
Rights. This Agreement shall not be construed to limit in any
way any “shop rights” or other common law or contractual right of the Company by
virtue of its relationship with the Wang.
12. Modification. This
Agreement may only be modified or terminated by an instrument in writing, signed
by the Wang and the Company; provided, however, that Company may from time to
time publish and adopt supplementary policies with respect to the subject matter
of this Agreement, and Wang agrees that such supplemental policies shall be
binding upon Wang.
- 17
-
13. Remedies. Wang and
Company acknowledge and stipulate that the covenants and agreements contained in
this Agreement are of a special nature, and that any breach, violation or
evasion by Wang of the terms of this Agreement will result in immediate and
irreparable injury and harm to the Company, and will cause damage to the Company
in amounts difficult to ascertain. Accordingly, the Company shall be
entitled to the remedies of injunction and specific performance, or either of
such remedies, as well as to all other legal or equitable remedies to which the
Company may be entitled, including, without limitation, termination of the
employment of Wang.
14. Entire
Agreement. Wang hereby acknowledges receipt of a signed
counterpart of this Agreement, and acknowledges that it is Wang’s entire
Agreement with the Company with respect to the subject matter hereof, thereby
superseding any previous oral or written understanding or agreements with the
Company or any officer or representative of the Company. Nothing in
this Agreement shall be deemed to be a contract of employment for a definite
period of time, or to limit the right of the Company to terminate the employment
of the Wang, with or without cause.
15. Severability. In
the event that any paragraph or provision of this Agreement shall be held to be
illegal or unenforceable, such paragraph or provisions shall be severed or
otherwise modified as may best preserve the intention of the parties hereto, and
the Agreement as so modified shall remain in full force and effect.
16. Successors and
Assigns. This Agreement shall be binding upon Wang’s heirs,
executors, administrators and other legal representatives, and is for the
benefit of the Company, it successors and assigns.
17. Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of New
York without regard to its choice of law provisions.
IN WITNESS WHEREOF, the parties hereby
set their hands as of this _____ day of ____________________,
2010.
|
Shengkai
Innovations, Inc
|
|||
|
By:
|
|||
|
▇▇▇▇
▇▇▇▇
|
|||
|
Address:
|
Address:
|
||
|
▇▇.
▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
|
|||
|
▇▇▇
▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇) Economic and
|
|||
|
Technology
Development Area,
|
|||
|
Tianjin,
People’s Republic of China
300350
|
|||
- 18
-
Exhibit
E
Guo
Chuanye Non-Disclosure Letter Agreement
- 19
-
ANNEX
III
Form
of Employee Confidentiality and Rights Agreements
[Refer
to Exhibits B, C, and D of the Form of Trade Secret Identification and
Confirmatory Assignment provided in Annex II above]
V-3
ANNEX
IV
Form
of Lock-Up Agreement
V-4
Lock-Up
Agreement
November
__, 2010
The
undersigned understands that Maxim Group LLC and Global Hunter Securities, LLC
(each, a “Underwriter,”
and collectively, the “Underwriters”) propose to
enter into an Underwriting Agreement (the “Underwriting Agreement”) with
Shengkai Innovations, Inc., a Florida corporation (the “Company”), providing for the
issuance (the “Offering”) by the Company of
shares of common stock, par value $0.001 per share, of the Company (the “Shares”).
In
consideration of the foregoing and in order to induce the
Underwriters to participate as the underwriters in the Offering, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the undersigned hereby agrees that, without the prior written consent of the
Underwriters, it will not, during the period (the “Lock-Up Period”) commencing on
the closing date of the Offering and ending on the date that is 365 days after
the date of the filing of the final prospectus supplement relating to the
Offering (the “Prospectus”), (1) offer,
pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose
of, directly or indirectly, any Shares or any securities convertible into or
exercisable or exchangeable for Shares, or (2) establish or increase a “put
equivalent position” or liquidate or decrease a “call equivalent position” (in
each case within the meaning of the general rules and regulations promulgated
under Section 16a-1 of the Securities Exchange Act of 1934, as amended), and
with respect to any Relevant Security (as defined in the Underwriting
Agreement), or otherwise enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Shares, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Shares or such other securities, in cash or
otherwise. Notwithstanding the foregoing, the undersigned may
transfer Shares without the prior consent of the Underwriters in connection with
(a) transactions relating to Shares or other securities of the Company acquired
in open market transactions after the completion of the Offering, provided that no filing under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be
required or shall be voluntarily made in connection with subsequent sales of
Shares or other securities acquired in such open market transactions, (b) if the
undersigned is an individual, transfers of Shares or any security convertible
into Shares as a bona fide gift, by will or intestacy or to a family member or
trust for the benefit of a family member; provided that in the case of
any transfer or distribution pursuant to clause (b), each donee or distributee
shall sign and deliver a lock-up letter substantially in the form of this letter
agreement, (c) transfer of Shares to a charity or educational institution, (d)
if the undersigned is, or directly or indirectly controls, a corporation,
partnership, limited liability company or other business entity, any transfers
of Shares to any shareholder, partner or member of, or owner of similar equity
interests in, the undersigned, as the case may be, if, in any such case, such
transfer is not for value, or (e) if the undersigned is a corporation,
partnership, limited liability company or other business entity, any transfer of
Shares made by the undersigned (i) in connection with the sale or other bona
fide transfer in a single transaction of all or substantially all of the
undersigned’s capital stock, partnership interests, membership interests or
other similar equity interests, as the case may be, or all or substantially all
of the undersigned’s assets, in any such case not undertaken for the purpose of
avoiding the restrictions imposed by this agreement or (ii) to another
corporation, partnership, limited liability company or other business entity so
long as the transferee is an affiliate of the undersigned and such transfer is
not for value. In addition, the undersigned agrees that during the Lock-Up
Period and except for the Prospectus relating to the Offering, without the prior
written consent of the Underwriters, it will not make any demand for or exercise
any right with respect to the registration of any Shares or any security
convertible into or exercisable or exchangeable for Shares. The undersigned also
agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the undersigned’s
Shares except in compliance with this letter agreement.
If (i)
the Company issues an earnings release or material news, during the last 17 days
of the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period,
the Company announces that it will release earnings results during the 16-day
period beginning on the last day of the Lock-Up Period, the restrictions imposed
by this agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release, unless the Underwriter
waives such extension.
The
undersigned understands that the Company and the Underwriters are relying upon
this letter agreement in proceeding toward consummation of the Offering. The
undersigned further understands that this agreement is irrevocable and shall be
binding upon the undersigned’s legal representatives, heirs, successors and
assigns.
Whether
or not the Offering actually occurs depends on a number of factors, including
market conditions. Any Offering will be made only pursuant to an Underwriting
Agreement, the terms of which are subject to negotiation between the Company and
the Underwriters.
The
undersigned hereby represents and warrants that the undersigned has full power
and authority to enter into this letter agreement and that this letter agreement
constitutes the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms. Upon request, the undersigned will
execute any additional documents necessary in connection with enforcement
hereof. Any obligations of the undersigned shall be binding upon the successors
and assigns of the undersigned from the date first above written.
This
letter agreement shall be governed by and construed in accordance with the laws
of the State of New York. Delivery of a signed copy of this letter by telecopier
or facsimile transmission shall be effective as delivery of the original
hereof.
|
Very
truly yours,
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(Name):
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(Address
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ANNEX
V
Opinion
of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
[Filed
as Exhibit 5.1 to this Report]
V-5
ANNEX
VI
Form
of Opinion of ▇▇▇▇▇▇ Westwood & Riegels
V-6
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▇▇▇▇▇▇
Westwood & Riegels
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇
▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇
Tortola
VG1110, British Virgin Islands
Tel:
▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Fax:
▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇.▇▇▇▇▇▇▇.▇▇▇
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[
date ] November
2010
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Your
Ref
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Our
Ref 039146.0002/TSM
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||
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BY:
EMAIL & COURIER
|
Doc
ID 2865447_2
|
ADDRESSEE
ADDRESS
(the
“Addressee”)
Dear
Sirs
Shen
Kun International Limited, Company No. 1442191 (the “Company”)
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1.
|
We
are lawyers qualified to practise in the British Virgin Islands and have
been asked to advise as to the Company in connection with a underwritten
public offering (the “Offering”).
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2.
|
For
the purpose of this opinion, we have examined the following documents and
records:
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(a)
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a
copy of the Memorandum and Articles of Association and Certificate of
Incorporation of the Company obtained from the British Virgin Islands
Registry of Corporate Affairs on 15 November
2010;
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(b)
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a
copy of a director’s certificate dated [ ] November 2010 signed
by the director [ ] , as attached and marked
Appendix I (the “Director’s
Certificate”); and
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(c)
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information
revealed by our searches of:
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(i)
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the
records and information certified by Offshore Incorporations Limited, the
registered agent of the Company, on [●] of the statutory documents and
records maintained by the Company at its registered office, including a
copy of the register of members;
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(ii)
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the
public records of the Company on file and available for inspection at the
Registry of Corporate Affairs, Road Town, Tortola, British Virgin Islands
on [●]; and
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(iii)
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the
records of proceedings on file with, and available for inspection on [●]
at the High Court of Justice, British Virgin
Islands,
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(the
“Searches”).
The above
are the only documents or records we have examined and the only enquiries we
have carried out. In particular we have made no enquiries as to matters of fact
other than the Searches.
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3.
|
For
the purposes of this opinion we have assumed without further
enquiry:
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(a)
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the
authenticity of all documents submitted to us as originals, the conformity
with the originals of all documents submitted to us as copies and the
authenticity of such originals, and the genuineness of all signatures and
seals;
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(b)
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the
accuracy of any and all representations of fact expressed in or implied by
the documents we have examined;
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(c)
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that
the information indicated by the Searches is complete and remains true and
correct; and
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(d)
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that
no resolution of the members of the Company has been passed limiting the
powers of the directors.
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4.
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Based
on the foregoing, and subject to the qualifications expressed below, our
opinion is as follows:
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(a)
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Existence and Good
Standing.
|
The
Company is a company duly incorporated with limited liability for an unlimited
duration under the BVI Business Companies Act, 2004, and is validly existing and
in good standing under the laws of the British Virgin Islands. It is
a separate legal entity and is subject to suit in its own name.
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(b)
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Shares and Shareholding
Structure.
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(i)
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The
Company is authorized to issue maximum of 50,000 shares of a single class
with a par value of US$1.00.
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(ii)
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[ ]
shares are issued and outstanding (the “Shares”).
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(iii)
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The
sole legal registered shareholder of the Company is Shengkai Innovations,
Inc.
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(iv)
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The
Shares are issued, paid for and non-assessable (which term when used
herein means that no further sums are required to be paid by the holders
thereof in connection with the issue of the
shares).
|
(c) High Court
Searches.
No court
proceedings pending against the Company are indicated by our searches of the
British Virgin Islands High Court Registry referred to at paragraph
2(c)(iii).
2
(d) Registry
Searches.
On the
basis of our searches of the British Virgin Islands Registry of Corporate
Affairs and the British Virgin Islands High Court Registry referred to at
paragraphs 2(c)(ii) and 2(c)(iii) respectively, no currently valid order or
resolution for liquidation of the Company and no current notice of appointment
of a receiver over the Company or any of its assets appears on the records
maintained in respect of the Company at the Registry of Corporate Affairs, but
it should be noted that failure to file notice of appointment of a receiver does
not invalidate the receivership but merely gives rise to penalties on the part
of the receiver.
|
5.
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This
opinion is confined to the matters expressly opined on herein and given on
the basis of the laws of the British Virgin Islands as they are in force
and applied by the British Virgin Islands courts at the date of this
opinion. We have made no investigation of and express no
opinion on the laws of any other jurisdiction. We express no opinion as to
matters of fact. We express no opinion with respect to the commercial
terms of the Offering.
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6.
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This
opinion is rendered for the benefit of the Addressee and the benefit of
their legal counsel (in that capacity only) in connection with the issues
addressed above only. It may not be disclosed to or relied on
by any other party or for any other
purpose.
|
Yours
faithfully
3
ANNEX
VII
Form
of Opinion of Deheng Law Offices
V-7
 |
德恒律师事务所 Deheng
Law Offices
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12/F,
Tower B, Focus Place, ▇▇.▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Tel:
(▇▇) ▇▇▇-▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
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Fax:
(▇▇) ▇▇▇-▇▇▇▇▇▇▇▇
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中国 · 北京西城区金融街19号
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Website:
▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇
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富凯大厦B▇▇▇▇ 邮编：100033
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E-mail:
DeHeng@ ▇▇▇▇▇▇▇▇▇.▇▇▇
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November
__, 2010
To:
Tianjin Shengkai Industrial Technology Development Co., Ltd.
Room1-325,
No.122, Dongting Road, Development Zone, Tianjin, PRC
Shengkai
Innovations, Inc.
▇▇. ▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇) Economic and Technology Development Area,
Tianjin, People’s Republic of China 300350
We are
qualified lawyers of the People’s Republic of China (the “PRC”, for the purpose of this
legal opinion, excluding Hong Kong Special Administrative Region, Macao Special
Administrative Region and Taiwan) and are qualified to issue this legal opinion
(the “Opinion”) based on
the PRC Laws.
We have
acted as the PRC legal counsel for Tianjin Shengkai Industrial Technology
Development Co., Ltd. and Shengkai Innovations Inc. (the “Company”) in connection with
the PRC legal issues of the Offering of the Shares of the Company as defined
under the Underwriting Agreement.
This
Opinion delivered to you concerns, inter alia: (1) the legal ownership structure
of the PRC Companies; (2) the legality and validity of the Restructuring
Transactions under the PRC Laws, (3) the legality of the business operations of
the PRC Companies as described below; (4) certain matters relating to the
Underwriting Agreement; and (5) certain other matters as set forth
below.
In
arriving at the opinion expressed below, we have assumed without
independent investigation or inquiry (collectively, the “Assumptions”):
|
i.
|
All
signatures, seals and chops are genuine, each signature on behalf of a
party thereto is that of a person duly authorized to execute the same, all
documents submitted to us (“Documents”) as originals are authentic, and
all Documents as certified or photostatic copies conform to the
originals;
|
1
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ii.
|
Each
of the parties to the Documents other than PRC Companies is duly organized
and is validly existing in good standing under the laws of its
jurisdiction of organization and/or incorporation; each of them, other
than PRC Companies, has full power and authority to execute, deliver and
perform its obligations under the Documents to which it is a party in
accordance with the laws of its jurisdiction of
organization;
|
|
iii.
|
The
Documents that were presented to us remain in full force and effect on the
date of this Opinion and have not been revoked, amended or
supplemented;
|
|
iv.
|
The
laws of any country other than PRC which may be applicable to the
execution, delivery, performance or enforcement of the Documents are
complied with;
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v.
|
All
the government approval authorities mentioned in the Documents have the
power, right or due authorization to approve the relevant matters on which
it has delivered the approvals, permits, licenses or certificates, as the
case may be;
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vi.
|
All
the explanations and interpretations provided by the government officers,
which duly reflect the official position of the relevant governmental
authorities, and all factual statements, but not legal conclusion or
statements of law, provided by the Company, Shen Kun International
Limited, including but not limited to the statements set forth in the
Documents, are complete, true and
correct.
|
This
Opinion is rendered on the basis of the PRC Laws effective as of the date
hereof. There is no assurance that any of such laws will not be
changed, amended or replaced in the immediate future or in the longer term with
or without retrospective effect. We do not purport to be expert on and do not
purport to be generally familiar with or qualified to express opinions based on
any laws other than the PRC Laws and accordingly express or imply no opinion
herein based upon any laws other than the PRC Laws.
Based on
the foregoing, we are of the opinion that:
|
A.
|
Definitions
|
In
addition to the terms defined in the context of this Opinion, the following
capitalized terms used in this Opinion shall have the meanings ascribed to them
as follows:
|
(a)
|
“Government
Agencies” means any competent government authorities, courts,
arbitration commissions, or regulatory bodies of the
PRC.
|
|
(b)
|
“Governmental
Authorization” means any approval, consent, permit, authorization,
filing, registration, exemption, waiver, endorsement, annual inspection,
qualification and license required by the applicable PRC Laws to be
obtained from any Government
Agency.
|
2
|
(c)
|
“Group
Companies” means the Company, Shen Kun International Limited, the
PRC Subsidiaries and the Variable Interest
Entity.
|
|
(d)
|
“Intellectual
Property” means all of the following types of intangible assets:
(a) patents (including utility model patents) and patent applications; (b)
database rights; (c) copyrights, copyright registrations and applications
therefore; (d) trademarks, trade names and registrations and applications
therefore; and (e) domain names, as listed in the Schedule 3
hereto.
|
|
(e)
|
“PRC Companies”
means the PRC Subsidiaries and the Variable Interest
Entity.
|
|
(f)
|
“PRC Laws” means
any and all laws, regulations, statutes, rules, decrees, notices, and
supreme court’s judicial interpretations currently in force and publicly
available in the PRC as of the date
hereof.
|
|
(g)
|
“PRC
Subsidiaries” means Shengkai (Tianjin) Limited, a wholly foreign-owned
enterprise incorporated under the PRC Laws, and Shengkai (Tianjin) Trading
Ltd., a limited liability company incorporated under the PRC Laws which is
wholly owned by Shengkai (Tianjin)
Limited.
|
|
(h)
|
“Prospectus”
means the Company’s Registration Statement on Form S-3, including all
amendments or supplements thereto, initially filed with Securities and
Exchange Commission under the U.S. Securities Act of 1933, as amended, on
June 3, 2010, relating to the follow-on offering by the
Company.
|
|
(i)
|
“Restructuring
Transactions” means the transactions relating to (i) the
establishment of the PRC Subsidiaries, the Variable Interest Entity, (ii)
any and all direct and indirect changes in shareholders’ equity interests
in the PRC Subsidiaries, the Variable Interest Entity and (iii) any and
all arrangements establishing control among Shengkai (Tianjin) Limited,
the Variable Interest Entity and/or the shareholders of the Variable
Interest Entity as described in the
Prospectus.
|
|
(j)
|
“SAFE Rules”
means the Circular on
Issues relating to the Administration of Foreign Exchange in Fund-Raising
and Reverse Investment Activities of Domestic Residents Conducted via
Offshore Special Purpose Companies issued by the State
Administration of Foreign Exchange of the PRC (“SAFE”) on October 21, 2005
and related rules and regulations currently in force and publicly
available in the PRC as of the date
hereof.
|
|
(k)
|
“Variable
Interest Entity” means Tianjin Shengkai Industrial Technology Development
Co., Ltd., a company incorporated under the PRC
Laws.
|
Capitalized
terms used herein but not defined shall have the meaning ascribed to them in the
Underwriting Agreement and the Prospectus.
3
(B) Opinions
|
(i)
|
The
PRC Subsidiaries have been duly organized and are validly existing as the
PRC companies with limited liability and full legal person status under
the PRC Laws. Shengkai (Tianjin) Limited is duly qualified as a
foreign invested enterprise under the PRC Laws. Shengkai
(Tianjin) Trading Co., Ltd. has been duly organized and is validly
existing as an enterprise re-invested by Shengkai (Tianjin) Limited under
the PRC Laws. The Variable Interest Entity has been duly organized and is
validly existing as a PRC domestic company with limited liability and full
legal person status under the PRC
Laws.
|
|
(ii)
|
The
articles of association and business license of each of the PRC Companies
comply with the requirements of the applicable PRC Laws and are in full
force and effect. The business carried out by each PRC Company
as described in the Prospectus complies with its articles of association
in effect and is within the business scope described in its current
business license.
|
|
(iii)
|
All
of the registered capital of each of the PRC Companies has been fully paid
in accordance with PRC Laws. Each of the PRC Companies has duly
obtained all Governmental Authorizations that are required under PRC Laws
for the ownership interest by its respective shareholders as set out in
Schedule
1 hereto of its equity interests. All of the equity
interests of each of the PRC Companies are legally owned directly by the
entities or individuals in the percentages as set out in Schedule 1
hereto after the respective names of the PRC Companies. To the
best of our knowledge after due inquiry, except for the pledges on such
equity interests disclosed in both the Prospectus and Schedule 1
hereto, all of the equity interests of each of the PRC Companies are free
and clear of all liens, charges or any other encumbrances, equities or
claims or any third party right.
|
|
(iv)
|
As
confirmed by the Company and to the best of our knowledge after due
inquiry, except for the PRC Companies, the Company has no other
subsidiaries in the PRC and does not own or control, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or any other person in the
PRC.
|
|
(v)
|
To
the best of our knowledge after due inquiry, none of the PRC Companies has
taken any action nor have any steps been taken or legal or administrative
proceedings been commenced or threatened for the winding up, dissolution,
bankruptcy or liquidation, or for the appointment of a liquidation
committee or similar officers in respect of the assets of any of the PRC
Companies, or for the suspension, withdrawal, revocation or cancellation
of any of the business licenses of the PRC
Companies.
|
4
|
(vi)
|
Each
of the PRC Companies has full legal right, power and authority (corporate
and other) to own, use, lease and operate its assets and to conduct its
business in the manner presently conducted and as described in its
business license and is duly qualified to transact business in the PRC
where it owns or uses or leases properties, conducts any
business. Each of the PRC Companies has all Governmental
Authorizations to own, use, lease and operate its assets and to conduct
its business in the manner presently conducted and as described in its
business license and such Governmental Authorizations contain no
materially burdensome restrictions or conditions not described in the
Prospectus. To the best of our knowledge after due inquiry, (A)
each of the PRC Companies is in compliance with the provisions of such
Governmental Authorizations in all material respects, (B) none of the PRC
Companies has received any notification of proceedings relating to the
modification, suspension or revocation of any such Governmental
Authorizations, and (C) no circumstances have arisen to make us believe
that any of such Governmental Authorizations may be revoked, suspended,
cancelled or withdrawn or (where relevant) cannot be renewed upon its
expiration date.
|
|
(vii)
|
To
the best of our knowledge after due inquiry, none of the PRC Companies is,
in all material respects, in breach or violation of or in default under
(A) its articles of association or business license, (B) any obligation,
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness governed by the PRC Laws, (C) the terms or
provisions of any material contracts entered into by the PRC Companies,
(D) any other obligation, license, lease, contract or other agreement or
instrument governed by the PRC Laws to which any of the PRC Companies is a
party or by which any of them may be bound or affected, or (E) any PRC
Laws, or any decree, judgment or order of any Government Agency or any
court in the PRC.
|
|
(viii)
|
Except
as disclosed in the Prospectus, each PRC Company has legal and valid title
to all of the real properties that it owns, free and clear of all liens,
charges, encumbrances, equities, claims, defects, options and
restrictions. Each lease agreement to which a PRC Company is a
party is duly executed and legally binding, and the leasehold interests of
each PRC Company is free from liens, pledge and restrictions and are
protected by the terms of the lease agreements, which are valid, binding
and enforceable in accordance with their respective terms under PRC
Laws.
|
5
|
(ix)
|
To
the best of our knowledge after due inquiry, each PRC Company owns or has
valid licenses in full force and effect or otherwise has the legal right
to use all Intellectual Property currently owned by it in connection with
the business currently operated by it, which is listed in Schedule 3
hereto. To the best of our knowledge after due and reasonable
inquiry, none of the PRC Companies possesses any other material
Intellectual Property except as listed in Schedule
3. To the best of our knowledge after due and reasonable
inquiry, we are not aware that, (A) there are any rights of third
parties in the PRC to any of the Intellectual Property owned by the PRC
Companies; (B) there is any pending or threatened action, suit,
proceeding or claim by others challenging the PRC Companies’ rights to, or
the violation of any of the terms of, any of their Intellectual Property
within the territory of the PRC; (C) there is any pending or
threatened action, suit, proceeding or claim by others challenging the
validity, enforceability or scope of any of the PRC Companies’
Intellectual Property within the territory of the PRC; (D) there is
any pending or threatened action, suit, proceeding or claim by others that
any of the PRC Companies infringes, misappropriates or otherwise violates
or conflicts with any Intellectual Property of others within the territory
of the PRC.
|
|
(x)
|
As
confirmed by the PRC Companies and to the best of our knowledge after due
inquiry, no labor dispute or disturbance involving the employees of the
PRC Companies exists, is imminent or threatened; each of the PRC Companies
has complied in all material respects with all employment, labor and other
similar laws applicable to the PRC Companies and has made all welfare
contributions for its employees as required under the PRC laws in
accordance with the written confirmation letters respectively issued by
Development Zone Branch of Tianjin Social Insurance Fund Management Center
on November 5, 2010 and Hexi Management Department of Tianjin Housing Fund
Management Center on November 11, 2010, and each of the PRC Companies has
entered into a labor contract with each of its employees, and the labor
contracts or employment agreements entered by each of the PRC Companies
with its employees are in compliance with the PRC
laws.
|
|
(xi)
|
As
confirmed by the PRC Companies and to the best of our knowledge after due
inquiry, each of the PRC Companies has no outstanding guarantees other
than as disclosed in the
Prospectus.
|
|
(xii)
|
Except as disclosed in the
Prospectus, Shengkai (Tianjin) Limited has full power and authority to
effect dividend payments and remittances thereof outside the PRC in United
States dollars provided that the procedural formalities required by the
competent foreign exchange authorities shall be completed on a timely
basis in accordance with the relevant PRC Laws on foreign exchange
regulations; as confirmed by the PRC Companies and to the best of our
knowledge after due inquiry, none of the PRC Companies are currently
prohibited, directly or indirectly, by the PRC Laws from distributing any
dividend to its
shareholders.
|
6
|
(xiii)
|
Under
the PRC Enterprise Income Tax Law (“EIT Law”) and its implementation rules
and the Circular of the State Administration of Taxation on Issues
Concerning the Identification of China-controlled Overseas-registered
Enterprises as Resident Enterprises on the Basis of the Standard of Actual
Management Organization dated on April 22, 2009 (“SAT Circular 82”), if
the Company is regarded as a PRC resident enterprise as defined in the EIT
Law, the non-PRC holders of the shares of the Company who are also not PRC
taxpayers as defined in the EIT Law will be subject to withholding tax,
income tax or any other taxes or duties imposed by any governmental agency
of the PRC in respect to any payments, dividends or other distributions
made on Company shares.
|
|
(xiv)
|
To
the best of our knowledge after due inquiry and as confirmed by the PRC
Companies, all returns, reports or filings required to have been made in
respect of any of the PRC Companies for taxation purposes under the PRC
laws have been made by the PRC Companies and are not subject to any
dispute with the relevant tax, revenue or other appropriate authorities;
to the best of our knowledge after due inquiry, all taxes and other
assessments of a similar nature including any interest, additions to tax
or penalties applicable thereto due or claimed to be due from such
authorities have been paid in full, and none of the PRC Companies has
committed any breach of the relevant PRC tax laws and regulations in accordance with
the letter of confirmation issued by No. Fist Branch of Tianjin State
Taxation Bureau on August 27, 2010.
|
|
(xv)
|
To
the best of our knowledge after due inquiry, except for those matters of
non-compliance which would not have a material adverse effect on the
results of operations or the financial condition of each of the PRC
Companies and except as described in the Registration Statement, each of
the PRC Companies (a) is in compliance with all PRC environmental
protection laws, orders, rules and regulations; and (b) has obtained all
permits, licenses or other approvals required of it under such applicable
PRC environmental protection laws, orders, rules or regulations to conduct
its businesses, as described in the Registration
Statement.
|
|
(xvi)
|
The
description of the Restructuring Transactions of the PRC Companies and the
Control Agreements (as defined below) set forth in the Prospectus are true
and accurate in all material respects and nothing has been omitted from
such description which would make the same misleading in any material
respects. The corporate structure of the PRC Companies (including the
shareholding structure of each of the PRC Companies) as described in the
Prospectus complies and, immediately after the Offering and sale of the
Shares, will comply with applicable PRC Laws, and does not violate,
breach, contravene or otherwise conflict with any applicable PRC
Laws.
|
7
|
(xvii)
|
Schedule 2
hereto sets forth a true, complete and correct list of all the current
contractual arrangements and agreements (the “Control
Agreements”). Each of the Control Agreements is, and all of the
Control Agreements taken as a whole are legal, valid, enforceable and
admissible as evidence against the PRC Companies and the shareholders of
the Variable Interest Entity under the PRC laws, and constitute(s) valid
and legally binding documents on the parties thereto, and enforceable in
accordance with its terms thereunder and relevant PRC
laws. Each of the Control Agreements is in proper legal form
under the PRC laws for the enforcement thereof against each of the PRC
Companies and the shareholders of the Variable Interest Entity without any
further action to be taken in the PRC by any of the PRC Companies and the
shareholders of the Variable Interest Entity other than those already
taken; and to ensure the legality, validity, enforceability or
admissibility in evidence of each of the Control Agreements in the PRC,
all government authorizations for the execution, delivery, performance and
enforcement by each of the PRC Companies and their shareholders in respect
of the Control Agreements have been obtained as required by the PRC
laws.
|
|
(xviii)
|
The
consummation of the Restructuring Transactions has been in compliance with
the PRC Laws; all necessary Governmental Authorizations for the
Restructuring Transactions have been obtained, made and taken and are in
full force and effect; all necessary steps for the Restructuring
Transactions, insofar as the PRC Laws are concerned, have been taken and
all consents required from respective parties have been obtained and are
in full force and effect; the relevant documents for the Restructuring
Transactions that are governed by the PRC Laws constitute legal, valid and
binding obligations of all the parties thereto, enforceable against all
the parties thereto, in accordance with their
terms.
|
|
(xix)
|
To
the best of our knowledge after due inquiry, there are no current or
pending legal, arbitration or governmental proceedings, regulatory or
administrative inquiries or investigations, or other governmental
decisions, rulings, orders, demands, actions or initiatives before any
court, arbitration body or any Government Agencies in the PRC to which any
of the Group Companies is a party or of which any property of the Group
Companies is the subject; and to the best of our knowledge after due
inquiry, no such proceedings, inquiries, investigations, decisions,
rulings, orders, demands, actions or initiatives are threatened or
contemplated by any Governmental Agency or threatened by others in the
PRC.
|
|
(xx)
|
To
the best of our knowledge after due inquiry, the PRC Companies have duly
completed all relevant Governmental Authorizations required under the SAFE
Rules; each of the shareholders and option holders of the Company who are
PRC citizens or residents, including shareholders and option holders of
the Company that are directly or indirectly owned or controlled by PRC
citizens or residents, has duly completed all relevant Governmental
Authorizations required under the SAFE Rules, but only insofar as such
relevant Governmental Authorizations required arose from such person’s
ownership interest in the Company or by being the Company’s option
holders.
|
8
|
(xxi)
|
The
application of the net proceeds to be received by the Company from the
Offering as contemplated by the Prospectus, will not contravene any PRC
Laws, or the articles of association or business license of any PRC
Companies or, to the best of our knowledge after due inquiry, contravene
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument binding upon any PRC Companies, or any judgment, order or
decree of any Governmental Agency.
|
|
(xxii)
|
The
statements set forth in the Prospectus insofar as such
statements describe or summarize PRC legal or regulatory matters, or
documents, agreements or proceedings governed by PRC Laws, are correct and
fairly present or fairly summarize in all material respects the PRC legal
and regulatory matters, documents, agreements or proceedings referred to
therein; and such statements did not contain an untrue statement of a
material fact, and did not omit to state any material fact necessary to
make the statements, in light of the circumstances under which they were
made, not misleading.
|
|
(xxiii)
|
No
Government Authorization from any Governmental Agency is required in
connection with (A) the execution, delivery and performance by the Company
of the Underwriting Agreement, (B) the issuance and sale of the Shares,
(C) compliance by the Company with all of the provisions of the
Underwriting Agreement, and (D) consummation by the Company of the
transactions contemplated by the Underwriting
Agreement.
|
|
(xxiv)
|
On
August 8, 2006, six PRC Government Agencies, namely, the Ministry of
Commerce (the “MOFCOM”), the
State Assets Supervision and Administration Commission, the State
Administration of Taxation, the State Administration for Industry and
Commerce, the China Securities Regulatory Commission (the “CSRC”), and
SAFE, jointly issued the Regulations on Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors (the
“M&A
Regulation”), which became effective on September 8, 2006, as
amended on June 22, 2009 to regulate foreign investment in PRC domestic
enterprises. The M&A Regulation contains provisions purporting,
among other things, to require offshore special purpose vehicles (the
“SPVs”)
that are (1) formed for the purpose of overseas listing of equity
interests in PRC companies via acquisition of domestic companies, and (2)
directly or indirectly controlled by PRC companies and/or individuals, to
obtain the approval of the CSRC prior to the listing and trading of their
securities on overseas stock exchanges. On September 21, 2006,
pursuant to the M&A Regulation and other PRC Laws, the CSRC published
a notice on its website specifying the documents and materials that SPVs
are required to submit when seeking the CSRC approval for their listings
outside of China (the “CSRC
Procedure”). As of the date of this Opinion, the CSRC has not
issued any definitive rule or interpretation concerning whether offerings
like this Offering are subject to this new
procedure.
|
9
Based on
our understanding of the current PRC Laws publicly available as of the date
hereof, we believe that neither MOFCOM nor CSRC approval is required in the
context of this Offering.
|
(xxv)
|
The
(A) execution, delivery and performance by the Company of the Underwriting
Agreement, (B) the issuance and sale of the Shares, (C) compliance by the
Company with all of the provisions of the Underwriting Agreement, and (D)
consummation by the Company of the transactions contemplated by the
Underwriting Agreement, do not and will not (i) result in any violation of
the business license, articles of association or Government Authorizations
of any of the PRC Companies; (ii) result in any violation of, or penalty
under, any PRC Laws; or (iii) to the best of our knowledge after due
inquiry, conflict with or result in a breach or violation, in all material
respects, of any of the terms or provisions of, or constitute a default
under, any other contract, license, indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument to which any
of the PRC Companies is a party or by which any of them is bound or to
which any of their properties or assets is subject in the
PRC.
|
|
(xxvi)
|
The
choice of the laws of the State of New York as the governing law of the
Underwriting Agreement is a valid choice of law under the laws of the
PRC. The PRC courts may recognize and enforce foreign judgments
in accordance with the PRC Civil Procedures Law and other related PRC Laws
based either on treaties between the PRC and the country where the
judgment is made or on reciprocity between
jurisdictions.
|
|
(xxvii)
|
The
indemnification and contribution provisions set forth in the Underwriting
Agreement do not contravene the PRC Laws; and to ensure the legality,
validity, enforceability or admissibility in evidence of the Underwriting
Agreement in the PRC, it is not necessary that any such document be filed
or recorded with any Governmental
Agency.
|
|
(xxviii)
|
As
a matter of PRC Laws, each of the Group Companies and each of the equity
holders of the Variable Interest Entity can ▇▇▇ and be sued in its own
name in the PRC subject to the acceptance by the competent PRC courts and
compliance with relevant PRC civil procedural requirements; none of the
PRC Companies or any of their respective properties, assets or revenues,
is entitled to any right of immunity on the grounds of sovereignty or
otherwise from any legal action, suit or proceeding, set-off or
counterclaim, the jurisdiction of any court in the PRC, service of
process, attachment prior to or in aid of execution of judgment, or other
legal process or proceeding for the granting of any relief or the
enforcement of any judgment in the PRC in connection with the transaction
contemplated by the Underwriting
Agreement.
|
10
|
(xxix)
|
Except
as disclosed in the Registration Statement, the General Disclosure Package
and the Final Prospectus, other than potential
withholding PRC taxes on holders of the Shares who are non-residents of
the PRC in respect of (A) any payments, dividends or other distributions
made on such Shares or (B) gains made on sales of the Shares between
non-residents of the PRC in connection with the transactions contemplated
by the Underwriting Agreement consummated outside
the PRC, no
other stamp or issuance or transfer taxes or duties and no capital gains,
income, withholding or other taxes are payable by or on behalf of any
Group Company to any Governmental Agency in connection with (A) the
creation, issuance, sale and delivery of the Shares, (B) the sale and
delivery by the Company of the Shares to or for the accounts of the
Underwriters in the manner contemplated in the Underwriting Agreement, (C)
the execution, delivery and performance of the Underwriting Agreement by
the parties thereto, or (D) the sale and delivery outside of the PRC by
the Underwriters of the Shares to the initial purchasers thereof in the
manner contemplated in the Prospectus unless the purchasers thereof are
subject to such taxes in respect of the Shares by reason of being
connected with the PRC other than by reason solely of the holding of the
Shares or receiving payments in connection
therewith.
|
|
(xxx)
|
Under
PRC Laws, no holder of the Shares who is not a PRC resident will be
subject to a requirement to be licensed or otherwise qualified to do
business or be deemed domiciled or resident in the PRC, by virtue only of
holding such Shares.
|
|
(xxxi)
|
There
are no reporting obligations to any Governmental Agency under PRC Laws on
the holders of the Offering Securities who are not PRC
residents.
|
|
(xxxii)
|
Nothing
has come to our attention that causes us to believe, insofar as the PRC
Laws or documents, agreements or proceedings governed by PRC Laws are
concerned, that (A) any part of the Registration Statement (other than the
financial statements, the related schedules and other financial data
included therein, as to which we express no opinion), as of its effective
date or as of the closing date of the Offering, contained any untrue
statement of a material fact or omitted 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 (B) that the Prospectus (other than the financial
statements, the related schedules and other financial data included
therein, as to which we express no opinion), as of its issue date or as of
the closing date of the Offering, contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, and that (C) the General Disclosure
Package (as such term is defined in the Underwriting Agreement, but other
than the financial statements, the related schedules and other financial
data included therein, as to which we express no opinion), as of the
Applicable Time (as such term is defined in the Underwriting Agreement) or
as of the closing date of the Offering, contained any untrue statement of
a material fact or omitted to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not
misleading.
|
11
This
Opinion is strictly limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressed stated
herein. The opinions expressed herein are rendered only as of
the date hereof, and we assume no responsibility to advise you of facts,
circumstances, events or developments that hereafter may be brought to our
attention and that may alter, affect or modify the opinion expressed
herein.
This
Opinion is given solely for the benefit of the persons to whom it is addressed.
It may not, without our prior written consent, be relied upon by anyone else or
used for any other purpose.
[Signature
Page Follows]
12
Yours
faithfully,
Beijing
DeHeng Law Office
13
Schedule
1: The Shareholding Structure of the PRC Companies
1. The
shareholding structure of the Variable Interest Entity:
|
Shareholders
|
Capital Contribution
(RMB Million)
|
Percentages of Capital
Contribution (%)
|
Encumbrances
|
|||
|
▇▇▇▇
▇▇▇▇
|
45.6896
|
72.61
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
▇▇▇
▇▇▇
|
8.5312
|
13.56
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
▇▇▇▇▇
▇▇▇▇
|
0.0720
|
0.11
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
▇▇▇▇
▇▇▇▇
|
0.0720
|
0.11
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
▇▇▇▇
▇▇▇▇
|
0.0720
|
0.11
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
▇▇
▇▇▇▇▇▇▇
|
0.0555
|
0.09
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
Liu
Naifan
|
0.0555
|
0.09
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
▇▇▇▇
▇▇▇▇▇▇
|
4.1920
|
6.66
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
Ji
Haihong
|
4.1920
|
6.66
|
Pledge
to Shengkai (Tianjin) Limited
|
|||
|
Total
|
|
62.9318
|
|
100
|
|
Pledge
to Shengkai (Tianjin)
Limited
|
2. The
shareholding structure of Shengkai (Tianjin) Limited:
|
Shareholder
|
Capital Contribution
(USD Million)
|
Percentages of Capital
Contribution (%)
|
Encumbrances
|
|||
|
Shen
Kun International Limited
|
|
17.78
|
|
100
|
|
None
|
3. The
shareholding structure of Shengkai (Tianjin) Trading Ltd.:
|
Shareholder
|
Capital Contribution
(RMB Million)
|
Percentages of Capital
Contribution (%)
|
Encumbrances
|
|||
|
Shengkai
(Tianjin) Limited
|
0.5
|
100
|
None
|
14
Schedule
2: The Control Agreements
|
1.
|
Loan
Agreement
|
Signed by
and between Shengkai (Tianjin) Limited and the shareholders of the Variable
Interest Entity on May 30, 2008.
|
2.
|
Consigned
Management Agreement
|
|
|
Signed
by and among Shengkai (Tianjin) Limited, the Variable Interest Entity and
its shareholders on May 30, 2008.
|
|
3.
|
Technology
Service Agreement
|
|
|
Signed
by and among Shengkai (Tianjin) Limited, the Variable Interest Entity and
its shareholders on May 30, 2008.
|
|
4.
|
Exclusive
Purchase Option Agreement
|
|
|
Signed
by and among Shengkai (Tianjin) Limited, the Variable Interest Entity and
its shareholders on May 30, 2008.
|
|
5.
|
Equity
Pledge Agreement
|
|
|
Signed
by and among Shengkai (Tianjin) Limited, the Variable Interest Entity and
its shareholders on May 30, 2008.
|
|
6.
|
Supplementary
Agreement to Equity Pledge
Agreement
|
|
|
Signed
by and among Shengkai (Tianjin) Limited, the Variable Interest Entity and
its shareholders on November 16,
2010.
|
|
7.
|
Supplementary
Agreement to Exclusive Purchase Option
Agreement
|
Signed by
and among Shengkai (Tianjin) Limited, the Variable Interest Entity and its
shareholders on November 16, 2010.
15
Schedule
3: List of the Intellectual Property
1. Patent
of the Variable Interest Entity
|
No.
|
Title
|
Patent No.
|
Gazette
Date
|
Type
|
Valid Term
|
|||||
|
1
|
External
composite armor plate for tank（用于坦克的外挂式复合装甲板）
|
ZL
2004 2 0029600.2
|
08/03/2005
|
Utility
model
|
Ten
years as of August 24, 2004
|
|||||
|
2
|
The
new V-shaped channel spherical valve（V形通道的新型球阀）
|
ZL
2004 2 0029601.7
|
08/03/2005
|
Utility
model
|
Ten
years as of August 24, 2004
|
|||||
|
3
|
Cavitation
and erosion-resistant high-pressure adjusting valve（抗冲刷耐汽蚀高压差调节阀）
|
ZL
2004 2 0029602.1
|
08/03/2005
|
Utility
model
|
Ten
years as of August 24, 2004
|
|||||
|
4
|
New
ceramic three links valve（新型陶瓷三通换向阀）
|
ZL
2004 2 0029603.6
|
08/03/2005
|
Utility
model
|
Ten
years as of August 24, 2004
|
|||||
|
5
|
New
ceramic replica valve（新型陶瓷翻板阀）
|
ZL
2004 2 0029885.X
|
11/09/2005
|
Utility
model
|
Ten
years as of October 10, 2004
|
|||||
|
6
|
Anti-fouling
ceramic seal discharge valve（防积灰陶瓷密封卸料闸阀）
|
ZL
2004 2 0029887.9
|
12/07/2005
|
Utility
model
|
Ten
years as of October 10, 2004
|
|||||
|
7
|
Reciprocating
sliding dual-plate ceramic sealing valve（往复滑动式双闸板陶瓷密封闸阀）
|
ZL
2004 2 0029886.4
|
02/01/2006
|
Utility
model
|
Ten
years as of October 10, 2004
|
|||||
|
8
|
Preventing
slag at the bottom of the wedge and abrasion-resistant ceramic slag-off
valve（防止底部积渣且耐磨的楔式陶瓷导渣闸阀）
|
ZL
2004 2 0029889.8
|
02/01/2006
|
Utility
model
|
Ten
years as of October 10,
2004
|
16
|
9
|
High
temperature and high pressure ceramic stop valve in power station（电站用高温高压陶瓷截止阀）
|
ZL
2004 2 0029890.0
|
02/01/2006
|
Utility
model
|
Ten
years as of October 10, 2004
|
|||||
|
10
|
Ceramic
valve with purge device（带有吹扫装置的轻型陶瓷闸阀）
|
ZL
2008 2 0002560.0
|
12/24/2008
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
11
|
Fine-tuning
ceramic adjusting valve（微调型陶瓷调节阀）
|
ZL
2008 2 0002567.2
|
12/24/2008
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
12
|
Ceramic
seal switching valve（陶瓷密封切换阀）
|
ZL
2008 2 0002566.8
|
12/24/2008
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
13
|
Eccentric
anti-seize abrasion-resistant spherical valve（偏心防卡耐磨损球阀）
|
ZL
2008 2 0002564.9
|
12/24/2008
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
14
|
Throttle
ceramic valve（节流型陶瓷闸阀）
|
ZL
2008 2 0002561.5
|
01/21/2009
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
15
|
Spherical
ceramic adjusting valve（全球形陶瓷调节阀）
|
ZL
2008 2 0002562.X
|
01/28/2009
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
16
|
Fast-opening
ceramic adjusting valve（快开型陶瓷调节阀）
|
Zl
2008 2 0002565.3
|
01/28/2009
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
17
|
Ceramic
butterfly valve
（陶瓷蝶阀）
|
ZL
2008 2 0002563.4
|
02/04/2009
|
Utility
model
|
Ten
years as of January 22, 2008
|
|||||
|
18
|
Hemispherical
ceramic adjusting valve（半球形陶瓷调节阀）
|
ZL
2008 2 0002559.8
|
02/04/2009
|
Utility
model
|
Ten
years as of January 22,
2008
|
17
|
19
|
Ceramic
spherical check valve（陶瓷球形止回阀）
|
ZL
2009 2 0179548.1
|
10/06/2010
|
Utility
model
|
Ten
years as of October 12, 2009
|
|||||
|
20
|
Three
links ceramic stop valve（三通切换式陶瓷截止阀）
|
ZL
2009 2 0179544.3
|
09/29/2010
|
Utility
model
|
Ten
years as of October 12, 2009
|
|||||
|
21
|
Pneumatic
ceramic seal cutout valve（气动陶瓷密封切断阀）
|
ZL
2009 2
0179546.2
|
10/06/2010
|
Utility
model
|
Ten
years as of October 12, 2009
|
|||||
|
22
|
An
enhanced ceramic sphere（一种增强型陶瓷球体）
|
ZL
2009 2
0179545.8
|
11/03/2010
|
Utility
model
|
Ten
years as of October 12, 2009
|
|||||
|
23
|
Ceramic
spherical stop valve（陶瓷球形截止阀）
|
200920179547.7
|
09/28/2009
|
Utility
model
|
Ten
years as of October 12, 2009
|
|||||
|
24
|
|
High
pressure ceramic plate valve（高压陶瓷平板闸阀）
|
|
200920179550.9
|
|
09/10/2009
|
|
Utility
model
|
|
Ten
years as of October 12,
2009
|
18
2. Patent
Applications of the Variable Interest Entity
|
No.
|
Title
|
Application No.
|
Application
Date
|
Type
|
Situation
|
|||||
|
1
|
Ceramic
seal swing check valve（陶瓷密封旋启式止回阀）
|
200920179549.6
|
10/12/2009
|
Utility
model
|
Application
is in the process of preliminary examination by the State Intellectual
Property Office of the PRC ( “SIPO”)
|
|||||
|
2
|
Throttle
ceramic stop valve（节流型陶瓷截止阀）
|
200920179551.3
|
10/12/2009
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
3
|
Ceramic
jar cover （陶瓷缸套）
|
201020576395.7
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
4
|
High
temperature ceramic sprayer（高温陶瓷喷头）
|
201020576411.2
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
5
|
Ceramic
nozzle（陶瓷喷嘴）
|
201020576415.0
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
6
|
Ceramic
plunger pump（陶瓷柱塞泵）
|
201020576428.8
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
7
|
Ceramic
centrifugal pump（陶瓷离心泵）
|
201020576436.2
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
8
|
Ceramic
valve rod（陶瓷阀杆）
|
201020576439.6
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
9
|
Ceramic
plunger piston （陶瓷柱塞）
|
201020576448.5
|
10/26/2010
|
Utility
model
|
Application
is in the process of preliminary examination by SIPO
|
|||||
|
10
|
|
Thermocouple
Protector（热电偶保护器）
|
|
201020576462.5
|
|
10/26/2010
|
|
Utility
model
|
|
Application
is in the process of preliminary examination by
SIPO
|
19
3.
Registered Trademark of the Variable Interest Entity
|
No.
|
Trademark
Description
|
Certificate No.
|
Class
|
Valid Term
|
Situation
|
|||||
|
1
|
“SK”
|
No.1717597
|
No.6
|
From
02/21/2002 to 02/20/2012
|
Accepted
by the Trademark Office of the State Administration of Industry and
Commerce of the PRC( the “Trademark Office”)
|
|||||
|
2
|
“圣恺”
|
No.4152529
|
No.2
|
From
05/07/2007 to 05/06/2017
|
Accepted
by Trademark Office
|
|||||
|
3
|
“圣恺”
|
No.4152532
|
No.20
|
From
05/07/2007 to 05/06/2017
|
Accepted
by Trademark Office
|
|||||
|
4
|
“圣恺”
|
No.4152527
|
No.7
|
From
10/14/2006 to 10/13/2016
|
Accepted
by Trademark Office
|
|||||
|
5
|
“圣恺”
|
No.4152528
|
No.6
|
From
10/14/2006 to 10/13/2016
|
Accepted
by Trademark Office
|
|||||
|
6
|
|
“圣恺”
|
|
No.4152533
|
|
No.11
|
|
From
10/14/2006 to 10/13/2016
|
|
Accepted
by Trademark
Office
|
4. Domain
Name of the Variable Interest Entity
|
No.
|
Domain Name
|
Registrant
|
Expiration Date
|
|||
|
1
|
“▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
04/13/2011
|
|||
|
2
|
“▇▇▇▇▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
06/15/2014
|
|||
|
3
|
“▇▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
04/13/2011
|
|||
|
4
|
“▇▇▇▇.▇▇”
|
Variable
Interest Entity
|
04/16/2011
|
|||
|
5
|
“▇▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
04/13/2011
|
|||
|
6
|
“▇▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
04/13/2011
|
|||
|
7
|
“▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
04/13/2011
|
|||
|
8
|
“▇▇▇▇.▇▇▇”
|
Variable
Interest Entity
|
04/13/2011
|
20