2,000,000 SHARES OF COMMON STOCK BUDDHA STEEL INC. UNDERWRITING AGREEMENT
Exhibit
1.1
2,000,000
SHARES OF COMMON STOCK
BUDDHA
STEEL INC.
________________,
▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co. Inc.
As
Representative of the
Several
Underwriters named
in
Schedule I hereto
Ladies
and Gentlemen:
BUDDHA
STEEL INC, a Delaware corporation (the “Company”), proposes to issue
and sell to the several Underwriters (as defined below) an aggregate of
2,000,000 shares of common stock (the “Shares”) pursuant to and in
accordance with the terms and conditions of this underwriting agreement (the
“Agreement”).
It is
understood that, subject to the conditions hereinafter stated, an aggregate of
2,000,000 shares of Common Stock (the “Firm Securities”) will be sold
to the several Underwriters named in Schedule I hereto (the “Underwriters”) in connection
with the public offering (the “Offering”) and sale of such
Firm Securities. Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc. shall act as the
representative (the “Representative”) of the
several Underwriters. In addition, as set forth below, the Company
proposes to issue and sell to the Underwriters, upon the terms and conditions
set forth in Section 3 hereof, an aggregate of up to 300,000 additional Shares
(“Optional
Securities”). The Firm Securities and the Optional Securities
are hereinafter called the “Securities.”
This is
to confirm the agreement concerning the purchase of the Securities from the
Company by the Underwriters.
1. Representations and Warranties of the
Company. The Company represents and warrants to, and agrees
with, each Underwriter that:
(a) The
Company has prepared and filed with the Securities and Exchange Commission (the
“Commission”) a
registration statement on Form S-1 (No. 333-169462), which contains a form of
prospectus to be used in connection with the public offering and sale of the
Securities. Such registration statement on Form S-1, as amended,
including the financial statements, exhibits and schedules thereto, in the form
in which it was declared effective by the Commission under the Securities Act of
1933, as amended (the “Securities Act”) and the rules
and regulations promulgated thereunder (the “Rules and Regulations”),
including any required information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430A under the Securities Act, is called the
“Registration
Statement.” Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the “Rule 462(b) Registration
Statement”, and from and after the date and time of filing of the Rule
462(b) Registration Statement the term “Registration Statement” shall
include the Rule 462(b) Registration Statement. Any preliminary
prospectus included in the Registration Statement is hereinafter called a “preliminary
prospectus.” The term “Prospectus” shall mean the
final prospectus relating to the Securities that is first filed pursuant to Rule
424(b) after the date and time that this Agreement is executed and delivered by
the parties hereto (the “Execution Time”) or, if no
filing pursuant to Rule 424(b) is required, shall mean the form of final
prospectus relating to the Securities included in the Registration Statement at
the time it became effective. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus, the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System (“▇▇▇▇▇”).
(b) The
Registration Statement and any Rule 462(b) Registration Statement have been
declared effective by the Commission under the Securities Act. The
Company has complied, to the Commission’s satisfaction, with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement is in effect and no proceedings for such purpose have
been instituted or are pending or, to the best knowledge of the Company, are
contemplated or threatened by the Commission.
The final
preliminary prospectus included in the Disclosure Package (as defined below) and
the Prospectus when filed complied in all material respects with the Securities
Act and the rules thereunder and, if filed by electronic transmission pursuant
to ▇▇▇▇▇ (except as may be permitted by Regulation S-T under the Securities
Act), was identical to the copy thereof delivered to the Underwriters for use in
connection with the offer and sale of the Securities. Each of the
Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at the
date hereof, and each Closing Date (as defined below), complied and will comply
in all material respects with the Securities Act and did not and 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 Prospectus (including any Prospectus wrapper), as
amended or supplemented, as of its date and at the date hereof, the Closing Date
and any Option Closing Date, did not and will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Representative expressly for use therein, it being understood and agreed
that the only such information furnished by the Representative consists of the
information described as such in Section 12 hereof. There are no
contracts or other documents required to be described in the Prospectus or to be
filed as exhibits to the Registration Statement which have not been described or
filed as required.
(c) The
term “Disclosure
Package” shall mean, collectively, (i) the preliminary prospectus that is
included in the Registration Statement immediately prior to the Initial Sale
Time (as defined below), if any, as amended or supplemented, (ii) any issuer
free writing prospectuses as defined in Rule 433 of the Securities Act (each, an
“Issuer Free Writing
Prospectus”) identified in Schedule III hereto, and (iii) any other free
writing prospectus that the parties hereto shall hereafter expressly agree in
writing to treat as part of the Disclosure Package. As of 4:30 PM
(Eastern time) on the date of this Agreement (the “Initial Sale Time”), the
Disclosure Package did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The preceding sentence does not apply to statements in or
omissions from the Disclosure Package based upon and in conformity with written
information furnished to the Company by the Representative specifically for use
therein, it being understood and agreed that the only such information furnished
by or on behalf of any Underwriter consists of the information described as such
in Section 12 hereof.
(d) Each
Issuer Free Writing Prospectus, as of its issue date and at all subsequent times
through the completion of the Offering or until any earlier date that the
Company notified or notifies the Representative 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. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by the
Representative specifically for use therein, it being understood and agreed that
the only such information furnished by any Underwriter consists of the
information described as such in Section 12 hereof.
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(e) The
Company has delivered to the Representative one complete manually signed copy of
the Registration Statement and of each consent and certificate of experts filed
as a part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representative have
reasonably requested for each of the Underwriters.
(f) The
Company has not distributed and will not distribute, prior to the later of the
Option Closing Date (as defined in Section 4 below) and the completion of the
Underwriters’ distribution of the Securities, any offering material in
connection with the offering and sale of the Securities other than any
preliminary prospectus, the Prospectus, any Issuer Free Writing Prospectus
reviewed and consented to by the Representative or included in Schedule III
hereto or the Registration Statement.
(g) ▇▇▇▇▇▇▇▇
LLP (“▇▇▇▇▇▇▇▇”), whose report appears in the Registration Statement, and
included in the Disclosure Package and the Prospectus, are independent certified
public accountants as required by the Securities Act and the Rules and
Regulations and the Public Company Accounting Oversight Board (including the
rules and regulations promulgated by such entity, the “PCAOB”). To the
knowledge of the Company, ▇▇▇▇▇▇▇▇ is duly registered and in good standing with
the PCAOB. ▇▇▇▇▇▇▇▇ has not during the periods covered by the financial
statements included in the Registration Statement and in the Disclosure Package
and Prospectus, provided to the Company any non-audit services, as such term is
defined in Section 10A(g) of the Securities Exchange Act of 1934, as amended
(“Exchange
Act”). The financial statements and schedules (including the
related notes) included in the Registration Statement, and included in the
Disclosure Package and the Prospectus, present fairly the financial condition,
the results of the operations and changes in financial condition of the entities
purported to be shown thereby at the dates or for the periods indicated and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. All
adjustments necessary for a fair presentation of results for such periods have
been made. The selected financial, operating and statistical data set
forth in any preliminary prospectus included in the Disclosure Package and the
Prospectus under the captions “Prospectus Summary,” “Selected Financial Data”
and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” fairly present, when read in conjunction with the Company’s
financial statements and the related notes and schedules and on the basis stated
in the Registration Statement, the information set forth therein.
(h) Each
of the Company and its subsidiaries (“Subsidiaries”) has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its organization, with full power and authority
(corporate and other) to own or lease its properties and conduct its business as
described in the Disclosure Package and Prospectus, and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the character of the business conducted by it or the location of the
properties owned or leased by it makes such qualification necessary; each of the
Company and its Subsidiaries is in possession of and operating in compliance
with all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates and orders required for the conduct of its business, all
of which are valid and in full force and effect (except where any failure to do
so would not result in a material adverse change in the condition (financial or
otherwise), business, prospects, properties or results of operations of the
Company or any of its Subsidiaries (“Material Adverse Effect”); and
neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such franchise,
grant, authorization, license, permit, easement, consent, certificate or order
which, individually or in the aggregate, if the subject of an unfavorable
decision, would result, individually or in the aggregate, in having a Material
Adverse Effect.
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(i) The
capitalization of the Company is as set forth under the caption “Capitalization”
in the Disclosure Package and Prospectus, and the Shares conform to the
description thereof contained under the caption “Description of Capital Stock”
in the Disclosure Package and Prospectus; the outstanding shares of capital
stock have been duly authorized, validly issued, fully paid and nonassessable
and have been issued in compliance with federal and state securities
laws. There are no preemptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, any shares of
capital stock pursuant to the Company’s certificate of incorporation, by-laws or
other governing documents or any agreement or other instrument to which the
Company or any of its Subsidiaries is a party or by which any of them may be
bound other than those accurately described in the Disclosure Package and the
Prospectus. None of the outstanding shares of capital stock was
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscript for or purchase securities of the
Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company other than those accurately described in the
Disclosure Package and the Prospectus. The description of the
Company’s stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth in the Disclosure
Package and the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights. Neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this Agreement gives rise
to any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock. All of
the outstanding shares of capital stock of each Subsidiary of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are owned directly or indirectly by the Company, free and clear of any claim,
lien, encumbrance or security interest. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of any Subsidiary other than
those accurately described in the Disclosure Package and the
Prospectus.
(j) Subsequent
to the respective dates as of which information is given in the Disclosure
Package and the Prospectus, and except as described or contemplated in the
Disclosure Package and Prospectus or otherwise disclosed to the Underwriters in
writing: neither the Company nor any of its Subsidiaries has incurred any
liabilities or obligations, direct or contingent, nor entered into any
transactions not in the ordinary course of business, which in either case are
material to the Company or such Subsidiary, as the case may be; there has not
been any Material Adverse Effect; and there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its capital
stock.
(k) Except
as would not have a Material Adverse Effect, neither the Company nor any of its
Subsidiaries is, or with the giving of notice or lapse of time or both would be,
in violation of or in default under, nor will the execution or delivery hereof
or consummation of the transactions contemplated hereby result in a violation
of, or constitute a default under, the certificate of incorporation, bylaws or
other governing documents of the Company or any of its Subsidiaries, or any
agreement, contract, mortgage, deed of trust, loan agreement, note, lease,
indenture or other instrument, to which the Company or any of its Subsidiaries
is a party or by which any of them is bound, or to which any of their properties
is subject, nor will the performance by the Company of its obligations hereunder
violate any law, rule, administrative regulation or decree of any court, or any
governmental agency or body having jurisdiction over the Company, its
Subsidiaries or any of their properties, or result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of the
Company or any of its Subsidiaries. Except for permits and similar
authorizations required under the Securities Act and the securities or “Blue
Sky” laws of certain jurisdictions, if applicable, and for such permits and
authorizations which have been obtained, no consent, approval, authorization or
order of any court, governmental agency or body or financial institution is
required in connection with the consummation of the transactions contemplated by
this Agreement.
(l) This
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company and is
enforceable against the Company in accordance with its terms.
(m) The
Securities to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly issued,
fully paid and nonassessable. The issuance of the Securities pursuant
to this Agreement will not be subject to any preemptive rights, rights of first
refusal or other similar rights to subscript for or purchase securities of the
Company. There are no restrictions upon the voting or transfer of the
Securities under the Company’s certificate of incorporation or by laws or any
agreement or other instrument to which the Company is a party or otherwise filed
as an exhibit to the Registration Statement.
(n) The
Company and its Subsidiaries have good and marketable title in fee simple to all
items of real property owned by them and good and marketable title to all
personal property owned by them, in each case clear of all liens, encumbrances
and defects except such as are described or referred to in the Disclosure
Package and Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made or proposed to be made of such
property by the Company or such Subsidiaries; and any real property and
buildings held under lease by the Company and its Subsidiaries are held by them
under valid, existing and enforceable leases with such exceptions as are not
material and do not interfere with the use made or proposed to be made of such
property and buildings by the Company or such Subsidiaries.
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(o) Except
as fully described in the Disclosure Package and Prospectus, there is no
litigation or governmental proceeding to which the Company or any of its
Subsidiaries is a party or to which any property of the Company or any of its
Subsidiaries is subject or which is pending or, to the knowledge of the Company,
threatened against the Company which individually or in the aggregate might
result in any Material Adverse Effect, which would materially and adversely
affect the consummation of this Agreement or the transactions contemplated
hereby or which is required to be disclosed in the Disclosure Package and
Prospectus.
(p) Neither
the Company nor any Subsidiary is in violation of any law, ordinance,
governmental rule or regulation or court decree to which it may be subject which
violation might have a Material Adverse Effect.
(q) The
Company has not taken and may not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Securities.
(r) Each
of the Company and the Subsidiaries has accurately prepared and timely filed all
federal, state, foreign, including the People’s Republic of China (“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.
(s) The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Except as disclosed in the Registration Statement, the Disclosure
Package and the Prospectus, since the date of the most recent evaluation of such
system of internal accounting controls, there has been no material change in
internal control over financial reporting, including any corrective actions with
regard to significant deficiencies or material weaknesses. The
Company has established and maintains disclosure controls and procedures (as
defined in Rule 13a-15 under the Exchange Act). Such disclosure
controls and procedures are designed to ensure that material information
relating to the Company is made known to the Company’s principal executive
officer and its principal financial officer, particularly during the periods in
which the periodic reports required under the Exchange Act are being
prepared. Such disclosure controls and procedures are effective in
timely alerting the Company’s principal executive officer and principal
financial officer to material information required to be included in the
Company’s periodic reports required under the Exchange Act.
(t) The
Company and its Subsidiaries maintain commercial insurance for their equipment
and directors’ and officers’ insurance deemed adequate for the Company’s
business, all of which insurance is in full force and effect. The
Company has not been refused any insurance coverage sought or applied for, and
the Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse
Effect.
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(u) Neither
the Company nor any of its Subsidiaries nor, to the best of the Company’s
knowledge, any of its employees or agents has at any time during the last five
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 foreign, federal or state governmental officer
or official or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(v) The
Company is not and, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described under the
caption “Use of Proceeds” in the Disclosure Package or the Prospectus, will not
be an “investment company” as defined in the Investment Company Act of 1940, as
amended.
(w) Except
as disclosed in the Disclosure Package or 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
Offering.
(x) Except
as disclosed in the Disclosure Package or the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to a Registration Statement or
in any securities being registered pursuant to any other registration statement
filed by the Company under the Securities Act.
(y) The
Shares have been reserved for issuance and have been approved for listing on the
NASDAQ Global Market, subject only to official notice of
issuance. The Common Stock of the Company has been registered under
Section 12(b) of the Exchange Act.
(z) The
Company is in material compliance with all applicable provision of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are currently effective and the rules and
regulations promulgated in connection therewith.
(aa) No
consent, approval, authorization, or order of, or filing with, any governmental
agency or body or any court is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance and sale of the
Securities by the Company, except such as have been obtained and made under the
Securities Act and such as may be required by the Financial Industry Regulatory
Authority (“FINRA”) or
under state securities laws or the laws of any foreign
jurisdiction.
(bb) The
execution, delivery and performance of this Agreement, and the issuance and sale
of the Securities will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any statute, any
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company, except in the case of
this clause (i) for such breaches, violations or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect or
(ii) any agreement or instrument to which the Company is a party or by
which the Company is bound, except in the case of this clause (ii) for such
breaches, violations or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) the charter or by-laws
of the Company, and the Company has full power and authority to authorize, issue
and sell the Securities as contemplated by this Agreement.
(cc) The
Company is not presently doing business with the government of Cuba or with any
person or affiliate located in Cuba.
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(dd) No
labor dispute with the employees of the Company or any Subsidiary exists or, to
the knowledge of the Company, is imminent that might have a Material Adverse
Effect.
(ee) The
Company and its Subsidiaries own or possess the right to use sufficient
trademarks, trade names, patent rights, copyrights, domain names, licenses,
approvals, trade secrets, inventions, technology, know-how and other similar
rights (collectively, “Intellectual Property Rights”)
as are (i) necessary or material to conduct its business as now conducted
and as described in the Disclosure Package and the Prospectus and as are
(ii) necessary or material for the commercialization of the products
described in the Disclosure Package and the Prospectus as being under
development. Except as set forth in the Disclosure Package and the
Prospectus, (a) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding, or claim by others challenging the rights
of the Company or any of its Subsidiaries in or to any such Intellectual
Property Rights that, if decided adversely to the Company would, individually or
in the aggregate, have a Material Adverse Effect, and the Company is unaware of
any facts which would form a reasonable basis for any such claim; (b) there
is no pending, or to the Company’s knowledge, threatened action, suit,
proceeding, or claim by others that the Company or any of its Subsidiaries
infringes, misappropriates, or otherwise violates any Intellectual Property
Rights, of others that, if decided adversely to the Company would, individually
or in the aggregate, have a Material Adverse Effect, and the Company is unaware
of any facts which would form a reasonable basis for any such claim;
(c) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding, or claim by others challenging the validity, scope, or
enforceability of any such Intellectual Property Rights owned by the Company or
its Subsidiaries and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (d) to the Company’s knowledge, the
operation of the business of the Company and its Subsidiaries as now conducted,
and as described in the Disclosure Package and the Prospectus, and in connection
with the development and commercialization of the products described in the
Disclosure Package and the Prospectus does not infringe any claim of any patent
or published patent application; (e) there is no prior art of which the
Company is aware that may render any patent owned or licensed by the Company or
its Subsidiaries invalid or any patent application owned or licensed by the
Company unpatentable which has not been disclosed to the applicable government
patent office; and (f) the Company’s granted or issued patents, registered
trademarks, and registered copyrights have been duly maintained and are in full
force and in effect, and none of the patents, trademarks and copyrights have
been adjudged invalid or unenforceable in whole or in part. Neither
the Company nor any of its Subsidiaries is a party to or bound by any options,
licenses or agreements with respect to the Intellectual Property Rights of any
other person or entity that are required to be set forth in the Disclosure
Package and the Prospectus and are not described therein in all material
respects. None of the technology or intellectual property used by the
Company and its Subsidiaries in its business has been obtained or is being used
by the Company or its Subsidiaries in violation of any contractual obligation
binding on the Company or its Subsidiaries, or, to the Company’s knowledge, any
of its officers, directors, or employees or otherwise in violation of the rights
of any persons. No third party has been granted by the Company or its
Subsidiaries rights to the Intellectual Property Rights of the Company or its
Subsidiaries that, if exercised, could enable such party to develop products
competitive to those of the Company as described in the Disclosure Package and
the Prospectus.
(ff) Except
as would not have a Material Adverse Effect, neither the Company or any of its
Subsidiaries has breached and is currently in breach of any provision of any
license, contract or other agreement governing the use by the Company or its
Subsidiaries of Intellectual Property Rights owned by third parties
(collectively, the “Licenses”) and, except as
described in the Disclosure Package and the Prospectus, no third party has
alleged any such breach and the Company is unaware of any facts that would form
a reasonable basis for such a claim. To the Company’s knowledge, no
other party to the Licenses has breached or is currently in breach of any
provision of the Licenses. Each of the Licenses is in full force and
effect and constitutes a valid and binding agreement between the parties
thereto, enforceable in accordance with its terms, and there has not occurred
any breach or default under any such Licenses or any event that with the giving
of notice or lapse of time would constitute a breach or default
thereunder. Except as would not have a Material Adverse Effect,
neither the Company nor any of its Subsidiaries has been and is currently
involved in any disputes regarding the Licenses. To the Company’s
knowledge, all patents licensed to the Company pursuant to the Licenses are
valid, enforceable and being duly maintained. To the Company’s
knowledge, all patent applications licensed to the Company pursuant to the
Licenses are being duly prosecuted.
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(gg) Except
as described in the Registration Statement, the Disclosure Package and the
Prospectus, the Company and its subsidiaries: (A) are and at all times have
been in full compliance with all statutes, rules, regulations, or guidances
applicable to the Company and its subsidiaries and the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, storage, import, export or disposal
of any product manufactured or distributed by the Company (“Applicable
Laws”), except as could not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Change; (B) have not received
any notice of adverse finding, warning letter, untitled letter or other
correspondence or notice from any other federal, state or foreign governmental
authority having authority over the Company (“Governmental
Authority”) alleging or asserting noncompliance with any Applicable Laws
or any licenses, certificates, approvals, clearances, authorizations, permits
and supplements or amendments thereto required by any such Applicable Laws
(“Authorizations”);
(C) possess all material Authorizations and such Authorizations are valid
and in full force and effect and are not in violation of any term of any such
Authorizations; (D) have not received notice of any claim, action, suit,
proceeding, hearing, enforcement, investigation, arbitration or other action
from any Governmental Authority or third party alleging that any product
operation or activity is in violation of any Applicable Laws or Authorizations
and have no knowledge that any such Governmental Authority or third party is
considering any such claim, litigation, arbitration, action, suit, investigation
or proceeding; (E) have not received notice that any Governmental Authority
has taken, is taking or intends to take action to limit, suspend, modify or
revoke any Authorizations and the Company has no knowledge that any such
Governmental Authority is considering such action; and (F) have filed,
obtained, maintained or submitted all material reports, documents, forms,
notices, applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and that all
such reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct in all
material respects on the date filed (or were corrected or supplemented by a
subsequent submission).
(hh) The
Company and each Subsidiary possess such valid and current certificates,
authorizations, approvals or permits issued by the appropriate state, federal,
foreign regulatory agencies or bodies necessary to conduct their respective
businesses and the farming, processing marketing, sale, exportation and
importation of the Company’s products and elimination as described in the
Disclosure Package and the Prospectus, including under the rules and regulations
of the United States Food and Drug Administration, and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the revocation
or modification of, or non-compliance with, any such certificate, authorization
or permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse
Effect.
(ii) 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.
(jj) Except
as would not, individually or in the aggregate, result in a Material Adverse
Effect (i) neither the Company nor any of its Subsidiaries is in violation
of any federal, state, local or foreign law or regulation relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products (collectively, “Materials of Environmental
Concern”), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern (collectively, “Environmental Laws”), which
violation includes, but is not limited to, noncompliance with any permits or
other governmental authorizations required for the operation of the business of
the Company under applicable Environmental Laws, or noncompliance with the terms
and conditions thereof, nor has the Company or any of its Subsidiaries received
any written communication, whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Company or any of its
Subsidiaries is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental authority,
no investigation with respect to which the Company or any of its Subsidiaries
has received written notice, and no written notice by any person or entity
alleging potential liability for investigatory costs, cleanup costs,
governmental responses costs, natural resources damages, property damages,
personal injuries, attorneys’ fees or penalties arising out of, based on or
resulting from the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by the Company
or any of its Subsidiaries, now or in the past (collectively, “Environmental Claims”),
pending or, to the best of the Company’s knowledge, threatened against the
Company, any of its Subsidiaries, or any person or entity whose liability for
any Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law; and (iii) to the
Company’s knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim against
the Company, any of its Subsidiaries, or against any person or entity whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
retained or assumed either contractually or by operation of
law.
8
(kk) The
Company and its subsidiaries (A) are in compliance, in all material
respects, with any and all applicable foreign, federal, state and local laws,
rules, regulations, treaties, statutes and codes promulgated by any and all
governmental authorities (including pursuant to the Occupational Health and
Safety Act) relating to the protection of human health and safety in the
workplace (“Occupational
Laws”); (B) have received all material permits, licenses or other
approvals required of it under applicable Occupational Laws to conduct their
business as currently conducted; and (C) are in compliance, in all material
respects, with all terms and conditions of such permit, license or approval. No
action, proceeding, revocation proceeding, writ, injunction or claim is pending
or, to the Company’s knowledge, threatened against the Company or any of its
subsidiaries relating to Occupational Laws, and the Company does not have
knowledge of any facts, circumstances or developments relating to its operations
or cost accounting practices that could reasonably be expected to form the basis
for or give rise to such actions, suits, investigations or
proceedings.
(ll) The
Company and its Subsidiaries are in material compliance with PRC regulations in
connection with social insurance for employees.
(mm) There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees or indebtedness by the Company
to or for the benefit of any of the officers or directors of the Company or any
of the members of any of them, except as disclosed in the Disclosure Package and
the Prospectus.
(nn) The
market data and industry forecasts included in the Registration Statement and
the Disclosure Package and the Prospectus were obtained or derived from industry
publications that are and were not at any time under the Company’s control 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.
(oo) Except
as disclosed in the Disclosure Package or the Prospectus, since the date of the
latest audited financial statements included in the Disclosure Package or the
Prospectus there has been no Material Adverse Effect, nor any development or
event involving a prospective Material Adverse Effect, in the condition
(financial or other), business, properties or results of operations of the
Company and its Subsidiaries taken as a whole.
(pp) No
director or officer is subject to any non-competition agreement or
non-solicitation agreement with any employer or prior employer which could
materially affect each director’s or officer’s ability to be and act in the
capacity of a director or officer of the Company.
(qq) The
Company has not offered, or caused the Underwriter to offer, the Firm Securities
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.
9
(rr) Each
of the Company and Subsidiaries, and to the knowledge of the Company, each of
its affiliates and any of the respective officers, directors, supervisors,
managers, agents or employees of each of the foregoing, has not violated, its
participation in the offering will not violate, and the Company has instituted
and maintains policies and procedures designed to ensure continued compliance
with, each of the following laws: (a) anti-bribery laws, including but not
limited to, any applicable law, rule, or regulation of any locality, including
but not limited to any law, rule, or regulation promulgated to implement the
OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, signed December 17, 1997, including
the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other law,
rule or regulation of similar purposes and scope, (b) anti-money laundering
laws, including but not limited to, applicable federal, state, international,
foreign or other laws, regulations or government guidance regarding anti-money
laundering, including, without limitation, U.S. Currency and Foreign
Transactions Reporting Act of 1970, Title 18 US. Code section 1956 and 1957, the
Patriot Act, the Bank Secrecy Act, and international anti-money laundering
principles or procedures by an intergovernmental group or organization, such as
the Financial Action Task Force on Money Laundering, of which the United States
and/or PRC is a member and with which the designated representative of the
United States and/or PRC to the group or organization continues to concur, all
as amended, and any executive order, directive, or regulation pursuant to the
authority of any of the foregoing, or any orders or licenses issued thereunder
(collectively, the “Money Laundering
Laws”) or (c) laws and regulations imposing U.S. economic sanctions
measures, including, but not limited to, the International Emergency Economic
Powers Act, the Trading with the Enemy Act, the United Nations Participation Act
and the Syria Accountability and Lebanese Sovereignty Act, all as amended, and
any executive order, directive, or regulation pursuant to the authority of any
of the foregoing, including the regulations of the United States Treasury
Department set forth under 31 CFR, Subtitle B, Chapter V, as amended, or any
orders or licenses issued thereunder. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of the Money
Laundering Laws and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened.
(ss) All
“non-GAAP financial measures” (as defined in the Regulations) included in the
Registration Statement, the Disclosure Package or the Prospectus comply with the
requirements of Regulation G and Item 10 of Regulation S-K under the
Regulations.
(tt) Except
as described in the Registration Statement and the Prospectus, there are no
claims, payments, arrangements, agreements or understandings relating to the
payment of a finder’s, consulting or origination fee by the Company or any
officer, director or stockholder of the Company with respect to the sale of the
Securities hereunder or any other arrangements, agreements or understandings of
the Company or, to the Company’s knowledge, any of its shareholders that may
affect the Underwriter’s compensation, as determined by FINRA. Except as
described in the Registration Statement and the Prospectus, the Company has not
made any direct or indirect payments (in cash, securities or otherwise) to:
(i) any person, as a finder’s fee, consulting fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who raised or provided capital to the Company; (ii) to
any FINRA member; or (iii) to any person or entity that has any direct or
indirect affiliation or association with any FINRA member, within the 180 days
prior to the Effective Date, other than the prior payment of $800 to the
Underwriter as provided hereunder in connection with the Offering. None of the
net proceeds of the Offering will be paid by the Company to any participating
FINRA member or its affiliates, except as specifically authorized herein. No
officer, director or any beneficial owner of the Company’s securities (whether
debt or equity, registered or unregistered, regardless of the time acquired or
the source from which derived) (any such individual or entity, a “Company Affiliate”) has any
direct or indirect affiliation or association with any FINRA member (as
determined in accordance with the rules and regulations of FINRA); no Company
Affiliate is an owner of stock or other securities of any member of FINRA (other
than securities purchased on the open market); no Company Affiliate has made a
subordinated loan to any member of FINRA; no proceeds from the sale of Shares
(excluding underwriting compensation as disclosed in the Registration Statement
or Prospectus) will be paid to any FINRA member, or any persons associated with
or affiliated with any member of FINRA. Except as disclosed in the Registration
Statement or the Prospectus, the Company has not issued any warrants or other
securities or granted any options, directly or indirectly, to anyone who is a
potential underwriter in the Offering or a related person (as defined by FINRA
rules) of such an underwriter within the 180-day period prior to the initial
filing date of the Registration Statement; no person to whom securities of the
Company have been privately issued within 180-day period prior to the initial
filing date of the Registration Statement has any relationship or affiliation or
association with any member of FINRA; and no FINRA member participating in the
offering has a conflict of interest with the Company. For this purpose, a
“conflict of interest” exists when a member of FINRA and/or its associated
persons, parent or affiliates in the aggregate beneficially own 10% or more of
the Company’s outstanding subordinated debt or common equity, or 10% or more of
the Company’s preferred equity. “FINRA member participating in the Offering”
includes any associated person of a FINRA member that is participating in the
Offering, any member of such associated person’s immediate family and any
affiliate of a FINRA member that is participating in the
Offering.
10
(uu) The
descriptions of the ownership structure of the Company and its subsidiaries and
non-subsidiary controlled companies as set forth in Exhibit 21.1 to the
Registration Statement (collectively, the “Subsidiaries”) and the
restructurings set forth in the Registration Statement under the caption
“Corporate Structure and History” are accurate and complete. The ownership
structure of the Company and Subsidiaries, both currently and after giving
effect to the offering of the Securities (the “Corporate Structure”), are in
material compliance with existing laws and regulations of the PRC. All consent,
approval, authorization or order of, or registration or filing with any
Governmental Authority required for the restructuring transactions resulting
into the Corporate Structure (collectively, the “Restructuring”), including
without limitation the contractual arrangements between Hebei Anbang Investment
Consultation Co., Ltd. (“Hebei”) and Dachang Hui Autonomous County Baosheng
Steel Products Co., Ltd. (“Baosheng”) (Hebei and Baosheng, collectively the “PRC
Companies”), have been duly obtained, and none of such governmental
authorizations has been withdrawn or revoked nor, to the Company’s knowledge,
are there circumstances which may give rise to such governmental authorizations
being withdrawn or revoked, or is subject to any condition precedent which has
not been fulfilled or performed. The Restructuring did not and/or does not
(A) contravene or conflict with any provision of any applicable PRC laws
and regulations, (B) contravene or conflict with the respective articles of
incorporation, business license or other constitutional documents of any of the
Company and its Subsidiaries, or (C) conflict with or result in a breach or
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 any of the Company and its Subsidiaries
is a party or by which any of the Company and its Subsidiaries is bound or to
which any of the property or assets of any of the Company and its Subsidiaries
is subject, except in the case of (c) where non-compliance would not
reasonably be expected to have a Material Adverse Effect (as defined below). The
PRC Companies operate their businesses in compliance with all PRC laws and
regulations, except where non-compliance would not reasonably be expected to
have a Material Adverse Effect.
(vv) 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. 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”).
Except as disclosed in the Registration Statement, 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
Stock.
(ww) 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.
(xx) The
conditions for use of Form S-1 to register the Offering under the Securities
Act, as set forth in the General Instructions to such Form, have been
satisfied.
11
(yy)
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.
(zz) Reserved.
(aaa) The
Company is in compliance with all applicable PRC and other foreign and U.S.
laws, rules, regulations, ordinances, directives, judgments, decrees and orders
(including, without limitation, all securities and tax laws, rules and
regulations of the PRC), except for such non-compliance as would not have a
Material Adverse Effect. 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.
(bbb) Reserved.
(ccc) Except
as set forth in the Registration Statement and the Prospectus, no holders of any
securities of the Company or any rights exercisable for or convertible or
exchangeable into securities of the Company have the right to require the
Company to register any such securities of the Company under the Act or to
include any such securities in a registration statement to be filed by the
Company.
(ddd) 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.
(eee) None
of the Subsidiaries is currently prohibited, directly or indirectly, from paying
any dividends to the Company, from making any other distribution on such
Subsidiary’s share capital, from repaying to the Company any loans or advances
to such Subsidiary from the Company or from transferring any of such
Subsidiary’s property or assets to the Company or any other Subsidiary, except
as described in or contemplated by the General Disclosure Package and the
Prospectus; except as described in the General Disclosure Package and the
Prospectus, any dividends and other distributions declared with respect to
after-tax retained earnings on the equity interests of the PRC Group Companies
may under PRC laws and regulations be paid to the Company; and all such
dividends and distributions will not be subject to withholding or other taxes
under PRC laws and regulations and are otherwise free and clear of any other
tax, withholding or deduction in the PRC, and without the necessity of obtaining
any governmental authorization in the PRC.
(fff) Except
as described in the Registration Statement, the General Disclosure Package and
the Prospectus, each of the Company and Subsidiaries has taken or is in the
process of taking all reasonable steps (to the extent required of the Company
and each such Subsidiary under PRC laws and regulations) to comply with, and to
ensure compliance by each of (i) its principal stockholders as disclosed in
the Registration Statement, the General Disclosure Package and the Prospectus,
and (ii) any other persons known to the Company that are required to comply
(in connection with their interests in the Company) with applicable rules and
regulations of the relevant PRC governmental agencies (including, without
limitation, the Ministry of Commerce, National Development and Reform Commission
and the State Administration of Foreign Exchange) relating to overseas
investment by PRC residents and citizens or overseas 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 such persons to
complete any registration and other procedures required under applicable PRC
Overseas Investment and Listing Regulations.
12
(ggg) As
of the date hereof, as of the date of the Prospectus and the Closing Date, 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”) or
any official clarifications, guidance, interpretations or implementation rules
in connection with or related to the M&A Rules did not and do not apply to
the issuance and sale of the Securities, the quotation and trading of the
Securities on the NASDAQ Global Market, or the consummation of the transactions
contemplated by this Agreement. Nor is CSRC or other PRC government approval
required in connection with the above.
(hhh) The
Registration Statement, the General Disclosure Package and the Prospectus each
fairly and accurately describe all material trends, demands, commitments and
events known to the Company, and uncertainties, and the potential effects
thereof, that the Company believes would materially affect its liquidity and are
reasonably likely to occur. As used herein, the phrase “reasonably likely”
refers to a disclosure threshold lower than “more likely than not.”
Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
The
Company acknowledges that the Underwriters and, for purposes of the opinions to
be delivered pursuant to Section 6 hereof, counsel to the Company and
counsel to the Underwriters, will rely upon the accuracy and truthfulness of the
foregoing representations and hereby consents to such reliance.
2. Representations and Warranties of the
Underwriters. Each Underwriter severally represents and agrees
that:
(a) It
has not and will not use, authorize use of, refer to, or participate in the
planning for use of, any “free writing prospectus”, as defined in Rule 405 under
the Securities Act (which term includes use of any written information furnished
to the Commission by the Company and not incorporated by reference into the
Registration Statement and any press release issued by the Company) other than
(i) any Issuer Free Writing Prospectus, or (ii) any other free writing
prospectus that the parties hereto shall hereafter expressly agree in writing to
treat as part of the Disclosure Package.
(b) It
will retain copies of each free writing prospectus used or referred to by it to
the extent required by Rule 433 under the Securities Act.
3. Purchase
of the Securities by the Underwriters.
(a) Subject
to the terms and conditions and upon the basis of the representations,
warranties and agreements herein set forth, the Company agrees to issue and sell
to the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase at a price of $________ per Share (which amount will be
adjusted to give effect to, as may be applicable to each Underwriter, a 7.5%
discount, a 1.5% non-accountable expense allowance and up to $110,000 in
reasonable out-of-pocket expenses actually incurred and payable pursuant to
applicable FINRA rules), the number of Firm Securities set forth opposite such
Underwriter’s name in Schedule I hereto, subject to adjustment in
accordance with Section 8 hereof. The Underwriters agree to
offer the Firm Securities to the public as set forth in the
Prospectus.
(b) The
Company hereby grants to the Representative and its designees an option to
purchase from the Company, solely for the purpose of covering over-allotments in
connection with the distribution and sale of the Firm Securities, all or any
portion of the Optional Securities for a period of forty-five (45) days from the
date hereof at the purchase price per Unit set forth above. Optional
Securities shall be purchased from the Company, severally and not jointly, for
the accounts of the several Underwriters in proportion to the number of Firm
Securities set forth opposite such Underwriter’s name in Schedule I hereto,
except that the respective purchase obligations of each Underwriter shall be
adjusted by the Representative so that no Underwriter shall be obligated to
purchase fractional Optional Securities. No Optional Securities shall
be sold and delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered.
13
4. Delivery of and Payment for
Securities. Delivery of certificates for the Firm Securities
to be purchased by the Underwriters from the Company against payments for such
securities shall be made at the offices of the Representative (or such other
place as mutually may be agreed upon), on the third full Business Day following
the date hereof or, if the pricing of the Firm Securities occurs after
4:30 p.m., New York City time, on the fourth full Business Day thereafter,
or at such other date as shall be determined by the Representative and the
Company (the “First Closing
Date”).
The
option to purchase Optional Securities granted in Section 3 hereof may be
exercised during the term thereof by written notice to the Company from the
Representative. The option may be exercised in whole or part, and if
in part, the option can be exercised on multiple occasions. Such
notice shall set forth the aggregate number of Optional Securities as to which
the option is being exercised and the time and date, not earlier than either the
First Closing Date or the second Business Day after the date on which the option
shall have been exercised nor later than the fifth Business Day after the date
of such exercise, as determined by the Representative, when the Optional
Securities are to be delivered (the “Option Closing
Date”). Delivery and payment for such Optional Securities is
to be at the offices set forth above for delivery and payment of the Firm
Securities. (The First Closing Date and the Option Closing Date are
herein individually referred to as the “Closing Date” and collectively
referred to as the “Closing
Dates”.)
Delivery
of certificates for the Securities shall be made by or on behalf of the Company
to the Representative, for the respective accounts of the Underwriters, against
payment by the Representative, for the several accounts of the Underwriters, of
the purchase price therefor by (i) Federal funds wire transfer or
(ii) certified or official bank check payable in next day funds to the
order of the Company. The certificates for the Securities shall be
registered in such names and denominations as the Representative shall have
requested at least two full Business Days prior to the applicable Closing Date,
and shall be made available for checking and packaging at a location in New
York, New York as may be designated by the Representative at least one full
Business Day prior to such Closing Date. Time shall be of the essence
and delivery at the time and place specified in this Agreement is a further
condition to the obligations of each Underwriter.
5. Covenants. The
Company covenants and agrees with each Underwriter that:
(a) During
such period beginning on the Initial Sale Time 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 in connection with
sales as contemplated by this Agreement by an Underwriter or dealer, including
in circumstances where such requirement may be satisfied pursuant to Rule 172
(the “Prospectus Delivery
Period”), prior to amending or supplementing the Registration Statement
(including any registration statement filed under Rule 462(b) under the
Securities Act), the Disclosure Package or the Prospectus, the Company shall
furnish to the Representative 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 Representative reasonably object.
(b) After
the date of this Agreement, the Company shall promptly advise the Representative
in writing (i) when the Registration Statement, if not effective at the
Execution Time, shall have become effective, (ii) of the receipt of any comments
of, or requests for additional or supplemental information from, the Commission,
(iii) of the time and date of any filing of any post-effective amendment to the
Registration Statement or any amendment or supplement to any preliminary
prospectus or the Prospectus, (iv) of the time and date that any post-effective
amendment to the Registration Statement becomes effective and (v) 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
or notice preventing or suspending the use of the Registration Statement, any
preliminary prospectus or the Prospectus, or of any proceedings to remove,
suspend or terminate from listing or quotation the Common Stock from any
securities exchange upon which it is listed for trading or included or
designated for quotation, or of the threatening or initiation of any proceedings
for any of such purposes. The Company shall use its best efforts to
prevent the issuance of any such stop order or prevention or suspension of such
use. If the Commission shall enter any such stop order or order or
notice of prevention or suspension at any time, the Company will use its best
efforts to obtain the lifting of such order at the earliest possible moment, or
will file a new registration statement and use its best efforts to have such new
registration statement declared effective as soon as
practicable. Additionally, the Company agrees that it shall comply
with the provisions of Rules 424(b) and 434, as applicable, under the Securities
Act, including with respect to the timely filing of documents thereunder, and
will use its reasonable efforts to confirm that any filings made by the Company
under such Rule 424(b) were received in a timely manner by the
Commission.
14
(c) (i)
If the preliminary prospectus included in the Disclosure Package is being used
to solicit offers to buy the Securities and any event or development shall occur
or condition exist as a result of which it is necessary to amend or supplement
the Disclosure Package in order to make the statements therein, in the light of
the circumstances under which they were made or then prevailing, as the case may
be, not misleading (in which case the Company agrees to notify the
Representative of any such event or condition), or if in the reasonable opinion
of the Representative it is otherwise necessary to amend or supplement the
Disclosure Package to comply with law, the Company agrees to promptly prepare,
file with the Commission and furnish to the Underwriters and to dealers, at its
own expense, amendments or supplements to the Disclosure Package so that the
statements in the Disclosure Package as so amended or supplemented will not be,
in the light of the circumstances under which they were made or then prevailing,
as the case may be, misleading or so that the Disclosure Package, as amended or
supplemented, will comply with law; (ii) if, during the Prospectus Delivery
Period, any event or development shall occur or condition exist as a result of
which it is necessary to amend or supplement the Registration Statement or the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made or then prevailing, as the case may be,
not misleading (in which case the Company agrees to notify the Representative of
any such event or condition), or if in the reasonable opinion of the
Representative it is otherwise necessary to amend or supplement the Registration
Statement or the Prospectus to comply with law, including in connection with the
delivery of the Prospectus, the Company agrees to promptly prepare, file with
the Commission (and use its best efforts to have any amendment to the
Registration Statement or any new registration statement to be declared
effective) and furnish to the Underwriters and to dealers, amendments or
supplements to the Registration Statement or the Prospectus, or any new
registration statement so that the statements in the Registration Statement or
the Prospectus as so amended or supplemented will not be, in the light of the
circumstances under which they were made or then prevailing, as the case may be,
misleading or so that the Registration Statement or the Prospectus, as amended
or supplemented, will comply with law.
(d) The
Company agrees that, unless it obtains the prior written consent of the
Representative, it will not make any offer relating to the Common Stock that
would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a “free writing prospectus” (as defined in Rule 405 of the Securities
Act) 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 Representative hereto shall be deemed to have been given in
respect of the Free Writing Prospectuses included in Schedule III
hereto. Any such free writing prospectus consented to by the
Representative is hereinafter referred to as a “Permitted Free Writing
Prospectus”. The Company agrees that (i) it has treated and
will treat, as the case may be, each Permitted Free Writing Prospectus as an
Issuer Free Writing Prospectus, and (ii) has complied and will comply, as the
case may be, with the requirements of Rules 164 and 433 of the Securities Act
applicable to any Permitted Free Writing Prospectus, including in respect of
timely filing with the Commission, legending and record keeping.
(e) The
Company shall furnish to the Underwriters, from time to time and without charge,
copies of the Registration Statement of which three shall be signed and shall
include exhibits and all amendments and supplements to any of such Registration
Statement, in each case as soon as available and in such quantities as the
Representative may from time to time reasonably request.
(f) The
Company shall take or cause to be taken all necessary action and furnish to
whomever the Representative may direct such information as may be required in
qualifying the Securities for sale under the laws of such jurisdictions which
the Representative shall designate and to continue such qualifications in effect
for as long as may be necessary for the distribution of the Securities; 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 for service of
process.
(g) The
Company shall make generally available to its securityholders, in the manner
contemplated by Rule 158(b) under the Securities Act, as soon as
practicable but in any event not later than 60 days after the end of its fiscal
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs, an earning statement which will comply with
Section 11(a) of the Securities Act covering a period of at least 12
consecutive months beginning after the effective date of the Registration
Statement.
15
(h) The
Company will not, without the prior written consent of the Representative (which
consent may be withheld in the Representative’s sole discretion), directly or
indirectly, issue, sell, offer, agree to sell, contract or grant any option to
sell (including, without limitation, pursuant to any short sale), pledge, make
any short sale of, maintain any short position with respect to, transfer,
establish or maintain an open “put equivalent position” within the meaning of
Rule 16a-1(h) under the Exchange Act, enter into any swap, derivative
transaction or other arrangement (whether such transaction is to be settled by
delivery of common stock, other securities, cash or other consideration) that
transfers to another, in whole or in part, any of the economic consequences of
ownership, or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock, or securities exchangeable or
exercisable for or convertible into shares of Common Stock, or publicly announce
an intention to do any of the foregoing, for a period commencing on the date
hereof and continuing through the close of trading on the date one year after
the date of the Prospectus (the “Lock-Up Period”).
Notwithstanding
the foregoing, for the purpose of allowing the Underwriters to comply with FINRA
Rule 2711(f)(4), if (1) during the last 17 days of the initial Lock-Up Period,
the Company releases earnings results or material news or a material event
relating to us occurs or (2) prior to the expiration of the initial Lock-Up
Period, the Company announces that it will release earnings results during the
16-day period beginning on the last day of the initial Lock-Up Period, then in
each case the Lock-Up Period will be extended until the expiration of the 18-day
period beginning on the date of release of the earnings results or material
news, as applicable, unless the Representative waives, in writing, such
extension.
(i) The
Company shall cause each officer and director of the Company and each 5% holder
of shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock, of which such officers, directors and
shareholders shall constitute holders on an aggregate and fully diluted basis,
to furnish to the Representative, on or prior to the date of this Agreement, a
letter or letters, in form and substance satisfactory to counsel for the
Underwriters, pursuant to which each such person shall agree not to offer for
sale, contract to sell, sell, distribute, grant any option, right or warrant to
purchase, pledge, hypothecate or otherwise dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock during the one-year period (subject to
an additional extension to accommodate for earnings or material news releases)
following the effective date of the Registration Statement, except with the
Representative’s prior written consent. The Company shall cause
certain other shareholders identified by the Underwriter to enter into a similar
lock-up agreement that permits limited sales within the lock-up period on
substantially the terms described in Exhibit
B.
(j) The
Company shall maintain, at its expense, a registrar and transfer agent for the
Common Stock.
(k) The
Company shall apply the net proceeds of the sale of the Securities in the manner
specified in the Prospectus under the heading “Use of Proceeds” and shall file
such reports with the Commission with respect to the sale of the Securities and
the application of the proceeds therefrom as may be required in accordance with
Rule 463 under the Securities Act.
(l) The
Company will furnish to its securityholders annual reports containing financial
statements audited by independent public accountants and quarterly reports
containing financial statements and financial information which may be
unaudited. During the period of two years from the date hereof, the
Company will deliver to the Representative and, upon request, to each of the
other Underwriters, copies of each annual report of the Company and each other
report furnished by the Company to its securityholders and will deliver to the
Representative, as soon as they are available, copies of any other reports
(financial or otherwise) which the Company shall publish or otherwise make
available to any of its securityholders as such, and as soon as they are
available, copies of any reports and financial statements furnished to or filed
with the Commission or FINRA.
(m) The
Company will use its best efforts to maintain the listing of the Securities on
the NASDAQ Global Market.
16
(n) Whether
or not this Agreement is terminated or the sale of the Securities to the
Underwriters is consummated, the Company shall pay or cause to be paid
(A) all expenses (including stock transfer taxes) incurred in connection
with the delivery to the several Underwriters of the Securities, (B) all
fees and expenses (including, without limitation, fees and expenses of the
Company’s accountants and counsel) in connection with the preparation, printing,
filing, delivery and shipping of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto), each
preliminary prospectus, the Disclosure Package and the Prospectus as amended or
supplemented and the printing, delivery and shipping of this Agreement and other
underwriting documents, including Underwriters’ Questionnaires, Underwriters’
Powers of Attorney, Blue Sky Memoranda, the Agreement Among Underwriters and
Selected Dealer Agreements, (C) if necessary, all filing fees and
reasonable fees and disbursements of counsel to the Underwriters incurred in
connection with the qualification of the Securities for sale under state
securities laws as provided in Section 5(f) hereof, (D) the filing fee
of FINRA and any applicable fees and expenses of counsel for the Underwriters in
connection with a review of the offering by FINRA, (E) any applicable
listing fees, (F) the cost of printing certificates representing the
Securities, (G) the cost and charges of any transfer agent or registrar,
and (H) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise provided for in this
Section. If the sale of the Securities provided for herein is
consummated, or if it is not consummated by reason of acts of the Company which
prevent this Agreement from becoming effective, or by reason of any failure,
refusal or inability on the part of the Company to perform any agreement on its
part to be performed or because any other condition of the Underwriters’
obligations hereunder is not fulfilled, unless the failure to perform the
agreement or fulfill the condition is due to the default or omission of any
Underwriter, the Company shall reimburse the several Underwriters for all
reasonable out-of-pocket disbursements (including fees and disbursements of
counsel) incurred by the Underwriters in connection with their investigation,
preparing to market and marketing the Securities or in contemplation of
performing their obligations hereunder. The Company shall not in any
event be liable to any of the Underwriters for loss of anticipated profits from
the transactions covered by this Agreement.
(o) The
Company will not issue press releases or engage in any other publicity, without
the Representative’s prior written consent, for a period ending at 5:00 p.m.
Eastern Standard 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.
(p) Right of First
Refusal. The Company agrees that if the Shares are sold in
accordance with the terms of this Underwriting Agreement, the Representative
shall have an irrevocable preferential right for a period of twelve (12) months
from the date the Offering is completed to purchase for its account or to sell
for the account of the Company, or any subsidiary of or successor to the Company
any securities (whether debt or equity or any combination thereof) of the
Company or any such subsidiary or successor which the Company or any such
subsidiary or successor may seek to sell whether with or without or through an
underwriter, placement agent or broker-dealer and whether pursuant to
registration under the Act or otherwise. The Company and any such subsidiary or
successor will consult the Representative with regard to any such proposed
financing and will offer the Representative the opportunity to purchase or sell
any such securities on terms not more favorable to the Company or any such
subsidiary or successor, as the case may be, than it or they can secure
elsewhere. If the Representative fails to accept such offer within 10 business
days after the mailing of a notice containing the material terms of the proposed
financing proposal by registered mail or overnight courier service addressed to
the Representative, then the Representative shall have no further claim or right
with respect to the financing proposal contained in such notice. If, however,
the terms of such financing proposal are subsequently modified in any material
respect, the preferential right referred to herein shall apply to such modified
proposal as if the original proposal had not been made. The Representative’s
failure to exercise its preferential right with respect to any particular
proposal shall not affect its preferential rights relative to future
proposals.
6. Conditions of Underwriters’
Obligations. The respective obligations of the several
Underwriters hereunder are subject to the accuracy, at and as of the date hereof
and the First Closing Date (as if made at the First Closing Date) and, with
respect to the Optional Securities, the Option Closing Date (as if made at the
Option Closing Date), of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations hereunder
and to the following additional conditions:
17
(a) The
Registration Statement shall have become effective not later than 4 p.m.,
Eastern time, on the date of this Agreement, or such later time and date as the
Representative shall approve and all filings required by Rules 424, 430A and 433
under the Securities Act shall have been timely made; no stop order suspending
the effectiveness of the Registration Statement or any amendment thereof shall
have been issued; no proceedings for the issuance of such an order shall have
been initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement, the Disclosure
Package, the Prospectus, any Issuer Free Writing Prospectus or otherwise) shall
have been complied with to the Representative’s satisfaction.
(b) No
Underwriter shall have advised the Company that the Registration Statement, the
Disclosure Package or the Prospectus, or any amendment thereof or supplement
thereto, contains an untrue statement of fact which, in the Representative’s
opinion, is material, or omits to state a fact which, in the Representatives
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(c) On
each Closing Date, the Representative shall have received the favorable opinion
of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C. counsel for the Company, dated as of such Closing
Date, the form of which is attached as Exhibit C and
the favorable written opinion of ▇▇▇▇▇▇▇▇▇ Law Offices, legal counsel for the
Company with respect to the laws of the PRC dated as of the Closing Date,
addressed to the Underwriters in the form attached hereto as Exhibit
D.
(d) On
each Closing Date the Representative shall have received the favorable opinion
of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel for the Underwriters, dated as
of such Closing Date, in form and substance satisfactory to the
Representative.
(e) There
shall have been furnished to the Representative a certificate of the Company,
dated as of each Closing Date and addressed to the Representative, signed by the
Chief Executive Officer and by the Chief Financial Officer of the Company to the
effect that:
(i) The
representations and warranties of the Company in this Agreement are true and
correct, as if made at and as of such Closing Date, and the Company has complied
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date;
(ii) No
stop order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been initiated or are pending
or, to their knowledge, contemplated;
(iii) Any
and all filings required by Rules 424, 430A, 430B and 430C under the Securities
Act have been timely made;
(iv) The
signers of said certificate have carefully examined the Registration Statement
and the Disclosure Package and the Prospectus, and any amendments or supplements
thereto, and such documents contain all statements and information required to
be included therein; the Registration Statement or any amendment thereto does
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Disclosure Package and the Prospectus or any
supplements thereto do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(v) Since
the effective date of the Registration Statement, there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or the Disclosure Package and the Prospectus which has not been so set
forth; and
18
(vi) Since
the effective date of the Registration Statement, neither the Company nor any of
its Subsidiaries shall have sustained any loss by strike, fire, flood, accident
or other calamity (whether or not insured), or shall have become a party to or
the subject of any litigation, which is material to the Company or its
Subsidiaries taken as a whole, nor shall there have been a material adverse
change in the general affairs, business, key personnel, capitalization,
financial position, earnings or net worth of the Company and its Subsidiaries,
whether or not arising in the ordinary course of business, which loss,
litigation or change, in the Representative’s judgment, shall render it
inadvisable to proceed with the delivery of the Securities.
(f) On
the date hereof, and on each Closing Date, the Representative shall have
received from ▇▇▇▇▇▇▇▇ LLP, independent public or certified public accountants
for the Company, a letter dated the date hereof addressed to the Representative,
on behalf of the several Underwriters, in form and substance satisfactory to the
Representative, containing statements and information of the type ordinarily
included in accountant’s “comfort letters” to underwriters, delivered according
to Statement of Auditing Standards No. 72 (or any successor bulletin), with
respect to the audited and unaudited financial statements and certain financial
information contained in the Registration Statement and the Prospectus (and the
Representative shall have received an additional five conformed copies of such
accountants’ letter for each of the several Underwriters).
(g) The
“lock-up” agreements between the Representatives and the stockholders, officers
and directors of the Company listed on Schedule II,
delivered to the Representative on or before the date hereof, shall be in full
force and effect on each Closing Date.
(h) Since
the date of the Prospectus, there has not been a Material Adverse
Effect.
(i) On
or before each Closing Date, the Representative and counsel for the Underwriters
shall have received such information, certificates, agreements, opinions and
other documents as they may reasonably require.
(j) On
or before the First Closing Date, the Common Stock shall have been approved for
listing on the NASDAQ Global Market.
(k) FINRA
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and
arrangements.
All such
opinions, certificates, letters and documents shall be in compliance with the
provisions hereof only if they are satisfactory in form and substance to the
Representative and to counsel for the Underwriters. The Company shall
furnish the Representative with such conformed copies of such opinions,
certificates, letters and other documents as the Representative shall reasonably
request. If any of the conditions specified in this Section 6
shall not have been fulfilled when and as required by this Agreement, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the First Closing Date or the Option Closing Date, as
the case may be, by the Representative. Any such cancellation shall
be without liability of the Underwriters to the Company. Notice of
such cancellation shall be given to the Company in writing, or by telegraph or
telephone and confirmed in writing.
19
7. Indemnification
and Contribution.
(a) The
Company agrees to indemnify, defend and hold harmless each Underwriter and any
person who controls any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and the respective directors,
officers, employees and agents of each Underwriter from and against any loss,
expense, liability, damage or claim (including the reasonable cost of
investigation) which, jointly or severally, any such Underwriter or controlling
person may incur under the Securities Act, the Exchange Act or otherwise,
insofar as such loss, expense, liability, damage or claim arises out of or is
based upon (A) any breach of any representation, warranty or covenant of the
Company contained herein, (B) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereof), the Disclosure Package, any Issuer Free Writing Prospectus
or the Prospectus (the term Prospectus for the purpose of this Section being
deemed to include the preliminary prospectus included in the Registration
Statement at the time it became effective, the Prospectus and the Prospectus as
amended or supplemented by the Company), (C) any application or other document,
or any amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction (domestic or foreign) in order to qualify the Common Stock under
the securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each an “Application”), (D) any
omission or alleged omission to state a material fact required to be stated in
any such Registration Statement, or necessary to make the statements made
therein not misleading, (E) any omission or alleged omission from the Disclosure
Package , any Issuer Free Writing Prospectus, Prospectus or any Application of a
material fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; except in the case of
(B), (D) and (E) above only insofar as any such loss, expense, liability, damage
or claim arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in and in
conformity with information furnished in writing by the Underwriters through the
Representative to the Company expressly for use in such Registration Statement,
Disclosure Package, Issuer Free Writing Prospectus, Prospectus or
Application. The indemnity agreement set forth in this Section 7(a) shall
be in addition to any liability which the Company may otherwise
have.
(b) Each
Underwriter agrees, severally and not jointly, to indemnify, defend and hold
harmless the Company, the Company’s directors, the Company’s officers that
signed the Registration Statement, and any person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any loss, expense, liability, damage or claim
(including the reasonable cost of investigation) which the Company or any such
person may incur under the Securities Act, the Exchange Act or otherwise,
insofar as such loss, expense, liability, damage or claim arises out of or is
based upon (A) any breach of any representation, warranty or covenant of the
Underwriters contained herein, (B) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereof), the Disclosure Package, any Issuer Free Writing Prospectus,
the Prospectus, or any Application, (C) any omission or alleged omission to
state a material fact required to be stated in any such Registration Statement,
or necessary to make the statements made therein not misleading, or (D) any
omission or alleged omission from the Disclosure Package, any such Issuer Free
Writing Prospectus, Prospectus or any Application of a material fact necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading, but in each case only insofar as such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, Disclosure Package, Issuer Free Writing
Prospectus, Prospectus or Application in reliance upon and in conformity
with information furnished in writing by the Underwriters through the
Representative to the Company expressly for use therein; and to reimburse the
Company, or any such director, officer, employee or controlling person for any
legal and other expense reasonably incurred by the Company, or any such
director, officer, employee or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The indemnity agreement set
forth in this Section 7(b) shall be in addition to any liabilities that each
Underwriter may otherwise have.
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
claim or the commencement of that action; the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under such subsection. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under such subsection for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; except that the
Representative shall have the right to employ counsel to represent it and those
other Underwriters who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriters against the Company
under such subsection if, in the Representative’s reasonable judgment, based
upon the advice of counsel, it is advisable for the Representative and those
Underwriters to be represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the
Company.
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(d) If
the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) and (b)
of this Section 7 in respect of any losses, expenses, liabilities, damages or
claims referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, expenses,
liabilities, damages or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Underwriters from
the offering of the Securities or (ii) if (but only if) the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and of the Underwriters in
connection with the statements or omissions which resulted in such losses,
expenses, liabilities, damages or claims, 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 the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company bear to the underwriting
discounts and commissions received by the Underwriters. The relative fault
of the Company and of the Underwriters shall be determined by reference to,
among other things, whether the untrue statement or alleged untrue statement of
a material fact or omission or alleged omission relates to information supplied
by the Company or by the Underwriters and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any claim or action.
(e) The
Company and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 7 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 in subsection (d)(i) and, if applicable (ii),
above. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Securities purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters’ obligations to contribute pursuant to
this Section 7 are several in proportion to their respective underwriting
commitments and not joint.
8. Substitution of
Underwriters. If any Underwriter defaults in its obligation to
purchase the number of Securities which it has agreed to purchase under this
Agreement, the non-defaulting Underwriters shall be obligated to purchase (in
the respective proportions which the number of Securities set forth opposite the
name of each non-defaulting Underwriter in Schedule I hereto bears to the
total number of Securities set forth opposite the names of all the non-
defaulting Underwriters in Schedule I
hereto) the Securities which the defaulting Underwriter agreed but failed to
purchase; except that the non-defaulting Underwriters shall not be obligated to
purchase any of the Securities if the total number of Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase exceeds 10%
of the total number of Firm Securities, and any non-defaulting Underwriter shall
not be obligated to purchase more than 110% of the number of Securities set
forth opposite its name in Schedule I hereto purchasable by it pursuant to
the terms of Section 3 hereof. If the foregoing maximums are
exceeded, (i) the non-defaulting Underwriters, and any other underwriters
satisfactory to the Representative who so agree, shall have the right, but shall
not be obligated, to purchase (in such proportions as may be agreed upon among
them) all the Securities. If the non- defaulting Underwriters or the
other underwriters satisfactory to the Representative do not elect to purchase
the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company except for the payment of
expenses to be borne by the Company and the Underwriters as provided in Section
5 hereof and the indemnity and contribution agreements of the Company and the
Underwriters contained in Section 7 hereof.
Nothing
contained herein shall relieve a defaulting Underwriter of any liability it may
have for damages caused by its default. If the other underwriters
satisfactory to the Representative are obligated or agree to purchase the
Securities of a defaulting Underwriter, either the Representative or the Company
may postpone the First Closing Date for up to five full Business Days in order
to effect any changes that may be necessary in the Registration Statement, the
Disclosure Package or the Prospectus or in any other document or agreement, and
to file promptly any amendments or any supplements to the Registration Statement
or the Disclosure Package or the Prospectus which in the Representative’s
opinion may thereby be made necessary.
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9. Effective
Date and Termination.
(a) This
Agreement shall become effective at 9:00 a.m., New York City time, on the
first full Business Day following the earlier of (i) the date hereof, or
(ii) the day on which the Representative release the initial public
offering of the Firm Securities for sale to the public. The
Representative shall notify the Company immediately after the Representative has
taken any action which causes this Agreement to become
effective. Until this Agreement is effective, it may be terminated by
the Company or by the Representative by giving notice as hereinafter provided to
the Representative or by the Representative by giving notice as hereinafter
provided to the Company, except that the provisions of Sections 5(n) and 7
hereof shall at all times be effective. For the purpose of this
Section, the Securities shall be deemed to have been released for sale to the
public upon release by the Representative of an electronic communication
authorizing commencement of the offering the Securities for sale by the
Underwriters or other securities dealers.
(b) Until
the First Closing Date, this Agreement may be terminated by the Representative
by giving notice as hereinafter provided to the Company, if (i) the Company
shall have failed, refused or been unable, at or prior to the First Closing
Date, to perform any agreement on its part to be performed hereunder unless the
failure to perform any agreement is due to the default or omission by any
Underwriter, (ii) any other condition of the obligations of the
Underwriters hereunder is not fulfilled; (iii) trading in securities
generally on the New York Stock Exchange or Nasdaq shall have been suspended or
minimum or maximum prices shall have been established on either of such
exchanges or such market by the Commission or by such exchange or other
regulatory body or governmental authority having jurisdiction; (iv) trading
or quotation in any of the Company’s securities shall have been suspended or
limited by the Commission or by the NYSE or NASDAQ or other regulatory body of
governmental authority having jurisdiction; (v) a general banking
moratorium shall have been declared by Federal or state authorities; (vi) a
material disruption in securities settlement, payment or clearance services in
the United States shall have occurred; (vii) there shall have been any
material adverse change in general economic, political or financial conditions
or if the effect of international conditions on the financial markets in the
United States shall be such as, in the Representative’s judgment, makes it
inadvisable to proceed with the delivery of the Securities; or (viii) any
attack on, outbreak or escalation of hostilities, declaration of war or act of
terrorism involving the United States or any other national or international
calamity or emergency if, in the Representative’s judgment, the effect of any
such attack, outbreak, escalation, declaration, act, calamity or emergency makes
it impractical or inadvisable to proceed with the completion of the public
offering or the delivery of the Securities. Any termination of this
Agreement pursuant to this Section 9 shall be without liability on the part
of the Company or any Underwriter, except as otherwise provided in Sections 5(n)
or 7 hereof.
Any
notice referred to above may be given at the address specified in
Section 11 hereof in writing or by telegraph or telephone, and if by
telegraph or telephone, shall be immediately confirmed in writing.
(c) This
Agreement may also be terminated as provided in Section 8
hereof.
10. Survival of Indemnities,
Contribution, Warranties and Representations. All
representations, warranties, and agreements of the Company and the Underwriting
herein or in certificates delivered pursuant hereto, and the agreements of the
several Underwriters and the Company contained in Section 7 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 the
Company or any of its officers, directors, or controlling persons, and shall
survive delivery of, and payment for, the Securities to and by the Underwriters
hereunder.
11. Notices. All
communications hereunder shall be in writing and shall be mailed, hand delivered
or telecopied and confirmed to the parties hereto as follows:
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If to the Representative:
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Ladenburg
▇▇▇▇▇▇▇▇ & Co. Inc.
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▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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22
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with a copy to:
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Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
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▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Facsimile: 212-930-9725
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If to the Company:
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Dachang
Hui Autonomous County Industrial Park
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Hebei,
065300 People’s Republic of China
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Attention: Hongzhong
Li, Chief Executive Officer
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with a copy to:
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▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, P.C.
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Three
▇▇▇▇▇ Center, 12th Floor
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▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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Facsimile: 804.771.5777
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12.
Information
Furnished by Underwriters. The statements set forth under the
caption “Underwriting” in the table in the first paragraph concerning the names
of each Underwriter and the number of shares each Underwriter has agreed to
purchase, in the paragraphs concerning sales by Underwriters to the public at
the offering price and to dealers at such price less a concession and sales by
Underwriters to discretionary accounts in any preliminary prospectus and the
Prospectus, and in the first two paragraph under the caption “Underwriter -
Stabilization, short positions and penalty bids” constitute the only written
information furnished by or on behalf of any Underwriter referred to in
paragraphs (b) and (c) of Section 1 hereof and in paragraphs (a) and (b) of
Section 7 hereof.
13.
Parties. This
Agreement is made solely for the benefit of the several Underwriters, the
Company, any officer, director or controlling person referred to in
Section 7 hereof, and their respective successors and assigns, and no other
person shall acquire or have any right by virtue of this
Agreement. The term “successors and assigns,” as used in this
Agreement, shall not include any purchaser of any of the Securities from any of
the Underwriters merely by reason of such purchase.
14.
Definition of
“Business Day” and “Subsidiary”. For purposes of this
Agreement, (a) ”Business Day” means any day on which the New York Stock
Exchange, Inc. is open for trading, and (b) ”Subsidiary” has the meaning
set forth in Rule 405 under the Securities Act.
15.
Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of laws principles thereof.
16.
Partial
Unenforceability. The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision
hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
17.
Absence of
Fiduciary Relationship.
The Company acknowledges and agrees that:
(a) The
Underwriters have been retained solely to act as underwriters in connection with
the sale of Securities and that no fiduciary, advisory or agency relationship
between the Company and the Underwriters has been created in respect of any of
the transactions contemplated by this Agreement or the Final Prospectus,
irrespective of whether the Underwriters have advised or are advising the
Company on other matters;
23
(b) The
price of the Securities set forth in this Agreement was established by the
Company following discussions and arms’ length negotiations with the
Underwriters, and the Company is capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement;
(c) The
Company has been advised that the Underwriters and their affiliates are engaged
in a broad range of transactions which may involve interests that differ from
those of the Company, and that the Underwriters have no obligation to disclose
such interests and transactions to the Company by virtue of any fiduciary,
advisory or agency relationship; and
(d) The
Company waives, to the fullest extent permitted by law, any claims they may have
against the Underwriters for breach of fiduciary duty or alleged breach of
fiduciary duty and agree that the Underwriters shall have no liability (whether
direct or indirect) to the Company in respect of such a fiduciary duty claim or
to any person asserting a fiduciary duty claim on behalf of or in right of the
Company, including shareholders, employees or creditors of the
Company.
18. General
Provisions. This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof (including, but not limited to, that certain
Investment Banking Agreement between the Company and Ladenburg ▇▇▇▇▇▇▇▇, dated
April 20, 2010, and any amendment thereto). This Agreement may be
executed in two or more counterparts, each one of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement may not be amended or modified unless in
writing by all of the parties hereto, and no condition herein (express or
implied) may be waived unless waived in writing by each party whom the condition
is meant to benefit. The Section headings herein are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
Please
confirm, by signing and returning to us two (2) counterparts of this Agreement,
that the Representative is acting on behalf of itself and the several
Underwriters and that the foregoing correctly sets forth the agreement among the
Company and the several Underwriters.
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Very
truly yours,
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BUDDHA
STEEL INC.
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By:
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Name:
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Hongzhong
Li
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Title:
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Chief
Executive Officer
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Confirmed
and accepted as of the date first above mentioned:
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LADENBURG
▇▇▇▇▇▇▇▇ & CO. INC.
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As
Representative of the Several Underwriters named in Schedule I
hereto
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By:
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▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Managing
Director
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24
SCHEDULE
I
Underwriting
Agreement dated _____________, 2010
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Underwriter
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Number of Firm Securities
to be Purchased
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Ladenburg
▇▇▇▇▇▇▇▇ & Co. Inc.
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||
SCHEDULE
II
Lock-Up
Agreements
C-1
SCHEDULE
III
Issuer
Free Writing Prospectus
2