PANSOFT COMPANY LIMITED (a British Virgin Islands limited company) Offering: 1,200,000 Ordinary Shares ($6.00 per share) PLACEMENT AGREEMENT
PANSOFT
COMPANY LIMITED
(a
British Virgin Islands limited company)
Offering:
1,200,000 Ordinary Shares
($6.00
per share)
,
2008
▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, Incorporated
▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned, Pansoft Company Limited a, British Virgin Islands limited company
(the “Company”), hereby confirms its agreement with you as follows:
1. Introduction.
This
Agreement sets forth the understandings and agreements between the Company
and
you whereby, subject to the terms and conditions herein contained, you will
offer to sell, on a “best efforts, all-or-none” basis on behalf of the Company
as provided in Section 4(a) (the “Offering”), at an offering price of U.S. $6.00
per share, 1,200,000 ordinary shares of the Company (the “Shares”). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Prospectus prepared by the Company and dated
___________, 2008 (the “Prospectus”).
2.
Representations
and Warranties of the Company.
The
Company makes the following representations and warranties to you:
(a)
Registration
Statement and Prospectus.
The
Company has prepared and filed with the Securities and Exchange Commission
(the
“Commission”) a registration statement on Form S-1 (File No. 333-_____) (as
defined below, the “Registration Statement”) conforming to the requirements of
the Securities Act of 1933, as amended (the “1933 Act”), and the applicable
rules and regulations (the “Rules and Regulations”) of the Commission. Such
amendments to such Registration Statement as may have been required prior to
the
date hereof have been filed with the Commission, and such amendments have been
similarly prepared. Copies of the Registration Statement, any and all amendments
thereto prepared and filed with the Commission, and each related Preliminary
Prospectus, and the exhibits, financial statements and schedules, as finally
amended and revised, have been delivered to you for review. The term
“Registration Statement” as used in this Agreement shall mean the Company’s
Registration Statement on Form S-1 and any additional registration statement
filed pursuant to Rule 462 (b) of the 1933 Act, including the Prospectus, any
documents incorporated by reference therein, and all financial schedules and
exhibits thereto, as amended on the date that the Registration Statement becomes
effective. The term “Prospectus” as used in this Agreement shall mean the
prospectus relating to the Shares in the form in which it was filed with the
Commission pursuant
to
Rule
424(b) of the 1933 Act or, if no filing pursuant to Rule 424(b) of the 1993
Act
is required, shall mean the form of the final prospectus included in the
Registration Statement when the Registration Statement becomes effective. The
term “Preliminary Prospectus” shall mean any prospectus included in the
Registration Statement before it becomes effective. The terms “effective date”
and “effective” refer to the date the Commission declares the Registration
Statement effective pursuant to Section 8 of the ▇▇▇▇ ▇▇▇.
(b) A
registration statement on Form 8-A (File No.001-______) in respect of the
registration of the Shares under the U.S. Securities Exchange Act of 1934,
as
amended (the “1934 Act”), has been filed with the Commission. Such registration
statement in the form heretofore delivered to you has been declared effective
by
the Commission in such form. No other document with respect to such registration
statement has heretofore been filed with the Commission, and no stop order
suspending the effectiveness of such registration statement has been issued
and
no proceeding for that purpose has been initiated, or to the knowledge of the
Company after due inquiry threatened, by the Commission (the various parts
of
such registration statement, including all exhibits thereto, each as amended
at
the time such part of the registration statement became effective, being
hereinafter called the “Form 8-A Registration Statement”). The Form 8-A
Registration Statement when it became effective conformed, and any further
amendments thereto will conform, in all material respects to the requirements
of
the Exchange Act and the rules and regulations of the Commission thereunder,
and
did not and will not, as of the applicable effective date, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(c)
Adequacy
of Disclosure.
Each
Preliminary Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the 1933 Act and the Rules and Regulations,
and
did 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, in light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall
not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by you expressly for use
in
the Registration Statement. When the Registration Statement shall become
effective, when the Prospectus is first filed pursuant to Rule 424(b) of the
Rules and Regulations, when any amendment to the Registration Statement becomes
effective, when any supplement to the Prospectus is filed with the Commission
and on the Closing Date (as hereinafter defined), (i) the Registration
Statement, the Prospectus and any amendments thereof and supplements thereto
will conform in all material respects with the applicable requirements of the
1933 Act and the Rules and Regulations, and (ii) neither the Registration
Statement, the Prospectus nor any amendment or supplement thereto will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by you expressly
for use in the Registration Statement.
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(d)
No
Stop Order.
The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with respect to the Shares, and no proceedings for that
purpose have been instituted or threatened by the Commission or the state
securities or blue sky authority of any jurisdiction.
(e)
Company;
Organization and Qualification.
The
Company has been duly incorporated and is validly existing in good standing
as a
limited company under the laws of the British Virgin Islands with all requisite
corporate power and authority to enter into this Agreement, to conduct its
business as now conducted and as proposed to be conducted, and to own and
operate its properties, investments and assets, as described in the Registration
Statement and Prospectus. The Company is not in violation of any provision
of
its memorandum or articles of association or other governing documents and
is
not in default under or in breach of, and does not know of the occurrence of
any
event that with the giving of notice or the lapse of time or both would
constitute a default under or breach of, any term or condition of any material
agreement or instrument to which it is a party or by which any of its
properties, investments or assets is bound, except as disclosed in the
Registration Statement and Prospectus. Except as noted in the Prospectus, the
Company does not own or control, directly or indirectly, any other corporation,
association, or other entity. The Company has furnished to you copies of its
articles and memorandum of association, as amended, and all such copies are
true, correct and complete and contain all amendments thereto through the
Closing Date.
(f)
Validity
of Shares.
The
Shares have been duly and validly authorized by the Company and upon issuance,
will be validly issued, fully paid and nonassessable, with no personal liability
attaching to the ownership thereof, and will conform to the description thereof
contained in the Prospectus. The preferences, rights and limitations of the
Shares are set forth in the Prospectus under the caption “Description of Share
Capital.” No party has any preemptive rights with respect to any of the Shares
or any right of participation or first refusal with respect to the sale of
the
Shares by the Company. No person or entity holds a right to require or
participate in the registration under the 1933 Act of the Shares pursuant to
the
Registration Statement; and, except as set forth in the Prospectus, no person
holds a right to require registration under the 1933 Act of any ordinary shares
of the Company at any other time. The form of certificates evidencing the Shares
complies with all applicable requirements of British Virgin Islands law.
(g)
Capitalization.
The
authorized, issued and outstanding capital stock of the Company is as set forth
in the Prospectus under the caption “Description of Share Capital.” All of the
issued and outstanding ordinary shares of the Company have been duly authorized,
validly issued, fully paid and are non-assessable. Except as disclosed in the
Prospectus, there is no outstanding option, warrant or other right calling
for
the issuance of, and no commitment, plan or arrangement to issue, any shares
of
capital stock of the Company or any security convertible into or exchangeable
for capital stock of the Company.
(h)
Full
Power.
The
Company has full legal right, power, and authority to enter into this Agreement
and the Escrow Agreement among the Company, SunTrust Bank (the “Escrow Agent”)
and you (the “Escrow Agreement”), to issue and deliver the Shares as provided
herein and in the Prospectus and to consummate the transactions contemplated
herein and in the
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Prospectus.
Each of this Agreement and the Escrow Agreement has been duly authorized,
executed, and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms, except
to
the extent that enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, liquidation, reorganization, or similar laws affecting creditors’
rights generally, regardless of whether such enforceability is considered in
equity or at law, (ii) general equity principles, and (iii) limitations imposed
by applicable laws or the public policy underlying such laws regarding the
enforceability of indemnification or contribution provisions.
(i)
Disclosed
Agreements.
All
agreements between or among the Company and third parties expressly referenced
in the Prospectus are legal, valid, and binding obligations of the Company,
enforceable in accordance with their respective terms, except to the extent
enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
liquidation, reorganization, or similar laws affecting creditors’ rights
generally, regardless of whether such enforceability is considered in equity
or
at law, (ii) general equity principles and (iii) limitations imposed by federal
or state securities laws or the public policy underlying such laws regarding
the
enforceability of indemnification or contribution provisions.
(j) Consents.
Except
as disclosed in the Registration Statement and Prospectus, each consent,
approval, authorization, order, license, certificate, permit, registration,
designation or filing by or with any governmental agency or body or any other
third party necessary for the valid authorization, issuance, sale and delivery
of the Shares, the execution, delivery and performance of this Agreement and
the
consummation by the Company of the transactions contemplated hereby and by
the
Registration Statement and Prospectus, except such as may be required under
the
1933 Act, the 1934 Act, or under other applicable securities laws has been
made
or obtained and is in full force and effect.
(k)
Litigation.
There
is not pending or, to the knowledge of the Company, threatened or contemplated,
any action, suit, proceeding, inquiry, or investigation before or by any court
or any governmental authority or agency to which the Company may be a party,
or
to which any of the properties or rights of the Company may be subject, that
is
not described in the Registration Statement and Prospectus and (i) that may
reasonably be expected to result in any material adverse change in the condition
(financial or otherwise) or business of the Company; or (ii) that may reasonably
be expected to materially adversely affect any of the material properties of
the
Company; or (iii) that may reasonably be expected to adversely affect the
consummation of the transactions contemplated by this Agreement, nor, to the
knowledge of the Company, is there any meritorious basis therefor.
(l)
Financial
Statements.
The
financial statements of the Company together with related schedules and notes
included in the Registration Statement and Prospectus present fairly the
financial position of the Company as of the dates indicated and the results
of
operations and cash flows for the periods specified. Such financial statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved. The financial
information schedules included in the Registration Statement and the amounts
in
the Prospectus fairly present the information shown therein and have
been
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compiled
on a basis consistent with the financial statements included in the Registration
Statement and the Prospectus. No other financial statements or schedules are
required by Form S-1 or otherwise to be included in the Registration Statement,
the Prospectus or any Preliminary Prospectus. The unaudited pro forma financial
information (including the related notes) included in the Prospectus or any
Preliminary Prospectus complies as to form in all material respects to the
applicable accounting requirements of the 1933 Act and the Rules and
Regulations, and management of the Company believes that the assumptions
underlying the pro forma adjustments are reasonable. Such pro forma adjustments
have been properly applied to the historical amounts in the compilation of
the
information and such information fairly presents with respect to the Company
the
financial position, results of operations and other information purported to
be
shown therein at the respective dates and for the respective periods specified.
(m) Independent
Accountants.
MSCM
LLP, who have audited certain financial statements of the Company and its
subsidiaries, are, to the Company’s knowledge, independent public accountants as
required by the 1933 Act and the rules and regulations of the Commission
promulgated thereunder.
(n) Disclosed
Liabilities.
The
Company has not sustained, since December 31, 2007, any material loss or
interference with its business from fire, explosion, flood, hurricane, accident,
or other calamity, whether or not covered by insurance, or from any labor
dispute or arbitrators’ or court or governmental action, order, or decree,
otherwise than as set forth or contemplated in the Registration Statement and
Prospectus; and, since the respective dates as of which information is given
in
the Registration Statement and Prospectus, and except as otherwise stated in
the
Registration Statement and Prospectus or as set forth on the Disclosure
Schedule, there has not been (i) any material change in the capital stock,
long-term debt, obligations under capital leases, or short-term borrowings
of
the Company, (ii) any material adverse change, or any development that could
be
reasonably be seen as involving a prospective material adverse change in or
affecting the business, prospects, properties, assets, results of operations
or
condition (financial or other) of the Company, (iii) any liability or
obligation, direct or contingent, incurred or undertaken by the Company that
is
material to the business or condition (financial or other) of the Company,
except for liabilities or obligations incurred in the ordinary course of
business, (iv) any declaration or payment of any dividend or distribution of
any
kind on or with respect to the capital stock of the Company, or (v) any
transaction that is material to the Company, except transactions in the ordinary
course of business or as otherwise disclosed in the Registration Statement
and
Prospectus.
(o)
Required
Licenses and Permits.
Except
as disclosed in the Prospectus, the Company owns, possesses, has obtained or
in
the ordinary course of business will obtain, and has made available for your
review, all material permits, licenses, franchises, certificates, consents,
orders, approvals, and other authorizations of governmental or regulatory
authorities as are necessary to own or lease, as the case may be, and to operate
its properties and to carry on its business as presently conducted, or as
contemplated in the Prospectus to be conducted (the “Permits”), and the Company
has not received any notice of proceedings relating to revocation or
modification of any such Permits.
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(p) Internal
Accounting Measures.
The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act), which
(i) 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 by others within the Company; and (ii) are effective in all
material respects to perform the functions for which they were established.
The
Company’s system of internal accounting controls provides reasonable assurance
that: (A) transactions are executed in accordance with management’s general or
specific authorizations; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles in the United States (“US GAAP”); (C) access to assets is
permitted only in accordance with management’s general or specific
authorization; (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate actions are taken with
respect to any differences; and (E) the Company has made and kept books, records
and accounts which, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets of such entity and provide a sufficient
basis for the preparation of financial statements in accordance with US GAAP.
There (x) are not any significant deficiencies in the design or operation of
internal controls which could adversely affect the Company’s ability to record,
process, summarize, and report financial data or (y) has not been any fraud,
whether or not material, that involves management or other employees who have
a
significant role in the Company’s internal controls. Since the date of the most
recent evaluation of the Company’s disclosure controls and procedures, there
have been no significant changes in internal controls or in other factors that
could significantly affect internal controls, including any corrective actions
with regard to significant deficiencies and material weaknesses. Upon the
effectiveness of the Registration Statement, the Company will be in compliance
in all material respect with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
that are effective and applicable to the Company as an “issuer” as defined under
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
(q)
Taxes.
The
Company has timely paid all taxes that have become due and have no tax
deficiency asserted against the Company, and the Company does not know of any
tax deficiency that is likely to be asserted against the Company that if
determined adversely to the Company, would, either individually or in the
aggregate, have a material adverse effect on the business, prospects,
properties, assets, results of operations, or condition (financial or otherwise)
of the Company. All tax liabilities are adequately provided for on the books
of
the Company.
(r)
Compliance
with Instruments.
The
execution, delivery and performance of this Agreement and the Escrow Agreement,
the compliance with the terms and provisions hereof and the consummation of
the
transactions contemplated herein, therein and in the Registration Statement
and
Prospectus by the Company, do not and will not violate or constitute a breach
of, or default under (i) the memorandum or articles of association of the
Company; (ii) any of the material terms, provisions, or conditions of any
material instrument, agreement, or indenture to which the Company is a party
or
by which it is bound or by which its business, assets, investments or properties
may be affected; or (iii) any order, statute, rule, or regulation applicable
to
the Company, or any of its business, investments, assets or properties, of
any
court or (to the knowledge of the Company) any governmental authority or agency
having jurisdiction
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over
the
Company, or any of its business, investments, properties or assets; and to
the
knowledge of the Company do not and will not result in the creation or
imposition of any lien, charge, claim, or encumbrance upon any property or
asset
of the Company.
(s)
Insurance.
The
Company maintains insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally deemed adequate for
its business and, to the knowledge of the Company, consistent with insurance
coverage maintained by similar companies and similar businesses, all of which
insurance is in full force and effect.
(t)
Work
Force.
To the
knowledge of the Company, no general labor problem exists or is imminent with
the employees of the Company.
(u)
Securities
Matters.
The
Company and its officers, directors, or affiliates have not taken and will
not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in or constitute the stabilization or
manipulation of any security of the Company or to facilitate the sale or resale
of the Shares.
(v)
Payment
of Commissions and Fees.
Except
as stated in or contemplated by the Prospectus, neither the Company nor any
affiliate of the Company has paid or awarded, nor will any such person pay
or
award, directly or indirectly, any commission or other compensation to any
person engaged to render investment advice to a potential purchaser of Shares
as
an inducement to advise the purchase of Shares.
(w) Intellectual
Property.
Except
as disclosed in the Registration Statement and Prospectus, the Company owns,
possesses, licenses or has other rights to use the patents and patent
applications, copyrights, trademarks, service marks, trade names, technology,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary rights) and other intellectual property (or could acquire such
intellectual property upon commercially reasonable terms) necessary to conduct
its business in the manner in which it is being conducted (collectively, the
“Company Intellectual Property”); except as disclosed in the Registration
Statement and Prospectus, to the Company’s knowledge, none of the patents owned
or licensed by the Company is unenforceable or invalid, and, to the Company’s
knowledge, none of the patent applications owned or licensed by the Company
would be unenforceable or invalid if issued as patents; to the Company’s
knowledge, the Company is not obligated to pay a royalty, grant a license,
or
provide other consideration to any third party in connection with the Company
Intellectual Property other than as disclosed in the Prospectus; except as
disclosed in the Registration Statement and Prospectus, the Company has not
received any notice of violation or conflict with rights of others with respect
to the Company Intellectual Property; except as disclosed in the Registration
Statement and Prospectus, there are no pending or to the Company’s knowledge,
threatened actions, suits, proceedings or claims by others that the Company
is
infringing any patent, trade secret, trade ▇▇▇▇, service ▇▇▇▇, copyright or
other intellectual property or proprietary right; and except as disclosed in
the
Registration Statement and Prospectus, the products or processes of the Company
referenced in the Prospectus do not, to
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the
knowledge of the Company, violate or conflict with any intellectual property
or
proprietary right of any third person.
(x) Forward
Looking Statement.
No
forward-looking statement (within the meaning of Section 27A of the Act and
Section 21E of the Exchange Act) contained in the Registration Statement, the
Preliminary Prospectus or the Prospectus has been made or reaffirmed without
a
reasonable basis or has been disclosed other than in good faith.
(y) Industry
Data.
The
industry-related and market-related statistics obtained from independent
industry publications and reports and included in the Registration Statement
and
the Prospectus agree with the sources from which they are derived.
(z) Related
Party Transactions.
No
relationship exists between or among the Company and any director, officer,
stockholder or affiliate of the Company which is required by the 1933 Act and
rules and regulations of the Commission under the 1933 Act to be described
in
the Registration Statement or the Prospectus which is not so described and
described as required in material compliance with such requirement. There are
no
outstanding loans, advances (except advances for business expenses in the
ordinary course of business) or guarantees of indebtedness by the Company to
or
for the benefit of any of the officers or directors of the Company or any of
their respective family members, except as disclosed in the Registration
Statement and the Prospectus.
3.
Representations
and Warranties of Placement Agent.
You
represent and warrant to the Company that:
(a) You
are a
member, in good standing, of the Financial Industry Regulatory Authority
(“FINRA”), and are duly registered as a broker-dealer under the 1934 Act, and
under the laws of each state in which you propose to offer the Shares, except
where such registration would not be required by law.
(b)
This
Agreement when accepted and approved will be duly authorized, executed and
delivered by you and is a valid and binding agreement of you, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, liquidation, reorganization,
or similar laws affecting creditors’ rights generally, regardless of whether
such enforceability is considered in equity or at law, (ii) general equity
principles, and (iii) limitations imposed by federal and state securities laws
or the public policy underlying such laws regarding the enforceability of
indemnification or contribution provisions.
(c)
The
consummation of the transactions contemplated by the Prospectus relating to
the
Offering will not violate or constitute a breach of, or default under, your
articles of incorporation or bylaws, or any material instrument, agreement,
or
indenture to which you are a party, or violate any order applicable to you
of
any federal or state regulatory body or administrative agency having
jurisdiction over you or your property.
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4.
Sale
of Shares.
(a)
Exclusive
Agency.
The
Company hereby appoints you as its exclusive agent to offer for sale, and hereby
agrees to sell during the Offering Period (as defined in Section 4.(c)), the
Shares on a “best efforts, all-or-none” basis, and on the basis of the
representations and warranties herein contained but subject to the terms and
conditions herein set forth, you accept such appointment and agree to use your
best efforts as agent to offer the Shares for sale for the account of the
Company, on a cash basis only at the offering price of $6.00 per share. During
the Offering Period, the Company will not sell or agree to sell any debt or
equity securities otherwise than through you. Subject to your commitment to
the
sell the Shares on a “best efforts, all-or-none” basis as provided herein,
nothing in this Agreement shall prevent you from entering into an agency
agreement, underwriting agreement, or other similar agreement governing the
offer and sale of securities with any other issuer of securities, and nothing
contained herein shall be construed in any way as precluding or restricting
your
right to sell or offer for sale securities issued by any other person, including
securities similar to, or competing with, the Shares. It is understood between
the parties that there is no firm commitment by you to purchase any or all
of
the Shares.
(b)
Obligation
to Offer Shares.
Your
obligation to offer the Shares is subject to receipt by you of written advice
from the Commission that the Registration Statement is effective, is subject
to
the Shares being qualified for offering under applicable laws in the states
as
may be reasonably designated by you, is subject to the absence of any
prohibitory action by any governmental body, agency, or official, and is subject
to the terms and conditions contained in this Agreement and in the Registration
Statement.
(c)
Offering
Termination Date.
The
“Offering Period” shall commence on the day that the Prospectus is first made
available to prospective investors in connection with the Offering and shall
continue until the “Offering Termination Date,” which shall be the earliest of
(i) a date mutually acceptable to the Company and you after which the Shares
have been sold, (ii) September 30, 2008,
or (iii)
such other date mutually agreeable to the parties hereto. The Company and you
agree that unless the Shares offered are sold on or before the Offering
Termination Date, all proceeds that have been paid for the Shares will be
promptly returned to the purchasers.
(d)
Escrow
Agent.
Prior
to the sale of all of the Shares, all funds received from purchasers of the
Shares shall be placed in an escrow account (the “Escrow Account”) with the
Escrow Agent pursuant to the Escrow Agreement, the form of which is attached
as
an exhibit to the Registration Statement, and all payments of, from or on
account of such funds shall be made pursuant to the Escrow Agreement. In the
event that the Shares are not sold on or before the Offering Termination Date,
all funds then held in the Escrow Account shall be returned promptly to the
respective purchasers as provided in the Escrow Agreement.
(e)
Closing
Date.
As and
when the closing of the Offering is effected, which shall be on or before the
Offering Termination Date, and proceeds from the Shares sold are received and
accepted, on such date (the “Closing Date”) and at such time and place
as
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determined
by you (which determination shall be subject to the satisfaction on such date
of
the conditions contained herein), the funds received from purchasers will be
delivered by the Escrow Agent to the Company, by wire transfer of immediately
available funds, on the Closing Date.
(f) Selling
Commissions.
In
consideration for your execution of this Agreement and for the performance
of
your obligations hereunder, the Company agrees to pay you, by wire transfer
of
immediately available funds on the Closing Date, if any, a selling commission
computed at the rate of seven percent (7.0%) of the public offering price of
the
Shares sold by you. In addition, on the Closing Date, the Company will issue
to
you a warrant for the purchase of ordinary shares, equal to ten percent (10%)
of
the number of the Company’s ordinary shares sold in the Offering, substantially
in the form of Exhibit
A
attached
to this Agreement.
(g) Finder’s
Fees.
Except
as set forth in the Registration Statement or Prospectus, neither you nor the
Company, directly or indirectly, shall pay or award any finder’s fee,
commission, or other compensation to any person engaged by a potential purchaser
for investment advice as an inducement to such advisor to advise the purchase
of
the Shares or for any other purpose.
(h) Delivery
of Share Certificates.
Delivery of certificates in definitive form representing the Shares shall be
made at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Incorporated or at such other
place as shall be agreed upon by the Company and you, on such date as you may
request (the “Date of Delivery”). The certificates representing the Shares shall
be in such denominations and registered in such names as you may request in
writing at least three full business days before the Date of Delivery. The
certificates representing the Shares will be made available for examination
and
packaging at the offices of ▇▇▇▇▇▇▇▇ & Strudwick, Incorporated or at such
other place as shall be agreed upon by the Company and you, not later than
at
least two (2) full business days prior to each Date of Delivery.
5.
Covenants.
(a) Covenants
of the Company.
The
Company covenants with you as follows:
(i)
Notices.
The
Company immediately will notify you, and confirm such notice in writing, (A)
of
any fact that would make inaccurate any representation or warranty by the
Company, and (B) of any change in facts on which your obligation to perform
under this Agreement is dependent.
(ii)
Effectiveness
of Registration Statement.
The
Company will use its best efforts to cause the Registration Statement to become
effective (if not yet effective at the date and time this Agreement is executed
and delivered by the parties hereto). If the Company elects to rely upon Rule
430A of the Rules and Regulations or the filing of the Prospectus is otherwise
required under Rule 424(b) of the Rules and Regulations, and subject to the
provisions of Section 5.(a)(iii) of this Agreement, the Company will comply
with
the requirements of Rule
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10 -
430A
and
will file the Prospectus, properly completed, pursuant to the applicable
provisions of Rule 424(b) within the time prescribed. The Company will notify
you immediately, and confirm the notice in writing, (i) when the Registration
Statement, or any post-effective amendment to the Registration Statement, shall
have become effective, or any supplement to the Prospectus, or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from
the
Commission, (iii) of any request by the Commission to amend the Registration
Statement or amend or supplement the Prospectus or for additional information,
and (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the
institution or threatening of any proceeding for any such purposes. The Company
will use all reasonable efforts to prevent the issuance of any such stop order
or of any order preventing or suspending such use and, if any such order is
issued, to obtain the withdrawal thereof at the earliest possible moment.
(iii) Amendments
to Registration Statement and Prospectus.
The
Company will not at any time file or make any amendment to the Registration
Statement, or any amendment or supplement (i) to the Prospectus, if the Company
has not elected to rely upon Rule 430A, or (ii) if the Company has elected
to
rely upon Rule 430A, to either the Prospectus included in the Registration
Statement at the time it becomes effective or to the Prospectus filed in
accordance with Rule 424(b), in either case if you shall not have previously
been advised and furnished a copy thereof a reasonable time prior to the
proposed filing, or if you or your counsel shall reasonably object to such
amendment or supplement; provided, however, that if you shall have objected
to
such amendment or supplement, you shall cease your efforts to sell the Shares
until an amendment or supplement is filed.
(iv)
Delivery
of Registration Statement.
The
Company has delivered to you or will deliver to you, without expense to you,
at
such locations as you shall request, as soon as the Registration Statement
or
any amended Registration Statement is available, such number of signed copies
of
the Registration Statement as originally filed and of amended Registration
Statements, if any, copies of all exhibits and documents filed therewith, and
signed copies of all consents and certificates of experts, as you may reasonably
request.
(v)
Delivery
of Prospectus.
The
Company will deliver to you at its expense, from time to time, as many copies
of
each Preliminary Prospectus as you may reasonably request, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will deliver to you at its expense, as soon as the Registration
Statement shall have become effective and thereafter from time to time as
requested during the period when the Prospectus is required to be delivered
under the 1933 Act, such number of copies of the Prospectus (as supplemented
or
amended) as you may reasonably request. The Company will comply to the best
of
its ability with the 1933 Act and the Rules and Regulations so as to permit
the
completion of the distribution of the Shares as contemplated in this Agreement
and in the prospectus. If the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Shares and if at such time any
events shall have occurred as result of
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11 -
which
the
Prospectus as then amended or supplemented would include an untrue statement
of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made
when such Prospectus is delivered not misleading or, if for any reason it shall
be necessary during the same period to amend or supplement the Prospectus in
order to comply with the 1933 Act, the Company will notify you and upon your
request prepare and furnish without charge to you and to any dealer in
securities as many copies as you may from time to time reasonably request of
an
amended Prospectus or a supplement to the Prospectus that will correct such
statement or omission or effect such compliance, and in case you are required
to
deliver a prospectus in connection with sales of any of the Shares, upon your
request but at your expense, the Company will prepare and deliver to you as
many
copies as you may request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the 1933 Act.
(vi)
Blue
Sky Qualification.
The
Company, in good faith and in cooperation with you, will use its best efforts
to
qualify the Shares for offering and sale under the applicable “blue sky” or
securities laws of such jurisdictions as you from time to time may reasonably
designate and to maintain such qualifications in effect until the date on which
the Company ceases to be obligated to maintain the effectiveness of the
Registration Statement, provided, however, that the Company shall not be
obligated to qualify as a foreign entity in any jurisdiction in which it is
not
so qualified or to make any undertakings in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company will file
such
statements and reports as may be required by the laws of each jurisdiction
in
which the Shares have been qualified as above provided.
(vii)
Application
of Net Proceeds.
The
Company will apply the net proceeds received from the sale of the Shares in
all
material respects as set forth in the Prospectus under the caption “Use of
Proceeds.”
(viii)
Cooperation
with Your Due Diligence.
At all
times prior to the Offering Termination Date, the Company will cooperate with
you in such investigation as you may make or cause to be made of all the
business and operations of the Company in connection with the sale of the
Shares, and will make available to you in connection therewith such information
in its possession as you may reasonably request, all of which you agree to
safeguard as the confidential information of the Company and to refrain from
using for any purpose adverse to the interests of the Company.
(ix)
Transfer
Agent.
The
Company will maintain a transfer agent and, if necessary under applicable
jurisdictions, a registrar (which may be the same entity as the transfer agent)
for its ordinary shares.
(x)
Nasdaq.
The
Company will use its reasonable best efforts to maintain the quotation of its
ordinary shares on The Nasdaq Capital Market.
(xi)
Actions
of Company, Officers, Directors, and Affiliates.
The
Company will not and will use its best efforts to cause its officers, directors,
and affiliates not to
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12 -
(i)
take,
directly or indirectly, prior to termination of the Offering contemplated by
this Agreement, any action designed to stabilize or manipulate the price of
any
security of the Company, or that may cause or result in, or that might in the
future reasonably be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Company, to facilitate the
sale
or resale of any of the Shares, (ii) other than under this Agreement, sell,
bid
for, purchase, or pay anyone any compensation for soliciting purchases of the
Shares or (iii) pay or agree to pay to any person any compensation for
soliciting any order to purchase any other securities of the Company.
(xii) Up
until
such time as (A) the investors in the Offering own less than ten percent (10%)
of our outstanding voting securities or (B) the closing price of one of the
Company’s ordinary shares equals or exceeds U.S. $24.00 for a period of fifteen
consecutive trading days, you will have the right, from time to time, to
designate one person to serve as a non-voting observer to the Company’s Board of
Directors. This right shall be subject to our approval, which shall not be
unreasonably withheld. The observer to the Board will be entitled to receive
up
to $6,000 of reimbursed travel expenses per each meeting attended in person,
subject to a maximum of $12,000 per year.
(b)
Your
Covenants.
You
covenant with the Company as follows:
(i)
Information
Provided.
You
have not provided and will not provide to the purchasers of Shares any written
or oral information regarding the business of the Company, including any
representations regarding the Company’s financial condition or financial
prospects, other than such information as is contained in the Prospectus. You
further covenant that, in connection with the Offering you will use your best
efforts to comply with such purchaser suitability requirements as may be imposed
by state securities or blue sky requirements.
(ii)
Prospectus
Supplements.
Until
the termination of this Agreement, if any event affecting the Prospectus, the
Company or you shall occur which, in the opinion of counsel to the Company,
should be set forth in a supplement to the Prospectus, you agree to distribute
each supplement of the Prospectus to each person who has previously received
a
copy of the Prospectus from you and you further agree to include such supplement
in all future deliveries of the Prospectus. You agree that following notice
from
the Company that a supplement to the Prospectus is necessary, you will cease
further efforts to sell the Shares until such a supplement is prepared and
delivered to you.
(iii)
Compliance
with Laws, Etc.
In your
sale of the Shares, you will comply in all material respects with applicable
rules and regulations and the rules and regulations of applicable
self-regulatory organizations (provided, however, that you shall be deemed
not
to have breached this covenant if your failure to so comply is based on a breach
by the Company of any of its representations, warranties or covenants contained
in this Agreement and you shall have complied with Section 5.(b)(ii) above).
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13 -
6.
Payment
of Expenses.
Whether
or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, and subject to the provisions of Section 10 of this
Agreement, the Company hereby agrees that it will pay all fees and expenses
incident to the performance of its obligations under this Agreement (excluding
fees and expenses of counsel for you, except as specifically set forth below),
including (a) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits), as originally filed and as
amended, the Preliminary Prospectuses and the Prospectus and any amendments
or
supplements thereto, and the cost of furnishing copies thereof to you, (b)
the
preparation, printing, and distribution of this Agreement, any selected dealer
agreement, the certificates representing the Shares, the blue sky memoranda,
and
any instruments relating to any of the foregoing, (c) the issuance and delivery
of the Shares, including any transfer taxes payable thereon, (d) the fees and
disbursements of the Company’s counsel and accountants, (e) the qualification of
the Shares under applicable securities laws in accordance with Section 5.(a)
of
this Agreement and any filing fee paid in connection with the review of the
Offering by FINRA, including filing fees and fees and disbursements made in
connection therewith and in connection with the blue sky memoranda supplied
to
you by counsel for the Company, (f) all costs, fees, and expenses in connection
with the application for qualifying the Shares for quotation on the Nasdaq
Capital Market, (g) the transfer agent’s and registrar’s fees and all
miscellaneous expenses referred to in the Registration Statement, (h) costs
related to travel and lodging incurred by the Company and its representatives
relating to meetings with and presentations to prospective purchasers of the
Shares reasonably determined by you to be necessary or desirable to effect
the
sale of the Shares to the public, (i) any escrow arrangements in connection
with
the transactions described herein, including any compensation or reimbursement
to the Escrow Agent for its services as such, and (j) all other costs and
expenses incident to the performance of the Company’s obligations hereunder that
are not otherwise specifically provided for in this Section.
7.
Conditions
of Your Obligations.
Your
obligations hereunder shall be subject to, in your discretion, the following
terms and conditions:
(a)
Effectiveness
of Registration Statement.
The
Registration Statement shall have become effective not later than 5:30 p.m.
on
the date of this Agreement or, at such later time or on such later date as
you
may agree to in writing; and as of the Closing Date no stop order suspending
the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or
shall
be pending or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the satisfaction
of
your counsel.
(b)
Closing
Date Matters.
On the
Closing Date, (i) the Registration Statement and the Prospectus, as they may
then be amended or supplemented, shall contain all statements that are required
to be stated therein under the 1933 Act and the Rules and Regulations and in
all
material respects shall conform to the requirements of the 1933 Act and the
Rules and Regulations; the Company shall have complied in all material respects
with Rule 430A (if it shall have elected to rely thereon) and neither the
Registration Statement nor the Prospectus, as they may then be amended or
supplemented, shall contain an untrue statement of a material fact
or
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14 -
omit
to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) there shall not have been, since the
respective dates as of which information is given in the Registration Statement,
any material adverse change in the business, prospects, properties, assets,
results of operations or condition (financial or otherwise) of the Company
whether or not arising in the ordinary course of business, (iii) no action,
suit
or proceeding at law or in equity shall be pending or, to the Company’s
knowledge, threatened against the Company that would be required to be set
forth
in the Prospectus other than as set forth therein and no proceedings shall
be
pending or, to the knowledge of the Company, threatened against the Company
before or by any applicable or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding could materially adversely
affect the business, prospects, assets, results of operations or condition
(financial or otherwise) of the Company other than as set forth in the
Prospectus, (iv) the Company shall have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied on or prior
to the Closing Date, and (v) the representations and warranties of the Company
set forth in Section 2 of this Agreement shall be accurate in all material
respects as though expressly made at and as of the Closing Date. On the Closing
Date, you shall have received a certificate executed by the President of the
Company, dated as of the Closing Date, to such effect and with respect to the
following additional matters: (A) the Registration Statement has become
effective under the 1933 Act and no stop order suspending the effectiveness
of
the Registration Statement or preventing or suspending the use of the Prospectus
has been issued, and no proceedings for that purpose have been instituted or
are
pending or, to his knowledge, threatened under the 1933 Act; and (B) he has
reviewed the Registration Statement and the Prospectus and, when the
Registration Statement became effective and at all times subsequent thereto
up
to the delivery of such certificate, the Registration Statement and the
Prospectus and any amendments or supplements thereto contained all statements
and information required to be included therein or necessary to make the
statements therein not misleading and neither the Registration Statement nor
the
Prospectus nor any amendment or supplement thereto contained any untrue
statement of a material fact or omitted to state any material fact required
to
be stated therein or necessary to make the statements therein not misleading,
and, since the effective date of the Registration Statement, there has occurred
no event required to be set forth in an amended or supplemented Prospectus
that
has not been so set forth.
(c) Opinion
of Sinowing Law Firm.
At the
Closing Date, you shall receive the opinion of Sinowing Law Firm, counsel for
the Company, in form and substance reasonably satisfactory to you, to the effect
of Exhibit
B.
(d)
Opinion
of Your Counsel.
At the
Closing Date, you shall receive the favorable opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
P.C., your counsel, with respect to such matters as you may reasonably require,
and the Company shall have furnished to such counsel such documents as they
may
reasonably request for the purpose of enabling them to pass on such matters.
(e)
Independent
Public Accountants.
At the
time that this Agreement is executed by the Company, you shall have received
from MSCM LLP, a letter dated the date hereof, in form and substance
satisfactory to you, confirming that they are independent
public
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15 -
accountants
with respect to the Company within the meanings of the 1933 Act and the Rules
and Regulations, and stating in effect that:
(i)
in
their
opinion, the financial statements and any supplementary financial information
and schedule included in the Registration Statement and covered by their opinion
therein comply as to form and in all material respects with the applicable
accounting requirements of the 1933 Act and the Rules and Regulations;
(ii)
on
the
basis of limited procedures (set forth in detail in such letter and made in
accordance with such procedures as may be specified by you) not constituting
an
audit in accordance with generally accepted auditing standards, consisting
of
(but not limited to) a reading of the latest available internal unaudited
financial statements of the Company, a reading of the minute books of the
Company, inquiries of officials of the Company responsible for financial and
accounting matters, and such other inquiries and procedures as may be specified
in such letter, nothing came to their attention to cause them to believe that:
(A)
the
unaudited financial statements and supporting schedule and other unaudited
financial data of the Company included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the Rules and Regulations or are not presented
in conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement;
(B)
any
other
unaudited income statement data and balance sheet items included in the
Prospectus do not agree with the corresponding items in the unaudited financial
statements from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent with
the
basis for the corresponding amounts in the audited financial statements included
in the Prospectus;
(C)
any
unaudited pro forma financial information included in the Prospectus does not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the Rules and Regulations or the pro forma
adjustments have not been properly applied to historical amounts in the
compilation of that information;
(D)
at
a
specified date not more than five (5) days prior to the date of such letter,
there was any change in the capital stock or long-term debt or obligations
of
the Company or there were any decreases in net current assets or net assets,
shareholders’ equity, or other items specified by you from that set forth in the
Company’s balance sheet at December 31, 2007, except as described in such
letter; and
(E)
for
the
period from December 31, 2007 to a specified date not more than five (5) days
prior to the date of such letter, there were any decreases in revenues or
operating income before interest, depreciation and amortization for the Company,
in each case as compared with the corresponding period of the preceding year,
except in each case for
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16 -
decreases
that the Prospectus discloses have occurred or may occur or that are described
in such letter; and
(iii) in
addition to the procedures referred to in clause (ii) above and the examination
referred to in their reports including in the Registration Statement, they
have
carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages, and financial information specified by you that are
derived from the general accounting records of the Company, that appear in
the
Registration Statement or the exhibits or schedules thereto and are specified
by
you, and have compared such amounts, percentages, and financial information
with
the accounting records of the Company and with material derived from such
records and have found them to be in agreement.
(f)
Updated
Comfort Letter.
At the
Closing Date, you shall have received from MSCM LLP a letter, in form and
substance satisfactory to you and dated as of the Closing Date, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
Section 7.(e) above, except that the specified date referred to shall be a
date
not more than five (5) days prior to the Closing Date.
(g)
Post-Financial
Developments.
In the
event that either of the letters to be delivered pursuant to Sections 7.(e)
and
7.(f) above sets forth any changes, decreases or increases, it shall be a
further condition to your obligations that you shall have reasonably determined,
after discussions with officers of the Company responsible for financial and
accounting matters and with MSCM LLP, that such changes, decreases or increases
as are set forth in such letter do not reflect a material adverse change in
the
capital stock, long-term debt, obligations under capital leases, total assets,
net current assets, or shareholders’ equity of the Company as compared with the
amounts shown in the latest consolidated pro forma balance sheet of the Company,
or a material adverse change in the revenues or operating income before
interest, depreciation and amortization for the Company in each case as compared
with the corresponding period of the prior year.
(h)
Additional
Information.
On the
Closing Date, you shall have been furnished with all such documents,
certificates and opinions as you may reasonably request for the purpose of
enabling your counsel to pass upon the issuance and sale of the Shares as
contemplated in this Agreement and the matters referred to in Section 7.(b),
and
in order to evidence the accuracy and completeness of, any of the
representations, warranties or statements of the Company, the performance of
any
of the covenants of the Company, or the fulfillment of any of the conditions
herein contained; and all proceedings taken by the Company at or prior to the
Closing Date in connection with the authorization, issuance and sale of the
Shares as contemplated in this Agreement, shall be satisfactory in form and
substance to you and to your counsel. The Company will furnish you with such
number of conformed copies of such opinions, certificates, letters and documents
as you shall reasonably request. Any certificate signed by any officer, partner,
or other official of the Company and delivered to you or your counsel shall
be
deemed a representation and warranty by the Company to you as to the statements
made therein.
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17 -
(i)
Adverse
Events.
Subsequent to the date hereof, there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, the Nasdaq National Market or the
Nasdaq Capital Market, (ii) a general moratorium on commercial banking
activities in the People’s Republic of China or New York, (iii) the outbreak or
escalation of hostilities involving the United States or the People’s Republic
of China or the declaration by the United States or the People’s Republic of
China of a national emergency or war if the effect of any such event specified
in this clause (iii) in your reasonable judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
on
the terms and in the manner contemplated in the Prospectus, or (iv) such a
material adverse change in general economic, political, financial or
international conditions affecting financial markets in the United States or
the
People’s Republic of China having a material adverse impact on trading prices of
securities in general, as, in your reasonable judgment, makes it impracticable
or inadvisable to proceed with the public offering of the Shares or the delivery
of the Shares on the terms and in the manner contemplated in the Prospectus.
(j)
FINRA
Review.
FINRA,
upon review of the terms of the Offering, shall not have objected to the
Offering, the terms of the Offering or your participation in the Offering.
(k)
Nasdaq
Quotation.
The
Shares shall be approved for quotation on The Nasdaq Capital Market.
If
any of
the conditions specified in this Section 7 shall not have been fulfilled when
and as required by this Agreement to be fulfilled, this Agreement may be
terminated by you on notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party
to
any other party, except as provided in Sections 6 and 10. Notwithstanding any
such termination, the provisions of Section 8 shall remain in effect.
8.
Indemnification
and Contribution.
(a) Indemnification
by the Company.
The
Company will indemnify and hold you harmless against any losses, claims,
damages, or liabilities, joint or several, to which you may become subject
under
the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any breach of any representation, warranty or covenant of the Company
herein contained or any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse you for any legal or other expenses
reasonably incurred by you in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the
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18 -
Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon and in conformity with written information furnished to the Company by
you
expressly for use therein; provided further, that the indemnity agreement
contained in Section 8.(a) with respect to any Preliminary Prospectus shall
not
inure to your benefit if you failed to send or give a copy of the Prospectus
to
such person at or prior to the written confirmation of the sale of such Shares
to such person in any case where such delivery is required by the 1933 Act
or
the Rules and Regulations and if the Prospectus would have cured any untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such loss, claim, damage, or liability. In addition to its other
obligations under this Section 8.(a), the Company agrees that, as an interim
measure during the pendency of any such claim, action, investigation, inquiry,
or other proceeding arising out of or based upon any statement or omission,
or
any alleged statement or omission, described in this Section 8.(a), it will
reimburse you on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry, or other proceeding, notwithstanding the absence of
a
judicial determination as to the propriety and enforceability of the Company’s
obligation to reimburse you for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. Any such interim reimbursement payments that are not made to
you
within thirty (30) days of a request for reimbursement shall bear interest
at
the prime rate (or reference rate or other commercial lending rate for borrowers
of the highest credit standing) published from time to time by The Wall Street
Journal (the “Prime Rate”) from the date of such request. This indemnity
agreement shall be in addition to any liabilities that the Company may otherwise
have. For purposes of this Section 8, the information set forth in the last
paragraph on the front cover page (insofar as such information relates to you)
and under “Placement” in any Preliminary Prospectus and in the Prospectus
constitutes the only information furnished by you to the Company for inclusion
in any Preliminary Prospectus, the Prospectus, or the Registration Statement.
The Company will not, without your prior written consent, settle or compromise
or consent to the entry of any judgment in any pending or threatened action
or
claim or related cause of action or portion of such cause of action in respect
of which indemnification may be sought hereunder (whether or not you are a
party
to such action or claim), unless such settlement, compromise, or consent
includes an unconditional release of you from all liability arising out of
such
action or claim (or related cause of action or portion thereof). The indemnity
agreement in this Section 8.(a) shall extend upon the same terms and conditions
to, and shall inure to the benefit of, each person, if any, who controls you
within the meaning of the 1933 Act or the 1934 Act to the same extent as such
agreement applies to you.
(b)
Indemnification
by You.
You
will indemnify and hold harmless the Company against any losses, claims,
damages, or liabilities to which the Company may become subject, under the
1933
Act, the 1934 Act, or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon
any
breach of any warranty or covenant by you herein contained or any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement, or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case
to the extent, but only to
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19 -
the
extent, that (i) such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement, or the Prospectus or any such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by you expressly for use therein, or (ii) you failed to deliver an
amendment or supplement to the Prospectus that the Company made available to
you
prior to the Closing Date and that corrected any statement or omission in a
Preliminary Prospectus, the Registration Statement or the Prospectus which
forms
the basis for a claim against the Company; and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such loss, claim, damage, liability, or
action. In addition to its other obligations under this Section 8.(b), you
agree
that, as an interim measure during the pendency of any such claim, action,
investigation, inquiry, or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 8.(b), you will reimburse the Company on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating
or
defending any such claim, action, investigation, inquiry, or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety
and
enforceability of your obligation to reimburse the Company for such expenses
and
the possibility that such payments might later been held to have been improper
by a court of competent jurisdiction. Any such interim reimbursement payments
that are not made to the Company within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement shall be in addition to any liabilities that
you may otherwise have. You will not, without the Company’s prior written
consent, settle or compromise or consent to the entry of any judgment in any
pending or threatened action or claim or related cause of action or portion
of
such cause of action in respect of which indemnification may be sought hereunder
(whether or not the Company is a party to such action or claim), unless such
settlement, compromise, or consent includes an unconditional release of the
Company from all liability arising out of such action or claim (or related
cause
of action or portion thereof). The indemnity agreement in this Section 8.(b)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each officer and director of the Company and each person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
to
the same extent as such agreement applies to the Company.
(c)
Notices
of Claims; Employment of Counsel.
Any
party that proposes to assert the right to be indemnified under this Section
8
promptly shall notify in writing each party against which a claim is to be
made
under this Section 8 of the institution of such action but the omission so
to
notify such indemnifying party of any such action shall not relieve it from
any
liability it may have to any indemnified party except (i) to the extent that
the
omission to notify shall have caused or increased the indemnifying party’s
liability, and (ii) that the indemnifying party shall be relieved of its
indemnity obligation for expenses of the indemnified party incurred before
the
indemnifying party is notified. Such indemnifying party or parties shall assume
the defense of such action, including the employment of counsel (satisfactory
to
the indemnified party) and payment of fees and expenses. An indemnified party
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless the employment of such counsel shall have been authorized in writing
by
the indemnifying party or parties in connection with the defense of such action
or the
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indemnifying
party or parties shall not have employed counsel to have charge of the defense
of such action or such indemnified party or parties reasonably shall have
concluded that there may be defenses available to it or them that are different
from or additional to those available to such indemnifying party or parties
(in
which case such indemnifying party or parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties),
in
any of which events such fees and expenses shall be borne by such indemnifying
party or parties. Anything in this paragraph to the contrary notwithstanding,
an
indemnifying party shall not be liable for any settlement of any such claim
or
action effected without its written consent.
(d)
Arbitration.
It is
agreed that any controversy arising out of the operation of the interim
reimbursement arrangements set forth in Sections 8.(a) and 8.(b) hereof,
including the amounts of any requested reimbursement payments, the method of
determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration
or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Any such arbitration
will be limited to the operation of the interim reimbursement provisions
contained in Sections 8.(a) and 8.(b) hereof and will not resolve the ultimate
propriety or enforceability of the obligation to indemnify for expenses that
is
created by the provisions of Sections 8.(a) and 8.(b).
(e)
Contribution.
If the
indemnification provided for in Section 8.(a) or 8.(b) is unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
therein, then the Company on the one hand and you on the other shall contribute
to the amount paid or payable as a result of such losses, claims, damages,
or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and
you
on the other from the Offering. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then the
Company and you shall contribute to such amount paid or payable in such
proportion as is appropriate to reflect not only such relative benefits but
also
the relative fault of the Company on the one hand and you on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof), as well as
any
other relevant equitable considerations. The relative benefits received by
the
Company on the one hand and you on the other shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total selling commissions received
by you in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or allegedly untrue statement of a material fact
or
the omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or to information with respect to you
and furnished by you respectively, in writing specifically for inclusion in
the
Prospectus on the other and the parties’ relative intent, knowledge, access to
information, and
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21 -
opportunity
to correct or prevent such statement or omission. The Company and you agree
that
it would not be just and equitable if contribution pursuant to this Section
8.(e) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to above in this Section 8.(e). The amount paid or payable as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 8.(e) shall be deemed to include any legal or other
expenses reasonably incurred by any such party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
with respect to the transactions giving rise to the right of contribution
provided in this Section 8.(e) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The obligations in
this
Section 8.(e) for you to contribute are several in proportion to your respective
underwriting obligations and not joint. For purposes of this Section 8.(e),
each
person, if any, who controls you within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as you, and each director of
the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act, shall
have the same rights to contribution as the Company.
9.
Representations
and Agreements to Survive.
Except
as the context otherwise requires, all representations, warranties, covenants
and agreements contained in this Agreement shall remain operative and in full
force and effect regardless of any investigation made by you, or on your behalf,
or by any controlling person, or by or on behalf of the Company, and shall
survive until the fifth anniversary of the Offering Termination Date and the
termination of this Agreement pursuant to Section 10 hereof.
10.
Termination
of Agreement.
(a)
Termination
of Agreement.
You
shall have the right to terminate this Agreement at any time prior to the
Closing Date (i) if any representation or warranty of the Company hereunder
shall be found to have been incorrect or misleading in any material respect
when
made or the Company shall fail, refuse, or be unable to perform any of its
agreements hereunder or to fulfill any condition of your obligations hereunder,
(ii) if there shall have been since the respective dates as of which information
is given in the Registration Statement, a material adverse change, or any
development which could reasonably be expected to result in a prospective
material adverse change, in or affecting the business, prospects, management,
properties, assets, results of operations, or condition (financial or otherwise)
of the Company, whether or not arising in the ordinary course of business,
(iii)
if trading on any national securities exchange shall have been suspended (other
than for reasons unrelated to the securities markets), or minimum or maximum
prices for trading generally shall have been fixed or maximum ranges for prices
for all securities shall have been required on any such exchange by such
exchange or by order of the Commission or any other governmental authority
having jurisdiction, (iv) if there has occurred or accelerated any outbreak
of
hostilities or other national or international calamity or crisis or change
in
economic or political conditions the effect of which on the financial markets
of
the United States is such as to make it, in your reasonable judgment,
impracticable to market the Shares or enforce contracts for the sale of the
Shares, (v) if a banking moratorium has
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22 -
been
declared by Virginia, New York or U.S. authorities, (vi) any applicable statute,
regulation, rule, or order of any court or other governmental authority has
been
enacted, published, decreed, or otherwise promulgated that in your sole judgment
materially adversely affects or will materially adversely affect the business
or
operations of the Company, or (vii) any action has been taken by any applicable
government or agency in respect of its monetary or fiscal affairs that in your
reasonable opinion has a material adverse effect on the securities markets
in
the United States. You shall have no liability to the Company pursuant to this
Agreement or otherwise as a result of any such termination.
(b) Result
of Termination.
(i) If
the
sale of the 1,200,000 Shares is not consummated by September 30, 2008 due to
reasons beyond the control of either party hereto or if the Company abandons
the
Offering for reasons within its control, then in addition to its obligations
with respect to expenses as set forth in Section 6, the Company will reimburse
you on demand for all your reasonable out-of-pocket expenses (including the
fees
and expenses of your counsel), including disbursements reasonably incurred
by
you in reviewing the Registration Statement and the Prospectus, and in
investigating and making preparations for the marketing of the Shares up to
a
maximum of $$75,000. In addition, if within one year of the termination or
abandonment of the Offering the Company or any successor or affiliated entity
should raise equity in any public or private market in excess of $7,200,000
either in one installment or several, the Company will pay you the fees that
you
would have received if the Offering had been completed.
(ii) If
the
sale of the Shares provided for herein is not consummated for any other reason,
the Company shall pay expenses as required by Section 6, and the neither party
shall have any additional liability to the other except for such liabilities,
if
any, as may exist or thereafter arise under Section 8.
11. Notices.
(a) Method
and Location of Notices.
All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be sent by overnight courier, hand-delivered
or
telecopied and confirmed as follows:
To
the
Company:
Pansoft
Company Limited
3/F,
Qilu
Software Park Building
▇▇▇▇
Hi-Tech Zone
Jinan
250101, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
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23 -
To
you:
▇▇▇▇▇▇▇▇
& Strudwick, Incorporated
▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇. ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, III
with
a
copy to:
▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, P.C.
III
▇▇▇▇▇
Center
▇▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
(b) Time
of Notices.
Notice
shall be deemed to be given by you to the Company or by the Company to you
when
it is sent by overnight courier, hand-delivered or telecopied as provided in
Section 11.(a).
12.
Parties.
This
Agreement shall inure solely to the benefit of and shall be binding upon you,
the Company and the controlling persons referred to in Section 8, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have a legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
13.
Governing
Law, Construction, and Time.
This
Agreement shall be governed by and construed in accordance with the laws of
the
Commonwealth of Virginia. Specified time of day refers to United States Eastern
Time. Time shall be of the essence of this Agreement.
14.
Description
Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
15.
Counterparts.
This
Agreement may be executed in one or more counterparts, and if executed in more
than one counterpart, the executed counterparts shall together constitute a
single instrument.
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24 -
If
the
foregoing correctly sets forth the understanding between you and the Company,
please so indicate in the space provided below for that purpose, whereupon
this
letter shall constitute a binding agreement between us.
Very
truly yours,
PANSOFT
COMPANY, LIMITED
By:
Name:
▇▇▇▇ ▇▇▇▇
Title:
Chairman
Confirmed
and accepted as of the date first above written:
▇▇▇▇▇▇▇▇
& STRUDWICK, INCORPORATED
By:
Name:
▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, III
Title:
Senior Vice President
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25 -
EXHIBIT
A
Form
of Warrant
EXHIBIT
B
Form
of Sinowing Opinion