Shares of Common Stock SORL AUTO PARTS, INC. UNDERWRITING AGREEMENT
Exhibit
1.1
________________
Shares of Common Stock
SORL
AUTO PARTS, INC.
_________,
2006
MAXIM
GROUP LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
CHARDAN
CAPITAL MARKETS, LLC
▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representatives of the Underwriters
named
on Schedule
A
hereto
Ladies
and Gentlemen:
SORL
Auto
Parts, Inc., a corporation organized and existing under the laws of Delaware
(the “Company”),
confirms its agreement, subject to the terms and conditions set forth herein,
with each of the underwriters listed on Exhibit
A hereto
(collectively, the “Underwriters”),
for
whom Maxim Group LLC and Chardan Capital Markets, LLC are acting as
representatives (in such capacity, individually and collectively, the
“Representatives”),
to
sell and issue to the Underwriters an aggregate of _________ shares (the
“Firm
Shares”)
of its
common stock, par value $0.002 per share (the “Common
Stock”).
The
Shares are more fully described in the Registration Statement and Prospectus
referred to below. The offering and sale of the Shares contemplated by this
underwriting agreement (this “Agreement”)
is
referred to herein as the “Offering.”
1.1 Firm
Securities; OverAllotment Option.
(a) Purchase
of Firm Shares.
On the basis of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell, severally and not jointly, to the several Underwriters, an aggregate
of
_______________ Firm Shares of the Company at a purchase price (net of discounts
and commissions) of $____ per Firm Shares. The Underwriters, severally and
not jointly, agree to purchase from the Company the number of Firm Shares set
forth opposite their respective names on Schedule A
attached
hereto and made a part hereof at a purchase price (net of discounts and
commissions) of $____ per Firm Shares. The Firm Shares are to be offered
initially to the public (the “Offering”)
at the
offering price of $_____ per Firm Shares.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
2 of
44
(b) Payment
and Delivery.
Delivery and payment for the Firm Shares shall be made at 10:00 A.M., New York
time, on the third Business Day following the effective date (the “Effective
Date”)
of the
Registration Statement (as defined in Section 2.1.1 hereof) (or the fourth
Business Day following the Effective Date, if the Registration Statement is
declared effective after 4:30 p.m.) or at such earlier time as shall be agreed
upon by the Representative and the Company at the offices of the Representative
or at such other place as shall be agreed upon by the Representative and the
Company. The hour and date of delivery and payment for the Firm Shares is
called the “Closing
Date.”
Payment for the Firm Shares shall be made on the Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House funds. Any
remaining proceeds (less commissions, expense allowance and actual expense
payments or other fees payable pursuant to this Agreement) shall be paid to
the
order of the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Firm Shares (or through
the
facilities of the Depository Trust Company (the “DTC”))
for
the account of the Underwriters. The Firm Shares shall be registered in
such name or names and in such authorized denominations as the Representative
may request in writing at least two Business Days prior to the Closing
Date. The Company will permit the Representative to examine and package
the Firm Shares for delivery, at least one full Business Day prior to the
Closing Date. The Company shall not be obligated to sell or deliver the
Firm Shares except upon tender of payment by the Representative for all the
Firm
Shares. As used herein, the term “Business
Day”
shall
mean any day other than a Saturday, Sunday or any day on which national banks
in
New York, New York are not open for business.
(c) Option
Shares.
For the purposes of covering any over-allotments in connection with the
distribution and sale of the Firm Shares, the Underwriters are hereby granted,
severally and not jointly, an option to purchase up to an additional 15% of
the
number of Firm Shares to be offered by the Company in the Offering (the
“Over-allotment
Option”).
Such additional _________ shares shall be identical in all respects to the
Firm
Shares and are hereinafter referred to as “Option
Shares.”
The Firm Shares and the Option Shares are hereinafter collectively referred
to
as the “Shares”.
The
purchase price to be paid for the Option Shares (net of discounts and
commissions) will be $___ per Option. The Option Shares are to be offered
initially to the public at the offering price of $___ per Option.
Chardan
Capital Markets LLC
___________,
2006
Page
3 of
44
(d) Exercise
of Option.
The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be
exercised by the Representative as to all (at any time) or any part (from time
to time) of the Option Shares within 45 days after the Effective Date. The
Underwriters will not be under any obligation to purchase any Option Shares
prior to the exercise of the Over-allotment Option. The Over-allotment
Option granted hereby may be exercised by the giving of oral notice to the
Company from the Representative, which must be confirmed in writing by overnight
mail or facsimile transmission setting forth the number of Option Shares to
be
purchased and the date and time for delivery of and payment for the Option
Shares, which will not be later than five Business
Days after the date of the notice or such other time as shall be agreed upon
by
the Company and the Representative, at the offices of the Representative or
at
such other place as shall be agreed upon by the Company and the
Representative. If such delivery and payment for the Option Shares does
not occur on the Closing Date, the date and time of the closing for such Option
Shares will be as set forth in the notice (hereinafter the “Option
Closing Date”).
Upon exercise of the Over-allotment Option, the Company will become obligated
to
convey to the Underwriters, and, subject to the terms and conditions set forth
herein, the Underwriters will become obligated to purchase, the number of Option
Shares specified in such notice.
(e) Payment
and Delivery of Option Shares.
Payment for the Option Shares shall be made on the Option Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House funds, by
deposit of the sum of $____ per Option Shares upon delivery to you of
certificates (in form and substance satisfactory to the Underwriters)
representing the Option Shares (or through the facilities of DTC) for the
account of the Underwriters. The certificates representing the
Option Shares to be delivered will be in such denominations and registered
in
such names as the Representative requests not less than two Business Days prior
to the Closing Date or the Option Closing Date, as the case may be, and will
be
made available to the Representative for inspection, checking and packaging
at
the aforesaid office of the Company’s transfer agent or correspondent not less
than one full Business Day prior to such Closing Date or Option Closing
Date.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 4 of
44
2. Representations
and Warranties of the Company.
2.1 The
Company represents, warrants and covenants to, and agrees with, each of the
Underwriters that, as of the date hereof and as of the Closing
Date:
(a) The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a
registration statement on Form [S-1] (Registration No. _______), and amendments
thereto, and related preliminary prospectuses for the registration under the
Securities Act of 1933, as amended (the “Securities
Act”),
of
the Shares which registration statement, as so amended (including post-effective
amendments, if any), has been declared effective by the Commission and copies
of
which have heretofore been delivered to the Underwriters. The registration
statement, as amended at the time it became effective, including the prospectus,
financial statements, schedules, exhibits and other information (if any) deemed
to be part of the registration statement at the time of effectiveness pursuant
to Rule 430A under the Securities Act, is hereinafter referred to as the
“Registration
Statement.”
If
the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional shares of Common Stock (a “Rule
462(b) Registration Statement”),
then,
unless otherwise specified, any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration Statement.
Other than a Rule 462(b) Registration Statement, which, if filed, becomes
effective upon filing, no other document with respect to the Registration
Statement has heretofore been filed with the Commission. All of the Shares
have
been registered under the Securities Act pursuant to the Registration Statement
or, if any Rule 462(b) Registration Statement is filed, will be duly registered
under the Securities Act with the filing of such Rule 462(b) Registration
Statement. Based on communications from the Commission, no stop order suspending
the effectiveness of either the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission. The Company, if
required by the Securities Act and the rules and regulations of the Commission
(the “Rules
and Regulations”),
proposes to file the Prospectus with the Commission pursuant to Rule 424(b)
under the Securities Act (“Rule
424(b)”).
The
prospectus, in the form in which it is to be filed with the Commission pursuant
to Rule 424(b), or, if the prospectus is not to be filed with the Commission
pursuant to Rule 424(b), the prospectus in the form included as part of the
Registration Statement at the time the Registration Statement became effective,
is hereinafter referred to as the “Prospectus,”
except
that if any revised prospectus or prospectus supplement shall be provided to
the
Underwriters by the Company for use in connection with the Offering which
differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to Rule
424(b)), the term “Prospectus” shall also refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first
provided to the Underwriters for such use. Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or
filed
with the Commission pursuant to Rule 424 under the Securities Act is hereafter
called a “Preliminary
Prospectus.”
Any
reference herein to the Registration Statement, any Preliminary Prospectus
or
the Prospectus shall be deemed to refer to and include the exhibits incorporated
by reference therein pursuant to the Rules and Regulations on or before the
effective date of the Registration Statement, the date of such Preliminary
Prospectus or the date of the Prospectus, as the case may be. Any reference
herein to the terms “amend”, “amendment” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
be
deemed to refer to and include: (i) the filing of any document under the
Securities Exchange Act of 1934, as amended, and together with the Rules and
Regulations promulgated thereunder (the “Exchange
Act”)
after
the effective date of the Registration Statement, the date of such Preliminary
Prospectus or the date of the Prospectus, as the case may be, which is
incorporated therein by reference, and (ii) any such document so filed. All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus and the Prospectus, or any
amendments or supplements to any of the foregoing shall be deemed to include
any
copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System (“▇▇▇▇▇”).
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 5 of
44
(b) At
the
time of the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement or the effectiveness of any post-effective amendment
to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b), when any supplement to or amendment of
the
Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed and at the Closing Date (as hereinafter defined),
if any, the Registration Statement and the Prospectus and any amendments thereof
and supplements or exhibits thereto complied or will comply in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act
and the Rules and Regulations, and did not and will not contain an untrue
statement of a material fact and did not and will not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein: (i) in the case of the Registration Statement, not misleading, and
(ii)
in the case of the Prospectus or any related Preliminary Prospectus in light
of
the circumstances under which they were made, not misleading. When any
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the registration statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) under the Securities Act) and
when
any amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the Rules and Regulations and did not
contain an untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No representation and warranty is made in this subsection (b),
however, with respect to any information contained in or omitted from the
Registration Statement or the Prospectus or any related Preliminary Prospectus
or any amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Underwriter through the Representatives specifically for use therein.
The
parties acknowledge and agree that such information provided by or on behalf
of
any Underwriter consists solely of the subsections of the “Underwriting” section
of the Prospectus captioned “Nature of the Underwriting Commitment,” “Conduct of
the Offering” and “Stabilization.”
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 6 of
44
(c) ▇▇▇▇▇▇▇▇▇
& Co. LLP, whose reports relating to the Company are included in the
Registration Statement, are independent public accountants as required by the
Securities Act, the Exchange Act and the Rules and Regulations.
(d) Subsequent
to the respective dates as of which information is presented in the Registration
Statement and the Prospectus, and except as disclosed in the Registration
Statement and the Prospectus: (i) the Company has not declared, paid or made
any
dividends or other distributions of any kind on or in respect of its capital
stock, and (ii) there has been no material adverse change (or, to the knowledge
of the Company, any development which has a high probability of involving a
material adverse change in the future), whether or not arising from transactions
in the ordinary course of business, in or affecting: (A) the business, condition
(financial or otherwise), results of operations, shareholders’ equity,
properties or prospects of the Company and each direct or indirect subsidiary
or
joint venture of the Company listed on Schedule
B
hereto
(the “Subsidiaries”),
taken
as a whole; (B) the long-term debt or capital stock of the Company or any of
its
Subsidiaries; or (C) the Offering or consummation of any of the other
transactions contemplated by this Agreement, the Registration Statement or
the
Prospectus (a “Material
Adverse Change”).
Since
the date of the latest balance sheet presented in the Registration Statement
and
the Prospectus, neither the Company nor any Subsidiary has incurred or
undertaken any liabilities or obligations, whether direct or indirect,
liquidated or contingent, matured or unmatured, or entered into any
transactions, including any acquisition or disposition of any business or asset,
which are material to the Company and the Subsidiaries taken as a whole, except
for liabilities, obligations and transactions which are disclosed in the
Registration Statement and the Prospectus.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 7 of
44
(e) As
of the
dates indicated in the Prospectus, the authorized, issued and outstanding shares
of capital stock of the Company were as set forth in the Prospectus in the
column headed “Actual” under the section thereof captioned “Capitalization” and,
after giving effect to the Offering and the other transactions contemplated
by
this Agreement, the Registration Statement and the Prospectus, will be as set
forth in the column headed “As Adjusted” in such section. After giving effect to
the Offering, the other transactions contemplated by this Agreement, the
Registration Statement and the Prospectus, the authorized, issued and
outstanding shares of capital stock of the Company will be as set forth in
the
column headed “Pro Forma As Adjusted” in the section of the Prospectus captioned
“Capitalization.” All of the issued and outstanding shares of capital stock of
the Company are fully paid and non-assessable and have been duly and validly
authorized and issued, in compliance with all applicable state, federal and
foreign securities laws and not in violation of or subject to any preemptive
or
similar right that does or will entitle any Person (as defined below), upon
the
issuance or sale of any security, to acquire from the Company or any Subsidiary
any Relevant Security. As used herein, the term “Relevant
Security”
means
any Common Stock or other security of the Company or any Subsidiary that is
convertible into, or exercisable or exchangeable for Common Stock or equity
securities, or that holds the right to acquire any Common Stock or equity
securities of the Company or any Subsidiary or any other such Relevant Security,
except for such rights as may have been fully satisfied or waived prior to
the
effectiveness of the Registration Statement. As used herein, the term
“Person”
means
any foreign or domestic individual, corporation, trust, partnership, joint
venture, limited liability company or other entity.
(f) The
Shares have been duly and validly authorized and, when issued,
delivered
and
paid
for in
accordance with this Agreement
and as
described in the Prospectus on the Closing Date, will
be
duly and validly issued, fully paid and non-assessable, will have been issued
in
compliance with all applicable state, federal and foreign securities laws and
will not have been issued in violation of or subject to any preemptive or
similar right that does or will entitle any Person to acquire any Relevant
Security from the Company or any Subsidiary upon issuance or sale of Shares
in
the Offering. The shares of Common Stock representing the Shares conform to
the
descriptions thereof contained in the Registration Statement and the Prospectus.
Except as disclosed in the Registration Statement and the Prospectus, neither
the Company nor any Subsidiary has outstanding warrants, options to purchase,
or
any preemptive rights or other rights to subscribe for or to purchase, or any
contracts or commitments to issue or sell, any Relevant Security.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 8 of
44
(g) The
Subsidiaries are the only subsidiaries of the Company within the meaning of
Rule
405 under the Securities Act. Except for the Subsidiaries and as otherwise
disclosed in the Registration Statement and the Prospectus, 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”).
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 shares of Common Stock.
(h) Each
of
the Company and the Subsidiaries has been duly incorporated, formed or
organized, and validly exists as a corporation, partnership or limited liability
company in good standing under the laws of its jurisdiction of incorporation,
formation or organization. Each of the Company and the Subsidiaries has all
requisite power and authority to carry on its business as it is currently being
conducted and as described in the Prospectus, and to own, lease and operate
its
respective properties. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation,
partnership or limited liability company in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary, except,
in
each case, for those failures to be so qualified or in good standing which
(individually and in the aggregate) could not reasonably be expected to have
a
material adverse effect on: (i) the business, condition (financial or
otherwise), results of operations, shareholders’ equity, properties or prospects
of the Company and the Subsidiaries, taken as a whole; (ii) the long-term debt
or capital stock of the Company or any Subsidiary; or (iii) the Offering or
consummation of any of the other transactions contemplated by this Agreement,
the Registration Statement or the Prospectus (any such effect being a
“Material
Adverse Effect”).
(i) Neither
the Company nor any Subsidiary: (i) is in violation of its certificate or
articles of incorporation, by-laws, certificate of formation, limited liability
company agreement, joint venture agreement, partnership agreement or other
organizational documents, (ii) is in default under, and no event has occurred
which, with notice or lapse of time or both, would constitute a default under
or
result in the creation or imposition of any Lien upon any of its property or
assets pursuant to, any indenture, mortgage, deed of trust, loan agreement
or
other agreement or instrument to which it is a party or by which it is bound
or
to which any of its property or assets is subject or (iii) is in violation
in
any respect of any law, rule, regulation, ordinance, directive, judgment, decree
or order of any judicial, regulatory or other legal or governmental agency
or
body, foreign or domestic, except (in the case of clause (ii) above) for any
lien, charge or encumbrance disclosed in the Registration Statement and the
Prospectus.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 9 of
44
(j) The
Company, through its wholly owned Subsidiary, Fairford Holdings Limited, a
Hong
Kong registered entity (“Fairford”), owns 90% of the ownership and economic
interests in a joint venture (“Joint Venture”) established under the laws of the
Peoples Republic of China. The Joint Venture operates under the name “Ruili
Group Ruian Auto Parts Co. LTD”. The Contract of Joint Venture dated as of
January 19, 2004(“Joint Venture Agreement”) has been duly authorized and
executed by Fairford, is in full force and effect and constitutes the legal
and
binding obligation of Fairford. The Company has no knowledge of, and has not
received any oral or written notice of, any default under the Joint Venture
Agreement and no proceedings have been discussed or initiated regarding the
termination, amendment, liquidation or dissolution of the Joint Venture. The
Joint Venture was established and operates in compliance with all laws and
regulations of the Peoples Republic of China, including, without limitation,
“The
Implementation Regulations of Sino-foreign Joint Ventures Law of Peoples of
China”.
The
sole other party to the Joint Venture Agreement and the sole owner of the
remaining 10% ownership and economic interests in the Joint Venture is Ruili
Group Co, LTD.
(k) The
Company has full right, power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate each of the
transactions contemplated by this Agreement. The Company has duly and validly
authorized this Agreement and each of the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered
by
the Company and constitutes the legal, valid and binding obligation of the
Company and is enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(l) The
execution, delivery, and performance of this Agreement and consummation of
the
transactions contemplated by this Agreement do not and, to the knowledge of
the
Company, will not: (i) conflict with, require consent under or result in a
breach of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any Lien upon any property
or
assets of the Company or any Subsidiary pursuant to, any indenture, mortgage,
deed of trust, loan agreement or other agreement, instrument, franchise, license
or permit to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or their respective properties, operations or assets
may be bound or (ii) violate or conflict with any provision of the certificate
or articles of incorporation, by-laws, certificate of formation, limited
liability company agreement, partnership agreement or other organizational
documents of the Company or any Subsidiary, or (iii) violate or conflict with
any law, rule, regulation, ordinance, directive, judgment, decree or order
of
any judicial, regulatory or other legal or governmental agency or body, domestic
or foreign.
(m) Each
of
the Company and the Subsidiaries has all material 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 and the
Prospectus, and each such Consent is valid and in full force and
effect.
Neither
the
Company nor any Subsidiary has received notice of any investigation or
proceedings which results in or, if decided adversely to the Company or any
Subsidiary, could reasonably be expected to result in, the revocation of, or
imposition of a materially burdensome restriction on, any Consent. No
Consent contains a materially burdensome restriction not adequately disclosed
in
the Registration Statement and the Prospectus.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 10 of
44
(n) Each
of
the Company and the Subsidiaries is in compliance with all applicable laws,
rules, regulations, ordinances, directives, judgments, decrees and orders,
foreign and domestic. Neither the Company, nor any of its Affiliates (within
the
meaning of Rule 144 under the Securities Act) (“Affiliates”)
has
received any notice or other information from any regulatory or other legal
or
governmental agency relating to any default or potential decertification by
the
Company, or any of its Affiliates.
(o) No
Consent of, with or from any judicial, regulatory or other legal or governmental
agency or body or any third party, foreign or domestic is required for the
execution, delivery and performance of this Agreement or consummation of each
of
the transactions contemplated by this Agreement, including the issuance, sale
and delivery of the Shares to be issued, sold and delivered hereunder, except
the registration under the Securities Act of the Shares, which has become
effective, and such Consents as may be required under state securities or blue
sky laws or the by-laws and rules of The NASDAQ Stock Market, Inc., including
the NASDAQ Capital Market, where the Common Stock has been approved for listing
(“NASDAQ”),
the
National Association of Securities Dealers, Inc. (the “NASD”)
or
NASD Regulation, Inc. in connection with the purchase and distribution of the
Shares by the Underwriters, each of which has been obtained and is in full
force
and effect.
(p) Except
as
disclosed in the Registration Statement and the Prospectus, there is no
judicial, regulatory, arbitral or other legal or governmental proceeding or
other litigation or arbitration, domestic or foreign, pending to which the
Company or any Subsidiary is a party or of which any property, operations or
assets of the Company or any Subsidiary is the subject which, individually
or in
the aggregate, if determined adversely to the Company or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect. To the Company’s
knowledge, no such proceeding, litigation or arbitration is threatened or
contemplated; and the defense of all such proceedings, litigation and
arbitration against or involving the Company or any Subsidiary could not
reasonably be expected to have a Material Adverse Effect.
(q) The
financial statements, including the notes thereto, and the supporting schedules
included in the Registration Statement and the Prospectus present fairly the
financial position as of the dates indicated and the cash flows and results
of
operations for the periods specified of the Company and its consolidated
Subsidiaries. Except as otherwise stated in the Registration Statement and
the
Prospectus, said financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis throughout the periods involved. The supporting schedules included in
the
Registration Statement and the Prospectus present fairly the information
required to be stated therein. No other financial statements or supporting
schedules are required to be included or incorporated by reference in the
Registration Statement. The other financial and statistical information included
in the Registration Statement and the Prospectus present fairly the information
included therein and have been prepared on a basis consistent with that of
the
financial statements that are included in the Registration Statement and the
Prospectus and the books and records of the respective entities presented
therein.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 11 of
44
(r) There
are
no pro forma or as adjusted financial statements which are required to be
included in
the
Registration Statement and
the
Prospectus in accordance with Regulation
S-X which have not been included as so required. The pro forma and pro forma
as
adjusted financial information included in the Registration Statement and the
Prospectus has been properly compiled and prepared in accordance with the
applicable requirements of the Securities Act and the Rules and Regulations
and
include all adjustments necessary to present fairly in accordance with generally
accepted accounting principles the pro forma and as adjusted financial position
of the respective entity or entities presented therein at the respective dates
indicated and their cash flows and the results of operations for the respective
periods specified. The assumptions used in preparing the pro forma and pro
forma
as adjusted financial information included in the Registration Statement and
the
Prospectus provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described therein. The
related pro forma and pro forma as adjusted adjustments give appropriate effect
to those assumptions; and the pro forma and pro forma as adjusted financial
information reflect the proper application of those adjustments to the
corresponding historical financial statement amounts.
(s) The
statistical, industry-related and market-related data included in the
Registration Statement and the Prospectus are based on or derived from sources
which the Company reasonably and in good faith believes are reliable and
accurate, and such data agree with the sources from which they are derived.
(t) The
Company is subject to the reporting requirements of Section 13 or 15(d) of
the
Exchange Act and files reports with the Commission on the ▇▇▇▇▇ System. The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act and the outstanding shares of Common Stock are listed for quotation on
the
OTCBB and except for the agreement by the Company to have its shares of Common
stock listed fro trading on the Nasdaq National Stock Market, the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the Common
Stock from the OTCBB, nor has the Company received any notification that the
Commission or NASDAQ is contemplating terminating such registration or listing.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 12 of
44
(u) The
Company and the Subsidiaries maintain a system of internal accounting and other
controls sufficient to provide reasonable assurances that: (i) transactions
are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States generally accepted accounting
principles and to maintain accountability for assets, (iii) access to assets
is
permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) The
Company’s Board of Directors has validly appointed an audit committee whose
composition satisfies the requirements of Rule 4350(d)(2) of the Rules of the
NASD (the “NASD
Rules”)
and
the Board of Directors and/or audit committee has adopted a charter that
satisfies the requirements of Rule 4350(d)(1) of the NASD Rules. The audit
committee has reviewed the adequacy of its charter within the past twelve
months. Neither the Board of Directors nor the audit committee has been
informed, nor is any director of the Company aware, of: (i) any significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
the Company’s ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal control over financial reporting.
(w) Neither
the Company nor any of its Subsidiaries has violated: (i) the Bank Secrecy
Act,
as amended, (ii) the Money Laundering Control Act of 1986, as amended, (iii)
the
Foreign Corrupt Practices Act, or (iv) the Uniting and Strengthening of America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
(USA
PATRIOT ACT) Act of 2001, and/or the rules and regulations promulgated under
any
such law, or any successor law, except
for such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
(x) Neither
the Company nor any of its Affiliates has taken, directly or indirectly, any
action which constitutes or is designed to cause or result in, or which could
reasonably be expected to constitute, cause or result in, the stabilization
or
manipulation of the price of any security to facilitate the sale or resale
of
the Shares.
(y) Neither
the Company nor any of its Affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules and Regulations with the offer and sale
of
the Shares pursuant to the Registration Statement. Except as disclosed in the
Registration Statement, the Prospectus or in any public filings relating to
the
Company filed with the Commission, neither Company nor any of its Affiliates
has
sold or issued any Relevant Security during the six-month period preceding
the
date of the Prospectus, including but not limited to any sales pursuant to
Rule
144A or Regulation D or S under the Securities Act, other than shares of Common
Stock issued pursuant to employee benefit plans, qualified stock option plans
or
the employee compensation plans or pursuant to outstanding options, rights
or
warrants as described in the Registration Statement and the Prospectus.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 13 of
44
(z) Except
as
disclosed in the Registration Statement and the Prospectus, no holder of any
Relevant Security has any rights to require registration of any Relevant
Security as part or on account of, or otherwise in connection with, the offer
and sale of the Shares contemplated hereby, and any such rights so disclosed
have either been fully complied with by the Company or effectively waived by
the
holders thereof, and any such waivers remain in full force and effect.
(aa) The
documents, exhibits or other materials incorporated or deemed to be
incorporated by reference
in the
Prospectus, at the time they were or hereafter are filed with the Commission,
complied and will comply
in all
material respects
with the
requirements of the Securities Act, the Exchange Act and the Rules and
Regulations, and, when read together with the other information in the
Prospectus, do not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(bb) 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.
(cc) The
Company is not and, at all times up to and including consummation of the
transactions contemplated by this Agreement, and after giving effect to
application of the net proceeds of the Offering, will not be, subject to
registration as an “investment company” under the Investment Company Act of
1940, as amended, and is not and will not be an entity “controlled” by an
“investment company” within the meaning of such act.
(dd) There
are
no contracts or other documents (including, without limitation, any voting
agreement), which are required to be described in the Registration Statement
and
the Prospectus or filed as exhibits to the Registration Statement by the
Securities Act, the Exchange Act or the Rules and Regulations and which have
not
been so described, filed or incorporated by reference.
(ee) 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 and described as required.
There are no outstanding loans, advances (except normal advances for business
expenses in the ordinary course of business) or guarantees of indebtedness
by
the Company to or for the benefit of any of the officers or directors of the
Company or any of their respective family members, except as disclosed in the
Registration Statement and the Prospectus. The Company has not, in violation
of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (“Sarb-Ox”),
directly or indirectly, including through a Subsidiary (other than as permitted
under the Sarb-Ox for depositary institutions), extended or maintained credit,
arranged for the extension of credit, or renewed an extension of credit, in
the
form of a personal loan to or for any director or executive officer of the
Company.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 14 of
44
(ff) The
Company is in material compliance with the provisions of Sarb-Ox and the Rules
and Regulations promulgated thereunder and related or similar rules and
regulations promulgated by NASDAQ or any other governmental or self regulatory
entity or agency, except for such violations which, singly or in the aggregate,
would not have a Material Adverse Effect. Without limiting the generality of
the
foregoing: (i) all members of the Company’s board of directors who are required
to be “independent” (as that term is defined under applicable laws, rules and
regulations), including, without limitation, all members of the audit committee
of the Company’s board of directors, meet the qualifications of independence as
set forth under applicable laws, rules and regulations and (ii) the audit
committee of the Company’s board of directors has at least one member who is an
“audit committee financial expert” (as that term is defined under applicable
laws, rules and regulations).
(gg) Except
as
disclosed in the Registration Statement and the Prospectus, there are no
contracts, agreements or understandings between the Company and any Person
that
would give rise to a valid claim against the Company or any Underwriter for
a
brokerage commission, finder’s fee or other like payment in connection with the
transactions contemplated by this Agreement or, to the Company’s knowledge, any
arrangements, agreements, understandings, payments or issuance with respect
to
the Company or any of its officers, directors, shareholders, partners,
employees, Subsidiaries or Affiliates that may affect the Underwriters’
compensation as determined by the NASD.
(hh) The
Company and each Subsidiary owns or leases all such properties as are necessary
to the conduct of its business as presently operated and as proposed to be
operated as described in the Registration and the Prospectus. The Company and
the Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them,
in each case free and clear of all Liens except such as are described in the
Registration Statement and the Prospectus or such as do not (individually or
in
the aggregate) materially affect the business or prospects of the Company or
any
of the Subsidiaries. Any real property and buildings held under lease or
sublease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
to,
and do not interfere with, the use made and proposed to be made of such property
and buildings by the Company and the Subsidiaries. Neither the Company nor
any
Subsidiary has received any notice of any claim adverse to its ownership of
any
real or personal property or of any claim against the continued possession
of
any real property, whether owned or held under lease or sublease by the Company
or any Subsidiary.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 15 of
44
(ii) The
Company and each Subsidiary: (i) owns or possesses adequate right to use all
patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, licenses, formulae,
customer lists, and know-how and other intellectual property (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, “Intellectual
Property”)
necessary for the conduct of their respective businesses as being conducted
and
as described in the Registration Statement and Prospectus and (ii) have no
knowledge that the conduct of their respective businesses do not or will not
conflict with, and they have not received any notice of any claim of conflict
with, any such right of others. To the Company’s knowledge, all material
technical information developed by and belonging to the Company or any
Subsidiary which has not been patented (including, without limitation, the
Internet-based, proprietary referral system referred to in the Prospectus)
has
been kept confidential so as, among other things, all such information may
be
deemed proprietary to the Company. Except as set forth in the Registration
Statement, the Prospectus or the Company Filings (as defined below), neither
the
Company nor any Subsidiary has granted or assigned to any other Person any
right
to sell the current products and services of the Company and its Subsidiaries
or
those products and services described in the Registration Statement and
Prospectus. To the Company’s best knowledge, there is no infringement by third
parties of any such Intellectual Property; there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the Company’s or any Subsidiary’s rights in or to any such
Intellectual Property, and the Company is unaware of any facts which would
form
a reasonable basis for any such claim; and there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others that
the Company or any Subsidiary infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights of others, and
the Company is unaware of any other fact which would form a reasonable basis
for
any such claim. As used herein, the term “Company
Filings”
means
all of the Company’s filings with the Commission prior to the date hereof via
▇▇▇▇▇.
(jj) Each
of
the Company and the Subsidiaries has accurately prepared and timely filed all
federal, state, foreign 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 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.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 16 of
44
(kk) No
labor
disturbance by the employees of the Company or any Subsidiary currently exists
or, to the Company’s knowledge, is likely to occur.
(ll) The
Company and each Subsidiary have at all times operated their respective
businesses in material compliance with all Environmental Laws, and no material
expenditures are or will be required in order to comply therewith. Neither
the
Company nor any Subsidiary has received any notice or communication that relates
to or alleges any actual or potential violation or failure to comply with any
Environmental Laws that will result in a Material Adverse Effect. As used
herein, the term “Environmental
Laws”
means
all applicable laws and regulations, including any licensing, permits or
reporting requirements, and any action by a Federal state or local government
entity pertaining to the protection of the environment, protection of public
health, protection of worker health and safety, or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et
seq., the Comprehensive Environmental Response, Compensation and Liability
Act
of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33
U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et
seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq. or similar
laws and regulations, to the extent applicable, under the Peoples Republic
of
China (“PRC”)
(mm) Except
as
set forth in the Registration Statement, the Prospectus or the Company Filings,
neither the Company nor any Subsidiary is a party to an “employee benefit plan,”
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974 (“ERISA”)
which:
(i) is subject to any provision of ERISA and (ii) is or was at any time
maintained, administered or contributed to by the Company or any Subsidiary
and
covers any employee or former employee of the Company or any Subsidiary or
any
ERISA Affiliate (as defined hereafter). These plans are referred to collectively
herein as the “Employee
Plans.”
For
purposes of this Section, “ERISA
Affiliate”
of
any
person or entity means any other person or entity which, together with that
person or entity, could be treated as a single employer under Section 414(m)
of
the Internal Revenue Code of 1986, as amended (the “Code”),
or is
an “affiliate,” whether or not incorporated, as defined in Section 407(d)(7) of
ERISA, of the person or entity.
(nn) The
Registration Statement and the Prospectus identify each employment, severance
or
other similar arrangement or policy and each material plan or arrangement
providing for insurance coverage (including any self-insured arrangements),
workers’ compensation, disability benefits, severance benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation, or post-retirement insurance,
compensation or benefits which: (i) is not an Employee Plan, (ii) is entered
into, maintained or contributed to, as the case may be, by the Company or any
Subsidiary or any of their respective ERISA Affiliates, and (iii) covers any
employee or former employee of the Company or any Subsidiary or any of their
respective ERISA Affiliates. These contracts, plans and arrangements are
referred to collectively in this Agreement as the “Benefit
Arrangements.”
Each
Benefit Arrangement has been maintained in substantial compliance with its
terms
and with requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to that Benefit Arrangement.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 17 of
44
(oo) Except
as
set forth in the Registration Statement, the Prospectus or the Company Filings,
there is no liability in respect of post-retirement health and medical benefits
for retired employees of the Company or any Subsidiary or any of their
respective ERISA Affiliates other than medical benefits required to be continued
under applicable law, determined using assumptions that are reasonable in the
aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 40 1(h) of the Code). With
respect to any of the Company’s or any Subsidiaries’ Employee Plans which are
“group health plans” under Section 4980B of the Code and Section 607(1) of
ERISA, there has been material compliance with all requirements imposed there
under such that the Company or any Subsidiary or their respective ERISA
Affiliates have no (and will not incur any) loss, assessment, tax penalty,
or
other sanction with respect to any such plan.
(pp) Except:
(i) as set forth in the Registration Statement, the Prospectus or the Company
Filings or (ii) for the Company’s Controller and Chief Accounting Officer as of
the Execution Date, neither the Company nor any Subsidiary is a party to or
subject to any employment contract or arrangement providing for annual future
compensation, or the opportunity to earn annual future compensation (whether
through fixed salary, bonus, commission, options or otherwise) of more than
$60,000 to any officer, consultant, director or employee.
(qq) The
execution of this Agreement and consummation of the Offering does not constitute
a triggering event under any Employee Plan or any other employment contract,
whether or not legally enforceable, which (either alone or upon the occurrence
of any additional or subsequent event) will or may result in any payment (of
severance pay or otherwise), acceleration, increase in vesting, or increase
in
benefits to any current or former participant, employee or director of the
Company or any Subsidiary other than an event that is not material to the
financial condition or business of the Company or any Subsidiary, either
individually or taken as a whole.
(rr) No
“prohibited transaction” (as defined in either Section 406 of the ERISA or
Section 4975 of Code), “accumulated funding deficiency” (as defined in Section
302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company or any Subsidiary would have any liability;
each employee benefit plan of the Company or any Subsidiary is in compliance
in
all material respects with applicable law, including (without limitation) ERISA
and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from any “pension plan”; and each employee benefit plan of the
Company or any Subsidiary that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or
by
failure to act, which could cause the loss of such qualification.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 18 of
44
(ss) Each
of
the Company and its Subsidiaries are in compliance in all material respects
with
all applicable laws administered by and regulations of the Board of Governors
of
the Federal Reserve System, the Office of the Comptroller of the Currency,
the
Federal Deposit Insurance Corporation, the U.S. Small Business Administration
(the “SBA”)
or
similar laws and regulations under the PRC and any state bank regulatory
authority with jurisdiction over the Company or the Subsidiaries, as the case
may be (collectively, the “Bank
Regulatory Authorities”),
the
failure to comply with which would have a Material Adverse Effect. Neither
the
Company nor the Subsidiary is a party to any written agreement or memorandum
of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to an order or directive by, or is a recipient of any
extraordinary supervisory letter from any Bank Regulatory Authority,
specifically directed at the Company and the Subsidiary, which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit policies or its management, nor have any of them been
advised in writing by any Bank Regulatory Authority that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission,
specifically directed at the Company and the Subsidiary.
(tt) Each
of
the Company and the Subsidiaries, are in compliance with the requirements of
the
insurance laws and regulations of their respective states of incorporation
or
organization and the insurance laws and regulations of other jurisdictions
which
are applicable to the Company or such Subsidiaries, and each have filed all
notices, reports, documents or other information required to be filed
thereunder, except where the failure to comply with such requirement could
not
reasonably be expected to have a Material Adverse Effect.
(uu) Neither
the Company, any Subsidiary nor, to the Company’s knowledge, any of their
respective employees or agents has at any time during the last five (5) years:
(i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made
any
payment to any federal or state governmental officer or official, or other
Person charged with similar public or quasi-public duties, other than payments
that are not prohibited by the laws of the United States of any jurisdiction
thereof.
(vv) The
Company has not offered, or caused the Underwriters to offer, the Firm Shares
to
any Person or entity with the intention of unlawfully influencing: (i) a
customer or supplier of the Company or any Subsidiary to alter the customer’s or
supplier’s level or type of business with the Company or any Subsidiary or (ii)
a journalist or publication to write or publish favorable information about
the
Company, any Subsidiary or its products or services.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 19 of
44
(ww) The
Company is in compliance with all applicable Chinese 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 Country of China), 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, the Company does not operate
within the jurisdiction of United States or any state or territory thereof
in
such a manner so as to subject the Company or its operations or businesses
to
registration as a foreign company doing business in any state within the United
States or to any of the following laws in any material respect: (i) the Bank
Secrecy Act, as amended, (ii) the Uniting and Strengthening of America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of
2001, as amended, (iii) the Foreign Corrupt Practices Act of 1977, as amended,
(iv) the Currency and Foreign Transactions Reporting Act of 1970, as amended,
(v) the Employee Retirement Income Security Act of 1974, as amended, (vi) the
rules and regulations promulgated under any such law, or any successor law,
or
any judgment, decree or order of any applicable administrative or judicial
body
relating to such law and (vii) any corresponding law, rule, regulation,
ordinance, judgment, decree or order of any state or territory of the United
States or any administrative or judicial body thereof.
(xx) The
operations of the Company are and have been conducted at all times in compliance
with applicable financial record keeping and reporting requirements and money
laundering statutes of the PRC and, to the Company’s knowledge, all other
jurisdictions to which the Company is subject, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any applicable governmental agency (collectively,
the “Money
Laundering Laws”)
and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the best knowledge of the Company,
threatened.
(yy) 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.
(zz) As
used
in this Agreement, references to matters being “material”
with
respect to the Company or its Subsidiaries shall mean a material event, change,
condition, status or effect related to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
prospects, operations or results of operations of the Company or the applicable
Subsidiaries, either individually or taken as a whole, as the context
requires.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 20 of
44
(aaa) As
used
in this Agreement, the term “knowledge
of the Company”
(or
similar language) shall mean the knowledge of the officers and directors of
the
Company and the applicable Subsidiaries who are named in the Prospectus, with
the assumption that such officers and directors shall have made reasonable
and
diligent inquiry of the matters presented (with reference to what is customary
and prudent for the applicable individuals in connection with the discharge
by
the applicable individuals of their duties as officers, directors or managers
of
the Company or the applicable Subsidiaries).
Any
certificate signed by or on behalf of the Company and delivered to the
Underwriters or to Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP (“Underwriters’
Counsel”)
shall
be deemed to be a representation and warranty by the Company to each Underwriter
listed on Schedule
A
hereto
as to the matters covered thereby.
2.2 Free
Writing Prospectus.
2.2.1 Neither:
(i) any Issuer-Represented General Free Writing Prospectus(es) issued at or
prior to the Time of Sale and the Statutory Prospectus, all considered together
(collectively, the “General
Disclosure Package”),
nor
(ii) any individual Issuer-Represented Limited-Use Free Writing Prospectus(es)
(as defined below), when considered together with the General Disclosure
Package, includes or included as of the Time of Sale any untrue statement of
a
material fact or omits or omitted as of the Time of Sale to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding sentence
does not apply to statements in or omissions from any Statutory Prospectus
included in the Registration Statement or any Issuer-Represented Free Writing
Prospectus based upon and in conformity with written information furnished
to
the Company by the Representative specifically for use therein.
2.2.2 Each
Issuer-Represented Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the
Securities or until any earlier date that the Company notified or notifies
the
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, any Statutory Prospectus
or
the Prospectus. If at any time following issuance of an Issuer-Represented
Free
Writing Prospectus there occurred or occurs an event or development as a result
of which such Issuer-Represented Free Writing Prospectus conflicted or would
conflict with the information contained in the Registration Statement, any
Statutory Prospectus or the Prospectus relating to the Securities or included
or
would include an untrue statement of a material fact or omitted or would omit
to
state a material fact necessary in order to make the statements therein, in
the
light of the circumstances prevailing at that subsequent time, not misleading,
the Company has notified or will notify promptly the Representative so that
any
use of such Issuer-Represented Free Writing Prospectus may cease until it is
promptly amended or supplemented by the Company, at its own expense, to
eliminate or correct such conflict, untrue statement or omission. The foregoing
two sentences do not apply to statements in or omissions from any
Issuer-Represented Free Writing Prospectus based upon and in conformity with
written information furnished to the Company by the Representative specifically
for use therein.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 21 of
44
2.2.3 The
Company has not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the Public
Securities other than any Preliminary Prospectus, the General Disclosure Package
or the Prospectus or other materials permitted by the Act to be distributed
by
the Company. Unless the Company obtains the prior consent of the
Representatives, and except as set forth on Exhibit
D
attached
hereto, the Company has not made and will not make any offer relating to the
Securities that would constitute an “issuer free writing prospectus,” as defined
in Rule 433 under the Act, or that would otherwise constitute a “free writing
prospectus,” as defined in Rule 405 under the Act, required to be filed with the
Commission. The Company has complied and will comply with the requirements
of
Rules 164 and 433 under the Act applicable to any Issuer-Represented Free
Writing Prospectus as of its issue date and at all subsequent times through
the
completion of the public offer and sale of the Securities, including timely
filing with the Commission where required, legending and record keeping. The
Company has satisfied and will satisfy the conditions in Rule 433 under the
Act
to avoid a requirement to file with the Commission any electronic road
show.
2.2.4 Free
Writing Prospectus.
Each
Underwriter agrees that, unless it obtains the prior written consent of the
Company, it will not make any offer relating to the Shares that would constitute
an Issuer-Represented Free Writing Prospectus (as defined in Section 2.2 hereof)
or that would otherwise (without taking into account any approval,
authorization, use or reference thereto by the Company) constitute a “free
writing prospectus” required to be filed by the Company with the Commission (as
defined herein) or retained by the Company under Rule 433 of the Act (as defined
herein); provided that the prior written consent of the Company hereto shall
be
deemed to have been given in respect of any Issuer-Represented General Free
Writing Prospectuses (as defined in Section 2.2.5 hereof) referenced on
Exhibit
D
attached
hereto
2.2.5 Definitions.
As used
in this Agreement, the terms set forth below shall have the following meanings:
(i) “Time
of Sale”
means
[____:00 [a.m.][p.m.]] (Eastern time) on the date of this
Agreement.
(ii) “Statutory
Prospectus”
as
of
any time means the prospectus that is included in the Registration Statement
immediately prior to that time. For purposes of this definition, information
contained in a form of prospectus that is deemed retroactively to be a part
of
the Registration Statement pursuant to Rule 430A shall be considered to be
included in the Statutory Prospectus as of the actual time that form of
prospectus is filed with the Commission pursuant to Rule 424(b) under the
Act.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 22 of
44
(iii) “Issuer-Represented
Free Writing Prospectus”
means
any “issuer free writing prospectus,” as defined in Rule 433 under the Act,
relating to the Securities that (A) is required to be filed with the Commission
by the Company, or (B) is exempt from filing pursuant to Rule 433(d)(5)(i)
under
the Act because it contains a description of the Securities or of the offering
that does not reflect the final terms or pursuant to Rule 433(d)(8)(ii) because
it is a “bona fide electronic road show,” as defined in Rule 433 of the
Regulations which is made available without restriction, in each case in the
form filed or required to be filed with the Commission or, if not required
to be
filed, in the form retained in the Company’s records pursuant to Rule 433(g)
under the Act.
(iv) “Issuer-Represented
General Free Writing Prospectus”
means
any Issuer-Represented Free Writing Prospectus that is intended for general
distribution to prospective investors, as evidenced by its being specified
on
Exhibit
D
attached
hereto.
(v) “Issuer-Represented
Limited-Use Free Writing Prospectus”
means
any Issuer-Represented Free Writing Prospectus that is not an Issuer-Represented
General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free
Writing Prospectus also includes any “bona fide electronic road show,” as
defined in Rule 433 of the Regulations, that is made available without
restriction pursuant to Rule 433(d)(8)(ii), even though not required to be
filed
with the Commission.
3. Purchase,
Sale and Delivery of the Shares.
(a) On
the
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter and each Underwriter, severally and not
jointly, agrees to purchase from the Company, at a purchase price per share
of
$____, the number of Firm Shares set forth opposite their respective names
on
Schedule
A
hereto
together with any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) Payment
of the purchase price for, and delivery of certificates representing, the Firm
Shares shall be made at the offices of the Underwriters’ Counsel, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed
upon
by the Representatives and the Company, at 10:00 A.M., New York City time,
on
the third (3rd) or, as permitted under Rule 15c6-1 under the Exchange Act,
fourth (4th) business day (unless postponed in accordance with the provisions
of
Section 10 hereof) following the date of the effectiveness of the Registration
Statement, or such other time not later than ten (10) business days after such
date as shall be agreed upon by the Representatives and the Company as permitted
under Rule 15c6-1 under the Exchange Act (such time and date of payment and
delivery being herein called the “Closing
Date”).
The
closing of the payment of the purchase price for, and delivery of certificates
representing, the Firm Shares is referred to herein as the “Closing.”
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 23 of
44
(c) Payment
of the purchase price for the Firm Shares shall be made by wire transfer in
immediately available funds to or as directed by the Company upon delivery
of
certificates for the Firm Shares to the Representatives through the facilities
of The Depository Trust Company for the respective accounts of the several
Underwriters. Certificates for the Firm Shares shall be registered in such
name
or names and shall be in such denominations as the Representatives may request
at least two (2) business days before the Closing Date. The Company will permit
the Representatives to examine and package such certificates for delivery at
least one (1) full business day prior to the Closing Date.
4. Offering.
Upon
authorization of the release of the Firm Shares by the Representatives, the
Underwriters propose to offer the Shares for sale to the public upon the terms
and conditions set forth in the Prospectus.
5. Covenants
of the Company.
The
Company acknowledges, covenants and agrees with the Underwriters
that:
(a) The
Registration Statement and any amendments thereto have been declared effective,
and if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus (properly completed
if
Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time
period and will provide evidence satisfactory to the Representatives of such
timely filing.
The
Company will notify the Representatives immediately (and, if requested by the
Representatives, will confirm such notice in writing): (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any request
by
the Commission for any amendment of or supplement to the Registration Statement
or the Prospectus or for any additional information, (iii) of the Company’s
intention to file or prepare any supplement or amendment to the Registration
Statement or the Prospectus, (iv) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, including but not limited to Rule 462(b) under
the
Securities Act, (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 the initiation, or the threatening, of any proceedings
therefor, it being understood that the Company shall make every effort to avoid
the issuance of any such stop order, (vi) of the receipt of any comments from
the Commission, and (vii) of the receipt by the Company of any notification
with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time,
the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Prospectus (including the prospectus
required to be filed pursuant to Rule 424(b)) that differs from the prospectus
on file at the time of the effectiveness of the Registration Statement or file
any document under the Exchange Act if such document would be deemed to be
incorporated by reference into the Prospectus to which the Representatives
shall
object in writing after being timely furnished in advance a copy thereof. The
Company will provide the Representatives with copies of all such amendments,
filings and other documents a sufficient time prior to any filing or other
publication thereof to permit the Representatives a reasonable opportunity
to
review and comment thereon.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 24 of
44
(b) The
Company shall comply with the Securities Act, the Exchange Act and all
applicable Rules and Regulations to permit completion of the distribution as
contemplated in this Agreement, the Registration Statement and the Prospectus.
If, at any time when a prospectus relating to the Shares is required to be
delivered under the Securities Act, the Exchange Act and all applicable Rules
and Regulations in connection with the sales of Shares, any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would, in the judgment of the Underwriters or the Company, include an untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in the light of
the
circumstances existing at the time of delivery to the purchaser, not misleading,
or if, to comply with the Securities Act, the Exchange Act or the Rules and
Regulations, it shall be necessary at any time to amend or supplement the
Prospectus or Registration Statement, or to file any document which is an
exhibit to the Registration Statement or the Prospectus or in any amendment
thereof or supplement thereto, the Company will notify the Representatives
promptly and prepare and file with the Commission, subject to Section 5(a)
hereof, an appropriate amendment or supplement (in form and substance
satisfactory to the Representatives) which will correct such statement or
omission or which will effect such compliance and will use its best efforts
to
have any amendment to the Registration Statement declared effective as soon
as
possible.
(c) The
Company will promptly deliver to the Underwriters and Underwriters’ Counsel a
signed copy of the Registration Statement, as initially filed and all amendments
thereto, including all consents and exhibits filed therewith, and will maintain
in the Company’s files manually signed copies of such documents for at least
five (5) years after the date of filing thereof. The Company will promptly
deliver to each of the Underwriters such number of copies of any Preliminary
Prospectus, the Prospectus, the Registration Statement, and all amendments
of
and supplements to such documents, if any, and all documents which are exhibits
to the Registration Statement and Prospectus or any amendment thereof or
supplement thereto, as the Underwriters may reasonably request. Prior to 10:00
A.M., New York time, on the business day next succeeding the date of this
Agreement and from time to time thereafter, the Company will furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as the Underwriters may reasonably request.
(d) The
Company consents to the use and delivery of the Preliminary Prospectus by the
Underwriters in accordance with Rule 430 and Section 5(b) of the Securities
Act.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 25 of
44
(e) If
the
Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule
111 of the Act by the earlier of: (i) 10:00 p.m., New York City time, on the
date of this Agreement, and (ii) the time that confirmations are given or sent,
as specified by Rule 462(b)(2).
(f) The
Company will use its best efforts, in cooperation with the Representatives,
at
or prior to the time of effectiveness of the Registration Statement, to qualify
the Shares for offering and sale under the securities laws relating to the
offering or sale of the Shares of such jurisdictions, domestic or foreign,
as
the Representatives may designate and to maintain such qualification in effect
for so long as required for the distribution thereof; except that in no event
shall the Company be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.
(g) The
Company will make generally available to its security holders and to the
Underwriters as soon as practicable, but in any event not later than twelve
(12)
months after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Securities Act), an audited earnings statement of the
Company and the Subsidiaries complying with Section 11(a) of the Securities
Act
and the Rules and Regulations (including, at the option of the Company, Rule
158).
(h) Except
with respect to (i) securities of the Company which may be issued in connection
with an acquisition of another entity (or the assets thereof) (ii) the issuance
of securities of the Company intended to provide the Company with proceeds
to
acquire anther entity (or the assets thereof), or (iii) the issuance of
securities at Fair Market Value (as defined below) under the Company’s stock
option plans in effect from time to time, during the twelve (12) months
following the Closing Date, the
Company or any successor to the Company
shall
not undertake
any public or private offerings of any equity securities of the Company
(including equity-linked securities) without
the written consent of the Representatives, which consent shall not be
unreasonably withheld.
(i) For
a
period of 36 months from the Closing Date, (i) neither the Company nor Fairford
Holdings, Inc. (“Fairford”) shall (A) sell, transfer or assign any interest in
Ruili Group Ruian Auto Parts Co., LTd. (“joint Venture”) or (B) allow the Joint
Venture or Fairford to dilute the ownership interest (economic and legal) of
the
Company in the Joint Venture and (ii) the Company shall not sell, transfer
or
assign any ownership interest (legal or economic) in Fairford. .
(j) Except
with respect to (i) securities of the Company which may be issued in connection
with an acquisition of another entity (or the assets thereof) (ii) the issuance
of securities of the Company intended to provide the Company with proceeds
to
acquire anther entity (or the assets thereof),during
the
twelve (12) months following the Closing Date, without the consent of the
Representatives which shall not be unreasonably withheld: (i) the Company will
not file any registration statement relating to the offer or sale of any of
the
Company’s securities, , except Form S-8 filed with the Commission in connection
with the Company’s Stock Option Plan.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 26 of
44
(k) During
the nine (9) month period following the Closing Date (the “Lock-Up
Period”),
without the consent of the Representatives, which consent shall not be
unreasonably withheld, neither the Company, any holder in excess of 5.0% of
the
Common Stock of the Company (“Affiliated
Shareholders”)
nor
any of the individuals listed on Schedule
C
hereto
(such individuals, collectively with the Affiliated Shareholders, the
“Lock-Up
Parties”)
will
sell or otherwise dispose of any securities of the Company, whether publicly
or
in a private placement; provided, however, that the holders of options to
purchase Common Stock shall be entitled to exercise their outstanding options,
subject to a written agreement by the recipient of the lock-up terms contained
in this Section 5(k).
The
Company will deliver to the Representatives the agreements of Lock-Up Parties
to
the foregoing effect prior to the Closing Date, which agreements shall be
substantially in the form attached hereto as Annex
II.
For
purposes of this Section 5, the term “Fair
Market Value”
shall
mean the last sale price of the Common Stock, during normal operating hours,
as
reported on NASDAQ.
(l) During
the twelve (12) month period following the Closing Date, without the consent
of
the Representatives, which consent shall not be unreasonably withheld, no
holders of registration rights relating to securities of the Company will
exercise any such registration rights. The Company will deliver to the
Representatives the agreements of such holders of registration rights to the
foregoing effect prior to the Closing Date in the form reasonably agreeable
to
the Representatives.
(m) For
a
period of one (1) year from the effective date of the Registration Statement,
the Company, at its expense, shall provide the Representatives on a weekly
basis
with a copy of the Company’s weekly transfer sheets from the previous week and
securities positions listings.
(n) For
a
period of two (2) years from the effective date of the Registration Statement,
the Company, at its expense, shall obtain
and keep current a listing in the Standard & Poor’s Corporation Records
Services or the ▇▇▇▇▇’▇ Industrial Manual; provided that ▇▇▇▇▇’▇ OTC Industrial
Manual is not sufficient for these purposes.
(o) During
the period of three (3) years from the effective date of the Registration
Statement, the Company will furnish to the Underwriters copies of all reports
or
other communications (financial or other) furnished to security holders or
from
time to time published or publicly disseminated by the Company, and will deliver
to the Underwriters: (i) as soon as they are available, copies of any reports,
financial statements and proxy or information statements furnished to or filed
with the Commission or any national securities exchange on which any class
of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as the
Representatives may from time to time reasonably request (such financial
information to be on a consolidated basis to the extent the accounts of the
Company and the Subsidiaries are consolidated in reports furnished to its
security holders generally or to the Commission).
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 27 of
44
(p) The
Company will not issue press releases or engage in any other publicity, without
the Representatives’ prior written consent, for a period ending at 5:00 p.m.
Eastern time on the first business day following the thirtieth (30th) day
following the Closing Date, other than normal and customary releases issued
in
the ordinary course of the Company’s business.
(q) Prior
to
the consummation of the Offering, the Company will engage or continue to engage
(for no less than two (2) years from the date of the Closing Date) a financial
public relations firm mutually acceptable to the Company and the
Representatives. The Company further agrees to consult with the Representatives
as is customary within the securities industry prior to distribution to third
parties of any financial information, news releases, and/or other publicity
regarding the Company, its business, or any terms of the proposed Offering,
it
being agreed that the Company shall give the Representatives no less than twelve
(12) hours prior notice of any such distribution and a reasonable opportunity
during or prior to such period to review the contents of the proposed
distribution.
(r) The
Company has or will retain Continental Stock Transfer & Trust Company as
transfer agent for the Shares and shall continue to retain such transfer agent
for a period of two (2) years following the Closing Date.
(s) The
Company will apply the net proceeds from the sale of the Shares as set forth
under the caption “Use of Proceeds” in the Prospectus. Without
the written consent of the Representatives, no proceeds of the Offering will
be
used to pay outstanding loans from officers, directors or shareholders or to
pay
any accrued salaries or bonuses to any employees or former
employees.
(t) The
Company will use its best efforts to effect and maintain the listing of the
Shares on Nasdaq Capital Market for at least three (3) years after the Closing
Date.
(u) The
Company, during the period when the Prospectus is required to be delivered
under
the Securities Act or the Exchange Act, will file all documents required to
be
filed with the Commission pursuant to the Securities Act, the Exchange Act
and
the Rules and Regulations within the time periods required thereby.
(v) The
Company will use its best efforts to do and perform all things required to
be
done or performed under this Agreement by the Company prior to the Closing
Date,
and to satisfy all conditions precedent to the delivery of the Firm Shares.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 28 of
44
(w) The
Company will not take, and will cause its Affiliates not to take, directly
or
indirectly, any action which constitutes or is designed to cause or result
in,
or which could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Shares.
(x) The
Company shall cause to be prepared and delivered to the Representatives, at
its
expense, within one (1) business day from the effective date of this Agreement,
an Electronic Prospectus
to be used by the Underwriters in connection with the Offering. As used herein,
the term “Electronic
Prospectus”
means
a
form of prospectus, and any amendment or supplement thereto, that meets each
of
the following conditions: (i) it shall be encoded in an electronic format,
satisfactory to the Representatives, that may be transmitted electronically
by
the other Underwriters to offerees and purchasers of the Shares for at least
the
period during which a Prospectus relating to the Shares is required to be
delivered under the Securities Act; (ii) it shall disclose the same information
as the paper prospectus and prospectus filed pursuant to ▇▇▇▇▇, except to the
extent that graphic and image material cannot be disseminated electronically,
in
which case such graphic and image material shall be replaced in the electronic
prospectus with a fair and accurate narrative description or tabular
representation of such material, as appropriate; and (iii) it shall be in or
convertible into a paper format or an electronic format, satisfactory to the
Representatives, that will allow recipients thereof to store and have
continuously ready access to the prospectus at any future time, without charge
to such recipients (other than any fee charged for subscription to the Internet
as a whole and for on-line time). The Company hereby confirms that it has
included or will include in the Prospectus filed pursuant to ▇▇▇▇▇ or otherwise
with the Commission and in the Registration Statement at the time it was
declared effective an undertaking that, upon receipt
of a request by an investor or his or her representative within the period
when
a prospectus relating to the Shares is required to be delivered under the
Securities Act, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus.
(y) The
Company agrees that it will, upon completion of the Offering, appoint a designee
of the Representatives (“Designee”)
to its
Board of Directors to serve as a director until the next annual meeting of
stockholders of the Company (the “Next Annual Meeting”). The Company shall
nominate the Designee for election at the Next Annual Meeting and shall use
its
best efforts (which shall include, but not be limited to, the solicitation
of
proxies, if necessary) to have the Designee elected to the Company’s Board of
Directors for a period of two (2) years following the completion of the
Offering. Such Designee shall be entitled to receive all compensation (including
options) and expense reimbursement as provided to the other members of the
Board
of Directors from time to time. The Company shall indemnify and hold such
Designee harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of such Designee at any such meeting described herein, and, if the Company
maintains a liability insurance policy affording coverage for the acts of its
officers and directors, it shall include such Designee as an insured under
such
policy.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 29 of
44
(z) The
Company shall not take any action that would result in the Underwriters or
the
Company being required to file with the Commission pursuant to Rule 433(d)
under
the Act a Free Writing Prospectus prepared by or on behalf of the Underwriters
that the Underwriters otherwise would not have been required to
file.
(aa) The
Company shall have filed with the Commission all Issuer-Represented Free Writing
Prospectuses or other information required to be filed by the Company under
the
Act and the Regulations.
(bb) For
a
period of 5 years from the Closing Date the Company agrees to hold all special
and annual meetings of its shareholders within the United States.
6. Consideration;
Payment of Expenses.
(a) In
consideration of the services to be provided for hereunder, the Company shall
pay to the Underwriters or their respective designees their pro rata portion
(based on the Shares purchased) of the following compensation:
(i) An
underwriting discount of ___ percent (___%); and
(ii) a
non-accountable expense allowance equal to ___ percent (__%) of the gross
proceeds of the Offering. The Company has heretofore paid a $75,000 advance
to
the Representatives, which shall be applied against the non-accountable expense
allowance.
(b) The
Representatives reserve the right to reduce any item of compensation or adjust
the terms thereof as specified herein in the event that a determination shall
be
made by the NASD to the effect that the Underwriters’ aggregate compensation is
in excess of NASD rules or that the terms thereof require
adjustment.
(c) Whether
or not the transactions contemplated by this Agreement, the Registration
Statement and the Prospectus are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of its obligations hereunder, including the following:
(i) all
expenses in connection with the preparation, printing, “edgarization” and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus
and
any and all amendments and supplements thereto and the mailing and delivering
of
copies thereof to the Underwriters and dealers;
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
30 of
44
(ii) the
fees,
disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Shares under the Securities Act and
the
Offering;
(iii) the
cost
of producing this Agreement and any agreement among Underwriters, blue sky
survey, closing documents and other instruments, agreements or documents
(including any compilations thereof) in connection with the Offering and the
cost of five (5) bound volumes of such documents for the
Representatives;
(iv) all
expenses in connection with the qualification of the Shares for offering and
sale under state or foreign securities or blue sky laws, including the fees
and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with any blue sky survey undertaken by such
counsel;
(v) all
fees
and expenses in connection with listing the Shares on the Nasdaq National Stock
Market;
(vi) all
travel expenses of the Company’s officers and employees and any other expense of
the Company incurred in connection with attending or hosting meetings with
prospective purchasers of the Shares (“Road
Show Expenses”);
(vii) any
stock
transfer taxes incurred in connection with this Agreement or the
Offering
(viii) the
cost
of preparing stock certificates representing the Shares;
(ix) the
cost
and charges of any transfer agent or registrar for the Shares;
and
(x) all
other
costs and expenses incident to the performance of the Company obligations
hereunder which are not otherwise specifically provided for in this Section
6.
(d) In
addition to the costs and expenses set forth in Section 6(c), the Company will
be responsible for: (i) the
cost
of two (2) “tombstone” advertisements
to be
placed in appropriate daily or weekly periodicals of
the
Representatives’ choice (i.e., The Wall Street Journal and The New York Times);
(ii) the cost of five (5) bound volumes of the Offering documents and eight
(8)
Offering commemorative lucite (or other reasonable form) memorabilia, both
to be
supplied to the Representatives.
(e) The
Company shall issue a payment of $15,000 to Underwriters’
Counsel in consideration and upon commencement of “Blue Sky” services
rendered
if the
Offering is commenced on the NASDAQ Capital Market, plus an additional $20,000
to such counsel at Closing; provided, however,
in the
event that the Offering
is commenced on the NASDAQ National Market, the Company shall make a payment
of
only $5,000 to Underwriters’ Counsel at Closing for Blue Sky services.
The
Company shall also
pay,
in advance upon request, any state registration, qualification and filing fees,
NASD filing fees incurred by the Representatives and accountable out-of-pocket
disbursements for mailing expenses actually incurred in connection with such
registration, qualification or filing.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
31 of
44
(f) It
is
understood, however, that except as provided in this Section, and Sections
7, 8
and 11 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel. Notwithstanding anything to the contrary
in
this Section 6, in the event that this Agreement is terminated pursuant to
Section 6 or 12(b) hereof, or subsequent to a Material Adverse Change, the
Company will pay all out-of-pocket expenses of the Underwriters (including
but
not limited to fees and disbursements of counsel to the Underwriters) incurred
in connection herewith which shall be limited to expenses which are actually
incurred as allowed under NASD Rule 2710.
7. Conditions
of Underwriters’ Obligations.
The
obligations of the Underwriters to purchase and pay for the Firm Shares as
provided herein shall be subject to: (i) the accuracy of the representations
and
warranties of the Company herein contained, as of the date hereof and as of
the
Closing Date (ii) the absence from any certificates, opinions, written
statements or letters furnished to the Representatives or to Underwriters’
Counsel pursuant to this Section 7 of any misstatement or omission (iii) the
performance by the Company of its obligations hereunder, and (iv) each of the
following additional conditions. For purposes of this Section 7, the terms
“Closing Date” and “Closing” shall refer to the Closing Date for the Firm
Shares, and each of the foregoing and following conditions must be satisfied
as
of each Closing.
(a) The
Registration Statement shall have become effective and all necessary regulatory
or listing approvals shall have been received not later than 5:30 P.M., New
York
time, on the date of this Agreement, or at such later time and date as shall
have been consented to in writing by the Representatives. If the Company shall
have elected to rely upon Rule 430A under the Securities Act, the Prospectus
shall have been filed with the Commission in a timely fashion in accordance
with
the terms hereof and a form of the Prospectus containing information relating
to
the description of the Shares and the method of distribution and similar matters
shall have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period; and, at or prior to the Closing Date or the actual
time
of the Closing, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and
no
proceedings therefor shall have been initiated or threatened by the Commission.
(b) The
Representatives shall have received the favorable written opinion of ▇▇▇▇ &
▇▇▇▇▇, legal counsel for the Company, dated as of the Closing Date addressed
to
the Underwriters in the form attached hereto as Annex
I.
and the
favorable written opinion of ______________, legal counsel for the Company
with
respect to the laws of the People’s Republic of China dated as of the Closing
Date addressed to the Underwriters in the form attached hereto as Annex
III
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
32 of
44
(c) All
proceedings taken in connection with the sale of the Firm Shares herein
contemplated shall be satisfactory in form and substance to the Representatives
and to Underwriters’ Counsel.
(d) The
Representatives shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of the Closing Date to
the
effect that: (i) the condition set forth in subsection (a) of this Section
7 has
been satisfied, (ii) as of the date hereof and as of the applicable Closing
Date, the representations and warranties of the Company set forth in Sections
1
and 2 hereof are accurate, (iii) as of the applicable Closing Date, all
agreements, conditions and obligations of the Company to be performed or
complied with hereunder on or prior thereto have been duly performed or complied
with, (iv) the Company and the Subsidiaries have not sustained any material
loss
or interference with their respective businesses, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding,
(v) no stop order suspending the effectiveness of the Registration Statement
or
any post-effective amendment thereof has been issued and no proceedings therefor
have been initiated or threatened by the Commission, (vi) there are no pro
forma
or as adjusted financial statements that are required to be included or
incorporated by reference in the Registration Statement and the Prospectus
pursuant to the Rules and Regulations which are not so included or incorporated
by reference and (vii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus there
has
not been any material adverse change or any development involving a prospective
material adverse change, whether or not arising from transactions in the
ordinary course of business, in or affecting (x) the business, condition
(financial or otherwise), results of operations, shareholders’ equity,
properties or prospects of the Company and the Subsidiaries, taken as a whole;
(y) the long-term debt or capital stock of the Company or any of its
Subsidiaries; or (z) the Offering or consummation of any of the other
transactions contemplated by this Agreement, the Registration Statement and
the
Prospectus.
(e) On
the
date of this Agreement and on the Closing Date, the Representatives shall have
received a “cold comfort” letter from ▇▇▇▇▇▇▇▇▇
& Co. LLP, independent public accountants for the Company, dated,
respectively, as of the date of the date of delivery and addressed to the
Underwriters and in form and substance satisfactory to the Representatives
and
Underwriters’ Counsel,
confirming that they are independent certified public accountants with respect
to the Company and its Subsidiaries within the meaning of the Securities Act
and
the Rules and Regulations, and stating, as of the date of delivery (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Prospectus,
as of a date not more than five (5) days prior to the date of such letter),
the
conclusions and findings of such firm with respect to the financial information
and other matters relating to the Registration Statement covered by such
letter.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
33 of
44
(f) Subsequent
to the execution and delivery of this Agreement or, if earlier, the dates as
of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been any change in the capital stock or long-term debt
of
the Company or any Subsidiary or any change or development involving a change,
whether or not arising from transactions in the ordinary course of business,
in
the business, condition (financial or otherwise), results of operations,
shareholders’ equity, properties or prospects of the Company and the
Subsidiaries, taken as a whole, including but not limited to the occurrence
of
any fire, flood, storm, explosion, accident, act of war or terrorism or other
calamity, the effect of which, in any such case described above, is, in the
sole
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the Offering on the terms and
in
the manner contemplated in the Prospectus (exclusive of any supplement).
(g) The
Representatives shall have received a lock-up agreement from each Lock-Up Party,
duly executed by the applicable Lock-Up Party, in each case substantially in
the
form attached hereto as Annex
II.
(h) The
Representatives shall have received a duly executed management confirmation
letter from the Company’s directors and officers relating to certain information
appearing in the Registration Statement, which letter shall be in the form
previously delivered to the Representatives in connection with the filing of
the
Preliminary Prospectus.
(i) The
Shares shall have been approved for quotation on NASDAQ.
(j) The
NASD
shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(k) No
action
shall have been taken and no statute, rule, regulation or order shall have
been
enacted, adopted or issued by any federal, state or foreign governmental or
regulatory authority that would, as of the Closing Date, prevent the issuance
or
sale of the Shares; and no injunction or order of any federal, state or foreign
court shall have been issued that would, as of the Closing Date, prevent the
issuance or sale of the Shares.
(l) The
Company shall have furnished the Underwriters and Underwriters’ Counsel with
such other certificates, opinions or other documents as they may have reasonably
requested.
If
any of
the conditions specified in this Section 7 shall not have been fulfilled when
and as required by this Agreement, or if any of the certificates, opinions,
written statements or letters furnished to the Representatives or to
Underwriters’ Counsel pursuant to this Section 7 shall not be reasonably
satisfactory in form and substance to the Representatives and to Underwriters’
Counsel, all obligations of the Underwriters hereunder may be cancelled by
the
Representatives at, or at any time prior to, the consummation of the Closing.
Notice of such cancellation shall be given to the Company in writing, or by
telephone. Any such telephone notice shall be confirmed promptly thereafter
in
writing.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
34 of
44
8. Indemnification.
(a) The
Company shall indemnify and hold harmless each Underwriter and each Person,
if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but
not limited to attorneys’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them
may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact made by such party contained in the Registration
Statement, as originally filed or any amendment thereof, or any related
Preliminary Prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or alleged
omission made by such party to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided,
however,
that the
Company will not be liable in any such case to the extent but only to the extent
that any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or omission
or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives expressly for use therein. The parties agree that such
information provided by or on behalf of any Underwriter through the
Representatives consists solely of the material referred to in the subsections
of the “Underwriting” section of the Prospectus captioned “Nature of the
Underwriting Commitment”, “Pricing of Securities”, “Stabilization” and
“Regulatory Restrictions on Purchase of Shares”. This indemnity agreement will
be in addition to any liability, which the Company or any Selling Shareholder
may otherwise have, including but not limited to other liability under this
Agreement.
(b) Each
Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, and each other Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but
not limited to attorneys’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them
may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
or the Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives specifically for use therein;
provided,
however,
that in
no case shall any Underwriter be liable or responsible for any amount in excess
of the underwriting discount applicable to the Shares to be purchased by such
Underwriter hereunder. The parties agree that such information provided by
or on
behalf of any Underwriter through the Representatives consists solely of the
material referred to in the last sentence of Section 1(b) hereof.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
35 of
44
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification
is
to be sought in writing of the claim or the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 8 to the extent
that it is not materially prejudiced as a result thereof and in any event shall
not relieve it from any liability that such indemnifying party may have
otherwise than on account of the indemnity agreement hereunder). In case any
such claim or action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate, at its own expense in the defense of such action,
and to the extent it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel satisfactory to such indemnified
party; provided however, that counsel to the indemnifying party shall not
(except with the written consent of the indemnified party) also be counsel
to
the indemnified party. Notwithstanding the foregoing, the indemnified party
or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, (iii) the
indemnifying party does not diligently defend the action after assumption of
the
defense, or (iv) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct
the
defense of such action on behalf of the indemnified party or parties), in any
of
which events such fees and expenses shall be borne by the indemnifying parties.
No indemnifying party shall, without the prior written consent of the
indemnified parties, effect any settlement or compromise of, or consent to
the
entry of judgment with respect to, any pending or threatened claim,
investigation, action or proceeding in respect of which indemnity or
contribution may be or could have been sought by an indemnified party under
this
Section 8 or Section 9 hereof (whether or not the indemnified party is an actual
or potential party thereto), unless (x) such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such claim, investigation, action or proceeding and
(ii) does not include a statement as to or an admission of fault, culpability
or
any failure to act, by or on behalf of the indemnified party, and (y) the
indemnifying party confirms in writing its indemnification obligations hereunder
with respect to such settlement, compromise or judgment.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
36 of
44
9. Contribution.
In
order to provide for contribution in circumstances in which the indemnification
provided for in Section 8 hereof is for any reason held to be unavailable from
any indemnifying party or is insufficient to hold harmless a party indemnified
thereunder, the Company
and the
Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from Persons, other than the Underwriters,
who may also be liable for contribution, including Persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20
of
the Exchange Act, officers of the Company who signed the Registration Statement
and directors of the Company) as incurred to which the Company and one or more
of the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company
and the
Underwriters from the Offering or, if such allocation is not permitted by
applicable law, in such proportions as are appropriate to reflect not only
the
relative benefits referred to above but also the relative fault of the
Company
and the
Underwriters in connection with the statements or omissions which resulted
in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company
and the
Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the Offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company bears
to
(y) the underwriting discount or commissions received by the Underwriters,
in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault of each of the Company
and of
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company
or the
Underwriters and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Company
and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation (even if
the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred
to
above in this Section 9 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
judicial, regulatory or other legal or governmental agency or body, commenced
or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 9: (i) no Underwriter shall be required to contribute any amount
in
excess of the amount by which the discounts and commissions applicable to the
Shares underwritten by it and distributed to the public exceeds the amount
of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission
and
(ii) no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any
Person who was not guilty of such fraudulent misrepresentation. For purposes
of
this Section 9, each Person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter, and each Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject
in
each case to clauses (i) and (ii) of the immediately preceding sentence. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they
may
have under this Section 9 or otherwise. The obligations of the Underwriters
to
contribute pursuant to this Section 9 are several in proportion to the
respective number of Shares to be purchased by each of the Underwriters
hereunder and not joint.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
37 of
44
10. Underwriter
Default.
(a) If
any
Underwriter or Underwriters shall default in its or their obligation to purchase
Firm Shares hereunder, and if the Firm Shares with respect to which such default
relates (the “Default
Shares”)
do not
(after giving effect to arrangements, if any, made by the Representatives
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of
Firm Shares, each non-defaulting Underwriter, acting severally and not jointly,
agrees to purchase from the Company that number of Default Shares that bears
the
same proportion of the total number of Default Shares then being purchased
as
the number of Firm Shares set forth opposite the name of such Underwriter on
Schedule
A
hereto
bears to the aggregate number of Firm Shares set forth opposite the names of
the
non-defaulting Underwriters, subject, however, to such adjustments to eliminate
fractional shares as the Representatives in its sole discretion shall make.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
38 of
44
(b) In
the
event that the aggregate number of Default Shares exceeds 10% of the number
of
Firm Shares, the Representatives may in their discretion arrange for themselves
or for another party or parties (including any non-defaulting Underwriter or
Underwriters who so agree) to purchase the Default Shares on the terms contained
herein. In the event that within five calendar days after such a default the
Representatives do not arrange for the purchase of the Default Shares as
provided in this Section 10, this Agreement shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Sections 5, 7, 8, 10 and 12(d)) or the Underwriters, but nothing
in this Agreement shall relieve a defaulting Underwriter or Underwriters of
its
or their liability, if any, to the other Underwriters and the Company for
damages occasioned by its or their default hereunder.
(c) In
the
event that any Default Shares are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Representatives or the Company shall have the right to postpone the Closing
Date for a period, not exceeding five (5) business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement
or
the Prospectus or in any other documents and arrangements, and the Company
agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the reasonable opinion of Underwriters’
Counsel, may thereby be made necessary or advisable. The term “Underwriter” as
used in this Agreement shall include any party substituted under this Section
10
with like effect as if it had originally been a party to this Agreement with
respect to such Firm Shares.
11. Survival
of Representations and Agreements.
All
representations and warranties, covenants and agreements of the Company and
the
Underwriters contained in this Agreement or in certificates of officers of
the
Company or any Subsidiary submitted pursuant hereto, including the agreements
contained in Section 6, the indemnity agreements contained in Section 8 and
the
contribution agreements contained in Section 9 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter or any controlling Person thereof or by or on behalf
of the Company, any of its officers and directors or any controlling Person
thereof, and shall survive delivery of and payment for the Shares to and by
the
Underwriters. The representations contained in Section 1 and 2 hereof and the
covenants and agreements contained in Sections 5, 6, 8, 9, this Section 11
and
Sections 15 and 16 hereof shall survive any termination of this Agreement,
including termination pursuant to Section 10 or 12 hereof.
12. Effective
Date of Agreement; Termination.
(a) This
Agreement shall become effective upon the later of: (i) receipt by the
Representatives and the Company of notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement. Notwithstanding
any termination of this Agreement, the provisions of this Section 12 and of
Sections 1, 5, 7, 8 and 12 through 17, inclusive, shall remain in full force
and
effect at all times after the execution hereof.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page
39 of
44
(b) The
Representatives shall have the right to terminate this Agreement at any time
prior to the consummation
of the Closing
if: (i)
any domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Representatives will in the immediate future
materially disrupt, the market for the Company’s securities or securities in
general; or (ii) trading on the New York Stock Exchange, The NASDAQ National
Market or the American Stock Exchange (“AMEX”)
shall
have been suspended or been made subject to material limitations, or minimum
or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, on the New York Stock Exchange, The
NASDAQ National Market or the AMEX or by order of the Commission or any other
governmental authority having jurisdiction; or (iii) a banking moratorium has
been declared by any state or federal authority or if any material disruption
in
commercial banking or securities settlement or clearance services shall have
occurred; (iv) any downgrading shall have occurred in the Company’s corporate
credit rating or the rating accorded the Company’s debt securities or trust
preferred stock by any “nationally recognized statistical rating organization”
(as defined for purposes of Rule 436(g) under the Securities Act) or if any
such
organization shall have been publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company’s debt securities; or (v) (A) there shall have occurred any outbreak or
escalation of hostilities or acts of terrorism involving the United States
or
there is a declaration of a national emergency or war by the United States
or
(B) there shall have been any other calamity or crisis or any change in
political, financial or economic conditions if the effect of any such event
in
(A) or (B), in the judgment of the Representatives, is so material and adverse
that such event makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Firm Shares on the terms and in the manner
contemplated by the Prospectus.
(c) Any
notice of termination pursuant to this Section 12 shall be in
writing.
(d) If
this
Agreement shall be terminated pursuant to any of the provisions hereof (other
than pursuant to Section 10(b) hereof), or if the sale of the Shares provided
for herein is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by
the
Representatives, reimburse the Underwriters for only thosel out-of-pocket
expenses (including the fees and expenses of their counsel), actually incurred
by the Underwriters in connection herewith.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 40 of
44
13. Notices.
All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing, and:
(a) if
sent
to the Representatives or any Underwriter, shall be mailed, delivered, or faxed
and confirmed in writing, to Maxim
Group LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Director of Investment Banking, and Chardan Capital Markets, LLC,
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief
Executive Officer, , in each case, with a copy to Underwriters’ Counsel at
Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.;
and
(b) if
sent
to the Company, shall be mailed, delivered, or faxed and confirmed in writing
to
the Company and its counsel at the addresses set forth in the Registration
Statement, provided,
however,
that any
notice to an Underwriter pursuant to Section 8 shall be delivered or sent by
mail or facsimile transmission to such Underwriter at its address set forth
in
its acceptance facsimile to the Representatives, which address will be supplied
to any other party hereto by the Representatives upon request. Any such notices
and other communications shall take effect at the time of receipt thereof.
14. Parties;Limitation
of Relationship.
(a) This
Agreement shall inure solely to the benefit of, and shall be binding upon,
the
Underwriters, the Company and the controlling Persons, directors, officers,
employees and agents referred to in Sections 7 and 8 hereof, and their
respective successors and assigns, and no other Person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be
for
the sole and exclusive benefit of the parties hereto and said controlling
Persons and their respective successors, officers, directors, heirs and legal
representatives, and it is not for the benefit of any other Person. The term
“successors and assigns” shall not include a purchaser, in its capacity as such,
of Shares from any of the Underwriters.
(b) The
Company acknowledges and agrees that: (i) the sale and issuance of the Shares
pursuant to this Agreement is an arm's-length commercial transaction between
the
Company and the Underwriters; (ii) in connection therewith and with the process
leading to the Offering, the Underwriters are acting solely as a principal
and
not the agent or fiduciary of the Company; (iii) no Underwriter has assumed
an
advisory or fiduciary responsibility in favor of the Company with respect to
the
Offering contemplated hereby or the process leading thereto, including any
negotiation related to the pricing of the Shares; and (iv) the Company has
consulted its own legal and financial advisors to the extent it has deemed
appropriate in connection with this Agreement and the Offering.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 41 of
44
15. Governing
Law.
This
Agreement shall be deemed to have been executed and delivered in New York and
both this Agreement and the transactions contemplated hereby shall be governed
as to validity, interpretation, construction, effect, and in all other respects
by the laws of the State of New York, without regard to the conflicts of laws
principals thereof (other than Section 5-1401 of The New York General
Obligations Law). Each of the Underwriters and the Company: (a) agrees that
any
legal suit, action or proceeding arising out of or relating to this Agreement
and/or the transactions contemplated hereby shall be instituted exclusively
in
the Supreme Court of the State of New York, New York County, or in the United
States District Court for the Southern District of New York, (b) waives any
objection which it may have or hereafter to the venue of any such suit, action
or proceeding, and (c) irrevocably consents to the jurisdiction of Supreme
Court
of the State of New York, New York County, or in the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Underwriters and the Company further agrees to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the Supreme Court of the State of New York, New
York County, or in the United States District Court for the Southern District
of
New York and agrees that service of process upon the Company mailed by certified
mail to the Company’s address or delivered by Federal Express via overnight
delivery shall be deemed in every respect effective service of process upon
the
Company, in any such suit, action or proceeding, and service of process upon
the
Underwriters mailed by certified mail to the Underwriters’ address or delivered
by Federal Express via overnight delivery shall be deemed in every respect
effective service process upon the Underwriter, in any such suit, action or
proceeding. THE COMPANY (ON BEHALF OF ITSELF, THE SUBSIDIARIES AND, TO THE
FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS
AND
CREDITORS) HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF
ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT
AND
THE PROSPECTUS.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 42 of
44
16. Entire
Agreement.
This
Agreement, together with the schedule and exhibits attached hereto and as the
same may be amended from time to time in accordance with the terms hereof,
contains the entire agreement among the parties hereto relating to the subject
matter hereof and there are no other or further agreements outstanding not
specifically mentioned herein.
17. Severability.
If any
term or provision of this Agreement or the performance thereof shall be invalid
or unenforceable to any extent, such invalidity or unenforceability shall not
affect or render invalid or unenforceable any other provision of this Agreement
and this Agreement shall be valid and enforced to the fullest extent permitted
by law.
18. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Delivery of a signed counterpart of this Agreement
by facsimile transmission shall constitute valid and sufficient delivery
thereof.
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 43 of
44
19. Headings.
The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
20. Time
is of the Essence.
Time
shall be of the essence of this Agreement. As used herein, the term “business
day” shall mean any day when the Commission’s office in Washington, D.C. is open
for business.
[Signature
Pages Follow]
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 44 of
44
If
the
foregoing correctly sets forth your understanding, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute
a
binding agreement among us.
| Very truly yours, | ||
| SORL AUTO PARTS, INC. | ||
| |
|
|
| By: | /s/ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇ Ping |
||
| Title: Chairman and Chief Executive Officer | ||
[Signature
Pages Continue]
Maxim
Group LLC
Chardan
Capital Markets LLC
___________,
2006
Page 45 of
44
Accepted
by the Representatives, acting for themselves and as
Representatives
of the Underwriters named on Schedule
A
attached hereto,
as
of the date first written above:
| MAXIM GROUP LLC | |||
| By: | |||
|
Name:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
Director
of Investment Banking
|
|||
| CHARDAN CAPITAL MARKETS, LLC | |||
| By: | |||
|
Name:
▇▇▇▇▇ ▇.▇▇▇▇▇▇▇
Title:
Chief
Executive Officer
|
|||
[End
of
Signature Pages to Underwriting Agreement]
SCHEDULE
A
Underwriters
|
Underwriter
|
Total
Number of Firm Shares to be Purchased
|
Over-Allotment
Option Shares
|
|
Maxim
Group LLC
|
||
|
Chardan
Capital Markets, LLC
|
||
|
TOTAL
|
SCHEDULE
B
Subsidiaries/Joint
Ventures of the Company
SCHEDULE
C
Lock-Up
Parties
SCHEDULE
D
Issuer-Represented
General Free Writing Prospectuses
ANNEX
I
Form
of Opinion of Company Counsel
All
capitalized terms used but not defined in this Annex I shall have the meanings
ascribed to such terms in the Underwriting Agreement to which this Annex is
attached.
1. Each
of
the Company and its Subsidiaries has been organized and validly exists as a
corporation in good standing in accordance with and under the laws of its
jurisdiction of incorporation, with full power and authority to own its
properties and conduct its business as described in the Registration Statement
and the Prospectus. Each of the Company and its Subsidiaries is duly qualified
and in good standing as a foreign corporation in each jurisdiction in which
the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary, except
for
those failures to be so qualified or in good standing which will not in the
aggregate have a Material Adverse Effect.
2. The
Company has full right, power and authority to execute and deliver this
Agreement and the Shares and to perform its obligations hereunder, and all
corporate action required to be taken for the due and proper authorization,
execution and delivery of this Agreement and the Shares and consummation of
the
transactions contemplated by Underwriting Agreement, the Registration Statement
and the Prospectus and as described in the Registration Statement and the
Prospectus have been duly and validly taken.
3. The
Company has an authorized capitalization as set forth in the Registration
Statement and the Prospectus. All of the issued shares of capital stock of
the
Company have been duly and validly authorized and issued, are fully paid and
non-assessable and are not in violation of or subject to any preemptive or,
to
such counsel’s knowledge, similar rights that entitle or will entitle any Person
to acquire any Shares from the Company upon issuance or sale thereof.
4. The
Shares to be delivered on the Closing Date have been duly and validly authorized
and, when delivered in accordance with the Underwriting Agreement, will be
duly
and validly issued, fully paid and non-assessable and will not have been issued
in violation of or subject to preemptive or, to such counsel’s knowledge,
similar rights that entitle or will entitle any Person to acquire any Shares
from the Company upon issuance or sale thereof.
5. Except
has set forth in the Registration Statement and the Prospectus, all of the
issued shares of capital stock of each Subsidiary of the Company have been
duly
and validly authorized and issued and are fully paid and non-assessable and
owned directly or indirectly by the Company, free and clear of all Liens. The
Common Stock and the Firm Shares conform to the descriptions thereof contained
in the Registration Statement and the Prospectus.
6. All
private offers and sales of securities prior to the date hereof by the Company
or any Subsidiary have been validly exempt from registration under the
Securities Act and have been properly filed or registered with all applicable
state securities authorities pursuant to appropriate “blue sky” filings or
otherwise.
7. Neither
the Company nor any of its Affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be “integrated” pursuant
to the Securities Act or the Rules and Regulations with the offer and sale
of
the Shares pursuant to the Registration Statement.
8. The
Common Stock currently outstanding is quoted, and the Shares are duly authorized
for quotation, on the NASDAQ Capital Market.
9. The
Underwriting Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
10. To
such
counsel’s knowledge, and other than as set forth in the Prospectus, there are no
judicial, regulatory or other legal or governmental proceedings pending to
which
the Company or any of its Subsidiaries is a party or of which any property
of
the Company or any of its Subsidiaries is the subject which, if determined
adversely to the Company or any of its Subsidiaries, would individually or
in
the aggregate have a Material Adverse Effect; and, to such counsel’s knowledge,
no such proceedings are threatened or contemplated.
11. The
execution, delivery, and performance of the Underwriting Agreement and
consummation of the transactions contemplated by Underwriting Agreement, the
Registration Statement and the Prospectus do not and will not: (a) conflict
with
or result in a breach of any of the terms and provisions of, or constitute
a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
of
its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan
agreement or any other agreement, instrument, franchise, license or permit
known
to such counsel to which the Company or any of its Subsidiaries is a party
or by
which any of the Company or any of its Subsidiaries or their respective
properties or assets may be bound or (b) violate or conflict with any provision
of the certificate or articles of incorporation, by-laws or other governing
documents of the Company or any of its Subsidiaries, or, to the best knowledge
of such counsel, any judgment, decree, order, statute, rule or regulation of
any
court or any judicial, regulatory or other legal or governmental agency or
body.
12. No
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any judicial, regulatory or other
legal or governmental agency or body is required for the execution, delivery
and
performance of the Underwriting Agreement or consummation of the transactions
contemplated by the Underwriting Agreement, the Registration Statement and
the
Prospectus, except for (1) such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Shares
by
the Underwriters (as to which such counsel need express no opinion), (2) such
as
have been made or obtained under the Securities Act and (3) such as are required
by the NASD.
13. The
Registration Statement and the Prospectus and any amendments thereof or
supplements thereto (other than the financial statements and schedules and
other
financial data included or incorporated by reference therein, as to which no
opinion need be rendered) comply as to form in all material respects with the
requirements of the Securities Act, the Exchange Act and the Rules and
Regulations. The documents filed under the Exchange Act and incorporated by
reference in the Registration Statement and the Prospectus or any amendment
thereof or supplement thereto (other than the financial statements and schedules
and other financial data included or incorporated by reference therein, as
to
which no opinion need be rendered) when they became effective or were filed
with
the Commission, as the case may be, complied as to form in all material respects
with the Securities Act or the Exchange Act, as applicable, and the Rules and
Regulations.
14. The
statements under the captions “Description of Capital Stock” and “Underwriting”
in the Prospectus and Items 14 and 15 of Part II of the Registration Statement,
insofar as such statements constitute a summary of the legal matters, documents
or proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings.
15. The
Company is not and, after giving effect to the offering and sale of the Shares
and the application of the proceeds thereof as described in the Registration
Statement and the Prospectus, will not be, an “investment company” as such term
is defined in the Investment Company Act of 1940, as amended.
16. All
members of the Company’s board of directors who are required to be “independent”
(as that term is defined under applicable laws, rules and regulations),
including, without limitation, all members of the audit committee of the
Company’s board of directors, meet the qualifications of independence as set
forth under applicable laws, rules and regulations.
17. The
Registration Statement is effective under the Securities Act, and, to the best
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof has been issued
and no proceedings therefore have been initiated or threatened by the Commission
and all filings required by Rule 424(b) and Rule 430A under the Securities
Act
have been made.
18. To
the
best knowledge of such counsel, no contract or agreement is required to be
filed
as an exhibit to the Registration Statement that is not so filed.
19. Neither
the Company nor any of its Subsidiaries is in violation of its respective
charter or by-laws and, to such counsel’s knowledge after due inquiry, neither
the Company nor any of its Subsidiaries is in default in the performance of
any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material
to
the Company and its Subsidiaries, taken as a whole, to which the Company or
any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective property is bound.
20. Each
of
the Company and its Subsidiaries has such authorizations of, and has made all
filings with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including,
without limitation, under applicable SBA Rules and Regulations and insurance
regulations, as are necessary to own, lease, license and operate their
respective properties and to conduct their respective businesses, except where
the failure to have any such authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each
such
authorization is valid and in full force and effect and each of the Company
and
its Subsidiaries is in compliance with all the terms and conditions thereof
and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto. To the best knowledge of such counsel, no
event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse
of
time or both, would allow, revocation, suspension or termination of any such
authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such authorization.
In
addition to the foregoing legal opinions, the opinion letter of counsel shall
contain the following statement (it being understood that such statement itself
shall not constitute a legal opinion): “As counsel, we have participated in
conferences with officers and representatives of the Company, representatives
of
the independent public accountants for the Company and the Underwriters at
which
the contents of the Registration Statement and the Prospectus and related
matters were discussed and, no facts have come to our attention which would
lead
us to believe that either the Registration Statement, at the time it became
effective (including the information deemed to be part of the Registration
Statement at the time of effectiveness pursuant to Rule 430A(b) or Rule 434,
if
applicable), or any amendment thereof made prior to the Closing Date, as of
the
date of such amendment, contained or incorporated by reference 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
or
that the Prospectus (including the documents incorporated by reference therein),
as of its date (or any amendment thereof or supplement thereto made prior to
the
Closing Date as of the date of such amendment or supplement) and as of the
Closing Date, contained or contains an untrue statement of a material fact
or
omitted or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel
need
express no belief or opinion with respect to the financial statements and
schedules and other financial data included or incorporated by reference
therein).”
When
used
in the legal opinion, the term “knowledge” shall mean the knowledge (after due
investigation) of attorneys and paralegals of the Firm who have represented
the
Company and/or the Subsidiaries.
ANNEX
II
Form
of Lock-Up Agreement
_____________,
2006
MAXIM
GROUP LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
CHARDAN
CAPITAL MARKETS, LLC
▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representatives of the Underwriters
Re:
SORL
Auto Parts, Inc. Lock-Up Agreement
Ladies
and Gentlemen:
This
letter agreement (this “Agreement”)
relates to the proposed public offering (the “Offering”)
by
SORL Auto Parts, Inc, a Delaware corporation (the “Company”),
of
its Common Stock, $0.__ par value per share (the “Stock”).
The
Offering is governed by the certain Underwriting Agreement, dated as of
_______________, 2006 (the “Underwriting
Agreement”),
by
and among the Company, Chardan Capital Markets, LLC and Maxim Group LLC (the
“Representatives”),
as
representatives of the several underwriters named therein.
In
order
to induce the Representatives to underwrite the Offering, the undersigned (on
behalf of himself and his Permitted Transferees (as defined below)) hereby
agrees that, without the prior written consent of the Representatives, which
consent shall not be unreasonably withheld, during the period from the date
hereof until nine (9) months from the date of the final prospectus for the
Offering (the “Lock-Up
Period”),
the
undersigned and his Permitted Transferees: (a) will not, directly or indirectly,
offer, sell, agree to offer or sell, solicit offers to purchase, grant any
call
option or purchase any put option with respect to, pledge, borrow or otherwise
dispose of any Relevant Security (as defined below), and (b) will not establish
or increase any “put equivalent position” or liquidate or decrease any “call
equivalent position” with respect to any Relevant Security (in each case within
the meaning of Section 16 of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder), or otherwise enter into
any swap, derivative or other transaction or arrangement that transfers to
another, in whole or in part, any economic consequence of ownership of a
Relevant Security, whether or not such transaction is to be settled by delivery
of Relevant Securities, other securities, cash or other consideration. As used
herein “Relevant
Security”
means
any common stock or other security of the Company or any Subsidiary thereof
that
is convertible into, or exercisable or exchangeable for common stock or equity
securities or that holds the right to acquire any common stock or equity
securities of the Company or any Subsidiary or any other such Relevant Security,
except for such rights as may have been fully satisfied or waived prior to
the
effectiveness of the Registration Statement.
Notwithstanding
the foregoing, during the Lock-Up Period, the undersigned may transfer
shares of Common Stock only for bona fide tax or estate planning purposes and
solely to his spouse, brothers and sisters, lineal ascendants or descendants
or
trusts for the benefit of such individuals (the “Permitted
Transferees”),
it
being agreed that: (A) such gifts or transfers of Common Stock shall not exceed
___________ shares of Common Stock for each such individual during the Lock-Up
Period, and (B) that the shares of Common Stock gifted shall be valued at the
Fair Market Value (as defined in the Underwriting Agreement) on the date of
the
gift or transfer. All Permitted Transferees will be subject to the terms
hereof.
The
undersigned hereby authorizes the Company during the Lock-Up Period to cause
any
transfer agent for the Relevant Securities to decline to transfer, and to note
stop transfer restrictions on the stock register and other records relating
to,
Relevant Securities for which the undersigned is the record holder and, in
the
case of Relevant Securities for which the undersigned is the beneficial but
not
the record holder, agrees during the Lock-Up Period to cause the record holder
to cause the relevant transfer agent to decline to transfer, and to note stop
transfer restrictions on the stock register and other records relating to,
such
Relevant Securities.
The
undersigned hereby further agrees that, without the prior written consent of
the
Representatives, which consent shall not be unreasonably withheld, during the
Lock-Up Period the undersigned will not: (x) file or participate in the filing
with the Securities and Exchange Commission of any registration statement,
or
circulate or participate in the circulation of any preliminary or final
prospectus or other disclosure document with respect to any proposed offering
or
sale of a Relevant Security and (y) exercise any rights the undersigned may
have
to require registration with the Securities and Exchange Commission of any
proposed offering or sale of a Relevant Security.
The
undersigned hereby represents and warrants that the undersigned has full power
and authority to enter into this Agreement and that this Agreement constitutes
the legal, valid and binding obligation of the undersigned, enforceable in
accordance with its terms. Upon request, the undersigned will execute any
additional documents necessary in connection with enforcement hereof. Any
obligations of the undersigned shall be binding upon the successors and assigns
of the undersigned from the date first above written.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to the conflicts of laws principles thereof.
Delivery of a signed copy of this letter by facsimile transmission shall be
effective as delivery of the original hereof.
| Very truly yours, | |||
|
By:
|
|||
|
|
|||
| Print Name: | |||
|
|
|||
ANNEX
III
FORM
OF
OPINIONS FOR COMPANY COUNSEL
RELATED
TO PEOPLE’S REPUBLIC OF CHINA
(i) Ruili
Group Ruian Auto Parts Co. Ltd. (the “PRC Subsidiary”) has been duly organized
and is validly existing and duly qualified as a foreign investment enterprise
with limited liability under PRC law, and its business license is in full force
and effect; has full power and authority (corporate and other) and has all
consents, approvals, authorizations, orders, registrations, clearances and
qualifications of or with any court, governmental agency or body having
jurisdiction over it or any of its properties required for the ownership or
lease of property by it and the conduct of its business, and has the legal
right
and authority to own, use, lease and operate its assets and to conduct its
business as described in the Final Prospectus; each of the Company and the
PRC
Subsidiary can ▇▇▇ and be sued in its own name under the laws of the People’s
Republic of China (“PRC”);
(ii) The
equity interests of the Company in the PRC Subsidiary through its wholly owned
subsidiary, Fairford Holdings, Ltd., have been duly and validly authorized
and
issued, are fully paid and nonassessable and are legally owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims; no additional governmental approval or authorization of or filing
with any governmental agency is required under PRC law for the ownership by
the
Company of its equity interests in the PRC Subsidiary, except the approval
from
or registration with the relevant governmental authorities, including, without
limitation, the relevant local branches of the Ministry of Commerce (“MOC”), the
State Administration of Industry and Commerce (“SAIC”), the State Administration
for Foreign Exchange (“SAFE”), the State Administration of Taxation and the
General Administration of Customs, which has been obtained and is in full force
and effect; the liability of the Company in respect of its equity interests
in
the PRC Subsidiary is limited to its investment therein;
(iii) The
PRC
Subsidiary has all necessary licenses, consents, authorizations, approvals,
orders, certificates and permits of and from, and have made all declarations
and
filings with all governmental agencies to own, lease, license and use their
properties and assets and conduct their business.
(iv) The
statements in the Final Prospectus under the caption “Prospectus Summary,” “Risk
Factors,” “Income Tax,” “Business—Doing Business in China” and
“Business—Intellectual Property,” to the extent such statements relate to
matters of law or regulation of the PRC, are true and accurate in all material
respects, and nothing has been omitted from such statements which would make
the
same misleading in any material respect;