EXHIBIT 1.1
QIAO XING MOBILE COMMUNICATION CO., LTD.
19,166,667 Shares
Ordinary Shares
(without par value)
UNDERWRITING AGREEMENT
_____, 2007
UNDERWRITING AGREEMENT
May 2, 2007
UBS AG
52/F, 2 International Finance Centre
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
as Managing Underwriter
and Representative of the several Underwriters
Ladies and Gentlemen:
Qiao Xing Mobile Communication Co., Ltd., a company incorporated in
the British Virgin Islands (the "Company"), proposes to issue and sell, and Qiao
Xing Universal Telephone, Inc., a company incorporated in the British Virgin
Islands (the "Controlling Shareholder") and each other entity identified as a
Selling Shareholder in Schedule C annexed hereto (each such entity and the
Controlling Shareholder, being referred to individually as a "Selling
Shareholder", and collectively as "Selling Shareholders"), proposes to sell, to
the underwriters named in Schedule A annexed hereto (the "Underwriters"), for
whom you are acting as representative (the "Representative"), an aggregate of
16,666,667 ordinary shares (the "Firm Shares"), without par value (the "Ordinary
Shares"), of the Company, of which 12,500,000 Firm Shares are to be issued and
sold by the Company and 4,166,667 Firm Shares are to be sold by the Selling
Shareholders. The number of Firm Shares to be sold by each Selling Shareholder
is the number of Firm Shares set forth opposite the name of such Selling
Shareholder in Schedule C annexed hereto. In addition, solely for the purpose of
covering over-allotments, the Company proposes to grant to the Underwriters the
option to purchase from the Company up to an additional 2,500,000 Ordinary
Shares (the "Additional Shares"). The Firm Shares and the Additional Shares are
hereinafter collectively sometimes referred to as the "Shares." The Shares are
described in the Prospectus which is referred to below.
The Company has prepared and filed, in accordance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively, the "Act"), with the Securities and
Exchange Commission (the "Commission") a registration statement on Form F-1
(File No. 333-142162) under the Act, including a prospectus, relating to the
Shares.
9 Except where the context otherwise requires, "Registration
Statement," as used herein, means the registration statement, as amended at the
time of such registration statement's effectiveness for purposes of Section 11
of the Act, as such section applies to the respective Underwriter (the
"Effective Time"), including (i) all documents filed as a part thereof, (ii) any
information contained in a prospectus filed with the Commission pursuant to Rule
424(b) under the Act, to the extent such information is deemed, pursuant to Rule
430A or Rule 430C under the Act, to be part of the registration statement at the
Effective Time, and (iii) any registration statement filed to register the offer
and sale of Shares pursuant to Rule 462(b) under the Act.
The Company has furnished to you, for use by the Underwriters and by
dealers in connection with the offering of the Shares, copies of one or more
preliminary prospectuses relating to the Shares. Except where the context
otherwise requires, "Preliminary Prospectus," as used herein, means each such
preliminary prospectus, in the form so furnished.
Except where the context otherwise requires, "Prospectus," as used
herein, means the prospectus, relating to the Shares, filed by the Company with
the Commission pursuant to Rule 424(b) under the Act on or before the second
business day after the date hereof (or such earlier time as may be required
under the Act), or, if no such filing is required, the final prospectus included
in the Registration Statement at the time it became effective under the Act, in
each case in the form furnished by the Company to you for use by the
Underwriters and by dealers in connection with the offering of the Shares.
"Permitted Free Writing Prospectuses," as used herein, means the
documents listed on Schedule B attached hereto and each "road show" (as defined
in Rule 433 under the Act), if any, related to the offering of the Shares
contemplated hereby that is a "written communication" (as defined in Rule 405
under the Act) (each such road show, an "Electronic Road Show"). The
Underwriters have not offered or sold and will not offer or sell, without the
Company's consent, any Shares by means of any "free writing prospectus" (as
defined in Rule 405 under the Act) that is not a Permitted Free Writing
Prospectus and that either (i) is required to be filed by the Underwriters with
the Commission pursuant to Rule 433 under the Act, or (ii) contains any "issuer
information" (as defined in Rule 433 under the Act) that has not been filed with
the Commission by the Company.
"Disclosure Package," as used herein, means the Preliminary
Prospectus that was included in the Registration Statement dated [ ], 2007,
together with any combination of one or more of the then-issued Permitted Free
Writing Prospectuses, if any.
As used in this agreement, "business day" shall mean a day on which
the New York Stock Exchange (the "NYSE") is open for trading. The terms
"herein," "hereof," "hereto," "hereinafter" and similar terms, as used in this
agreement, shall in each case refer to this agreement as a whole and not to any
particular section, paragraph, sentence or other subdivision of this agreement.
The term "or," as used herein, is not exclusive.
The Company has prepared and filed, in accordance with Section 12 of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the "Exchange Act"), a registration statement (the
"Exchange Act Registration Statement") on Form 8-A (File No. 000-[____]) under
the Exchange Act to register the Shares under Section 12(b) of the Exchange Act.
The Company, each of the Selling Shareholders, and the Underwriters
agree as follows:
1. Sale and Purchase. Upon the basis of the representations and warranties
and subject to the terms and conditions herein set forth, the Company agrees to
issue and sell, and each of the Selling Shareholders agrees to sell, to the
respective Underwriters and each of the
-2-
Underwriters, severally and not jointly, agrees to purchase from the Company and
each Selling Shareholder, the respective number of Firm Shares (subject to such
adjustment as the Representative may determine to avoid fractional shares) which
bears the same proportion to the total number of Firm Shares to be sold by the
Company or by such Selling Shareholder, as the case may be, as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule A
annexed hereto, subject to adjustment in accordance with Section 11 hereof,
bears to the total number of Firm Shares, in each case at a purchase price of
$[____] per Share. The Company is advised by you that the Underwriters intend
(i) to make a public offering of their respective portions of the Firm Shares as
soon after the effective date of the Registration Statement as in your judgment
is advisable and (ii) initially to offer the Firm Shares upon the terms set
forth in the Prospectus. You may from time to time increase or decrease the
public offering price after the initial public offering to such extent as you
may determine.
In addition, the Company hereby grants to the several Underwriters
the option (the "Over-Allotment Option") to purchase, and upon the basis of the
representations and warranties and subject to the terms and conditions herein
set forth, the Underwriters shall have the right to purchase, severally and not
jointly, from the Company, ratably in accordance with the number of Firm Shares
to be purchased by each of them, all or a portion of the Additional Shares as
may be necessary to cover over-allotments made in connection with the offering
of the Firm Shares, at the same purchase price per share to be paid by the
Underwriters to the Company for the Firm Shares. The Over-Allotment Option may
be exercised by the Representative on behalf of the several Underwriters at any
time and from time to time on or before the thirtieth day following the date of
the Prospectus, by written notice to the Company. Such notice shall set forth
the aggregate number of Additional Shares as to which the Over-Allotment Option
is being exercised and the date and time when the Additional Shares are to be
delivered (any such date and time being herein referred to as an "additional
time of purchase"); provided, however, that no additional time of purchase shall
be earlier than the "time of purchase" (as defined below) nor earlier than the
second business day after the date on which the Over-Allotment Option shall have
been exercised nor later than the tenth business day after the date on which the
Over-Allotment Option shall have been exercised. The number of Additional Shares
to be sold to each Underwriter shall be the number which bears the same
proportion to the aggregate number of Additional Shares being purchased as the
number of Firm Shares set forth opposite the name of such Underwriter on
Schedule A hereto bears to the total number of Firm Shares (subject, in each
case, to such adjustment as the Representative may determine to eliminate
fractional shares), subject to adjustment in accordance with Section 11 hereof.
Pursuant to a power of attorney (the "Power of Attorney") granted by
the Controlling Shareholder (which Power of Attorney shall be satisfactory to
the Representative), ▇▇. ▇▇▇ ▇▇▇ Wu and Mr. ▇▇▇ ▇▇▇▇ Wu shall act as
representatives of the Controlling Shareholder. Each of the foregoing
representatives (collectively, the "Representatives of the Controlling
Shareholder") is authorized, on behalf of the Controlling Shareholder, among
other things, to execute any documents necessary or desirable in connection with
the sale of the Shares to be sold hereunder by the Controlling Shareholder to
make delivery of the certificates of such Shares, to receive the proceeds of the
sale of such Shares, to give receipts for such proceeds, to pay therefrom the
expenses to be borne by the Controlling Shareholder in connection with the sale
and public offering of the Shares, to distribute the balance of such proceeds to
the
-3-
Controlling Shareholder, to receive notices on behalf of the Controlling
Shareholder and to take such other action as may be necessary or desirable in
connection with the transactions contemplated by this agreement.
2. Payment and Delivery. Payment of the purchase price for the Firm Shares
shall be made to the Company and to each Selling Shareholder by Federal Funds
wire transfer against delivery of the certificates for the Firm Shares to you
through the facilities of The Depository Trust Company ("DTC") for the
respective accounts of the Underwriters. Such payment and delivery shall be made
at 10:00 A.M., New York City time, on May 8, 2007 (unless another time shall be
agreed to by you and the Company and the Selling Shareholders or unless
postponed in accordance with the provisions of Section 11 hereof). The time at
which such payment and delivery are to be made is hereinafter sometimes called
the "time of purchase." Electronic transfer of the Firm Shares shall be made to
you at the time of purchase in such names and in such denominations as you shall
specify prior to the date of the time of purchase.
Payment of the purchase price for the Additional Shares shall be
made at the additional time of purchase in the same manner and at the same
office as the payment for the Firm Shares. Electronic transfer of the Additional
Shares shall be made to you at the additional time of purchase in such names and
in such denominations as you shall specify.
Deliveries of the documents described in Section 9 hereof with
respect to the purchase of the Shares shall be made at the offices of O'Melveny
& ▇▇▇▇▇ LLP, 31st Floor, China World Tower One, ▇▇. ▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P. R. China, at 9:00 A.M., New York City time, on the date of
the closing of the purchase of the Firm Shares or the Additional Shares, as the
case may be.
3. Representations and Warranties of the Company. The Company and the
Controlling Shareholder jointly and severally represent and warrant to and agree
with each of the Underwriters that:
(a) the Registration Statement has heretofore become effective under
the Act or, with respect to any registration statement to be filed to
register the offer and sale of Shares pursuant to Rule 462(b) under the
Act, will be filed with the Commission and become effective under the Act
no later than 10:00 P.M., New York City time, on the date of determination
of the public offering price for the Shares; no stop order of the
Commission preventing or suspending the use of any Preliminary Prospectus
or Permitted Free Writing Prospectus, or the effectiveness of the
Registration Statement, has been issued, and no proceedings for such
purpose have been instituted or, to the Company's knowledge, are
contemplated by the Commission; the Exchange Act Registration Statement
has become effective as provided in Section 12 of the Exchange Act;
(b) the Registration Statement complied when it became effective,
complies as of the date hereof and, as amended or supplemented, at the
time of purchase, each additional time of purchase, if any, and at all
times during which
-4-
a prospectus is required by the Act to be delivered (whether physically or
through compliance with Rule 172 under the Act or any similar rule) in
connection with any sale of Shares, will comply, in all material respects,
with the requirements of the Act; the Registration Statement did not, as
of the Effective Time, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; each Preliminary Prospectus
complied, at the time it was filed with the Commission, and complies as of
the date hereof, in all material respects with the requirements of the
Act; at no time during the period that begins on the earlier of the date
of such Preliminary Prospectus and the date such Preliminary Prospectus
was filed with the Commission and ends at the time of purchase did or will
any Preliminary Prospectus, as then amended or supplemented, include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at no time
during such period did or will any Preliminary Prospectus, as then amended
or supplemented, together with any combination of one or more of the then
issued Permitted Free Writing Prospectuses, if any, include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; the Prospectus, as then
amended and supplemented, will comply, as of its date, the date that it is
filed with the Commission, the time of purchase, each additional time of
purchase, if any, and at all times during which a prospectus is required
by the Act to be delivered (whether physically or through compliance with
Rule 172 under the Act or any similar rule) in connection with any sale of
Shares, in all material respects, with the requirements of the Act
(including, without limitation, Section 10(a) of the Act); at no time
during the period that begins on the earlier of the date of the Prospectus
and the date the Prospectus is filed with the Commission and ends at the
later of the time of purchase, the latest additional time of purchase, if
any, and the end of the period during which a prospectus is required by
the Act to be delivered (whether physically or through compliance with
Rule 172 under the Act or any similar rule) in connection with any sale of
Shares did or will the Prospectus, as then amended or supplemented,
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; at no time
during the period that begins on the date of such Permitted Free Writing
Prospectus and ends at the time of purchase did or will any Permitted Free
Writing Prospectus include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that neither the Company nor the
Controlling Shareholder makes any representation or warranty in this
Section 3 with respect to any statement contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any Permitted
Free Writing Prospectus in reliance upon and in conformity with
information concerning an
-5-
Underwriter and furnished in writing by or on behalf of such Underwriter
through you to the Company expressly for use in the Registration
Statement, such Preliminary Prospectus, the Prospectus or such Permitted
Free Writing Prospectus;
(c) prior to the execution of this agreement, the Company has not,
directly or indirectly, offered or sold any Shares by means of any
"prospectus" (within the meaning of the Act) or used any "prospectus"
(within the meaning of the Act) in connection with the offer or sale of
the Shares, in each case other than the Preliminary Prospectuses and the
Permitted Free Writing Prospectuses, if any; the Company has not, directly
or indirectly, prepared, used or referred to any Permitted Free Writing
Prospectus except in compliance with Rules 164 and 433 under the Act;
assuming that such Permitted Free Writing Prospectus is accompanied or
preceded by the most recent Preliminary Prospectus that contains a price
range or the Prospectus, as the case may be, and that such Permitted Free
Writing Prospectus is so sent or given after the Registration Statement
was filed with the Commission (and after such Permitted Free Writing
Prospectus was, if required pursuant to Rule 433(d) under the Act, filed
with the Commission), the sending or giving, by any Underwriter, of any
Permitted Free Writing Prospectus will satisfy the provisions of Rule 164
and Rule 433 (without reliance on subsections (b), (c) and (d) of Rule
164); the Preliminary Prospectus dated April 16, 2007 is a prospectus
that, other than by reason of Rule 433 or Rule 431 under the Act,
satisfies the requirements of Section 10 of the Act, including a price
range where required by rule; neither the Company nor the Underwriters are
disqualified, by reason of subsection (f) or (g) of Rule 164 under the
Act, from using, in connection with the offer and sale of the Shares,
"free writing prospectuses" (as defined in Rule 405 under the Act)
pursuant to Rules 164 and 433 under the Act; the Company is not an
"ineligible issuer" (as defined in Rule 405 under the Act) as of the
eligibility determination date for purposes of Rules 164 and 433 under the
Act with respect to the offering of the Shares contemplated by the
Registration Statement; the parties hereto agree and understand that the
content of any and all "road shows" (as defined in Rule 433 under the Act)
related to the offering of the Shares contemplated hereby is solely the
property of the Company; the Company has caused there to be made available
at least one version of a "bona fide electronic road show" (as defined in
Rule 433 under the Act) in a manner that, pursuant to Rule 433(d) under
the Act, causes the Company not to be required, pursuant to Rule 433(d)
under the Act, to file, with the Commission, any Electronic Road Show;
(d) as of the date of this agreement, the Company has an authorized
and outstanding capitalization as set forth in the sections of the
Registration Statement, the Preliminary Prospectuses and the Prospectus
entitled "Capitalization" and "Description of share capital" (and any
similar sections or information, if any, contained in any Permitted Free
Writing Prospectus), and, as of the time of purchase and any additional
time of purchase, as the case may
-6-
be, the Company shall have an authorized and outstanding capitalization as
set forth in the sections of the Registration Statement, the Preliminary
Prospectuses and the Prospectus entitled "Capitalization" and "Description
of share capital" (and any similar sections or information, if any,
contained in any Permitted Free Writing Prospectus) (subject, in each
case, to the issuance of Shares upon exercise of share options and
warrants disclosed as outstanding in the Registration Statement (excluding
the exhibits thereto), each Preliminary Prospectus and the Prospectus and
the grant of options under existing share incentive plans described in the
Registration Statement (excluding the exhibits thereto), each Preliminary
Prospectus and the Prospectus); all of the issued and outstanding share
capital of the Company, including the Ordinary Shares, of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable, have been issued in compliance with all applicable
securities laws and were not issued in violation of any preemptive right,
resale right, right of first refusal or similar right; and the Shares are
duly listed, and admitted and authorized for trading, subject to official
notice of issuance and evidence of satisfactory distribution, on the NYSE;
(e) the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the British Virgin
Islands, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement, the Preliminary Prospectuses, the Prospectus and the Permitted
Free Writing Prospectuses, if any, to execute and deliver this agreement
and to issue, sell and deliver the Shares as contemplated herein;
(f) the Company is duly qualified to do business as a foreign
company and is in good standing in each jurisdiction where the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good
standing would not, individually or in the aggregate, either (i) have a
material adverse effect on the business, properties, financial condition,
management, results of operations or prospects of the Company and the CECT
Entities (as defined below), taken as a whole, (ii) prevent or materially
interfere with consummation of the transactions contemplated hereby or
(iii) prevent the Shares from being accepted for listing on, or result in
the delisting of the Shares from, the NYSE (the occurrence of any such
effect or any such prevention or interference or any such result described
in the foregoing clauses (i), (ii) and (iii) being herein referred to as a
"Material Adverse Effect");
(g) the Company has no subsidiaries (as defined under the Act) other
than CEC Telecom Co., Ltd., a People's Republic of China ("PRC")
foreign-invested equity joint venture ("CECT"); the Company owns 93.4% of
the equity ownership of CECT and the remaining 6.6% of the equity of CECT
is owned by Qiao Xing Group Limited, a PRC company; CECT owns 100% of CEC
Telecom Co., Ltd., Huizhou Branch (the "CECT Huizhou Branch," and together
-7-
with CECT, collectively referred to as the "CECT Entities"), a branch
company formed under PRC Law (as used in this agreement, "PRC Law" means
all applicable laws, regulations, rules, orders, decrees, guidelines,
judicial interpretations and other legislation of the PRC in effect as of
the date of this agreement); except for CECT, the CECT Huizhou Branch and
CEC Mobile Co., Ltd., for which CECT holds 10% of the equity interest
since June 30, 2004, the Company does not own, directly or indirectly, any
shares of stock or any other equity interests or long-term debt securities
of any corporation, firm, partnership, joint venture, association or other
entity; complete and correct copies of constitutional and other
organizational documents of the Company and the CECT Entities, and all
amendments thereto, have been delivered to you, and, except as set forth
in the exhibits to the Registration Statement, no changes therein will be
made on or after the date hereof through and including the time of
purchase or, if later, any additional time of purchase; CECT has been duly
incorporated and is validly existing as a corporation in good standing
under PRC Law, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any; CECT's business license
is in full force and effect under PRC Law, and the operation of CECT is,
in all material respects, in compliance with its business license; the
CECT Huizhou Branch has been duly established and is validly existing with
its business license in full force and effect under PRC Law, and the
operation of the CECT Huizhou Branch is, in all material respects, in
compliance with its business license; CECT is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified and in good standing would not, individually or
in the aggregate, have a Material Adverse Effect; all of the outstanding
equity interests of CECT have been duly authorized and validly issued, are
fully paid and non-assessable, have been issued in compliance with all
applicable securities laws, were not issued in violation of any preemptive
right, resale right, right of first refusal or similar right and are owned
by the Company and Qiao Xing Group Limited subject to no security
interest, other encumbrance or adverse claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or
other rights to convert any obligation into equity or ownership interests
in the CECT Entities are outstanding;
(h) the Shares have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and non-assessable and free of
statutory and contractual preemptive rights, resale rights, rights of
first refusal and similar rights; the Shares, when issued and delivered
against payment therefor as provided herein, will be free of any
restriction upon the voting or transfer thereof pursuant to the Company's
constitutional and other organizational documents or any agreement or
other instrument to which the Company is a party;
-8-
(i) the share capital of the Company, including the Shares, conforms
in all material respects to each description thereof, if any, contained in
the Registration Statement, the Preliminary Prospectuses, the Prospectus
and the Permitted Free Writing Prospectuses, if any; and the certificates
for the Shares are in due and proper form and the holders of the Shares
will not be subject to personal liability solely by reason of being such
holders;
(j) the Registration Statement, each Preliminary Prospectus, the
Prospectus, the Exchange Act Registration Statement, and the filing of the
Registration Statement, the Prospectus and the Exchange Act Registration
Statement with the Commission have each been duly authorized by and on
behalf of the Company, and the Registration Statement and the Exchange Act
Registration Statement have each been duly executed pursuant to such
authorization by and on behalf of the Company;
(k) this agreement has been duly authorized, executed and delivered
by the Company;
(l) neither the Company nor any of the CECT Entities is in breach or
violation of or in default under (nor has any event occurred which, with
notice, lapse of time or by operation of law or any combination of the
foregoing, would result in any breach or violation of, constitute a
default under or give the holder of any indebtedness (or a person acting
on such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a part of such indebtedness under) (i) its
respective constitutional and other organizational documents, or (ii) as
of the listing, the rules and regulations of the NYSE applicable to it, or
(iii) any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any license, lease,
contract or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound or affected, or (iv) any
applicable law, regulation or rule, or (v) any rule or regulation of any
self-regulatory organization or other non-governmental regulatory
authority, or (vi) any decree, judgment or order applicable to it or any
of its properties, except, in the case of clauses (iii), (iv), (v) and
(vi) of this paragraph, where any such breach, violation or default would
not, individually or in the aggregate, have a Material Adverse Effect;
(m) the execution, delivery and performance of this agreement, the
issuance and sale of the Shares, the sale of the Shares by the Selling
Shareholders, and the consummation of the transactions contemplated hereby
will not conflict with, result in any breach or violation of or constitute
a default under (nor constitute any event which, with notice, lapse of
time or both, would result in any breach or violation of, constitute a
default under or give the holder of any indebtedness (or a person acting
on such holder's behalf) the right to
-9-
require the repurchase, redemption or repayment of all or a part of such
indebtedness under) (or result in the creation or imposition of a lien,
charge or encumbrance on any property or assets of the Company or any CECT
Entity pursuant to) (i) the constitutional and other organizational
documents of the Company or any of the CECT Entities, or (ii) as of the
listing, the rules and regulations of the NYSE applicable to it, or (iii)
any indenture, mortgage, deed of trust, bank loan or credit agreement or
other evidence of indebtedness, or any license, lease, contract or other
agreement or instrument to which the Company or any of the CECT Entities
is a party or by which any of them or any of their respective properties
may be bound or affected, or (iv) any applicable law, regulation or rule,
or (v) any rule or regulation of any self-regulatory organization or other
non-governmental regulatory authority, or (vi) any decree, judgment or
order applicable to the Company or any of the CECT Entities or any of
their respective properties, except, in the case of clauses (iii), (iv),
(v) and (vi) of this paragraph, where any such breach, violation or
default would not, individually or in the aggregate, have a Material
Adverse Effect;
(n) no approval, authorization, consent or order of or filing with
any federal, state, local PRC or other governmental or regulatory
commission, board, body, authority or agency, or of or with any
self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the NYSE), or approval of the
shareholders of the Company, is required in connection with the issuance
and sale of the Shares, the sale of the Shares to be sold by the Selling
Shareholders or the consummation of the transactions contemplated hereby,
other than (i) registration of the Shares under the Act, which has been
effected (or, with respect to any registration statement to be filed
hereunder pursuant to Rule 462(b) under the Act, will be effected in
accordance herewith), (ii) any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters or (iii) under the Conduct
Rules of the National Association of Securities Dealers, Inc. (the
"NASD");
(o) except as described in the Disclosure Package, (i) no person has
the right, contractual or otherwise, to cause the Company to issue or sell
to it any Ordinary Shares or any other share capital or other equity
interests of the Company, (ii) no person has any preemptive rights, resale
rights, rights of first refusal or other rights to purchase any Ordinary
Shares or share capital of or other equity interests in the Company, (iii)
no person has the right to act as an underwriter or as a financial advisor
to the Company in connection with the offer and sale of the Shares; and
(iv) no person has the right, contractual or otherwise, to cause the
Company to register under the Act any Ordinary Shares or any other share
capital of or other equity interests in the Company, or to include any
such shares or interests in the Registration Statement or the offering
contemplated thereby;
(p) each of the Company and the CECT Entities has all necessary
-10-
licenses, authorizations, consents and approvals and has made all
necessary filings required under PRC Law or any other applicable law,
regulation or rule, and has obtained all necessary licenses,
authorizations, consents and approvals from other persons, in order to
conduct their respective businesses; neither the Company nor any of the
CECT Entities has received notice of any proceedings relating to
revocation, suspension or modification of any such license, authorization,
consent or approval; and each of the Company and the CECT Entities is in
compliance with such licenses, authorizations, consents and approvals in
all material respects;
(q) there are no actions, suits, claims, investigations or
proceedings pending or, to the Company's knowledge, threatened or
contemplated to which the Company or any of the CECT Entities or any of
their respective directors or officers is or would be a party or of which
any of their respective properties is or would be subject at law or in
equity, before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency, or before or by
any self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the NYSE), except any such
action, suit, claim, investigation or proceeding which, if resolved
adversely to the Company or any CECT Entity, would not, individually or in
the aggregate, have a Material Adverse Effect;
(r) KPMG, whose report on the consolidated financial statements of
the Company and its subsidiaries is included in the Registration
Statement, the Preliminary Prospectuses, the Prospectus, and the Permitted
Free Writing Prospectuses, if any, are independent registered public
accountants as required by the Act and by the rules of the Public Company
Accounting Oversight Board of the United States;
(s) the consolidated financial statements included in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any, together with the related
notes and schedules, present fairly the consolidated financial position of
the Company and its subsidiaries as of the dates indicated and have been
prepared in compliance with the requirements of the Act and Exchange Act
and in conformity with U.S. generally accepted accounting principles
applied on a consistent basis during the periods involved; all pro forma
financial statements or data included in the Registration Statement, the
Preliminary Prospectuses, the Prospectus and the Permitted Free
-11-
Writing Prospectuses, if any, comply with the requirements of the Act and
the Exchange Act, and the assumptions used in the preparation of such pro
forma financial statements and data are reasonable, the pro forma
adjustments used therein are appropriate to give effect to the
transactions or circumstances described therein and the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of those statements and data; the other financial and
statistical data contained in the Registration Statement, the Preliminary
Prospectuses, the Prospectus and the Permitted Free Writing Prospectuses,
if any, are accurately and fairly presented and prepared on a basis
consistent with the financial statements and books and records of the
Company; there are no financial statements (historical or pro forma) that
are required to be included in the Registration Statement, any Preliminary
Prospectus or the Prospectus that are not included as required, except
where a waiver has been properly obtained from the Commission and in form
acceptable to the Representative; the Company and the CECT Entities do not
have any material liabilities or obligations, direct or contingent
(including any off-balance sheet obligations), not described in the
Registration Statement (excluding the exhibits thereto), each Preliminary
Prospectus and the Prospectus; and all disclosures contained in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any, regarding "non-GAAP
financial measures" (as such term is defined by the rules and regulations
of the Commission) comply with Regulation G of the Exchange Act and Item
10 of Regulation S-K under the Act, to the extent applicable; and the
financial information of the Company included under "Recent developments"
in the Registration Statement, the Preliminary Prospectuses, the
Prospectus and the Permitted Free Writing Prospectuses is: (i) true and
correct in all material respects; (ii) will not differ in any material
respect from the corresponding amounts to be reported by the Company in
connection with the announcement of its results for the quarter ended
March 31, 2007 and filed with the SEC on Form 6-K (assuming consummation
of the offering); and (iii) has been derived from the Company's accounting
records and prepared in conformity with U.S. GAAP and on a basis
consistent with the Company's audited consolidated financial statements
included in the Registration Statement, including all adjustments,
consisting only of normal recurring adjustments (other than adjustments
based upon the finalization of the Company's quarterly closing, review and
reporting processes), necessary in the opinion of the management of the
Company to provide a fair presentation of the results for such period
presented;
(t) subsequent to the respective dates as of which information is
given in the Registration Statement, the Preliminary Prospectuses, the
Prospectus and the Permitted Free Writing Prospectuses, if any, in each
case excluding any amendments or supplements to the foregoing made after
the execution of this agreement, there has not been (i) any material
adverse change, or any development involving a prospective material
adverse change, in the business, properties, management, financial
condition or results of operations of the Company and the CECT Entities,
taken as a whole, (ii) any transaction not in the ordinary course of
business of the Company and the CECT Entities, which is material to the
Company and the CECT Entities, taken as a whole, (iii) any obligation or
liability, direct or contingent (including any off-balance sheet
obligations), incurred by the Company or any CECT Entity, which is
material to the Company and the CECT Entities, taken as a whole, (iv) any
change in the share capital or outstanding indebtedness of the Company or
any CECT Entity or (v) any dividend or distribution of any kind declared,
paid or made on the
-12-
share capital of the Company or any CECT Entity;
(u) the Company has obtained for the benefit of the Underwriters the
agreement (each a "Lock-Up Agreement"), substantially in the form set
forth as Exhibit A hereto, of the directors, executive officers, the
Selling Shareholders, and each other security holder of the Company named
in Exhibit A-1 hereto; the Representative agrees that it will not grant a
waiver to, or release or exemption from, any such Lock-Up Agreement
without first notifying the Company;
(v) neither the Company nor any CECT Entity is, and at no time
during which a prospectus is required by the Act to be delivered (whether
physically or through compliance with Rule 172 under the Act or any
similar rule) in connection with any sale of Shares will either of them
be, and, after giving effect to the offering and sale of the Shares,
neither of them will be, an "investment company" or an entity "controlled"
by an investment company, as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act");
(w) the Company does not expect to be a Passive Foreign Investment
Company ("PFIC") as such term is defined in the United States Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder for the taxable year ending December 31, 2007,
and has no plan or intention to conduct its business in a manner that
would be reasonably expected to result in the Company becoming a PFIC in
the future;
(x) except as described in the Disclosure Package, the Company and
each of the CECT Entities have good and marketable title to all property
(real and personal) described in the Registration Statement, the
Preliminary Prospectuses, the Prospectus and the Permitted Free Writing
Prospectuses, if any, as being owned by any of them, free and clear of all
liens, claims, security interests or other encumbrances; all the property
described in the Registration Statement, the Preliminary Prospectuses, the
Prospectus and the Permitted Free Writing Prospectuses, if any, as being
held under lease by the Company or a CECT Entity is held thereby under
valid, subsisting and enforceable leases;
(y) except as disclosed in the Disclosure Package, the Company and
the CECT Entities own, or have obtained valid and enforceable licenses
for, or other rights to use, the inventions, patent applications, patents,
trademarks (both registered and unregistered), trade names, service names,
copyrights, trade secrets and other proprietary information described in
the Registration Statement, the Preliminary Prospectuses, the Prospectus
and the Permitted Free Writing Prospectuses, if any, as being owned or
licensed by them or which are necessary for the conduct of their
respective businesses as currently conducted or as proposed to be
conducted (including but not limited to the commercialization of products
or services described in the Registration Statement, the Preliminary
Prospectuses, the Prospectus and the Permitted Free
-13-
Writing Prospectuses, if any, as under development), (collectively,
"Intellectual Property"), except where the failure to own, license or have
such rights would not, individually or in the aggregate, have a Material
Adverse Effect; (i) there are no third parties who have or, to the
Company's knowledge, will be able to establish rights to any Intellectual
Property, except for, and to the extent of, the ownership rights of the
owners of the Intellectual Property which the Registration Statement
(excluding the exhibits thereto), each Preliminary Prospectus and the
Prospectus disclose is licensed to the Company; (ii) to the Company's
knowledge, there is no infringement by third parties of any Intellectual
Property; (iii) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others challenging the
Company's rights in or to any Intellectual Property, except as would not,
individually or in the aggregate, have a Material Adverse Effect, and the
Company is unaware of any facts which could form a reasonable basis for
any such action, suit, proceeding or claim; (iv) there is no pending or,
to the Company's knowledge, threatened action, suit, proceeding or claim
by others challenging the validity, enforceability or scope of any
Intellectual Property, except as would not, individually or in the
aggregate, have a Material Adverse Effect, and the Company is unaware of
any facts which could form a reasonable basis for any such action, suit,
proceeding or claim; (v) there is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others that the
Company or any CECT Entity infringes or otherwise violates, or would, upon
the commercialization of any product or service described in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any, as under development,
infringe or violate, any patent, trademark, trade name, service name,
copyright, trade secret or other proprietary rights of others, except as
would not, individually or in the aggregate, have a Material Adverse
Effect, and the Company is unaware of any facts which could form a
reasonable basis for any such action, suit, proceeding or claim; and (vi)
the Company and the CECT Entities have, except as would not individually
or in the aggregate have a Material Adverse Effect, complied with the
terms of each agreement pursuant to which Intellectual Property has been
licensed to the Company or any CECT Entity, and all such agreements are in
full force and effect;
(z) neither the Company nor any of the CECT Entities is engaged in
any unfair labor practice; except for matters which would not,
individually or in the aggregate, have a Material Adverse Effect, (i)
there is (A) no unfair labor practice complaint pending or, to the
Company's knowledge, threatened against the Company or any of the CECT
Entities, and no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending or, to the Company's
knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage
pending or, to the Company's knowledge, threatened against the Company or
any of the CECT Entities and (C) no union representation dispute currently
existing concerning the employees of the Company or any of the CECT
Entities, (ii) to the Company's knowledge, no
-14-
union organizing activities are currently taking place concerning the
employees of the Company or any of the CECT Entities and (iii) there has
been no violation of any PRC Law or other applicable laws, rules or
regulations relating to discrimination in the hiring, promotion or pay of
employees, or any applicable wage or hour laws or the rules and
regulations promulgated thereunder concerning the employees of the Company
or any of the CECT Entities;
(aa) the Company and the CECT Entities and their respective
properties, assets and operations are in compliance with, and the Company
and each of the CECT Entities hold all permits, authorizations and
approvals required under, Environmental Laws (as defined below), except to
the extent that failure to so comply or to hold such permits,
authorizations or approvals would not, individually or in the aggregate,
have a Material Adverse Effect; there are no past, present or, to the
Company's knowledge, reasonably anticipated future events, conditions,
circumstances, activities, practices, actions, omissions or plans that
could reasonably be expected to give rise to any material costs or
liabilities to the Company or any CECT Entity under, or to interfere with
or prevent compliance by the Company or any CECT Entity with,
Environmental Laws; except as would not, individually or in the aggregate,
have a Material Adverse Effect, neither the Company nor any of the CECT
Entities (i) is the subject of any investigation, (ii) has received any
notice or claim, (iii) is a party to or named in any pending or, to the
Company's knowledge, threatened action, suit or proceeding, (iv) is bound
by any judgment, decree or order or (v) has entered into any agreement, in
each case relating to any alleged violation of any Environmental Law or
any actual or alleged release or threatened release or cleanup at any
location of any Hazardous Materials (as defined below) (as used herein,
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order, decree, judgment, injunction,
permit, license, authorization or other binding requirement, or common
law, relating to health, safety or the protection, cleanup or restoration
of the environment or natural resources, including those relating to the
distribution, processing, generation, treatment, storage, disposal,
transportation, other handling or release or threatened release of
Hazardous Materials, and "Hazardous Materials" means any material
(including, without limitation, pollutants, contaminants, hazardous or
toxic substances or wastes) that is regulated by or may give rise to
liability under any Environmental Law);
(bb) all tax returns required to be filed by the Company or any of
the CECT Entities have been timely filed, and all taxes and other
assessments of a similar nature (whether imposed directly or through
withholding) including any interest, additions to tax or penalties
applicable thereto due or claimed to be due from such entities have been
timely paid, other than those being contested in good faith and for which
adequate reserves have been provided and other than those that would not,
individually or in the aggregate, have a Material Adverse
-15-
Effect; except as described in the Disclosure Package, all local and
national PRC governmental tax relief, concessions, waivers, holidays and
preferential treatments enjoyed by the Company and the CECT Entities are
valid and do not violate any PRC Law;
(cc) the Company and each of the CECT Entities maintain insurance
covering their respective owned properties, operations, personnel and
businesses, and in the case of the leased properties the lessor maintains
insurance covering the leased properties, as the Company reasonably deems
adequate; such insurance insures against such losses and risks to an
extent which is adequate in accordance with customary industry practice in
the PRC to protect the Company and the CECT Entities and their respective
businesses; all such insurance is fully in force on the date hereof and
will be fully in force at the time of purchase and each additional time of
purchase, if any; neither the Company nor any CECT Entity has reason to
believe that it will not be able to renew any such insurance as and when
such insurance expires;
(dd) neither the Company nor any CECT Entity has sent or received
any communication regarding termination of, or intent not to renew, any of
the contracts or agreements referred to or described in any Preliminary
Prospectus, the Prospectus or any Permitted Free Writing Prospectus, or
referred to or described in, or filed as an exhibit to, the Registration
Statement, and no such termination or non-renewal has been threatened by
the Company or any CECT Entity or, to the Company's knowledge, any other
party to any such contract or agreement;
(ee) except as described in the Disclosure Package, the Company and
CECT maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences;
(ff) the Company has established and maintains and evaluates
"disclosure controls and procedures" (as such term is defined in Rule
13a-15 and 15d-15 under the Exchange Act) and "internal control over
financial reporting" (as such term is defined in Rule 13a-15 and 15d-15
under the Exchange Act); such disclosure controls and procedures are
designed to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to the Company's
Chief Executive Officer and its Chief Financial Officer by others within
those entities, and such disclosure controls and procedures are effective
in all material respects to perform the
-16-
functions for which they were established; the Company's independent
auditors and the Audit Committee of the Board of Directors of the Company
have been advised of: (i) all significant deficiencies, if any, in the
design or operation of internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial data;
and (ii) all fraud, if any, whether or not material, that involves
management or other employees who have a role in the Company's internal
controls; all material weaknesses, if any, in internal controls have been
identified to the Company's independent auditors; since the date of the
most recent evaluation of such disclosure controls and procedures and
internal controls, there have been no significant adverse changes in
internal controls or in other factors that could significantly affect
internal controls; and the Company has taken all reasonable and necessary
actions to ensure that, upon and at all times after the filing of the
Registration Statement, the Company and the CECT Entities and their
respective officers and directors, in their capacities as such, will be in
compliance in all material respects with the applicable provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and the rules and
regulations promulgated thereunder;
(gg) each "forward-looking statement" (within the meaning of Section
27A of the Act or Section 21E of the Exchange Act) contained in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any, has been made or
reaffirmed with a reasonable basis and in good faith;
(hh) there are no material relationships or transactions among the
Company and the CECT Entities, on the one hand, and their current
shareholders, affiliates, directors or officers, or any affiliates or
members of the immediate families of such persons, on the other hand, that
are not disclosed in the Registration Statement, the Preliminary
Prospectuses and the Prospectus;
(ii) all statistical or market-related data included in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any, are based on or derived
from sources that the Company reasonably believes to be reliable and
accurate, and the Company has obtained the written consent to the use of
such data from such sources to the extent required;
(jj) neither the Company nor any of the CECT Entities nor, to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of the CECT Entities is aware of or has
taken any action, directly or indirectly, that would result in a violation
by such persons of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder; and the Company, the CECT
Entities and, to the knowledge of the Company, its affiliates have
instituted and maintain policies and procedures reasonably designed to
ensure continued compliance therewith;
-17-
(kk) the operations of the Company and the CECT Entities are and
have been conducted at all times in compliance with all money laundering
laws, rules and regulations applicable to them, and no action, suit or
proceeding by or before any court or governmental agency, authority or
body or any arbitrator or non-governmental authority involving the Company
or any of the CECT Entities with respect to such money laundering laws is
pending or, to the Company's knowledge, threatened;
(ll) neither the Company nor any of the CECT Entities nor, to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of the CECT Entities 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 of the Shares
contemplated hereby, or lend, contribute or otherwise make available such
proceeds to any CECT Entity, 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;
(mm) no CECT Entity is currently prohibited, directly or indirectly,
from paying any dividends to the Company, from making any other
distribution on such CECT Entity's share capital, from repaying to the
Company any loans or advances to such CECT Entity from the Company or from
transferring any of such CECT Entity's property or assets to the Company
or any other CECT Entity of the Company; except as disclosed in the
Disclosure Package, any dividends and other distributions declared with
respect to after-tax retained earnings on the equity interests of CECT may
under PRC Law be paid to the Company in Renminbi that, subject to
potential penalties under the Notice on Relevant Issues in the Foreign
Exchange Control over Financing and Return Investment Through Special
Purpose Companies by Residents Inside China issued by PRC State
Administration of Foreign Exchange in October 2005, may be converted into
U.S. dollars and freely transferred out of the PRC, and all such dividends
and other distributions are not and, except as disclosed in the Disclosure
Package, will not be subject to withholding or other taxes under PRC Laws
and, except as disclosed in the Disclosure Package, are otherwise free and
clear of any other tax, withholding or deduction in the PRC, and without
the necessity of obtaining any governmental authorization in the PRC
except for the routine PRC foreign exchange procedures and tax withholding
procedures.
(nn) the issuance and sale of the Shares as contemplated hereby will
not cause any holder of any share capital, securities convertible into or
exchangeable or exercisable for share capital or options, warrants or
other rights to purchase share capital or any other securities of the
Company to have any right to acquire any shares of preferred stock of the
Company;
(oo) except pursuant to this agreement, neither the Company nor any
-18-
of the CECT Entities has incurred any liability for any finder's or
broker's fee or agent's commission in connection with the execution and
delivery of this agreement or the consummation of the transactions
contemplated hereby or by the Registration Statement;
(pp) neither the Company nor any of the CECT Entities nor any of
their respective directors, officers, affiliates or controlling persons
has taken, directly or indirectly, any action designed, or which has
constituted or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(qq) the descriptions of the events and transactions (the
"Restructuring") set forth in the Registration Statement, the Preliminary
Prospectuses and the Prospectus under the captions "Prospectus
summary--Corporate structure" and "Corporate structure and history" are
accurate, complete and fair in all material respects; the Restructuring
does not contravene or conflict with (i) the respective constitutional and
other organizational documents of any of the Company and the CECT
Entities, (ii) any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any license, lease,
contract or other agreement or instrument to which any of the Company or
the CECT Entities is a party or by which they or any of their properties
may be bound or affected, or (iii) any PRC Law or any other applicable
laws, rules or regulations of any governmental agency having jurisdiction
over the Company or the CECT Entities or any of their properties
(including, without limitation, the PRC Ministry of Commerce, the
State-owned Assets Supervision and Administration Commission of the PRC
State Council, the PRC State Administration of Industry and Commerce and
the State Administration of Foreign Exchange of the PRC); except, in the
case of clause (ii) of this paragraph, where any such contravention or
conflict would not, individually or in the aggregate, have a Material
Adverse Effect; and except that clause (iii) of this paragraph is subject
to the following, none of which will, individually or in the aggregate,
have a Material Adverse Effect: (x) the approval of the acquisition of
certain registered capital of CECT in 2002 was rendered by the Beijing
Foreign Economic and Trade Commission outside of its approval authority,
which was limited to investments of US$30,000,000 or less at the time of
the approval in 2002, but given that the limitation was increased to
US$100,000,000 and the State Foreign Economic and Trade Commission has not
taken any substantive action after becoming aware of the matter, the prior
action of the Beijing Foreign Economic and Trade Commission will not have
a Material Adverse Effect on the ownership of the Company to such
registered capital, and (y) the acquisition of 25% registered capital of
CECT by ▇▇▇ ▇▇▇▇ Qiao Xing Communication Industry Co., Ltd. in 2004, which
was later acquired by the Company in 2004, was not qualified for
re-
-19-
investment in that the registered capital of ▇▇▇ ▇▇▇▇ Qiao Xing
Communication Industry Co., Ltd. was not fully paid up, but because such
qualification requirement for re-investment was abolished in 2006, the
lack of such qualification will not have a Material Adverse Effect on the
Company's ownership to CECT's registered capital.
(rr) all governmental authorizations required in connection with the
Restructuring have been made or unconditionally obtained in writing, and
no such governmental authorization has been withdrawn or revoked or is
subject to any condition precedent which has not been fulfilled or
performed;
(ss) the Company has taken, or is in the process of taking, all
reasonable steps to comply with, and to ensure compliance by each of its
shareholders, option holders, directors, officers, and employees that is,
or is directly or indirectly owned or controlled by, a PRC resident or
citizen with any applicable rules and regulations of the relevant PRC
government agencies (including, without limitation, the Ministry of
Commerce, National Development and Reform Commission and the State
Administration of Foreign Exchange) relating to overseas investment by PRC
residents and citizens or overseas listing by offshore special purpose
vehicles controlled directly or indirectly by PRC companies and
individuals, such as the Company, (the "PRC Overseas Investment and
Listing Regulations"), including, without limitation, requesting each
shareholder, option holder, director, officer and employee that is, or is
directly or indirectly owned or controlled by, a PRC resident or citizen
to complete any registration and other procedures required under
applicable PRC Overseas Investment and Listing Regulations;
(tt) to the Company's knowledge, there are no affiliations or
associations between (i) any member of the NASD and (ii) the Company or
any of the Company's officers, directors or 5% or greater security holders
or any beneficial owner of the Company's unregistered equity securities
that were acquired at any time on or after the 180th day immediately
preceding the date the Registration Statement was initially filed with the
Commission, except as disclosed in the Disclosure Package;
(uu) the Company is a "foreign private issuer" within the meaning of
Rule 405 under the Act;
(vv) except as disclosed in the Disclosure Package, no transaction,
stamp, capital or other issuance, registration or transfer taxes or duties
are, under the laws and regulations of each of the PRC and the British
Virgin Islands, payable in the PRC and the British Virgin Islands by or on
behalf of the Underwriters to any PRC or British Virgin Islands taxing
authority in connection with (i) the sale and delivery of the Shares, the
issuance of the Shares, and the delivery of the Shares to or for the
accounts of the Underwriters, (ii) the initial sale and delivery by the
Underwriters of the Shares to purchasers thereof, (iii) the holding or
transfer of the Shares outside the British Virgin Islands, or (iv) the
execution and delivery of this agreement;
-20-
(ww) the choice of the laws of the State of New York as the
governing law of this agreement is a valid choice of law and would be
recognized and given effect to in any action brought before a court of
competent jurisdiction in the British Virgin Islands, except for those
laws (i) which such court considers to be procedural in nature, (ii) which
are revenue or penal laws or (iii) the application of which would be
inconsistent with public policy, as such term is interpreted under the
laws of the British Virgin Islands; the choice of the laws of the State of
New York as the governing law of this agreement is a valid choice of law
and would be recognized and given effect to in any action brought before a
court of competent jurisdiction in the PRC, and any final judgment for a
fixed or readily calculable sum of money rendered by any court of the
State of New York or of the United States located in the State of New York
having jurisdiction under its own domestic laws in respect of any suit,
action or proceeding against the Company based upon this agreement would
be declared enforceable against the Company by the courts of the PRC in
accordance with the requirements of PRC Civil Procedures Law based either
on treaties between the PRC and the United States or on reciprocity
between jurisdictions, without payment of any stamp, registration or
similar tax or duty, provided that (a) the judgment was not contrary to
the public policy, state sovereignty or security of the PRC, (b) the
judgment was not given or obtained by fraud, (c) the judgment was not
based on clear mistake of law or fact, (d) the judgment was not directly
or indirectly for the payment of taxes or other charges of a like nature
or of a fine or other penalty, (e) the judgment was for a definite sum of
money, (f) the judgment was final and conclusive, (g) adequate service of
process has been effected and the defendant has had a reasonable
opportunity to be heard, (h) such judgments do not conflict with any other
valid judgment in the same matter between the same parties, (i) an action
between the same parties in the same matter is not pending in any PRC
court at the time the lawsuit is instituted in the New York Court, and (j)
the requirements of the PRC Civil Procedures Law based either on treaties
between the PRC and the United States or on reciprocity between such
jurisdictions are satisfied; the Company has the power to submit, and
pursuant to Section 16 hereof has legally, validly, effectively and
irrevocably submitted, to the personal jurisdiction of each New York Court
(as defined in Section 16 hereof), and the Company has the power to
designate, appoint and authorize, and pursuant to Section 16 hereof, has
legally, validly, effectively and irrevocably designated, appointed and
authorized, the Authorized Agent (as defined in Section 16 hereof) for
service of process in any action arising out of or relating to this
agreement in any New York Court, and service of process effected on such
Authorized Agent will be effective to confer valid personal jurisdiction
over the Company as provided in Section 16 hereof;
(xx) the courts of the British Virgin Islands would recognize as a
valid judgment, a final and conclusive judgment in personam obtained in
the New York Court against the Company based upon this agreement under
which a sum of money is payable (other than a sum of money payable in
respect of
-21-
multiple damages, taxes or other charges of a like nature or in respect of
a fine or other penalty) and would give a judgment based thereon provided
that (a) such courts had proper jurisdiction over the parties subject to
such judgment; (b) such courts did not contravene the rules of natural
justice of the British Virgin Islands; (c) such judgment was not obtained
by fraud; (d) the enforcement of the judgment would not be contrary to the
public policy of the British Virgin Islands; (e) no new admissible
evidence relevant to the action is submitted prior to the rendering of the
judgment by the courts of the British Virgin Islands; and (f) there is due
compliance with the correct procedures under the laws of the British
Virgin Islands;
(yy) each of the sections entitled "Management's discussion and
analysis of financial condition and results of operations" in the
Preliminary Prospectuses and the Prospectus accurately and fully describes
in all material respects (i) accounting policies that the Company believes
are the most important in the portrayal of the Company's financial
condition and results of operations and that require management's most
difficult, subjective or complex judgments; (ii) judgments and
uncertainties affecting the application of critical accounting policies;
and (iii) the likelihood that materially different amounts would be
reported under different conditions or using different assumptions and an
explanation thereof;
(zz) (i) the Preliminary Prospectuses and the Prospectus each fairly
and accurately describe all material trends, demands, commitments and
events known to the Company, and uncertainties, and the potential effects
thereof, that the Company believes would materially affect its liquidity
and are reasonably likely to occur; and (ii) neither the Company nor any
CECT Entity is engaged in any off-balance sheet transactions,
arrangements, and obligations, including, without limitation,
relationships with unconsolidated entities that are contractually limited
to narrow activities that facilitate the transfer of or access to assets
by the Company or any of CECT Entities, such as structured finance
entities and special purpose entities that are reasonably likely to have a
material effect on the liquidity of the Company or any of CECT Entities or
the availability thereof or the requirements of the Company or any of CECT
Entities for capital resources. As used herein, the phrase "reasonably
likely" refers to a disclosure threshold lower than "more likely than
not";
(aaa) the statements set forth in each Preliminary Prospectus and
the Prospectus under the caption "Description of share capital," insofar
as they purport to constitute a summary of the terms of the Shares, and
under the captions "Taxation," "Underwriting," "Enforceability of civil
liabilities" and "Regulation," insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair in all material respects;
(bbb) other than as set forth in each Preliminary Prospectus and the
-22-
Prospectus, no governmental approvals are currently required in the
British Virgin Islands in order for the Company to pay dividends or other
distributions declared by the Company to holders of Shares, and no other
withholding or other taxes under the laws and regulations of the British
Virgin Islands will be imposed in connection with the declaration and
payment by the Company of dividends and other distributions in respect of
its share capital;
(ccc) the entering into and performance or enforcement of this
agreement in accordance with its terms will not subject the Underwriters
to a requirement to be licensed or otherwise qualified to do business in
the British Virgin Islands or in the PRC, nor will the Underwriters be
deemed to be resident, domiciled, carrying on business through an
establishment or place in the British Virgin Islands or in the PRC or in
breach of any laws or regulations in the PRC or, to the best of the
Company's knowledge after due inquiry, the British Virgin Islands, by
reason of the entering into, performance or enforcement of this agreement;
(ddd) each of the Company and each of the Company's directors that
signed the Registration Statement is aware of, and has been advised as to,
the content of the Rules on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors jointly promulgated by the Ministry of
Commerce, the State Assets Supervision and Administration Commission, the
State Tax Administration, the State Administration of Industry and
Commerce, the China Securities Regulatory Commission (the "CSRC") and the
State Administration of Foreign Exchange of the PRC on August 8, 2006 (the
"M&A Rules"), in particular the relevant provisions thereof which purport
to require offshore special purpose vehicles, or SPVs, formed for listing
purposes and controlled directly or indirectly by PRC companies or
individuals, to obtain the approval of the CSRC prior to the listing and
trading of their securities on an overseas stock exchange; the Company has
received legal advice specifically with respect to the M&A Rules from its
PRC counsel and the Company understands such legal advice; and the Company
has fully communicated such legal advice from its PRC counsel to each of
its directors that signed the Registration Statement and each director has
confirmed that he or she understands such legal advice;
(eee) the statements set forth in the Prospectus under the captions
"Risk Factors--If the China Securities Regulatory Commission, or CSRC, or
another PRC regulatory agency, determines that CSRC approval is required
in connection with this offering, this offering may be delayed or
cancelled, or we may become subject to penalties" and "Risk
factors--Recent PRC regulations relating to the establishment of offshore
special purpose companies by PRC residents, if applied to us, may subject
the PRC resident shareholders of us or our parent company to personal
liability and limit our ability to acquire PRC companies or to inject
capital into our PRC subsidiary, limit our PRC subsidiary's ability to
distribute profits to us or otherwise materially adversely affect us"
represent fair and accurate summaries of the matters described
-23-
therein, and (i) no material information has been omitted from such
summaries which would make the same misleading in any material respect,
and (ii) nothing has come to the attention of the Company or the
Controlling Shareholder that would lead them to believe that the CSRC is
taking any action to require the Company to seek their approval for the
consummation of the transactions contemplated under this agreement or that
would otherwise have a Material Adverse Effect.
In addition, any certificate signed by any officer of the Company or any
of the CECT Entities and delivered to the Underwriters or counsel for the
Underwriters in connection with the offering of the Shares shall be deemed to
be a representation and warranty by the Company, as to matters covered
thereby, to each Underwriter.
4. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder, severally and not jointly with the other Selling
Shareholders, represents and warrants to each of the Underwriters that:
(a) such Selling Shareholder has not, prior to the execution of this
agreement, offered or sold any Shares by means of any "prospectus" (within
the meaning of the Act), or used any "prospectus" (within the meaning of
the Act) in connection with the offer or sale of the Shares, in each case
other than the then most recent Preliminary Prospectus and any Permitted
Free Writing Prospectus, if any;
(b) neither the execution, delivery and performance of this
agreement or the Custody Agreement (as defined below) or Power of Attorney
to which such Selling Shareholder is a party nor the sale by such Selling
Shareholder of the Shares to be sold by such Selling Shareholder pursuant
to this agreement nor the consummation of the transactions contemplated
hereby or thereby will conflict with, result in any breach or violation of
or constitute a default under (or constitute any event which with notice,
lapse of time or both would result in any breach or violation of or
constitute a default under) (i) the constitutional and other
organizational documents of such Selling Shareholder, (ii) any indenture,
mortgage, deed of trust, bank loan or credit agreement or other evidence
of indebtedness, or any license, lease, contract or other agreement or
instrument to which such Selling Shareholder is a party or by which such
Selling Shareholder or any of its properties may be bound or affected,
(iii) any applicable law, regulation or rule, (iv) any rule or regulation
of any self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the rules and regulations of the
NYSE) having jurisdiction over such Selling Shareholder or the property of
such Selling Shareholder, or (v) any decree, judgment or order applicable
to such Selling Shareholder or any of its properties, except, in the case
of clauses (ii), (iii), (iv) and (v) of this paragraph, where any such
breach, violation or default would not, individually or in the aggregate,
have a Material Adverse Effect or encumber or otherwise adversely affect
the prospective rights of the Underwriters, and
-24-
subsequent transferees, in and to the Shares to be sold by such Selling
Shareholder pursuant to this agreement;
(c) no approval, authorization, consent or order of or filing with
any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or of or with any
self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the NYSE) having jurisdiction
over such Selling Shareholder or the property of such Selling Shareholder,
is required in connection with the sale of the Shares to be sold by such
Selling Shareholder pursuant to this agreement or the consummation by such
Selling Shareholder of the transactions contemplated hereby or by the
Custody Agreement or Power of Attorney to which such Selling Shareholder
is a party other than (i) registration of the Shares under the Act, which
has been effected (or, with respect to any registration statement to be
filed hereunder pursuant to Rule 462(b) under the Act, will be effected in
accordance herewith), (ii) any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters or (iii) under the Conduct
Rules of the NASD;
(d) neither such Selling Shareholder nor any of its affiliates has
taken, directly or indirectly, any action designed to, or which has
constituted or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(e) there are no affiliations or associations between any member of
the NASD and such Selling Shareholder, except as disclosed in the
Disclosure Package; none of the proceeds received by such Selling
Shareholder from the sale of the Shares to be sold by such Selling
Shareholder pursuant to this agreement will be paid to a member of the
NASD or any affiliate of (or person "associated with," as such terms are
used in the Rules of the NASD) such member;
(f) such Selling Shareholder now is and, at the time of delivery of
such Shares (whether the time of purchase or any additional time of
purchase, as the case may be), will be the lawful owner of the number of
Shares to be sold by such Selling Shareholder pursuant to this agreement
and has and, at the time of delivery of such Shares, will have valid and
marketable title to such Shares, and upon delivery of and payment for such
Shares (whether at the time of purchase or any additional time of
purchase, as the case may be), the Underwriters will acquire valid and
marketable title to such Shares free and clear of any claim, lien,
encumbrance, security interest, community property right, restriction on
transfer or other defect in title;
(g) such Selling Shareholder has and, at the time of delivery of the
Shares to be sold by such Selling Shareholder pursuant to this agreement
-25-
(whether the time of purchase or any additional time of purchase, as the
case may be), will have full legal right, power and capacity, and all
authorizations and approvals required by law (other than those imposed by
the Act and state securities or blue sky laws), to (i) enter into this
agreement, the Custody Agreement (as defined below) and, in the case of
the Controlling Shareholder, the Power of Attorney, (ii) sell, assign,
transfer and deliver the Shares to be sold by such Selling Shareholder
pursuant to this agreement in the manner provided in this agreement and
(iii) make the representations, warranties and agreements made by such
Selling Shareholder herein;
(h) this agreement and the custody agreement (the "Custody
Agreement"), dated [April _____, 2007] among Computershare Shareholder
Services, Inc., as custodian (the "Custodian"), the Company and such
Selling Shareholder, and the Power of Attorney, have each been duly
executed and delivered by such Selling Shareholder, and each is a legal,
valid and binding agreement of such Selling Shareholder enforceable in
accordance with its terms;
(i) the Controlling Shareholder has duly and irrevocably authorized
each of the Representatives of the Controlling Shareholder (whether acting
alone or together), on behalf of the Controlling Shareholder, to execute
and deliver this agreement and any other documents necessary or desirable
in connection with the transactions contemplated hereby or thereby and to
deliver the Shares to be sold by the Controlling Shareholder pursuant to
this agreement and receive payment therefor pursuant hereto;
(j) the sale of the Shares to be sold by such Selling Shareholder
pursuant to this agreement is not prompted by any material information
concerning the Company or any CECT Entity which is not set forth in the
Registration Statement (excluding the exhibits thereto), each Preliminary
Prospectus and the Prospectus;
(k) at the time of purchase and each additional time of purchase,
all stock transfer or other taxes (other than income taxes), if any, that
are required to be paid in connection with the sale and transfer of the
Shares to be sold by such Selling Shareholder to the several Underwriters
hereunder will be fully paid or provided for by such Selling Shareholder,
and all laws imposing such taxes will be fully complied with; and
(l) pursuant to the Custody Agreement, such Selling Shareholder
agrees that (i) the arrangements made by such Selling Shareholder for
custody and for the appointment of the Custodian are irrevocable, and (ii)
the obligations of such Selling Shareholder thereunder shall not be
terminated by operation of law or the liquidation, dissolution, merger or
consolidation of such Selling Shareholder or the occurrence of any other
event (each, an "Event"); if an Event occurs before the delivery of the
Shares to be sold by such Selling Shareholder to the several Underwriters
hereunder, the Custody Agreement and this
-26-
agreement, and actions taken by the Custodian pursuant to such Custody
Agreement shall be as valid as if such Event had not occurred, regardless
of whether or not the Custodian shall have received notice thereof.
In addition, any certificate signed by any officer of such Selling
Shareholder or by any Representative of the Controlling Shareholder (in the case
of the Controlling Shareholder) and delivered to the Underwriters or counsel for
the Underwriters in connection with the offering of the Shares shall be deemed
to be a representation and warranty by such Selling Shareholder, as to matters
covered thereby, to each Underwriter.
5. Certain Covenants of the Company. The Company hereby agrees:
(a) to furnish such information as may be reasonably required and
otherwise to cooperate in qualifying the Shares for offering and sale
under the securities or blue sky laws of such states or other
jurisdictions as the Representative may designate and to maintain such
qualifications in effect so long as the Representative may request for the
distribution of the Shares; provided, however, that the Company shall not
be required to qualify as a foreign corporation or to consent to the
service of process under the laws of any such jurisdiction (except service
of process with respect to the offering and sale of the Shares); and to
promptly advise the Representative of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Shares for offer or sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(b) to make available to the Underwriters in New York City, as soon
as practicable after this agreement becomes effective, and thereafter from
time to time to furnish to the Underwriters, as many copies of the
Prospectus (or of the Prospectus as amended or supplemented if the Company
shall have made any amendments or supplements thereto after the effective
date of the Registration Statement) as the Underwriters may reasonably
request for the purposes contemplated by the Act; in case any Underwriter
is required to deliver (whether physically or through compliance with Rule
172 under the Act or any similar rule), in connection with the sale of the
Shares, a prospectus after the nine-month period referred to in Section
10(a)(3) of the Act, the Company will prepare, at its expense, promptly
upon request such amendment or amendments to the Registration Statement
and the Prospectus as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act;
(c) if, at the time this agreement is executed and delivered, it is
necessary or appropriate for a post-effective amendment to the
Registration Statement, or a Registration Statement under Rule 462(b)
under the Act, to be filed with the Commission and become effective before
the Shares may be sold, the Company will use its best efforts to cause
such post-effective amendment or such Registration Statement to be filed
and become effective, and will pay any
-27-
applicable fees in accordance with the Act, as soon as possible; and the
Company will advise the Representative promptly and, if requested by the
Representative, will confirm such advice in writing, (i) when such
post-effective amendment or such Registration Statement has become
effective, and (ii) if Rule 430A under the Act is used, when the
Prospectus is filed with the Commission pursuant to Rule 424(b) under the
Act (which the Company agrees to file in a timely manner in accordance
with such Rules);
(d) to advise the Underwriters promptly and, if requested by the
Representative, confirming such advice in writing, of any request by the
Commission for amendments or supplements to the Registration Statement or
the Exchange Act Registration Statement, any Preliminary Prospectus, the
Prospectus or any Permitted Free Writing Prospectus or for additional
information with respect thereto, or of notice of institution of
proceedings for, or the entry of, a stop order, suspending the
effectiveness of the Registration Statement and, if the Commission should
enter a stop order suspending the effectiveness of the Registration
Statement, to use its best efforts to obtain the lifting or removal of
such order as soon as possible; to advise the Representative promptly of
any proposal to amend or supplement the Registration Statement or the
Exchange Act Registration Statement, any Preliminary Prospectus or the
Prospectus, and to provide the Underwriters and Underwriters' counsel
copies of any such documents for review and comment a reasonable amount of
time prior to any proposed filing and to file no such amendment or
supplement to which the Representative shall object in writing;
(e) subject to Section 5(d) hereof, to file promptly all reports and
documents and any preliminary or definitive proxy or information statement
required to be filed by the Company with the Commission in order to comply
with the Exchange Act for so long as a prospectus is required by the Act
to be delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with any sale of Shares;
and to provide the Representative, for its review and comment, with a copy
of such reports and statements and other documents to be filed by the
Company pursuant to Section 13, 14 or 15(d) of the Exchange Act during
such period a reasonable amount of time prior to any proposed filing, and
to promptly notify the Representative of such filing;
(f) to advise the Representative promptly of the happening of any
event within the period during which a prospectus is required by the Act
to be delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with any sale of Shares,
which event could require the making of any change in the Prospectus then
being used so that the Prospectus would not include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading, and to advise the Representative promptly
if, during such period, it shall become
-28-
necessary to amend or supplement the Prospectus to cause the Prospectus to
comply with the requirements of the Act, and, in each case, during such
time, subject to Section 5(d) hereof, to prepare and furnish, at the
Company's expense, to the Underwriters promptly such amendments or
supplements to such Prospectus as may be necessary to reflect any such
change or to effect such compliance;
(g) to make generally available to its security holders, and to
deliver to the Representative, an earnings statement of the Company (which
will satisfy the provisions of Section 11(a) of the Act) covering a period
of twelve months beginning after the effective date of the Registration
Statement (as defined in Rule 158(c) under the Act) as soon as is
reasonably practicable after the termination of such twelve-month period
but in any case not later than August 15, 2008;
(h) to furnish to the Representative copies of the Registration
Statement, as initially filed with the Commission, and of all amendments
thereto (including all exhibits thereto) and sufficient copies of the
foregoing (other than exhibits) for distribution of a copy to each of the
other Underwriters;
(i) to furnish to the Representative as early as practicable prior
to the time of purchase and any additional time of purchase, as the case
may be, but not later than two business days prior thereto, a copy of the
latest available unaudited interim and monthly consolidated financial
statements, if any, of the Company and its subsidiaries which have been
read by the Company's independent registered public accountants, as stated
in their letter to be furnished pursuant to Section 9(f) hereof;
(j) to apply the net proceeds to the Company from the sale of the
Shares in the manner set forth under the caption "Use of proceeds" in the
Prospectus and to file such reports with the Commission with respect to
the sale of the Shares and the application of the proceeds therefrom as
may be required by Rule 463 under the Act; to not use, and to cause the
CECT Entities not to use, the proceeds from the sale of any Shares,
directly or indirectly, for any purpose or activity that would cause the
Underwriters or any purchaser of the Shares, by virtue of their purchasing
or holding any Shares, to be in violation of the Trading With the Enemy
Act, as amended, the International Emergency Economic Powers Act, as
amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto, or in
connection with business, operations or contracts with the governmental
authority or with any person or entity of Cuba, Iran, North Korea, Syria
or Myanmar or any person or entity that is subject to sanctions under any
program administered by OFAC;
(k) to comply with Rule 433(d) under the Act (without reliance on
-29-
Rule 164(b) under the Act) and with Rule 433(g) under the Act;
(l) beginning on the date hereof and ending on, and including, the
date that is 180 days after the date of the Prospectus (the "Lock-Up
Period"), without the prior written consent of the Representative, not to
(i) issue, sell, offer to sell, contract or agree to sell, hypothecate,
pledge, grant any option to purchase or otherwise dispose of or agree to
dispose of, directly or indirectly, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent position
within the meaning of Section 16 of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, with respect to, any
Ordinary Shares or any other securities of the Company that are
substantially similar to Ordinary Shares, or any securities convertible
into or exchangeable or exercisable for, or any warrants or other rights
to purchase, the foregoing, (ii) file or cause to become effective a
registration statement under the Act relating to the offer and sale of any
Ordinary Shares or any other securities of the Company that are
substantially similar to Ordinary Shares, or any securities convertible
into or exchangeable or exercisable for, or any warrants or other rights
to purchase, the foregoing, (iii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of Ordinary Shares or any other securities of
the Company that are substantially similar to Ordinary Shares, or any
securities convertible into or exchangeable or exercisable for, or any
warrants or other rights to purchase, the foregoing, whether any such
transaction is to be settled by delivery of Ordinary Shares or such other
securities, in cash or otherwise or (iv) publicly announce an intention to
effect any transaction specified in clause (i), (ii) or (iii), except, in
each case, for (A) the registration of the offer and sale of the Shares as
contemplated by this agreement, (B) issuances of Ordinary Shares upon the
exercise of options or warrants disclosed as outstanding in the
Registration Statement (excluding the exhibits thereto), each Preliminary
Prospectus and the Prospectus, (C) the granting of employee share options
not exercisable during the Lock-Up Period pursuant to share incentive
plans described in the Registration Statement (excluding the exhibits
thereto), each Preliminary Prospectus and the Prospectus and (D) issuances
of Ordinary Shares or any other securities in connection with any
acquisition that has been approved by the Representative; provided,
however, that if (a) during the period that begins on the date that is
fifteen (15) calendar days plus three (3) business days before the last
day of the Lock-Up Period and ends on the last day of the Lock-Up Period,
the Company issues an earnings release or material news or a material
event relating to the Company occurs; or (b) prior to the expiration of
the Lock-Up Period, the Company announces that it will release earnings
results during the sixteen (16) day period beginning on the last day of
the Lock-Up Period, then the restrictions imposed by this Section 5(l)
shall continue to apply until the expiration of the date that is fifteen
(15) calendar days plus three (3) business days after the date on which
the issuance of the earnings release or the material news or material
event occurs;
-30-
(m) prior to the time of purchase or any additional time of
purchase, as the case may be, to issue no press release or other
communication directly or indirectly and hold no press conferences with
respect to the Company or any CECT Entity, the financial condition,
results of operations, business, properties, assets, or liabilities of the
Company or any CECT Entity, or the offering of the Shares, without the
Representative's prior consent (such consent not to be unreasonably
withheld by the Representative);
(n) not, at any time upon or after the execution of this agreement,
to, directly or indirectly, offer or sell any Shares by means of any
"prospectus" (within the meaning of the Act), or use any "prospectus"
(within the meaning of the Act) in connection with the offer or sale of
the Shares, in each case other than the Prospectus;
(o) not to, and to cause the CECT Entities not to, take, directly or
indirectly, any action designed, or which will constitute, or has
constituted, or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(p) to use its best efforts to cause the Shares to be listed on the
NYSE and to maintain the listing of the Shares on the NYSE;
(q) to maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar for the Shares;
(r) to indemnify and hold harmless the Underwriters against any
documentary, stamp or similar issue tax, including any interest and
penalties, on the creation, issue and sale of the Shares and on the
execution, delivery and performance of this agreement; to make all
payments to be made by the Company hereunder without withholding or
deduction for or on account of any present or future taxes, duties or
governmental charges whatsoever unless the Company is compelled by law to
deduct or withhold such taxes, duties or charges, in which event, to pay
such additional amounts as may be necessary in order that the net amounts
received after such withholding or deduction shall equal the amounts that
would have been received if no withholding or deduction had been made;
(s) upon request of any Underwriter, to furnish, or cause to be
furnished, to such Underwriter an electronic version of the Company's
trademarks, trade names, service marks and corporate logo for use on the
website, if any, operated by such Underwriter solely for the purpose of
facilitating the on-line offering of the Shares (the "License"); provided,
however, that the License is granted without any fee and may not be
assigned or transferred to any person other than affiliates of such
Underwriter; and
-31-
(t) to comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, and to use its best
efforts to cause the Company's directors and officers, in their capacities
as such, to comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
6. Certain Covenants of the Selling Shareholders. Each Selling Shareholder
hereby agrees:
(a) not, at any time upon or after the execution of this agreement,
to offer or sell any Shares by means of any "prospectus" (within the
meaning of the Act), or use any "prospectus" (within the meaning of the
Act) in connection with the offer or sale of the Shares, in each case
other than the Prospectus;
(b) not to take, directly or indirectly, any action designed, or
which will constitute, or has constituted, or might reasonably be expected
to cause or result in the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Shares;
(c) to pay or cause to be paid all taxes, if any, on the transfer
and sale of the Shares being sold by such Selling Shareholder;
(d) to advise the Representative promptly, and if requested by the
Representative, confirm such advice in writing, so long as a prospectus is
required by the Act to be delivered (whether physically or through
compliance with Rule 172 under the Act or any similar rule) in connection
with any sale of Shares, of (i) any change in information in the
Registration Statement, the Preliminary Prospectuses, the Prospectus and
the Permitted Free Writing Prospectuses, if any, relating to such Selling
Shareholder or (ii) any new material information relating to the Company
or relating to any matter stated in the Registration Statement, the
Preliminary Prospectuses, the Prospectus and the Permitted Free Writing
Prospectuses, if any, which comes to the attention of such Selling
Shareholder;
(e) prior to or concurrently with the execution and delivery of this
agreement, to execute and deliver to the Underwriters a Custody Agreement
and a Lock-Up Agreement, and solely in the case of the Controlling
Shareholder, a Power of Attorney; and
(f) in order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Shareholder shall deliver to the Underwriters
prior to or at the time of purchase a properly completed and executed
United States Treasury W-8BEN or W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
7. Covenant to Pay Costs. The Company agrees to pay all costs, expenses,
fees and
-32-
taxes in connection with (i) the preparation and filing of the Registration
Statement, each Preliminary Prospectus, the Prospectus, each Permitted Free
Writing Prospectus and any amendments or supplements thereto, and the printing
and furnishing of copies of each thereof to the Underwriters and to dealers
(including costs of mailing and shipment), (ii) the registration, issue, sale
and delivery of the Shares including any stock or transfer taxes and stamp or
similar duties payable upon the sale, issuance or delivery of the Shares to the
Underwriters, (iii) the producing, word processing and/or printing of this
agreement, any agreements among the Underwriters, any dealer agreements, any
Powers of Attorney, Custody Agreements, closing documents, agreements or
materials (including compilations thereof) and the reproduction and/or printing
and furnishing of copies of each thereof to the Underwriters and (except closing
documents) to dealers (including costs of mailing and shipment), (iv) the
qualification of the Shares for offering and sale under state or foreign laws
and the determination of their eligibility for investment under state or foreign
law (including the legal fees and filing fees and other disbursements of counsel
for the Underwriters) and the printing and furnishing of copies of any blue sky
surveys or legal investment surveys to the Underwriters and to dealers, (v) any
listing of the Shares on any securities exchange or qualification of the Shares
for quotation on the NYSE and any registration thereof under the Exchange Act,
(vi) any filing for review of the public offering of the Shares by the NASD,
including the legal fees and filing fees and other disbursements of counsel to
the Underwriters relating to NASD matters, (vii) the fees and disbursements of
any transfer agent or registrar for the Shares, (viii) the costs and expenses of
the Company and such Selling Shareholder relating to presentations or meetings
undertaken in connection with the marketing of the offering and sale of the
Shares to prospective investors and the Underwriters' sales forces, including,
without limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations, travel, lodging and other expenses incurred by the
officers of the Company or by such Selling Shareholder and any such consultants,
and the cost of any aircraft chartered in connection with the road show, (ix)
the costs and expenses of qualifying the Shares for inclusion in the book-entry
settlement system of the DTC, (x) the preparation and filing of the Exchange Act
Registration Statement, including any amendments thereto, and (xi) the fees and
disbursements of counsel to the Underwriters. The Company agrees to reimburse
the Representative for all costs and reasonable expenses incurred by it in
connection with the offering, including without limitation, cost of audit and
accounting reports, provision of comfort letters, document production, postage,
telecommunications, travel (including road show travel), reasonable
out-of-pocket expenses and the fees and disbursements of the Representative's
legal counsel and other advisers. For the avoidance of doubt, each of the
Company and the Selling Shareholders agrees to pay for all its own legal fees,
the costs of its accountants, auditors and other advisers, and the costs of all
audit and accounting reports and work. The Company agrees that the
Representative may deduct any and all sums payable to it pursuant to this
Section 7 from the proceeds payable to the Company pursuant to the terms and
conditions of this agreement at the time of purchase of the Firm Shares, and at
the additional time of purchase of the Additional Shares to the extent any
additional costs of a nature as described in this Section 7 are incurred by the
Representative during the period from the time of purchase and the additional
time of purchase.
8. Reimbursement of Underwriters' Expenses. If the Shares are not
delivered for any reason other than the termination of this agreement pursuant
to the fifth paragraph of Section 11
-33-
hereof or the default by one or more of the Underwriters in its or their
respective obligations hereunder, the Company shall, in addition to paying the
amounts described in Section 7 hereof, reimburse the Underwriters for all of
their out of pocket expenses, including the fees and disbursements of their
counsel reasonably incurred by them in connection with the offering of the
Shares and in no event to exceed US$874,000.
9. Conditions of Underwriters' Obligations. The several obligations of the
Underwriters hereunder are subject to the accuracy of the respective
representations and warranties on the part of the Company and each Selling
Shareholder on the date hereof, at the time of purchase and, if applicable, at
the additional time of purchase, the performance by the Company and each Selling
Shareholder of each of their respective obligations hereunder and to the
following additional conditions precedent:
(a) The Company shall furnish to you at the time of purchase
and, if applicable, at the additional time of purchase, an opinion
of Shearman & Sterling LLP, United States counsel for the Company,
addressed to the Underwriters, and dated the time of purchase or the
additional time of purchase, as the case may be, with executed
copies for each of the other Underwriters, substantially in the form
set forth in Exhibit B hereto.
(b) The Company shall furnish to you at the time of purchase
and, if applicable, at the additional time of purchase, an opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, British Virgin Islands counsel for the
Company, addressed to the Underwriters, and dated the time of
purchase or the additional time of purchase, as the case may be,
with executed copies for each of the other Underwriters, and in form
and substance satisfactory to the Representative, substantially in
the form set forth in Exhibit C hereto.
(c) The Company shall furnish to you at the time of purchase
and, if applicable, at the additional time of purchase, an opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, British Virgin Islands counsel for each
Selling Shareholder that is a British Virgin Islands company,
addressed to the Underwriters, and dated the time of purchase or the
additional time of purchase, as the case may be, with executed
copies for each of the other Underwriters, and in form and substance
satisfactory to the Representative, substantially in the form set
forth in Exhibit D hereto.
(d) The Company shall furnish to you at the time of purchase
and, if applicable, at the additional time of purchase, an opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, Cayman Islands counsel for each Selling
Shareholder that is a Cayman Islands company, addressed to the
Underwriters, and dated the time of purchase or the additional time
of purchase, as the case may be, with executed copies for each of
the other Underwriters, and in form and substance satisfactory to
the Representative, substantially in the forms set forth in Exhibit
E hereto.
-34-
(e) You shall have received at the time of purchase, and, if
applicable, at the additional time of purchase, an opinion of King
and Wood, PRC counsel for the Company, addressed to the
Underwriters, and dated the time of purchase or the additional time
of purchase, as the case may be, in form and substance satisfactory
to the Representative, substantially in the form set forth in
Exhibit F hereto.
(f) You shall have received from KPMG letters dated,
respectively, the date of this agreement, the date of the
Prospectus, the time of purchase and, if applicable, the additional
time of purchase, and addressed to the Underwriters (with executed
copies for each of the Underwriters) in the forms satisfactory to
the Representative, which letters shall cover, without limitation,
the various financial disclosures contained in the Registration
Statement, the Preliminary Prospectuses, the Prospectus and the
Permitted Free Writing Prospectuses, if any.
(g) You shall have received from the Chief Financial Officer
of the Company letters dated, respectively, the date of this
agreement, the time of purchase and, if applicable, the additional
time of purchase, and addressed to the Underwriters (with executed
copies for each of the Underwriters), substantially in the form set
forth in Exhibit G, which letters shall cover, without limitation,
the various financial and operating disclosures contained in the
Registration Statement, the Preliminary Prospectuses, the Prospectus
and the Permitted Free Writing Prospectuses, if any.
(h) You shall have received at the time of purchase and, if
applicable, at the additional time of purchase, an opinion of
O'Melveny & ▇▇▇▇▇ LLP, United States counsel for the Underwriters,
dated the time of purchase or the additional time of purchase, as
the case may be, in form and substance reasonably satisfactory to
the Representative.
(i) You shall have received at the time of purchase, and, if
applicable, at the additional time of purchase, an opinion of
Commerce & Finance Law Offices, dated the time of purchase or the
additional time of purchase, as the case may be, in form and
substance reasonably satisfactory to the Representative.
(j) No Prospectus or amendment or supplement to the
Registration Statement or the Prospectus shall have been filed to
which you shall have objected in writing.
(k) The Registration Statement, the Exchange Act Registration
Statement and any registration statement required to be filed, prior
to the sale of the Shares, under the Act pursuant to Rule 462(b)
shall have been filed and shall have become effective under the Act
or the Exchange Act, as the case may be. If Rule 430A under the Act
is used, the Prospectus shall have been filed with
-35-
the Commission pursuant to Rule 424(b) under the Act at or before
5:30 P.M., New York City time, on the second full business day after
the date of this agreement (or such earlier time as may be required
under the Act).
(l) Prior to and at the time of purchase, and, if applicable,
the additional time of purchase, (i) no stop order with respect to
the effectiveness of the Registration Statement shall have been
issued under the Act or proceedings initiated under Section 8(d) or
8(e) of the Act; (ii) the Registration Statement, and all amendments
thereto shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (iii) none
of the Preliminary Prospectuses or the Prospectus, and no amendment
or supplement thereto, shall include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they are made, not misleading; (iv) no Disclosure Package, and
no amendment or supplement thereto, shall include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading; and (v)
none of the Permitted Free Writing Prospectuses, if any, shall
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not
misleading.
(m) The Company shall, at the time of purchase and, if
applicable, at the additional time of purchase, deliver to you a
certificate of its Chief Executive Officer and its Chief Financial
Officer, dated the time of purchase or the additional time of
purchase, as the case may be, substantially in the form attached as
Exhibit H hereto.
(n) Each Selling Shareholder shall, at the time of purchase
and, if applicable, at the additional time of purchase, deliver to
you a certificate signed by such Selling Shareholder, or a
Representative of the Controlling Shareholder (in the case of the
Controlling Shareholder), dated the time of purchase or the
additional time of purchase, as the case may be, substantially in
the form attached as Exhibit I hereto.
(o) You shall have received each of the signed Lock-Up
Agreements referred to in Section 3 hereof, and each such Lock-Up
Agreement shall be in full force and effect at the time of purchase
and the additional time of purchase, as the case may be.
(p) The Company and the Controlling Shareholder shall have
furnished to you such other documents and certificates as to the
accuracy and completeness of any statement in the Registration
Statement, the Disclosure Package, the Prospectus or any Permitted
Free Writing Prospectus as of the time of purchase and, if
applicable, the additional time of purchase, as you may
-36-
reasonably request.
(q) The Shares shall have been approved for listing on the
NYSE, subject only to notice of issuance and evidence of
satisfactory distribution at or prior to the time of purchase or the
additional time of purchase, as the case may be.
(r) At or prior to the time of purchase and each additional
time of purchase, if applicable, the NASD shall not have raised any
objection with respect to the fairness or reasonableness of the
underwriting, or other arrangements of the transactions,
contemplated hereby, that remains unresolved to the satisfaction of
the NASD.
(s) Each Selling Shareholder shall have delivered to you a
duly executed Custody Agreement, and the Controlling Shareholder
shall have delivered to you a duly executed Power of Attorney, in
each case in form and substance satisfactory to the Representative.
10. Effective Date of Agreement; Termination. This agreement shall become
effective when the parties hereto have executed and delivered this agreement.
The obligations of the several Underwriters hereunder shall be
subject to termination in the absolute discretion of the Representative, if (1)
since the time of execution of this agreement or the earlier respective dates as
of which information is given in the Registration Statement, the Preliminary
Prospectuses, the Prospectus and the Permitted Free Writing Prospectuses, if
any, there has been any change or any development involving a prospective change
in the business, properties, management, financial condition or results of
operations of the Company and the CECT Entities, taken as a whole, the effect of
which change or development is, in the sole judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the public offering or the delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement, the Preliminary Prospectuses, the
Prospectus and the Permitted Free Writing Prospectuses, if any, or (2) since the
time of execution of this agreement, there shall have occurred: (A) a suspension
or material limitation in trading in securities generally on the NYSE, the
American Stock Exchange or the NASDAQ; (B) a suspension or material limitation
in trading in the Company's securities on the NYSE; (C) a general moratorium on
commercial banking activities declared by either United States federal or New
York State authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; (D) an
outbreak or escalation of hostilities or acts of terrorism involving the United
States or a declaration by the United States of a national emergency or war; or
(E) any other calamity or crisis or any change in financial, political or
economic conditions in the United States or elsewhere, if the effect of any such
event specified in clause (D) or (E), in the sole judgment of the
Representative, makes it impractical or inadvisable to proceed with the public
offering or the delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement, the Preliminary Prospectuses, the
Prospectus and the Permitted Free Writing Prospectuses, if any.
-37-
If the Representative elects to terminate this agreement as provided
in this Section 10, the Company, the Selling Shareholders and each other
Underwriter shall be notified promptly in writing.
If the sale to the Underwriters of the Shares, as contemplated by
this agreement, is not carried out by the Underwriters for any reason permitted
under this agreement, or if such sale is not carried out because the Company or
any Selling Shareholder, as the case may be, shall be unable to comply with any
of the terms of this agreement, the Company and the Selling Shareholders shall
not be under any obligation or liability under this agreement (except to the
extent provided in Sections 7, 8, and 12), and the Underwriters shall be under
no obligation or liability to the Company or any Selling Shareholder under this
agreement (except to the extent provided in Section 12 hereof) or to one another
hereunder.
11. Increase in Underwriters' Commitments. Subject to Sections 9 and 10
hereof, if any Underwriter shall default in its obligation to take up and pay
for the Firm Shares to be purchased by it hereunder (otherwise than for a
failure of a condition set forth in Section 9 hereof or a reason sufficient to
justify the termination of this agreement under the provisions of Section 10
hereof) and if the number of Firm Shares which all Underwriters so defaulting
shall have agreed but failed to take up and pay for does not exceed 10% of the
total number of Firm Shares, the non-defaulting Underwriters (including the
Underwriters, if any, substituted in the manner set forth below) shall take up
and pay for (in addition to the aggregate number of Firm Shares they are
obligated to purchase pursuant to Section 1 hereof) the number of Firm Shares
agreed to be purchased by all such defaulting Underwriters, as hereinafter
provided. Such Shares shall be taken up and paid for by such non-defaulting
Underwriters in such amount or amounts as you may designate with the consent of
each Underwriter so designated or, in the event no such designation is made,
such Shares shall be taken up and paid for by all non-defaulting Underwriters
pro rata in proportion to the aggregate number of Firm Shares set forth opposite
the names of such non-defaulting Underwriters in Schedule A.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company and each Selling Shareholder each agrees with the
non-defaulting Underwriters that it will not sell any Firm Shares hereunder
unless all of the Firm Shares are purchased by the Underwriters (or by
substituted Underwriters selected by you with the approval of the Company or
selected by the Company with your approval).
If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the right
to postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and the
Prospectus and other documents may be effected.
The term "Underwriter" as used in this agreement shall refer to and
include any Underwriter substituted under this Section 11 with like effect as if
such substituted Underwriter had originally been named in Schedule A hereto.
If the aggregate number of Firm Shares which the defaulting
Underwriter or
-38-
Underwriters agreed to purchase exceeds 10% of the total number of Firm Shares
which all Underwriters agreed to purchase hereunder, and if neither the
non-defaulting Underwriters nor the Company shall make arrangements within the
five business day period stated above for the purchase of all the Firm Shares
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this agreement shall terminate without further act or deed and without any
liability on the part of the Company or any Selling Shareholder to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company or to any Selling Shareholder. Nothing
in this paragraph, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this agreement.
12. Indemnity and Contribution.
(a) The Company and the Controlling Shareholder jointly and
severally agree to indemnify, defend and hold harmless each
Underwriter, its partners, directors and officers, and any person
who controls any Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, and the successors and
assigns of all of the foregoing persons, from and against any loss,
damage, expense, liability or claim (including the reasonable cost
of investigation) which, jointly or severally, any such Underwriter
or any such person may incur under the Act, the Exchange Act, the
common law or otherwise, insofar as such loss, damage, expense,
liability or claim arises out of or is based upon: (i) any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof by the Company) or
arises out of or is based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as any
such loss, damage, expense, liability or claim arises out of or is
based upon any untrue statement or alleged untrue statement of a
material fact contained in, and in conformity with information
concerning such Underwriter furnished in writing by or on behalf of
such Underwriter through you to the Company expressly for use in,
the Registration Statement, which information consists solely of the
information specified in Section 13, or arises out of or is based
upon any omission or alleged omission to state a material fact in
the Registration Statement in connection with such information,
which material fact was not contained in such information and which
material fact was required to be stated in such Registration
Statement or was necessary to make such information not misleading;
(ii) any untrue statement or alleged untrue statement of a material
fact included in any Prospectus (the term Prospectus for the purpose
of this Section 12 being deemed to include any Preliminary
Prospectus, the Prospectus and any amendments or supplements to the
foregoing), in any Permitted Free Writing Prospectus, in any "issuer
information" (as defined in Rule 433 under the Act) of the Company
or in any Prospectus together with any combination of one or more of
the Permitted Free Writing Prospectuses, if any, or arises out of or
is based upon any omission or alleged omission to state a material
fact
-39-
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading,
except, with respect to such Prospectus or Permitted Free Writing
Prospectus, insofar as any such loss, damage, expense, liability or
claim arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in, and in conformity
with information concerning such Underwriter furnished in writing by
or on behalf of such Underwriter through you to the Company
expressly for use in, such Prospectus or Permitted Free Writing
Prospectus, which information consists solely of the information
specified in Section 13, or arises out of or is based upon any
omission or alleged omission to state a material fact in such
Prospectus or Permitted Free Writing Prospectus in connection with
such information, which material fact was not contained in such
information and which material fact was necessary in order to make
the statements in such information, in the light of the
circumstances under which they were made, not misleading.
(b) Each Selling Shareholder severally and not jointly agrees
to indemnify, defend and hold harmless each Underwriter, its
partners, directors and officers, and any person who controls any
Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, and the successors and assigns of all of the
foregoing persons, from and against any loss, damage, expense,
liability or claim (including the reasonable cost of investigation)
which, jointly or severally, any such Underwriter or any such person
may incur under the Act, the Exchange Act, the common law or
otherwise, insofar as such loss, damage, expense, liability or claim
arises out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any
post-effective amendment thereof by the Company), as such
Registration Statement relates to such Selling Shareholder, or
arises out of or is based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact included in
any Prospectus, in any Permitted Free Writing Prospectus or in any
Prospectus together with any combination of one or more of the
Permitted Free Writing Prospectuses, if any, in each case as such
document(s) relate to such Selling Shareholder, or arises out of or
is based upon any omission or alleged omission to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(c) Each Underwriter severally agrees to indemnify, defend and
hold harmless the Company, its directors and officers, the Selling
Shareholders and any person who controls the Company or any Selling
Shareholder within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, and the successors and assigns of all of the
foregoing persons, from and against any loss, damage, expense,
liability or claim (including the reasonable cost of investigation)
which, jointly or severally, the Company, the Selling
-40-
Shareholders or any such person may incur under the Act, the
Exchange Act, the common law or otherwise, insofar as such loss,
damage, expense, liability or claim arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material
fact contained in, and in conformity with information concerning
such Underwriter furnished in writing by or on behalf of such
Underwriter through you to the Company expressly for use in, the
Registration Statement (or in the Registration Statement as amended
by any post-effective amendment thereof by the Company), which
information consists solely of the information specified in Section
13, or arises out of or is based upon any omission or alleged
omission to state a material fact in such Registration Statement in
connection with such information, which material fact was not
contained in such information and which material fact was required
to be stated in such Registration Statement or was necessary to make
such information not misleading or (ii) any untrue statement or
alleged untrue statement of a material fact contained in, and in
conformity with information concerning such Underwriter furnished in
writing by or on behalf of such Underwriter through you to the
Company expressly for use in, a Prospectus or a Permitted Free
Writing Prospectus, which information consists solely of the
information specified in Section 13, or arises out of or is based
upon any omission or alleged omission to state a material fact in
such Prospectus or Permitted Free Writing Prospectus in connection
with such information, which material fact was not contained in such
information and which material fact was necessary in order to make
the statements in such information, in the light of the
circumstances under which they were made, not misleading.
(d) If any action, suit or proceeding (each, a "Proceeding")
is brought against a person (an "indemnified party") in respect of
which indemnity may be sought against the Company, the Selling
Shareholders or an Underwriter (as applicable, the "indemnifying
party") pursuant to subsection (a), (b) or (c), respectively, of
this Section 12, such indemnified party shall promptly notify such
indemnifying party in writing of the institution of such Proceeding
and such indemnifying party shall assume the defense of such
Proceeding, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all reasonable
fees and expenses; provided, however, that the omission to so notify
such indemnifying party shall not relieve such indemnifying party
from any liability which such indemnifying party may have to any
indemnified party or otherwise. 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 the
employment of such counsel shall have been authorized in writing by
the indemnifying party (or, in the case such indemnifying party is a
Selling Shareholder, by such Selling Shareholder or by a
Representative of the Controlling Shareholder (in the case of the
Controlling Shareholder)) in connection with the defense of such
Proceeding or the indemnifying party shall not have, within a
reasonable period of time in light of the circumstances, employed
counsel to defend such Proceeding or such indemnified party or
-41-
parties shall have reasonably concluded that there may be defenses
available to it or them which are different from, additional to or
in conflict with those available to such indemnifying party (in
which case such indemnifying party shall not have the right to
direct the defense of such Proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses
reasonably incurred shall be borne by such indemnifying party and
paid as incurred (it being understood, however, that such
indemnifying party shall not be liable for the expenses of more than
one separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such
Proceeding). The indemnifying party shall not be liable for any
settlement of any Proceeding effected without its written consent
(or, in the case such indemnifying party is a Selling Shareholder,
without the written consent of either such Selling Shareholder or a
Representative of the Controlling Shareholder (in the case of the
Controlling Shareholder)) but, if settled with its written consent
(or, in the case such indemnifying party is a Selling Shareholder,
with the written consent of such Selling Shareholder or of a
Representative of the Controlling Shareholder (in the case of the
Controlling Shareholder)), such indemnifying party agrees to
indemnify and hold harmless the indemnified party or parties from
and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party (or,
where such indemnifying party is a Selling Shareholder, requested
such Selling Shareholder or any Representative of the Controlling
Shareholder (in the case of the Controlling Shareholder)) to
reimburse the indemnified party for reasonable fees and expenses of
counsel as contemplated by the second sentence of this Section
12(d), then the indemnifying party agrees that it shall be liable
for such reasonable fees and expenses of counsel if (i) such
settlement is entered into more than 60 business days after receipt
by such indemnifying party (or, where such indemnifying party is a
Selling Shareholder, receipt by such Selling Shareholder or by any
Representative of the Controlling Shareholder (in the case of the
Controlling Shareholder)) of the aforesaid request, (ii) such
indemnifying party shall not have fully reimbursed the indemnified
party in accordance with such request prior to the date of such
settlement, and (iii) such indemnified party shall have given the
indemnifying party (or, where such indemnifying party is a Selling
Shareholder, given such Selling Shareholder or any Representative of
the Controlling Shareholder (in the case of the Controlling
Shareholder)) at least 30 days' prior notice of its intention to
settle. No indemnifying party shall, without the prior written
consent of the indemnified party (or, where such indemnified party
is a Selling Shareholder, the prior written consent of such Selling
Shareholder or of any Representative of the Controlling Shareholder
(in the case of the Controlling Shareholder)), effect any settlement
of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified
party from all liability on
-42-
claims that are the subject matter of such Proceeding and does not
include an admission of fault or culpability or a failure to act by
or on behalf of such indemnified party.
(e) If the indemnification provided for in this Section 12 is
unavailable to an indemnified party under subsections (a), (b) and
(c) of this Section 12 or insufficient to hold an indemnified party
harmless in respect of any losses, damages, expenses, liabilities or
claims referred to therein, then each applicable indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, damages, expenses, liabilities or
claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and each Selling
Shareholder on the one hand and the Underwriters on the other hand
from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault
of the Company and each Selling Shareholder on the one hand and of
the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses,
liabilities or claims, as well as any other relevant equitable
considerations. The relative benefits received by the Company and
each Selling Shareholder on the one hand and the Underwriters on the
other shall be deemed to be in the same respective proportions as
the total proceeds from the offering (net of underwriting discounts
and commissions but before deducting expenses) received by the
Company and each Selling Shareholder, and the total underwriting
discounts and commissions received by the Underwriters, bear to the
aggregate public offering price of the Shares. The relative fault of
the Company and each Selling Shareholder on the one hand and of the
Underwriters on the other shall be determined by reference to, among
other things, whether the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission relates
to information supplied by the Company or such Selling Shareholder
or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims
referred to in this subsection shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in
connection with investigating, preparing to defend or defending any
Proceeding.
(f) The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution
pursuant to this Section 12 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 that does not take
account of the equitable considerations referred to in subsection
(e) above. Notwithstanding the provisions of this Section 12, no
Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten
by such Underwriter
-43-
and distributed to the public were offered to the public exceeds the
amount of any damage which such Underwriter has otherwise been
required to pay by reason of such untrue statement or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 12 are several in
proportion to their respective underwriting commitments and not
joint.
(g) The indemnity and contribution agreements contained in
this Section 12 and the covenants, warranties and representations of
the Company and the Selling Shareholders contained in this agreement
shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, its partners,
directors or officers or any person (including each partner, officer
or director of such person) who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act,
or by or on behalf of the Company or any Selling Shareholder, its
respective directors or officers or any person who controls the
Company or any Selling Shareholder within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, and shall survive any
termination of this agreement or the issuance and delivery of the
Shares to be sold by the Company pursuant hereto and the delivery of
the Shares to be sold by each Selling Shareholder pursuant hereto.
The Company, the Selling Shareholders and each Underwriter agree
promptly to notify each other of the commencement of any Proceeding
against it and, in the case of the Company or each Selling
Shareholder, against any of their officers or directors in
connection with the issuance and sale of the Shares, or in
connection with the Registration Statement, any Preliminary
Prospectus, the Prospectus or any Permitted Free Writing Prospectus.
13. Information Furnished by the Underwriters. The statements set forth in
the Prospectus under the captions "Underwriting - Commissions and discounts" and
"Underwriting - Price stabilization, short positions," only insofar as such
statements relate to the amount of selling concession and reallowance or to
over-allotment and stabilization activities that may be undertaken by the
Underwriters, constitute the only information furnished by or on behalf of the
Underwriters, as such information is referred to in Sections 3, 4 and 12 hereof.
14. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram or facsimile
and, if to the Underwriters, shall be sufficient in all respects if delivered or
sent to UBS AG at 52/F, 2 International Finance Centre, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, if to the Company, shall be sufficient in all respects if
delivered or sent to the Company at the offices of the Company at 10th Floor,
CEC Building, 6 Zhongguancun South Street, Beijing 100086, People's Republic of
China, Attention: ▇▇▇▇▇ ▇▇, Chief Executive Officer, if to the Controlling
Shareholder, shall be sufficient in all respects if delivered or sent to the
Controlling Shareholder at Qiao Xing Industrial Park, ▇▇▇▇ ▇▇▇▇, Huizhou City,
Guangdong, People's Republic of China, 516023 (facsimile: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇),
Attention: ▇▇. ▇▇▇ ▇▇▇ Wu, Chairman and Chief Executive Officer, and if to the
other
-44-
Selling Shareholders other than the Controlling Shareholder, shall be sufficient
in all respects if delivered or sent to DKR Soundshore Oasis Holding Fund Ltd.
at Suite 2608, 26th Floor, Two Exchange Square, Central, Hong Kong, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Counsel.
15. Governing Law; Construction. This agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The section headings in this agreement have been inserted as a matter of
convenience of reference and are not a part of this agreement.
16. Submission to Jurisdiction. Except as set forth below, no Claim may be
commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company and
each Selling Shareholder each consent to the jurisdiction of such courts and
personal service with respect thereto. The Company and each Selling Shareholder
each hereby consent to personal jurisdiction, service and venue in any court in
which any Claim arising out of or in any way relating to this agreement is
brought by any third party against any Underwriter or any indemnified party.
Each Underwriter and the Company (on its behalf and, to the extent permitted by
applicable law, on behalf of its shareholders and affiliates) and each Selling
Shareholder (on its behalf and, in the case such Selling Shareholder is not an
individual, to the extent permitted by applicable law, on behalf of its
shareholders and affiliates) each waive all right to trial by jury in any
action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) in any way arising out of or relating to this agreement. The Company
and each Selling Shareholder each agree that a final judgment in any such
action, proceeding or counterclaim brought in any such court shall be conclusive
and binding upon the Company and each Selling Shareholder and may be enforced in
any other courts to the jurisdiction of which the Company or each Selling
Shareholder is or may be subject, by suit upon such judgment. The Company has
irrevocably appointed CT Corporation System, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, the Controlling Shareholder has irrevocably appointed ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Esq., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and each
of the other Selling Shareholders other than the Controlling Shareholder has
irrevocably appointed DKR Oasis Management Company L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, in each case, as its respective authorized agent upon whom
process may be served in any action, proceeding or counterclaim in any way
relating to, arising out of or based on this Agreement or the transactions
contemplated hereby which may be instituted in any New York court.
17. Judgment Currency. In respect of any judgment or order given or made
for any amount due hereunder that is expressed and paid in a currency (the
"judgment currency") other than United States dollars, the Company and each
Selling Shareholder, as the case may be, will indemnify each Underwriter against
any loss incurred by such Underwriter as a result of any variation as between
(a) the rate of exchange at which the United States dollar amount is converted
into the judgment currency for the purpose of such judgment or order and (b) the
rate of exchange at which an Underwriter is able to purchase United States
dollars with the amount of the judgment currency actually received by such
Underwriter. The foregoing indemnity shall constitute a separate and independent
obligation of the Company and each Selling Shareholder
-45-
and shall continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "rate of exchange" shall include any premiums and
costs of exchange payable in connection with the purchase of or conversion into
United States dollars.
18. Parties at Interest. This agreement has been and is made solely for
the benefit of the Underwriters, the Company and each Selling Shareholder and to
the extent provided in Section 12 hereof the controlling persons, partners,
directors and officers referred to in such Section, and their respective
successors, assigns, heirs, personal representatives and executors and
administrators. No other person, partnership, association or corporation
(including a purchaser, as such purchaser, from any of the Underwriters) shall
acquire or have any right under or by virtue of this agreement.
19. No Fiduciary Relationship. The Company and each Selling Shareholder
each hereby acknowledge that the Underwriters are acting solely as underwriters
in connection with the purchase and sale of the Company's securities. The
Company and each Selling Shareholder each further acknowledge that the
Underwriters are acting pursuant to a contractual relationship created solely by
this agreement entered into on an arm's length basis, and in no event do the
parties intend that the Underwriters act or be responsible as a fiduciary to the
Company or any Selling Shareholder, their respective management, stockholders or
creditors or any other person in connection with any activity that the
Underwriters may undertake or have undertaken in furtherance of the purchase and
sale of the Company's securities, either before or after the date hereof. The
Underwriters hereby expressly disclaim any fiduciary or similar obligations to
the Company or any Selling Shareholder, either in connection with the
transactions contemplated by this agreement or any matters leading up to such
transactions, and the Company and each Selling Shareholder each hereby confirm
their understanding and agreement to that effect. The Company, each Selling
Shareholder and the Underwriters agree that they are each responsible for making
their own independent judgments with respect to any such transactions and that
any opinions or views expressed by the Underwriters to the Company or each
Selling Shareholder regarding such transactions, including, but not limited to,
any opinions or views with respect to the price or market for the Company's
securities, do not constitute advice or recommendations to the Company or any
Selling Shareholder. The Company and each Selling Shareholder each hereby waive
and release, to the fullest extent permitted by law, any claims that the Company
or such Selling Shareholder may have against the Underwriters with respect to
any breach or alleged breach of any fiduciary or similar duty to the Company or
any Selling Shareholder in connection with the transactions contemplated by this
agreement or any matters leading up to such transactions.
20. Counterparts. This agreement may be signed by the parties in one or
more counterparts which together shall constitute one and the same agreement
among the parties.
21. Successors and Assigns. This agreement shall be binding upon the
Underwriters, the Company and each Selling Shareholder and their successors and
assigns and any successor or assign of any substantial portion of the Company's,
any of the Selling Shareholder's and any of the Underwriters' respective
businesses and/or assets.
22. Miscellaneous. The Representative will notify the Company of the date
when the
-46-
distribution of the Shares is complete.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
-47-
If the foregoing correctly sets forth the understanding among the Company,
each Selling Shareholder and the several Underwriters, please so indicate in the
space provided below for that purpose, whereupon this agreement and your
acceptance shall constitute a binding agreement among the Company, the Selling
Shareholders and the Underwriters, severally.
Very truly yours,
QIAO XING MOBILE COMMUNICATION CO., LTD.
By: _____________________________________
Name:
Title:
QIAO XING UNIVERSAL TELEPHONE, INC.
By: REPRESENTATIVE, Attorney-in-Fact
By: ______________________________________
Name:
Title:
S-1
DKR SOUNDSHORE OASIS HOLDING FUND LTD.
By: DKR Oasis Management Company L.P.,
its investment manager
By: ______________________________________
Name:
Title:
CEDAR DKR HOLDING FUND LTD.
By: DKR Oasis Management Company L.P.,
its investment manager
By: ______________________________________
Name:
Title:
S-2
Accepted and agreed to as of the date first above written, on behalf of itself
and the other several Underwriters named in Schedule A
UBS AG
By: UBS AG
By: ________________________________
Name:
Title:
S-3
SCHEDULE A
Uderwriters Number of Firm Shares
----------- --------------
UBS AG.................................................. 14,166,667
CIBC World Markets Corp................................. 1,250,000
▇▇▇▇▇ and Company, LLC 1,250,000
------------
Total.............................................. 16,666,667
============
SCHEDULE B
1. Public offering price: $[ ] per share
2. Number of shares offered: 19,166,667
SCHEDULE C
Number of Firm Number of
Shares Additional Shares
-------------- -----------------
Company................................................ 12,500,000 2,500,000
Selling Shareholders
QIAO XING UNIVERSAL TELEPHONE, INC.................. 2,500,000 0
DKR Soundshore Oasis Holding Fund Ltd............... 1,500,000 0
CEDAR DKR Holding Fund Ltd.......................... 166,667 0
---------- ---------
Total............................................. 16,666,667 2,500,000
========== =========
EXHIBIT A
Lock-Up Agreement
___________ ___, 2007
UBS AG
52/F, 2 International Finance Centre
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
as Managing Underwriter
and Representative of the several Underwriters
Ladies and Gentlemen:
This Lock-Up Agreement is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement") to be entered
into by Qiao Xing Mobile Communication, Co., Ltd., a British Virgin Islands
company (the "Company"), the selling shareholders named therein (the "Selling
Shareholders") and you and the other underwriters named in Schedule A to the
Underwriting Agreement (collectively, the "Underwriters"), with respect to the
public offering (the "Offering") of ordinary shares, without par value, of the
Company (the "Ordinary Shares").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
agrees that, effective as of the date of this Lock-Up Agreement, for a period
beginning on the date hereof and ending on, and including, the date that is 180
days after the date of the final prospectus relating to the Offering (the
"Lock-Up Period"), the undersigned will not, without the prior written consent
of UBS AG, (i) sell, offer to sell, contract or agree to sell, hypothecate,
pledge, grant any option to purchase or otherwise dispose of or agree to dispose
of, directly or indirectly, or file (or participate in the filing of) a
registration statement with the Securities and Exchange Commission (the
"Commission") in respect of, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder (the "Exchange Act") with
respect to, any Ordinary Shares or any other securities of the Company that are
substantially similar to Ordinary Shares, or any securities convertible into or
exchangeable or exercisable for, or any warrants or other rights to purchase,
the foregoing, (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
Ordinary Shares or any other securities of the Company that are substantially
similar to Ordinary Shares, or any securities convertible into or exchangeable
or exercisable for, or any warrants or other rights to purchase, the foregoing,
whether any such transaction is to be settled by delivery of Ordinary Shares or
such other securities, in cash or otherwise, or (iii) publicly announce an
intention to effect any transaction specified in clause (i) or (ii). The
foregoing sentence shall not apply to (a) the registration of the offer and sale
of Ordinary Shares as contemplated by the Underwriting
A-1
Agreement and the sale of the Ordinary Shares to the Underwriters in the
Offering, (b) bona fide gifts, provided the recipient thereof agrees in writing
with UBS AG to be bound by the terms of this Lock-Up Agreement and confirms that
he, she or it has been in compliance with the terms of this Lock-Up Agreement
since the date hereof, or (c) dispositions to any trust for the direct or
indirect benefit of the undersigned and/or the immediate family of the
undersigned, provided that such trust agrees in writing with the Underwriters to
be bound by the terms of this Lock-Up Agreement and confirms that it has been in
compliance with the terms of this Lock-Up Agreement since the date hereof. For
purposes of this paragraph, "immediate family" shall mean the undersigned and
the spouse, any lineal descendent, father, mother, brother or sister of the
undersigned.
Notwithstanding anything herein to the contrary, the preceding paragraph
shall not apply to the sale of Ordinary Shares by the Selling Shareholders to
the Underwriters in the Offering pursuant to the Underwriting Agreement.
In addition, the undersigned hereby waives any rights the undersigned may
have to require registration of Ordinary Shares in connection with the filing of
a registration statement relating to the Offering. The undersigned further
agrees that, during the Lock-Up Period, the undersigned will not, without the
prior written consent of UBS AG, make any demand for, or exercise any right with
respect to, the registration of Ordinary Shares or any securities convertible
into or exercisable or exchangeable for Ordinary Shares, or warrants or other
rights to purchase Ordinary Shares or any such securities.
Notwithstanding the above, if (a) during the period that begins on the
date that is fifteen (15) calendar days plus three (3) business days before the
last day of the Lock-Up Period and ends on the last day of the Lock-Up Period,
the Company issues an earnings release or material news or a material event
relating to the Company occurs; or (b) prior to the expiration of the Lock-Up
Period, the Company announces that it will release earnings results during the
sixteen (16) day period beginning on the last day of the Lock-Up Period, then
the restrictions imposed by this Lock-Up Agreement shall continue to apply until
the expiration of the date that is fifteen (15) calendar days plus three (3)
business days after the date on which the issuance of the earnings release or
the material news or the material event relating to the Company occurs.
In addition, the undersigned hereby waives any and all preemptive rights,
participation rights, resale rights, rights of first refusal and similar rights
that the undersigned may have in connection with the Offering or with any
issuance or sale by the Company of any equity or other securities before the
Offering, except for any such rights as have been heretofore duly exercised.
The undersigned hereby confirms that the undersigned has not,
directly or indirectly, taken, and hereby covenants that the undersigned will
not, directly or indirectly, take, any action designed, or which has constituted
or will constitute or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of Ordinary Shares.
* * *
A-2
If (i) the Company notifies you in writing that it does not intend to
proceed with the Offering, (ii) the registration statement filed with the
Commission with respect to the Offering is withdrawn, (iii) the Underwriting
Agreement does not become effective prior to May 31, 2007, or (iv) for any
reason the Underwriting Agreement (other than the provisions thereof which
survive termination) shall be terminated prior to the payment for and the
delivery of the Ordinary Shares in the Offering pursuant to the Underwriting
Agreement, this Lock-Up Agreement shall be terminated and the undersigned shall
be released from its obligations hereunder.
Yours very truly,
___________________________
Name:
▇-▇
▇▇▇▇▇▇▇ ▇-▇
LIST OF PARTIES TO EXECUTE LOCK-UP AGREEMENTS
Name Position
---- -------------------------------------------------------
1. QIAO XING UNIVERSAL TELEPHONE, INC. Shareholder
2. DKR Soundshore Oasis Holding Fund Ltd. Shareholder
3. CEDAR DKR Holding Fund Ltd. Shareholder
4. ▇▇▇ ▇▇▇▇ Wu Chairman
5. ▇▇▇ ▇▇▇ Wu Vice Chairman
6. Zacky Sun Independent Director
7. ▇▇▇ ▇▇▇▇▇ Independent Director
8. Pei De ▇▇▇ Independent Director
9. ▇▇▇▇▇ ▇▇ Chief Executive Officer
10. Kok ▇▇▇▇▇ ▇▇▇ Chief Financial Officer and Principal Accounting Officer
11. Shi Ze Zhu Vice President and Executive Director of CECT
12. ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ Consultant
A-1-1