UNDERWRITING AGREEMENT between CHINA EDUCATION ALLIANCE, INC. and RODMAN & RENSHAW, LLC as Underwriter
Exhibit
10.1
between
CHINA
EDUCATION ALLIANCE, INC.
and
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
as
Underwriter
CHINA
EDUCATION ALLIANCE, INC.
September
29, 2009
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
1251
Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned, CHINA EDUCATION ALLIANCE, INC., a company formed under the laws of
North Carolina (“Company”), hereby confirms its agreement with ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLC (hereinafter referred to as “you” (including its correlatives) or
the “Representative”) and with the other underwriters named on Schedule 1
hereto, if any, for which the Representative is acting as representative (the
Representative and such other underwriters being collectively called the
“Underwriters” or, individually, an “Underwriter”) as follows:
1. Purchase and Sale of
Securities.
1.1. Firm
Securities.
1.1.1. Nature and Purchase of Firm
Securities.
(i) On
the basis of the representations and warranties herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to issue and sell,
severally and not jointly, to the several Underwriters, an aggregate of
3,162,055 shares (“Firm Shares”) of Common Stock, par value $.001 per share (the
“Shares”).
(ii) The
Underwriters, severally and not jointly, agree to purchase from the Company the
number of Firm Shares set forth opposite their respective names on Schedule 1
attached hereto and made a part hereof at a purchase price (net of discounts and
commissions) of $5.17 per Share (94% of the per Share offering
price). The Firm Shares are to be offered initially to the public
(the “Offering”) at the offering price set forth on the cover page of the
Prospectus Supplement (as defined in Section 2.1.1 hereof).
1.1.2. Shares Payment and
Delivery.
(i) Delivery
and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on
October 5, 2009 or at such other time as shall be agreed upon by the
Representative and the Company at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP,
counsel to the Underwriters (“RP”), or at such other place (or remotely by
facsimile or other electronic transmission) as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and
payment for the Firm Shares is called the “Closing Date.”
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(ii) Payment
for the Firm Shares shall be made on the Closing Date by wire transfer in
Federal (same day) funds, payable to the order of the Company upon delivery of
the certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Shares (or through the facilities of the Depository Trust
Company (the “DTC”)) for the account of the Underwriters. The Firm
Shares shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two (2) full
Business Days prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Shares except upon tender of payment by
the Representative for all the Firm Shares. The term “Business
Day” means any day other than a Saturday, a Sunday or a legal holiday or a day
on which banking institutions are authorized or obligated by law to close in New
York City.
1.2. Over-allotment
Option.
1.2.1. Option
Shares. For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares, the Underwriters
are hereby granted, an option to purchase up to 474,308 Shares or fifteen (15%)
percent of the Firm Shares sold in the offering from the Company (the
“Over-allotment Option”). Such additional 474,308 Shares,
the net proceeds of which will be deposited with the Company’s account, are
hereinafter referred to as “Option Shares.” The purchase price to be
paid for the Option Shares will be the same price per Option Share as the price
per Firm Shares set forth in Section 1.1.1 hereof. The Firm Shares and the
Option Shares are hereinafter referred to collectively as the “Public
Securities.”
1.2.2. Exercise of
Option. The Over-allotment Option granted pursuant to Section
1.2.1 hereof may be exercised by the Representative as to all (at any time) or
any part (from time to time) of the Option Shares within 45 days after the
Closing Date. The Underwriters will not be under any obligation to
purchase any Option Shares prior to the exercise of the Over-allotment
Option. The Over-allotment Option granted hereby may be exercised by
the giving of oral notice to the Company from the Representative, which must be
confirmed in writing by overnight mail or facsimile or other electronic
transmission setting forth the number of Option Shares to be purchased and the
date and time for delivery of and payment for the Option Shares (the “Option
Closing Date”), which will not be later than five (5) full Business Days after
the date of the notice or such other time as shall be agreed upon by the Company
and the Representative, at the offices of RP or at such other place (including
remotely by facsimile or other electronic transmission) as shall be agreed upon
by the Company and the Representative. If such delivery and payment
for the Option Shares does not occur on the Closing Date, the Option Closing
Date will be as set forth in the notice. Upon exercise of the
Over-allotment Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth herein, the
Underwriters will become obligated to purchase, the number of Option Shares
specified in such notice.
1.2.3. Payment and
Delivery. Payment for the Option Shares will be made on the
Option Closing Date by wire transfer in Federal (same day) funds as follows:
$5.17 per Option Share, [94% of the per Option Share offering price], payable to
the order of the Company upon delivery to you of certificates (in form and
substance satisfactory to the Underwriters) representing the Option Shares (or
through the facilities of DTC) for the account of the
Underwriters. The Option Shares shall be registered in such name or
names and in such authorized denominations as the Representative may request in
writing at least two (2) full Business Days prior to the Option Closing
Date. The Company shall not be obligated to sell or deliver the
Option Shares except upon tender of payment by the Representative for applicable
Option Shares.
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2. Representations and
Warranties of the Company. The Company represents and warrants
to the Underwriters as of the Applicable Time (as defined below) and as of the
Closing Date and as of the Option Closing Date, if any, as follows:
2.1. Registration
Statement.
2.1.1. The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-3 (Registration File No. 333-161487) under
the Securities Act of 1933, as amended (the “Securities Act”), which became
effective on September 4, 2009, for the registration under the Securities Act of
the Public Securities. At the time of such filing, the Company met
the requirements of Form S-3 under the Securities Act. Such
registration statement meets the requirements set forth in Rule 415(a)(1)(x)
under the Securities Act and complies with said Rule. The Company
will file with the Commission pursuant to Rule 424(b) under the Securities Act,
and the rules and regulations (the “Rules and Regulations”) of the Commission
promulgated thereunder, a supplement to the form of prospectus included in such
registration statement relating to the Offering of the Public Securities and the
plan of distribution thereof and will advise the Representative of all further
information (financial and other) with respect to the Company required to be set
forth therein. Such registration statement, including the exhibits
thereto, as amended at the date of this Agreement, is hereinafter called the
“Registration Statement”; such prospectus in the form in which was filed on
August 21, 2009 is hereinafter called the “Base Prospectus”; and the
supplemented form of prospectus, in the form in which it will be filed with the
Commission pursuant to Rule 424(b) (including the Base Prospectus as so
supplemented) is hereinafter called the “Prospectus Supplement.” Any reference
in this Agreement to the Registration Statement, the Base Prospectus or the
Prospectus Supplement shall be deemed to refer to and include the documents
incorporated by reference therein (the “Incorporated Documents”) pursuant to
Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), on or before the date of this Agreement, or the
issue date of the Base Prospectus or the Prospectus Supplement, as the case may
be; and any reference in this Agreement to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement, the Base Prospectus or
the Prospectus Supplement shall be deemed to refer to and include the filing of
any document under the Exchange Act after the date of this Agreement, or the
issue date of the Base Prospectus or the Prospectus Supplement, as the case may
be, deemed to be incorporated therein by reference. All references in
this Agreement to financial statements and schedules and other information that
is “contained,” “included,” “described,” “referenced,” “set forth” or “stated”
in the Registration Statement, the Base Prospectus or the Prospectus Supplement
(and all other references of like import) shall be deemed to mean and include
all such financial statements and schedules and other information that is or is
deemed to be incorporated by reference in the Registration Statement, the Base
Prospectus or the Prospectus Supplement, as the case may be. No stop
order suspending the effectiveness of the Registration Statement or the use of
the Base Prospectus or the Prospectus Supplement has been issued, and no
proceeding for any such purpose is pending or has been initiated or, to the
Company’s knowledge, is threatened by the Commission. For purposes of
this Agreement, “free writing prospectus” has the meaning set forth in Rule 405
under the Securities Act and the “Time of Sale Prospectus” means the preliminary
prospectus, if any, together with the free writing prospectuses, if any, used in
connection with the Offering, including any documents incorporated by reference
therein. “Applicable Time” means 5:30 pm (New York time) on the date
of this Agreement or such other time as agreed by the Company and the
Underwriter.
2.1.2. The
Company is eligible to use free writing prospectuses in connection with the
Offering pursuant to Rules 164 and 433 under the Securities Act. Any
free writing prospectus that the Company is required to file pursuant to Rule
433(d) under the Securities Act and related to the Offering has been, or will
be, filed with the Commission in accordance with the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder. Each free writing prospectus that the Company has filed,
or is required to file, pursuant to Rule 433(d) under the Securities Act and
related to the Offering or that was prepared by or behalf of or used by the
Company complies or will comply in all material respects with the requirements
of the Securities Act and the applicable rules and regulations of the Commission
thereunder. The Company will not, without the prior consent of the
Representative, prepare, use or refer to, any free writing prospectus related to
the Offering.
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2.1.3. The
Company has delivered or made available to, or will as promptly as practicable
deliver or make available to, to the Representative complete conformed copies of
the Registration Statement and of each consent and certificate of experts, as
applicable, filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits), the Base Prospectus, the Time of Sale Prospectus,
if any, and the Prospectus Supplement, as amended or supplemented (collectively,
the Base Prospectus, the Time of Sale Prospectus, and the Propectus Supplement
shall be referred to as the “Prospectus Documents”), in such quantities and at
such places as the Representative reasonably requests. Neither the
Company nor any of its directors and officers has distributed and none of them
will distribute, prior to the Closing Date, any offering material in connection
with the offering and sale of the Public Securities other than the Base
Prospectus, the Time of Sale Prospectus, if any, the Prospectus Supplement, the
Registration Statement, copies of the documents incorporated by reference
therein and any other materials permitted by the Securities Act.
2.1.4. Pursuant to the Exchange
Act. The Company has filed with the Commission a Form 8-A12B
(File Number 001-34386) providing for the registration under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), of the Company’s common
stock including shares of common stock issued pursuant to this
Offering. Such Form 8-A has been declared effective by the Commission
on the date hereof.
2.2. No Stop Orders,
etc. Neither the Commission nor, to the best of the Company’s
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of the Prospectus or the Registration Statement or has
instituted or, to the best of the Company’s knowledge, threatened to institute
any proceedings with respect to such an order.
2.3. Disclosures in Registration
Statement.
2.3.1. 10b-5
Representation. At the respective times the Registration
Statement, the Base Prospectus, the Time of Sale Prospectus, if any, the
Prospectus Supplement, and any post-effective amendments thereto become
effective (and at the Closing Date and the Option Closing Date, if
any):
(i) The
Registration Statement, any post-effective amendments thereto, the Base
Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement
did and will contain all material statements that are required to be stated
therein in accordance with the Securities Act and the Rules and Regulations, and
will in all material respects conform to the requirements of the Securities Act
and the Rules and Regulations;
(ii) Neither
the Registration Statement, the Base Prospectus, the Time of Sale Prospectus, if
any, the Prospectus Supplement, nor any amendment or supplement thereto, on such
dates, do or will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation and warranty made in this Section
2.3.1(ii) does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriters by the Representative expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto. The parties acknowledge and agree that such information
provided by or on behalf of any Underwriter consists solely of the
names of the Underwriters appearing in the “Underwriting and Plan of
Distribution” section of the Prospectus Supplement and the following additional
disclosure contained in the “Underwriting and Plan of Distribution” section of
the Prospectus Supplement: (i) the first paragraph under the heading “Pricing of
Securities”, (ii) the first paragraphs under the heading “Other Terms” and (iii)
all paragraphs under the heading “Foreign Regulatory Restrictions on Purchase of
the Common Stock” (the “Underwriters’ Information”).
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2.3.2. The
Registration Statement (and any further documents to be filed with the
Commission in connection with the Offering) contains, or will contain, as
applicable, all exhibits and schedules as required by the Securities
Act. The Incorporated Documents, when they were filed with the
Commission, conformed in all material respects to the requirements of the
Exchange Act and the applicable Rules and Regulations, and none of such
documents, when they were filed with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein (with respect to Incorporated Documents incorporated
by reference in the Base Prospectus or Prospectus Supplement), in light of the
circumstances under which they were made not misleading; and any further
documents so filed and incorporated by reference in the Base Prospectus, the
Time of Sale Prospectus, if any, or Prospectus Supplement, when such documents
are filed with the Commission, will conform in all material respects to the
requirements of the Exchange Act and the applicable Rules and Regulations, as
applicable, and will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. No
post-effective amendment to the Registration Statement reflecting any facts or
events arising after the date thereof which represent, individually or in the
aggregate, a fundamental change in the information set forth therein is required
to be filed with the Commission. There are no documents required to
be filed with the Commission in connection with the transaction contemplated
hereby that (x) have not been filed as required pursuant to the Securities Act
or (y) will not be filed within the requisite time period. There are
no contracts or other documents required to be described in the Base Prospectus,
the Time of Sale Prospectus, if any, or Prospectus Supplement, or to be filed as
exhibits or schedules to the Registration Statement, that have not been or will
not be described or filed as required.
2.3.3. Disclosure of
Agreements. The agreements and documents described in the
Prospectus Documents and the Registration Statement (including the Incorporated
Documents) conform to the descriptions thereof contained therein and there are
no agreements or other documents required by the Securities Act and the Rules
and Regulations to be described in the Prospectus Documents and the Registration
Statement or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement
or other instrument (however characterized or described) to which the Company is
a party or by which it is or may be bound or affected and (i) that is
referred to in any Prospectus Document, or (ii) is material to the
Company’s business, has been duly authorized and validly executed by the
Company, is in full force and effect in all material respects and is enforceable
against the Company and, to the Company’s knowledge, the other parties thereto,
in accordance with its terms, except (x) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally, (y) as enforceability of any indemnification
or contribution provision may be limited under the federal and state securities
laws, and (z) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought. None of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company’s
knowledge, any other party is in default thereunder and, to the best of the
Company’s knowledge, no event has occurred that, with the lapse of time or the
giving of notice, or both, would constitute a default thereunder. To
the best of the Company’s knowledge, performance by the Company of the material
provisions of such agreements or instruments will not result in a violation of
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its assets or businesses, including, without limitation, those
relating to environmental laws and regulations.
2.3.4. Prior Securities
Transactions. No securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company, except as
disclosed in the Registration Statement.
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2.3.5. Regulations. The
disclosures in the Registration Statement and Prospectus Supplement concerning
the effects of Federal, State, local and all foreign regulation on the Company’s
business as currently contemplated are correct in all material
respects.
2.4. Changes After Dates in
Registration Statement and Prospectus Supplement.
2.4.1. No Material Adverse
Change. Since the respective dates as of which information is
given in the Prospectus Supplement, except as otherwise specifically stated
therein: (i) there has been no material adverse change in the
condition, financial or otherwise, or business prospects of the Company;
(ii) there have been no material transactions entered into by the Company,
other than as contemplated pursuant to this Agreement; and (iii) no officer
or director of the Company has resigned from any position with the
Company.
2.4.2. Recent Securities
Transactions, etc. Subsequent to the respective dates as of
which information is given in the Prospectus Supplement, and except as may
otherwise be indicated or contemplated herein or disclosed in the Prospectus
Supplement, the Company has not: (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
2.5. Independent
Accountants. To the knowledge of the Company, Sherb & Co.
LLP (“Sherb”), whose report is filed with the Commission as part of the
Registration Statement, are independent registered public accountants as
required by the Securities Act and the Rules and Regulations. Sherb
has not, during the periods covered by the financial statements included in the
Prospectus Documents, provided to the Company any non-audit services, as such
term is used in Section 10A(g) of the Exchange Act.
2.6. Financial
Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus Documents fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles (“GAAP”), consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement and Prospectus Documents present fairly the information required to be
stated therein. The Registration Statement discloses all material
off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unconsolidated
entities or other persons that may have a material current or future effect on
the Company’s financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses.
2.7. Authorized Capital; Options,
etc. The Company had, at the date or dates indicated in the
Prospectus Supplement, the duly authorized, issued and outstanding
capitalization as set forth in the Prospectus Supplement. Based on
the assumptions stated in the Registration Statement and the Prospectus
Documents, the Company will have on the Closing Date the stock capitalization
set forth therein. Except as set forth in, or contemplated by, the
Registration Statement and the Prospectus Documents, on the Closing Date, there
will be no options, warrants, or other rights to purchase or otherwise acquire
any authorized, but unissued Shares of the Company or any security convertible
into Shares of the Company, or any contracts or commitments to issue or sell
Shares or any such options, warrants, rights or convertible
securities.
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2.8. Valid Issuance of
Securities, etc.
2.8.1. Outstanding
Securities. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this Agreement have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or similar contractual rights granted by the
Company. The securities conform in all material respects
to all statements relating thereto contained in the Registration Statement and
the Prospectus Documents. The offers and sales of the outstanding
securities were at all relevant times either registered under the Securities Act
and the applicable state securities or Blue Sky laws or, based in part on the
representations and warranties of the purchasers of such Shares, exempt from
such registration requirements.
2.8.2. Securities Sold Pursuant to
this Agreement. The Public Securities have been duly
authorized for issuance and sale and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability by reason of being such holders; the Public
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Public Securities conform in all material respects to all
statements with respect thereto contained in the Registration
Statement.
2.9. Registration Rights of Third
Parties. Except as set forth in the Registration Statement and
Prospectus Documents, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Securities Act or to include any such securities in a
registration statement to be filed by the Company.
2.10. Validity and Binding Effect
of Agreements. This Agreement has been duly and
validly authorized by the Company, and, when executed and delivered, will
constitute, the valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except: (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally; (ii) as enforceability
of any indemnification or contribution provision may be limited under the
federal and state securities laws; and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
2.11. No Conflicts,
etc. The execution, delivery, and performance by the Company
of this Agreement and all ancillary documents, the consummation by the Company
of the transactions herein and therein contemplated and the compliance by the
Company with the terms hereof and thereof do not and will not, with or without
the giving of notice or the lapse of time or both: (i) result in a material
breach of, or conflict with any of the terms and provisions of, or constitute a
material default under, or result in the creation, modification, termination or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any agreement or instrument to which the
Company is a party; (ii) result in any violation of the provisions of the
Articles of Incorporation of the Company (as the same may be amended from time
to time, the “Articles of Incorporation”); or (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business constituted as of the date
hereof.
2.12. No Defaults;
Violations. No material default exists in the due performance
and observance of any term, covenant or condition of any material license,
contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or
any other agreement or instrument evidencing an obligation for borrowed money,
or any other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the properties or assets of
the Company is subject. The Company is not in violation of any term
or provision of its Articles of Incorporation or By-laws, or in violation of any
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or businesses.
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2.13. Corporate Power; Licenses;
Consents.
2.13.1. Conduct of
Business. Except as described in the Registration Statement
and the Prospectus Documents, the Company has all requisite corporate power and
authority, and has all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory officials and
bodies that it needs as of the date hereof to conduct its business purpose as
described in the Registration Statement and Prospectus Documents, except where
the failure to have such requisite corporate power and authority and all
authorizations, approvals, orders, licenses, certificates and permits would not
have a material adverse effect on the assets, business or operations of the
Company. The disclosures in the Registration Statement concerning the
effects of federal, state, local and foreign regulation on this Offering and the
Company’s business purpose as currently contemplated are correct in all material
respects.
2.13.2. Transactions Contemplated
Herein. The Company has all corporate power and authority to
enter into this Agreement and to carry out the provisions and conditions hereof,
and all consents, authorizations, approvals and orders required in connection
therewith have been obtained. No consent, authorization or order of,
and no filing with, any court, government agency or other body is required for
the valid issuance, sale and delivery of the Public Securities and the
consummation of the transactions and agreements contemplated by this Agreement
and as contemplated by the Prospectus Documents, except with respect to
applicable federal and state securities laws and regulations and the rules and
regulations of the Financial Industry Regulatory Authority, Inc.
(“FINRA”).
2.14. D&O
Questionnaires. To the Company’s knowledge, all information
contained in the questionnaires (the “Questionnaires”) completed by each of the
Company’s directors and officers immediately prior to the Offering (the “Initial
Shareholders”) as well as in the Lock-Up Agreement provided to the
Underwriters is true and correct in all respects and the Company has not become
aware of any information which would cause the information disclosed in the
questionnaires completed by each Initial Shareholder to become inaccurate and
incorrect.
2.15. Litigation; Governmental
Proceedings. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding pending or, to
the Company’s knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any executive officer or director that is required to be
disclosed in the Registration Statement and the Prospectus Documents which has
not been disclosed in the Registration Statement and the Prospectus Documents or
in connection with the Company’s listing application for the listing of the
Shares and Common Stock on the NYSE Amex.
2.16. Good
Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the State of
North Carolina as of the date hereof, and is duly qualified to do business and
is in good standing in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the assets,
business or operations of the Company.
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2.17. Stop
Orders. The Commission has not issued any order preventing or
suspending the use of any Prospectus Documents or any part thereof.
2.18. Transactions Affecting
Disclosure to FINRA.
2.18.1. Finder’s
Fees. Except as described in the Registration Statement and
the Prospectus Documents, there are no claims, payments, arrangements,
agreements or understandings relating to the payment of a finder’s, consulting
or origination fee by the Company or any Initial Shareholder with respect to the
sale of the Public Securities hereunder or any other arrangements, agreements or
understandings of the Company or, to the Company’s knowledge, any of its
shareholders that may affect the Underwriters’ compensation, as determined by
FINRA.
2.18.2. Payments Within Twelve
Months. Except as described in the Registration Statement and
the Prospectus Documents, the Company has not made any direct or indirect
payments (in cash, securities or otherwise) to: (i) any person, as a
finder’s fee, consulting fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company persons who raised
or provided capital to the Company; (ii) to any FINRA member; or
(iii) to any person or entity that has any direct or indirect affiliation
or association with any FINRA member, within the twelve months prior to the
Closing Date, other than payments to the Underwriters as provided hereunder in
connection with the Offering.
2.18.3. Use of
Proceeds. None of the net proceeds of the Offering will be
paid by the Company to any participating FINRA member or its affiliates, except
as specifically authorized herein.
2.18.4. FINRA
Affiliation. To the Company’s knowledge, no officer, director
or any beneficial owner of the Company’s unregistered securities has any direct
or indirect affiliation or association with any FINRA member (as determined in
accordance with the rules and regulations of FINRA) except as set forth in the
Registration Statement. The Company will advise the Representative
and RP if it learns that any officer, director or owner of at least 5% of the
Company’s outstanding Common Stock (or securities convertible into Common Stock)
is or becomes an affiliate or associated person of a FINRA member participating
in the Offering.
2.19. Foreign Corrupt Practices
Act. Neither the Company nor any of the directors , employees
or officers of the Company or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) that (i) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a material
adverse effect on the assets, business or operations of the Company as reflected
in any of the financial statements contained in the Prospectus Documents or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company has
taken reasonable steps to ensure that its accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
2.20. Officers’
Certificate. Any certificate pursuant to this Agreement signed
by any duly authorized officer of the Company and delivered to you or to RP
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
10
2.21. “Ineligible
Issuer.” At the time the Registration Statement was initially
filed, the Company was not an “ineligible issuer,” as defined in Rule 405 under
the Securities Act;
2.22. Lock-up
agreements. Each of the Company’s officers, directors and
holders of more than 5% of the outstanding common stock of the Company (“5%
Stockholders”) (the “Lock-Up Parties”) has agreed that for a period of 6 months,
(the “Lock-Up Period”) from the Closing Date, such persons and shall not offer
for sale, sell, pledge, or otherwise dispose of (or enter into any transaction
or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any of the Shares,
without the prior written consent of the Representative. The
Representative may consent to an early release from the Lock-Up period if, in
its opinion, the market for Shares would not be adversely impacted by sales and
in cases of financial emergency of any of the Lock-Up Parties.
2.23. Adequate
Summary. The statements set forth in the Prospectus Documents
under the captions “The Offering,” “Description of Capital Stock”, insofar as
they purport to constitute a summary of the terms of the Public Securities, and
under the caption “Underwriting and Plan of Distribution”, insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate summaries of such provisions in all material
respects.
2.24. Subsidiaries. Annex
1 to this Agreement sets forth the ownership of all direct and indirect
subsidiaries of the Company (each a “Subsidiary” and together the
“Subsidiaries”). All direct and indirect subsidiaries of the Company are duly
organized and in good standing under the laws of the place of organization or
incorporation, and each such subsidiary and is in good standing in each
jurisdiction in which its ownership or lease of property or the conduct of
business requires such qualification, except where the failure to qualify would
not have a material adverse effect on the assets, business or operations of the
Company taken as a whole.
2.25. Related Party
Transactions. Except as disclosed in the Registration
Statement and the Prospectus Documents, there are no business relationships or
related party transactions involving the Company or any other person required to
be described in the Registration Statements and Prospectus Documents that have
not been described as required.
2.26. Board of
Directors. The Board of Directors of the Company is comprised
of the persons set forth in the Incorporated Documents. The
qualifications of the persons serving as board members and the overall
composition of the board comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
rules promulgated thereunder applicable to the Company and the rules of the NYSE
Amex. At least one member of the Board of Directors of the Company
qualifies as a “financial expert” as such term is defined under the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules promulgated thereunder and the rules of
the NYSE Amex. In addition, at least a majority of the persons serving on the
Board of Directors qualify as “independent” as defined under the rules of the
NYSE Amex.
2.27. ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Compliance.
2.27.1. Disclosure
Controls. The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15
of the Exchange Act, and such controls and procedures are effective to ensure
that all material information concerning the Company will be made known on a
timely basis to the individuals responsible for the preparation of the Company’s
Exchange Act filings and other public disclosure documents.
2.27.2. Compliance. The
Company is, or on the Closing Date will be, in material compliance with the
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 applicable to it, and has
implemented or will implement such programs and taken reasonable steps to ensure
the Company’s future compliance (not later than the relevant statutory and
regulatory deadlines therefore) with all the material provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
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3. Covenants of the
Company. The Company covenants and agrees as
follows:
3.1. Amendments to Registration
Statement and Prospectus Documents. The Company will deliver
to the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus Documents proposed to be filed after the
Closing Date and not file any such amendment or supplement to which the
Representative shall reasonably object in writing, provided that the Company may
file such amendment or supplement if it would render the Company in breach of
the Securities Act, the Exchange Act and any Rules and Regulations and the
Representative has not suggested a form of amendment or supplement which would
not be objectionable.
3.2. Federal Securities
Laws.
3.2.1. Compliance. During
the time when a Prospectus is required to be delivered under the Securities Act,
the Company will comply with all requirements imposed upon it by the Securities
Act, the Rules and Regulations and the Exchange Act, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Public Securities in accordance with the provisions hereof and the
Prospectus Documents. If at any time when a Prospectus relating to
the Public Securities is required to be delivered under the Securities Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriters, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend any of the Prospectus
Documents to comply with the Securities Act, the Company will notify the
Representative promptly and prepare and file with the Commission, subject to
Section 3.1 hereof, an appropriate amendment or supplement in accordance with
Section 10 of the Securities Act.
3.2.2. Intentionally
Omitted.
3.2.3. Exchange Act
Registration. For a period of three years from the Effective
Date, or until such earlier time upon which the Company is required to be
liquidated, the Company will maintain the registration of the Shares under the
provisions of the Exchange Act. The Company will not deregister the
Shares under the Exchange Act without the prior written consent of the
Representative.
3.2.4. Free Writing
Prospectuses. The Company represents and agrees that it has
not made and will not make any offer relating to the Public Securities that
would constitute an issuer free writing prospectus, as defined in Rule 433 of
the Securities Act, without the prior consent of the
Representative. Any such free writing prospectus consented to by the
Representative is hereinafter referred to as a “Permitted Free Writing
Prospectus.” The Company represents that it will treat each Permitted
Free Writing Prospectus as an “issuer free writing prospectus” as defined in
Rule 433, and has complied and will comply with the applicable requirements of
Rule 433 of the Securities Act, including timely Commission filing where
required, legending and record keeping.
3.3. Delivery to Underwriters of
Prospectuses. The Company will deliver to each of the several
Underwriters, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Securities Act or the Exchange
Act such number of copies of each Prospectus as such Underwriters may reasonably
request and, deliver to you two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all
exhibits filed therewith or incorporated therein by reference and all original
executed consents of certified experts.
12
3.4. Effectiveness and Events
Requiring Notice to the Representative. The Company will use
its best efforts to cause the Registration Statement to remain effective with a
current prospectus for at least nine (9) months from the Applicable
Time and will notify the Representative immediately and confirm the
notice in writing: (i) of the effectiveness of the Registration Statement
and any amendment thereto; (ii) of the issuance by the Commission of any
stop order or of the initiation, or the threatening, of any proceeding for that
purpose; (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Shares for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose; (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration
Statement or Prospectus; (v) of the receipt of any comments or request for
any additional information from the Commission; and (vi) of the happening
of any event during the period described in this Section 3.4 hereof that, in the
judgment of the Company, makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Commission or any state securities commission
shall enter a stop order or suspend such qualification at any time, the Company
will make every reasonable effort to obtain promptly the lifting of such
order.
3.5. Listing of
Securities. The Company shall use its best efforts to cause
the Public Securities to meet the criteria necessary for inclusion of the Shares
on the NYSE Amex and seek and use its commercially reasonable efforts to
maintain such listing for a period of at least three years after the
Closing.
3.6. Intentionally
omitted
3.7. Intentionally
omitted.
3.8. Financial Public Relations
Firm. The Company shall engage a financial public relations
firm reasonably acceptable to ▇▇▇▇▇▇, which firm will be experienced in
assisting issuers in public offerings of securities and in their relations with
their security holders, and the Company will continue to retain such firm or
another firm reasonably acceptable to Representative for a period of no less
than two (2) years after the Closing Date. Representative agrees that
the Company’s financial public relations firm, Redchip, is
acceptable.
3.9. Reports to the
Representative.
3.9.1. Periodic Reports,
etc. For a period of three years from the Closing Date, or
until such earlier time upon which the Company is required to be liquidated, the
Company will furnish to the Representative copies of such financial statements
and other periodic and special reports as the Company from time to time
furnishes generally to holders of any class of its securities and also promptly
furnish to the Representative: (i) a copy of each periodic
report the Company shall be required to file with the Commission; (ii) a
copy of every press release and every news item and article with respect to the
Company or its affairs which was released by the Company; (iii) a copy of
each Form 8-K prepared and filed by the Company; (iv) five copies of each
Registration Statement; (v) such additional documents and information with
respect to the Company and the affairs of any future subsidiaries of the Company
as the Representative may from time to time reasonably request; provided the
Representative shall sign, if requested by the Company, a Regulation FD
compliant confidentiality agreement which is reasonably acceptable to the
Representative and RP in connection with the Representative’s receipt of such
information. Documents filed with the Commission pursuant to its
▇▇▇▇▇ system shall be deemed to have been delivered to the Representative
pursuant to this Section.
13
3.9.2. Transfer
Sheets. For a period of three years from the Effective Date,
the Company shall retain a transfer and registrar agent acceptable to the
Representative (the “Transfer Agent”) and will furnish to the Representatives at
the Company’s sole cost and expense such transfer sheets of the Company’s
securities as the Representative may reasonably request, including the daily and
monthly consolidated transfer sheets of the Transfer Agent and
DTC. For the purposes of this Section 3.9.2, the Representative
agrees that the Company’s current transfer and registrar agent, StockTrans, Inc.
is acceptable.
3.9.3. Trading
Reports. During such time as the Public Securities are listed
on NYSE Amex the Company shall provide to the Representative, at its expense,
such reports published by the NYSE Amex relating to price trading of
the Public Securities, as the Representative shall reasonably
request.
3.10. Payment of
Expenses.
3.10.1. General Expenses Related to
the Offering. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not paid at the
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement, including, but not limited to: (a) all filing fees
and communication expenses relating to the registration of the Shares to be sold
in the Offering (including the Over-allotment Shares) with the Commission; (b)
all COBRADesk filing fees associated with the review of the Offering by FINRA;
all fees and expenses relating to the listing of such Shares on the Nasdaq
Capital Market, the Nasdaq National Market or the NYSE Amex and on such other
stock exchanges as the Company and Representative together determine; (c) all
fees, expenses and disbursements relating to background checks of the Company’s
officers and directors in an amount not to exceed $5,000 per individual; (d) all
fees, expenses and disbursements relating to the registration or qualification
of such Shares under the “blue sky” securities laws of such states and other
jurisdictions as ▇▇▇▇▇▇ may reasonably designate (including, without limitation,
all filing and registration fees); (e) all fees, expenses and disbursements
relating to the registration, qualification or exemption of such Shares under
the securities laws of such foreign jurisdictions as Representative may
reasonably designate; (f) the costs of all mailing and printing of the
underwriting documents (including, without limitation, the Underwriting
Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among
Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power
of Attorney), Registration Statements, Prospectuses and all amendments,
supplements and exhibits thereto and as many preliminary and final Prospectuses
as ▇▇▇▇▇▇ may reasonably deem necessary; (g) the costs of preparing, printing
and delivering certificates representing the Shares; (h) fees and expenses of
the transfer agent for the Shares; (i) stock transfer and/or stamp taxes, if
any, payable upon the transfer of securities from the Company to
▇▇▇▇▇▇; (j) the fees and expenses of the Company’s accountants; (k)
the fees and expenses of the Company’s legal counsel and other agents and
representatives; and (l) the $16,000 cost associated with the use of i-Deal’s
book building, prospectus tracking and compliance software for the
offering. The Representative may deduct from the net proceeds of the
Offering payable to the Company on the Closing Date, or the Option Closing Date,
if any, the expenses set forth herein to be paid by the Company to the
Representative. In the event of Company’s termination prior to
Closing Date, pursuant to Section 8.2 below, the Company shall be obligated to
pay the Underwriters their actual and accountable out of pocket expenses related
to the transactions contemplated herein then due and payable subject to a
maximum of $100,000.
3.11. Application of Net
Proceeds. The Company will apply the net proceeds from the
Offering received by it in a manner consistent with the application described
under the caption “Use Of Proceeds” in the Prospectus Supplement.
14
3.12. Delivery of Earnings
Statements to Security Holders. The Company will make
generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Securities Act or the Rules and Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a
period of at least twelve consecutive months beginning after the Effective
Date.
3.13. Stabilization. Neither
the Company, nor, to its knowledge, any of its employees, directors or
shareholders (without the consent of the Representative) has taken or will take,
directly or indirectly, any action designed to or that has constituted or that
might reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
3.14. Internal
Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are
recorded as necessary in order to permit preparation of financial statements in
accordance with GAAP 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.
3.15. Accountants. As
of the Closing Date, the Company shall retain an independent certified public
accounting firm reasonably acceptable to Representative, which will have
responsibility for the preparation of the financial statements and the financial
exhibits, if any, to be included in the Registration Statement, and the Company
shall continue to retain an independent certified public accounting firm
reasonably acceptable to Representative for a period of at least three years
after the Closing.
3.16. FINRA. The
Company shall advise the Representative (who shall make an appropriate filing
with FINRA) if it is aware that any 5% or greater shareholder of the Company
becomes an affiliate or associated person of an FINRA member participating in
the distribution of the Company’s Public Securities.
3.17. No Fiduciary
Duties. The Company acknowledges and agrees that the
Underwriters’ responsibility to the Company is solely contractual in nature and
that none of the Underwriters or their affiliates or any selling agent shall be
deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary
duty to the Company or any of its affiliates in connection with the Offering and
the other transactions contemplated by this Agreement.
4. Conditions of Underwriters’
Obligations. The obligations of the several Underwriters to
purchase and pay for the Shares, as provided herein, shall be subject to the
continuing accuracy of the representations and warranties of the Company as of
the date hereof and as of each of the Closing Date and the Option Closing Date,
if any, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
4.1. Regulatory
Matters.
4.1.1. Effectiveness of
Registration Statement. The Prospectus shall have been filed
with the Commission pursuant to Rule 424(b) under the Securities Act within the
applicable time period prescribed for such filing by the rules and regulations
under the Securities Act; all material required to be filed by the Company
pursuant to Rule 433(d) under the Securities Act shall have been filed with the
Commission within the applicable time period prescribed for such filing by Rule
433; no stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and no stop order
suspending or preventing the use of any Prospectus Document shall have been
initiated or threatened by the Commission and all requests for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of Representative’s counsel.
15
4.1.2. FINRA
Clearance. By the Closing Date, the Representative shall have
received clearance from FINRA as to the amount of compensation allowable or
payable to the Underwriters as described in the Registration
Statement.
4.1.3. NYSE Amex
Clearance. On and after the Closing Date, as applicable, the
Public Securities shall have been duly listed for quotation on the
NYSE Amex and the Company shall have complied with all obligations of the NYSE
Amex relating to the sale of the Public Securities;
4.1.4. Free Writing
Prospectuses. The Representative covenants with the Company
that the Underwriters will not use, authorize the use of, refer to, or
participate in the planning for the use of a “free writing prospectus” as
defined in Rule 405 under the Securities Act, which term includes use of any
written information furnished by the Commission to the Company and not
incorporated by reference into the Registration Statement, without the prior
written consent of the Company. Any such free writing prospectus
consented to by the Company is hereinafter referred to as an “Underwriter Free
Writing Prospectus.”
4.2. Company Counsel
Matters.
4.2.1. Closing Date Opinion of
Counsel. On the Closing Date, the Representative shall have
received the favorable opinion of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel
to the Company (“SRFF”), dated the
Closing Date, addressed to the Representative, substantially as
follows:
(i) Based
solely on a certificate of good standing dated within 5 days of the Closing
Date, the Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of the State of North
Carolina.
(ii) Based
solely as to factual matters on representations and warranties by the Company,
all issued and outstanding securities of the Company have been duly authorized
and validly issued and, to our knowledge, are fully paid and non-assessable; the
holders thereof are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any stockholder of the Company arising by operation of law or under
the Articles of Incorporation. The offers and sales of the
outstanding securities were at all relevant times either registered under the
Securities Act or exempt from such registration requirements. The
authorized, and to the extent of SRFF’s knowledge, outstanding capital stock of
the Company is as set forth in the Prospectus.
(iii) The
Public Securities have been duly authorized and, when issued and paid for, will
be validly issued, to our knowledge, fully paid and non-assessable; the holders
thereof are not and will not be subject to personal liability solely by reason
of being such holders. The Public Securities are not and will not be
subject to the preemptive rights of any holders of any security of the Company
arising by operation of law or under the Articles of Incorporation.
16
(iv) This
Agreement has been duly and validly authorized and, when executed and delivered
by the Company, constitutes, the valid and binding obligations of the Company,
enforceable against the Company in accordance with its respective terms, except
(a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally, (b) as
enforceability of any indemnification or contribution provisions may be limited
under the Federal and state securities laws, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
(v) The
execution, delivery and performance of this Agreement and the Lock-up Agreements
by the Company and compliance by the Company with the terms and
provisions thereof and the consummation of the transactions contemplated
thereby, and the issuance and sale of the Public Securities, do not and will
not, with or without the giving of notice or the lapse of time, or both,
(a) to such counsel’s knowledge, based on representations of the Company
made to such counsel and contained in a certificate provided by an executive
officer of the Company, conflict with, or result in a breach of, any of the
terms or provisions of, or constitute a default under, or result in the creation
or modification of any lien, security interest, charge or encumbrance upon any
of the properties or assets of the Company pursuant to the terms of, any
mortgage, deed of trust, note, indenture, loan, contract, commitment or other
agreement or instrument filed as an exhibit to the Registration Statement,
(b) result in any violation of the provisions of the Articles of
Incorporation, or (c) to such counsel’s knowledge, violate any statute or
any judgment, order or decree, rule or regulation applicable to the Company of
any court, domestic or foreign, or of any federal, state or other regulatory
authority or other governmental body having jurisdiction over the Company, its
properties or assets.
(vi) The
Public Securities conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus
Documents. To its knowledge, no United States or state statute or
regulation required to be described in the Prospectus Documents is not described
as required (except as to the Blue Sky laws of the various states, as to which
such counsel expresses no opinions), nor are any contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus Documents or to be filed as exhibits to the Registration Statement
not so described or filed as required (except for the contracts and documents
described in the “Underwriting and Plan of Distribution” section of the
Prospectus Supplement, as to which such counsel expresses no
opinion).
(vii) Based
solely on a notice of effectiveness received from the Commission, the
Registration Statement is effective under the Securities Act. To such
counsel’s knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Securities Act or
applicable state securities laws.
(viii) The
Company is not and, after giving effect to the Offering and sale of the Public
Securities and the application of the proceeds thereof as described in the
Registration Statement and the Prospectus Documents, will not be, an “investment
company” as defined in the Investment Company Act of 1940, as
amended.
17
(ix) The
opinion of SRFF shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriters and the independent registered public
accounting firm of the Company, at which conferences the contents of the
Registration Statement and the Prospectus Documents contained therein and
related matters were discussed and, although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus Documents contained therein, solely on the basis of the foregoing
without independent check and verification, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statement or
any amendment thereto, at the time the Registration Statement or amendment
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or the Prospectus Documents or any amendment
or supplement thereto, at the time they were filed pursuant to Rule 424(b) or at
the date of such counsel’s opinion, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
view and shall not be deemed to have rendered an opinion with respect to
the financial information, statistical data and information and matters
regarding non-United States laws, rules and regulations included in the
Registration Statement or the Prospectus Documents). The Registration
Statement and the Prospectus Documents and any post-effective amendments or
supplements thereto (other than the financial statements including notes and
schedules, financial data, statistical data and non-United States laws, rules
and regulations included in the Registration Statement or the Prospectus
Documents, included therein, as to which no opinion need be rendered) each as of
their respective dates complied as to form in all material respects with the
requirements of the Securities Act and Rules and Regulations.
4.2.2 On
the Closing Date, the Representative shall have received the favorable opinion
of Heilongjiang Min Qiang Law Firm, counsel to the Company, reasonably
acceptable to the Representative, related to, among other things, the
descriptions of laws of the People’s Republic of China and the organization of
the Company’s PRC affiliates and ownership structure, dated the Closing Date and
addressed to the Representative.
4.2.3 Intentionally
Omitted.
4.2.4 On
the Closing Date, the Representative shall have received the favorable opinion
of ▇▇▇▇ & Berlis LLP counsel to the Company, reasonably acceptable to the
Representative, related to, among other things, the organization of
the Company’s Canadian affiliate and ownership structure, dated the Closing Date
and addressed to the Representative.
4.2.5. Option Closing Date Opinions
of Counsel. On the Option Closing Date, if any, the
Representative shall have received the favorable opinion of each counsel listed
in Sections 4.2.1 through 4.2.4, dated the Option Closing Date, addressed to the
Representative and in form and substance reasonably satisfactory to the
Representative, confirming as of the Option Closing Date, the statements made by
such counsels in their respective opinions delivered on the Closing
Date.
4.2.6. Reliance. In
rendering such opinions, such counsel may rely: (i) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to the
Representative) of other counsel reasonably acceptable to the Representative,
familiar with the applicable laws; and (ii) as to matters of fact, to the
extent they deem proper, on certificates or other written statements of officers
of the Company and officers of departments of various jurisdiction having
custody of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to RP if requested. The opinion of SRFF and any opinion
relied upon by SRFF shall include a statement to the effect that it may be
relied upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.
18
4.3. Cold Comfort
Letter. At the time this Agreement is executed, and at each of
the Closing Date and the Option Closing Date, if any, you shall have received a
letter, addressed to the Representative and in form and substance satisfactory
in all respects (including the non-material nature of the changes or decreases,
if any, referred to in clause (iii) below) to you and to RP from Sherb dated,
respectively, as of the date of this Agreement and as of the Closing Date and
the Option Closing Date, if any:
(i) Confirming
that they are independent public accountants with respect to the Company within
the meaning of the Securities Act and the applicable Rules and Regulations and
that they have not, during the periods covered by the financial statements
included in the Prospectus, provided to the Company any non-audit services, as
such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating
that in their opinion the financial statements of the Company included in the
Registration Statement and Prospectus Documents comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the published Rules and Regulations thereunder;
(iii) Stating
that, on the basis of a limited review which included a reading of the latest
available unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the shareholders and
board of directors and the various committees of the board of directors,
consultations with officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe
that: (a) the unaudited financial statements of the Company
included in the Registration Statement and Prospectus Documents do not comply as
to form in all material respects with the applicable accounting requirements of
the Securities Act and the Rules and Regulations or are not fairly presented in
conformity with GAAP applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the Registration
Statement; (b) at a date not later than five days prior to the Closing Date
or Option Closing Date, as the case may be, there was any change in the capital
stock or long-term debt of the Company, or any decrease in the shareholders’
equity of the Company as compared with amounts shown in the December 31, 2008
balance sheet included in the Registration Statement, other than as set forth in
or contemplated by the Registration Statement, or, if there was any decrease,
setting forth the amount of such decrease, and (c) during the period from
December 31, 2008 to a specified date not later than five days prior to the
Closing Date or Option Closing Date, as the case may be, there was any decrease
in revenues, net earnings or net earnings per share, in each case as
compared with the corresponding period in the preceding year and as compared
with the corresponding period in the preceding quarter, other than as set forth
in or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) Setting
forth, at a date not later than five days prior to the Closing Date, the amount
of liabilities of the Company (including a breakdown of commercial paper and
notes payable to banks and related parties);
(v) Stating
that they have compared specific dollar amounts, numbers of shares, percentages
of revenues and earnings, statements and other financial information pertaining
to the Company set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement;
19
(vi) Stating
that they have not since the Company’s formation brought to the attention of the
Company’s management any reportable condition related to internal structure,
design or operation as defined in the Statement on Auditing Standards No. 60
“Communication of Internal Control Structure Related Matters Noted in an Audit,”
in the Company’s internal controls; and
(vii) Statements
as to such other matters incident to the transaction contemplated hereby as you
may reasonably request.
4.4. Officers’
Certificates.
4.4.1. Officers’
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a certificate of
the Company signed by the Chairman of the Board and Chief Executive Officer of
the Company, dated the Closing Date or the Option Closing Date, as
the case may be, respectively, to the effect that the Company has performed all
covenants and complied with all conditions required by this Agreement to be
performed or complied with by the Company prior to and as of the Closing Date,
or the Option Closing Date, as the case may be, and that the conditions set
forth in Section 4.5 hereof have been satisfied as of such date and that, as of
the Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct. In addition, the Representative will have received
such other and further certificates of officers of the Company as the
Representative may reasonably request.
4.4.2. Secretary’s
Certificate. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a certificate of
the Company signed by the Secretary or Assistant Secretary of the Company, dated
the Closing Date or the Option Date, as the case may be, respectively,
certifying: (i) that the Articles of Incorporation are true and complete,
have not been modified and are in full force and effect; (ii) that the
resolutions of the Company’s Board of Directors relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified; (iii) all correspondence between the Company or its counsel and
the Commission; and (iv) as to the incumbency of the officers of the
Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5. No Material
Changes. Prior to and on each of the Closing Date and the
Option Closing Date, if any: (i) there shall have been no
material adverse change or development involving a prospective material adverse
change in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus Documents; (ii) no
action suit or proceeding, at law or in equity, shall have been pending or
threatened against the Company or any Initial Shareholder before or by any court
or federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and
Prospectus Documents; (iii) no stop order shall have been issued
under the Securities Act and no proceedings therefore shall have been initiated
or threatened by the Commission; and (iv) the Registration Statement and
the Prospectus Documents and any amendments or supplements thereto shall contain
all material statements which are required to be stated therein in accordance
with the Securities Act and the Rules and Regulations and shall conform in all
material respects to the requirements of the Securities Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus Documents
nor any amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
20
4.6. Delivery of
Agreements.
4.6.1. Execution Date
Deliveries. On the date of this Agreement, the Company shall
have delivered to the Representative executed copies of this Agreement and the
Lock-Up Agreements.
4.6.2. Closing Date
Deliveries. On the Closing Date, the Company shall have
delivered to the Representative the Shares.
5. Indemnification.
5.1. Indemnification of
Underwriters.
5.1.1 General. Subject to
the conditions set forth below, the Company agrees to indemnify and hold
harmless each of the Underwriters, and each dealer selected by the
Representative that participates in the offer and sale of the
Public Securities (each a "Selected Dealer") and each of their
respective directors, officers and employees and each person, if any, who
controls any such Underwriter ("Controlling Person") within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
and all loss, liability, claim, damage and expense whatsoever (including but not
limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any action between
any of the Underwriters and the Company or between any of the Underwriters and
any third party or otherwise, as incurred) to which they or any of them may
become subject under the Securities Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement and the Prospectus
Documents (as from time to time each may be amended and supplemented); (ii) any
materials or information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the Public
Securities, including any "road show" or investor presentations made to
investors by the Company (whether in person or electronically); or (iii) any
application or other document or written communication (in this Section 5,
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Public Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NYSE Amex or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to an Underwriter
by or on behalf of such Underwriter expressly for use in any Prospectus
Document, the Registration Statement, or any amendment or supplement thereof, or
in any application, as the case may be. With respect to any untrue statement or
omission or alleged untrue statement or omission made in the Preliminary
Prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of any Underwriter to the extent that any loss, liability, claim,
damage or expense of such Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Public Securities to such person as required by the Securities Act and the
Rules and Regulations, and if the untrue statement or omission has been
corrected in the Prospectus, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with its obligations under Section 3.3
hereof. The Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the issue and sale
of the Public Securities or in connection with the Registration Statement or
Prospectus.
21
5.1.2. Procedure. If any
action is brought against an Underwriter, a Selected Dealer or a Controlling
Person in respect of which indemnity may be sought against the Company pursuant
to Section 5.1.1, such Underwriter, Selected Dealer or Controlling Person shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the reasonable approval of such Underwriter or such
Selected Dealer, as the case may be) and payment of actual expenses. Such
Underwriter, such Selected Dealer or Controlling Person 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 Underwriter, such Selected Dealer
or Controlling Person unless (i) the employment of such counsel at the expense
of the Company shall have been authorized in writing by the Company in
connection with the defense of such action, or (ii) the Company shall not have
employed counsel to have charge of the defense of such action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of not more
than one additional firm of attorneys selected by the Underwriter, Selected
Dealer and/or Controlling Person shall be borne by the Company, in addition to
local counsel. Notwithstanding anything to the contrary contained herein, if any
Underwriter, Selected Dealer or Controlling Person shall assume the defense of
such action as provided above, the Company shall have the right to approve the
terms of any settlement of such action which approval shall not be unreasonably
withheld.
5.2. Indemnification of the
Company. Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors, officers and employees and agents
who control the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act against any and all loss, liability, claim,
damage and expense described in the foregoing indemnity from the Company to the
several Underwriters, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application, in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
such Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1. Contribution Rights.
In order to provide for just and equitable contribution under the Securities Act
in any case in which (i) any person entitled to indemnification under this
Section 5 makes claim for indemnification pursuant hereto but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Securities Act, the Exchange Act or
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under this Section 5, then, and in each such
case, the Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company and the Underwriters, as incurred,
in such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial offering price appearing
thereon and the Company is responsible for the balance; provided, that, no
person guilty of a fraudulent misrepresentation (within the meaning of Section
ll (f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 5.3.1, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Public
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
an Underwriter or the Company, as applicable, and each person, if any, who
controls an Underwriter or the Company, as applicable, within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
such Underwriter or the Company, as applicable.
22
5.3.2. Contribution
Procedure. Within fifteen days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party ("contributing party”), notify the
contributing party of the commencement thereof, but the omission to so notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or its representative of the commencement thereof within
the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution on account of any
settlement of any claim, action or proceeding affected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section are intended to supersede, to
the extent permitted by law, any right to contribution under the Securities Act,
the Exchange Act or otherwise available. Each Underwriter's obligations to
contribute pursuant to this Section 5.3 are several and not joint.
6. Default by an
Underwriter.
6.1. Default Not Exceeding 10% of
Firm Shares or Option Shares. If any Underwriter or
Underwriters shall default in its or their obligations to purchase the Firm
Shares or the Option Shares, if the Over-allotment Option is exercised,
hereunder, and if the number of the Firm Shares or Option Shares with respect to
which such default relates does not exceed in the aggregate 10% of the number of
Firm Shares or Option Shares that all Underwriters have agreed to purchase
hereunder, then such Firm Shares or Option Shares to which the default relates
shall be purchased by the non-defaulting Underwriters in proportion to their
respective commitments hereunder.
6.2. Default Exceeding 10% of
Firm Shares or Option Shares. In the event that the default
addressed in Section 6.1 relates to more than 10% of the Firm Shares or Option
Shares, you may in your discretion arrange for yourself or for another party or
parties to purchase such Firm Shares or Option Shares to which such default
relates on the terms contained herein. If, within one (1) Business
Day after such default relating to more than 10% of the Firm Shares or Option
Shares, you do not arrange for the purchase of such Firm Shares or Option
Shares, then the Company shall be entitled to a further period of one (1)
Business Day within which to procure another party or parties satisfactory to
you to purchase said Firm Shares or Option Shares on such terms. In
the event that neither you nor the Company arrange for the purchase of the Firm
Shares or Option Shares to which a default relates as provided in this Section
6, this Agreement will automatically be terminated by you or the Company without
liability on the part of the Company (except as provided in Sections 3.10 and 5
hereof) or the several Underwriters (except as provided in Section 5 hereof);
provided, however, that
if such default occurs with respect to the Option Shares, this Agreement will
not terminate as to the Firm Shares; and provided further that nothing herein
shall relieve a defaulting Underwriter of its liability, if any, to the other
Underwriters and to the Company for damages occasioned by its default
hereunder.
23
6.3. Postponement of Closing
Date. In the event that the Firm Shares or Option Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or Option
Closing Date for a reasonable period, but not in any event exceeding five (5)
Business Days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus Documents or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus Documents that in the
opinion of counsel for the Underwriter may thereby be made
necessary. The term “Underwriter” as used in this Agreement shall
include any party substituted under this Section 6 with like effect as if it had
originally been a party to this Agreement with respect to such Public
Securities.
7. Additional
Covenants.
7.1. Board Composition and Board
Designations. The Company shall ensure that: (i) the
qualifications of the persons serving as board members and the overall
composition of the board comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
rules promulgated thereunder and with the listing requirements of the NYSE Amex,
NASDAQ or any other national securities exchange or national securities
association, as the case may be, in the event the Company seeks to have its
Public Securities listed on another exchange or quoted on an automated quotation
system, and (ii) if applicable, at least one member of the board of
directors qualifies as a “financial expert” as such term is defined under the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules promulgated thereunder.
7.2. Right of First
Refusal. The Company agrees that if the Firm Shares are sold
in accordance with the terms of this Underwriting Agreement, the Representative
shall have an irrevocable preferential right for a period of twelve (12) months
from the date the Offering is completed to purchase for its account or to sell
for the account of the Company, or any subsidiary of or successor to the Company
any securities (whether debt or equity or any combination thereof) of the
Company or any such subsidiary or successor which the Company or any such
subsidiary or successor may seek to sell whether with or without or through an
underwriter, Representative or broker-dealer and whether pursuant to
registration under the Securities Act or otherwise. The Company and any such
subsidiary or successor will consult the Representative with regard to any such
proposed financing and will offer the Representative the opportunity to purchase
or sell any such securities on terms not more favorable to the Company or any
such subsidiary or successor, as the case may be, than it or they can secure
elsewhere. If the Representative fails to accept such offer within 10 business
days after the mailing of a notice containing the material terms of the proposed
financing proposal by registered mail or overnight courier service addressed to
the Representative, then the Representative shall have no further claim or right
with respect to the financing proposal contained in such notice. If, however,
the terms of such financing proposal are subsequently modified in any material
respect, the preferential right referred to herein shall apply to such modified
proposal as if the original proposal had not been made. The Representative's
failure to exercise its preferential right with respect to any particular
proposal shall not affect its preferential rights relative to future proposals.
The Company shall have the right, at its option, to designate the Representative
as lead underwriter or co-manager of any underwriting group or co-Representative
of any proposed financing in satisfaction of its obligations hereunder, and the
Representative shall be entitled to receive as its compensation 50% of the
compensation payable to the underwriting or Representative group when serving as
co-manager or co-Representative and 33% of the compensation payable to the
underwriting or Representative group when serving as co-manager or
co-Representative with respect to a proposed financing in which there are three
co-managing or lead underwriters or co-Representatives. The right of first
refusal, as described herein, will be terminated in the event the deal is
terminated pursuant to Section 8.2 below.
24
7.3. Prohibition on Press
Releases and Public Announcements. The Company will not issue
press releases or engage in any other publicity, without the Representative's
prior written consent, for a period ending at 5:00 p.m. Eastern time on the
first business day following the 40th day following the Closing Date, other than
normal and customary releases issued in the ordinary course of the Company’s
business.
8. Effective Date of this
Agreement and Termination Thereof.
8.1. Effective
Date. This Agreement shall become effective when both the
Company and the Representative have executed the same and delivered counterparts
of such signatures to the other party.
8.2. Termination. You
shall have the right to terminate this Agreement at any time prior to any
Closing Date, (i) if any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, general securities markets in the United States; or
(ii) if trading on the New York Stock Exchange, the NYSE Amex, the NASDAQ
Global Market or the NASDAQ Capital Market shall have been suspended or
materially limited, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required by
FINRA or by order of the Commission or any other government authority having
jurisdiction, or (iii) if the United States shall have become involved in a
new war or an increase in major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or
(v) if a moratorium on foreign exchange trading has been declared which
materially adversely impacts the United States securities markets, or
(vi) if the Company shall have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
opinion, make it inadvisable to proceed with the delivery of the Firm Shares or
Option Shares, or (vii) if the Company is in material breach of any of its
representations, warranties or covenants hereunder, or (viii) if the
Representative shall have become aware after the date hereof of such a material
adverse change in the conditions or prospects of the Company, or such adverse
material change in general market conditions as in the Representative’s judgment
would make it impracticable to proceed with the offering, sale and/or delivery
of the securities or to enforce contracts made by the Underwriters for the sale
of the securities.
8.3. Expenses. Except
in the case of a default by the Underwriters, pursuant to Section 6.2 above, in
the event that this Agreement shall not be carried out for any reason
whatsoever, within the time specified herein or any extensions thereof pursuant
to the terms herein, the Company shall be obligated to reimburse the
Underwriters for their out-of-pocket expenses of up to $100,000 as set forth in
Section 3.10.1.
8.4. Indemnification. Notwithstanding
any contrary provision contained in this Agreement, any election hereunder or
any termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 shall not be in any way
effected by, such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
25
9. Miscellaneous.
9.1. Notices. All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed (registered or certified mail, return
receipt requested), personally delivered or sent by facsimile transmission and
confirmed and shall be deemed given when so delivered or faxed and confirmed or
if mailed, two days after such mailing or five days in the case of an
international mailing.
If to the
Representative:
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
12▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General
Counsel
Fax No.:
▇▇▇.▇▇▇.▇▇▇▇
Copy
to:
▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇
10▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Fax:
▇▇▇.▇▇▇.▇▇▇▇
If to the
Company:
China
Education Alliance, Inc.
58 ▇▇▇▇
▇▇▇▇ Road
Kun Lun
Shopping Mall
Harbin,
People’s Republic of China
Attn: Mr.
Xiqun Yu, Chief Executive Officer
Fax:
▇▇-▇▇-▇▇▇▇▇▇▇▇
Copy
to:
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
61
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq./ ▇▇▇▇▇▇▇▇ ▇▇▇, Esq.
Fax:
▇▇▇.▇▇▇.▇▇▇▇
9.2. Headings. The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.
9.3. Amendment. This
Agreement may only be amended by a written instrument executed by each of the
parties hereto.
9.4. Entire
Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
9.5. Binding
Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon the Representative, the Underwriters, the Company and
the controlling persons, directors and officers referred to in Section 5 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. The term “successors and assigns” shall not include
a purchaser, in its capacity as such, of securities from any of the
Underwriters.
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9.6. Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws. The Company hereby agrees that any
action, proceeding or claim against it arising out of, or relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may
be served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 11 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or
claim. The Company agrees that the prevailing party(ies) in any such
action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys’ fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
9.7. Execution in
Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Delivery of a signed counterpart
of this Agreement by facsimile or email/pdf transmission shall constitute valid
and sufficient delivery thereof.
9.8. Waiver,
etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Agreement shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
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If the
foregoing correctly sets forth the understanding between the Underwriters and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between
us.
| Very truly yours, | |||
| CHINA EDUCATION ALLIANCE, INC. | |||
|
|
By:
|
/s/ Xiqun Yu | |
| Name: | Xiqun Yu | ||
| Title: | Chairman and Chief Executive Officer | ||
Accepted
on the date first above written.
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇ | ||
| Name: | ▇▇▇▇ ▇▇▇▇▇ | ||
| Title: | Sr. Managing Director | ||
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ANNEX
1
29
Schedule
1
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLC
30