ShengdaTech, Inc. 6.00% Senior Convertible Notes due 2018 PURCHASE AGREEMENT
Execution
Version
$100,000,000
6.00%
Senior Convertible Notes due 2018
May
22,
2008
▇▇▇▇▇▇▇▇▇▇▇
& Co. Inc.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(as
Representative of the Initial Purchasers)
Ladies
& Gentlemen:
ShengdaTech,
Inc., a Nevada corporation (the “Company”),
proposes to issue and sell to ▇▇▇▇▇▇▇▇▇▇▇ & Co. Inc. and the other initial
purchasers named on Schedule I to this Agreement (the “Initial
Purchasers”),
for
whom ▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc. is acting as Representative (the “Representative”),
$100,000,000 in aggregate principal amount of 6.00% Senior Convertible Notes
due
2018 (the “Firm Notes”),
subject to the terms and conditions set forth herein.
1. The
Transaction.
Subject
to the terms and conditions herein contained, the Company proposes to issue
and
sell to the Initial Purchasers, severally and not jointly, the Firm Notes which
are convertible into the common stock, $0.00001 par value per share, of the
Company (the “Common
Stock”).
In
addition, the Company proposes to grant to the Initial Purchasers an option
to
purchase up to an additional $15,000,000 principal amount of Notes from the
Company (the “Option
Notes”)
pursuant to the terms hereof. The Firm Notes and the Option Notes are
collectively referred to herein as the “Notes.”
The
Notes are to be issued under an Indenture between the Company and The Bank
of
New York, as trustee (the “Trustee”)
(the
“Indenture”).
The
amount of the Notes to be purchased by each of the several Initial Purchasers
are set forth opposite their names on Schedule I hereto.
In
connection with the sale of the Notes, the Company has prepared a preliminary
offering memorandum, dated May 14, 2008 (the “Preliminary
Offering Memorandum”),
and
has prepared a final offering memorandum, dated the date hereof (the
“Offering
Memorandum”),
each
setting forth information regarding the Company, the subsidiaries listed on
Schedule II hereto (the “Subsidiaries”),
the
Notes, the terms of the Offering and the transactions contemplated by the
Transaction Documents (as defined below), and any material developments relating
to the Company occurring after the date of the most recent financial statements
included therein. Any references herein to the Preliminary Offering Memorandum
or the Offering Memorandum shall be deemed to include, in each case, all
amendments and supplements thereto and any information and/or documents
incorporated by reference therein. The Company hereby confirms that it has
authorized the use of the Disclosure Package (as defined below) and the Offering
Memorandum in connection with the offering and resale of the Notes by the
Initial Purchasers.
The
Company understands that the Initial Purchasers propose to make an offering
of
the Notes (the “Exempt
Resales”)
only
on the terms and in the manner set forth in the Disclosure Package and the
Offering Memorandum, as amended or supplemented, and the terms hereof as soon
as
the Initial Purchasers deem advisable after this Agreement has been executed
and
delivered, solely to persons in the United States whom the Initial Purchasers
reasonably believe to be (i) “qualified institutional buyers” (each, a
“QIB”)
as
defined in Rule 144A under the Securities Act of 1933, as amended (the
“Securities
Act”),
as
such rule may be amended from time to time (“Rule
144A”)
in
transactions under Rule 144A, or (ii) institutional accredited investors (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
(“Institutional
Accredited Investors”)
that,
prior to their purchase of the Notes, deliver to the Initial Purchasers a letter
containing the representations and agreements set forth in Annex B to the
Offering Memorandum, in transactions pursuant to another exemption of sale
of
securities from registration requirements of the Securities Act, including
pursuant to transactions under “Section 4(1-1/2)”. The QIBs and Institutional
Accredited Investors are referred to herein from time to time as the
“Eligible
Purchasers.”
The
Initial Purchasers will offer the Notes to such Eligible Purchasers initially
at
a price equal to 100% of the principal amount thereof. Such price may be changed
by the Initial Purchasers at any time without notice.
The
Notes
are convertible in accordance with their terms and the terms of the Indenture
into Common Stock (except for any cash in lieu of fractional shares) at an
initial conversion rate of 100.6036 shares of Common Stock per $1,000 principal
amount of Notes.
Holders
of the Notes (including the Initial Purchasers and their direct and indirect
transferees) will be entitled to the benefits of a Registration Rights
Agreement, to be dated the Closing Date (as defined below) and substantially
in
the form attached hereto as Exhibit A hereto (the "Registration
Rights Agreement"),
pursuant to which the Company will agree to file one or more registration
statements with the Securities and Exchange Commission (the "Commission")
under
the conditions set forth therein, to the extent required by the Registration
Rights Agreement, for the purpose of registration under the Securities Act
of
(i) the Registrable Securities referred to (and as defined) in the Registration
Rights Agreement, which are identical in all material respects to the Notes
(except that the Registrable Securities will not contain terms with respect
to
transfer restrictions) and (ii) the Common Stock issuable upon conversion of
the
Notes or for the purpose of registration of the resale of the Notes and the
Common Stock issuable upon conversion of the Notes.
This
Agreement, the Notes, the Registration Rights Agreement and the Indenture are
hereinafter referred to collectively as the “Transaction
Documents.”
2
Capitalized
terms used herein and not otherwise defined shall have the meanings assigned
to
such terms in the Disclosure Package, and if not defined therein, in the
Indenture.
2. Representations
and Warranties of the Company.
The
Company represents and warrants to, and agrees with, each of the Initial
Purchasers that:
(a) (i)
The
Preliminary Offering Memorandum as of its date did not, (ii) the Preliminary
Offering Memorandum, as supplemented by the information listed in Schedule
III
hereto (the “Pricing
Supplement”)
(the
Preliminary Offering Memorandum and the Pricing Supplement taken together,
the
“Disclosure
Package”),
as of
the Applicable Time (as defined below) does not, (iii) the Offering Memorandum
as of its date does not, and as of the Closing Date will not, and (iv) any
supplement or amendment to any of the documents referenced in clauses (i)
through (iii) above does not and will not, contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the representations and
warranties contained in this paragraph shall not apply to statements in or
omissions from the Preliminary Offering Memorandum or the Offering Memorandum
(or any supplement or amendment thereto, including the Pricing Supplement)
made
in reliance upon and in conformity with Initial Purchaser Information (as such
term is defined in Section 11 hereof). For purposes of this Agreement, the
“Applicable
Time”
means
5:00 p.m. New York City time on the date of this Agreement.
(b) The
Disclosure Package and the Offering Memorandum have been or will be prepared
by
the Company for use by the Initial Purchasers in connection with the offering
of
the Notes.
(c)
The
financial information and statements, including the notes thereto, and the
supporting schedules, if any, included in the Disclosure Package and the
Offering Memorandum present fairly the financial position as of the dates
indicated and the cash flows and results of operations for the periods specified
of the Company and its Subsidiaries in the Disclosure Package and the Offering
Memorandum; except as otherwise stated in the Disclosure Package and the
Offering Memorandum, said financial statements have been prepared in conformity
with U.S. GAAP applied on a consistent basis throughout the periods involved;
and the supporting schedules included in the Disclosure Package and the Offering
Memorandum present fairly the information required to be stated therein. The
other financial and statistical information included in the Disclosure Package
and the Offering Memorandum derived from the historical and as adjusted
financial information and statements, present fairly the information included
therein and have been prepared on a basis consistent with that of the financial
statements, historical and as adjusted financial information and statements,
that are included in the Disclosure Package and the Offering Memorandum and
the
books and records of the respective entities presented therein and, to the
extent such information is a range, projection or estimate, is based on the
good
faith belief and estimates of the management of the Company and the
Subsidiaries.
(d)
▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C. (the “Auditor”)
who
have certified or will certify the financial statements and supporting schedules
and information of the Company and its Subsidiaries included or to be included
as part of the Disclosure Package and the Offering Memorandum, are and, during
the periods covered by their report, were an independent public accounting
firm
as required by the Securities Act and the Exchange Act.
3
(e)
The
Company and each of the Subsidiaries are duly organized, validly existing and
in
good standing under the laws of their respective jurisdictions of incorporation
or organization, and each such entity has all requisite power and authority
to
carry on its business as it is currently being conducted and as described in
the
Disclosure Package and the Offering Memorandum, and to own, lease and operate
its respective properties. The Company and each of its Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted by it or
location of the assets or properties owned, leased or licensed by it requires
such qualification, except for those failures to be so qualified or in good
standing which (individually or in the aggregate) would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on
(A) the business, general affairs, management, condition (financial or
otherwise), results of operations, stockholders’ equity, or properties of the
Company and the Subsidiaries, individually or taken as a whole, (B) the
long-term debt or capital stock of the Company or any Subsidiary, (C) the
issuance or marketability of the Notes or (D) the validity of this Agreement
or
any other Transaction Documents or the transactions described in the Disclosure
Package and the Offering Memorandum under the caption “Use of Proceeds” (any
such effect being a “Material
Adverse Effect”).
(f) The
Subsidiaries listed on Schedule II hereto are the only “subsidiaries” of the
Company (within the meaning of Rule 405 under the Securities Act). Except for
the Subsidiaries or as otherwise disclosed in the Disclosure Package and the
Offering Memorandum, the Company holds no ownership or other interest, nominal
or beneficial, direct or indirect, in any corporation, partnership, joint
venture or other business entity. All of the issued shares of capital stock
of,
or other ownership interests in, each Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable and are owned,
directly or indirectly, by the Company, free and clear of any lien, charge,
mortgage, pledge, security interest, claim, limitation on voting rights, equity,
trust or other encumbrance, preferential arrangement, defect or restriction
of
any kind whatsoever (any “Lien”).
(g) The
Company and each of the Subsidiaries has all requisite corporate power and
authority, and all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits of and from all governmental or regulatory
bodies or any other person or entity (collectively, the "Permits"),
to
own, lease and license its assets and properties and conduct its business,
all
of which are valid and in full force and effect, except where the lack of such
Permits, individually or in the aggregate, would not have a Material Adverse
Effect. The Company and each of the Subsidiaries has fulfilled and performed
in
all material respects all of its obligations with respect to such Permits and
no
event has occurred that allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment
of
the rights of the Company thereunder. No Permits are required to enter into,
deliver and perform this Agreement or any other Transaction Document and to
issue and sell the Notes.
4
(h) Except
as
described in the Disclosure Package and the Offering Memorandum, the Company
and
each of the Subsidiaries owns or possesses all rights to use all patents, patent
rights, inventions, trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, know-how and other similar
rights and proprietary knowledge (collectively, “Intangibles”)
reasonably necessary for the conduct of its business. Neither the Company nor
any of the Subsidiaries has received any notice of, or is aware of, any
infringement of or conflict with asserted rights of others with respect to
any
Intangibles.
(i) The
Company and each of the Subsidiaries has good and marketable title to all real
property, and good and marketable title, or valid land use rights granted by
relevant authorities in China to all other property owned by it described in
the
Disclosure Package and the Offering Memorandum, in each case free and clear
of
all Liens, except such as do not materially affect the value of such property
and do not materially interfere with the use made or proposed to be made of
such
property by the Company and the Subsidiaries. All property held under lease
by
the Company and the Subsidiaries is held by them under valid, existing and
enforceable leases, free and clear of all Liens, except such as are not material
and do not materially interfere with the use made or proposed to be made of
such
property by the Company and the Subsidiaries. Subsequent to the respective
dates
as of which information is given in the Disclosure Package and the Offering
Memorandum, (i) there has not been any event which, individually or in the
aggregate, would have a Material Adverse Effect; (ii) neither the Company nor
any of the Subsidiaries has sustained any loss or interference with its assets,
businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree which, individually or in the aggregate, would have a Material
Adverse Effect; and (iii) since the date of the latest balance sheet included
in
the Disclosure Package and the Offering Memorandum except as may be disclosed
in
the Offering Memorandum, neither the Company nor the Subsidiaries has (A) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money, except such liabilities or obligations incurred in the
ordinary course of business, (B) entered into any transaction not in the
ordinary course of business or (C) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire any shares of its
capital stock.
(j) Each
description of a contract, document or other agreement in the Disclosure Package
and the Offering Memorandum accurately reflects in all material respects the
terms of the underlying contract, document or other agreement. Each contract,
document or other agreement described in the Disclosure Package and the Offering
Memorandum is in full force and effect and is valid and enforceable by and
against the Company or the Subsidiary, as the case may be, in accordance with
its terms. Neither the Company nor any of the Subsidiaries, if a Subsidiary
is a
party, nor to the Company's knowledge, any other party is in default in the
observance or performance of any term or obligation to be performed by it under
any such agreement, and no event has occurred which with notice or lapse of
time
or both would constitute such a default, in any such case which default or
event, individually or in the aggregate, would have a Material Adverse Effect.
No default exists, and no event has occurred which with notice or lapse of
time
or both would constitute a default, in the due performance and observance of
any
term, covenant or condition, by the Company or any Subsidiary, if a Subsidiary
is a party thereto, of any other agreement or instrument to which the Company
or
any of the Subsidiaries is a party or by which Company or its properties or
business or a Subsidiary or its properties or business may be bound or affected
which default or event, individually or in the aggregate, would have a Material
Adverse Effect.
5
(k) The
statistical, industry-related and market related data included in the Disclosure
Package and the Offering Memorandum are based on or derived from sources that
the Company believes to be reliable and accurate, and such data agrees with
the
sources from which they are derived.
(l) Neither
the Company nor any Subsidiary (i) is in violation of its certificate or
articles of incorporation, articles of association, by-laws, certificate of
formation, limited liability company agreement, partnership agreement or other
organizational documents, (ii) is in default under, and no event has occurred
which, with notice or lapse of time, or both, would constitute a default under,
or result in the creation or imposition of any Lien upon, any property or assets
of the Company or any Subsidiary pursuant to, any bond, debenture, note,
indenture, mortgage, deed of trust, loan agreement or other material agreement
or instrument to which it is a party or by which it is bound or to which any
of
its properties or assets is subject or (iii) is in violation of any statute,
law, rule, regulation, ordinance, directive, judgment, decree or order of any
judicial, regulatory or other legal or governmental agency or body, foreign
or
domestic applicable to it, except (in the case of clauses (ii) and (iii) above)
for violations or defaults that could not (individually or in the aggregate)
reasonably be expected to have a Material Adverse Effect and except (in the
case
of clause (ii) alone) for any Lien disclosed in the Disclosure Package and
the
Offering Memorandum.
(m) The
Company has the required corporate or other power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the corporate
or
other power and authority to issue, sell and deliver the Notes.
(n) The
Notes
have been duly and validly authorized by the Company for issuance and sale
to
the Initial Purchasers pursuant to this Agreement and, when executed by the
Company and authenticated by the Trustee in accordance with the provisions
of
the Indenture and when delivered to and paid for by the Initial Purchasers
in
accordance with the terms hereof and thereof, will be duly and validly executed,
issued and delivered and will constitute valid and legally binding obligations
of the Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except that the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect relating
to or affecting creditors’ rights generally and (ii) general principles of
equity. The Notes will conform in all material respects to the descriptions
thereof in the Disclosure Package and the Offering Memorandum. At the Closing
Date, the Notes will be in the form contemplated by the
Indenture.
6
(o) The
Indenture has been duly and validly authorized by the Company and, when duly
executed and delivered by the Company (assuming the due authorization, execution
and delivery by the Trustee), will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its
terms, except that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in
effect relating to or affecting creditors’ rights generally and (ii) general
principles of equity. The Indenture conforms in all material respects to the
description thereof in the Disclosure Package and the Offering Memorandum.
On
the Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the “Trust
Indenture Act”),
and
the rules and regulations of the Commission applicable to an indenture that
is
qualified thereunder.
(p) The
Registration Rights Agreement has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company (assuming the
due
authorization, execution and delivery by the Initial Purchasers), will
constitute a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect relating
to or affecting creditors’ rights generally and (ii) general principles of
equity. The Registration Rights Agreement conforms in all material respects
to
the description thereof in the Disclosure Package and the Offering
Memorandum.
(q) This
Agreement has been duly and validly authorized, executed and delivered by the
Company.
(r)
On
the
Closing Date, the Registrable Securities will
have
been duly authorized by the Company and, when duly executed, authenticated,
issued and delivered as contemplated by the Registration Rights Agreement,
will
be duly and validly issued and outstanding and will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms and will be entitled to the benefits of the
Indenture.
(s) None
of
(i) the execution, delivery and performance by the Company of this Agreement
and
consummation of the transactions contemplated by the Transaction Documents
to
which each of them, respectively, is a party, (ii) the issuance and sale of
the
Notes or (iii) the consummation by the Company of the transactions described
in
the Disclosure Package and the Offering Memorandum under the caption “Use of
Proceeds,” will give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in the breach of any term
or
provision of, or constitute a default (or an event which with notice or lapse
of
time or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or any Subsidiary
pursuant to the terms of, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party or
by
which either the Company or any Subsidiary or any of their properties or
businesses is bound, or any franchise, license, permit, judgment, decree, order,
statute, rule or regulation applicable to the Company or any Subsidiary or
violate any provision of the charter or by-laws of the Company or any
Subsidiary, except for such consents or waivers which have already been obtained
and are in full force and effect.
7
(t) The
Company has authorized and outstanding capital stock as set forth under the
caption "Capitalization" in the Disclosure Package and the Offering Memorandum.
All of the issued and outstanding shares of common stock of the Company have
been duly and validly issued and are fully paid and nonassessable. There are
no
statutory preemptive or other similar rights to subscribe for or to purchase
or
acquire any shares of common stock of the Company or any of the Subsidiaries
or
any such rights pursuant to its charter or by-laws or any agreement or
instrument to or by which the Company or any of the Subsidiaries is a party
or
bound. Except as disclosed in the Disclosure Package and the Offering
Memorandum, there is no outstanding option, warrant or other right calling
for
the issuance of, and there is no commitment, plan or arrangement to issue,
any
share of stock of the Company or any of the Subsidiaries or any security
convertible into, or exercisable or exchangeable for, such stock. All
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, and are fully paid and nonassessable and are
owned directly by the Company or by another wholly owned subsidiary of the
Company free and clear of any security interests, liens, encumbrances, equities
or claims, other than those described in the Disclosure Package and the Offering
Memorandum.
(u) When
the
Notes the Initial Purchasers propose to offer in transactions under Rule 144A
are issued and delivered pursuant to this Agreement, no securities of the
Company or any Subsidiary will be (i) of the same class (within the meaning
of
Rule 144A) as such Notes the Initial Purchasers propose to offer in transactions
under Rule 144A and (ii) except for the Common Stock of the Company, listed
on a
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (together with the rules and regulations of
the
Securities & Exchange Commission (the “Commission”)
promulgated thereunder, the “Exchange
Act”)
or
quoted in a United States automated interdealer quotation system.
(v) Except
as
described in the Disclosure Package and the Offering Memorandum, no person
has
any rights to require registration of any security of the Company by reason
of
the execution by the Company of this Agreement or any other Transaction Document
to which it is a party or the consummation by the Company of the transactions
contemplated hereby and thereby, or as part or on account of, or otherwise
in
connection with the offering of the Notes and any of the other transactions
contemplated by the Transaction Documents, and any such rights so disclosed
have
been effectively waived by the holders thereof, and any such waivers remain
in
full force and effect.
(w) None
of
the Company or any Subsidiary or any of their respective affiliates (as defined
in Rule 501(b) of Regulation D under the Securities Act) or representatives
directly, or through any agent, (i) sold, offered for sale, solicited offers
to
buy or otherwise negotiated in respect of any “security” (as defined in the
Securities Act) which is or could be integrated with the sale of the Notes
in a
manner that would require the registration under the Securities Act of the
Notes
or (ii) engaged in any form of general solicitation or general advertising
(as
those terms are used in Regulation D under the Securities Act) in connection
with the offer and sale of the Notes or in connection with Exempt Resales of
the
Notes, or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act. Assuming the accuracy of the Initial
Purchasers’ representations and warranties set forth in Section 3 hereof,
neither (i) the offer and sale of the Notes to the Initial Purchasers in the
manner contemplated by this Agreement, the Disclosure Package and the Offering
Memorandum nor (ii) the Exempt Resales require registration under the Securities
Act and prior to the effectiveness of any Registration Statement. The Indenture
does not require qualification under the Trust Indenture Act. No securities
of
the same class as the Notes have been issued and sold by the Company or any
Subsidiary within the six-month period immediately prior to the date
hereof.
8
(x) Each
of
(i) the Preliminary Offering Memorandum as of its date, (ii) the Disclosure
Package as of the Applicable Time, (iii) the Offering Memorandum as of its
date
and as of the Closing Date and (iv) each amendment or supplement to any of
the
documents referenced in (i), (ii) or (iii), in each case, as of its date,
contains the information specified in, and meets the requirements of, Rule
144A(d)(4) under the Securities Act.
(y) Except
pursuant to this Agreement, there are no contracts, agreements or understandings
between or among the Company and the Subsidiaries, and any other person that
would give rise to a valid claim against the Company or any Subsidiary or the
Initial Purchasers for a brokerage commission, finder’s fee or like payment in
connection with the issuance, purchase and sale of the Notes.
(z) There
are
no legal or governmental proceedings pending to which the Company or any of
Subsidiary is a party or of which any property of the Company or any Subsidiary
is the subject which, if determined adversely to the Company or any of the
Subsidiaries could individually or in the aggregate have a Material Adverse
Effect; and, to the knowledge of the Company, no such proceedings are threatened
or contemplated by governmental authorities or threatened by
others.
(aa) Neither
the Company nor any Subsidiary is involved in any labor dispute nor, to the
knowledge of the Company, is any such dispute threatened, which dispute,
individually or in the aggregate, would have a Material Adverse Effect. The
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers or contractors which, individually
or in the aggregate, would have a Material Adverse Effect. The Company is not
aware of any threatened or pending litigation between the Company or any
Subsidiary and any of its executive officers which, if adversely determined,
could have, individually or in the aggregate, a Material Adverse Effect and has
no reason to believe that such officers will not remain in the employment of
the
Company.
(bb) Except
as
disclosed in the Disclosure Package and the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Company, any
Subsidiary or any affiliate of the Company, on the one hand, and any director,
officer, stockholder, customer or supplier of the Company, any Subsidiary or
any
affiliate of the Company, on the other hand, which is required by the Exchange
Act to be described in the Company’s annual and/or quarterly reports on Forms
10-K and 10-Q, as applicable, which is not so described and described as
required in such reports, or which would be required by the Securities Act
to be
described in the Disclosure Package and the Offering Memorandum if the
Disclosure Package and the Offering Memorandum were prospectuses included in
registration statements on Form S-1 filed with the Commission.
There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees of indebtedness by the Company
to or for the benefit of any of the officers or directors of the Company or
any
of their respective family members. The Company has not, in violation of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations promulgated in
connection therewith (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act”),
directly or indirectly, including through a Subsidiary, extended or maintained
credit, arranged for the extension of credit, or renewed an extension of credit,
in the form of a personal loan to or for any director or executive officer
of
the Company.
9
(cc) Neither
the Company nor any of its affiliates (as defined in Rule 144 under the
Securities Act) has taken, nor will it take, directly or indirectly, any action
designed to or which might reasonably be expected to cause or result in, or
which has constituted or which might reasonably be expected to constitute,
the
stabilization or manipulation of the price of the Common Stock of the Company
or
any other security of the Company to facilitate the sale or resale of any of
the
Notes or the Common Stock issuable upon conversion thereof.
(dd) Other
than U.S. income tax returns, for which the Company has had no reportable income
for any period and therefore no tax liability, the Company and each of the
Subsidiaries has filed all tax returns in all jurisdictions which are required
to be filed through the date hereof, which returns are true and correct in
all
material respects or has received timely extensions thereof, and has paid all
taxes shown on such returns and all assessments received by it to the extent
that the same are material and have become due. There are no tax audits or
investigations pending, which if adversely determined would have, individually
or in the aggregate, a Material Adverse Effect; nor are there any material
proposed additional tax assessments against the Company or any of the
Subsidiaries.
(ee) The
books, records and accounts of the Company and the Subsidiaries accurately
and
fairly reflect, the transactions in, and dispositions of, the assets of, and
the
results of operations of, the Company and its subsidiaries. The Company and
each
of the Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles and
to
maintain asset accountability, (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 the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(ff) The
Company and its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
described in the Disclosure Package and the Offering Memorandum; all policies
of
insurance and fidelity or surety bonds insuring the Company or any of the
Subsidiaries or the Company’s or the Subsidiaries’ respective businesses,
assets, employees, officers and directors are in full force and effect; the
Company and each of the Subsidiaries are in compliance with the terms of such
policies and instruments in all material respects; and neither the Company
nor
any Subsidiary has any reason to believe that it will not be able to renew
its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that is not materially greater than the current cost. There
are no material claims by the Company or any Subsidiary under any such policy
or
instrument as to which any insurance company is denying liability or defending
under a reservation of rights clause. Neither the Company nor any of the
Subsidiaries has been denied any insurance coverage which it has sought or
for
which it has applied.
10
(gg) Each
approval, consent, order, authorization, designation, declaration or filing
of,
by or with any regulatory, administrative or other governmental body necessary
in connection with the execution and delivery by the Company of this Agreement
and the other Transaction Documents and the consummation of the transactions
herein contemplated required to be obtained or performed by the Company has
been
obtained or made and is in full force and effect.
(hh) The
Company and each Subsidiary is not now and, after sale of the Notes as
contemplated hereunder and application of the net proceeds of such sale as
described in the Disclosure Package and the Offering Memorandum under the
caption “Use of Proceeds,” will not be, required to register as an “investment
company” under the Investment Company Act of 1940, as amended (the “Investment
Company Act”)
and is
not and will not be an entity “controlled” by an “investment company” within the
meaning of the Investment Company Act.
(ii) The
Company or any other person associated with or acting on behalf of the Company
including, without limitation, any director, or executive officer of the Company
or the Subsidiaries, has not, directly or indirectly, while acting on behalf
of
the Company or the Subsidiaries (i) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or
campaigns from corporate funds; or (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(jj) The
operations of the Company and the Subsidiaries are and have been conducted
at
all times in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as
amended, the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money
Laundering Laws”)
and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of the
Subsidiaries with respect to the Money Laundering Laws is pending, or to the
best knowledge of the Company, threatened.
(kk) Neither
the Company nor any of its Subsidiaries nor, to the knowledge of the Company,
any director, officer, agent, employee or affiliate of the Company or any of
the
Subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
and
the Company will not directly or indirectly use the proceeds of the offering,
or
lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
(ll) None
of
the Company or any of the Subsidiaries nor any of their properties, assets
or
revenues are entitled to any right of immunity on the grounds of sovereignty
from any legal action, suit or proceeding, from set-off or counterclaim, from
the jurisdiction of any court, from service of process, from attachment prior
to
or in aid of execution of judgment or from other legal process or proceeding
for
the giving of any relief or for the enforcement of any
judgment.
11
(mm) The
Company has taken all reasonable steps to comply with, and to ensure compliance
by all of the Company’s shareholders, directors and officers who are PRC
residents or PRC citizens with any applicable rules and regulations of the
State
Administration of Foreign Exchange (the “SAFE
Rules and Regulations”),
including without limitation, requiring each shareholder, director and officer
that is, or is directly or indirectly owned or controlled by, a PRC resident
or
PRC citizen to complete any registration and other procedures required under
applicable SAFE Rules and Regulations.
(nn) The
Company has fulfilled its obligations, if any, under the minimum funding
standards of Section 302 of the U.S. Employee Retirement Income Security Act
of
1974 (“ERISA”)
and
the regulations and published interpretations thereunder with respect to each
“plan” as defined in Section 3(3) of ERISA and such regulations and published
interpretations in which its employees are eligible to participate and each
such
plan is in compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations. No
“Reportable Event” (as defined in 12 ERISA) has occurred with respect to any
“Pension Plan” (as defined in ERISA) for which the Company could have any
liability.
(oo)
The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15 under the Exchange Act), which: (i) are
designed to ensure that material information relating to the Company and the
Subsidiaries is made known to the Company’s principal executive officer and its
principal financial officer by others within those entities; (ii) provide for
the periodic evaluation of the effectiveness of such disclosure controls and
procedures at the end of the periods in which the periodic reports are required
to be prepared; and (iii) are effective in all material respects to perform
the
functions for which they were established.
(pp) Except
as
described in the Disclosure Package and the Offering Memorandum, based on the
evaluation of its disclosure controls and procedures, the Company is not aware
of (i) any significant deficiency in the design or operation of internal
controls which could adversely affect the Company’s ability to record, process,
summarize and report financial data or any material weaknesses in internal
controls; or (ii) any fraud, whether or not material, that involves management
or other employees who have a role in the Company’s internal
controls.
(qq) Except
as
described in the Disclosure Package and the Offering Memorandum, there are
no
material off-balance sheet arrangements (as defined in Item 303 of Regulation
S-K) that, individually or in the aggregate, have or are reasonably likely
to
have a material current or future adverse effect on the Company’s financial
condition, revenues or expenses, changes in financial condition, results of
operations, liquidity, capital expenditures or capital resources.
(rr) The
Company’s Board of Directors has validly appointed an audit committee whose
composition satisfies the requirements of Rule 4350(d)(2) of the Rules of the
Financial Industry Regulatory Authority (the “FINRA
Rules”)
and
the Board of Directors and/or the audit committee has adopted a charter that
satisfies the requirements of Rule 4350(d)(1) of the FINRA Rules. The audit
committee has reviewed the adequacy of its charter within the past twelve
months.
12
(ss) There
is
and has been no failure on the part of the Company or any of its directors
or
officers, in their capacities as such, to comply with any provision of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, including, without limitation, Section 402 related to loans
and Sections 302 and 906 related to certifications.
(tt) Each
of
the Company and the Subsidiaries is in compliance with all rules, laws and
regulation relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment (“Environmental
Law”)
which
are applicable to its business except as would not reasonable be expected to
have a Material Adverse Effect. Except as described in the Disclosure Package
and the Offering Memorandum, neither the Company nor the Subsidiaries has
received any written notice from any governmental authority or third party
of an
asserted claim under Environmental Laws which are applicable to its business.
Except as described in the Disclosure Package and the Offering Memorandum,
each
of the Company and the Subsidiaries has received all permits, licenses or other
approvals required of it under applicable Environmental Laws to conduct its
business and is in compliance in all material respects with all terms and
conditions of any such permit, license or approval. To the Company’s knowledge,
except as disclosed in the Disclosure Package and Offering Memorandum, no facts
currently exist that will require the Company or any of the Subsidiaries to
make
future material capital or other expenditures to comply with Environmental
Laws
which are applicable to its business.
(uu) The
statements in the Preliminary Offering Memorandum and the Offering Memorandum
under the headings “Taxation” and “Business – Regulations” insofar as such
statements summarize legal matters, agreements, documents or proceedings
discussed therein, are accurate and fair summaries of such legal matters,
agreements, documents or proceedings.
(vv)
Each
director and executive officer of the Company and each stockholder of the
Company listed on Schedule V hereto has delivered to the Initial Purchasers
his
enforceable written lock-up agreement in the form attached to this Agreement
as
Exhibit B hereto ("Lock-Up
Agreement").
(ww)
Upon
the Issuance and delivery of the Notes in accordance with this Agreement and
the
Indenture, the Notes will be convertible at the option of the holder thereof
into shares of the Common Stock in accordance with the terms of the Notes and
the Indenture; the Common Stock issuable upon conversion of the Notes have
been
duly authorized and reserved and, when issued upon conversion of the Notes,
will
be validly issued, fully paid and non-assessable; and the issuance of the Common
Stock will not be subject to any preemptive or similar rights.
(xx)
The
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
the
quotation of the Common Stock on the Nasdaq Global Select Market, nor has the
Company received any notification that the Commission or the Nasdaq Global
Select Market is contemplating terminating such registration or
quotation.
13
(yy)
Except as described in the Disclosure Package and the Offering Memorandum,
none
of the Company or any of the Subsidiaries is in default under any of the
contracts described in the Disclosure Package and the Offering Memorandum,
has
received a written notice or claim of any such default or has knowledge of
any
breach of such contracts by the other party or parties thereto, except such
defaults or breaches as would not, individually or in the aggregate, have a
Material Adverse Effect.
(zz)
Neither the Company nor any of the Company’s Subsidiaries has distributed or,
prior to the later to occur of (i) the Closing Date and (ii) completion of
the
distribution of the Notes, will distribute any material in connection with
the
offering and sale of the Notes other than the Preliminary Offering Memorandum
or
the Offering Memorandum.
Any
certificate signed by or on behalf of the Company and delivered to the Initial
Purchasers shall be deemed to be a representation and warranty by the Company
to
the Initial Purchasers as to the matters covered thereby.
The
Company acknowledges that the Initial Purchasers and, for purposes of the
opinions to be delivered to the Initial Purchasers pursuant to Section 9 hereof,
counsel for the Company and counsel for the Initial Purchasers, will rely upon
the accuracy and truth of the foregoing representations and hereby consent
to
such reliance.
3. Representations
and Warranties of the Initial Purchasers.
Each
Initial Purchaser, severally and not jointly, represents, warrants and covenants
to the Company and agrees that:
(a) Such
Initial Purchaser is a QIB and an accredited investor within the meanings of
Rule 501(a) of the Securities Act, with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the merits
and risks of an investment in the Notes.
(b)
Such
Initial Purchaser (i) has not solicited offers for, or offered or sold, and
will
not solicit offers for, or offer or sell, the Notes by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c)
of
Regulation D under the Securities Act (“Regulation
D”)
or in
any manner involving a public offering within the meaning of Section 4(2) of
the
Securities Act and (ii) it has solicited and will solicit offers for the Notes
only from, and has offered or sold and will offer, sell or deliver the Notes,
as
part of their initial offering, only within the United States to persons whom
it
reasonably believes to be (i) QIBs,
or if
any such person is buying for one or more institutional accounts for which
such
person is acting as fiduciary or agent, only when such person has represented
to
it that each such account is a QIB to whom notice has been given that such
sale
or delivery is being made in reliance on Rule 144A and in each case, in
transactions under Rule 144A or (ii) Institutional Accredited Investors that,
prior to their purchase of the Notes, deliver to the Initial Purchasers a letter
containing the representations and agreements set forth in Annex B to the
Offering Memorandum, in transactions pursuant to another exemption from the
registration requirements of the Securities Act, including pursuant to
transactions under “Section 4(1-1/2)”.
14
(c)
Each
Initial Purchaser, severally and not jointly, covenants and agrees with the
Company that such Initial Purchaser will not use or refer to any “Free Writing
Offering Document” (as defined in Rule 405 under the Securities Act) without the
prior written consent of the Company where the use of or reference to such
“Free
Writing Offering Document” would require the Company to file with the Commission
any “issuer information” (as defined in Rule 433 under the Securities Act).
4. Purchase,
Sale and Delivery.
On the
basis of the representations, warranties, covenants and agreements contained
in
this Agreement, and subject to its terms and conditions:
(a)
The
Company agrees to issue and sell to the several Initial Purchasers, and each
of
the Initial Purchasers agree, severally and not jointly, to purchase from the
Company,
at
a purchase price of 95.50% of the principal amount thereof, plus accrued
interest, if any, from May 22, 2008 to the Closing Date, as defined below (the
"Initial
Price"),
the
aggregate amount of Firm Notes. The Company hereby grants to each of the Initial
Purchasers an option to purchase all or any part of the Option Notes at the
Initial Price. The aggregate amount of Option Notes to be purchased by each
of
the Initial Purchasers shall be the same percentage of the Option Notes to
be
purchased by each of the Initial Purchasers as such Initial Purchaser is
purchasing of the Firm Notes. Such option may be exercised in whole or in part
at any time on or before 12:00 noon, New York City time, on the business day
before the Firm Notes Closing Date (as defined below), and from time to time
thereafter within 30 days after the date of this Agreement, in each case upon
written, facsimile or telegraphic notice, or verbal or telephonic notice
confirmed by written, facsimile or telegraphic notice, by each of the Initial
Purchasers to the Company no later than 12:00 noon, New York City time, on
the
business day before the Firm Notes Closing Date or at least two business days
before the Option Notes Closing Date (as defined below), as the case may be,
setting forth the aggregate amount of Option Notes to be purchased and the
time
and date (if other than the Firm Notes Closing Date) of such
purchase.
(b)
Payment of the purchase price for, and delivery of, the Firm Notes shall be
made
at the offices of ▇▇▇▇▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., New York City time, on the third business day
following the date of this Agreement or at such time on such other date, not
later than ten (10) business days after the date of this Agreement, as shall
be
agreed upon by the Company and the Representative (such time and date of
delivery and payment are called the "Firm
Notes Closing Date”).
In
addition, in the event that any or all of the Option Notes are purchased by
the
Initial Purchasers, payment of the purchase price, and delivery of the
certificates, for such Option Notes shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Initial
Purchasers and the Company, on each date of delivery as specified in the notice
from the Initial Purchasers to the Company (such time and date of delivery
and
payment are called the “Option
Notes Closing Date”).
The
Firm Notes Closing Date and any Option Notes Closing Dates are called,
individually, a “Closing
Date”
and,
together, the “Closing
Dates”.
15
(c)
Payment for the Notes shall be made to the Company by wire transfer of
immediately available funds or by certified or official bank check or checks
payable in New York Clearing House (same day) funds drawn to the order of the
Company, against delivery of the Notes to the Representative for the respective
accounts of the Initial Purchasers.
(d)
On
each Closing Date, the Company will deliver to the Initial Purchasers, in such
denomination or denominations and registered in such name or names as the
Representative requests upon notice to the Company at least 48 hours prior
to
the Closing Date, one or more Notes in definitive form, registered in such
names and in such denominations as the Initial Purchasers shall request, having
an aggregate amount corresponding to the aggregate principal amount of the
Notes
sold pursuant to Exempt Resales to QIBs and Institutional Accredited Investors
(the “Definitive
Notes”)
against payment of the purchase price therefor by wire transfer of same-day
funds to the account of the Company, previously designated by it in writing.
The
Definitive Notes shall be made available to the Initial Purchasers for
inspection not later than 5:00 p.m., New York City time, on the business day
immediately preceding each Closing Date.
5. Offering
by Initial Purchasers.
The
Initial Purchasers propose to make an offering of the Notes at the price and
upon the terms set forth in the Offering Memorandum as soon as practicable
after
this Agreement is entered into and as, in the judgment of the Initial
Purchasers, is advisable.
6. Agreements
of the Company.
The
Company covenants and agrees with the Initial Purchasers that:
(a) The
Company shall advise the Initial Purchasers promptly and, if requested by the
Representative, confirm such advice in writing, (i) of the issuance by any
state
securities commission or other regulatory authority of any stop order or order
suspending the qualification or exemption from qualification of any Notes for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by any state securities commission or other regulatory authority
and (ii) of the happening of any event that makes any statement of a material
fact made in the Disclosure Package or the Offering Memorandum untrue or that
requires the making of any additions to or changes in the Disclosure Package
or
the Offering Memorandum in order to make the Disclosure Package or the Offering
Memorandum not misleading in the light of the circumstances existing at the
time
it is delivered to an Eligible Purchaser. The Company shall use its best efforts
to prevent the issuance of any stop order or order suspending the qualification
or exemption from qualification of any Notes under any state securities or
blue
sky laws and, if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of any Notes under any state securities or blue sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) The
Company shall, without charge, provide to the Initial Purchasers and to counsel
to the Initial Purchasers, and to those persons identified by the Initial
Purchasers to the Company as many copies of the Preliminary Offering Memorandum
and the Offering Memorandum, and any amendments or supplements thereto, as
the
Initial Purchasers may reasonably request. The Company consents to the use
of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchasers in connection with Exempt Resales.
16
(c) The
Company will not amend or supplement the Preliminary Offering Memorandum or
the
Offering Memorandum or any other document used in connection with the offer
and
sale of the Notes or any amendment or supplement thereto during such period
as,
in the opinion of counsel for the Initial Purchasers, the Preliminary Offering
Memorandum or the Offering Memorandum is required by law to be delivered in
connection with Exempt Resales and in connection with market-making activities
of the Initial Purchasers for so long as any Notes are outstanding unless the
Initial Purchasers shall previously have been advised thereof and furnished
a
copy for a reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchasers shall not have given their
consent, which consent shall not be unreasonably withheld. The Company shall
promptly, upon the request of the Initial Purchasers or counsel to the Initial
Purchasers, make any amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum or any other document used in connection
with the offer and sale of the Notes that may be necessary or advisable in
connection with such Exempt Resales or such market making
activities.
(d) If,
during the period referred to in 6(c) above, any event shall occur as a result
of which, it is necessary or advisable, in the opinion of counsel for the
Initial Purchasers, to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum or any other document used in connection with the
offer and sale of the Notes in order to make such Preliminary Offering
Memorandum or Offering Memorandum or such other document not misleading in
the
light of the circumstances existing at the time it is delivered to an Eligible
Purchaser, or if for any other reason it shall be necessary or advisable to
amend or supplement the Preliminary Offering Memorandum or the Offering
Memorandum or such other document to comply with applicable laws, rules or
regulations, the Company shall (subject to Section 6(c) hereof) forthwith amend
or supplement such Preliminary Offering Memorandum or Offering Memorandum or
such other document at its own expense so that, as so amended or supplemented,
such Preliminary Offering Memorandum or Offering Memorandum or such other
document will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading or so that such Preliminary Offering Memorandum or Offering
Memorandum or such other document will comply with all applicable laws, rules
or
regulations; if, during the period referred to in 6(c) above, the Company
proposes to file with the Commission an Exchange Act report that is incorporated
by reference into the Offering Memorandum, a reasonable time prior to the
proposed filing, the Company shall furnishes a copy of such Exchange Act report
to the Initial Purchasers for review and comment, and shall not file such
document with the Commission until the Initial Purchasers have been afforded
the
opportunity to review and comment and the Initial Purchasers have not reasonably
objected to the filing of such Exchange Act report.
(e) The
Company shall cooperate with the Initial Purchasers and counsel for the Initial
Purchasers in connection with the qualification or registration of the Notes
for
offering and sale under the securities or blue sky laws of such jurisdictions
as
the Representative may designate and shall continue such qualifications in
effect for as long as may be necessary to complete the Exempt Resales;
provided,
however,
that in
connection therewith the Company shall not be required to qualify as a foreign
corporation where it is not now so qualified or to execute a general consent
to
service of process in any jurisdiction or to take any other action that would
subject it to general service of process or to taxation in respect of doing
business in any jurisdiction in which it is not otherwise subject, in each
case,
other than as to matters and transactions relating to the Preliminary Offering
Memorandum, the Offering Memorandum or Exempt Resales.
17
(f) If
this
Agreement shall terminate or shall be terminated after execution because of
any
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Initial Purchasers for all reasonable out-of-pocket expenses (including
reasonable fees and expenses of counsel for the Initial Purchasers) incurred
by
the Initial Purchasers in connection herewith.
(g) The
Company shall apply the net proceeds from the sale of the Notes in the manner
set forth under “Use of Proceeds” in the Disclosure Package and the Offering
Memorandum.
(h) The
Company shall not voluntarily claim, and shall actively resist any attempts
to
claim, the benefit of any usury laws against the holders of any
Notes.
(i) The
Company shall do and perform all things required or necessary to be done and
performed under this Agreement prior to or after each Closing Date and to
satisfy all conditions precedent to the delivery of the Notes.
(j) None
of
the Company or any of its “affiliates” (as defined in Rule 144 under the
Securities Act) will sell, offer for sale, solicit offers to buy or otherwise
negotiate in respect of any “security” (as defined in the Securities Act) that
could be integrated with the sale of the Notes in a manner that would require
the registration under the Securities Act of the sale to the Initial Purchasers
or the Eligible Purchasers of the Notes or to take any other action that would
result in the Exempt Resales not being exempt from registration under the
Securities Act.
(k) For
so
long as any of the Notes remain outstanding and are “restricted securities”
within the meaning of Rule 144(a)(3) under the Securities Act and are not able
to be sold in their entirety under Rule 144 under the Securities Act (or any
successor provision), for the benefit of holders from time to time of Notes,
the
Company will furnish at its expense, upon request, to any holder or beneficial
owner of Notes and prospective purchasers of the Notes, information specified
in
Rule 144A(d)(4) under the Securities Act, unless the Company are then subject
to
and in compliance with Section 13 or 15(d) of the Exchange Act.
(l) The
Company shall comply with all of the agreements set forth in the Registration
Rights Agreement and the representation letters to DTC relating to the approval
of the Notes by DTC for “book-entry” transfer.
(m) The
Company shall (i) permit the Notes to be included for quotation on The PORTAL
Market and (ii) permit the Notes to be eligible for clearance and settlement
through DTC.
18
(n) During
the period of three years from the Closing Date, the Company shall deliver
without charge to the Initial Purchasers (i) as soon as available, copies of
each report and other communication (financial or otherwise) of the Company
mailed to the Trustee of the holders of the Notes, stockholders or any national
securities exchange on which any class of securities of the Company may be
listed (including without limitation, press releases) other than materials
filed
with the Commission and (ii) from time to time such other information concerning
the Company and the Subsidiaries as the Initial Purchasers may reasonably
request.
(o) The
Company shall not take, directly or indirectly, any action which constitutes
or
is designed to cause or result in, or which could reasonably be expected to
constitute, cause or result in, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Notes
or
the Common Stock issuable upon conversion thereof, or take any action prohibited
by Regulation M under the Exchange Act, in connection with the distribution
of
the Notes contemplated hereby. The Company will not distribute any (i)
preliminary offering memorandum, including, without limitation, the Preliminary
Offering Memorandum, (ii) offering memorandum, including, without limitation,
the Offering Memorandum or (iii) other offering material in connection with
the
offering and sale of the Notes.
(p) For
so
long as the Notes constitute “restricted” securities within the meaning of Rule
144(a)(3) under the Securities Act, the Company shall not, and shall not permit
any Subsidiary to, solicit any offer to buy or offer to sell the Notes by means
of any form of general solicitation or general advertising (as those terms
are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.
(q) During
the period from the Closing Date until one year after the Closing Date, without
the prior written consent of the Initial Purchasers, the Company shall not,
and
shall not permit any of its “affiliates” (as defined in Rule 144 under the
Securities Act) to, resell any of the Notes or Common Stock issuable upon
conversion of the Notes that constitute “restricted securities” under Rule 144
that have been reacquired by any of them.
(r) Prior
to
the Closing Date, the Company shall not issue any press release or other
communications, directly or indirectly, or hold any press conference with
respect to the issuance of the Notes, the Company or any of its Subsidiaries,
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company or any of its Subsidiaries,
without the prior consent of the Initial Purchasers. In such instance, the
Company shall furnish a copy of any such release or communication to the Initial
Purchasers for review and comment a reasonable time prior to its contemplated
release.
(s) Without
the prior consent of the Initial Purchasers, not to make any offer relating
to
the Notes that would constitute a “free writing prospectus” (if the offering of
the Notes was made pursuant to a registered offering under the Securities Act)
as defined in Rule 405 under the Securities Act (a “Free
Writing Offering Document”);
any
such Free Writing Offering Document the use of which has been consented to
by
the Initial Purchasers is listed on Schedule IV hereto; if at any time following
issuance of a Free Writing Offering Document any event occurred or occurs as
a
result of which such Free Writing Offering Document would conflict with the
information in the Preliminary Offering Memorandum or the Offering Memorandum
or
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of
the
circumstances then prevailing, not misleading, the Company will give prompt
notice thereof to the Initial Purchasers and, if requested by the Initial
Purchasers, will prepare and furnish without charge to the Initial Purchasers
a
Free Writing Offering Document or other document which will correct such
conflict, statement or omission.
19
(t) The
Company, during the time prior to completion of the distribution of Notes by
the
Initial
Purchasers,
will
file all reports and other documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods
required by the Exchange Act and the regulations promulgated
thereunder.
(u)
Without
the prior written consent of the Representative, for a period of 90 days after
the date of this Agreement, the Company shall not issue, sell or register with
the Commission (other than on Form S-8 or on any successor form), or otherwise
dispose of, directly or indirectly, any (i) debt
securities issued or guaranteed by the Company and having a maturity of more
than one year from the date of issue, or (ii) equity securities of the Company
(or any securities convertible into, exercisable for or exchangeable for equity
securities of the Company.
(v) The
Company shall cause, pursuant to the terms of the Registration Rights Agreement,
to be registered, to the extent required by the Registration Rights Agreement,
pursuant to an effective registration statement under the Securities Act, the
shares of Common Stock issuable upon conversion of the Notes and to use its
best
efforts to maintain the effectiveness of such registration statement during
the
entire period prescribed in the Registration Rights Agreement.
(w) To
reserve and keep available at all times, free of preemptive rights, shares
of
Common Stock for the purpose of enabling the Company to satisfy any obligations
to issue shares of its Common Stock upon conversion of the Notes.
(x) The
Company shall comply with the SAFE Rules and Regulations, and shall use best
efforts to cause its directors, officers, option holders and shareholders that
are, or that are directly or indirectly owned or controlled by, PRC residents
or
PRC citizens, to comply with the SAFE Rules and Regulations applicable to them
in connection with the Company, including without limitation, requiring each
shareholder, option holder, director and officer that is, or is directly or
indirectly owned or controlled by, a PRC resident or PRC citizen to complete
any
registration and other procedures required under applicable SAFE Rules and
Regulations.
(y) To
use
its best efforts to list, subject to notice of issuance, the shares of Common
Stock issuable upon conversion of the Notes on the Nasdaq Global Select
Market.
20
7. Expenses.
Whether
or not the transactions contemplated by this Agreement are consummated or this
Agreement becomes effective or is terminated (pursuant to Section 13
hereof or
otherwise), the Company hereby agrees to pay all costs and expenses incident
to
the performance of their obligations hereunder, including the following: (i)
the
negotiation, preparation, printing, typing, filing, reproduction, execution
and
delivery of this Agreement and of the other Transaction Documents, any amendment
or supplement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith and with the Exempt Resales; (ii) the preparation, printing or
reproduction of each Preliminary Offering Memorandum, the Offering Memorandum
(including, without limitation, financial statements), and any other document
prepared in connection with the offer and sale of the Notes, and all amendments
and supplements to any of them; (iii) the issuance, transfer and delivery of
the
Notes endorsed thereon to the Initial Purchasers; (iv) the registration or
qualification of the Notes for offer and sale under the securities or blue
sky
laws of the several states (including, without limitation, filing fees, the
cost
of printing and mailing a preliminary and final blue sky memorandum, and the
reasonable fees and disbursements of counsel to the Initial Purchasers relating
to such registration or qualification); (v) the delivery (including postage,
air
freight charges and charges for counting and packaging) of such copies of each
Preliminary Offering Memorandum, the Offering Memorandum and any other document
used in connection with the offer and sale of the Notes and all amendments
or
supplements to any of them as may be requested for use in connection with the
offering and sale of the Notes and the Exempt Resales; (vi) the preparation,
printing, authentication, issuance and delivery of certificates for the Notes,
including any stamp or other issuance or transfer taxes in connection with
the
original issuance and sale of the Notes and Trustee’s fees; (vii) the fees,
disbursements and expenses of the Company’s counsel (including local and special
counsel, if any) and accountants; (viii) the preparation, reproduction and
delivery of the preliminary and supplemental blue sky memoranda and all other
agreements of documents reproduced and delivered in connection with the offering
of the Notes (including the reasonable fees and disbursements of counsel to
the
Initial Purchasers in connection with such preparation); (ix) all fees and
expenses (including fees and expenses of counsel) of the Company in connection
with the approval of the Notes by DTC for “book-entry” transfer; (x) the fees
and expenses of the Trustee and its counsel; (xi) all expenses incurred in
connection with the performance by the Company of its other obligations under
this Agreement and the other Transaction Documents; (xii) the transportation
and
other “roadshow” expenses incurred by or on behalf of the Company
representatives in connection with presentations to and related communications
with prospective purchasers of the Notes; and (xiii) all expenses and listing
fees incurred in connection with the application for quotation of the Notes
on
The PORTAL Market.
8. Indemnification.
(a) The
Company agrees to indemnify and hold harmless the Initial Purchasers, each
person, if any, who controls the Initial Purchasers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and any
affiliates of the Initial Purchasers against any and all losses, claims, damages
and liabilities, joint or several (including any reasonable investigation,
legal
and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other Federal or state law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are
based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the Disclosure Package, any Free Writing Offering Document or
the
Offering Memorandum, or in any supplement thereto or amendment thereof, or
in
any Blue Sky application or other information or other documents executed by
the
Company filed in any state or other jurisdiction to qualify any or all of the
Notes under the securities laws thereof (any such application, document or
information being hereinafter referred to as a “Blue Sky Application”) or (ii)
any omission or alleged omission to state therein a material fact required
to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that such indemnity shall not inure to the benefit of the
Initial Purchasers (or any person controlling the Initial Purchasers or
affiliate of the Initial Purchasers) on account of any losses, claims, damages
or liabilities arising from the sale of the Notes to any person by the Initial
Purchasers if such untrue statement or omission or alleged untrue statement
or
omission was made in the Disclosure Package, any Free Writing Offering Document
or the Offering Memorandum, or in any supplement thereto or amendment thereof,
or in any Blue Sky Application in reliance upon and in conformity with the
Initial Purchaser Information (as defined in Section 11 hereto). This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
21
(b) Each
Initial Purchaser, severally and not jointly, agrees to indemnify and hold
harmless the Company, each person, if any, who controls the Company within
the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and the officers and directors of the Company, against any losses, claims,
damages or liabilities to which such party may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Disclosure Package, any Free Writing Offering Document or
the
Offering Memorandum, or in any supplement thereto or amendment thereof, or
arise
out of or are based upon the omission or alleged omission to state therein,
a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Disclosure Package, any Free Writing Offering Document or the Offering
Memorandum, or in any supplement thereto or amendment thereof, in reliance
upon
and in conformity with the Initial Purchaser Information; provided, however,
that the obligation of any Initial Purchasers, jointly and not severally, to
indemnify the Company (including any controlling person, director or officer
thereof) shall be limited to the net proceeds received by such Initial Purchaser
from the Company.
(c) Any
party
that proposes to assert the right to be indemnified under this Section will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section, notify each such
indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 8(a) or 8(b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and
was prejudiced by the failure to give such notice but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
it from any liability that it may have to any indemnified party for contribution
or otherwise than under this Section. In case any such action, suit or
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall
be entitled to participate in, and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval by the indemnified
party of such counsel, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, except as provided below
and
except for the reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party
shall have the right to employ its counsel in any such action, but the fees
and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party has been
authorized in writing by the indemnifying parties, (ii) the indemnified party
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those available
to
the indemnifying party (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party) or (iii) the indemnifying parties shall not have employed counsel to
assume the defense of such action within a reasonable time after notice of
the
commencement thereof, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying parties. An indemnifying party
shall
not be liable for any settlement of any action, suit, and proceeding or claim
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any proceeding or
threatened proceeding in respect of which any indemnified party is or could
have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless (i) such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of
such proceeding and (ii) does not contain any factual or legal admission by
or
with respect to any indemnified party or any adverse statement with respect
to
the character, professionalism, expertise or reputation of any Indemnified
Party
or any action or inaction of any Indemnified Party.
22
9. Contribution.
In
order to provide for just and equitable contribution in circumstances in which
the indemnification provided for in Section 8(a) or 8(b) is due in accordance
with its terms but for any reason is unavailable to or insufficient to hold
harmless an indemnified party in respect to any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate losses, liabilities, claims, damages and expenses
(including any investigation, legal and other expenses reasonably incurred
in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting any contribution received
by any person entitled hereunder to contribution from any person who may be
liable for contribution) incurred by such indemnified party, as incurred, in
such proportion as is appropriate to reflect the relative benefits received
by
the Company, on the one hand, and the Initial Purchasers, on the other hand,
from the offering of the Notes pursuant to this Agreement or, if such allocation
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to above but also the relative
fault of the Company, on the one hand, and the Initial Purchasers, on the other
hand, in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The Company and the Initial Purchasers agree that
it
would not be just and equitable if contribution pursuant to this Section 9
were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 9, no Initial Purchasers shall be required to contribute any amount
in excess of the amount by which the total price at which the Notes resold
by it
to Eligible Purchasers were offered to the public exceeds the amount of damages
which such Initial Purchaser has otherwise been required to pay by reason of
any
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 9, each person, if any, who controls an Initial Purchaser within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Initial Purchaser, and each
director of the Company, each officer of the Company, and each person, if any,
who controls the Company within the meaning of the Section 15 of the Securities
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties under this Section 9, notify such party or
parties from whom contribution may be sought, but the omission so to notify
such
party or parties from whom contribution may be sought shall not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have hereunder or otherwise than under this Section 9. No party
shall be liable for contribution with respect to any action, suit, proceeding
or
claim settled without its written consent.
23
The
remedies provided for in Section 8 and this Section 9 are not exclusive and
shall not limit any rights or remedies which otherwise may be available to
any
indemnified party in law or in equity.
10. Conditions
of Initial Purchasers’ Obligations.
The
obligations of the Initial Purchasers to purchase and pay for the Notes, as
provided herein, are subject to the absence from any certificates, opinions,
written statements or letters furnished to the Initial Purchasers pursuant
to
this Section 10 of any misstatement or omissions and to the satisfaction of
the
following additional conditions unless waived in writing by the
Representative:
(a) All
of
the representations and warranties of the Company contained in this Agreement
shall be true and correct on the date hereof and on each Closing Date with
the
same force and effect as if made on and as of the date hereof and the Closing
Date, respectively. The Company shall have performed or complied with all of
the
agreements and satisfied all conditions on their respective parts to be
performed, complied with or satisfied hereunder at or prior to each Closing
Date.
(b) The
Offering Memorandum shall have been printed and copies distributed to the
Initial Purchasers not later than 10:00 a.m., New York City time, on the day
following the date of this Agreement or at such later date and time as to which
the Representative may agree.
(c) No
stop
order suspending the qualification or exemption from qualification of the Notes
in any jurisdiction referred to in Section 6(e) hereof shall have been issued
and no proceeding for that purpose shall have been commenced or shall be pending
or threatened.
24
(d) None
of
the issuance and sale of the Notes pursuant to this Agreement or any of the
transactions contemplated by any of the other Transaction Documents shall be
enjoined (temporarily or permanently) and no restraining order or other
injunctive order shall have been issued; and there shall not have been any
legal
action, statute, order, rule, regulation, decree or other administrative
proceeding enacted, instituted, adopted, issued or threatened against the
Company or against any Initial Purchasers relating to the issuance of the Notes
or the Initial Purchasers’ activities in connection therewith or any other
transactions contemplated by this Agreement or the Offering Memorandum, or
the
other Transaction Documents. No action, suit or proceeding shall have been
commenced and be pending against or affecting or, to the best of the Company’s
knowledge, threatened against, the Company or any Subsidiary before any court
or
arbitrator or any governmental body, agency or official that, if adversely
determined, could reasonably be expected, individually or in the aggregate,
to
result in a Material Adverse Effect; and no stop order shall have been issued
preventing the use of the Preliminary Offering Memorandum, any Free Writing
Offering Document, the Offering Memorandum, or any amendment or supplement
thereto.
(e) Since
the
respective dates as of which information is given in the Disclosure Package,
(i)
there shall not have occurred any change, or any development involving a
prospective change, in or affecting the general affairs, management, business,
condition (financial or other), properties, prospects, results of operations,
capital stock, or long-term debt, or a material increase in the short-term
debt,
of the Company or any of the Subsidiaries, not contemplated by the Disclosure
Package and the Offering Memorandum that is, in the sole judgment of the
Representative, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering of the Notes on the terms and in the
manner contemplated by the Transaction Documents, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the Company
or any of the Subsidiaries on any class of its capital stock, other than as
disclosed in the Disclosure Package and the Offering Memorandum, (iii) none
of
the Company or any of the Subsidiaries shall have incurred any liability or
obligation, direct or contingent, that is material, individually or in the
aggregate, to the Company and the Subsidiaries, taken as a whole, and that
is
required to be disclosed on a balance sheet or notes thereto in accordance
with
U.S. GAAP and is not disclosed on the latest balance sheet or notes thereto
included in the Disclosure Package and the Offering Memorandum and (iv) there
shall not have occurred any event or development relating to or involving the
Company or any of the Subsidiaries, or any of their respective officers or
directors that makes any statement made in the Disclosure Package or the
Offering Memorandum untrue or that, in the opinion of the Company and its
counsel or the Initial Purchasers and their counsel, require the making of
any
addition to or change in the Disclosure Package or the Offering Memorandum
in
order to state a material fact required by any applicable law, rule or
regulation to be stated therein or necessary in order to make the statements
made therein not misleading.
(f) At
each
Closing Date and after giving effect to the consummation of the transactions
contemplated by the Transaction Documents, there exists no Default or Event
of
Default (as defined in the Indenture).
25
(g) The
Initial Purchasers shall have received certificates, dated each Closing Date,
signed by the chief executive officer and the chief financial officer of the
Company, in form and substance satisfactory to the Representative, confirming,
as of the Closing Date, the matters set forth in paragraphs (a), (b), (c),
(d)
and (e) of this Section 10 and that, as of such Closing Date, the obligations
of
the Company to be performed hereunder on or prior thereto have been duly
performed.
(h) The
Initial Purchasers shall have received on the Closing Date:
(i) an
opinion and letter, dated the Closing Date, in form and substance satisfactory
to the Initial Purchasers, of Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP and Jolley
Urga ▇▇▇▇▇ Woodbury & ▇▇▇▇▇▇▇▇, United States counsel for the Company, to
the effect set forth in Exhibit
C-1
hereto.
(ii) an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers, of ▇▇▇▇▇▇ and Calder, British Virgin Islands counsel for
the
Company, to the effect set forth in Exhibit
C-2
hereto.
(iii) an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers, of King & Shine Partners, PRC counsel for the Company,
addressed to the Company with express consent to the release to the Initial
Purchasers, to the effect set forth in Exhibit
C-3
hereto.
(iv) an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers, of Haiwen & Partners, PRC counsel for the Initial
Purchasers, to the effect set forth in Exhibit
C-4
hereto.
(v) an
opinion and letter, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, of Shearman & Sterling LLP, counsel
for the Initial Purchasers.
(vi) an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers, of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel for the Trustee,
to the effect set forth in Exhibit
C-5
hereto.
(i) ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C. (the “Auditor”), the independent registered public
accounting firm for the Company, shall deliver to the Initial Purchasers: (i)
simultaneously with the execution of this Agreement a signed letter from the
Auditor addressed to the Initial Purchasers and dated the date of this
Agreement, in form and substance reasonably satisfactory to the Representative
and Shearman & Sterling LLP, counsel for the Initial Purchasers, containing
statements and information of the type ordinarily included in accountants’
“comfort letters” to initial purchasers with respect to the financial statements
and certain financial information contained in the Preliminary Offering
Memorandum, and (ii) on each Closing Date, a signed letter from the Auditor
addressed to the Initial Purchasers and dated the date of such Closing Date(s),
in form and substance reasonably satisfactory to the Representative and Shearman
& Sterling LLP, counsel for the Initial Purchasers, containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
26
(j) The
Initial Purchasers and Shearman & Sterling LLP, counsel to the Initial
Purchasers, shall have been furnished with such information, certificates and
documents, in addition to those set forth above, as they may reasonably require
for the purpose of enabling them to review or pass upon the matters referred
to
in this Section 10 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations, warranties
or conditions herein contained.
(k) The
Company and the Trustee shall have entered into the Indenture and the Initial
Purchasers shall have received counterparts, conformed as executed, thereof
and
the Notes shall have been duly executed and delivered by the Company, and the
Notes shall have been duly authenticated by the Trustee.
(l) On
or
after the date hereof (i) there shall not have occurred any downgrading,
suspension or withdrawal of, nor shall there have been any announcement of
any
potential or intended downgrading, suspension or withdrawal of, or of any review
(or of any potential or intended review) for a possible downgrading, or with
negative implications, or direction not determined of, any rating of the Company
or any securities of the Company (including, without limitation, the placing
of
any of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by any “nationally
recognized statistical rating organization” as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act, (ii) there shall not have occurred
any change, nor shall any notice have been given of any potential or intended
change, in the outlook for any rating of the Company or any securities of the
Company by any such rating organization and (iii) no such rating organization
shall have given notice that it has assigned (or is considering assigning)
a
lower rating to the Notes than that on which the Notes were
marketed.
(m) The
Notes
shall have been approved for trading on The PORTAL Market.
(n) Each
of
the Transaction Documents and each other agreement or instrument executed in
connection with the transactions contemplated thereby shall be reasonably
satisfactory in form and substance to the Initial Purchasers and shall have
been
executed and delivered by all the respective parties thereto and shall be in
full force and effect, and there shall have been no material amendments,
alterations, modifications or waivers of any provision thereof since the date
of
this Agreement.
(o) All
proceedings taken in connection with the issuance of the Notes and the
transactions contemplated by this Agreement, the other Transaction Documents
and
all documents and papers relating thereto shall be reasonably satisfactory
to
the Initial Purchasers and counsel to the Initial Purchasers. The Initial
Purchasers and counsel to the Initial Purchasers shall have received copies
of
such papers and documents as they may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to
them.
27
(p) All
opinions, certificates, letters, schedules, documents or instruments required
by
this Section 10 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Representative and counsel to the Initial Purchasers. The Company shall
furnish the Initial Purchasers such conformed copies of such opinions,
certificates, letters, schedules, documents and instruments in such quantities
as the Initial Purchasers shall reasonably request.
(q) On
or
prior to the Closing Date, the Initial Purchasers shall have received a lock
up
agreement substantially in the form attached hereto as Exhibit B signed by
the
Company’s Executive Officers, Directors and those shareholders listed on
Schedule V hereto.
(r) On
or
prior to the Closing Date, the Initial Purchasers shall have received a letter
containing the representations and agreements set forth in Annex B to the
Offering Memorandum from all Institutional Accredited Investors purchasing
Notes
pursuant to this Agreement.
11. Initial
Purchaser Information.
The
Company acknowledge that the statements with respect to the offering of the
Notes set forth in the third, fourteenth and fifteenth paragraphs under the
heading “Plan of Distribution” in the Preliminary Offering Memorandum and the
Offering Memorandum constitute the only written information relating to the
Initial Purchasers furnished to the Company by or on behalf of the Initial
Purchasers expressly for use in the Preliminary Offering Memorandum, the
Disclosure Package and the Offering Memorandum, for purposes of Sections 2(a),
8(a) and 8(b) hereof (the “Initial
Purchaser Information”).
12. Survival
of Representations and Agreements.
The
respective representations, warranties, covenants, agreements, indemnities
and
other statements of the Company their respective officers and the Initial
Purchasers set forth in this Agreement or made by or on behalf of them,
respectively pursuant to this Agreement shall remain operative and in full
force
and effect regardless of (i) any investigation made by or on behalf of the
Company, any of its officers of directors, the Initial Purchasers or any
controlling person referred to in Sections 8 and 9 hereof and (ii) delivery
of
and payment for the Notes to and by the Initial Purchasers, and shall be binding
upon and shall inure to the benefit of, any successors, assigns, heirs, personal
representatives of the Company, the Initial Purchasers and the indemnified
parties referred to in Section 8 hereof. The respective representations,
agreements, covenants, indemnities and other statements set forth in Sections
7,
8, 9, 12 and 13 shall survive the termination of this Agreement, regardless
of
any termination or cancellation of this Agreement.
13. Effective
Date of Agreement; Termination.
(a) This
Agreement shall become effective upon execution and delivery of a counterpart
hereof by each of the parties hereto.
(b) This
Agreement may be terminated in the sole discretion of the Initial Purchasers
by
notice to the Company from the Representative, without liability (other than
with respect to Sections 8 and 9 hereof) on the Initial Purchasers’ part to the
Company in the event that the Company has failed, refused or been unable to
perform or satisfy all conditions on their respective parts to be performed
or
satisfied hereunder on or prior to the Closing Date, or if:
28
(i) there
has
occurred any material adverse change in the securities markets or any event,
act
or occurrence that has materially disrupted, or in the opinion of the Initial
Purchasers, will in the future materially disrupt, the securities markets or
there shall be such a material adverse change in general financial, political
or
economic conditions or the effect of international conditions on the financial
markets in the United States or elsewhere is such as to make it, in the judgment
of the Initial Purchasers, inadvisable or impracticable to market the Notes
or
enforce contracts for the sale of the Notes;
(ii) there
has
occurred any outbreak or material escalation of hostilities or other calamity
or
crisis the effect of which on the financial markets of the United States or
elsewhere is such as to make it, in the judgment of the Initial Purchasers,
inadvisable or impracticable to market the Notes or enforce contracts for the
sale of the Notes;
(iii) trading
in any securities of the Company has been suspended or materially limited or
trading generally on the New York Stock Exchange, the American Stock Exchange
or
the Nasdaq Global Select 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 any of said
exchanges or by order of the Commission, the Financial Industry Regulatory
Authority or other regulatory body or governmental authority having
jurisdiction;
(iv) a
banking
moratorium has been declared by any state or Federal a banking moratorium has
been declared by any state or Federal authority;
(v) in
the
judgment of the Initial Purchasers, there has been since the time of the
execution of the Purchase Agreement or since the respective dates as of which
information is given in the Disclosure Package, any material adverse change
in
the assets, properties, condition (financial or otherwise), or in the results
or
operations, business affairs or business prospects or cash flows of the Company
and its Subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business; or
(vi) any
debt
securities of the Company shall have been downgraded or placed on any “watch
list” for possible downgrading by any “nationally recognized statistical rating
organization” as defined for purposes of Rule 436(g) under the Securities
Act.
(c) If
this
Agreement shall be terminated pursuant to any of the provisions hereof, or
if
the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth herein is
not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof,
the
Company will, subject to demand by the Initial Purchasers, reimburse the Initial
Purchasers for all out-of-pocket expenses (including the fees and expenses
of
the Initial Purchasers’ counsel), incurred by the Initial Purchasers in
connection herewith, subject to the limit as set forth in the engagement
agreement between the Company and Oppenheimer. If this Agreement is terminated
pursuant to Section 14 by reason of the default of one or more of the Initial
Purchasers, the Company shall not be obligated to reimburse any Initial
Purchasers on account of such expenses.
29
14. Substitution
of Initial Purchasers.
If any
Initial Purchaser shall default in its obligation to purchase on the Closing
Date the Notes agreed to be purchased hereunder, the Representative shall have
the right, within 36 hours thereafter, to make arrangements for one or more
of
the non-defaulting Initial Purchasers, or any other Initial Purchasers, to
purchase such Notes on the terms contained herein. If, however, the
Representative shall not have completed such arrangements within such 36-hour
period, then the Company shall be entitled to a further period of 36 hours
within which to procure another party or other parties satisfactory to the
Initial Purchasers to purchase such Notes on such terms.
If,
after giving effect to any arrangements for the purchase of the Notes of a
defaulting Initial Purchaser or Initial Purchasers by the Representative and
the
Company as provided above, the aggregate amount of Notes which remains
unpurchased on the Closing Date does not exceed one-tenth of the aggregate
amount of all the Notes that all the Initial Purchasers are obligated to
purchase on such date, then the Company shall have the right to require each
non-defaulting Initial Purchaser to purchase the aggregate amount of Notes
which
such Initial Purchaser agreed to purchase hereunder at such date and, in
addition, to require each non-defaulting Initial Purchaser to purchase its
pro
rata share (based on the aggregate amount of Notes which such Purchaser agreed
to purchase hereunder) of the Notes of such defaulting Initial Purchaser or
Initial Purchasers for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Initial Purchaser from liability for its
default. In any such case, either the Representative or the Company shall have
the right to postpone the Closing Date for a period of not more than seven
days
in order to effect any necessary changes and arrangements (including any
necessary amendments or supplements to the Offering Memorandum or any other
documents).
If,
after
giving effect to any arrangements for the purchase of the Notes of a defaulting
Initial Purchaser or Initial Purchasers by the Representative and the Company
as
provided above, the aggregate amount of such Notes which remains unpurchased
exceeds 10% of the aggregate amount of all the Notes to be purchased at such
date, then this Agreement shall terminate, without liability on the part of
any
non-defaulting Initial Purchasers to the Company and without liability on the
part of the Company except as provided in Sections 7, 8, 9 and 13(b). The
provisions of this Section 14 shall not in any way affect the liability of
any
defaulting Initial Purchaser to the Company or the nondefaulting Initial
Purchasers arising out of such default. The term "Initial Purchaser" as used
in
this Agreement shall include any person substituted under this Section 14 with
like effect as if such person had originally been a party to this Agreement
with
respect to such Securities.
15. Notices.
All
communications hereunder shall be in writing and, if sent to the Initial
Purchasers, shall be hand-delivered, mailed by first-class mail, couriered
by
next-day air courier or faxed and confirmed in writing to ▇▇▇▇▇▇▇▇▇▇▇ & Co.
Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Managing Director, Head of Equity Capital Markets, and with a copy to Shearman
& Sterling LLP, 12th
Floor,
East Tower, Twin Towers, B-12 Jianguomenwai Dajie, Beijing 100022, PRC,
Attention: ▇▇▇▇ Seem, Esq. If sent to the Company, shall be mailed, delivered,
couriered or faxed and confirmed in writing to ShengdaTech, Inc., Youth Pioneer
Park, Tai’an Economic and Technological Development Zone, Tai’an City, Shangdong
Province 271000, PRC, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇, and with a copy to Cadwalader,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, 2301 China Central ▇▇▇▇▇ ▇▇▇▇▇ ▇, ▇▇. ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ 100025, PRC, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
30
16. Successors.
This
Agreement shall inure to the benefit of, and shall be binding upon, the Initial
Purchasers, the Company and their respective successors, legal representatives
and assigns, and nothing expressed or mentioned in this Agreement is intended
or
shall be construed to give any other person any legal or equitable right, remedy
or claim under or in respect of, or by virtue of, this Agreement or any
provision herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of
such
persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 8 hereof shall also be for the benefit
of
the controlling persons and agents referred to in Sections 8 and 9 hereof and
(ii) the indemnities of the Initial Purchasers contained in Section 8
hereof shall also be for the benefit of the directors of the Company, and its
officers, employees and agents and any controlling person or persons referred
to
in Sections 8 and 9 hereof. No purchaser of Notes from the Initial Purchasers
will be deemed a successor, legal representative or assign because of such
purchase.
17. No
Waiver; Modifications in Writing.
No
failure or delay on the part of the Company or the Initial Purchasers in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power
or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company
or
the Initial Purchasers at law or in equity or otherwise. No waiver of or consent
to any departure by the Company or the Initial Purchasers from any provision
of
this Agreement shall be effective unless signed in writing by the party entitled
to the benefit thereof; provided
that
notice of any such waiver shall be given to each party hereto as set forth
above. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of the Company and the Initial Purchasers. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company or the Initial Purchasers from the terms of any provision of
this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required
by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
18. Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties hereto with respect to the subject matter
hereof.
31
19. Applicable
Law; Waiver of Jury Trial.
THE
VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS
SET
FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK. TIME IS OF THE ESSENCE IN THIS AGREEMENT. The Company
irrevocably (a) submits to the jurisdiction of any court of the State of New
York or the United State District Court for the Southern District of the State
of New York for the purpose of any suit, action, or other proceeding arising
out
of this Agreement, or any of the Transaction Documents and the Offering
Memorandum (each, a “Proceeding”), (b) agrees that all claims in respect of any
Proceeding may be heard and determined in any such court, (c) waives, to the
fullest extent permitted by law, any immunity from jurisdiction of any such
court or from any legal process therein, (d) agrees not to commence any
Proceeding other than in such courts, and (e) waives, to the fullest extent
permitted by law, any claim that such Proceeding is brought in an inconvenient
forum. The Company hereby irrevocably designates CT Corporation System Inc,
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ as agent upon whom process against the Company
may be served. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT
PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS)
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS
AND
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS, THE DISCLOSURE
PACKAGE AND THE OFFERING MEMORANDUM.
20. Judgment
Currency.
If for
the purposes of obtaining judgment in any court it is necessary to convert
a sum
due hereunder into any currency other than United States dollars, the parties
hereto agree, to the fullest extent permitted by law, that the rate of exchange
used shall be the rate at which in accordance with normal banking procedures
the
relevant party or parties could purchase United States dollars with such other
currency in The City of New York on the business day preceding that on which
final judgment is given. The obligation of each party hereto with respect to
any
sum due from it to any other party hereto or any person controlling any such
other party shall, notwithstanding any judgment in a currency other than United
States dollars, not be discharged until the first business day following receipt
by such other party or controlling person of any sum in such other currency,
and
only to the extent that such other party or controlling person may in accordance
with normal banking procedures purchase United States dollars with such other
currency. If the United States dollars so purchased are less than the sum
originally due to such other party or controlling person hereunder, the
first-mentioned party agrees as a separate obligation and notwithstanding any
such judgment, to indemnify such other party or controlling person against
such
loss. If the United States dollars so purchased are greater than the sum
originally due to such other party or controlling person hereunder, such other
party or controlling person agrees to pay to the first-mentioned party an amount
equal to the excess of the United States dollars so purchased over the sum
originally due to such other party or controlling person hereunder.
21. Foreign
Taxes.
All
payments made by the Company under this Agreement will be made without
withholding or deduction for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed or levied
by or on behalf of the PRC or the British Virgin Islands or any political
subdivision or any taxing authority thereof or therein unless the Company is
or
becomes required by law to withhold or deduct such taxes, duties, assessments
or
other governmental charges. In such event, the Company shall pay such additional
amounts as will result, after such withholding or deduction, in the receipt
by
the Initial Purchasers and each person controlling the Initial Purchasers,
as
the case may be, of the amounts that would otherwise have been receivable in
respect thereof, except to the extent such taxes, duties, assessments or other
governmental charges are imposed or levied by reason of such Initial Purchasers’
or controlling person’s being connected with the PRC or the British Virgin
Islands other than by reason of its being an Initial Purchasers or a person
controlling an Initial Purchasers under this Agreement.
32
22. Contractual
Relationship.
The
Company acknowledges and agrees that each of the Initial Purchasers has acted
and is acting solely in the capacity of a principal in an arm’s length
transaction between the Company, on the one hand, and the Initial Purchasers,
on
the other hand, with respect to the offering of Notes contemplated hereby
(including in connection with determining the terms of the offering) and not
as
a financial advisor, agent or fiduciary to the Company or any other person.
Additionally, the Company acknowledges and agrees that the Initial Purchasers
have not and will not advise the Company or any other person as to any legal,
tax, investment, accounting or regulatory matters in any jurisdiction. The
Company has consulted with its own advisors concerning such matters and shall
be
responsible for making its own independent investigation and appraisal of the
transactions contemplated hereby, and the Initial Purchasers shall have no
responsibility or liability to the Company or any other person with respect
thereto, whether arising prior to or after the date hereof. Any review by the
Initial Purchasers of the Company, the transactions contemplated hereby or
other
matters relating to such transactions have been and will be performed solely
for
the benefit of the Initial Purchasers and shall not be on behalf of the Company.
The Company agrees that it will not claim that the Initial Purchasers, or any
of
them, has rendered advisory services of any nature or respect, or owes a
fiduciary duty to the Company or any other person in connection with any such
transaction or the process leading thereto.
23. Partial
Unenforceability.
The
invalidity or unenforceability of any Section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof.
24. Headings.
The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
25. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Delivery of a signed counterpart of this Agreement
by facsimile transmission shall constitute valid and sufficient delivery
thereof.
[Signature
page follows]
33
If
the
foregoing correctly sets forth the understanding among the Initial Purchasers
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among
us.
|
Very
truly yours,
|
|
|
By:
|
/s/
▇▇▇▇▇▇▇▇ ▇▇▇▇
|
|
Name:
▇▇▇▇▇▇▇▇ ▇▇▇▇
|
|
|
Title: President, Chief Executive Officer and Director
|
|
Accepted and agreed to as of
the
date
first above written:
▇▇▇▇▇▇▇▇▇▇▇
& Co. Inc.
ACTING
SEVERALLY ON BEHALF OF THEMSELVES
AND
AS
REPRESENTATIVES OF THE SEVERAL INITIAL
PURCHASERS
NAMED IN SCHEDULE I HERETO.
|
By:
|
▇▇▇▇▇▇▇▇▇▇▇
& CO. INC.
|
|
/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|
|
Title:
Managing Director
|
|
|
Head of Equity Capital Markets
|
34
Schedule
I
Initial
Purchasers
|
Name
|
Aggregate
Amount of
Firm Notes to
be Purchased
|
|||
|
▇▇▇▇▇▇▇▇▇▇▇
& Co. Inc.
|
$
|
80,000,000
|
||
|
▇▇▇▇
Capital Partners, LLC
|
$
|
10,000,000
|
||
|
▇▇▇▇▇
▇▇▇▇▇▇, Carret & Co., LLC
|
$
|
10,000,000
|
||
|
Total
|
$
|
100,000,000
|
||
Schedule
II
Subsidiaries
Faith
Boom Limited
Shandong
Haize Nanomaterials Co., Ltd.
Shaanxi
Haize Nanomaterials Co., Ltd.
Shandong
Bangsheng Chemicals Co., Ltd.
2
Schedule
III
5/22/08
$100,000,0006.0%
Convertible Senior Notes due 2018
|
Issuer:
|
||
|
Common
stock symbol:
|
SDTH
|
|
|
Title
of securities:
|
6.00%
Convertible Senior Notes due ▇▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇
principal amount offered:
|
$100.0
million
|
|
|
Deal
type
|
144A
with Registration Rights and Section 4-1(1/2)
|
|
|
Principal
amount per bond:
|
$1,000
|
|
|
Issue
price:
|
100%
of principal amount
|
|
|
Over-Allotment
option:
|
$15.0
million
|
|
|
Annual
interest rate:
|
6.00%
|
|
|
Conversion
premium:
|
18.0%
|
|
|
Reference
price:
|
$8.42
|
|
|
Conversion
price:
|
$9.94
|
|
|
Conversion
rate:
|
100.6036
|
|
|
Interest
payment dates:
|
6/1
& 12/1 of each year beginning 12/1/08
|
|
|
Maturity:
|
6/1/18
|
|
|
Call
feature:
|
3
year NC, 2 year provisional call protection @ 150%
|
|
|
Put
dates:
|
Year
3, Year 5
|
|
|
Voluntary
Conversion Make Whole
|
See
“Conversion Rights” below
|
|
|
Use
of proceeds:
|
$56M
to expand its NPCC production capacity, acquisitions,
GCP
|
|
|
Additional
Indebtedness Covenant:
|
See
“Limitation on Incurrence of Indebtedness” below
|
|
|
Trade
date:
|
5/22/08
|
|
|
Settlement
date:
|
5/28/08
|
|
|
144A
CUSIP:
|
▇▇▇▇▇▇▇▇▇
|
|
|
Section
4-1(1/2) CUSIP:
|
▇▇▇▇▇▇▇▇▇
|
|
|
Bookrunner:
|
▇▇▇▇▇▇▇▇▇▇▇
& Co.
|
3
Adjustment
to conversion rate upon a specified Fundamental Change
|
Stock
Price
|
|||||||||||||||||||||||||||||||
|
Effective
Date
|
$
|
8.42
|
$
|
9.26
|
$
|
9.94
|
$
|
11.00
|
$
|
12.50
|
$
|
14.00
|
$
|
15.50
|
$
|
17.00
|
$
|
18.50
|
$
|
20.00
|
|||||||||||
|
5/28/2008
|
21.38
|
19.44
|
18.11
|
16.36
|
14.40
|
12.86
|
11.61
|
10.59
|
9.73
|
9.00
|
|||||||||||||||||||||
|
6/1/2009
|
14.25
|
12.96
|
12.07
|
10.91
|
9.60
|
8.57
|
7.74
|
7.06
|
6.49
|
6.00
|
|||||||||||||||||||||
|
6/1/2010
|
7.13
|
6.48
|
6.04
|
5.45
|
4.80
|
4.29
|
3.87
|
3.53
|
3.24
|
3.00
|
|||||||||||||||||||||
|
6/1/2011
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|||||||||||||||||||||
CONFIDENTIAL
This
document is confidential and must not be redistributed or forwarded by you
under
any circumstance.
The
term sheet contains a summary of select terms of the offering only and should
not be relied upon in making any investment decision. This term sheet is
qualified in its entirety by the Offering Memorandum, and you should read these
documents for a complete description of the company and offering, including
risk
factors related thereto.
TERMS
The
notes and the shares of common stock issuable upon conversion of the notes
(together, the “Securities”) have
not been and will not be registered under the Securities Act or any state
securities laws and may not be offered in the United States, except that
Securities may be offered and sold to Qualified Institutional Buyers exclusively
in reliance upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A or another exemption from
registration
The
Securities have not been approved or disapproved by the Securities and Exchange
Commission or by any state securities commission or regulatory authority, nor
have the foregoing authorities passed on the accuracy or adequacy of the
attached documents. Any representation to the contrary is a criminal
offense.
This
announcement shall not constitute an offer to sell or the solicitation of an
offer to buy any securities of ShengdaTech, Inc., nor shall there be any sale
of
securities in any state or jurisdiction in which such an offer, solicitation
or
sale would be unlawful prior to registration or qualification under the
securities laws of any such state or jurisdiction.
Copies
of the Offering Memorandum can be obtained from your Oppenheimer sales
representative.
This
message is intended solely for the benefit of the initial recipient. No
retransmission, copying or distribution is
permitted.
4
SUPPLEMENTAL
DISCLOSURE TO THE PRICING SUPPLEMENT
Below
is
additional information regarding the beneficial ownership of ShengdaTech, Inc.
(the “Company”),
clarification regarding the payment of additional interest upon the conversion
of notes by holders any time prior to June 1, 2011, information regarding
limitations on the Company’s ability to incur indebtedness and the fact that the
offering is being conducted in two tranches. Such information should be
considered by the investors when making an investment in the convertible senior
notes to be issued by the Company. Please note that the additional information
below will also be reflected in the final offering memorandum.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth information as of May 16, 2008, regarding the
beneficial ownership of the Company’s common stock by each person known by the
Company to own 5% or more of its outstanding shares of common stock, each the
Company’s directors and executive officers who beneficially own common stock of
the Company, and the Company’s directors and executive officers as a group. The
percentage of beneficial ownership is calculated based on a total of 54,202,036
shares of common stock outstanding as of May 16, 2008.
|
Name
and Address
|
Number of Shares
|
Percentage Owned
|
|||||
|
▇▇▇▇▇▇▇▇
▇▇▇▇
|
22,902,912
|
42.3
|
%
|
||||
|
▇▇▇▇
▇▇▇▇
|
5,000
|
—
|
|||||
|
▇▇▇▇▇▇
▇▇
|
1,159,584
|
2.1
|
%
|
||||
|
Directors
and executive officers as a group (8 persons)
|
24,062,496
|
44.4
|
%
|
||||
The
address for all of the above officers and executive directors is Youth Pioneer
Park, Tai'an Economic and Technological Development ▇▇▇▇, ▇▇▇'▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, People's Republic of China.
CONVERSION
RIGHTS
If
holders convert their notes at any time prior to June 1, 2011, the Company
will
pay additional interest in cash or, at the option of the Company, in shares
to
holders of the notes being converted. The amount of this additional interest
(the “additional interest”) shall be equal to the interest due and payable from
the date of issuance until and including June 1, 2011, less any interest
actually paid or provided for prior to the date of such conversion.
In
the
event the Company elects to pay any portion of the additional interest in
shares, it will notify the holders of notes being converted the amount of
additional interest to be satisfied in shares, or it will notify that it will
satisfy the entire additional interest in cash, within one VWAP trading day
(as
defined below) of the relevant conversion date; provided
that if
the Company does not give any notice within the time period described as to
how
it intends to settle the additional interest, the Company will satisfy its
obligations with respect to the additional interest only in cash. The Company
will treat all holders with the same conversion date in the same manner, but
will not, however, have any obligation to treat holders with different
conversion dates in the same manner.
If
the
Company elects to settle the additional interest only in cash, such settlement
will occur simultaneously with its settlement of the related conversion, which
will occur as soon as practicable, but in any event within three business days
of the relevant conversion date.
If
the
Company elects to settle all or any portion of the additional interest in
shares, such settlement will occur on the third business day following the
final
VWAP trading day of the related share settlement averaging period (as defined
below).
5
The
amount of cash and/or number of shares, as the case may be, due with respect
to
the additional interest will be determined as follows:
(1) If
the
Company elects to satisfy the entire additional interest in cash, it will
deliver to the holders of notes being converted the amount of cash equal to
the
additional interest described above.
(2) If
the
Company elects to satisfy the entire additional interest in shares, it will
deliver to the holders of notes being converted the number of shares equal
to
(A) the amount of additional interest due with respect to such notes,
divided
by
(B) 95%
of the average daily VWAP during the share settlement averaging
period.
(3) If
the
Company elects to satisfy the additional interest in a combination of cash
and
shares, it will deliver to the holders of notes being converted:
• cash
(the
“cash amount”) in an amount equal to the portion of additional interest due with
respect to such notes the Company elects to satisfy in cash; and
• the
number of shares equal to (A) the amount of additional interest due with respect
to such notes minus
the cash
amount, divided
by
(B) 95%
of the average daily VWAP during the share settlement averaging
period.
The
“share settlement averaging period” means the 10 consecutive VWAP trading day
period beginning on the second VWAP trading day following the relevant
conversion date.
“VWAP”
for the Company’s shares of common stock means, for each of the 10 consecutive
VWAP trading days during any share settlement averaging period, the per share
volume-weighted average price as displayed under the heading “Bloomberg VWAP” on
Bloomberg page [SDTH <equity> VWAP] (or any equivalent successor page if
such page is not available) in respect of the period from the scheduled open
of
trading on the principal trading market for the Company’s common stock to the
scheduled close of trading on such market on such VWAP trading day, or if such
volume-weighted average price is unavailable, the market value of one share
of
the Company’s common stock on such VWAP trading day as the Company’s board of
directors determines in good faith using a volume-weighted method.
A
“VWAP
trading day” means a day during which (i) trading in the Company’s common stock
generally occurs on the principal U.S. national securities exchange on which
such common stock is listed and (ii) there is no VWAP market disruption event.
If the Company’s common stock is not so listed, then “VWAP trading day” means a
business day.
A
“VWAP
market disruption event” means (i) a failure by the principal U.S. national
securities exchange or market on which the Company’s common stock is listed to
open for trading during its regular trading session or (ii) the occurrence
or
existence prior to 1:00 p.m. on any scheduled trading day for the Company’s
common stock for an aggregate one half-hour period of any suspension or
limitation imposed on trading (by reason of movements in price exceeding limits
permitted by the stock exchange or otherwise) in the Company’s common stock or
in any options contracts or futures contracts relating to the Company’s common
stock.
LIMITATION
ON INCURRENCE OF INDEBTEDNESS
The
Company will not incur any secured indebtedness and it will not permit any
of
its subsidiaries to directly or indirectly incur any indebtedness. The Company
will be permitted to incur additional indebtedness (the “Permitted
Indebtedness”)
which
ranks equal in right of payment to the notes in an amount not to exceed
US$15,000,000; provided
that
such Permitted Indebtedness does not require any repayment prior to the next
purchase date as set forth under “—Purchase of Notes at Your Option on Specified
Dates” at the time of such incurrence. The Company will be permitted to issue
equity securities, including common stock and preferred stock (in the case
of
preferred stock, which shall not be redeemable or otherwise repayable prior
to
the stated maturity date of the Notes so long as 25% or more of the initial
aggregate principal amount of notes issued, including any notes issued pursuant
to the over-allotment option, is outstanding), and any securities which rank
junior in right of payment to the notes.
6
The
limitation as set forth above shall cease to be in effect at such point as
either of the following conditions is met: (i) the aggregate principal amount
of
notes outstanding is less than 25% of the initial aggregate principal amount
of
notes issued including any notes issued pursuant to the over-allotment option
or
(ii) the common stock into which the notes are convertible trades at a level
greater than 165% of the conversion price in effect at such time for a period
of
20 of 30 consecutive trading days, subject to the notes and common stock into
which the notes are convertible being the subject of an effective registration
statement or exempt from registration requirements under Rule 144.
"indebtedness"
means obligations for money borrowed.
OFFERING
BEING CONDUCTED IN TWO SEPARATE TRANCHES
The
offering will be conducted in the form two separate tranches, a Rule 144A
tranche and a Section 4(1-1/2) tranche. Purchasers in the Rule 144A tranche
will
be subject to the following restriction on aggregate additional interest
payments upon early conversion to preserve Rule 144A
eligibility:
If
a
holder converts notes prior to the earliest of (1) the sale of such notes
pursuant to Rule 144 under the U.S. Securities Act of 1933, as amended, (2)
the
date falling one year after the last issuance of the notes pursuant to this
offering and (3) the sale of such notes pursuant to an effective registration
statement, then the aggregate additional interest such holder will receive
upon
conversion of each US$1,000 original principal amount of notes will not exceed
US$68.21, which is the amount determined pursuant to the following
formula:
1000
-
1.1(CR * OP)
where
CR
is 100.6036, the initial conversion rate for the notes and OP is US$8.42, the
last reported sale price of our common stock on the date we priced this offering
of notes; provided,
however,
that if
such holder has elected in writing to purchase the notes in this offering in
a
Section 4(1-1/2) transaction under the U.S. Securities Act of 1933, as amended,
instead of pursuant to Rule 144A, then such restriction on the maximum aggregate
amount of additional interest payable during this period shall not apply. If
the
notes held by such a holder are subsequently resold pursuant to Rule 144A prior
to the expiration of this period, then such restriction on additional interest
shall once again apply to such notes.
Purchasers
in the Section 4(1-1/2) tranche will receive notes that are not subject to
this
restriction on aggregate additional interest payments. However, such purchasers
will be required to enter into typical investor letters as a condition to
closing and will receive their purchased securities in the form of physical
legended note certificates."
7
Schedule
IV
Free
Writing Offering Documents
None
8
Schedule
V
Persons
Party to Lock Up Agreement
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9
Exhibit
A
Form
of
Registration Rights Agreement
10
Exhibit
B
FORM
LOCK
UP
AGREEMENT
May
22,
2008
▇▇▇▇▇▇▇▇▇▇▇
& Co. Inc.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
This
Lock-Up Agreement is being delivered to you in connection with the proposed
Purchase Agreement (the “Purchase
Agreement”)
to be
entered into by ShengdaTech, Inc., a Nevada corporation (the “Company”),
and
you with respect to the offering (the “Offering”)
without registration under the Securities Act of 1933, as amended (the
“Act”),
and
initial resale in reliance on Rule 144A under the Act, of $100,000,000 of
6.00% Senior
Convertible Notes due 2018 (the “Notes”)
of the
Company. Capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Purchase Agreement.
In
order
to induce you to enter into the Purchase Agreement, the undersigned agrees
that,
for a period (the “Lock-Up
Period”)
beginning on the date hereof and ending on, and including, the date that is
90 days after the date of the final offering memorandum relating to the
Offering, the undersigned will not, without your prior written consent,
(i) sell, offer to sell, contract or agree to sell, hypothecate, pledge,
grant any option to purchase or otherwise dispose of or agree to dispose of,
directly or indirectly, or file (or participate in the filing of) a registration
statement with the Securities and Exchange Commission (the “Commission”)
in
respect of, or establish or increase a put equivalent position or liquidate
or
decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of
the Commission promulgated thereunder (the “Exchange
Act”)
with
respect to, any Common Stock, $0.00001 par value per share, of the Company
(the
“Common
Stock”),
the
Notes or any other securities of the Company that are substantially similar
to
the Common Stock or the Notes, or any securities convertible into or
exchangeable or exercisable for, or any warrants or other rights to purchase,
the foregoing, (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, the Notes or any other securities of the Company that
are
substantially similar to the the Common Stock or the Notes, or any securities
convertible into or exchangeable or exercisable for, or any warrants or other
rights to purchase, the foregoing, whether any such transaction is to be settled
by delivery of Common Stock or such other securities, in cash or otherwise
or
(iii) publicly announce an intention to effect any transaction specified in
clause (i) or (ii). The foregoing sentence shall not apply to (a) bona fide
gifts or distributions without consideration, provided the recipient thereof
agrees in writing with the Initial Purchasers to be bound by the terms of this
Lock-Up Agreement, or (b) dispositions to any trust for the direct or
indirect benefit of the undersigned and/or the immediate family of the
undersigned, provided that such trust agrees in writing with the Initial
Purchasers to be bound by the terms of this Lock-Up Agreement, or
(c) transfers that occur by operation of law, such as the rules of
intestate succession or statutes governing the effects of a merger, provided
the
transferee thereof agrees in writing with the Initial Purchasers to be bound
by
the terms of this Lock-Up Agreement. For purposes of this paragraph, “immediate
family” shall mean the undersigned and the spouse, any lineal descendent,
father, mother, brother or sister of the undersigned.
11
In
addition, the undersigned hereby waives any rights the undersigned may have
to
require registration of Common Stock in connection with the filing of any
registration statement to be filed with the Commission pursuant to the
Registration Rights Agreement. The undersigned further agrees that, for the
Lock-Up Period, the undersigned will not, without your prior written consent,
make any demand for, or exercise any right with respect to, the registration
of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, or warrants or other rights to purchase Common Stock or any
such securities.
* * *
12
If
(i) the Company notifies you in writing that it does not intend to proceed
with the Offering or (ii) for any reason the Purchase Agreement shall be
terminated prior to the “Firm Notes Closing Date” (as defined in the Purchase
Agreement), this Lock-Up Agreement shall be terminated and the undersigned
shall
be released from its obligations hereunder.
13
Exhibit
C-1
Form
of
Opinion of Company Counsel
i
Exhibit
C-2
Form
of
Opinion of Company British Virgin Islands Counsel
ii
Exhibit
C-3
Form
of
Opinion of Company PRC Counsel
iii
Exhibit
C-4
Form
of
Opinion of Initial Purchasers’ PRC Counsel
iv
Exhibit
C-5
Form
of
Opinion of Trustee’s Counsel
v