[] shares1 Southern China Livestock, Inc. Common Stock UNDERWRITING AGREEMENT

Newbridge Securities Corporation

  as Representatives of the several Underwriters

c/o Rodman & Renshaw, LLC

1251 Avenue of the Americas, 20th Floor

 

New York, NY 10020

 

Ladies and Gentlemen:

 

Southern China Livestock, Inc., a Delaware corporation (the “Company”), proposes to sell to you and other firms and corporations named in Schedule A attached hereto (the “Underwriters,” which term shall also include any underwriter substituted as provided in Section 11 hereof), for which you are acting as representatives (“Representatives”), [            ] shares (the “Primary Shares”) of the Company’s Common Stock, par value $0.001 p er share (“Common Stock”).  In addition, the Company proposes to grant to the Underwriters an option to purchase, solely for the purpose of covering over-allotments, up to an additional [           ] shares of the Common Stock (the “Over-Allotment Shares”).  The Company has agreed to sell up to the amount set forth opposite the Company’s name in Schedule B hereto, if and to the extent that you, as Representatives, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such Over-Allotment Shares granted to the Underwriters under this Agreement. The Primary Shares and the Over-Allotment Shares are collectively referred to below as the “Shares.”  The Company agrees with the several Underwriters as set forth below.

 

1. Representations, Warranties and Certain Covenants of the Company.  The Company represents and warrants to, and the Company also covenants and agrees with, each of the Underwriters as follows:

 

(a) The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (No. 333-167173), including a preliminary prospectus, relating to the Shares and such amendments to the registration statement and prospectus included therein as may have been required to the date hereof.  The Company will file with the Commission either:  (i) prior to effectiveness of such registration statement, a further amendment thereto, including a form of prospectus, and if required after effectiveness of such registration statement, a final prospectus in accordance with Rule 424(b) of the rules and regulations (“Rules and Regulations”) under the Securities Act of 1933, as amended (the “Act”); or (ii) after effectiveness of such registration statement, a final prospectus in accordance with Rules 430A and 424(b) of the Rules and Regulations.  Any such preliminary prospectus and any prospectus included in the registration statement at the time it becomes effective that omits information pursuant to Rule 430A of the Rules and Regulations, is referred to herein as a “preliminary prospectus”; such registration statement, as it may have been amended at the time when it becomes effective, including financial statements, exhibits and the information, if any, deemed to be a part of such registration statement by virtue of Rule 430A of the Rules and Regulations, is referred to herein as the “Registration Statement”; the preliminary prospectus that was included in the Registration Statement immediately prior to the time it became effective is referred to herein as the “Pricing Prospectus”; such final form of prospectus, in the form in which it was first filed pursuant to Rule 424(b) of the Rules and Regulations or, if no filing pursuant to Rule 424(b) of the Rules and Regulations is made, in the form included in the Registration Statement at the time it becomes effective, is referred to herein as the “Prospectus”.  If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Act (the “Rule 462 Registration Statement”), t hen any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.

 

_____

1 Plus an option to purchase from the Company up to an aggregate of [        ] additional shares solely to cover over-allotments.

 

 

 

(b) Neither the Commission nor any state regulatory authority has issued an order preventing or suspending the use of any preliminary prospectus or Prospectus, and no proceedings for such purpose are pending before or threatened or contemplated by the Commission, and the Company has complied in all respects with all requests by the Commission for additional information in connection therewith.  Each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.  At the date of this Ag reement and at the date the Registration Statement becomes effective the Registration Statement, and the Pricing Prospectus and Prospectus conform, and any amendments or supplements thereto will conform, in all material respects to the requirements of the Act and the Rules and Regulations.   At the date of this Agreement, at the date the Registration Statement becomes effective and at the Closing Date (as defined below), the Registration Statement will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading.  At the date of this Agreement and at the date the Registration Statement becomes effective the Prospectus, as amended or supplemented, if applicable, will not include any untrue statement of a material fact and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the ci rcumstances under which they were made, not misleading. At the time that the Registration Statement became effective, the Pricing Prospectus did not include 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; provided, however, that the Company makes no representations, warranties or agreements as to information contained in or omitted from the Registration Statement, each preliminary prospectus or Prospectus or any such amendment or supplement in reliance upon, and in conformity with, written information furnished to the Company by the Underwriters expressly for use therein, it being understood and agreed that the only such information is that described as such in Section 7(d) hereof.

 

(c) No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by, or under common control with the Company, except as disclosed in the Registration Statement.

 

(d) The disclosures in the Registration Statement concerning the effects of Federal, State, local and all foreign regulations on the Company’s business as currently conducted or contemplated are correct in all material respects.

 

(e) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the condition, financial or otherwise, or business of the Company and its subsidiaries individually or taken as a whole; (ii) there have been no material transactions entered into by the Company and its subsidiaries, other than as contemplated pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company or any of its subsidiaries.  Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement and the Prospectus, the Company has not: (i) issued any securities or incurred any material liability or obligation, direct or contingent, for borrowed money; (ii) entered into any material transaction; or (iii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.  The Company has not sustained, since the date of the latest audited financial statements included or incorporated by reference in the in the Registration Statement and the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since such date, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any material adverse changes, or any development that is reasonably likely to result in a material adverse change, in or affecting the business, assets, general affairs, management, financial position, business, stockholders’ equity or results of operations of the Company and its subsidiaries individually or taken as a whole, otherwise than as set forth or contemplated in the Registration Statement and the Prospectus.

 

 

 

(f) The accountants who certified the financial statements and supporting schedules included in the Registration Statement are independent public accountants as required by the Act and the Rules and Regulations.  The consolidated financial statements of the Company set forth in the Registration Statement and Prospectus, together with the related notes thereto, present fairly the financial condition of the Company and its subsidiaries as of the dates indicated and the results of operations and cash flows for the periods therein specified in conformity with United States generally accepted accounting principles (“GAAP”) consistently appl ied throughout the periods involved (except as otherwise stated therein).  The selected financial data and the summary financial information included in the Prospectus present fairly in all material respects the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement.  The schedules set forth in the Registration Statement present fairly the information required to be stated therein in conformity with GAAP.  All disclosures contained in the Registration Statement or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by rules and regulations of the Commission) comply in all material respects with Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 10 of Regulation S-K under the A ct, to the extent applicable.

 

(g) The agreements and documents described in the Prospectus and the Registration Statement conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Act and the Rules and Regulations to be described in the Prospectus and the Registration Statement or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Prospectus, or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the l apse of time or the giving of notice, or both, would constitute a default thereunder. To the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or any of their respective assets or businesses, including, without limitation, those relating to environmental laws and regulations, except where any such violation would not result in a material adverse effect on the condition (financial or otherwise), business or results of operations of the Company and its Subsidiaries taken as a whole (a “Material Adverse Effect”).

 

 

 

(h) The Company has filed with the Commission a registration statement on Form 10 (File Number 000-52868) providing for the registration under the Exchange Act of the Common Stock. The registration of the Common Stock under the Exchange Act has been declared effective by the Commission as of the date hereof.

 

(i) The Company has been duly organized and is validly existing, in good standing, under the laws of the State of Delaware.  The Company has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as is described in each preliminary prospectus and the Prospectus.  The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect.

 

(j) Each of the subsidiaries of the Company listed on Exhibit 21.1 to the Registration Statement (the “Subsidiaries”) has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in each preliminary prospectus and the Prospectus and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.  Except as set forth in the Registration Statement, the Company does not own any shares of capital stock or any other securities of any corporation, nor does it have any equity interest, direct or indirect, in any firm, partnership, association or other entity or subsidiary.

 

(k) The authorized, issued and outstanding capital stock of the Company conforms to the description thereof contained in the Pricing Prospectus and the Prospectus.  The issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.  The issued and outstanding shares of the capital stock of each of the Subsidiaries of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are owned beneficially and of record, directly or indirectly, by the Company free and clear of all liens, claims or encumbrances whatsoever.  None of the outstanding shares of capital stock of the Company or any of its Subsidiaries was issued in violation of the preemptive or similar rights of any securityholder arising by operation of law, under the certificate of incorporation or by-laws of the Company or its Subsidiaries or under any agreement or obligation to which the Company or any of its Subsidiaries is a party or by which any of them are bound.

 

(l) The sale of the Shares by the Company has been duly authorized and after issuance of and payment for such Shares in accordance with this Agreement, such Shares will be validly issued, fully paid and nonassessable.  The Underwriters will acquire good and marketable title to the Shares to be sold by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, or other claim, and the holders of the Common Stock are not entitled to any preemptive rights with respect to the Shares to be sold by the Company.

 

(m) Except as disclosed in each preliminary prospectus and the Prospectus and the financial statements of the Company and the related notes thereto included in each preliminary prospectus and the Prospectus, neither the Company nor any of its Subsidiaries has outstanding any options or warrants to purchase, any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, warrants, rights, convertible securities or obligations.

 

(n) Except as described in the Registration Statement, each preliminary prospectus and the Prospectus, there are no persons with registration rights or other similar rights to have any securities registered by the Company pursuant to the Registration Statement or otherwise registered by the Company under the Act.

 

 

(o) Except as contemplated in each preliminary prospectus and the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement, each preliminary prospectus and the Prospectus, neither the Company nor any of its Subsidiaries has incurred any liabilities or obligations, direct or contingent (including any off-balance sheet obligations or any “variable interest entities” within the meaning of Financial Accounting Standards Board Interpretation No. 46), or entered into any transactions, not in the ordinary course of business, that are material to the Company and its Subsidiaries taken as a whole, and there has not been any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, any material change in the capital stock, short-term debt or long-term debt of the Company, or any Material Adverse Effect.

 

(p) Except as set forth in each preliminary prospectus and the Prospectus, there are no pending actions, suits or proceedings against the Company, any of its Subsidiaries or any of their respective properties that, if determined adversely to the Company or its Subsidiaries, would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or that are otherwise material in the context of the sale of the Shares by the Company; and no such actions, suits or proceedings are, to the Company’s knowledge,  threatened or contemplated.

 

(q) The Company and its Subsidiaries own or have valid leasehold interests in all material properties and assets required for the operation of their business as now conducted or as presently proposed to be conducted, including those described in the Registration Statement, each preliminary prospectus and the Prospectus as being owned by them; and each of the Company and its Subsidiaries has good and marketable title to all properties and assets owned by it which are material to its business, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by the Company or its subsidiaries.  All real pr operty leases to which the Company or any of its Subsidiaries is a party are valid, subsisting and, to the knowledge of the Company, enforceable by the Company or such Subsidiary, in each case with no exceptions that would materially interfere with the use made or to be made thereof by the Company or its Subsidiaries and each of the Company and its Subsidiaries enjoys peaceful and undisturbed possession under all such leases to which it is a party as lessee.

 

(r) The Company has the corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder and thereunder.  This Agreement has been duly authorized, executed and delivered by the Company constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms except as (i) rights to indemnification hereunder and thereunder may be limited by applicable law and (ii) the enforcement hereof and thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.

 

(s) The Company is not in, and the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated herein, therein and in the Registration Statement (including the issuance and sale of the Shares and the use of the proceeds from the sale of the Shares as described in the Pricing Prospectus and the Prospectus under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder do not and will not, with or without the giving of notice or passage of time or both, result in a violation, breach or conflict with the charter or bylaws of the Company or any of its Subsidiaries or any agreement or instrument to which the C ompany or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or as to which any of their respective properties is subject or any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries or any of their properties, except for any such violations, breaches or conflicts that could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; and no consent, approval, authorization or order of, or filing with, any court or governmental agency or body is required in connection with the transactions contemplated hereby except as have been obtained and made under the Act and such as may be required under state securities or “Blue Sky” laws.

 

 

 

(t) The Company, together with its Subsidiaries, owns or possesses all material trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, “intellectual property rights”) necessary to conduct the business now operated by it, and, except as disclosed in each preliminary prospectus and the Prospectus, neither the Company nor any of its subsidiaries has received any notice or otherwise become aware of any infringement of or conflict with asserted rights of others with respect to any intellectual property rights, nor of any facts or circumstances that would render any intellectual property rights invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict, if determined adversely to the Company or its subsidiaries, or invalidity or inadequacy could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(u) No default exists in the due performance and observance of any term, covenant or condition of any license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries may be bound or to which any of the properties or assets of the Company or any of its Subsidiaries is subject, except for such defaults that would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is: (i) in violation of any term or provision of its Certificate of Incorporation or by-laws; or (ii) any other applicable organizational document(s), or in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company, any of its Subsidiaries or any of their respective properties or businesses, except, with respect to clause (ii), for such defaults that would not, individually or in the aggregate, have a Material Adverse Effect.

 

(v) To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors officers and 5% shareholders of the Company’s outstanding common stock (or securities convertible into common stock) immediately prior to this offering (collectively, the “Insiders”, and each individually, an “Insider”) is true and correct in all respects and the Company has not become aware of any information which would cause the information discl osed in the Questionnaires completed by each Insider to become inaccurate and incorrect.

 

(w) Except as disclosed in the Registration Statement, each preliminary prospectus and the Prospectus, there are no contracts, agreements or understandings between the Company or any of its Subsidiaries and any person that would give rise to a valid claim against the Company, any of its Subsidiaries or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with this offering.

 

(x) The Company and its Subsidiaries possess all material certificates, authorities or permits issued by appropriate governmental agencies or bodies and have made all material filings required under any federal, state, local or foreign law, rule or regulation necessary to conduct the business now operated by them (the “Permits”) and have not received any notice of proceedings relating to the revocation or modification of any such Permit that, if determined adversely to the Company or its Subsidiaries, would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(y) No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company or its Subsidiaries, is imminent that would reasonably be expected to result in a Material Adverse Effect.

 

(z) Neither the Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “environmental laws”), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any env ironmental laws, which violation, contamination, liability or claim would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; and neither the Company nor any Subsidiary is aware of any pending investigation that might lead to such a claim.

 

 

 

(aa) The Company and its Subsidiaries maintain systems of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP 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.  The Company and its Subsidiaries maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Commission, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate to allow timely decisions regarding required disclosure. The Company is otherwise in compliance in all materials respects with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulatio ns issued thereunder by the Commission.

 

(bb) No relationship, direct or indirect, exists among the Company or any of its Subsidiaries, on the one hand, and the directors, officers, customers, suppliers or, to the Company’s knowledge, stockholders of the Company or its Subsidiaries, on the other, that is required by the Act to be described in the Registration Statement and Prospectus and that is not so described.

 

(cc) Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in the Registration Statement, each preliminary prospectus and the Prospectus is not based on or derived from sources that are reliable and accurate (in accordance with the methodologies used to derive such statistical and market-related data set forth in the underlying source material) in all material respects.

 

(dd) The Shares have been approved for listing on the NASDAQ Capital Market, subject to official notice of issuance.

 

(ee) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in each preliminary prospectus and the Prospectus, will not be an “investment company” as defined in the Investment Company Act of 1940.

 

(ff) The Company has not made any offer relating to the Shares that would constitute a “free writing prospectus” as defined in Rule 405 under the Act.

 

(gg) Except as described in the Registration Statement and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or, to the Company’s knowledge, any Insider with respect to the sale of the Shares hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its shareholders that may affect the Underwriters’ compensation, as determined by the Financial Industry Regulatory Authority (“FINRA”).

 

(hh) Except as described in the Registration Statement, each preliminary prospectus and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) to any FINRA member; or (iii) to any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve months prior to the effective date of the Registration Statement, other than payments to the Underwriters as provided hereunder in connection with this offering.

 

 

 

(ii) None of the net proceeds of this offering will be paid by the Company to any participating FINRA member or its affiliates, except as described in the Registration Statement, each preliminary prospectus and the Prospectus and as specifically authorized herein.

 

(jj) Except as described in the Registration Statement, each preliminary prospectus and the Prospectus, to the Company’s knowledge, no Insider has any direct or indirect affiliation or association with any FINRA member (as determined in accordance with the rules and regulations of FINRA). The Company will advise the Representatives and Loeb & Loeb LLP if it learns that any officer, director or owner of at least 5% of the Company’s outstanding Common Stock (or securities convertible into Common Stock) is or becomes an affiliate or associated person of a FINRA member participating in this offering.

 

(kk) Neither the Company nor any of its Subsidiaries nor any of the directors , employees or officers of the Company or any of its Subsidiaries or any other person acting on behalf of the Company or any of its Subsidiaries has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or any political party or candidate for office (domestic or foreign) or ot her person who was, is, or may be in a position to help or hinder the business of the Company or any of its Subsidiaries (or assist the Company or any of its Subsidiaries in connection with any actual or proposed transaction) that (i) might subject the Company or any of its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Effect or (iii) if not continued in the future, might have a Material Adverse Effect. The Company has taken reasonable steps to ensure that its accounting controls and procedures  and the accounting controls and procedures of each of its Subsidiaries are sufficient to cause the Company and each of its Subsidiaries to comply with the Foreign Corrupt Practices Act of 1977, as amended.

 

(ll) The Company conducts substantially all of its operations and generates substantially all of its revenue through its indirect subsidiaries, Jiangxi Southern China Livestock Technology Limited (“Jiangxi SCLT”), Beijing Huaxin Tianying Livestock Technology Co. Limited (“Beijing Huaxin”), Jiangxi Yingtan Huaxin Livestock Limited, Yujiang Fengyuan Livestock Co., Ltd., Yingtan Yujiang Zhongtong Swine Co., Ltd., Yujiang Xianyue Livestock Feeds Co., Ltd., Jiangxi Yingtan Fuxin Development and Trade Co., Ltd., Yingtan Livestock Feeds Development Co., Ltd., Yujiang Xiangying Swine Co., Ltd. and Yujiang Decheng Livestock Co., Ltd (as described in the Registration Statement and the Prospectus (collectively, the “PRC Subsidiaries”);

 

(mm) Jiangxi SCLT and Beijing Huaxin have been duly established and are validly existing as a wholly-foreign-owned enterprises in good standing under the laws of the People’s Republic of China (“PRC”).  Each of the PRC Subsidiaries has the corporate power and authority to own, lease and operate its property and to conduct its business as described in the Registration Statement and the Prospectus, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing is not reasonably likely to result in a Material Adverse Effect.  Each of the PRC Subsidiaries has applied for and obtained all requisite business licenses, clearance and permits required under the laws and regulations of the PRC as necessary for the conduct of its businesses, and each of the PRC Subsidiaries has complied in all material respects with all laws and regulations of the PRC in connection with foreign exchange.  The registered capital of each of the PRC Subsidiaries has been fully paid up in accordance with the schedule of payment stipulated in its respective articles of association, approval document, certificate of approval and legal person business license (hereinafter referred to as the “Establishment Documents”) and in compliance with PRC laws and regulations.  The Establishment Documents of the PRC Subsidiaries have been duly approved in accordance with the laws of the PRC and are valid and enforceable.  The business scope specified in the Establishment Documents of each of the PRC Subsidiaries complies with the requirements of all relevant PRC laws and regulations.  The outstanding equity interests of each of the PRC Subsidiaries is owned of record by the Company or a wholly owned subsidiary, except for such specific entities or individuals identified as the registered holders thereof in the Registration Statement and the Prospectus.  The Company possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the PRC Subsidiaries.

 

 

 

(nn) No PRC Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to the Company (or the Company’s Subsidiary that holds the outstanding equity interest of such PRC Subsidiary). No PRC Subsidiary is prohibited, directly or indirectly, from making any other distribution on such PRC Subsidiary’s equity capital, from repaying to the Company any loans or advances to such PRC Subsidiary from the Company or any of the Company’s Subsidiaries.

 

(oo) None of the PRC 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 services of process, from attachment prior to or in aid of execution of judgment, or from any other legal process or proceeding for the giving of any relief or for the enforcement of any judgment.

 

(pp) It is not necessary that this Agreement, the Registration Statement, the Representative’s Option, the Prospectus or any other document be filed or recorded with any governmental agency, court or other authority in the PRC, the British Virgin Islands (the “BVI”) or the Hong Kong Special Administrative Region (“Hong Kong”), in connection with the transactions contemplated by this Agreement, except that such documents may be in whole or in part filed with or disclosed to SAFE for the purpose of registration under Circular No. 75 of SAFE by certain shareholders of the Com pany who are PRC residents.

 

(qq) No transaction, stamp, capital or other issuance, registration, transaction, transfer or withholding taxes or duties are payable in the PRC, the BVI or Hong Kong by or on behalf of the Underwriter to any PRC, BVI or Hong Kong taxing authority in connection with (i) the issuance, sale and delivery of any shares of Common Stock by the Company and the delivery of any shares of Common Stock to or for the account of the Underwriters, (ii) the purchase from the Company and the initial sale and delivery by the Underwriters of any shares of Common Stock to purchasers thereof, or (iii) the execution and delivery of this Agreement and the Representative’s Option.

 

(rr) The issuance and sale of the Shares to the Underwriters, the listing and trading of the Shares on the NASDAQ Capital Market (the “Exchange”) and the consummation of the other transactions contemplated by this Agreement, the Representation’s Option, the Registration Statement and the Prospectus are not and will not be, as of the date hereof, on each Closing Date, subject to any approval by any PRC, BVI or Hong Kong governmental or regulatory authority.

 

(ss) Any PRC governmental tax benefits, exemptions, waivers, or other relief, enjoyed by any PRC Subsidiary as described in the Registration Statement and the Prospectus are valid, binding and enforceable and in accordance with PRC law and regulations and no PRC Subsidiary has received notice of any deficiency in its applications for such tax benefits, exemptions, waivers or other relief as so described.

 

(tt) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Registration Statement and the Prospectus, will not be, an “investment company” as defined in the Investment Company Act of 1940, as amended.

 

(uu) No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.

 

(vv) The Company and each of its Subsidiaries owns or possesses or has valid right to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets, confidential information and similar rights (“Intellectual Property”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Registration Statement and the Prospectus except where such failure to own or possess such rights would not result in a Material Adverse Effect.  To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries of any Intellectual Property will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property of others, except as such infringement, license or fees would not result in a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement or fee.

 

 

 

(ww) Each of the Company and its Subsidiaries has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof.  Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective subsidiary, except for taxes being contested in good faith.  The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not dispu ted, and for all periods to and including the dates of such consolidated financial statements.  Except as disclosed in writing to the Representative or that would not, individually or in the aggregate, have a Material Adverse Effect, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries.  The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto.  The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.

 

2. Sale and Purchase of the Shares.

 

(a) The Company hereby agrees to sell the Primary Shares, to the several Underwriters as set forth in Schedule A attached hereto, and the several Underwriters, in reliance upon the representations, warranties and agreements herein contained, but subject to the conditions hereinafter stated, agree, severally and not jointly, to purchase from the Company, at the place and the time specified below, the respective aggregate numbers of Primary Shares set forth in Schedule A opposite their respective names, plus any additional Shares which such Underwriters may become obligated to purchase pursuant to the provisions of Section 2(b) hereof, at a price of $[     ] per Share (94% of the Primary Share offering price).

 

(b) In addition, on the basis of the representations and warranties herein contained, from time to time upon not less than two days’ and not more than ten days’ notice from the Representatives to the Company, or their counsel or Attorney-in-Fact, the Company agrees to sell to the Underwriters (but only for the purpose of covering over-allotments in the sale of the Primary Shares), all or any portion of the Over-Allotment Shares, as specified by the Representatives in such notice, at the purchase price stated in Section 2(a) hereof.  The Over-Allotment Shares may be purchased on the Closing Date or at any time or times thereafter so long as the notice to purchase is given not later than forty-five (45) days following the date of the Prospectus.  Upon timely delivery of the notice to the Company, the Company shall become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters shall become obligated to purchase, the number of Over-Allotment Shares specified in such notice.  Over-Allotment Shares shall be purchased by each Underwriter from the Company in the proportion that the number of Primary Shares set opposite the name of each Underwriter in Schedule A hereto bears to the total number of Primary Shares (subject to such adjustments to eliminate fractional shares as you may determine).  No Over-Allotment Shares shall be delivered to or for the accounts of the Underwriters unless the Primary Shares shall be simultaneously delivered and paid for or shall theretofore have been delivered and paid for as herein provided.

 

(c) The respective purchase obligation of each Underwriter shall be subject to such adjustments as the Representatives may make in their absolute discretion.

 

3. Terms of Offering and Authority to Use Prospectus.  The terms of the public offering by the Underwriters of the Shares to be purchased by them shall be as set forth in the Registration Statement, each preliminary prospectus and the Prospectus.  The Company has authorized the Representatives to use preliminary prospectuses and to make them available for use by prospective Underwriters and dealers and authorize the Underwriters and all dealers acquiring Shares from an Underwriter to use the Prospectus (as amended or supplemented, if the Company shall have furnished any amendments or supplements thereto) in connection with the sale of th e Shares until the earlier of the completion of the public offering or the period as, in the opinion of counsel for the Underwriters, the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer.

 

 

 

4. Payment and Delivery.

 

(a) Payment for the Primary Shares that the Underwriters agree to purchase from the Company hereunder shall be made to the Company by wire transfer of immediately available funds to the bank account designated by the Company at 10:00 a.m., Eastern Time, on [        ], 2011 (unless postponed in accordance with the provisions of Section 9 hereof), or at the time, date (not later than five full business days thereafter) and place agreed upon by the Representatives and the Company, against delivery to the Representatives for the respective accounts of the several Underwriters of the Primary Shares in the form of certificates for the securities comprising the Primary Shares thr ough the facilities of the Depository Trust Company (the “DTC”) for the account of the Underwriters.  The date and time of this payment and delivery (which may be postponed as provided in Section 9 hereof) are sometimes referred to below as the “First Closing Date.”

 

(b) Payment for the Over-Allotment Shares that the Underwriters have the right to purchase from the Company shall be made to the Company by wire transfer of immediately available funds to the bank account designated by the Company at the time or times and on the date or dates specified in the notice or notices delivered by the Representatives against delivery to the Representatives for the respective accounts of the several Underwriters of the Over-Allotment Shares in the form of certificates for the securities comprising the Over-Allotment Shares through the facilities of DTC for the account of the Underwriters.  The dates and times of these payments and deliveries are herein singularly or collectivel y sometimes referred to as “Additional Closing Date.”  The term “Closing Date” refers to both the First Closing Date and the Additional Closing Date.

 

(c) You, individually and not as Representatives of the Underwriters, may (but shall not be obligated to) make payment to the Company for Shares to be purchased by any Underwriter whose funds shall not have been received by you at the date of payment therefor for the account of that Underwriter.  Any payment by the Representatives shall not relieve that Underwriter from any of its obligations hereunder.

 

(d) The certificates for the Shares shall be registered in the name or names and shall be in the denominations you, as Representatives, designate at least one full business day prior to the First Closing Date, in the case of the Primary Shares, and at least one full business day prior to any Additional Closing Date, in the case of the Over-Allotment Shares.  The Company agrees to cause certificates for the Shares to be delivered pursuant to this Agreement through the facilities of the DTC, New York, New York, or at such other places as may be designated by you as Representatives, and to be made available for checking and packaging at the above offices or such other places as may be designated by you as the Representatives at least one full business day prior to the First Closing Date in the case of the Primary Shares, and at least one full business day prior to any Additional Closing Date, in the case of the Over-Allotment Shares.

 

5. Conditions of the Underwriters’ Obligations.  The several obligations of the Underwriters hereunder are subject to the following conditions:

 

(a) The Registration Statement shall have become effective under the Act and, at the Closing Date, no stop order suspending the effectiveness of the Registration Statement or the qualifications of the Shares shall have been issued and no proceedings for that purpose shall have been instituted before or, to the knowledge of the Company, or the Representatives, shall be contemplated by the Commission or any state securities or “Blue Sky” commissioner or authority.

 

 

 

(b) At each Closing Date, (i) the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects with the same effect as if made on and as of such Closing Date and the Company shall have performed all of the obligations and complied with all of the conditions hereunder on their part to be performed or complied with on or prior to the Closing Date; (ii) the Registration Statement, each preliminary prospectus and the Prospectus and any amendments or supplements thereto shall in all material respects conform to the requirements of the Act and the Rules and Regulations, and neither the Registration Statement, any preliminary prospectus or the Pr ospectus, or any amendment or supplement thereto, shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) there shall have been, since the respective dates as of which information is given, no material adverse change in the condition (financial or otherwise), business, results of operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Registration Statement, each preliminary prospectus and the Prospectus, except changes that the Registration Statement indicates might occur after the effective date of the Registration Statement, and neither the Company nor any of its Subsidiaries shall have incurred any material liabilities or material obligations, direct or contingent, or entered into any material transaction, contract or agreement not in the ordinary course of business other than as referred to or contemplated in the Registration Statement ; (iv) except as set forth in each preliminary prospectus and the Prospectus, no action, suit or proceeding at law or in equity shall be pending or, to the Company’ knowledge, threatened against the Company or any of its Subsidiaries that would be required to be set forth in the Registration Statement, and no proceedings shall be pending or, to the Company’ knowledge, threatened against the Company or any of its Subsidiaries before or by any commission, board or administrative agency in the United States or elsewhere, wherein an unfavorable decision, ruling or finding could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; and (v) you shall have received a certificate of the principal executive officer and the principal financial or accounting officer of the Company, dated as of such Closing Date, evidencing compliance with the provisions of this Section 5(b), and confirming the accuracy of the representations of the Company set forth in Sectio n 1 hereof and confirming that all conditions set forth herein to be met by the Company have been met as of such date.

 

(c) At each Closing Date the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date certifying: (i) that the Certificate of Incorporation are true and complete, have not been modified and are in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the public offering contemplated by this Agreement are in full force and effect and have not been modified; (iii) all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certifica te.

 

(d) No Underwriter shall have discovered and disclosed to the Company prior to any Closing Date that the Registration Statement, any preliminary prospectus or the Prospectus or any amendment or supplement thereto, contains an untrue statement of a fact that in the opinion of counsel to the Representatives is material, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading.

 

(e) On each Closing Date, you shall have received the signed opinion, dated as of such date, of Anslow & Jaclin, LLP, counsel to the Company, in the form attached hereto as ANNEX B, and the signed confirmation letter, dated as of such date, of DLA Piper LLP (US), counsel to the Company, in the form attached hereto as ANNEX C, each addressed to the Representatives and reasonably satisfactory to the Representatives, together with signed or photostatic copies thereof for each of the other Underwriters.

 

(f) On each Closing Date, you shall have received the favorable opinion of Jintian and Gongcheng, PRC counsel to the Company, in the form attached hereto as ANNEX D addressed to the Representatives and reasonably satisfactory to the Representatives, together with signed or photostatic copies thereof for each of the other Underwriters.

 

(g)  On each Closing Date, you shall have received the favorable opinion of [        ], Hong Kong counsel to the Company, in the form attached hereto as ANNEX E addressed to the Representatives and reasonably satisfactory to the Representatives, together with signed or photostatic copies thereof for each of the other Underwriters.

 

 

 

(h) On each Closing Date, you shall have received the favorable opinion of [        ], BVI counsel to the Company, in the form attached hereto as ANNEX F addressed to the Representatives and reasonably satisfactory to the Representatives, together with signed or photostatic copies thereof for each of the other Underwriters.

 

(i) At the time of the signing of this Agreement and on each Closing Date, you shall have received a signed comfort letters, dated, respectively, as of each such date, from Schwartz Levitsky Feldman LLP, addressed to the Underwriters (with executed copies for each of the Underwriters) in the forms heretofore approved by counsel for the Underwriters.

 

(j) As of the effective date of the Registration Statement, the Common Stock shall be listed on the Exchange, subject to official notice of issuance.

 

(k) FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements for this offering.

 

(l) At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of ANNEX A hereto signed by the persons listed on Schedule C hereto, and such agreements shall be in full force and effect on the Closing Date.

 

(m) All proceedings taken at or prior to each Closing Date in connection with the sale of the Shares shall be reasonably satisfactory in form and substance to you and counsel to the several Underwriters, and at the time of signing this Agreement and on the Closing Date, you and such counsel shall have received each and every additional document, letter, opinion, certificate or other item dated and executed in a manner reasonably satisfactory to you and such counsel, as you or such counsel may reasonably request in connection with each preliminary prospectus, the Prospectus, the Registration Statement, the offer and sale of the Shares hereunder, or proceedings at the Closing Date.

 

If any of the conditions herein provided for in this Section shall not have been fulfilled as of the date indicated, all obligations of the several Underwriters under this Agreement may be cancelled by the Representatives by notifying the Company of such cancellation on or prior to the applicable Closing Date.  The Representatives may in their sole discretion waive, on behalf of the Underwriters, compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of the First Closing Date, an Additional Closing Date or otherwise.

 

6. Covenants of the Company.

 

6.1           The Company covenants and agrees as follows:

 

(a) To use all reasonable efforts to bring about the effectiveness of the Registration Statement and not, at any time, whether before or after the effective date, to file any amendment to the Registration Statement or Prospectus or supplement thereto of which you shall not previously have been advised and furnished with a copy or to which you or your counsel shall have objected or which is not in compliance in all material respects with the Act and the Rules and Regulations, and as soon as the Company is advised thereof, to advise the Representatives and confirm this advice in writing (i) when the Registration Statement has become effective and (ii) of the issuance by the Commission or any state securi ties or “Blue Sky” commissioner or authority of any order suspending the effectiveness of the Registration Statement or any qualification of the Shares or prohibiting the sale of the Shares or the initiation or threatening of any proceedings for any such purpose.

 

(b) To use best efforts to cause the Registration Statement to remain effective with a current prospectus for a period of at least nine months from the effective date, and to notify the Representatives immediately in writing if the Registration Statement ceases to be effective, or the prospectus is no longer current within such time period.

 

 

 

(c) To deliver, on or before the effective date of the Registration Statement and from time to time thereafter until the earlier of the completion of the public offering or the period as, in the opinion of counsel for the Underwriters, the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, without charge, to the Representatives and to send to the several Underwriters, at such office or offices as the Representatives may designate, as many copies of the preliminary prospectus and Prospectus as the Representatives may reasonably request.  The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be substantially identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

(d) To furnish the Representatives, without charge, one executed copy of the Registration Statement (including exhibits) and of any amendments thereto and to furnish the Representatives, without charge, a reasonable number of conformed copies of the Registration Statement (excluding exhibits) and of any amendments thereto.

 

(e) To furnish the Representatives with a copy of each proposed amendment or supplement before amending or supplementing the Registration Statement or the Prospectus.

 

(f) Until the earlier of the completion of the public offering or the period as, in the opinion of counsel for the Underwriters, the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, if any event shall occur as a result of which it shall be necessary to amend or supplement the Prospectus in order to comply with applicable law or to make the statements therein, in light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, forthwith to notify the Representative and prepare and file with the Commission an appropriate amendment or supplement in accordance with Section 10 of the Act, and furnish, at its own expense, to the Underwriters and to dealers (whose names and addresses the Representatives will furnish to the Company) to whom Shares may have been sold by the Representatives and to any other dealers upon request, either amendments or supplements to the Prospectus to effect such compliance or so that the statements in the Prospectus, as so amended or supplemented, will not, in light of the circumstances when the Prospectus is delivered to a purchaser, be misleading. Neither the Representatives’ consent to, nor the Underwriters’ delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 5.

 

(g) To make generally available to the Company’s security holders, as soon as practicable, but not later than fifteen months after the end of the Company’s current fiscal quarter, an earnings statement (which need not be audited) covering a period of twelve months beginning after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of the last paragraph of Section 11(a) of the Act and Rule 158.

 

(h) For a period of three years following the date of this Agreement, to supply to the Representatives, and to each other Underwriter who may so request in writing, copies of such financial statements and other periodic and special reports as the Company may from time to time furnish generally to holders of any class of its securities, and to furnish the Representatives a copy of each annual report on Form 10-K which it files with the Commission.

 

(i) To cooperate with the Representatives in an endeavor to qualify the Shares for offer and sale under the “blue sky” laws of such jurisdictions (domestic or foreign) as the Representatives may request, and to pay, or reimburse if paid by the Representatives, reasonable fees and disbursements of counsel for the Underwriters and all other expenses and filing fees in connection therewith; provided, however, that the Company shall not be required to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any juris diction in which it is not so qualified or to subject itself to taxation as doing business in any jurisdiction.

 

 

 

(j) To apply the net proceeds from the sale of the Shares in accordance with the statement made under “Use of Proceeds” in the Prospectus.

 

(k) To supply the Representatives with copies of all correspondence to and from and all documents issued to and by the Commission in connection with the registration of the Shares under the Act.

 

(l) Federal Securities Laws.

 

(i) During the time when a Prospectus is required to be delivered under the Act, the Company will use its best efforts to comply with all requirements imposed upon it by the Act, the Rules and Regulations and the Exchange Act and by the regulations under the Exchange Act, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Shares in accordance with the provisions hereof and the Prospectus.

 

(ii) The Company will file the Prospectus (in form and substance satisfactory to the Representative) with the Commission pursuant to the requirements of Rule 424 of the Rules and Regulations.

 

(iii) For a period of three years from the effective date of the Registration Statement, the Company will use its best efforts to maintain the registration of the Common Stock, including the Shares under the provisions of the Exchange Act. The Company will not deregister the Common Stock under the Exchange Act for a period of twenty-four (24) months from the Closing Date without the prior written consent of the Representative.

 

(iv) The Company represents and agrees that it will not make, or authorize the Underwriters or any other party to make, any offer relating to the Shares that would constitute a “free writing prospectus” as defined in Rule 405 of the 1933 Act, or pursuant to Rule 433 of the 1933 Act.

 

(m) For a period of three (3) years from the effective date of the Registration Statement, the Company, at its expense, shall cause its regularly engaged independent certified public accountants to review (but not audit) the Company’s financial statements for each of the first three fiscal quarters prior to the announcement of quarterly financial information.

 

(n) As of the effective date of the Registration Statement, the Company shall have retained a financial investor relations advisory firm reasonably acceptable to the Representative and the Company, which firm will be experienced in assisting issuers in public offerings of securities and in their relations with their security holders, and continuing to retain such firm or another firm reasonably acceptable to the Representative for a period of no less than one (1) year after the effective date of the Registration Statement.

 

(o) As promptly as practicable following the execution of this Agreement, the Company shall take all necessary steps to ensure compliance by Shu Mei Yu, Ltd., its affiliates and each of the Insiders that is, or is directly or indirectly owned or controlled by, a PRC resident or citizen with any applicable rules and regulations of the relevant PRC government agencies in connection with the securities of the Company and each of its Subsidiaries.

 

(p) As promptly as practicable following the execution of this Agreement, the Company shall  secure and put into effect Directors’ and Officers’ and Errors’ & Omissions insurance with liability levels reasonably acceptable to the Representatives and use its reasonable best efforts to ensure that such policies have effect no later than the Effective Date, if permitted by the insurer.  The Company shall use its reasonable best efforts to have the Representatives named as additional insureds on the Company’s Directors’ and Officers’ liability insurance but such additional insured coverage shall only be for liability of the Representatives based on the Wron gful Act(s) of the Company, its directors and/or officers within the scope of the policy terms. Any such additional insured coverage that it obtains shall be for a period commencing no later than the  date on which such policy commences with respect to the other insureds under such policy through the fourth anniversary of the commencement date of such policy.

 

 

 

6.2           Payment of Expenses.  The Company will pay, or reimburse if paid by the Representatives, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, all costs and expenses incident to the entry into and performance under this Agreement by the Company, and without limiting the generality of the foregoing, all costs and expenses incident to (i) the issuance, purchase, sale and delivery of the Shares to the Underwriters, (ii) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Agreement, any Blue Sky surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agree ment, Registration Statements, Underwriters’ Questionnaire and Power of Attorney, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as Representative may reasonably deem necessary; (iii) the costs of preparing, printing and delivering certificates representing the Shares; (iv) all COBRADesk filing fees associated with the review of the Offering by FINRA, including the reasonable fees, disbursements and expenses of counsel to the Underwriters in connection with the review of the Offering by FINRA (v) all fees and expenses relating to the listing of such Common Stock on the Exchange and on such other stock exchanges as the Company and Representative together determine; (vi) the fees and expenses of the Company’s legal counsel, accountants and other agents and representatives; (vii) the costs associated with bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones, each of which the Company o r its designee will provide within a reasonable time after the Closing in such quantities as the Representative may reasonably request; (viii) all fees, expenses and disbursements relating to background checks for the officers and directors of the Company up to a maximum amount of $1,000 per individual; (ix) all fees, expenses and disbursements relating to the registration or qualification of such Common Stock under the “blue sky” securities laws of such states and other jurisdictions as Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of Representative’s counsel, it being agreed that such fees and expenses will be limited to: (a) if the offering is commenced on either the Nasdaq Global Market, Nasdaq Global Select Market or the NYSE Alternext, the Company will make a payment by the Company of $5,000 to such counsel at Closing or (b) if the offering is commenced on the Nasdaq Capital Market or on the Over the Counter Bulletin Board, the Company will make a payment of $15,000 to such counsel upon the commencement of “blue sky” work by such counsel and an additional $5,000 at Closing); (x) the fees and expenses of the transfer agent for the Common Stock, (xi) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters, (xii) the Underwriter’s actual “road-show” expenses in an amount not to exceed $10,000, (xiii) the costs and expenses of the investor relations advisory firm referred to in Section 6.1(p) hereof, (xiv) the furnishing to the Representatives and, to the extent requested, the other Underwriters of copies of the Registration Statement, the Prospectus, this Agreement, the Blue Sky survey (preliminary and final), and of the documents required by paragraphs (b), (c), (d) and (e) of Section 6.1, to be so furnished, including costs of preparing, printing and shipment, (xv) the preparation, prin ting, mailing, delivery, filing and distribution by the Company of all supplements and amendments to the Prospectus required by paragraph (e) of Section 6.1, (xvi) the furnishing to the Representatives and the other Underwriters of all reports and financial statements required by paragraphs (f) and (g) of Section 6.1, (xvii) all advertising costs and expenses related to the offer and sale of the Shares, including publishing a “tombstone” advertisement in the national edition of the Wall Street Journal and the New York Times, (xiii) $16,000 for the Representative’s use of i-Deal’s book-building, prospectus tracking and compliance software for the sale of the Shares and (xix) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Shares under the securities laws of such foreign jurisdictions as the Representative may reasonably designate.  The Company shall at the First Closing Date pay to the Representatives (i) a non-account able expense allowance equal to 2.0% of the gross proceeds from the sale of the Primary Shares and, (ii) to the extent not previously received, a $50,000 advance.  If the sale of the Shares to the several Underwriters pursuant to this Agreement is not consummated for any reason, other than as specified in Section 9, the Company will reimburse the several Underwriters for all of their out-of-pocket expenses (including reasonable fees and expenses of counsel) incurred by the Underwriters in connection with this Agreement or in investigating, preparing to market or marketing the Shares.

 

 

 

6.3           The Company covenants and agrees that except as expressly contemplated hereby, it will not, directly or indirectly, (a) offer, pledge, sell, offer to sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any of the shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock, (b) purchase or offer to purchase any shares of its capital stock or (c) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the shares of Common Stock or such other securities convertible into, or exercisable or exchangeab le for, shares of Common Stock (whether any such transaction described in clause (a) or (b) above is to be settled by delivery of the shares of Common Stock or such other securities, in cash or otherwise), other than repurchases at cost or without cost pursuant to the terms of the Company’s option and restricted stock purchase agreements, in each case, beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) or otherwise controlled by the Company on the date hereof or hereafter acquired or otherwise controlled, for a period beginning from the date hereof and continuing to and including the date six months after the date of the Prospectus, without the prior written consent of the Representatives.

 

6.4           Stabilization.  Neither the Company, nor, to its knowledge, any of its employees, directors or shareholders has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.

 

6.5           Internal Controls.  The Company will maintain a system of internal accounting controls designed to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.