UNDERWRITING AGREEMENT
BETWEEN
CHINA OPPORTUNITY ACQUISITION CORP.
AND
EARLYBIRDCAPITAL, INC.
DATED: ___________, 2006
CHINA OPPORTUNITY ACQUISITION CORP.
UNDERWRITING AGREEMENT
New York, New York
________, 0000
XxxxxXxxxXxxxxxx, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, China Opportunity Acquisition Corp., a Delaware
corporation ("Company"), hereby confirms its agreement with EarlyBirdCapital,
Inc. (being referred to herein variously as "you," "EBC" or the
"Representative") and with the other underwriters named on Schedule I hereto for
which EBC is acting as Representative (the Representative and the other
Underwriters being collectively called the "Underwriters" or, individually, an
"Underwriter") as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Units. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to issue and sell, severally and not jointly, to
the several Underwriters, an aggregate of 6,000,000 units ("Firm Units") of the
Company at a purchase price (net of discounts and commissions) of $5.67 per Firm
Unit (including discounts and commissions of $0.06 that will not be paid to the
Underwriters unless and until a Business Combination (as defined below) has been
consummated by the Company). The Underwriters, severally and not jointly, agree
that they will not seek payment of the discounts and commissions of $0.06
referred to in the preceding sentence unless and until a Business Combination
has been consummated by the Company, and the Company agrees that it shall pay
such discounts and commissions only upon consummation of such Business
Combination. The Underwriters, severally and not jointly, agree to purchase from
the Company the number of Firm Units set forth opposite their respective names
on Schedule I attached hereto and made a part hereof at a purchase price (net of
discounts and commissions) of $5.67 per Firm Unit. The Firm Units are to be
offered initially to the public ("Offering") at the offering price of $6.00 per
Firm Unit. Each Firm Unit consists of one share of the Company's common stock,
par value $.0001 per share ("Common Stock"), and two warrants ("Warrant(s)").
The shares of Common Stock and the Warrants included in the Firm Units will not
be separately transferable until 90 days after the effective date ("Effective
Date") of the Registration Statement (as defined in Section 2.1.1 hereof) unless
EBC informs the Company of its decision to allow earlier separate trading, but
in no event will EBC allow separate trading until the preparation of an audited
balance sheet of the Company reflecting receipt by the Company of the proceeds
of the Offering and the filing of a Form 8-K by the Company which includes such
balance sheet. Each Warrant entitles its holder to exercise it to purchase one
share of Common Stock for $5.00 during the period commencing on the later of the
consummation by the Company of its "Business Combination" or one year from the
Effective Date and terminating on the four-year anniversary of the Effective
Date. "Business Combination" shall mean the acquisition, through a stock
exchange, asset acquisition or other similar business combination, of an
operating business, or control of such
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operating business, through contractual arrangements, that has its principal
operations located in the People's Republic of China (as described more fully in
the Registration Statement).
1.1.2 Payment and Delivery. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on the third business day
following commencement of trading of the Firm Units or at such earlier time as
shall be agreed upon by the Representative and the Company at the offices of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and payment for
the Firm Units are called "Closing Date." Payment for the Firm Units shall be
made on the Closing Date at the Representative's election by wire transfer in
Federal (same day) funds or by certified or bank cashier's check(s) in New York
Clearing House funds, payable as follows: $33,200,000 of the proceeds received
by the Company for the Firm Units shall be deposited in the trust fund
established by the Company for the benefit of the public stockholders as
described in the Registration Statement ("Trust Fund") pursuant to the terms of
an Investment Management Trust Agreement ("Trust Agreement") and the remaining
proceeds shall be paid (subject to Section 3.13 hereof) to the order of the
Company upon delivery to you of certificates (in form and substance satisfactory
to the Underwriters) representing the Firm Units (or through the facilities of
the Depository Trust Company ("DTC")) for the account of the Underwriters. The
Firm Units shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two full
business days prior to the Closing Date. The Company will permit the
Representative to examine and package the Firm Units for delivery, at least one
full business day prior to the Closing Date. The Company shall not be obligated
to sell or deliver the Firm Units except upon tender of payment by the
Representative for all the Firm Units.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 900,000 units from the Company ("Over-allotment
Option"). Such additional 900,000 units are hereinafter referred to as "Option
Units." The Firm Units and the Option Units are hereinafter collectively
referred to as the "Units," and the Units, the shares of Common Stock and the
Warrants included in the Units and the shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to collectively as the "Public
Securities." The purchase price to be paid for the Option Units will be the same
price per Option Unit as the price per Firm Unit set forth in Section 1.1.1
hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative as to
all (at any time) or any part (from time to time) of the Option Units within 45
days after the Effective Date. The Underwriters will not be under any obligation
to purchase any Option Units prior to the exercise of the Over-allotment Option.
The Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company by the Representative, which must be confirmed in writing
by overnight mail or facsimile transmission setting forth the number of Option
Units to be purchased and the date and time for delivery of and payment for the
Option Units (the "Option Closing Date"), which will not be later than five full
business days after the date of the notice or such other time as shall be agreed
upon by the Company and the Representative, at the offices of the Representative
or at such other place as shall be agreed upon by the Company and the
Representative. Upon exercise of the Over-allotment Option, the Company will
become obligated to convey to the Underwriters, and, subject to the terms and
conditions set forth herein, the Underwriters will become obligated to purchase,
the number of Option Units specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option Units shall be
made on the Option Closing Date at the Representative's election by wire
transfer in Federal (same day) funds or by certified or bank cashier's check(s)
in New York Clearing House funds, payable as follows: approximately $5.93 per
Option Unit shall be deposited in the Trust Fund (including discounts and
commissions of $0.06 that will be paid to the Underwriters only upon
consummation of a Business Combination by the Company) pursuant to the
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Trust Agreement upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Option Units (or through the
facilities of DTC) for the account of the Underwriters. The certificates
representing the Option Units to be delivered will be in such denominations and
registered in such names as the Representative requests not less than two full
business days prior to the Closing Date or the Option Closing Date, as the case
may be, and will be made available to the Representative for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one full business day prior to such Closing Date.
1.3 Representative's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and sell
to the Representative (and/or its designees) on the Effective Date an option
("Representative's Purchase Option") for the purchase of an aggregate of ____
units ("Representative's Units") for an aggregate purchase price of $100. Each
of the Representative's Units is identical to the Firm Units. The
Representative's Purchase Option shall be exercisable, in whole or in part,
commencing on the later of the consummation of a Business Combination and one
year from the Effective Date and expiring on the five-year anniversary of the
Effective Date at an initial exercise price per Representative's Unit of $___
(___% of the initial public offering price of a Unit). The Representative's
Purchase Option, the Representative's Units, the Warrants included in the
Representative's Units ("Representative's Warrants") and the shares of Common
Stock issuable upon exercise of the Representative's Warrants are hereinafter
referred to collectively as the "Representative's Securities." The Public
Securities and the Representative's Securities are hereinafter referred to
collectively as the "Securities." The Representative understands and agrees that
there are significant restrictions against transferring the Representative's
Purchase Option during the first year after the Effective Date, as set forth in
Section 3 of the Representative's Purchase Option.
1.3.2 Payment and Delivery. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Representative, upon payment therefor, certificates for the
Representative's Purchase Option in the name or names and in such authorized
denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form S-1 (File No. 333-________),
including any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations ("Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Regulations), is hereinafter called the
"Registration Statement," and the form of the final prospectus dated the
Effective Date included in the Registration Statement (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration Statement
has been declared effective by the Commission on the date hereof.
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2.1.2 Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A (File Number 000-_______) providing for the registration
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 Disclosures in Registration Statement.
2.3.1 10b-5 Representation. At the time the Registration Statement
became effective and at all times subsequent thereto up to the Closing Date and
the Option Closing Date, if any, the Registration Statement and the Prospectus
does and will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, does or will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
for the registration of the Securities or any amendment thereto or pursuant to
Rule 424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an 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, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this Section
2.3.1 does not apply to statements made or statements omitted in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
2.3.2 Disclosure of Agreements. The agreements and documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus 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 its property or business 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 and validly executed by the Company, is in full force and effect
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 therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without
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limitation, those relating to environmental laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company since the Company's formation, except as disclosed in the Registration
Statement.
2.3.4 Regulations. The disclosures in the Registration Statement
concerning the effects of Federal, State and local regulation on the Company's
business as currently contemplated are correct in all material respects and do
not omit to state a material fact.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. 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 prospects
of the Company, (ii) there have been no material transactions entered into by
the Company, other than as contemplated pursuant to this Agreement, and (iii) no
member of the Company's management has resigned from any position with the
Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its equity securities.
2.5 Independent Accountants. WithumSmith+Xxxxx P.C. ("WSB"), whose
report is filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations. WSB has not,
during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Exchange Act.
2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus fairly present the financial position, the results of operations and
the cash flows of the Company at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The
summary financial data included in the Registration Statement and the Prospectus
present fairly the information shown thereon and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement or the Prospectus. The Registration Statement discloses
all material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company with
unconsolidated entities or other persons that may have a material current or
future effect on the Company's financial condition, changes in financial
condition, results of operations, liquidity, capital expenditures, capital
resources, or significant components of revenues or expenses.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
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Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The authorized Common Stock conforms
to all statements relating thereto contained in the Registration Statement and
the Prospectus. The offers and sales of the outstanding Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or, based in part on the representations and
warranties of the purchasers of such shares of Common Stock, exempt from such
registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. The Securities
conform in all material respects to all statements with respect thereto
contained in the Registration Statement. When issued, the Representative's
Purchase Option, the Representative's Warrants and the Warrants will constitute
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment of the respective exercise prices therefor, the number and
type of securities of the Company called for thereby in accordance with the
terms thereof and such Representative's Purchase Option, the Representative's
Warrants and the Warrants are enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.8.3 Insider Securities. Xxxxx Xxxxxxx, Xxxxxxxx Xxxx, Xxxxx X.
Xxxxxxx, Xxxx-Xxxxx Xxx, Xxxx Xx, Xxxxxx Xxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx (the
"Insider Purchasers") have committed to purchase an aggregate of 2,266,667
Warrants ("Insider Warrants" and together with the shares of Common Stock
underlying the Insider Warrants, collectively referred to as the "Insider
Securities") at $0.60 per Warrant (for an aggregate purchase price of
$1,360,000.20) from the Company upon consummation of the Offering. The Insider
Securities have been duly authorized and, when issued and paid for in accordance
with the subscription agreements ("Subscription Agreements") entered into by the
Insider Purchasers to purchase such Insider Securities, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Insider
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Insider Securities has been duly and
validly taken.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
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2.10 Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.21 hereof), the Trust Agreement, the
Services Agreement (as defined in Section 3.7.2 hereof), the Subscription
Agreements and the Escrow Agreement (as defined in Section 2.22.2 hereof) have
been duly and validly authorized by the Company and constitute, and the
Representative's Purchase Option, has been duly and validly authorized by the
Company and, when executed and delivered, will constitute, the valid and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement, the Representative's Purchase
Option, the Trust Agreement, the Services Agreement, the Subscription Agreement
and the Escrow Agreement, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not, with or without the giving of notice or
the lapse of time or both (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of
any agreement or instrument to which the Company is a party except pursuant to
the Trust Agreement referred to in Section 2.24 hereof; (ii) result in any
violation of the provisions of the Certificate of Incorporation or the Bylaws of
the Company; or (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
business.
2.12 No Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or Bylaws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
businesses.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies that it needs as of the date hereof to conduct its business
purpose as described in the Prospectus. The disclosures in the Registration
Statement concerning the effects of federal, state and local regulation on this
offering and the Company's business purpose as currently contemplated are
correct in all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement, the Warrant
Agreement, the Subscription Agreements, the Services Agreement, the
Representative's Purchase Option, the Trust Agreement and the Escrow Agreement
and to carry out the provisions and conditions hereof and thereof, and all
consents, authorizations, approvals, licenses, certifications, permits and
orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the
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valid issuance, sale and delivery, of the Securities and the consummation of the
transactions and agreements contemplated by this Agreement, the Warrant
Agreement, the Representative's Purchase Option, the Trust Agreement and the
Escrow Agreement and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws.
2.14 D&O Questionnaires. To the best of the Company's knowledge, all
information contained in the questionnaires ("Questionnaires") completed by each
of the Company's stockholders immediately prior to the Offering (the "Initial
Stockholders") and provided to the Underwriters as an exhibit to his, her or its
Insider Letter (as defined in Section 2.22.1) is true and correct and the
Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by each Initial
Stockholder to become inaccurate and incorrect.
2.15 Litigation; Governmental Proceedings. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the best of the Company's knowledge, threatened
against, or involving the Company or, to the best of the Company's knowledge,
any Initial Stockholder, which has not been disclosed in the Registration
Statement or the Questionnaires.
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the assets,
business or operations of the Company.
2.17 Stop Orders. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or any part
thereof and has not threatened to issue any such order.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Finder's Fees. Except as described in 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 any
Initial Stockholder with respect to the sale of the Securities hereunder or any
other arrangements, agreements or understandings of the Company or, to the best
of the Company's knowledge, any Initial Stockholder that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
2.18.2 Payments Within Twelve Months. Other than payments to EBC,
the Company has not within the twelve months prior to the Effective Date made
any direct or indirect payments (in cash, securities or otherwise) (i) to 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 NASD member or (iii) to
any person or entity that has any direct or indirect affiliation or association
with any NASD member.
2.18.3 Use of Proceeds. None of the net proceeds of the Offering
will be paid by the Company to any participating NASD member or its affiliates,
except as specifically authorized herein and except as may be paid in connection
with a Business Combination as contemplated by the Prospectus.
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2.18.4 Insiders' NASD Affiliation. Based on questionnaires
distributed to such persons, except as set forth on Schedule 2.18.4, no officer,
director or any beneficial owner of the Company's unregistered securities has
any direct or indirect affiliation or association with any NASD member. The
Company will advise the Representative and its counsel if it learns that any
officer, director or owner of at least 5% of the Company's outstanding Common
Stock is or becomes an affiliate or associated person of an NASD member
participating in the offering.
2.19 Foreign Corrupt Practices Act. Neither the Company nor any of the
Initial Stockholders or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) that (i) might subject the Company to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a material adverse effect on the
assets, business or operations of the Company as reflected in any of the
financial statements contained in the Prospectus or (iii) if not continued in
the future, might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
2.20. Officers' Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to your counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
2.21 Warrant Agreement. The Company has entered into a warrant agreement
with respect to the Warrants, the Insider Warrants and the Representative's
Warrants with Continental Stock Transfer & Trust Company substantially in the
form annexed as Exhibit 4.5 to the Registration Statement ("Warrant Agreement").
2.22 Agreements With Initial Stockholders.
2.22.1 Insider Letters. The Company has caused to be duly executed
legally binding and enforceable agreements (except (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or noncompete provision may be limited under the
federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought) annexed as Exhibits 10.1 through 10.7 to the
Registration Statement ("Insider Letters"), pursuant to which each of the
Initial Stockholders of the Company agrees to certain matters, including but not
limited to, certain matters described as being agreed to by them under the
"Proposed Business" section of the Prospectus.
2.22.2 Escrow Agreement. The Company has caused the Initial
Stockholders to enter into an escrow agreement ("Escrow Agreement") with
Continental Stock Transfer & Trust Company ("Escrow Agent") substantially in the
form annexed as Exhibit 10.9 to the Registration Statement, whereby the Common
Stock owned by the Initial Stockholders will be held in escrow by the Escrow
Agent, until one year after the consummation of a Business Combination. During
such escrow period, the Initial Stockholders shall be prohibited from selling or
otherwise transferring such shares (except to spouses and children of Initial
Stockholders and trusts established for their benefit and as otherwise set forth
in the Escrow Agreement) but will retain the right to vote such shares. To the
Company's knowledge, the Escrow Agreement is enforceable against each of the
Initial Stockholders and will not, with or without the giving of notice or the
lapse of time or
9
both, result in a breach of, or conflict with any of the terms and provisions
of, or constitute a default under, any agreement or instrument to which any of
the Initial Stockholders is a party. The Escrow Agreement shall not be amended,
modified or otherwise changed without the prior written consent of EBC.
2.22.3 Subscription Agreements. The Company has entered into the
Subscription Agreements substantially in the form annexed as Exhibit 10.13 to
the Registration Statement with the Insider Purchasers to purchase the Insider
Securities. Pursuant to the Subscription Agreement, the Insider Purchasers have
placed the purchase price for the Insider Securities in escrow prior to the date
hereof. Simultaneously with the consummation of the Offering, such purchase
price shall be deposited into the Trust Fund pursuant to the Trust Agreement.
2.23 Intentionally Omitted.
2.24 Investment Management Trust Agreement. The Company has entered into
the Trust Agreement with respect to certain proceeds of the Offering
substantially in the form annexed as Exhibit 10.8 to the Registration Statement.
2.25 Covenants Not to Compete. No Initial Stockholder, employee, officer
or director of the Company is subject to any noncompetition agreement or
non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be an Initial Stockholder, employee, officer
and/or director of the Company.
2.26 Investment Company Act; Investments. The Company has been advised
concerning the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and the rules and regulations thereunder and has in the past
conducted, and intends in the future to conduct, its affairs in such a manner as
to ensure that it will not become an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act and such rules and regulations. The Company is not, nor will the
Company become upon the sale of the Units and the application of the proceeds
therefore as described in the Prospectus under the caption "Use of Proceeds", an
"investment company" or a person controlled by an "investment company" within
the meaning of the Investment Company Act. No more than 45% of the "value" (as
defined in Section 2(a)(41) of the Investment Company Act) of the Company's
total assets (exclusive of cash items and "Government Securities" (as defined in
Section 2(a)(16) of the Investment Company Act) consist of, and no more than 45%
of the Company's net income after taxes is derived from, securities other than
the Government Securities.
2.27 Subsidiaries. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.28 Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any other person required to
be described in the Prospectus that have not been described as required. There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees of indebtedness by the Company
to or for the benefit of any of the officers or directors or Initial
Stockholders of the Company or any of the members of the families of any of
them, except as disclosed in the Registration Statement and the Prospectus.
2.29 No Distribution of Offering Material. The Company has not
distributed and will not distribute prior to the Closing Date any offering
material in connection with the offering and sale of the Units other than any
Preliminary Prospectuses, the Prospectus, the Registration Statement and other
materials, if any, permitted by the Act.
2.30 Title to Assets. Except as set forth in the Registration Statement
and Prospectus, the Company has good and marketable title to all properties and
assets described in the Registration Statement and
10
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrances, claim or equitable interest, other than such as would
not have a material adverse effect on the financial condition, earnings,
operations, business or business prospects of the Company.
2.31 Taxes. The Company has timely filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown thereon as
due, and there is no tax deficiency that has been or, to the best of the
Company's knowledge, might be asserted against the Company that might have a
material adverse effect on the financial condition, earnings, operations,
business or business prospects of the Company, and all material tax liabilities
are adequately provided for on the books of the Company.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1 Compliance. 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 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 Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. 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 Regulations.
3.2.3 Exchange Act Registration. The Company will use its best
efforts to maintain the registration of the Units, Common Stock and Warrants
under the provisions of the Exchange Act for a period of five years from the
Effective Date, or until the Company is required to be liquidated, if earlier
or, in the case of the Warrants, until the Warrants expire and are no longer
exercisable. The Company will not deregister the Units under the Exchange Act
without the prior written consent of EBC.
3.2.4 Ineligible Issuer. At the time of filing the Registration
Statement and at the date hereof, the Company was and is an "ineligible issuer,"
as defined in Rule 405 under the Securities Act. The Company has not made and
will not make any offer relating to the Public Securities that would constitute
an "issuer free writing prospectus," as defined in Rule 433, or that would
otherwise constitute a "free writing prospectus," as defined in Rule 405.
3.3 Blue Sky Filings. The Company will use its best efforts, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result
11
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use its best efforts to file and make such statements or reports
at such times as are or may be required by the laws of such jurisdiction.
3.4 Delivery to Underwriters of Prospectuses. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 Effectiveness and Events Requiring Notice to the Representative. The
Company will use its best efforts to cause the Registration Statement to remain
effective and will notify the Representative immediately and confirm the notice
in writing (i) of the effectiveness of the Registration Statement and any
amendment thereto, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding for that purpose, (iii)
of the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v) of
the receipt of any comments or request for any additional information from the
Commission, and (vi) of the happening of any event during the period described
in Section 3.4 hereof that, in the judgment of the Company, makes any statement
of a material fact made in the Registration Statement or the Prospectus untrue
or that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will use commercially reasonable effort
to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. Until the earlier of five years from
the Effective Date, or until such earlier time upon which the Company is
required to be liquidated, 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, the
filing of the Company's Form 10-Q quarterly report and the mailing of quarterly
financial information to stockholders.
3.7 Affiliated Transactions.
3.7.1 Business Combinations. The Company will not consummate a
Business Combination with any entity which is affiliated with any Initial
Stockholder unless the Company obtains an opinion from an independent investment
banking firm that the Business Combination is fair to the Company's stockholders
from a financial perspective.
3.7.2 Administrative Services. The Company has entered into an
agreement ("Services Agreement") with Xxxxxxx Technology Inc. ("Affiliate")
substantially in the form annexed as Exhibit 10.__ to the Registration Statement
pursuant to which the Affiliate will make available to the Company general and
administrative services including office space, utilities and secretarial
support for the Company's use for $7,500 per month.
3.7.3 Compensation. Except as set forth above in this Section 3.7,
the Company shall not pay any Initial Stockholder or any of their affiliates any
fees or compensation from the Company, for services
12
rendered to the Company prior to, or in connection with, the consummation of a
Business Combination; provided that the Initial Stockholders shall be entitled
to reimbursement from the Company for their reasonable out-of-pocket expenses
incurred in connection with seeking and consummating a Business Combination.
3.8 Secondary Market Trading and Standard & Poor's. The Company will
apply to be included in Standard & Poor's Daily News and Corporation Records
Corporate Descriptions for a period of five years from the consummation of a
Business Combination. Promptly after the consummation of the Offering, the
Company shall take such steps as may be necessary to obtain a secondary market
trading exemption for the Company's securities in the State of California. The
Company shall also take such other action as may be reasonably requested by the
Representative to obtain a secondary market trading exemption in such other
states as may be requested by the Representative.
3.9 Intentionally Omitted.
3.10 Financial Public Relations Firm. Promptly after the execution of a
definitive agreement for a Business Combination, the Company shall retain a
financial public relations firm.
3.11 Reports to the Representative.
3.11.1 Periodic Reports, Etc. For a period of five years from the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company will furnish to the Representative (Attn: Xxxxxx
Xxxxxx, President and Managing Director of Investment Banking) and its counsel
copies of such financial statements and other periodic and special reports as
the Company from time to time furnishes generally to holders of any class of its
securities, and promptly furnish to the Representative (i) a copy of each
periodic report the Company shall be required to file with the Commission, (ii)
a copy of every press release and every news item and article with respect to
the Company or its affairs which was released by the Company, (iii) a copy of
each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company, (iv) five copies of each registration statement filed by the Company
with the Commission under the Securities Act, (v) a copy of monthly statements,
if any, setting forth such information regarding the Company's results of
operations and financial position (including balance sheet, profit and loss
statements and data regarding outstanding purchase orders) as is regularly
prepared by management of the Company and (vi) such additional documents and
information with respect to the Company and the affairs of any future
subsidiaries of the Company as the Representative may from time to time
reasonably request.
3.11.2 Intentionally Omitted.
3.11.3 Secondary Market Trading Survey. Until such time as the
Public Securities are listed or quoted, as the case may be, on the New York
Stock Exchange, the American Stock Exchange or quoted on the Nasdaq National
Market, or until such earlier time upon which the Company is required to be
liquidated, the Company shall engage Xxxxxxxx Xxxxxx ("GM"), for a one-time fee
of $5,000 payable on the Closing Date , to deliver and update to the
Represenative on a timely basis, but in any event on the Effective Date and at
the beginning of each fiscal quarter, a written report detailing those states in
which the Public Securities may be traded in non-issuer transactions under the
Blue Sky laws of the fifty States ("Secondary Market Trading Survey").
3.11.4 Intentionally Omitted.
3.12 Disqualification of Form S-1. Until the earlier of seven years from
the date hereof or until the Warrants have expired and are no longer
exercisable, the Company will not take any action or actions which may prevent
or disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration of the Warrants and the Representative's Warrants under the Act.
13
3.13 Payment of Expenses.
3.13.1 General Expenses Related to the Offering. The Company hereby
agrees to pay on each of the Closing Date and the Option Closing Date, if any,
to the extent not paid at Closing Date, all expenses incident to the performance
of the obligations of the Company under this Agreement, including but not
limited to (i) the preparation, printing, filing and mailing (including the
payment of postage with respect to such mailing) of the Registration Statement,
the Preliminary and Final Prospectuses and the printing and mailing of this
Agreement and related documents, including the cost of all copies thereof and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as may be required by the Underwriters, (ii) the printing, engraving,
issuance and delivery of the Units, the shares of Common Stock and the Warrants
included in the Units and the Representative's Purchase Option, including any
transfer or other taxes payable thereon, (iii) the qualification of the Public
Securities under state or foreign securities or Blue Sky laws, including the
costs of printing and mailing the "Preliminary Blue Sky Memorandum," and all
amendments and supplements thereto, fees and disbursements of GM (such fees
shall be $35,000 in the aggregate (of which $15,000 has previously been paid)),
and a one-time fee of $5,000 payable to GM for the preparation of the Secondary
Market Trading Survey, (iv) filing fees, costs and expenses (including
disbursements for the Representative's counsel) incurred in registering the
Offering with the NASD, (v) fees and disbursements of the transfer and warrant
agent, (vi) the Company's expenses associated with "due diligence" meetings
arranged by the Representative, (vii) the preparation, binding and delivery of
transaction "bibles," in form and style reasonably satisfactory to the
Representative and transaction lucite cubes or similar commemorative items in a
style and quantity as reasonably requested by the Representative and (viii) all
other costs and expenses customarily borne by an issuer incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3.13.1. The Company also agrees that, if requested
by the Representative, it will engage and pay for an investigative search firm
of the Representative's choice to conduct an investigation of the principals of
the Company as shall be mutually selected by the Representative and the Company.
If the Offering is successfully consummated, any such amounts paid by the
Company pursuant to the immediately preceding sentence shall be credited against
the Representative's nonaccountable expense allowance (described below in
Section 3.13.2). The Representative may deduct from the net proceeds of the
Offering payable to the Company on the Closing Date, or the Option Closing Date,
if any, the expenses set forth in this Agreement to be paid by the Company to
the Representative and others. If the Offering contemplated by this Agreement is
not consummated for any reason whatsoever then the Company shall reimburse the
Underwriters in full for their out of pocket expenses, including, without
limitation, its legal fees (up to a maximum of $50,000) and disbursements and
"road show" and due diligence expenses. The Representative shall retain such
part of the nonaccountable expense allowance previously paid as shall equal its
actual out-of-pocket expenses and refund the balance. If the amount previously
paid is insufficient to cover such actual out-of-pocket expenses, the Company
shall remain liable for and promptly pay any other actual out-of-pocket
expenses.
3.13.2 Nonaccountable Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.13.1, on the Closing
Date, it will pay to the Representative a nonaccountable expense allowance equal
to one half of one percent (0.5%) of the gross proceeds received by the Company
from the sale of the Firm Units (of which $25,000 has previously been paid), by
deduction from the proceeds of the Offering contemplated herein.
3.13.3 Deferred Compensation. Upon the consummation of a Business
Combination, the Company shall pay the Underwriters discounts and commissions of
$0.06 per Unit sold in the Offering. This payment shall be made by wire transfer
to an account designated by the Representative on the closing date of the
Business Combination.
3.14 Application of Net Proceeds. The Company will apply the net proceeds
from the Offering received by it in a manner consistent with the application
described under the caption "Use Of Proceeds" in the Prospectus.
14
3.15 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.16 Notice to NASD. For a period of ninety days following the Effective
Date, in the event any person or entity (regardless of any NASD affiliation or
association) is engaged to assist the Company in its search for a merger
candidate or to provide any other merger and acquisition services, the Company
will provide the following to the NASD and EBC prior to the consummation of the
Business Combination: (i) complete details of all services and copies of
agreements governing such services (which details or agreements may be
appropriately redacted to account for privilege or confidentiality concerns);
and (ii) justification as to why the person or entity providing the merger and
acquisition services should not be considered an "underwriter and related
person" with respect to the Company's initial public offering, as such term is
defined in Rule 2710 of the NASD's Conduct Rules. The Company also agrees that
proper disclosure of such arrangement or potential arrangement will be made in
the proxy statement which the Company will file for purposes of soliciting
stockholder approval for the Business Combination.
3.17 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders (without the consent of EBC) 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 Units.
3.18 Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.19 Accountants. Until the earlier of five years from the Effective Date
or until such earlier time upon which the Company is required to be liquidated,
the Company shall retain WSB or another independent public accountant.
3.20 Form 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date ("Audited Financial Statements") reflecting the receipt
by the Company of the proceeds of the initial public offering. As soon as the
Audited Financial Statements become available, the Company shall immediately
file a Current Report on Form 8-K with the Commission, which Report shall
contain the Company's Audited Financial Statements.
3.21 NASD. The Company shall advise the NASD if it is aware that any 5%
or greater stockholder of the Company becomes an affiliate or associated person
of an NASD member participating in the distribution of the Company's Public
Securities.
3.22 Corporate Proceedings. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
15
3.23 Investment Company. The Company shall cause a portion of the
proceeds of the Offering to be held in the Trust Fund to be invested only as set
forth in the Trust Agreement and as more fully described in the Prospectus. The
Company will otherwise conduct its business in a manner so that it will not
become subject to the Investment Company Act. Furthermore, once the Company
consummates a Business Combination, it will be engaged in a business other than
that of investing, reinvesting, owning, holding or trading securities.
3.24 Business Combination Announcement. Within five business days
following the consummation by the Company of a Business Combination, the Company
shall cause an announcement ("Business Combination Announcement") to be placed,
at its cost, in The Wall Street Journal, The New York Times and a third
publication to be selected by the Representative announcing the consummation of
the Business Combination and indicating that EBC was the managing underwriter in
the Offering. The Company shall supply the Representative with a draft of the
Business Combination Announcement and provide the Representative with a
reasonable opportunity to comment thereon. The Company will not place the
Business Combination Announcement without the final approval of the
Representative, which such approval will not be unreasonably withheld.
3.25 Colorado Trust Filing. In the event the Securities are registered in
the State of Colorado, the Company will cause a Colorado Form ES to be filed
with the Commissioner of the State of Colorado no less than 10 days prior to the
distribution of the Trust Fund in connection with a Business Combination and
will do all things necessary to comply with Section 00-00-000 and Rule 51-3.4 of
the Colorado Securities Act.
3.26 Insider Securities.
3.26.1 Insider Securities Purchase Price. Simultaneously with the
consummation of the Offering, the purchase price to be paid for the Insider
Securities by the Insider Purchasers shall be deposited in the Trust Fund
3.26.2 Redemption. The Company hereby acknowledges and agrees that,
if the Warrants are called for redemption, so long as the Insider Warrants are
held by the Insider Purchasers or their affiliates, such Insider Warrants shall
not be redeemable by the Company.
3.27 Investment Banking Engagement. The Company hereby engages EBC as its
non-exclusive investment banker in connection with the Company's Business
Combination to provide the Company with assistance in structuring the Business
Combination and negotiating its terms.
3.27.1 Compensation. As compensation for the foregoing services,
the Company will pay EBC a cash fee, based on the "Total Consideration" paid by
the Company in the Business Combination, equal to 1% of the Total Consideration;
provided, however, that the maximum fee to be paid to EBC shall be $360,000. The
phrase "Total Consideration" for the purpose of this Agreement, shall mean the
total value of the securities (valued as determined in the applicable agreement
governing the terms of the Business Combination or, if not so valued, at market
on the day of closing, or if there is no public market, valued as set forth
herein for other property), cash and assets and property or other benefits
exchanged by the Company or received by the Company or its securityholders as
consideration as a result of or arising out of the Business Combination,
irrespective of the period of payment or terms (all valued at fair market
present value as agreed or, if not, by an independent appraiser selected by EBC
in good faith).
3.27.2 Payment. All fees payable under Section 3.27.1 are due and
payable to EBC, by certified check or wire transfer, at the closing of the
Business Combination. If a proposed Business Combination is not consummated for
any reason, no amounts shall be payable to EBC under 3.27.1. The fee payable
under Section 3.27.1 shall be paid to EBC directly from the proceeds of the
Trust Fund. The Company shall instruct the trustee under the Trust Agreement to
deliver the fee to EBC simultaneously
16
with the release of the remaining funds from the Trust Fund.
3.27.3 Expenses. In addition to the compensation described in
Section 3.27.1 above, the Company shall bear all reasonable out of pocket costs
and expenses incurred by EBC in connection with the performance of its services
under this Section 3.27, promptly after submission of appropriate evidence of
having incurred such costs and expenses.
3.28 "Tail" Fees for Private Placements. The Company hereby agrees that,
in accordance with NASD Conduct Rule 2710(c)(3)(B)(ii), it will pay the
Representative a cash fee if any individual or entity introduced by the
Representative to the Company purchases securities of the Company other than in
a public offering either simultaneously with the consummation of a Business
Combination or at any time thereafter. Such fee shall equal 5% of the total
amount of the investment made by such individual or entity and will be paid upon
the closing of such investment.
4 Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York time,
on the date of this Agreement or such later date and time as shall be consented
to in writing by you, and, at each of the Closing Date and the Option Closing
Date, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for the purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Blank Rome LLP, counsel to the
Underwriters ("BR").
4.1.2 NASD Clearance. By the Effective Date, the Representative
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the
Units in any jurisdiction designated by you pursuant to Section 3.3 hereof shall
have been issued on either on the Closing Date or the Option Closing Date, and
no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective Date,
the Representative shall have received the favorable opinion of GM, counsel to
the Company, dated the Effective Date, addressed to the Representative and in
form and substance satisfactory to ______ to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the assets, business or operations of the Company. To such
counsel's knowledge, the Company is not in violation of any term or provision of
its Certificate of Incorporation or Bylaws.
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(ii) All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any stockholder of the Company arising by
operation of law or under the Certificate of Incorporation or Bylaws of the
Company. The offers and sales of the outstanding Common Stock were at all
relevant times either registered under the Act or exempt from such registration
requirements. The authorized and, to such counsel's knowledge, outstanding
capital stock of the Company is as set forth in the Prospectus.
(iii) The Securities and Insider Securities have been duly
authorized and, when issued and paid for, will be validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to personal
liability by reason of being such holders. The Securities and Insider Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company arising by operation of law or under the Certificate of
Incorporation or Bylaws of the Company. When issued, the Representative's
Purchase Option, the Representative's Warrants, the Insider Warrants and the
Warrants will constitute valid and binding obligations of the Company to issue
and sell, upon exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby and such Warrants, the Insider
Warrants, the Representative's Purchase Option, and the Representative's
Warrants, when issued, in each case, are enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form.
(iv) This Agreement, the Warrant Agreement, the Services
Agreement, the Trust Agreement, the Subscription Agreements and the Escrow
Agreement have each been duly and validly authorized and, when executed and
delivered by the Company, constitute, and the Representative's Purchase Option
has been duly and validly authorized by the Company and, when executed and
delivered, will constitute, the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (b) as
enforceability of any indemnification or contribution provisions may be limited
under the federal and state securities laws, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(v) The execution, delivery and performance of this
Agreement, the Warrant Agreement, the Representative's Purchase Option, the
Escrow Agreement, the Trust Agreement, the Subscription Agreements and the
Services Agreement and compliance by the Company with the terms and provisions
thereof and the consummation of the transactions contemplated thereby, and the
issuance and sale of the Securities, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) to such counsel's knowledge,
conflict with, or result in a breach of, any of the terms or provisions of, or
constitute a default under, or result in the creation or modification of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to the terms of, any mortgage, deed of trust,
note, indenture, loan, contract, commitment or other agreement or instrument
filed as an exhibit to the Registration Statement, (b) result in any violation
of the provisions of the Certificate of Incorporation or the Bylaws of the
Company, or (c) to such counsel's knowledge, violate any United States statute
or any judgment, order or decree, rule or regulation applicable to the Company
of any court, United States federal, state or other regulatory authority or
other governmental body having jurisdiction over the Company, its properties or
assets.
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(vi) The Registration Statement, the Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) each as of their respective dates appeared on their
face to comply as to form in all material respects with the requirements of the
Act and Regulations. The Securities and all other securities issued or issuable
by the Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus. The descriptions in
the Registration Statement and in the Prospectus, insofar as such statements
constitute a summary of statutes, legal matters, contracts, documents or
proceedings referred to therein, fairly present in all material respects the
information required to be shown with respect to such statutes, legal matters,
contracts, documents and proceedings, and such counsel does not know of any
statutes or legal or governmental proceedings required to be described in the
Prospectus that are not described in the Registration Statement or the
Prospectus or included as exhibits to the Registration Statement that are not
described or included as required.
(vii) The Registration Statement is effective under the
Act. To such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act or applicable
state securities laws.
(viii) To such counsel's knowledge, there is no action,
suit or proceeding before or by any court of governmental agency or body,
domestic or foreign, now pending, or threatened against the Company that is
required to be described in the Registration Statement.
The opinion of counsel shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriters and the independent public accountants of the
Company, at which conferences the contents of the Registration Statement and the
Prospectus contained therein and related matters were discussed and, although
such counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus contained therein (except as otherwise
set forth in the foregoing opinion), solely on the basis of the foregoing
without independent check and verification, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statement or
any amendment thereto, at the time the Registration Statement or amendment
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or the Prospectus or any amendment or
supplement thereto, at the time they were filed pursuant to Rule 424(b) or at
the date of such counsel's opinion, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
opinion with respect to (i) any disclosures relating to the laws, rules,
statutes or regulations of China or (ii) the financial statements and related
notes and schedules thereto and other financial and statistical data and
information included in the Registration Statement or the Prospectus).
4.2.2 Effective Date Opinion of Chinese Counsel. On the Effective
Date, the Underwriters shall have received the favorable opinion of __________,
Chinese counsel to the Company ("_______"), dated the Effective Date, addressed
to the Underwriters and in form and substance satisfactory to the Representative
to the effect that:
(i) No Chinese law, rule, statute or regulation required
to be described in the Prospectus is not described as required and insofar as
the disclosures in the Registration Statement and Prospectus purport to
summarize matters of Chinese law, such disclosures constitute accurate summaries
thereof in all material respects.
(ii) Counsel has participated in certain conferences with
officers and other representatives of the Company, representatives of the
independent registered public accounting firm for the
19
Company and representatives of the Underwriters at which certain contents of the
Registration Statement, the Prospectus and related matters were discussed and
although such counsel is not passing upon in any way and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, and based on the
foregoing, no facts have come to the attention of such counsel which led them to
believe that either the Registration Statement or the Prospectus or any
amendment or supplement thereto (except for the financial statements and related
schedules therein, as to which such counsel need express any belief), as of the
date of such opinion, solely with respect to matters of Chinese law, rules,
statutes and regulations, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.2.3. Closing Date and Option Closing Date Opinion of Counsel. On
each of the Closing Date and the Option Closing Date, if any, the Representative
shall have received the favorable opinion of GM and ________, dated the Closing
Date or the Option Closing Date, as the case may be, addressed to the
Representative and in form and substance reasonably satisfactory to BR,
confirming as of the Closing Date and, if applicable, the Option Closing Date,
the statements made by GM and ________ in their opinions delivered on the
Effective Date.
4.2.4 Reliance. In rendering such opinion, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
__) of other counsel reasonably acceptable to __, familiar with the applicable
laws, and (ii) as to matters of fact, to the extent they deem proper, on
certificates or other written statements of officers of the Company and officers
of departments of various jurisdictions having custody of documents respecting
the corporate existence or good standing of the Company, provided that copies of
any such statements or certificates shall be delivered to the Underwriters'
counsel if requested. The opinion of counsel for the Company and any opinion
relied upon by such counsel for the Company shall include a statement to the
effect that it may be relied upon by counsel for the Underwriters in its opinion
delivered to the Underwriters.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Representative and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to BR from
WSB dated, respectively, as of the date of this Agreement and as of the Closing
Date and the Option Closing Date, if any:
(i) Confirming that they are independent registered public
accounting firm with respect to the Company within the meaning of the Act and
the applicable Regulations and that they have not, during the periods covered by
the financial statements included in the Prospectus, provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of the
Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a reading of the latest
available unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the stockholders and
board of directors and the various committees of the board of directors,
consultations with officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures and inquiries,
they have been advised by the Company officials that (a) the unaudited financial
statements of the Company included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements
20
of the Act and the Regulations or are fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company included
in the Registration Statement and (b) at a date not later than five days prior
to the Effective Date, Closing Date or Option Closing Date, as the case may be,
there was no change in the capital stock or long-term debt of the Company, or
any decrease in the stockholders' equity of the Company as compared with amounts
shown in the August 15, 2006 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any decrease, setting forth the amount of such
decrease;
(iv) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(v) Stating that they have not provided the Company's management
with any written communication in accordance with Statement on Auditing
Standards No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit;" and
(vi) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary or Assistant Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed all covenants and complied with all conditions
required by this Agreement to be performed or complied with by the Company prior
to and as of the Closing Date, or the Option Closing Date, as the case may be,
and that the conditions set forth in Section 4.5 hereof have been satisfied as
of such date and that, as of Closing Date and the Option Closing Date, as the
case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct. In addition, the Representative will have
received such other and further certificates of officers of the Company as the
Representative may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary or Assistant Secretary of the
Company, dated the Closing Date or the Option Date, as the case may be,
respectively, certifying (i) that the Bylaws and Certificate of Incorporation of
the Company are true and complete, have not been modified and are in full force
and effect, (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified, (iii) all correspondence between the Company or its counsel and the
Commission, and (iv) as to the incumbency of the officers of the Company. The
documents referred to in such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or
21
any Initial Stockholder before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus, (iii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission, and (iv) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.6 Delivery of Agreements.
4.6.1 Effective Date Deliveries. On the Effective Date, the
Company shall have delivered to the Representative executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement, the Services Agreement,
all of the Subscription Agreements and all of the Insider Letters.
4.6.2 Closing Date Deliveries. On the Closing Date, the Company
shall have delivered to the Representative executed copies of the
Representative's Purchase Option.
4.7 Opinion of Counsel for the Underwriters. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to BR and you shall have received from such counsel a favorable opinion, dated
the Closing Date and the Option Closing Date, if any, with respect to such of
these proceedings as you may reasonably require. On or prior to the Effective
Date, the Closing Date and the Option Closing Date, as the case may be, counsel
for the Underwriters shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 4.7, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
4.8 Secondary Market Trading Survey. On the Closing Date, the
Representative shall have received the Secondary Market Trading Survey from GM.
4.9 Insider Securities. On the Closing Date, the Insider Purchasers
shall have purchased the Insider Securities and the purchase price for such
Insider Securities shall be deposited into the Trust Fund.
5 Indemnification.
5.1 Indemnification of Underwriters.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, and each
dealer selected by you that participates in the offer and sale of the Securities
(each a "Selected Dealer") and each of their respective directors, officers and
employees and each person, if any, who controls any such Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
statute or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of
a material
22
fact contained in (i) any Preliminary Prospectus, the Registration Statement or
the Prospectus (as from time to time each may be amended and supplemented); (ii)
in any post-effective amendment or amendments or any new registration statement
and prospectus in which is included securities of the Company issued or issuable
upon exercise of the Representative's Purchase Option; or (iii) any application
or other document or written communication (in this Section 5 collectively
called "application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, Nasdaq or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, unless such statement
or omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to an Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. With respect to any untrue statement or
omission or alleged untrue statement or omission made in the Preliminary
Prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of any Underwriter to the extent that any loss, liability, claim,
damage or expense of such Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Securities to such person as required by the Act and the Regulations, and if
the untrue statement or omission has been corrected in the Prospectus, unless
such failure to deliver the Prospectus was a result of non-compliance by the
Company with its obligations under Section 3.4 hereof. The Company agrees
promptly to notify the Representative of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Securities or in connection
with the Registration Statement or Prospectus.
5.1.2 Procedure. If any action is brought against an Underwriter,
a Selected Dealer or a controlling person in respect of which indemnity may be
sought against the Company pursuant to Section 5.1.1, such Underwriter or
Selected Dealer shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action,
including the employment and fees of counsel (subject to the reasonable approval
of such Underwriter or Selected Dealer, as the case may be) and payment of
actual expenses. Such Underwriter, Selected Dealer or controlling person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Underwriter,
Selected Dealer or controlling person unless (i) the employment of such counsel
at the expense of the Company shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company shall
not have employed counsel reasonably acceptable to the Underwriter or Selected
Dealer, as the case may be, to have charge of the defense of such action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the reasonable fees and
expenses of not more than one additional firm of attorneys (in addition to a
local firm of attorneys in any applicable jurisdiction) selected by the
Underwriter, Selected Dealer and/or controlling person shall be borne by the
Company. Notwithstanding anything to the contrary contained herein, if the
Underwriter, Selected Dealer or controlling person shall assume the defense of
such action as provided above, the Company shall have the right to approve the
terms of any settlement of such action which approval shall not be unreasonably
withheld. This Indemnification provided for in this Section 5.1 shall not be
available to any party who shall fail to give notice as provided in this Section
5.1.2 if the Company was unaware of the proceeding to which such notice would
have related and was actually prejudiced by the failure to give such notice;
provided, however, that indemnification shall only be limited to the extent of
such prejudice; provided, further, that, the omission so to notify the Company
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 5.1. The Company shall not without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been sought hereunder by such indemnified party, unless such
23
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceedings.
5.2 Indemnification of the Company. Indemnification of the Company. Each
Underwriter, severally and not jointly, agrees to indemnify and hold harmless
the Company, its directors, officers and employees and agents who control the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense
described in the foregoing indemnity from the Company to the several
Underwriters, as incurred, but only with respect to untrue statements or
omissions made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or in any application, in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to such Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or in any such application. In
case any action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or any application, and in
respect of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the several Underwriters by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters and the
Company are responsible for; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 5.3.1, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Public Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay in respect of
such losses, liabilities, claims, damages and expenses. For purposes of this
Section, each director, officer and employee of an Underwriter or the Company,
as applicable, and each person, if any, who controls an Underwriter or the
Company, as applicable, within the meaning of Section 15 of the Act shall have
the same rights to contribution as the Underwriters or the Company, as
applicable.
5.3.2 Contribution Procedure. Within fifteen days after receipt by
any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any
24
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section are intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the
Exchange Act or otherwise available. The Underwriters' obligations to contribute
pursuant to this Section 5.3 are several and not joint.
6 Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Units or Option Units. If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the over-allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Units or Option Units. In the event
that the default addressed in Section 6.1 above relates to more than 10% of the
Firm Units or Option Units, you may in your discretion arrange for yourself or
for another party or parties to purchase such Firm Units or Option Units to
which such default relates on the terms contained herein. If within one business
day after such default relating to more than 10% of the Firm Units or Option
Units you do not arrange for the purchase of such Firm Units or Option Units,
then the Company shall be entitled to a further period of one business day
within which to procure another party or parties satisfactory to you to purchase
said Firm Units or Option Units on such terms. In the event that neither you nor
the Company arrange for the purchase of the Firm Units or Option Units to which
a default relates as provided in this Section 6, this Agreement will be
terminated by you or the Company without liability on the part of the Company
(except as provided in Sections 3.13 and 5 hereof) or the several Underwriters
(except as provided in Section 5 hereof); provided, however, that if such
default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm Units or
Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7 Intentionally Omitted.
8 Additional Covenants.
8.1 Intentionally Omitted.
8.2 Additional Shares or Options. The Company hereby agrees that until
the consummation of a Business Combination, it shall not issue any shares of
Common Stock or any options or other securities convertible into Common Stock,
or any shares of Preferred Stock which participate in any manner in the Trust
Fund or which vote as a class with the Common Stock on a Business Combination.
25
8.3 Trust Fund Waiver Acknowledgment.
(a) Underwriters/Representative. Except with respect to (i) the
underwriting discounts and commissions due to the Underwriters and (ii) the
investment banking fee due to the Representative pursuant to Section 3.27 only
upon successful consummation of a Business Combination, each of the Underwriters
and the Representative hereby agree that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund ("Claim")
and waive any Claim it may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with the Company and will not seek
recourse against the Trust Fund for any reason whatsoever.
(b) Target Businesses and Vendors. The Company hereby agrees that
it will not commence its due diligence investigation of any operating business
which the Company seeks to acquire ("Target Business") or obtain the services of
any vendor unless and until such Target Business or vendor acknowledges in
writing, whether through a letter of intent, memorandum of understanding or
other similar document (and subsequently acknowledges the same in any definitive
document replacing any of the foregoing), that (a) it has read the Prospectus
and understands that the Company has established the Trust Fund for the benefit
of the public stockholders and that the Company may disburse monies from the
Trust Fund only (i) to the public stockholders in the event they elect to
convert their IPO Shares (as defined below in Section 8.8), (ii) to the public
stockholders upon the liquidation of the Company if the Company fails to
consummate a Business Combination or (iii) to the Company after, or concurrently
with, the consummation of a Business Combination and (b) for and in
consideration of the Company (1) agreeing to evaluate such Target Business for
purposes of consummating a Business Combination with it or (2) agreeing to
engage the services of the vendor, as the case may be, such Target Business or
vendor agrees that it does not have Claim in or to any monies in the Trust Fund
and waives any Claim it may have in the future as a result of, or arising out
of, any negotiations, contracts or agreements with the Company and will not seek
recourse against the Trust Fund for any reason whatsoever.
8.4 Insider Letters. The Company shall not take any action or omit to
take any action which would cause a breach of any of the Insider Letters
executed between each Initial Stockholder and EBC and will not allow any
amendments to, or waivers of, such Insider Letters without the prior written
consent of EBC.
8.5 Certificate of Incorporation and Bylaws. The Company shall not take
any action or omit to take any action that would cause the Company to be in
breach or violation of its Certificate of Incorporation or Bylaws. Prior to the
consummation of a Business Combination, the Company will not amend its
Certificate of Incorporation without the prior written consent of EBC.
8.6 Blue Sky Requirements. The Company shall provide counsel to the
Representative with ten copies of all proxy information and all related material
filed with the Commission in connection with a Business Combination concurrently
with such filing with the Commission. In addition, the Company shall furnish any
other state in which its initial public offering was registered, such
information as may be requested by such state.
8.7 Intentionally Omitted.
8.8 Acquisition/Liquidation Procedure. The Company agrees: (i) that,
prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("Business
Combination Vote") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law and will
publicly announce the record date establishing the stockholders that will be
entitled to vote at the meeting to approve the Business Combination at least two
business days prior to such record date; and (ii) that, in the event that the
Company does not effect a Business Combination within 24 months from the
Effective Date, the Company will be liquidated and will distribute to all
holders of IPO Shares (defined below) an aggregate sum equal to the Company's
"Liquidation Value." The
26
Company's "Liquidation Value" shall mean the Company's book value, as determined
by the Company and approved by WSB. In no event, however, will the Company's
Liquidation Value be less than the Trust Fund, inclusive of any net interest
income thereon. Only holders of IPO Shares shall be entitled to receive
liquidating distributions and the Company shall pay no liquidating distributions
with respect to any other shares of capital stock of the Company. With respect
to the Business Combination Vote, the Company shall cause all of the Initial
Stockholders to vote the shares of Common Stock owned by them immediately prior
to this Offering in accordance with the vote of the holders of a majority of the
IPO Shares present, in person or by proxy, at a meeting of the Company's
stockholders called for such purpose. At the time the Company seeks approval of
any potential Business Combination, the Company will offer each holder of Common
Stock issued in this Offering ("IPO Shares") the right to convert their IPO
Shares at a per share price ("Conversion Price") equal to the amount in the
Trust Fund (inclusive of any interest income therein) calculated as of two
business days prior to the consummation of the proposed Business Combination
divided by the total number of IPO Shares. If a majority of the holders of IPO
Shares present and entitled to vote on the Business Combination vote in favor of
such Business Combination and holders of less than 20% in interest of the
Company's IPO Shares elect to convert their IPO Shares, the Company may, but
will not be required to, proceed with such Business Combination. If the Company
elects to so proceed, it will convert shares, based upon the Conversion Price,
from those holders of IPO Shares who affirmatively requested such conversion and
who voted against the Business Combination. If holders of 20% or more in
interest of the IPO Shares, who vote against approval of any potential Business
Combination, elect to convert their IPO Shares, the Company will not proceed
with such Business Combination and will not convert such shares. The provisions
of this Section 8.8 may not be modified, amended or deleted under any
circumstances.
8.9 Rule 419. The Company agrees that it will use its best efforts to
prevent the Company from becoming subject to Rule 419 under the Act prior to the
consummation of any Business Combination, including but not limited to using its
best efforts to prevent any of the Company's outstanding securities from being
deemed to be a "xxxxx stock" as defined in Rule 3a-51-1 under the Exchange Act
during such period.
8.10 Affiliated Transactions. The Company shall cause each of the Initial
Stockholders to agree that, in order to minimize potential conflicts of interest
which may arise from multiple affiliations, the Initial Stockholders will
present to the Company for its consideration, prior to presentation to any other
person or company, any suitable opportunity to acquire an operating business,
until the earlier of the consummation by the Company of a Business Combination,
the liquidation of the Company or until such time as the Initial Stockholders
cease to be an officer or director of the Company, subject to any pre-existing
fiduciary or contractual obligations the Initial Stockholders might have.
8.11 Target Net Assets. The Company agrees that the initial Target
Business that it acquires must have a fair market value equal to at least 80% of
the Company's net assets (all of the Company's assets, including the funds held
in the Trust Fund, less the Company's liabilities) at the time of such
acquisition. The fair market value of such business must be determined by the
Board of Directors of the Company based upon standards generally accepted by the
financial community, such as actual and potential sales, earnings and cash flow
and book value. If the Board of Directors of the Company is not able to
independently determine that the target business has a fair market value of at
least 80% of the Company's net assets at the time of such acquisition, the
Company will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the NASD with respect to the satisfaction of
such criteria. The Company is not required to obtain an opinion from an
investment banking firm as to the fair market value if the Company's Board of
Directors independently determines that the Target Business does have sufficient
fair market value.
27
9 Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Date or Option Closing Date and such representations, warranties
and agreements of the Underwriters and Company, including the indemnity
agreements contained in Section 5 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the several Underwriters until the earlier of the expiration of any applicable
statute of limitations and the seventh anniversary of the later of the Closing
Date or the Option Closing Date, if any, at which time the representations,
warranties and agreements shall terminate and be of no further force and effect.
10 Effective Date of This Agreement and Termination Thereof.
10.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
10.2 Termination. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, the Boston Stock Exchange or on the NASD OTC Bulletin Board (or
successor trading market) shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been fixed, or maximum ranges for prices for securities
shall have been required on the NASD OTC Bulletin Board or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a new war or an increase in
major hostilities, or (iv) if a banking moratorium has been declared by a New
York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared which materially adversely impacts the United States
securities market, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Units, or (vii) if any of the Company's representations, warranties or
covenants hereunder are breached, or (viii) if the Representative shall have
become aware after the date hereof of such a material adverse change in the
conditions or prospects of the Company, or such adverse material change in
general market conditions, including without limitation as a result of terrorist
activities after the date hereof, as in the Representative's judgment would make
it impracticable to proceed with the offering, sale and/or delivery of the Units
or to enforce contracts made by the Underwriters for the sale of the Securities.
10.3 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
out of pocket expenses related to the transactions contemplated herein shall be
governed by Section 3.13 hereof.
10.4 Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way effected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11 Miscellaneous.
11.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed and shall be deemed given when so delivered or
telecopied and confirmed or if mailed, two days after such mailing
28
If to the Representative:
EarlyBirdCapital, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Chairman
Copy to:
Blank Rome LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to the Company:
China Opportunity Acquisition Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx, Chairman
Copy to:
Xxxxxxxx Xxxxxx
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
11.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
11.3 Amendment. Except for Section 8.8 (which may not be amended under
any circumstances), this Agreement may only be amended by a written instrument
executed by each of the parties hereto.
11.4 Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5 Binding Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon the Representative, the Underwriters, the Company and
the controlling persons, directors and officers referred to in Section 5 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
11.6 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflicts of law principles that would result in the application of
the substantive laws of another jurisdiction. The Company hereby agrees that any
29
action, proceeding or claim against it arising out of, or relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum. Any such process or summons to be
served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 11 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the Company
in any action, proceeding or claim. The Company agrees that the prevailing
party(ies) in any such action shall be entitled to recover from the other
party(ies) all of its reasonable attorneys' fees and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
11.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Facsimile signatures will be binding and
effective as originals.
11.8 Waiver, Etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
30
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CHINA OPPORTUNITY ACQUISITION CORP.
By: _______________________________
Name:
Title:
Accepted on the date first
above written.
EARLYBIRDCAPITAL, INC.
By: _______________________________
Name: Xxxxxx Xxxxxx
Title: Managing Director
SCHEDULE I
CHINA OPPORTUNITY ACQUISITION CORP.
6,000,000 UNITS
Number of Firm Units
Underwriter to be Purchased
EarlyBirdCapital, Inc.
6,000,000
