EXHIBIT 1.1
UNDERWRITING AGREEMENT
between
CHINA UNISTONE ACQUISITION CORPORATION
and
EARLYBIRDCAPITAL, INC.
Dated: _____________________, 2004
CHINA UNISTONE ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
New York, New York
_________, 2004
EarlyBirdCapital, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, China Unistone Acquisition Corporation, 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 3,000,000 units ("Firm Units") of the
Company, at a purchase price (net of discounts and commissions) of $5.52 per
Firm Unit. 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 $5.52 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 of the Registration Statement and terminating on the four-year
anniversary of the Effective Date. "Business Combination" shall mean any merger,
capital stock exchange, asset acquisition or other similar business combination
consummated by the Company with an operating business which has its primary
operating facilities 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
the effective date of the Registration
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Statement (or the fourth business day following the effective date, if the
Registration Statement is declared effective after 4:30 p.m.) 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: $________ 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 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 450,000 units from the Company ("Over-allotment Option"). Such
additional 450,000 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: $________ of the proceeds
received by the Company for the Option Units shall be deposited in the Trust
Fund pursuant to the Trust Agreement and the remaining proceeds shall be paid to
the order of the Company 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
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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 their designees) on the Effective Date an option
("Representative's Purchase Option") for the purchase of an aggregate of 240,000
units ("Representative's Units") for an aggregate purchase price of $100. Each
of the Representative's Units is identical to the Firm Units except that the
Warrants included in the Representative's Units ("Representative's Warrants")
have an exercise price of $6.25 (125% of the exercise price of the Warrants
included in the Units sold to the public). The Representative's Purchase Option
shall be exercisable, in whole or in part, commencing on the later of the
consummation of a Business Combination or 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 $9.90, which is equal to one hundred
sixty five percent (165%) of the initial public offering price of a Unit. The
Representative's Purchase Option, the Representative's Units, the
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 Underwriters, 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.
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.
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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
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, 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 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
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common control with the Company within the three years prior to the date hereof,
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. Xxxxxxxxx Xxxxx Xxxxxxx LLP ("GGK"), whose
report is filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations. GGK 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
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
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
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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.
2.9 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.
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) 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 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
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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 and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
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 ("Initial
Stockholders") and provided to the Underwriters as an exhibit to his or her
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 Company.
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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.
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. The Company has not 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, within the twelve months prior to the Effective Date,
other than payments to EBC.
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.
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
Shares 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 and the Representative's Warrants with Continental
Stock Transfer & Trust Company substantially in
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the form filed as an exhibit to the Registration Statement ("Warrant
Agreement"), providing for, among other things, the payment of a warrant
solicitation fee as contemplated by Section 3.9 hereof.
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, 10.2, 10.3, 10.4,
10.5, 10.6, 10.7, 10.8 and 10.9 to the Registration Statement ("Insider
Letter"), 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") in form and
substance satisfactory to the Underwriters, whereby the Common Stock owned by
the Initial Stockholders will be held in escrow by the Escrow Agent until the
third anniversary of the Effective Date. 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 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.
2.23 Intentionally Omitted.
2.24 Investment Management Trust Agreement. The Company has entered into
the Trust Agreement with respect to certain proceeds of the Offering in form and
substance satisfactory to the Underwriters.
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 Investments. No more than 45% of the "value" (as defined in Section
2(a)(41) of the Investment Company Act of 1940 ("Investment Company Act")) of
the Company's total assets consist of, and no more than 45% of the Company's net
income after taxes is derived from, securities other than "Government
securities" (as defined in Section 2(a)(16) of the Investment Company Act).
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.
9
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 all reasonable 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. 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 use its best efforts to maintain the
registration of the Units, Common Stock and Warrants under the provisions of the
Exchange Act. The Company will not deregister the Units under the Exchange Act
without the prior written consent of EBC.
3.3 Blue Sky Filings. The Company will endeavor in good faith, 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 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 all reasonable 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
10
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
make every reasonable effort to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. For a period of five years from the
Effective Date, or until such earlier 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 Affiliate 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 Affiliate Services. The Company has entered into an agreement
("Services Agreement") with Majestic Partners ("Affiliate") 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 Affiliate 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 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; and
provided, further, that such persons shall be entitled to receive, upon
consummation of a Business Combination, commissions for monies raised by them
for the Company in connection with such Business Combination, at rates which are
no less favorable to the Company than those which the Company would pay to
unaffiliated third parties.
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.
11
3.9 Warrant Solicitation Fees. The Company hereby engages EBC, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Company will (i) assist EBC with respect to such solicitation, if
requested by EBC, and (ii) at EBC's request, provide EBC, and direct the
Company's transfer and warrant agent to provide to EBC, at the Company's cost,
lists of the record and, to the extent known, beneficial owners of, the
Warrants. Commencing one year from the Effective Date, the Company will pay EBC
a commission of five percent of the exercise price of the Warrants for each
Warrant exercised, payable on the date of such exercise, on the terms provided
for in the Warrant Agreement, only if permitted under the rules and regulations
of the NASD and only to the extent that an investor who exercises his Warrants
specifically designates, in writing, that EBC solicited his exercise. EBC may
engage sub-agents in its solicitation efforts. The Company agrees to disclose
the arrangement to pay such solicitation fees to EBC in any prospectus used by
the Company in connection with the registration of the shares of Common Stock
underlying the Warrants.
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 reasonably acceptable to the Representative for
a term to be agreed upon by the Company and the Representative.
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 at which the Company is 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 Transfer Sheets. For a period of five years following the
Effective Date or until such earlier time at which the Company is liquidated,
the Company shall retain a transfer and warrant agent acceptable to the
Representative ("Transfer Agent") and will furnish to the Underwriters at the
Company's sole cost and expense such transfer sheets of the Company's securities
as the Representative may request, including the daily and monthly consolidated
transfer sheets of the Transfer Agent and DTC. The Underwriters acknowledge that
Continental Stock Transfer & Trust Company is an acceptable Transfer Agent.
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 at which the Company is 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 Underwriters 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 Trading Reports. During such time as the Public Securities
are quoted on the NASD OTC Bulletin Board (or any successor trading market such
as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar publisher of
quotations) and no other automated quotation system, the Company shall provide
12
to the Representative, at its expense, such reports published by the NASD or the
Pink Sheets, LLC relating to price trading of the Public Securities, as the
Representative shall reasonably request.
3.12 Disqualification of Form S-1. For a period equal to seven years from
the date hereof, 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.
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 retained for
such purpose (such fees shall be capped at $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 incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3.13.1 (including the payments required by Sections
3.13.2 and 3.13.3 below). 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. 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 (described below in Section 3.13.2) 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 two percent (2%) 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 Expenses Related to Business Combination. The Company further
agrees that, in the event the Representative assists the Company in trying to
obtain stockholder approval of a proposed Business
13
Combination, the Company agrees to reimburse the Representative for all
out-of-pocket expenses, including, but not limited to, "road-show" and due
diligence expenses.
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.
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. 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 prior to the consummation of
the Business Combination: (i) complete details of all services and copies of
agreements governing such services; 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. Except with respect to the agreement between the
Company and each of Xxxx X. Xxxxxx, Xxxxx X. Xx and Xxxxx Xxxxxxxxx annexed as
Exhibit 10.15 to the Registration Statement, 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. 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 shall retain GGK or other independent public accountants reasonably
acceptable to EBC.
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.
14
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.
3.23 Investment Company. The Company shall cause the proceeds of the
Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed 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 the Representative 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.
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 such 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 Xxxxx & Xxxxxxx LLP, counsel to
the Underwriters ("D&G").
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 or before either the Closing Date or the Option Closing
Date, and no proceedings for that purpose shall have been instituted or shall be
contemplated.
15
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 D&G 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 Company.
(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 and the applicable state securities or Blue Sky Laws or
exempt from such registration requirements. The authorized and outstanding
capital stock of the Company is as set forth in the Prospectus.
(iii) 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 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 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 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 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 and the Services Agreement, the issuance and sale
of the Securities, the consummation of the transactions contemplated hereby and
thereby, and compliance by the Company with the terms and provisions hereof and
thereof, 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
16
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.
(vi) The Registration Statement, each 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 complied as to form in all
material respects with the requirements of the Act and Regulations. The
Securities and each agreement filed as an exhibit to the Registration Statement
conform in all material respects to the description thereof contained in the
Registration Statement and the Prospectus. No United States federal or state
statute or regulation required to be described in the Prospectus is not
described as required, nor are any contracts or documents of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement not so described or filed as
required.
(vii) Counsel has participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company and representatives of the Underwriters at
which the contents of the Registration Statement, the Prospectus 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 Prospectus (except as
otherwise set forth in this opinion), no facts have come to the attention of
such counsel which should lead them to believe that either the Registration
Statement or the Prospectus or any amendment or supplement thereto, as of the
date of such opinion contained any 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, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to (i) any disclosures relating to the laws, rules,
statutes or regulations of China (it being understood that the Underwriters are
relying on the opinion of ______ with respect to such matters) or (ii) the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(viii) 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.
(ix) 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.
4.2.2 Effective Date Opinion of China 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.
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 D&G,
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.
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4.2.4 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deem proper and to the extent specified in such opinions, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
D&G) of other counsel reasonably acceptable to D&G, 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 opinions 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 D&G from
GGK 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 accountants 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 limited review which included
a reading of the latest available unaudited interim financial statements of the
Company (with an indication of the date of the latest available unaudited
interim financial statements), a reading of the latest available minutes of the
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, nothing has come to their attention which would lead them to
believe that (a) the unaudited financial statements of the Company included in
the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Regulations or
are not 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, (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 any 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 June 22, 2004
balance sheet included in the Registration Statement, other than as set forth in
or contemplated by the Registration Statement, or, if there was any decrease,
setting forth the amount of such decrease, and (c) during the period from June
22, 2004 to a specified date not later than five days prior to the Effective
Date, Closing Date or Option Closing Date, as the case may be, there was any
decrease in revenues, net earnings or net earnings per share of Common Stock, in
each case as compared with the corresponding period in the preceding year and as
compared with the corresponding period in the preceding quarter, other than as
set forth in or contemplated by the Registration Statement, or, if there was any
such decrease, setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior to the
Effective Date, the amount of liabilities of the Company (including a break-down
of commercial papers and notes payable to banks);
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(v) Stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding
five year period brought to the attention of the Company's management any
reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board 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 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
19
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
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 D&G 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.
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 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
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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 to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of not more
than one additional firm of attorneys selected by the Underwriter, Selected
Dealer and/or controlling person shall be borne by the Company. 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.
5.2 Indemnification of the Company. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company, its directors,
officers and employees and agents who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to the several Underwriters, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions
made in any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment or supplement thereto or in any application, in reliance upon, and
in strict conformity with, written information furnished to the Company with
respect to such Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. The Company
acknowledges that (i) the statements set forth in ____________________________
in the Preliminary Prospectus and the Final Prospectus constitute the only
information furnished in writing by or on behalf of the Initial Stockholders for
inclusion in the Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto. 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.
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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 are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 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 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.
22
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 may be terminated
by you or the Company without liability on the part of the Company (except as
provided in Sections 3.15 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 Right to Appoint Representative. For a period of five years from the Effective
Date, upon notice from EBC to the Company, EBC shall have the right to send a
representative (who need not be the same individual from meeting to meeting) to
observe each meeting of the Board of Directors of the Company; provided that
such representative shall sign a Regulation FD compliant confidentiality
agreement which is reasonably acceptable to EBC and its counsel in connection
with such representative's attendance at meetings of the Board of Directors; and
provided further that upon written notice to EBC, the Company may exclude the
representative from meetings where, in the written opinion of counsel for the
Company, the representative's presence would destroy the attorney-client
privilege. The Company agrees to give EBC written notice of each such meeting
and to provide EBC with an agenda and minutes of the meeting no later than it
gives such notice and provides such items to the other directors, and reimburse
the representative of EBC for its reasonable out-of-pocket expenses incurred in
connection with its attendance at the meeting, including but not limited to,
food, lodging and transportation.
8 Additional Covenants.
8.1 Intentionally Omitted.
8.2 Additional Shares or Options. The Company hereby agrees that until the
Company consummates 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.
8.3 Trust Fund Waiver Letters. 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
23
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, initially in an amount of $__________ 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 of the
redemption of their shares or the liquidation of the Company or (ii) to the
Company after it consummates 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 any right, title, interest or claim of any
kind in or to any monies in the Trust Fund ("Claim") 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 No Involvement with Acquisition Fund. Until April 30, 2007, the
Company shall cause each of the Initial Stockholders to agree that, during such
time period, they will not become involved (whether as owner, manager, operator,
creditor, partner, shareholder, joint venturer, employee, officer, director,
consultant or otherwise) with any "Acquisition Fund" unless such Acquisition
Fund offers EBC the right of first refusal to be the managing underwriter of the
initial public offering of the Acquisition Fund's securities. As used herein,
"Acquisition Fund" shall mean any company formed with the intent to offer
securities to the public and use the proceeds to consummate one or more Business
Combinations which are unspecified at the time of the securities offering.
Notwithstanding anything else contained herein, the Company agrees that its
obligations and the obligations of the Initial Stockholders contained in this
paragraph shall be binding on them and shall constitute its and their legal
obligations, enforceable against them by EBC.
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 (ii) that, in the event
that the Company does not effect a Business Combination within 18 months from
the consummation of this Offering (subject to extension for an additional
six-month period, as described in the Prospectus), 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." 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. At the time the Company seeks approval of any potential Business
Combination, the Company will offer each of holders of the Company's Common
Stock issued in this Offering ("IPO Shares") the right to convert their IPO
Shares at a per share price equal to the amount in the Trust Fund (inclusive of
any interest income therein) on the record date ("Conversion Price") for
determination of stockholders entitled to vote upon the proposal to approve such
Business Combination ("Record Date")
24
divided by the total number of IPO Shares. The Company's "Liquidation Value"
shall mean the Company's book value, as determined by the Company and audited by
GGK. In no event, however, will the Company's Liquidation Value be less than the
Trust Fund, inclusive of any net interest income thereon. If holders of less
than 20% in interest of the Company's IPO Shares vote against such approval of a
Business Combination, 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. 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. If holders of 20%
or more in interest of the IPO Shares vote against approval of any potential
Business Combination, the Company will not proceed with such Business
Combination and will not convert such shares.
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 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 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 fair
market value 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.
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 Dates 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.
25
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 3.13.1 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
If to the Representative:
EarlyBirdCapital, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Chairman
Copy to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
26
If to the Company:
China Unistone Acquisition Corporation
0 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xx, Chief Executive Officer
Copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx 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. 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 conflict of laws. The Company hereby agrees that any action,
proceeding or claim against it arising out of, 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 10 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.
27
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.
28
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 UNISTONE
ACQUISITION CORPORATION
By: ___________________________________
Name: Xxxxx X. Xx
Title: Chief Executive Officer
Accepted on the date first
above written.
EARLYBIRDCAPITAL, INC.
By: ______________________________
Name: Xxxxxx Xxxxxx
Title: Managing Director
29
SCHEDULE I
CHINA UNISTONE ACQUISITION CORPORATION
3,000,000 Units
Number of Firm Units
Underwriter to be Purchased
----------- ---------------
EarlyBirdCapital, Inc.
3,000,000
