4,000,000 Units
CHINA RESOURCES LTD.
UNDERWRITING AGREEMENT
New York, New York
___, 2007
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
As Representative of the Underwriters
named on Schedule A hereto
Ladies and Gentlemen:
The undersigned, China Resources Ltd., a Delaware corporation
("Company"), hereby confirms its agreement with Maxim Group LLC ("Maxim",
hereinafter referred to collectively as "you" or the "Representative") and with
the other underwriters named on Schedule A hereto for which you are acting as
representative (the Representative and the other underwriters being collectively
referred to herein as 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 4,000,000 units (the "Firm Units") of
the Company's securities at a purchase price (net of discounts and commissions
of $0.60, $0.20 of which shall be deposited into the Trust Fund (as defined
herein) pursuant to Section 1.5) of $9.40 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 A attached hereto
and made a part hereof at a purchase price (net of discounts and commissions of
$0.60, $0.20 of which shall be deposited into the Trust Fund pursuant to Section
1.5) of $9.40 per Firm Unit. The Firm Units are to be offered initially to the
public (the "Offering") at the offering price of $10.00 per Firm Unit. Each Firm
Unit consists of one share of the Company's common stock, par value $0.0001 per
share (the "Common Stock"), and one warrant to purchase one share of Common
Stock (the "Warrant(s)"). The shares of Common Stock and the Warrants included
in the Firm Units will begin trading separately on the 10th business day
following the earlier to occur of: (a) the expiration of the underwriters'
over-allotment option or (b) its exercise in full. In no event will separate
trading of the Common Stock and Warrants occur until the Company has filed a
Current Report on Form 8-K (the "Current Report on Form 8-K") with the
Securities and Exchange Commission (as defined in Section 2.1.1 hereof)
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containing an audited balance sheet reflecting its receipt of the gross proceeds
of the Offering and issuing a press release announcing when such separate
trading will begin. The Company will file the Current Report on Form 8-K upon
the completion of the Offering, which is anticipated to take place three
Business Days following the date of the Prospectus (as defined in Section 2.1.1
hereof). The audited balance sheet will include proceeds the Company receives
from the exercise of the Over-allotment Option, if the Over-allotment Option is
exercised prior to the filing of the Current Report on Form 8-K. Each Warrant
entitles its holder to purchase one share of Common Stock for $7.50 per share
during the period commencing on the later of: (a) the consummation by the
Company of its Business Combination (as defined below) or (b) one year from the
effective date (the "Effective Date") of the Registration Statement (as defined
in Section 2.1.1 hereof), and terminating on the four-year anniversary of the
Effective Date. As used herein, the term "Business Combination" shall mean any
acquisition by merger, capital stock exchange, asset acquisition, stock purchase
or other similar business combination consummated by the Company with one or
more small- to mid-market operating companies engaged in the energy, minerals,
mining and manufacturing businesses located in or providing products and
services in China, (as described more fully in the Registration Statement). The
Company has the right to redeem the Warrants (and the Representative's Warrants
but only upon exercise of the Representative's Unit Purchase Option (each as
defined below)) if: (i) not less than 30 days written notice is given at a price
of $0.01 per Warrant at any time after the Warrants become exercisable; so long
as the last sales price of the Common Stock has been at least $14.25 per share
for any 20 trading days within a 30 trading day period ending on the third
Business Day prior to the day on which notice is given and (ii) a current
registration statement is in effect and a current prospectus with respect to the
common stock upon exercise of the Warrants is available from and including the
date the Company issues a redemption notice to and including the date of
redemption. As used herein, the term "Business Day" shall mean any day other
than a Saturday, Sunday or any day on which national banks in New York, New York
are not open for business.
1.1.2. Payment and Delivery. Delivery and payment for the Firm Units
shall be made at 10:00 a.m., New York City time, on the third Business Day
following the Effective Date of the Registration Statement (or the fourth
Business Day following the Effective Date, if the Registration Statement is
declared effective after 4:30 p.m., New York City time) or at such earlier time
as shall be agreed upon by the Representative or at such other place as shall be
agreed upon by the Representative and the Company. The closing of the Offering
is referred to herein as the "Closing" and the hour and date of delivery and
payment for the Firm Units is referred to herein as the "Closing Date." Payment
for the Firm Units shall be made on the Closing Date by wire transfer in federal
(same day) funds upon delivery to the Representative of certificates (in form
and substance satisfactory to the Underwriters) representing the Firm Units (or
through the facilities of The Depository Trust Company (the "DTC")) for the
account of the Underwriters. The Company shall deposit $40,000,000 ($45,760,000
plus the initial $240,000 of interest earned on the Trust Fund (as hereinafter
defined) if the Over-allotment Option is exercised in full), or $10.00 per Unit,
of the proceeds received by it for the Firm Units and the Private Placement (as
defined in Section 1.4 hereof) in the trust account established by it for the
benefit of the public stockholders and the Representative as described in the
Registration Statement (the "Trust Fund") pursuant to the terms of an Investment
Management Trust Agreement (the "Trust Agreement"), which amount includes
$800,000 ($0.20 per Firm Unit) or up to $920,000 if the Over-allotment Option is
exercised in full, payable to the Representative as contingent compensation upon
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consummation of a Business Combination. 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 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 purpose 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 600,000 Units from the Company (the "Over-allotment Option"). Such
additional 600,000 Units shall be identical in all respects to the Firm Units
and 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 (net of discounts and commissions of $0.60, $0.20 of which
shall be deposited in the Trust Fund pursuant to Section 1.5) will be $9.40 per
Option Unit.
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 from 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, which will not be later than five Business Days after the
date of the notice or such other time as shall be agreed upon by the Company and
the Representative or at such other place or in such other manner as shall be
agreed upon by the Company and the Representative. If such delivery of and
payment for the Option Units does not occur on the Closing Date, the date and
time of the closing for such Option Units will be as set forth in the notice
(hereinafter the "Option Closing Date"). 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 by wire transfer in federal (same day) funds
upon delivery to the Representative 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 Company shall
deposit the sum of $9.40 per Option Unit ($0.20 of which shall be deposited in
the Trust Fund pursuant to Section 1.5) in the Trust Fund pursuant to the Trust
Agreement. 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 Business Days prior to the Closing Date or any Option
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Closing Date, as the case may be, and will be made available to the
Representative for inspection, checking and packaging at the aforesaid office of
the Company's transfer agent or correspondent not less than one full Business
Day prior to such Closing Date or Option Closing Date.
1.3. Representative's Purchase Option.
1.3.1. Purchase Option. As additional consideration, the Company
hereby agrees to issue and sell to the Representative (and/or their respective
designees) on the Effective Date an option ("Representative's Purchase Option")
for the purchase of an aggregate of 280,000 Units (the "Representative's
Units"), or such lesser number allowed by the National Association of Securities
Dealers, (the "NASD") for an aggregate purchase price of $100.00. The
Representative's Purchase Option shall be exercisable, in whole or in part,
commencing six months 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 $11.00, which is equal to one hundred ten percent
(110%) of the initial public offering price of a Unit, or at such higher price
as allowed by the NASD. The Representative's Purchase Option, the
Representative's Units, the shares of Common Stock and the Warrants included in
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." Representative understands and agrees that
there are significant restrictions against transferring the Representative's
Purchase Option during the first six months after the Effective Date, as set
forth in Section 3 of the Representative's Purchase Option.
1.3.2. Delivery and Payment. Delivery of and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Representative and its respective designees upon payment
therefore certificates for the Representative's Purchase Option in the name or
names and in such authorized denominations as the Representative may request.
1.4. Private Placement. Prior to the Effective Date, certain of the
Company's officers and directors, or entities controlled by them, purchased from
the Company pursuant to that certain Subscription Agreement (as defined in
Section 2.23.2 hereof) an aggregate of 2,600,000 warrants identical to the
Warrants comprising part of the Units (the "Placement Warrants") at a purchase
price of $1.00 per Placement Warrant in a private placement effected pursuant to
Regulation S under the Securities Act of 1933, as amended (the "Act" or
"Securities Act") that occurred immediately prior to the entering into of this
Agreement (the "Private Placement"). The Placement Warrants and the shares of
Common Stock issuable upon exercise of the Placement Warrants are hereinafter
referred to collectively as the "Placement Securities." There was no placement
agent in the Private Placement and no party shall be entitled to a placement fee
or expense allowance from the sale of the Placement Warrants.
1.5. Contingent Portion of Underwriters' Discount. The Representative, on
behalf of itself and the other Underwriters, agrees that 2% of the gross
proceeds from the sale of the Firm Units ($800,000) and 2% of the gross proceeds
from the sale of the Option Units (an aggregate of $920,000 if the
Over-allotment Option is exercised in full) (collectively, the "Contingent
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Discount") will be delivered to the Company for deposit in the Trust Fund. The
parties hereto agree that such amounts shall remain payable to the
Representative, along with any interest accrued thereon, in respect of any IPO
Shares (as defined in Section 7.6 hereof) which are not redeemed pursuant to
Section 7.6 hereof, upon the consummation of a Business Combination. The
Representative, on behalf of itself and the other Underwriters, agrees that the
several Underwriters shall forfeit any rights or claims to the Contingent
Discount and any interest accrued thereon on a pro-rata basis, in respect of any
IPO Shares that are redeemed pursuant to Section 7.6 hereof. In addition, in the
event the Company is unable to consummate a Business Combination and American
Stock Transfer & Trust Company ("AST"), the trustee of the Trust Fund, commences
liquidation of the Trust Fund as provided in the Trust Agreement, the
Representative, on behalf of itself and the other Underwriters, agrees that (i)
the several Underwriters shall forfeit any rights or claims to the Contingent
Discount and any interest accrued thereon; and (ii) the Contingent Discount,
together with the all other amounts on deposit in the Trust Fund, and any
accrued interest thereon, shall be distributed on a pro-rata basis among the
holders of the shares of Common Stock included in the Units sold in the
Offering.
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 (the "Commission") a registration statement
on Form S-1 (File No. 333-__________), including any related preliminary
prospectus included therein or in any amendment thereto prior to the
effectiveness thereof (the "Preliminary Prospectus"), for the registration of
the Public Securities under the 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 (the "Regulations") of
the Commission under the Act. The conditions for use of Form S-1 to register the
Offering under the Act, as set forth in the General Instructions to such Form,
have been satisfied. 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 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 containing
information permitted to be omitted therefrom at the time of effectiveness by
Rule 430A of the Regulations filed with the Commission pursuant to Rule 424 of
the Regulations) is hereinafter called the "Prospectus." For purposes of this
Agreement, "Time of Sale", as used in the Act, means 5:00 p.m., New York City
time, on the date of this Agreement. Prior to the Time of Sale, the Company
prepared a preliminary prospectus, dated ______ __, 2007, for distribution by
the Underwriters to prospective investors (the "Sale Preliminary Prospectus").
If the Company has filed, or is required pursuant to the terms hereof to file, a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional Securities (a "Rule 462(b) Registration Statement"),
then, unless otherwise specified, any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462(b) Registration Statement.
Other than a Rule 462(b) Registration Statement, which, if filed, becomes
effective upon filing, no other document with respect to the Registration
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Statement has heretofore been filed with the Commission. All of the Public
Securities have been registered under the Securities Act pursuant to the
Registration Statement or, if any Rule 462(b) Registration Statement is filed,
will be duly registered under the Securities Act with the filing of such Rule
462(b) Registration Statement. The Registration Statement has been declared
effective by the Commission on the date hereof. If, subsequent to the date of
this Agreement, the Company and the Representative have determined that at the
Time of Sale the Sale Preliminary Prospectus included an untrue statement of a
material fact or omitted a statement of material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading and have agreed in writing to provide an opportunity to
purchasers of the Firm Units to terminate their old purchase contracts and enter
into new purchase contracts, then the Sale Preliminary Prospectus will be deemed
to include any additional information available to purchasers at the time of
entry into the first such new purchase contract.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A (File Number ___-___________) providing for the
registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of the Units, the Common Stock and the Warrants. The
registration of the Units, Common Stock and Warrants under the Exchange Act has
been declared effective by the Commission on the date hereof.
2.2. No Stop Orders, Etc. Neither the Commission nor any state regulatory
authority has issued any order or threatened to issue any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or the
effectiveness of the Registration Statement or has instituted or, to the best of
the Company's knowledge, threatened to institute any proceedings with respect to
such an order.
2.3. Disclosures in Registration Statement.
2.3.1. Disclosure Representation. At the time the Registration
Statement, or any post effective amendment to the Registration Statement, became
effective, upon the filing or first use (within the meaning of the Regulations)
of the Prospectus and at all times subsequent thereto up to the Closing Date and
the Option Closing Date, if any, the Registration Statement and the Prospectus
contained or will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and did or will in all
material respects conform to the requirements of the Act and the Regulations.
Neither the Registration Statement nor any Preliminary Prospectus (including the
Sale Preliminary Prospectus) or the Prospectus, nor, in each case, any amendment
thereof or supplement thereto, on their respective dates, did, does or will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the case of any Preliminary Prospectus and the Prospectus, 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) or first used (within the
meaning of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission or first used (within the meaning of the
Regulations), such Preliminary Prospectus and any amendments thereof and
supplements thereto complied or will have been corrected in the Sale Preliminary
Prospectus and the Prospectus to comply in all material respects with the
6
applicable provisions of the Act and the Regulations and did not, does 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, the Sale Preliminary Prospectus or Prospectus or any amendment
thereof or supplement thereto, which information, it is agreed, shall consist
solely of the names of the several Underwriters and the subsections captioned
"Pricing of Securities" (first paragraph only) contained in the section of the
Prospectus entitled "Underwriting."
2.3.2. Disclosure of Agreements. The agreements and documents
described in the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus conform in all material respects to the descriptions thereof
contained therein and there are no agreements or other documents required to be
described in the Registration Statement, the Sale Preliminary Prospectus 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 Registration Statement, Preliminary Prospectus or the
Prospectus or attached as an exhibit thereto, or (ii) is material to the
Company's business or financial condition or results has been duly and validly
executed by the Company, is in full force and effect in all material respects
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments have been assigned by
the Company, and neither the Company nor, to the Company's knowledge, any other
party is in breach or default thereunder and, to 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 Company's
knowledge, performance by the Company 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 offered or sold by the Company or by or on behalf of, or for the
benefit of, any person or persons controlling, controlled by, or under common
control with the Company except as disclosed in the Registration Statement, the
Sale Preliminary Prospectus and the Prospectus.
2.3.4. Regulations. The disclosures in the Registration Statement,
the Preliminary Prospectus and the Prospectus concerning the effects of federal,
state and local regulation and any foreign law or regulation on the Company's
business and financial condition and results as currently contemplated fairly
summarize in all material respects and do not omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
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2.4. Changes after Dates in Registration Statement.
2.4.1. No Material Adverse Change. Except as stated in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus,
since the respective dates as of which information is given therein: (i) there
has been no material adverse change in the condition, financial or otherwise,
results of operations, business or prospects of the Company; (ii) there have
been no material transactions entered into by the Company, other than as
contemplated pursuant to this Agreement; (iii) no member of the Company's board
of directors or management has resigned from any position with the Company and
(iv) no event or occurrence has taken place which materially impairs, or would
likely materially impair, with the passage of time, the ability of the members
of the Company's board of directors or management to act in their capacities
with the Company as described in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus.
2.4.2. Recent Securities Transactions, Etc. Except as stated in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus,
subsequent to the respective dates as of which information is given 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 capital
stock.
2.5. Independent Accountants. Xxxxxxxxx Xxxx LLP ("Xxxxxxxxx Xxxx"), whose
report is filed with the Commission as part of the Registration Statement and
included in the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus, are independent registered public accountants as required by the Act
and the Regulations and the Public Company Accounting Oversight Board (including
the rules and regulations promulgated by such entity, the "PCAOB"). To the best
of the Company's knowledge, Xxxxxxxxx Kass is duly registered and in good
standing with the PCAOB. Xxxxxxxxx Xxxx has not, during the periods covered by
the financial statements included in the Registration Statement, the Sale
Preliminary Prospectus and 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; Statistical Data.
2.6.1. Financial Statements. The financial statements, including the
notes thereto and supporting schedules, included in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus fairly present the financial
position, cash flows and the results of operations of the Company at the dates
and for the periods to which they apply; such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved; and such supporting
schedules present fairly the information required to be stated therein. No other
financial statements or supporting schedules are required to be included or
incorporated by reference in the Registration Statement, the Sale Preliminary
Prospectus or the Prospectus. The Registration Statement, the Sale Preliminary
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Prospectus and the Prospectus disclose 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. There are no pro forma or as adjusted financial statements which
are required to be included in the Registration Statement, the Sale Preliminary
Prospectus or the Prospectus in accordance with Regulation S-X which have not
been included as so required.
2.6.2. Statistical Data. The statistical, industry-related and
market-related data included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus are based on or derived from sources which the
Company reasonably and in good faith believes are reliable and accurate, and
such data agree with the sources from which they are derived.
2.7. Authorized Capital; Options, Etc. The Company had at the date or
dates indicated in each of the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus, as the case may be, duly authorized, issued and
outstanding capitalization as set forth in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus. Based on the assumptions stated in
the Registration Statement, the Sale Preliminary Prospectus 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, the Sale Preliminary Prospectus and the Prospectus, on the date of
this Agreement and on the Closing Date and the Option Closing Date, if any,
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, or exchangeable or exercisable for, 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 securities.
2.8. Valid Issuance of Securities, Etc.
2.8.1. Outstanding Securities. All issued and outstanding securities
of the Company (including, without limitation, the Placement Securities) have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or similar contractual rights granted by the
Company. Such securities conform to all statements relating thereto contained in
the Registration Statement, the Sale Preliminary Prospectus and the Prospectus.
The offers and sales of the outstanding shares of Common Stock and Placement
Securities 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 reserved for issuance 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
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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, the Sale Preliminary
Prospectus and the Prospectus, as the case may be. 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 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. The shares of Common Stock issuable upon exercise of the
Representative's Purchase Option, the Representative's Warrants and the
Warrants, respectively, have been reserved for issuance upon the exercise of the
Representative's Warrants or the Warrants, as applicable, and when issued in
accordance with the terms thereof, will be duly and validly authorized, validly
issued, fully paid and non-assessable and the holders thereof are not and will
not be subject to personal liability by reason of being such holders.
2.8.3. Placement Warrants. The Placement Warrants 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 Placement 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 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. The
shares of Common Stock issuable upon exercise of the Placement Warrants have
been reserved for issuance upon the exercise of the Placement Warrants and, when
issued in accordance with the terms of the Placement Warrants, will be duly and
validly authorized, validly issued, fully paid and non-assessable, and the
holders thereof are not and will not be subject to personal liability by reason
of being such holders.
2.8.4. No Integration. Neither the Company nor any of its affiliates
has made any offer or sale of any securities which are required to be
"integrated" pursuant to the Act or the Regulations with the offer and sale of
the Public Securities pursuant to the Registration Statement.
2.9. Registration Rights of Third Parties. Except as set forth in the
Registration Statement, the Sale Preliminary Prospectus and 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.
10
2.10. Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.22 hereof), Representative's Purchase
Option, the Trust Agreement, the Service Agreement (as defined in Section 3.7.2
hereof), the Subscription Agreement (as defined in Section 2.23.2 hereof) and
the Escrow Agreement (as defined in Section 2.23.3 hereof) have been duly and
validly authorized by the Company and constitute 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 Service Agreement, the Subscription Agreement
and the Escrow Agreement, the consummation by the Company of the transactions
herein and therein contemplated (including the issuance of the Securities) and
the compliance by the Company with the terms hereof and thereof do not and will
not, with or without the giving of notice or the lapse of time or both: (i)
result in a breach of, or conflict with, any of the terms and provisions of, or
constitute a default under, or result in the creation, modification, termination
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company pursuant to the terms of any agreement or instrument to which the
Company is a party except pursuant to the Trust Agreement; (ii) result in any
violation of the provisions of the Certificate of Incorporation (the
"Certificate of Incorporation") or the bylaws ("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 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.
11
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
for the purposes described in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus. The disclosures in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus concerning the effects of
federal, state and local regulation and any foreign law or 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. Since its formation, the Company has conducted no business and has
incurred no liabilities other than in connection with and in furtherance of the
Offering as described in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus.
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 has obtained all consents, authorizations,
approvals and orders required in connection therewith. 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 as contemplated by this
Agreement, the Warrant Agreement, Representative's Purchase Option, the Trust
Agreement, the Service Agreement, the Subscription Agreement and the Escrow
Agreement and as contemplated by the Sale Preliminary Prospectus and Prospectus,
except those obtained or made under applicable federal and state securities laws
and the rules and regulations promulgated by the NASD.
2.14. D&O Questionnaires. All information contained in the questionnaires
(the "Questionnaires") completed by each of (i) the Company's officers and
directors immediately prior to the Offering (the "Directors/Officers") and (ii)
those persons listed in the Registration Statement as a special advisor
(collectively, the "Special Advisors"), and provided to the Underwriters, as
well as the biographies attached as an exhibit to his or her Insider Letter (as
defined in Section 2.23.1 hereof) is, to the best of the Company's knowledge,
true and correct and the Company is not aware that any information disclosed in
the Questionnaires completed by the Directors/Officers or Special Advisors is
inaccurate or incomplete.
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 Director/Officer or any Special Advisor which has not been disclosed in the
Registration Statement, the Questionnaires, the Sale Preliminary Prospectus and
the Prospectus.
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
or its business, assets, operations or financial condition or results.
12
2.17. No Contemplation of a Business Combination. Prior to the date
hereof, none of the Company, any Director/Officer or any Special Advisor had, or
as of the Closing, the Company and such Director/Officers, Special Advisors and
Initial Stockholders will have had: (a) any specific Business Combination under
consideration; or (b) any substantive interactions or discussions with any
target regarding a possible Business Combination.
2.18. Transactions Affecting Disclosure to NASD.
2.18.1. Except as described in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, there are no claims, payments,
arrangements, agreements or understandings relating to the payment of a
finder's, consulting or origination fee by the Company or any Director/Officer,
Special Advisor with respect to the sale of the Securities hereunder or any
other arrangements, agreements or understandings of the Company or, to the
Company's knowledge, any stockholders of the Company immediately prior to the
Offering (the "Initial Stockholders") that may affect the Underwriters'
compensation, as determined by the NASD.
2.18.2. The Company has not made any direct or indirect payments (in
cash, securities or otherwise) to: (i) any person, as a finder's fee, consulting
fee or otherwise, in consideration of such person raising capital for the
Company or introducing to the Company persons who raised or provided capital to
the Company; (ii) to any NASD member; or (iii) 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 the payment of $__________
to Maxim.
2.18.3. No officer, director, or beneficial owner of any class of
the Company's securities, including, without limitation, holders of securities
purchased in the Private Placement, whether debt or equity, registered or
unregistered, regardless of the time acquired or the source from which derived
(any such individual or entity, a "Company Affiliate"), is a member, a person
associated, or affiliated with a member of the NASD.
2.18.4. No Company Affiliate is an owner of stock or other
securities of any member of the NASD (other than securities purchased on the
open market).
2.18.5. No Company Affiliate has made a subordinated loan to any
member of the NASD.
2.18.6. No proceeds from the sale of the Public Securities or the
Placement Warrants will be paid to any NASD member, or any persons associated or
affiliated with a member of the NASD, except as specifically authorized herein.
2.18.7. Except with respect to the Representative, the Company has
not issued any warrants or other securities, or granted any options, directly or
indirectly to anyone who is a potential underwriter in the Offering or a related
person (as defined by NASD rules) of such an underwriter within the 180-day
period prior to the initial filing date of the Registration Statement.
13
2.18.8. No person to whom securities of the Company have been
privately issued within the 180-day period prior to the initial filing date of
the Registration Statement has any relationship or affiliation or association
with any member of the NASD.
2.18.9. No NASD member intending to participate in the Offering has
a conflict of interest with the Company. For this purpose, a "conflict of
interest" exists when a member of the NASD and its associated persons, parent or
affiliates in the aggregate beneficially own 10% or more of the Company's
outstanding subordinated debt or common equity, or 10% or more of the Company's
preferred equity. "Members participating in the Offering" include managing
agents, syndicate group members and all dealers which are members of the NASD.
2.18.10. Except with respect to the Representative in connection
with the Offering, the Company has not entered into any agreement or arrangement
(including, without limitation, any consulting agreement or any other type of
agreement) during the 180-day period prior to the initial filing date of the
Registration Statement, which arrangement or agreement provides for the receipt
of any item of value and/or the transfer or issuance of any warrants, options,
or other securities from the Company to an NASD member, any person associated
with a member (as defined by NASD rules), any potential underwriters in the
Offering and any related persons.
2.19. Foreign Corrupt Practices Act. None of the Company, any
Director/Officer, any Special Advisor 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 Company or the assets, business or operations of
the Company as reflected in any of the financial statements contained in the
Registration Statement, the Sale Preliminary Prospectus and 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. Patriot Act. Neither of the Company nor, to the Company's knowledge,
any Director/Officer or any Special Advisor or any other person acting on behalf
of the Company has violated: (i) the Bank Secrecy Act, as amended, (ii) the
Money Laundering Control Act of 1986, as amended, or (iii) the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and/or the rules and
regulations promulgated under any such law, or any successor law.
2.21. Officers' Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to Representative or Representative's
counsel shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
14
2.22. Warrant Agreement. The Company has entered into a warrant agreement
with respect to the Warrants, Representative's Warrants and the Placement
Warrants with AST substantially in the form filed as an exhibit to the
Registration Statement (the "Warrant Agreement"), providing for, among other
things, the payment of a warrant solicitation fee as contemplated by Section 3.9
hereof.
2.23. Agreements with Company Affiliates.
2.23.1. 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 therefore may be brought) annexed as exhibits to the Registration
Statement (the "Insider Letter"), pursuant to which each of the
Directors/Officers and Initial Stockholders of the Company agree to certain
matters, including but not limited to, certain matters described as being agreed
to by them under the "Proposed Business" section of the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus.
2.23.2. Subscription Agreement. Fuzu Xxxx, Xxxxx Baiping Xxxx,
Xxxxxx Nugawela, and Xxxxxxx Xxx, or entities controlled by them, have executed
and delivered a subscription agreement, annexed as an exhibit to the
Registration Statement (the "Subscription Agreement"), pursuant to which such
persons, among other things, have purchased an aggregate of 2,600,000 Placement
Warrants in the Private Placement. Pursuant to the Subscription Agreement, (i)
$2,500,000 of the proceeds from the sale of the Placement Warrants will be
deposited by the Company in the Trust Fund in accordance with the terms of the
Trust Agreement prior to the Closing, (ii) $100,000 shall be retained by the
Company for working capital requirements and (iii) such purchasers have waived
any and all rights and claims he or she may have to any proceeds, and any
interest thereon, held in the Trust Fund in respect of the Placement Securities
in the event a Business Combination is not consummated and the Trust Fund is
liquidated in accordance with the terms of the Trust Agreement.
2.23.3. Escrow Agreement. The Company has caused the
Directors/Officers and Initial Stockholders to enter into an escrow agreement
(the "Escrow Agreement") with AST (the "Escrow Agent") substantially in the form
filed as an exhibit to the Registration Statement whereby the Common Stock owned
by such parties will be held in escrow by the Escrow Agent, until the earlier
of: (i) the third anniversary of the Effective Date or (ii) the one-year
anniversary of a Business Combination. During such escrow period, such parties
shall be prohibited from selling or otherwise transferring such shares (except
(a) to spouses and children of such parties and trusts established for their
benefit, (b) after a Business Combination in a transaction whereby all the
outstanding shares of the Company are exchanged or converted into cash or
another entity's securities and (c) as otherwise set forth in the Escrow
Agreement) unless approved by the Company's public stockholders, but will retain
15
the right to vote such shares. The Escrow Agreement shall not be amended,
modified or otherwise changed without the prior written consent of the
Representative, such consent not to be unreasonably withheld.
2.24. Investment Management Trust Agreement. The Company has entered into
the Trust Agreement with respect to certain proceeds of the Offering and the
Private Placement substantially in the form filed as an exhibit to the
Registration Statement.
2.25. Covenants Not to Compete. No Director/Officer, Special Advisor or
Initial Stockholder 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 a Director/Officer, Special Advisor or
Initial Stockholder or employee 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. No relationship, direct or indirect,
exists between or among any of the Company or any Company Affiliate, on the one
hand, and any director, officer, shareholder, customer or supplier of the
Company, any Company Affiliate or any Underwriter, on the other hand, which is
required by the Act, the Exchange Act or the Regulations to be described in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus which
is not so described and described as required. There are no outstanding loans,
advances (except normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for the benefit of
any of the Directors/Officers or Initial Stockholders or any of their respective
family members, except as disclosed in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus. The Company has not extended or
maintained credit, arranged for the extension of credit, or renewed an extension
of credit, in the form of a personal loan to or for any director or officer of
the Company.
2.29. No Influence. The Company has not offered, or caused the
Underwriters to offer, the Units to any person or entity with the intention of
unlawfully influencing: (a) a customer or supplier of the Company or any Company
Affiliate to alter the customer's or supplier's level or type of business with
the Company or such affiliate or (b) a journalist or publication to write or
publish favorable information about the Company or any such affiliate.
2.30. Definition of "Knowledge". As used in herein, the term "knowledge of
the Company" (or similar language) shall mean the knowledge of the officers and
directors of the Company who are named in the Registration Statement, the Sale
Preliminary Prospectus or the Prospectus, with the assumption that such officers
and directors shall have made reasonable and diligent inquiry of the matters
presented.
16
2.31. Xxxxxxxx-Xxxxx. The Company is in material compliance with the
provisions of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations promulgated thereunder and related or similar rules and regulations
promulgated by any other governmental or self regulatory entity or agency that
are applicable to it as of the date hereof.
2.32. Quotation of the Public Securities on Bulletin Board. As of the
Effective Date, the Public Securities have been authorized for quotation on the
OTC Bulletin Board ("OTCBB") and, to the Company's knowledge, no proceedings
have been instituted or threatened which would affect, and no event or
circumstance has occurred which is reasonably likely to affect, the listing of
the Public Securities on the OTCBB.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1. Amendments to Registration Statement, the Sale Preliminary
Prospectus. The Company will deliver to the Representative, prior to filing or
use, any amendment of or supplement to the Registration Statement, the Sale
Preliminary Prospectus or Prospectus proposed to be filed or used on or after
the date of the Agreement and not file or use 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 or the Exchange 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 Sale Preliminary Prospectus and the Prospectus. If
(i) at any time when a prospectus relating to the Public Securities is required
to be delivered under the Act or the Exchange Act, (ii) any event shall have
occurred or any condition shall exist as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriters, the Registration
Statement, the Sale Preliminary Prospectus or 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 the case of the Sale Preliminary Prospectus and the
Prospectus, in light of the circumstances under which they were made) not
misleading, or (iii) if it is necessary during such period to amend the
Registration Statement or amend or supplement the Sale Preliminary Prospectus or
the Prospectus to comply with the Act or the Exchange Act, the Company will
notify the Representative promptly and prepare and file with the Commission,
subject to Section 3.1 hereof, an appropriate amendment to the Registration
Statement or amendment or supplement to the Sale Preliminary Prospectus and
Prospectus (at the expense of the Company) so as to correct such statement or
omission or effect such compliance.
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.
17
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 Public Securities under the provisions of the Exchange Act.
The Company will not deregister the Public Securities under the Exchange Act
without the prior written consent of the Representative.
3.2.4. Xxxxxxxx-Xxxxx Compliance. As soon as it is legally required
to do so, the Company shall take all actions necessary to obtain and thereafter
maintain material compliance with each applicable provision of the
Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations promulgated thereunder
and related or similar rules and regulations promulgated by any other
governmental or self regulatory entity or agency with jurisdiction over the
Company.
3.3. Blue Sky Filing. 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 and will make such notice filing in each of the states set
forth in the [______ full paragraph on page _____] of the pricing prospectus as
may be required in order to permit resales by holders thereof of the Public
Securities in such states, 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 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 a prospectus is required to be delivered (or would be required to be
delivered but for Rule 172) under the Act or the Exchange Act such number of
copies of each Sale Preliminary Prospectus and Prospectus and all amendments and
supplements to such documents as such Underwriters may reasonably request and,
as soon as the Registration Statement or any amendment thereof or supplement
thereto becomes effective, deliver to the Representative 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 become
and remain effective and will notify the Representative immediately and confirm
the notice in writing: (i) of the effectiveness of the Registration Statement
and any amendment thereto; (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, or any
post-effective amendment thereto or preventing or suspending the use of any
Preliminary Prospectus or the Prospectus 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, any Preliminary Prospectus or
18
Prospectus, subject to Section 3.1; (v) of the receipt of any comments or
request for any additional information from the Commission; and (vi) of the
happening of any event or existence of any condition during the period described
in Section 3.4 hereof that, in the judgment of the Company or its counsel, makes
any statement of a material fact made in the Registration Statement, the Sale
Preliminary Prospectus and/or the Prospectus untrue or that requires the making
of any changes in the Registration Statement, the Sale Preliminary Prospectus
and/or the Prospectus in order to make the statements therein (with respect to
the Prospectus and Sale Preliminary Prospectus, 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. Until the earlier of five years from
the Effective Date, or until such earlier date upon which the Company is
required to be liquidated, the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to review (but not
audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's Form 10-Q quarterly report and the mailing of quarterly
financial information to stockholders.
3.7. Affiliated Transactions.
3.7.1. Business Combinations. The Company will not consummate a
Business Combination with any entity which is affiliated with any
Director/Officer, Special Advisor or Initial Stockholder unless the Company
obtains an opinion from an independent investment banking firm that the Business
Combination is fair to the Company's stockholders from a financial perspective.
3.7.2. Administrative Services. The Company has entered into an
agreement (the "Service Agreement") with Xxxx Xxxx China Xxx Xxx Trading Co,
Ltd., an affiliate of Xx. Xxxx Xxxx, our principal stockholder, ("Xxxx Xxxx"),
in the form filed as an exhibit to the Registration Statement pursuant to which
Xxxx Xxxx will make available to the Company general and administrative
services, including office space, utilities, receptionist and secretarial
support for the Company's use for $7,500 per month, which shall be payable out
of the interest earned on the Trust Fund released to the Company.
3.7.3. Compensation. Except as set forth in this Section 3.7, the
Company shall not pay any Director/Officer, Special Advisor or 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, this
Offering or the consummation of a Business Combination; provided that the
Initial Stockholders shall be entitled to reimbursement from the Company for
their out-of-pocket expenses incurred on the Company's behalf which were made to
the Company prior to the Effective Date of the Registration Statement and
expenses incurred by them in connection with seeking and consummating a Business
Combination.
3.8. Secondary Market Trading and Standard & Poor's. The Company will
apply to be included in Standard and Poor's Daily News and Corporation Records
Corporate Descriptions for a period of five years from the consummation of the
19
Offering. Promptly after the consummation of the Offering, the Company shall
take such steps as may be necessary to obtain secondary market trading
exemptions for the Company's securities in any state requested by the
Representative, provided 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. The Company shall also take such other action as may be
reasonably requested by the Representative to obtain a secondary market trading
exemption in such other states as may be requested by the Representative.
3.9. Warrant Solicitation Fees. The Company hereby engages the
Representative, on a non-exclusive basis, as its agent for the solicitation of
the exercise of the Warrants. The Company will: (i) assist the Representative
with respect to such solicitation, if requested by the Representative and (ii)
at the Representative's request, provide the Representative, and direct the
Company's transfer and warrant agent to provide to the Representative, 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 the Representative five percent (5%) of the exercise price of the Warrants,
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 the Representative solicited his exercise. The
Company agrees to disclose the arrangement to pay such solicitation fees to
Maxim 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 upon which the Company is required to
be liquidated, the Company will furnish to the Representative 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; and (v) such
additional documents and information with respect to the Company and the affairs
of any future subsidiaries of the Company as the Representative may from time to
time reasonably request; provided the Representative shall sign, if requested by
the Company, a Regulation FD compliant confidentiality agreement which is
reasonably acceptable to the Representative and its counsel in connection with
the Representative's receipt of such information. Documents filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("XXXXX") shall be deemed to have been delivered to the Representative
pursuant to this section.
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3.11.2. Transfer Sheets. For a period of five years following the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company shall retain a transfer and warrant agent acceptable
to the Representative (the "Transfer Agent") and during the two (2) year period
following the Closing Date, 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 subscriptions to the daily, weekly and
monthly consolidated transfer sheets of the Transfer Agent and DTC. AST is
acceptable to the Underwriters.
3.11.3. Secondary Market Trading Survey. Until such time as the
later of (i) the Public Securities being listed or quoted, as the case may be,
on the New York Stock Exchange, the American Stock Exchange ("AMEX") or the
Nasdaq National Market, or until such earlier time upon which the Company is
required to be liquidated or (ii) upon consummation of a Business Combination,
the Company shall engage Ellenoff Xxxxxxxx & Schole LLP ("Ellenoff"), for an
initial fee of $5,000, plus expenses, 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 for an additional
$5,000 per quarter, plus expenses, 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 (the "Secondary Market Trading Survey"), a
copy of which will be provided to the Company and its counsel.
3.11.4. Trading Reports. During such time as the Public Securities
are quoted on the OTCBB (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 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. In addition to the requirements of the
preceding sentence, for a period of two years from the Closing Date, the
Company, at its expense, shall provide the Representative a subscription to the
Company's weekly Depository Transfer Company Security Position Reports.
3.12. Disqualification of Form S-1 and S-3. For a period equal to seven
years from the date hereof, the Company will not take any action or actions, or
fail to take any action, which may prevent or disqualify the Company's use of
Form S-1 or S-3 (or other appropriate form) for the registration of the
Warrants, the Representative's Warrants and the shares of Common Stock issuable
upon exercise 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 prior to each such date, all fees and 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 Prospectus and the Prospectus 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)
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the printing, engraving, issuance and delivery of the Units, Representative's
Purchase Option, the shares of Common Stock and the Warrants included in the
Units and the Representative's Units, including any transfer or other taxes
payable thereon; (iii) the listing and 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 in an amount equal to $35,000 and disbursements
for the Representative's counsel retained for such purpose, and a fee of $5,000
payable to the Representative's counsel for the preparation of the Secondary
Market Trading Survey; (iv) filing fees incurred in registering the Offering
with the NASD (including all COBRADesk fees); (v) costs of placing "tombstone"
advertisements in The Wall Street Journal, The New York Times and a third
publication to be selected by the Representative, in an amount not to exceed
$40,000; (vi) fees and disbursements of the transfer and warrant agent; (vii)
the Company's expenses associated with "due diligence" meetings arranged by the
Representative; (viii) the preparation, binding and delivery of leather bound
volumes in quantity, 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; (ix) all costs
and expenses associated with "road show" marketing and "due diligence" trips for
the Company's management to meet with prospective investors, including without
limitation, all travel, food and lodging expenses associated with such trips;
and (x) all other Company costs and expenses which are not otherwise
specifically provided for in this Section 3.13.1. 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 above to be
paid by the Company to the Representative and others, as agreed to by the
Company in writing. The Company has agreed to pay and has paid the sum of
$[______] for a portion of the fees and expenses of an investigative search firm
to conduct an investigation of the principals of the Company selected by the
Representative, which amount is included in the total underwriting compensation
for the transaction contemplated hereby.
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 Representatives a nonaccountable expense allowance
equal to one percent (1%) of the gross proceeds received by the Company from the
sale of the Firm Units (of which $________ has been previously paid) by
deduction from the proceeds of the Offering contemplated herein.
3.13.3. Fee on Business Combination. Upon consummation of a Business
Combination, the Company and the Underwriters agree that in addition to the
expenses payable pursuant to Section 3.13.1, the Company will pay to the
Representative the Contingent Discount plus interest as described in Section 1.5
hereof.
3.13.4. Fee on Termination of Offering. Upon termination of the
Offering, except as a result of the Representative's or any Underwriter's
material breach or default with respect to any of its material obligations as
described in this Agreement, the Company shall: (A) reimburse the Representative
for, or otherwise pay and bear, the expenses and fees to be paid and borne by
the Company as provided for in Section 3.13.1 above, as applicable, and (B)
reimburse the Representative for the full amount of its accountable out-of
pocket expenses actually incurred to such date (which shall include, but shall
not be limited to, all fees and disbursements of the Representative's counsel,
travel, lodging and other "road show" expenses, mailing, printing and
22
reproduction expenses, and any expenses incurred by the Representative in
conducting its due diligence), less the $__________ previously paid to Maxim in
reimbursement for such expenses. If applicable, and solely in the event of a
termination of this Offering, the Representative shall refund to the Company any
portion of the advance previously received by the Representative which is in
excess of the accountable out-of-pocket expenses actually incurred to such date
by the Representative.
3.14. Application of Net Proceeds. The Company will apply the net proceeds
from the Private Placement and 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) and 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.
3.16.1. Business Combination. 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 or the Representative, if they are engaged,
will provide the following information ("Merger Information") to the NASD (and
Representative, if they are not engaged) 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 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. Upon the Company's delivery
of the Merger Information to the Representative, the Company hereby expressly
authorizes the Representative to provide such information directly to the NASD
as a result of representations the Representative have made to the NASD in
connection with the Offering.
3.16.2. Broker/Dealer. In the event the Company or a Company
affiliate intends to register as a broker/dealer, merge with or acquire a
registered broker/dealer, or otherwise become a member of NASD, it shall
promptly notify the NASD.
3.17. Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders (without the consent of the
Representative) has taken or will take, directly or indirectly, any action
designed to or that has constituted or that might reasonably be expected to
cause or result in, under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Units.
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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 Xxxxxxxxx Xxxx or other independent public accountants
reasonably acceptable to the Representative.
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 (the "Audited Financial Statements") reflecting the
receipt by the Company of the proceeds of the Offering and the Private
Placement, as well as the proceeds from the exercise of the Over-allotment
Option if such exercise has occurred on the date of the Prospectus. Within three
(3) trading days of the Effective Date, the Company will file a Current Report
on Form 8-K with the Commission, which Report shall contain the Company's
Audited Financial Statements.
3.21. NASD. The Company shall advise the NASD if it is aware that any 5%
or greater stockholder of the Company becomes an affiliate or associated person
of an NASD member participating in the distribution of the Company's Public
Securities.
3.22. Corporate Proceedings. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction of 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 or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act
as set forth in the Trust Agreement and disclosed in the Registration Statement,
the Sale Preliminary Prospectus and 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
underwriters in the Offering. The Company shall supply the Representative with a
draft of the Business Combination Announcement and provide the Representative
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with reasonable advance opportunity to comment thereon. The Company will not
place the Business Combination Announcement without the final approval of the
Representative, which approval will not be unreasonably withheld.
3.25. Colorado Trust Filing. In the event the Securities are registered in
the State of Colorado, the Company will cause a Colorado Form ES to be filed
with the Commissioner of the State of Colorado no less than 10 days prior to the
distribution of the Trust Fund in connection with a Business Combination and
will do all things necessary to comply with Section 00-00-000 and Rule 51-3.4 of
the Colorado Securities Act. The Representative will notify the Company if it
has sold any Units purchased hereunder in Colorado within five days after the
Closing Date and each Option Closing Date, if any.
3.26. Press Releases. The Company agrees it will not issue press releases
or engage in any other publicity without the Representative's prior written
consent for a period of 90 days after the Closing Date.
3.27. Key-Man Insurance. Prior to the consummation of the Business
Combination, the Company will obtain key person life insurance with an insurer
rated at least AA or better in the most recent addition of "Best's Life Reports"
in the aggregate amount of $2,000,000 on the life of Xxxx Xxxx, or other key
management to be agreed upon by the Company and the Representative prior to the
Closing Date. Such insurance shall be maintained in full force and effect for a
period of three years from the consummation of the Business Combination. The
Company shall be the sole beneficiary of such policy.
3.28. Electronic Prospectus. The Company shall cause to be prepared and
delivered to the Representative, at its expense, within one Business Day from
the effective date of this Agreement, an Electronic Prospectus to be used by the
Underwriters in connection with the Offering. As used herein, the term
"Electronic Prospectus" means a form of prospectus, and any amendment thereof or
supplement thereto, that meets each of the following conditions: (i) it shall be
encoded in an electronic format, satisfactory to the Representative, that may be
transmitted electronically by the other Underwriters to offerees and purchasers
of the Units for at least the period during which a prospectus relating to the
Units is required to be delivered under the Securities Act; (ii) it shall
disclose the same information as the paper prospectus and prospectus filed
pursuant to XXXXX, except to the extent that graphic and image material cannot
be disseminated electronically, in which case such graphic and image material
shall be replaced in the electronic prospectus with a fair and accurate
narrative description or tabular representation of such material, as
appropriate; and (iii) it shall be in or convertible into a paper format or an
electronic format, satisfactory to the Representative, that will allow
recipients thereof to store and have continuously ready access to the prospectus
at any future time, without charge to such recipients (other than any fee
charged for subscription to the Internet as a whole and for on-line time). The
Company hereby confirms that it has included or will include in the Prospectus
filed pursuant to XXXXX or otherwise with the Commission and in the Registration
Statement at the time it was declared effective an undertaking that, upon
receipt of a request by an investor or his or her representative within the
period when a prospectus relating to the Units is required to be delivered under
the Securities Act, the Company shall transmit or cause to be transmitted
promptly, without charge, a paper copy of the Prospectus.
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3.29. Reservation of Shares. The Company will reserve and keep available
that maximum number of its authorized but unissued securities which are issuable
upon exercise of the Warrants, Representative's Purchase Option,
Representative's Warrants and the Placement Warrants outstanding from time to
time.
3.30. Private Placement Proceeds. Immediately upon establishment of the
Trust Fund and prior to the Closing, the Company shall deposit $2,500,000 of the
proceeds from the Private Placement in the Trust Fund and shall provide the
Representative with evidence of the same.
3.31. No Amendment to Charter.
(i) The Company covenants and agrees that it will not seek to amend
or modify provisions (A)-(G) of Article Fifth of its Certificate of
Incorporation.
(ii) The Company acknowledges that the purchasers of the Firm Units
and Option Units in this Offering shall be deemed to be third party
beneficiaries of Section 3.31 of this Agreement.
(iii) The Underwriters and the Company specifically acknowledge that
they may not waive this Section 3.31 under any circumstances.
3.32. Board Committees. As of the Effective Date, the Company's Board of
Directors shall have validly appointed an audit committee and the Company's
Board of Directors and audit committee shall have adopted a charter. Neither the
Company's Board of Directors nor the audit committee thereof has been informed,
nor is any director of the Company aware, of: (i) any significant deficiencies
and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal control over financial reporting.
3.33. Future Financings. The Company agrees that neither it, nor any
successor or subsidiary of the Company, will consummate any public or private
equity or debt financing prior to or in connection with the consummation of a
Business Combination, unless all investors in such financing expressly waive, in
writing, any rights in or claims against the Trust Fund.
3.34. Board Advisor. The Company agrees that it will, upon completion of
the proposed public offering contemplated herein, for a period of no less than
two (2) years, engage a designee of the Representative as an advisor ("Advisor")
to its Board of Directors where such Advisor shall attend meetings of the Board,
receive all notices and other correspondence and communications sent by the
Company to members of its Board of Directors provided, that such Advisor shall
not be entitled to any compensation, other than reimbursement for all costs
incurred in attending such meetings including, food, lodging, and
transportation. The Company further agrees that, during said two (2) year
period, it shall schedule no less than four (4) formal and "in person" meetings
of its Board of Directors in each such year at which meetings such Advisor shall
be permitted to attend as set forth herein; said meetings shall be held
quarterly each year and ten (10) days advance notice of such meetings shall be
given to the Advisor. Further, during such two (2) year period, the Company
26
shall give notice to the Representative with respect to any proposed
acquisitions, mergers, reorganizations or other similar transactions. The
Company shall indemnify and hold such Advisor harmless against any and all
claims, actions, damages, costs and expenses, and judgments arising solely out
of the attendance and participation of such Advisor at any such meeting
described herein, and, if the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it shall, if
possible, include such Advisor as an insured under such policy.
4. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Units and the Representative's 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 City
time, on the date of this Agreement or such later date and time as shall be
consented to in writing by Representative, and, at each of the Closing Date and
the Option Closing Date, if any, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for the
purpose shall have been instituted or shall be pending or contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel for the Underwriters.
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 Commission Stop Order. At each of the Closing Date and the
Option Closing Date, the Commission has not issued any order or threatened to
issue any order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or any part thereof, and has not instituted or threatened to
institute any proceedings with respect to such an order.
4.1.4. No Blue Sky Stop Orders. No order suspending the sale of the
Units in any jurisdiction designated by Representative pursuant to Section 3.3
hereof shall have been issued on either the Closing Date or any Option Closing
Date and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2. Company Counsel Matters.
4.2.1. Effective Date Opinion of Counsel. On the Closing Date, the
Representative shall have received the favorable opinion of Xxxxx & Xxx Xxxxxx
LLP ("EVW"), counsel to the Company, dated the Closing Date, addressed to the
Representative and in form and substance satisfactory to the Representative to
the effect that:
27
(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, with full power and authority to own its properties and conduct
its business as described in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus. The Company is duly qualified and licensed and in
good standing as a foreign corporation each state or jurisdiction in which it is
required to be so qualified and licensed, except where the failure to qualify
would not have a material adverse effect on the Company, its business or assets;
operations or financial conditions or results.
(ii) The Company's authorized equity capitalization is as set forth
in the Sale Preliminary Prospectus and the Prospectus; the capital stock of the
Company conforms to the description thereof contained in the Sale Preliminary
Prospectus and the Prospectus. All issued and outstanding securities of the
Company (including, without limitation, the Placement Securities) 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 and Placement Securities were at all relevant times
either registered under the Act or exempt from such registration requirements.
The authorized and outstanding capital stock of the Company is as set forth in
the Sale Preliminary Prospectus and the Prospectus. The Units, the Common Stock
and the Warrants conform in all material respects to the descriptions thereof
contained in the Registration Statement, the Sale Preliminary Prospectus and 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 or, to such
counsel's knowledge, similar rights that entitle or will entitle any person to
acquire any security from the Company upon issuance or sale thereof. When
issued, Representative's Purchase Option, 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 Representative's Purchase
Option, Representative's Warrants and Warrants, when issued, in each case, will
be 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 United States 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. A sufficient number of shares of Common
Stock have been reserved for issuance upon exercise of Representative's Purchase
Option, Representative's Warrants and the Warrants. The shares of Common Stock
underlying the Representative's Purchase Option, Representative's Warrants and
the Warrants will, upon their respective exercise and payment of the exercise
price thereof, be duly and validly issued, fully paid and non-assessable and
will not have been issued in violation of or subject to, to such counsel's
knowledge, preemptive or similar rights that entitle or will entitle any person
to acquire, to such counsel's knowledge, any securities from the Company upon
issuance thereof.
28
(iv) The Placement Warrants 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
Placement 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 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. A sufficient number
of shares of Common Stock have been reserved for issuance upon exercise of the
Placement Warrants. The shares of Common Stock underlying the Placement Warrants
will, upon exercise of the Placement Warrants and payment of the exercise price
thereof, be duly and validly issued, fully paid and non-assessable and will not
have been issued in violation of or subject to, to such counsel's knowledge,
preemptive or similar rights that entitle or will entitle any person to acquire
any securities from the Company upon issuance thereof.
(v) The Company has full corporate right, power and authority to
execute and deliver this Agreement, the Warrant Agreement, the Service
Agreement, the Trust Agreement, the Subscription Agreement, the Escrow Agreement
and Representative's Purchase Option, and to perform its obligations thereunder,
and all corporate action required to be taken for the due and proper
authorization, execution and delivery of this Agreement, the Warrant Agreement,
the Service Agreement, the Trust Agreement, the Subscription Agreement, the
Escrow Agreement and Representative's Purchase Option has been duly and validly
taken.
(vi) Based upon certificates provided by the Initial Stockholders,
each Insider Letter, the Subscription Agreement and the Escrow Agreement have
been duly authorized, executed and delivered by the Initial Stockholders (or, if
applicable, their affiliates) party thereto and constitute the valid and binding
obligations of such Initial Stockholders enforceable against them 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.
(vii) This Agreement, the Warrant Agreement, the Service Agreement,
the Trust Agreement, the Subscription Agreement, the Escrow Agreement and
Representative's Purchase Option have each been duly and validly authorized and,
when executed and delivered by the Company, 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 United States 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.
29
(viii) The execution, delivery and performance of this Agreement,
the Warrant Agreement, Representative's Purchase Option, the Escrow Agreement,
the Trust Agreement, the Subscription Agreement and the Service 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) conflict with, or result in
a breach of, any of the terms or provisions of, or constitute a default under,
or result in the creation or modification of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company pursuant to
the terms of, any mortgage, deed of trust, note, indenture, loan, contract,
commitment or other agreement or instrument filed as an exhibit to the
Registration Statement, (b) result in any violation of the provisions of the
Certificate of Incorporation or the Bylaws of the Company, or (c) violate any
statute, rule or regulation or, to such counsel's knowledge, any judgment, order
or decree applicable to the Company of any court, domestic or foreign, or of any
federal, state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets.
(ix) The Registration Statement, each Sale Preliminary Prospectus
and the Prospectus and any 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, the Sale Preliminary Prospectus and the Prospectus.
(x) 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. Any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b).
(xi) To such counsel's knowledge, there is no action, suit or other
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 that is not so described. To such
counsel's knowledge, there is no franchise, contract or other document of a
character required to be described in the Registration Statement, the Sale
Preliminary Prospectus or the Prospectus, or to be filed as an exhibit to the
Registration Statement, which is not described or filed as required.
(xii) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any judicial,
regulatory or other legal or governmental agency or body is required for the
execution, delivery and performance by the Company of the Underwriting Agreement
or consummation by the Company of the transactions contemplated by the
Underwriting Agreement, the Registration Statement, the Sale Preliminary
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Prospectus and the Prospectus, except for (1) such as may be required under
state securities or blue sky laws in connection with the purchase and
distribution of the Units by the Underwriters (as to which such counsel need
express no opinion), (2) such as have been made or obtained under the Securities
Act and (3) such as have been made or obtained under the NASD regulations (as to
which counsel need express no opinion).
(xiii) The statements under the captions "Proposed
Business--Comparison to Offerings of Blank Check Companies" and "Description of
Securities" and Item 14 of Part II of the Registration Statement and the Sale
Preliminary Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings.
(xiv) The Units, Common Stock and Warrants are duly authorized for
quotation on the OTCBB.
(xv) Except as set forth in the Sale Preliminary Prospectus and the
Prospectus, no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement pursuant to the
Certificate of Incorporation or the Bylaws of the Company or, to the best of
such counsel's knowledge, pursuant to any agreement or instrument of the
Company.
(xvi) The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as defined in
the Investment Company Act.
The opinion of counsel shall further include a statement to the
effect that 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 Sale Preliminary Prospectus, 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, Preliminary Prospectus and the Prospectus (except as otherwise set
forth in this opinion), nothing has come to the attention of such counsel which
lead them to believe that either the Registration Statement, Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, as of the
date of such opinion, or in the case of the Sale Preliminary Prospectus, as of
the date thereof, 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 the financial statements and schedules and other financial and
statistical data included in the Registration Statement, the Sale Preliminary
Prospectus or the Prospectus).
4.2.2. Option Closing Date Opinion of Counsel. On the Option Closing
Date, if any, the Representative shall have received the favorable opinion of
EVW, dated the Option Closing Date, addressed to the Representative and in form
and substance reasonably satisfactory to counsel to the Representative,
confirming as of the Option Closing Date, the statements made by EVW in its
opinion delivered on the Closing Date.
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4.2.3. Reliance. In rendering such opinion, such counsel may rely:
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
the Representative) of other counsel reasonably acceptable to the
Representative, familiar with the applicable laws; and (ii) as to matters of
fact, to the extent they deem proper, on certificates or other written
statements of officers of the Company and officers of departments of various
jurisdiction having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to the Underwriters' counsel if requested. The
opinion of counsel for the Company and any opinion relied upon by such counsel
for the Company shall include a statement to the effect that it may be relied
upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.
4.3. Comfort Letter. At the time this Agreement is executed, and at each
of the Closing Date and the Option Closing Date, if any, Representative shall
have received a letter, addressed to the Representative of the Underwriters 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 Representative from Xxxxxxxxx Xxxx dated, respectively, as of the date of
this Agreement and as of the Closing Date and such Option Closing Date:
(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 Registration Statement, the Preliminary Prospectus and 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, the Sale Preliminary Prospectus
and the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and the applicable Regulations
thereunder;
(iii) Stating that, on the basis of a limited review which included
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, the
sale Preliminary Prospectus and the Prospectus 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, Sale Preliminary Prospectus and the Prospectus; (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 30, 2007 unaudited balance sheet
included in the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus, or if there was any decrease, setting forth the amount of such
decrease;
32
(iv) Stating 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 Registration Statement,
the Sale Preliminary Prospectus and the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of the
Company and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement;
(v) Stating they have not, since inception, provided the Company's
management with any written communication in accordance with PCAOB Interim
Auditing Standards AU Section 325 "Communications about Control Deficiencies in
an Audit of Financial Statements"; and
(vi) Statements as to such other matters incident to the transaction
contemplated hereby as Representative 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 such 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 such Option Closing Date, as the case may be,
and that the conditions set forth in this Agreement have been satisfied as of
such date and that, as of the Closing Date and the Option Closing Date, as the
case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct. In addition, the Representative will have
received such other and further certificates of officers of the Company as the
Representative may reasonably request.
4.4.2. Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary or Assistant Secretary of the
Company, dated the Closing Date or such Option Closing Date, as the case may be,
respectively, certifying: (i) that the Certificate of Incorporation and Bylaws
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 Offering and the
Private Placement 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.
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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 in the condition, results, 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, the Sale
Preliminary Prospectus and Prospectus; (ii) no action, suit or proceeding, at
law or in equity, shall have been pending or threatened against the Company, any
Company Affiliate 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, the Sale Preliminary Prospectus 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, the Sale Preliminary Prospectus and the
Prospectus and any amendments thereof or supplements thereto shall contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and none of the Registration
Statement, the Sale Preliminary Prospectus or the Prospectus, nor any amendment
thereof or supplement thereto, shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the Sale Preliminary
Prospectus or Prospectus, 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 Service Agreement,
all of the Insider Letters, the Subscription Agreement and a lock-up letter from
Gemore, substantially in the form attached hereto as Exhibit A-1, and from each
of the Directors/Officers and Initial Stockholders other than Gemore,
substantially in the form attached hereto as Exhibit A-2.
4.6.2. Closing Date Deliveries. On the Closing Date, the Company
shall have delivered to the Representative, and its designees, executed copies
of the Representative's Purchase Option.
4.7. Secondary Market Trading Survey. On the Closing Date, the
Representative and the Company shall have received the Secondary Market Trading
Survey from Ellenoff.
5. Indemnification.
5.1. Indemnification of Underwriters.
5.1.1. General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters and each
dealer selected by the Representative that participates in the offer and sale of
the Units and each of their respective directors, officers and employees and
each person, if any, who controls any such Underwriter or dealer ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, and its counsel, against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any and all legal or
34
other expenses reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever,
whether arising out of any action between any of the Underwriters and the
Company or between any of the Underwriters and any third party or otherwise), as
incurred, to which they or any of them may become subject under the Act, the
Exchange Act or any other federal, state or local statute, law, rule, regulation
or ordinance or at common law or otherwise or under the laws, rules and
regulation 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) any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included Public Securities and in which the Representative acts as an
underwriter 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 Units under the securities laws thereof or filed with the
Commission, any state securities commission or agency, the OTCBB or 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 case of any Preliminary Prospectus or the Prospectus, in the
light of the circumstances under which they were made) not misleading, unless
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company with respect to an Underwriter by
the Representative expressly for use in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment thereof or
supplement thereto, or in any application, as the case may be, which furnished
written information, it is expressly agreed, consists solely of the information
described in the last sentence of Section 2.3.1. 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
Sale Preliminary Prospectus, the Registration Statement, or the Prospectus.
5.1.2. Procedure. If any action is brought against an Underwriter or
controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter 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 approval of such Underwriter, which will not be unreasonably
withheld) and payment of actual expenses. Such Underwriter 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 or such 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; (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 a
conflict may arise between the positions of the indemnified and indemnifying
parties or 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 Representative may assume the defense of such indemnified parties and the
reasonable fees and expenses of not more than one additional firm of attorneys
(in addition to local counsel) selected by the Representative shall be borne by
the Company. Notwithstanding anything to the contrary contained herein, if the
Representative 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.
35
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 each person, if any, who controls 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 Sale Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment thereof 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 the Representative expressly for use in such Sale
Preliminary Prospectus, the Registration Statement, or the Prospectus, or any
amendment thereof or supplement thereto or in any such application, which
furnished written information, it is expressly agreed, consists solely of the
information described in the last sentence of Section 2.3.1. In case any action
shall be brought against the Company or any other person so indemnified based on
any Sale Preliminary Prospectus, the Registration Statement, or the Prospectus,
or any amendment thereof or supplement thereto or any application, and in
respect of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the several Underwriters by the provisions of Section 5.1.2.
5.3. Contribution.
5.3.1. Contribution Rights. In order to provide for just and
equitable contribution 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: (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Units pursuant to this Agreement or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
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
36
("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.
5.3.3. Relative Benefits. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in connection
with the offering of the Units pursuant to this Agreement shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the Units pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters, in
each case as set forth on the cover of the Prospectus, bear to the aggregate
initial public offering price of the Securities as set forth on the cover of the
Prospectus.
5.3.4. Relative Fault. The relative fault of the Company on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
5.3.5. Equitable Considerations. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 5.3 were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 5.3. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred to
above in this Section 5.3 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
5.3.6. Limitation on Underwriters' Contributions. Notwithstanding
the provisions of this Section 5.3, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Units underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of any such untrue or alleged untrue statement or
37
omission or alleged omission. The Underwriters' respective obligations to
contribute pursuant to this Section 5.3 are several in proportion to the number
of Firm Units set forth opposite their respective names in Schedule A hereto and
not joint.
5.3.7. Fraudulent Misrepresentations. No person guilty of 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.
5.3.8. Others Included in Contribution Rights. For purposes of this
Section 5.3, each person, if any, who controls an Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and each
Underwriter's Affiliates, dealers and selling agents shall have the same rights
to contribution as such Underwriter, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Company.
6. Default by an Underwriter.
6.1. Default Not Exceeding 10% of Firm Units or Option Units. If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the Over-allotment Option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
6.2. Default Exceeding 10% of Firm Units or Option Units. In the event
that the default addressed in Section 6.1 above relates to more than 10% of the
Firm Units or Option Units, Representative may in their discretion arrange for
themselves or for other 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, the Representative does 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 Representative to purchase said Firm Units or Option Units on such terms. In
the event that neither Representative 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 the Representative or the Company
without liability on the part of the Company (except as provided in Sections
3.12 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, the Representative or the Company shall have the right to postpone
38
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, the Preliminary
Prospectus and/or the Prospectus, as the case may be, or in any other documents
and arrangements, and the Company agrees to file promptly any amendment to, or
to supplement, the Registration Statement, the Preliminary Prospectus and/or the
Prospectus, as the case may be, 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. Additional Covenants.
7.1. Additional Shares or Options. The Company hereby agrees that until
the Company consummates a Business Combination, it shall not (i) issue any
shares of Common Stock or any options, warrants, rights or other securities
convertible into, or exchangeable or exercisable for, shares of 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 other
than the Public Securities and the Placement Warrants, or (ii) file any
registration statement with respect to the offer and sale of any of the
foregoing.
7.2. Trust Fund Waiver Acknowledgments. The Company hereby agrees that it
will not commence its due diligence investigation of any operating business or
businesses which the Company seeks to acquire (each, a "Target Business") or
obtain the services of any vendor unless and until such Target Business or
vendor acknowledges in writing, whether through a letter of intent, memorandum
of understanding or other similar document (and subsequently acknowledges the
same in any definitive document replacing any of the foregoing), that (a) it has
read the Prospectus and understands that the Company has established the Trust
Fund, initially in an amount of $40,000,000 (without giving effect to any
exercise of the Over-allotment Option) for the benefit of the Public
Stockholders and that, except for a portion of the interest earned on the
amounts held in the Trust Fund, the Company may disburse monies from the Trust
Fund only (i) to the Public Stockholders in the event of the conversion of their
shares or the dissolution and liquidation of the Trust Fund as part of the
Company's plan of dissolution and liquidation 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 of 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. The foregoing letters shall substantially be in the
form attached hereto as Exhibit B and Exhibit C, respectively. Furthermore, each
officer and director of the Company shall execute a waiver letter in the form
attached hereto as Exhibit D.
7.3. 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 Company Affiliate, Initial Stockholder and the
Representative or the Subscription Agreement and will not allow any amendments
to, or waivers of, such Insider Letters or the Subscription Agreement without
the prior written consent of the Representative.
39
7.4. 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. Subject to
Section 3.31, prior to the consummation of a Business Combination, the Company
will not amend its Certificate of Incorporation or Bylaws without the prior
written consent of the Representative.
7.5. 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 the Offering was registered such information as may be
requested by such state.
7.6. Acquisition/Liquidation Procedure. (a) 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
"Termination Date"), the Company shall take all action necessary to dissolve the
Corporation and liquidate the Trust Fund to holders of IPO Shares (as defined
below) as soon as reasonably practicable, and after approval of the Company's
stockholders and subject to the requirements of the Delaware General Corporation
Law (the "GCL"), including the adoption of a resolution by the Company's Board
of Directors, prior to such Termination Date, pursuant to Section 275(a) of the
GCL, which shall deem the dissolution of the Company advisable and cause to be
prepared such notices as are required by Section 275(a) of the GCL as promptly
thereafter as possible. If the Company does not consummate a Business
Combination by the Termination Date, the Company shall, with respect to any plan
of dissolution and liquidation, cause the Company's Board of Directors to
convene, adopt a plan of dissolution and liquidation and promptly prepare and
file a proxy statement with the Securities and Exchange Commission setting out
the plan of dissolution and liquidation. If the Company seeks approval from its
stockholders to consummate a Business Combination within 90 days of the
expiration of 24 months from the Effective Date, the proxy statement related to
such Business Combination will state that a vote of the stockholders not to
approve the Business Combination will constitute a vote to dissolve and
liquidate the Company. If no proxy statement seeking the approval of the
stockholders for a Business Combination has been filed within 30 days prior to
the date which is 24 months from the Effective Date, the Company shall cause its
Board of Directors, prior to such date, to convene and adopt a plan of
dissolution and liquidation and on such date file a proxy statement with the
Securities and Exchange Commission seeking stockholder approval for such plan.
Upon liquidation of the Trust Fund, the Company will distribute to all holders
of IPO Shares an aggregate sum equal to the Company's "Net Assets." The
Company's "Net Assets" means the Company's book value, as determined by the
Company and approved by its independent accountant. In no event, however, will
the Company's Net Assets be less than the amount in the Trust Account, inclusive
of any net interest income (after payment of, or provision for applicable taxes)
thereon except to the extent there are creditors' claims not satisfied by
40
amounts outside the Trust Account. Only holders of IPO Shares (as defined below)
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. There will be no distribution from the Trust Account with
respect to the Warrants, which will expire worthless if the Company is
liquidated. With respect to any vote for any plan of dissolution and liquidation
recommended by the Company's Board of Directors, the Company shall use its best
efforts to cause all of the Company Affiliates and Initial Stockholders to vote
the shares of Common Stock owned by them in favor of such plan of dissolution
and liquidation.
(b) With respect to the Business Combination Vote, the Company shall
use its best efforts to cause all of the Company Affiliates and Initial
Stockholders to vote the shares of Common Stock owned by them immediately prior
to this Offering in accordance with the majority of the IPO Shares voted by the
holders of the IPO Shares in connection with the Business Combination Vote. At
the time the Company seeks approval of any potential Business Combination, the
Company will offer each of the holders of the Company's Common Stock issued in
this Offering (the "IPO Shares") the right to convert their IPO Shares at a per
share price equal to $10.00 (the "Conversion Price"). If holders of less than
35% in interest of the Company's IPO Shares elect to convert their IPO Shares
into cash at the Conversion Price, the Company may proceed with such Business
Combination. In any such event, the Company will convert IPO Shares into cash at
the Conversion Price from those holders of IPO Shares who affirmatively
requested such conversion and who voted against the Business Combination. If
holders of 35% or more in interest of the IPO Shares, who vote against approval
of any potential Business Combination, elect to convert their IPO Shares into
cash at the Conversion Price, the Company will not proceed with such Business
Combination and will not convert such IPO Shares. In the event any of the
holders of the IPO Shares exercise its right to convert its IPO Shares to cash,
certain of the stockholders of the Company prior to the IPO have agreed pursuant
to the Insider Letters and the Escrow Agreement that, in order to partially
offset the resulting dilution to the non-converting holders of the IPO Shares,
they shall surrender to the Company, prior to the consummation of the Business
Combination, up to an aggregate of 100,000 of their shares of Common Stock of
the Company (as described in the Prospectus) and the Company shall cause such
stockholders to surrender to the Company, prior to the consummation of the
Business Combination, such shares of Common Stock.
7.7. 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.
7.8. Presentation of Potential Target Businesses. The Company shall cause
each of the Directors/Officers, Special Advisors and Initial Stockholders to
agree that, in order to minimize potential conflicts of interest which may arise
from multiple affiliations, the Directors/Officers, Special Advisors and 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 or the liquidation of the Company, subject to any
pre-existing fiduciary obligations such Director/Officer, Special Advisor or
Initial Stockholder might have.
41
7.9. 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 amount in the Trust Fund (excluding deferred underwriting compensation
payable to the Representative) 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 amount in the
Trust Fund (excluding deferred underwriting compensation payable to the
Representative) 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.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements at the Closing Date and each of the
Option Closing Date, if any, 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.
9. Effective Date of This Agreement and Termination Thereof.
9.1. Effective Date. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
9.2. Termination. The Representative 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 the
Representative's sole 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 AMEX, the Boston Stock Exchange or on the OTCBB (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 OTCBB 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 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
a material disruption in commercial banking or securities settlement or
clearance services has occurred, 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
42
insured, will, in the Representative's sole opinion, make it impracticable or
inadvisable to proceed with the delivery of the Units, or (vii) if the
Representative shall have become aware after the date hereof of such a material
adverse change in the financial condition, results of operations, business or
prospects of the Company, or such adverse material change in general market
conditions, including, without limitation, as a result of terrorist activities
on or 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 Units.
9.3. Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, except as a result of the Representative's or any
Underwriter's material breach or default with respect to any of its material
obligations as described in this Agreement, within the time specified herein or
any extensions thereof pursuant to the terms herein, the obligations of the
Company to pay the out of pocket expenses related to the transactions
contemplated herein shall be governed by Section 3.13 hereof.
9.4. 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.
10. Miscellaneous.
10.1. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered by
hand or reputable overnight courier or delivered by facsimile transmission (with
printed confirmation of receipt) and confirmed and shall be deemed given when so
mailed, delivered or faxed (or, if mailed, two days after such mailing):
If to the Representative:
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx Xxxxxx, Director of Investment Banking
Fax: (000) 000-0000
Copy to:
Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
43
If to the Company:
c/o Xxxx Xxxx China Jia Yua Trading Co, Ltd.
Room 921, Block A
Golden Central Tower, Jintian Road
Futian District
Shenzhen, P.R. China
Fax: 00-000-00000000
Copy to:
Xxxxx & Xxx Xxxxxx LLP
Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx XxXxxx, Esq.
Fax: (000) 000-0000
10.2. 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.
10.3. Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
10.4. 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.
10.5. 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, officers referred to in Section 5 hereof,
except as otherwise specified in Section 3.31, and their respective successors,
legal Representative 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.
10.6. Governing Law, Venue, etc.
10.6.1. 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 the conflict of laws principles thereof. Each of the Representative
and the Company (and any individual signatory hereto): (i) agrees that any legal
suit, action or proceeding arising out of or relating to this Agreement and/or
the transactions contemplated hereby shall be instituted exclusively in New York
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection which such party
may have or hereafter to the venue of any such suit, action or proceeding and
(iii) irrevocably and exclusively consents to the jurisdiction of the New York
Supreme Court, County of New York, and the United States District Court for the
Southern District of New York in any such suit, action or proceeding.
44
10.6.2. Each of the Representative and the Company (and any
individual signatory hereto) further agrees to accept and acknowledge service of
any and all process which may be served in any such suit, action or proceeding
in the New York Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company or any such individual mailed by certified mail to the
Company's address shall be deemed in every respect effective service of process
upon the Company or any such individual in any such suit, action or proceeding,
and service of process upon the Representative mailed by certified mail to the
address of the Representative shall be deemed in every respect effective service
process upon the Representative, in any such suit, action or proceeding.
10.6.3. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT
PERMITTED BY LAW, ON BEHALF OF ITS EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THE REGISTRATION STATEMENT, THE SALE PRELIMINARY PROSPECTUS AND THE
PROSPECTUS.
10.6.4 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.
10.7. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Delivery of a signed counterpart of this
Agreement by fax or email/pdf transmission shall constitute valid and sufficient
delivery thereof.
10.8. 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 affect 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.
10.9. No Fiduciary Relationship. The Company hereby acknowledges that the
Underwriters are acting solely as underwriters in connection with the offering
of the Company's securities. The Company further acknowledges that the
Underwriters are acting pursuant to a contractual relationship created solely by
this Agreement entered into on an arm's length basis and in no event do the
parties intend that the Underwriters act or be responsible as an agent, advisor
or fiduciary to the Company, its management, stockholders, creditors or any
45
other person in connection with any activity that the Underwriters may undertake
or have undertaken in furtherance of the offering of the Company's securities,
either before or after the date hereof. The Underwriters hereby expressly
disclaim any agency, advisory, fiduciary or similar obligations to the Company,
either in connection with the transactions contemplated by this Agreement or any
matters leading up to such transactions, and the Company hereby confirms its
understanding and agreement to that effect. The Company and the Underwriters
agree that they are each responsible for making their own independent judgments
with respect to any such transactions, and that any opinions or views expressed
by the Underwriters to the Company regarding such transactions, including but
not limited to any opinions or views with respect to the price or market for the
Company's securities, do not constitute advice or recommendations to the
Company. The Company hereby waives and releases, to the fullest extent permitted
by law, any claims that the Company may have against the Underwriters with
respect to any breach or alleged breach of any agency, advisory, fiduciary or
similar duty to the Company in connection with the transactions contemplated by
this Agreement or any matters leading up to such transactions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
46
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 RESOURCES LTD.
By:
------------------------------
Name: Xxxx Xxxx
Title: Chief Executive Officer
Agreed to and accepted on
the date first above written
MAXIM GROUP LLC, as
Representative of the several underwriters
By:
---------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Director of Investment Banking
47
SCHEDULE A
CHINA RESOURCES LTD.
4,000,000 Units
Number of Firm Units
Underwriter to be Purchased
---------------------------------------------------- --------------------
Maxim Group LLC 4,000,000
--------------------------------------------------------------------------------
48
EXHIBIT A-1
Form of Lock-Up Letter for Holders of Private Warrants
August 27, 2007
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
As Representative of the several Underwriters
Re: China Resources, Ltd. - Registration Statement on Form S-1 for Units
Dear Sirs:
This Agreement is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") between China Resources
Ltd., a Delaware corporation (the "Company") and Maxim Group LLC ("Maxim"), as
representative of a group of underwriters (collectively, the "Underwriters"), to
be named therein, and the other parties thereto (if any), relating to the
proposed public offering of units (the "Units"), each of which consists of one
share of the Company's common stock, par value $0.0001 per share (the "Common
Stock"), and one warrant to purchase one share of Common Stock (the
"Warrant(s)").
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, and in light of the benefits that the offering of the
Units will confer upon the undersigned in its capacity as a securityholder of
the Company, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees, subject to
the terms of the Escrow Agreement (as defined in the Underwriting Agreement),
with each Underwriter that, during the period beginning on and including the
date of the Underwriting Agreement through and ending on the later of the date
of the consummation of the initial Business Combination (as defined in the
Underwriting Agreement) and the date that is the 180th day after the date of the
Underwriting Agreement (the "Lock-Up Period"), the undersigned will not, without
the prior written consent of Maxim, directly or indirectly, (i) offer, sell,
assign, transfer, pledge, contract to sell, or otherwise dispose of, or announce
the intention to otherwise dispose of, any shares of Common Stock (including,
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations promulgated under
the Securities Act of 1933, as amended (the "Securities Act") as the same may be
amended or supplemented from time to time (such shares, the "Beneficially Owned
Shares")) or securities convertible into or exercisable or exchangeable for
Common Stock, (ii) enter into any swap, hedge or similar agreement or
arrangement that transfers in whole or in part, the economic risk of ownership
of, directly or indirectly, or demand a filing with the Securities and Exchange
Commission of a registration statement under the Securities Act relating to, any
shares of Common Stock (including, without limitation, the Beneficially Owned
Shares) or securities convertible into or exercisable or exchangeable for Common
Stock, whether now owned or hereafter acquired by the undersigned or with
A-1
respect to which the undersigned has or hereafter acquires the power of
disposition, or (iii) engage in any short selling of the Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock. If
(x) the Company issues an earnings release or material news or a material event
relating to the Company occurs during the last 17 days of the Lock-Up Period, or
(y) prior to the expiration of the Lock-Up Period, the Company announces that it
will release earnings results during the 16-day period beginning on the last day
of the Lock-Up Period, the Lock-Up Period shall be extended and the restrictions
imposed by this Agreement shall continue to apply until the expiration of the
18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
The restrictions set forth in the immediately preceding paragraph shall
not apply to:
(a) any transfers to any shareholder, partner or member of, or owner
of a similar equity interest in, the undersigned, as the case may be, if, in any
such case, such transfer is not for value, and
(b) any transfer made by the undersigned (i) in connection with the
sale or other bona fide transfer in a single transaction of all or substantially
all of the undersigned's capital stock, partnership interests, membership
interests or other similar equity interests, as the case may be, or all or
substantially all of the undersigned's assets, in any such case not undertaken
for the purpose of avoiding the restrictions imposed by this agreement or (ii)
to another corporation, partnership, limited liability company or other business
entity so long as the transferee is an affiliate (as defined below) of the
undersigned and such transfer is not for value;
provided, however, that in the case of any transfer described in clause (a) or
(b) above, it shall be a condition to the transfer that (A) the transferee
executes and delivers to Maxim, acting on behalf of the Underwriters, not later
than one business day prior to such transfer, a written agreement, in
substantially the form of this agreement and otherwise satisfactory in form and
substance to Maxim, and (B) if the undersigned is required to file a report
under Section 16(a) of the Securities Exchange Act of 1934, as amended,
reporting a reduction in beneficial ownership of shares of Common Stock or
Beneficially Owned Shares or any securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares during the Lock-Up
Period (as the same may be extended as described above), the undersigned shall
include a statement in such report to the effect that, in the case of any
transfer pursuant to clause (a) above, such transfer is being made to a
shareholder, partner or member of, or owner of a similar equity interest in, the
undersigned and is not a transfer for value or, in the case of any transfer
pursuant to clause (b) above, such transfer is being made either (i) in
connection with the sale or other bona fide transfer in a single transaction of
all or substantially all of the undersigned's capital stock, partnership
interests, membership interests or other similar equity interests, as the case
may be, or all or substantially all of the undersigned's assets or (ii) to
another corporation, partnership, limited liability company or other business
entity that is an affiliate of the undersigned and such transfer is not for
value. For purposes of this paragraph, "affiliate" shall have the meaning set
forth in Rule 405 under the Securities Act of 1933, as amended.
In order to enable this covenant to be enforced, the undersigned hereby
consents to the placing of legends or stop transfer instructions with the
Company's transfer agent with respect to any Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock.
A-2
The undersigned further agrees that (i) it will not, during the Lock-Up
Period (as the same may be extended as described above), make any demand or
request for or exercise any right with respect to the registration under the
Securities Act of 1933, as amended, of any shares of Common Stock or other
Beneficially Owned Shares or any securities convertible into or exercisable or
exchangeable for Common Stock or other Beneficially Owned Shares, and (ii) the
Company may, with respect to any Common Stock or other Beneficially Owned Shares
or any securities convertible into or exercisable or exchangeable for Common
Stock or other Beneficially Owned Shares owned or held (of record or
beneficially) by the undersigned, cause the transfer agent or other registrar to
enter stop transfer instructions and implement stop transfer procedures with
respect to such securities during the Lock-Up Period (as the same may be
extended as described above).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this agreement and that this agreement
has been duly authorized, executed and delivered by the undersigned and is a
valid and binding agreement of the undersigned. This agreement and all authority
herein conferred are irrevocable and shall be binding upon the personal
representative, successors and assigns of the undersigned.
A-3
The undersigned acknowledges and agrees that whether or not any public offering
of the Units actually occurs depends on a number of factors, including market
conditions.
Very truly yours,
(Name of Stockholder - Please Print)
(Signature)
(Name of Signatory - Please Print)
(Title of Signatory - Please Print)
Address: ______________________________
______________________________
______________________________
X-0
XXXXXXX X-0
Form of Lock-Up Letter
for Directors/Officers and Existing Shareholders other than Holders of
Private Warrants
_______, 2007
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
As Representative of the several Underwriters
Re: China Resources Ltd. - Registration Statement on Form S-1 for Units
Dear Sirs:
This Agreement is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") between China Resources
Ltd., a Delaware corporation (the "Company") and Maxim Group LLC ("Maxim"), as
representative of a group of underwriters (collectively, the "Underwriters"), to
be named therein, and the other parties thereto (if any), relating to the
proposed public offering of units (the "Units"), each of which consists of one
share of the Company's common stock, par value $0.0001 per share (the "Common
Stock"), and one warrant to purchase one share of Common Stock (the
"Warrant(s)").
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, and in light of the benefits that the offering of the
Units will confer upon the undersigned in its capacity as a securityholder
and/or an officer, director or employee of the Company, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees, subject to the terms of the Escrow
Agreement (as defined in the Underwriting Agreement), with each Underwriter
that, during the period beginning on and including the date of the Underwriting
Agreement through and ending on the later of the date of the consummation of the
initial Business Combination (as defined in the Underwriting Agreement) and the
date that is the 180th day after the date of the Underwriting Agreement (the
"Lock-Up Period"), the undersigned will not, without the prior written consent
of Maxim, directly or indirectly, (i) offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, or announce the intention to
otherwise dispose of, any shares of Common Stock (including, without limitation,
Common Stock which may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations promulgated under the Securities Act
of 1933, as amended (the "Securities Act") as the same may be amended or
supplemented from time to time (such shares, the "Beneficially Owned Shares"))
or securities convertible into or exercisable or exchangeable for Common Stock,
(ii) enter into any swap, hedge or similar agreement or arrangement that
transfers in whole or in part, the economic risk of ownership of, directly or
indirectly, or demand a filing with the Securities and Exchange Commission of a
registration statement under the Securities Act relating to, any shares of
Common Stock (including, without limitation, the Beneficially Owned Shares) or
A-5
securities convertible into or exercisable or exchangeable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
(iii) engage in any short selling of the Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock. If (x) the Company issues
an earnings release or material news or a material event relating to the Company
occurs during the last 17 days of the Lock-Up Period, or (y) prior to the
expiration of the Lock-Up Period, the Company announces that it will release
earnings results during the 16-day period beginning on the last day of the
Lock-Up Period, the Lock-Up Period shall be extended and the restrictions
imposed by this Agreement shall continue to apply until the expiration of the
18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
The restrictions set forth in the immediately preceding paragraph shall
not apply to any transfers made by the undersigned (i) as a bona fide gift to
any member of the immediate family (as defined below) of the undersigned or to a
trust the beneficiaries of which are exclusively the undersigned or members of
the undersigned's immediate family, (ii) by will or intestate succession upon
the death of the undersigned or (iii) as a bona fide gift to a charity or
educational institution; provided, however, that in the case of any such
transfer described above, it shall be a condition to the transfer that (A) the
transferee executes and delivers to Maxim, acting on behalf of the Underwriters,
not later than one business day prior to such transfer, a written agreement, in
substantially the form of this agreement (it being understood that any
references to "immediate family" in the agreement executed by such transferee
shall expressly refer only to the immediate family of the undersigned and not to
the immediate family of the transferee) and otherwise satisfactory in form and
substance to Maxim, and (B) if the undersigned is required to file a report
under Section 16(a) of the Securities Exchange Act of 1934, as amended,
reporting a reduction in beneficial ownership of shares of Common Stock or
Beneficially Owned Shares or any securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares during the Lock-Up
Period (as the same may be extended as described above), the undersigned shall
include a statement in such report to the effect that such transfer is being
made as a gift or by will or intestate succession. For purposes of this
paragraph, "immediate family" shall mean a spouse, child, grandchild or other
lineal descendant (including by adoption), father, mother, brother or sister of
the undersigned; and "affiliate" shall have the meaning set forth in Rule 405
under the Securities Act of 1933, as amended.
In order to enable this covenant to be enforced, the undersigned hereby
consents to the placing of legends or stop transfer instructions with the
Company's transfer agent with respect to any Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock.
The undersigned further agrees that (i) it will not, during the Lock-Up
Period (as the same may be extended as described above), make any demand or
request for or exercise any right with respect to the registration under the
Securities Act of 1933, as amended, of any shares of Common Stock or other
Beneficially Owned Shares or any securities convertible into or exercisable or
exchangeable for Common Stock or other Beneficially Owned Shares, and (ii) the
Company may, with respect to any Common Stock or other Beneficially Owned Shares
or any securities convertible into or exercisable or exchangeable for Common
Stock or other Beneficially Owned Shares owned or held (of record or
A-6
beneficially) by the undersigned, cause the transfer agent or other registrar to
enter stop transfer instructions and implement stop transfer procedures with
respect to such securities during the Lock-Up Period (as the same may be
extended as described above).
The undersigned hereby represents and warrants that this agreement is a
valid and binding agreement of the undersigned. This agreement and all authority
herein conferred are irrevocable and shall survive the death or incapacity of
the undersigned and shall be binding upon the heirs, personal representative,
successors and assigns of the undersigned.
A-7
The undersigned acknowledges and agrees that whether or not any public offering
of the Units actually occurs depends on a number of factors, including market
conditions.
Very truly yours,
(Name of Stockholder - Please Print)
(Signature)
Address: ______________________________
______________________________
______________________________
A-8
EXHIBIT B
Form of Target Business Letter
China Resources Ltd.
c/o Xxxx Xxxx China Jia Yua Trading Co, Ltd.
Room 921, Block A
Golden Central Tower, Jintian Road
Futian District
Shenzhen, P.R. China
Attn: Xxxx Xxxx, Chief Executive Officer and President
Fax: 00-000-00000000
Gentlemen:
Reference is made to the final prospectus of China Resources, Ltd.,
("China Resources"), dated ________, 2007 (the "Prospectus"). Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to them
in the Prospectus.
We have read the Prospectus and understand that China Resources has
established the Trust Fund (as defined in the Underwriting Agreement between
China Resources and the underwriters named therein), initially in an amount of
at least $40,000,000 for the benefit of the Public Stockholders and the
Representative of the several underwriters of China Resources's initial public
offering and that, except for a portion of the interest earned on the amounts
held in the Trust Fund, China Resources may disburse monies from the Trust Fund
only (i) to the Public Stockholders in the event of the redemption of their
shares or the dissolution and liquidation of China Resources or (ii) to China
Resources and the Representative after it consummates a Business Combination.
For and in consideration of China Resources agreeing to evaluate the
undersigned for purposes of consummating a Business Combination with it, the
undersigned hereby agrees that it does not have any right, title, interest or
claim of any kind in or to any monies in the Trust Fund (the "Claim") and hereby
waives any Claim it may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with China Resources and will not seek
recourse against the Trust Fund for any reason whatsoever.
---------------------------------------
Print Name of Target Business
---------------------------------------
Authorized Signature of Target Business
B-1
EXHIBIT C
Form of Vendor Letter
China Resources Ltd.
c/o Xxxx Xxxx China Jia Yua Trading Co, Ltd.
Room 921, Block A
Golden Central Tower, Jintian Road
Futian District
Shenzhen, P.R. China
Attn: Xxxx Xxxx, Chief Executive Officer and President
Fax: 00-000-00000000
Gentlemen:
Reference is made to the final prospectus of China Resources Ltd., ("China
Resources"), dated ___________, 2007 (the "Prospectus"). Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to them in the
Prospectus.
We have read the Prospectus and understand that China Resources has
established the Trust Fund (as defined in the Underwriting Agreement between
China Resources and the underwriters named therein), initially in an amount of
at least $40,000,000 for the benefit of the Public Stockholders and the
Representative of the several underwriters of China Resources's initial public
offering and that, except for a portion of the interest earned on the amounts
held in the Trust Fund, China Resources may disburse monies from the Trust Fund
only (i) to the Public Stockholders in the event of the redemption of their
shares or the dissolution and liquidation of China Resources or (ii) to China
Resources and the Representative after it consummates a Business Combination.
For and in consideration of China Resources agreeing to use the products
or services of the undersigned, the undersigned hereby agrees that it does not
have any right, title, interest or claim of any kind in or to any monies in the
Trust Fund (the "Claim") and hereby waives any Claim it may have in the future
as a result of, or arising out of, any negotiations, contracts or agreements
with China Resources and will not seek recourse against the Trust Fund for any
reason whatsoever.
---------------------------------------
Print Name of Vendor
---------------------------------------
Authorized Signature of Vendor
C-1
EXHIBIT D
Form of Director/Officer or Special Advisor Letter
China Resources Ltd.
c/o Xxxx Xxxx China Jia Yua Trading Co, Ltd.
Room 921, Block A
Golden Central Tower, Jintian Road
Futian District
Shenzhen, P.R. China
Attn: Xxxx Xxxx, Chief Executive Officer and President
Fax: 00-000-00000000
Gentlemen:
The undersigned officer or director of, or special advisor to, China
Resources Ltd., ("China Resources") hereby acknowledges that China Resources has
established the Trust Fund (as defined in the Underwriting Agreement between
China Resources and the underwriters named therein), initially in an amount of
at least $40,000,000 for the benefit of the Public Stockholders Maxim Group LLC,
the Representative of the underwriters of China Resources's initial public
offering ("Representative") and that China Resources may disburse monies from
the Trust Fund only (i) to the Public Stockholders in the event of the
redemption of their shares or the dissolution and liquidation of China Resources
or (ii) to China Resources and the Representative after it consummates a
Business Combination.
The undersigned hereby agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund (the
"Claim") and hereby waives any Claim it may have in the future as a result of,
or arising out of, any contracts or agreements with China Resources and will not
seek recourse against the Trust Fund for any reason whatsoever.
Notwithstanding the foregoing, such waiver shall not apply to any shares
acquired by the undersigned in the public market.
----------------------------------------
Print Name of Officer/Director
----------------------------------------
Authorized Signature of Officer/Director
