EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT
BETWEEN
CHINAGROWTH SOUTH ACQUISITION CORPORATION
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO. INC.
DATED: __________, 2006
CHINAGROWTH SOUTH ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
New York, New York
______, 2006
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
As Representative of the
Several Underwriters named in Schedule I hereto
Re: Public Offering of Securities
Ladies and Gentlemen:
The undersigned, ChinaGrowth South Acquisition Corporation, a
Cayman Islands corporation ("Company"), hereby confirms its agreement with
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. Inc. ("▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co." and also referred to herein
variously as "you," or the "Representative") and with the other underwriters
named on Schedule I hereto for which ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. is acting as
Representative (the Representative and the other Underwriters being collectively
called the "Underwriters" or, individually, an "Underwriter") as follows:
1. Purchase and Sale of Securities.
1.1 FIRM SECURITIES.
1.1.1 PURCHASE OF FIRM UNITS. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters, an aggregate of 4,500,000 units ("Firm
Units") of the Company, at a purchase price (net of discounts and commissions)
of $7.44 per Firm Unit. The Underwriters, severally and not jointly, agree to
purchase from the Company the number of Firm Units set forth opposite their
respective names on Schedule I attached hereto and made a part hereof at a
purchase price (net of discounts and commissions) of $7.44 per Firm Unit. The
Firm Units are to be offered initially to the public ("Offering") at the
offering price of $8.00 per Firm Unit. Each Firm Unit consists of one share of
the Company's ordinary shares, par value $.001 per share ("Ordinary Shares"),
and one warrant ("Warrant"). The Ordinary Shares and the Warrants included in
the Firm Units will not be separately transferable until 90 days after the
effective date ("Effective Date") of the Registration Statement (as defined in
Section 2.1.1 hereof) unless the Representative informs the Company, in writing,
of its decision to allow earlier separate trading based on its assessment of the
relative strengths of the securities markets and small capitalization companies
in general, and the trading pattern of, and demand for, the Company's securities
in particular, but in no event will the Representative allow separate trading
until the Company has filed with the Securities and Exchange Commission a
Current Report on Form 6-K that includes an audited balance sheet reflecting the
Company's receipt of the proceeds of the Offering, including any proceeds the
Company receives from the exercise of the Over-allotment Option (as defined
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in Section 1.2.1), if such option is exercised prior to the filing of the Form
6-K. Each Warrant entitles its holder to exercise it to purchase one Ordinary
Share for $6.00 during the period commencing on the later of the consummation by
the Company of its "Business Combination" or one year from the Effective Date of
the Registration Statement and terminating on the four-year anniversary of the
Effective Date. "Business Combination" shall mean any merger, capital stock
exchange, asset acquisition, other contractual arrangement resulting in a
business combination or other similar business combination consummated by the
Company with an operating business (as described more fully in the Registration
Statement (as defined in Section 2.1.1 below)).
1.1.2 PAYMENT AND DELIVERY. Delivery and payment for the Firm
Units shall be made at 10:00 a.m., New York time, on the fourth Business Day (as
defined below) following the effective date of the Registration Statement or at
such earlier time as shall be agreed upon by the Representative and the Company
at the offices of Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP ("EGS") or at such other place
as shall be agreed upon by the Representative and the Company. The hour and date
of delivery and payment for the Firm Units are called "Closing Date." Payment
for the Firm Units shall be made on the Closing Date at the Representative's
election by wire transfer in federal (same day) funds or by certified or bank
cashier's check(s) in New York Clearing House funds, payable as follows:
$34,200,000 of the proceeds received by the Company for the Firm Units and the
Placement Warrants (as defined in Section 2.22.3 below) and $720,000 of the
Deferred Fees ( as defined in Section 1.1.3 below) shall be deposited (or with
respect to the $1,080,000 of proceeds from the sale of the Placement Warrants
shall have been deposited on or prior to the date hereof) in the trust fund
established by the Company for the benefit of the public stockholders as
described in the Registration Statement ("Trust Fund") pursuant to the terms of
an Investment Management Trust Agreement ("Trust Agreement") between the Company
and American Stock Transfer & Trust Company ("AST") and the remaining proceeds
shall be paid (subject to Section 3.12 hereof) to the order of the Company upon
delivery to you of certificates (in form and substance satisfactory to the
Underwriters) representing the Firm Units (or through the facilities of the
Depository Trust Company ("DTC")) for the account of the Underwriters. The Firm
Units shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two full
Business Days prior to the Closing Date. The Company will permit the
Representative to examine and package the Firm Units for delivery, at least one
full Business Day prior to the Closing Date. The Company shall not be obligated
to sell or deliver the Firm Units except upon tender of payment by the
Representative for all the Firm Units. "Business Day" shall mean any day other
than a Saturday, a Sunday or a legal holiday or a day on which banking
institutions or trust companies are authorized or obligated by law to close in
New York City.
1.1.3 DEFERRAL OF A PORTION OF UNDERWRITERS' DISCOUNT. On the
Closing Date and, if applicable, on the Option Closing Date (as defined below),
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. agrees to deposit into the Trust Fund a portion of the
Underwriters' discount equal to $0.16 per Unit in the Offering and, if
applicable, a portion of the discount equal to $0.16 per Option Unit (as defined
below) (the "Deferred Fees") until the earlier of the completion of a Business
Combination or the liquidation of the Trust Fund. Upon the consummation of a
Business Combination, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. shall promptly receive the Deferred
Fees, but only with respect to those units as to which the component shares have
not been converted to cash by those stockholders who voted against the Business
Combination and exercised their conversion rights. In the event that the Company
is unable to consummate a Business Combination and American Stock Transfer &
Trust Company, the trustee of the Trust Fund, commences liquidation of the Trust
Fund, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. hereby agrees to the following: (i) to forfeit any
rights or claims to the Deferred Fees; and (ii) that the Deferred Fees shall be
distributed on a pro-rata basis among the holders of the Ordinary Shares
included in the Units sold in the Offering along with any interest accrued
thereon, net of taxes.
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1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION UNITS. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 675,000 units from the Company ("Over-allotment
Option"). Such additional 675,000 units, the net proceeds of which will be
deposited in the Trust Fund, 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 Ordinary Shares and the Warrants included in the
Units and the Ordinary Shares issuable upon exercise of the Warrants are
hereinafter referred to collectively as the "Public Securities." The purchase
price to be paid for each Option Unit will be the same price per Option Unit as
the price per Firm Unit set forth in Section 1.1.1 hereof.
1.2.2 EXERCISE OF OPTION. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative as to
all (at any time) or any part (from time to time) of the Option Units within 45
days after the Effective Date. The Underwriters will not be under any obligation
to purchase any Option Units prior to the exercise of the Over-allotment Option.
The Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company by the Representative, which must be confirmed in writing
by overnight mail or facsimile transmission setting forth the number of Option
Units to be purchased and the date and time for delivery of and payment for the
Option Units (the "Option Closing Date"), which will not be later than five full
Business Days after the date of the notice or such other time and in such other
manner as shall be agreed upon by the Company and the Representative, at the
offices of EGS or at such other place as shall be agreed upon by the Company and
the Representative. Upon exercise of the Over-allotment Option, the Company will
become obligated to convey to the Underwriters, and, subject to the terms and
conditions set forth herein, the Underwriters will become obligated to purchase,
the number of Option Units specified in such notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option Units shall
be made on the Option Closing Date at the Representative's election by wire
transfer in federal (same day) funds or by certified or bank cashier's check(s)
in New York Clearing House funds, payable as follows: $7.44 per Option Unit
shall be deposited in the Trust Fund pursuant to the Trust Agreement upon
delivery to you of certificates (in form and substance satisfactory to the
Underwriters) representing the Option Units (or through the facilities of DTC)
for the account of the Underwriters. The certificates representing the Option
Units to be delivered will be in such denominations and registered in such names
as the Representative requests not less than two full Business Days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Representative for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full Business Day prior to such Closing Date.
1.3 Representative's Purchase Option.
1.3.1 PURCHASE OPTION. The Company hereby agrees to issue and
sell to the Representative (and/or its designees) on the Effective Date an
option ("Representative's Purchase Option") for the purchase of an aggregate of
315,000 units ("Representative's Units") for an aggregate purchase price of
$100. Each of the Representative's Units is identical to the Firm Units,
including the warrants constituting the Units to purchase Ordinary Shares
(sometimes referred to as the "Representative's Warrants"). The Representative's
Purchase Option shall be exercisable, in whole or in part, commencing on the
later of the consummation of a Business Combination and one year from the
Effective Date and expiring on the five-year anniversary of the Effective Date
at an initial exercise price per Representative's Unit of $10.00 (125% of the
initial public offering price of a Unit). The Representative's Purchase Option,
the Representative's Units, the Ordinary Shares contained within the
Representative's Units, the Representative's Warrants and the Ordinary Shares
issuable upon exercise of the Representative's Warrants are hereinafter referred
to collectively as the "Representative's Securities." The Public Securities and
the Representative's Securities are hereinafter referred to collectively as the
"Securities." The Representative understands and agrees that there are
significant restrictions against
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transferring the Representative's Securities during the first year after the
Effective Date, as set forth in Section 3 of the Representative's Purchase
Option.
1.3.2 PAYMENT AND DELIVERY. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for the
Representative's Purchase Option in the name or names and in such authorized
denominations as the Representative may request.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Underwriters as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
and an amendment or amendments thereto, on Form F-1 (File No. 333-134458),
including any related preliminary prospectus (the "Preliminary Prospectus"), for
the registration of the Securities under the Securities Act of 1933, as amended
("Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations (the "Regulations") of the Commission under the Act. The
conditions for use of Form F-1 to register the Offering under the Act, as set
forth in the General Instructions to such Form, have been satisfied. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including any 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 filed by
the Company with the Commission pursuant to Rule 424(b) at or after the time of
effectiveness as allowed under Rule 430A of the Regulations), is hereinafter
called the "Prospectus." For purposes of this Agreement, "Time of Sale", as used
in the Act, means [4:30 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
_______, 2006, for distribution by the Underwriters (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 Act
registering additional Securities of any type (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 Statement has heretofore been filed with the Commission. All of the
Public Securities have been registered for public sale under the Act pursuant to
the Registration Statement or, if any Rule 462(b) Registration Statement is
filed, will be duly registered for public sale under the 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 or the Representative has determined that at
the Time of Sale the Sale Preliminary Prospectus includes an untrue statement of
a material fact or omitted a statement of material fact necessary to make the
statements therein not misleading and have agreed 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.
2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the best
of the Company's knowledge, any state regulatory authority has issued any order
or threatened to issue any order preventing or suspending the use of any Sale
Preliminary Prospectus or Prospectus or has instituted or, to the best of the
Company's knowledge, threatened to institute any proceedings with respect to
such an order.
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2.3 Disclosures in Registration Statement.
2.3.1 REPRESENTATION AS TO SECTION 10B-5 OF THE ACT. At the
time the Registration Statement became effective and at all times subsequent
thereto up to the Closing Date and the Option Closing Date, if any, the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
contains or will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations; and neither
the Registration Statement, the Sale Preliminary Prospectus nor the Prospectus,
nor any amendment or supplement thereto, on their respective dates, nor the Sale
Preliminary Prospectus as of the Time of Sale (or such subsequent Time of Sale
pursuant to Section 2.1.1) does or will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus or Sale
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Securities or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus or Sale Preliminary Prospectus and any amendments
thereof and supplements thereto complied or will comply in all material respects
with the applicable provisions of the Act and the Regulations and did not and
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation and warranty made in this Section 2.3.1 does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Representative expressly for use in the Registration
Statement, Sale Preliminary Prospectus or Prospectus or any amendment thereof or
supplement thereto.
2.3.2 DISCLOSURE OF AGREEMENTS. The agreements and documents
described in the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus conform to the descriptions thereof contained therein and there are
no agreements or other documents required to be described in the Registration
Statement, 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 Sale
Preliminary Prospectus or Prospectus, or (ii) is material to the Company's
business, has been duly and validly executed by the Company, is in full force
and effect and is enforceable against the Company and, to the Company's
knowledge, the other parties thereto, in accordance with its terms, except (x)
as such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (y) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or
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under common control with the Company since the Company's formation, except as
disclosed in the Registration Statement.
2.3.4 REGULATIONS. The disclosures in the Registration
Statement and Sale Preliminary Prospectus concerning the effects of federal,
state and local regulation on the Company's business as currently contemplated
are correct in all material respects and do not omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO MATERIAL ADVERSE CHANGE. Since the respective dates
as of which information is given in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, except as otherwise specifically
stated therein, (i) there has been no material adverse change in the condition,
financial or otherwise, or business prospects of the Company, (ii) there have
been no material transactions entered into by the Company, other than as
contemplated pursuant to this Agreement, and (iii) no member of the Company's
management has resigned from any position with the Company.
2.4.2 RECENT SECURITIES TRANSACTIONS; ETC. Subsequent to the
respective dates as of which information is given in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money; or (ii) declared or paid any dividend or made any other
distribution on or in respect to its equity securities.
2.5 INDEPENDENT ACCOUNTANTS. Berenson LLP ("Berenson"), whose
report is filed with the Commission as part of the Registration Statement, the
Sale Preliminary Prospectus and Prospectus and included in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus, are independent
registered public accountants as required by the Act, the Regulations and the
Public Company Accounting Oversight Board (including the rules and regulations
promulgated by such entity, the "PCAOB"). Berenson is duly registered and in
good standing with the PCAOB. Berenson 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. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement,
the Sale Preliminary Prospectus and Prospectus fairly present the financial
position, the results of operations and the cash flows of the Company at the
dates and for the periods to which they apply; such financial statements have
been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement, the Sale Preliminary
Prospectus and Prospectus present fairly the information required to be stated
therein. The Registration Statement, the Sale Preliminary Prospectus and
Prospectus discloses all material off-balance sheet transactions, arrangements,
obligations (including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have a material
current or future effect on the Company's financial condition, changes in
financial condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenues or expenses.
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the date
or dates indicated in the Sale Preliminary Prospectus and Prospectus 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
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Prospectus, on the Effective Date and on the Closing Date, there will be no
options, warrants, or other rights to purchase or otherwise acquire any
authorized but unissued Ordinary Shares of the Company or any security
convertible into Ordinary Shares of the Company, or any contracts or commitments
to issue or sell Ordinary Shares or any such options, warrants, rights or
convertible securities.
2.8 VALID ISSUANCE OF SECURITIES, ETC.
2.8.1 OUTSTANDING SECURITIES. All issued and outstanding
securities of the Company (including, without limitation, the Placement
Warrants) have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The authorized Ordinary Shares and Warrants
conform in all material respects to the description thereof contained in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus. All
offers and sales of any outstanding securities of the Company were at all
relevant times either registered under the Act or exempt from such registration
requirements and the registration requirements of applicable blue sky laws and
regulations.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to the descriptions
thereof contained in the Registration Statement, the Sale Preliminary Prospectus
and the Prospectus. When issued, the Representative's Securities 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' Securities are enforceable against the
Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.8.3 PLACEMENT WARRANTS. The Placement Warrants (as defined
in Section 2.22.3 below) 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 Ordinary Shares 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. Other than with respect to the Placement
Warrants, neither the Company nor any of its affiliates has, prior to the date
hereof, made any offer or sale of any securities
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which are required to be or may be "integrated" pursuant to the Act or the
Regulations with the offer and sale of the Securities pursuant to the
Registration Statement.
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth in
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.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement, the
Warrant Agreement (as defined in Section 2.21 hereof), the Trust Agreement, the
Services Agreement (as defined in Section 3.7.2 hereof), the Escrow Agreement
(as defined in Section 2.22.2 hereof) and the Warrant Purchase Agreement (as
defined in Section 2.22.3 hereof) have been duly and validly authorized by the
Company and constitute, and the Representative's Purchase Option, has been duly
validly authorized by the Company and, when executed and delivered, will
constitute the valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.11 NO CONFLICTS, ETC. The execution, delivery, and performance by
the Company of this Agreement, the Warrant Agreement, the Representative's
Purchase Option, the Trust Agreement, the Services Agreement, the Escrow
Agreement and the Warrant Purchase Agreement, the consummation by the Company of
the transactions herein and therein contemplated and the compliance by the
Company with the terms hereof and thereof do not and will not, with or without
the giving of notice or the lapse of time or both (i) result in a breach of, or
conflict with any of the terms and provisions of, or constitute a default under,
or result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any agreement or instrument to which the Company is a party except
pursuant to the Trust Agreement; (ii) result in any violation of the provisions
of the Amended and Restated Memorandum and Articles of Association of the
Company (the "Articles"); or (iii) violate any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business.
2.12 NO DEFAULTS; VIOLATIONS. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of the Articles or in violation of any material
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or businesses.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies that it needs as of the date hereof to conduct
its business as described in the Registration Statement, Sale Preliminary
Prospectus and the Prospectus. The disclosures in the Registration Statement,
the Sale Preliminary Prospectus and Prospectus concerning the effects of
federal, state and local regulation on this Offering and the Company's business
as currently
9
contemplated are correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities and the consummation of the transactions and agreements contemplated
by this Agreement, the Warrant Agreement, the Representative's Purchase Option,
the Trust Agreement, the Escrow Agreement and the Warrant Purchase Agreement and
as contemplated by the Registration Statement, Sale Preliminary Prospectus and
Prospectus, except with respect to applicable federal and state securities laws
and the rules and regulations promulgated by the National Association of
Securities Dealers, Inc. ("NASD").
2.14 D&O QUESTIONNAIRES. To the best of the Company's knowledge,
all information contained in the questionnaires ("Questionnaires") completed by
each of the Company's stockholders prior to the Offering ("Existing
Stockholders") and previously provided to the Representative is true and correct
and the Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by each Existing
Stockholder to become inaccurate or incorrect.
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. There is no action,
suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding pending or, to the best of the Company's knowledge,
threatened against, or involving the Company or, to the best of the Company's
knowledge, any Existing Stockholder which has not been disclosed, that is
required to be disclosed, in the Registration Statement, the Sale Preliminary
Prospectus or 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
place of incorporation, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the conduct of business requires such qualification, except
where the failure to qualify would not have a material adverse effect on the
assets, business or operations of the Company.
2.17 STOP ORDERS. The Commission has not issued any order
preventing or suspending the use of the Registration Statement, any Preliminary
Prospectus, the Sale Preliminary Prospectus or Prospectus or any part thereof
and has not threatened to issue any such order.
2.18 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.18.1 FINDER'S FEES. 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 Existing
Stockholder with respect to the sale of the Securities hereunder or any other
arrangements, agreements or understandings of the Company or any Existing
Stockholder that may affect the Underwriters' compensation, as determined by the
NASD.
2.18.2 PAYMENTS WITHIN SIX MONTHS. The Company has not made
any direct or indirect payments (in cash, securities or otherwise) (i) to any
person, as a finder's fee, consulting fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
raised or provided capital to the Company, (ii) to any NASD member or (iii) to
any person or entity that has any direct or indirect affiliation or association
with any NASD member, within the six months prior to the Effective Date, other
than payments to the Representative in connection with this Offering.
2.18.3 USE OF PROCEEDS. None of the net proceeds of the
Offering and Private Placement will be paid by the Company to any participating
NASD member or its affiliates, except as specifically
10
authorized herein and except as may be paid in connection with a Business
Combination as contemplated by the Sale Preliminary Prospectus.
2.18.4 EXISTING STOCKHOLDERS' NASD AFFILIATION. Based on
questionnaires distributed to the Existing Stockholders, no officer, director or
any beneficial owner of the Company's unregistered securities has any direct or
indirect affiliation or association with any NASD member, as determined in
accordance with the rules and regulations of the NASD. The Company will advise
the Representative and its counsel if it learns that any officer, director or
beneficial owner (direct or indirect) of 5% or more of the Company's outstanding
Ordinary Shares is or becomes an affiliate or associated person of an NASD
member participating in the Offering.
2.19 FOREIGN CORRUPT PRACTICES ACT; PATRIOT ACT.
2.19.1 Neither the Company nor any of the Existing
Stockholders or any other person acting on behalf of the Company has, directly
or indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or any political party or candidate for office (domestic or foreign)
or other person who was, is, or may be in a position to help or hinder the
business of the Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, might have had a material adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
2.19.2 PATRIOT ACT. Neither the Company nor any Company
Affiliate 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.
2.20 OFFICERS' CERTIFICATE. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
2.21 WARRANT AGREEMENT. The Company has entered into a warrant
agreement with respect to the Warrants and the Representative's Warrants with
AST substantially in the form annexed as Exhibit 4.5 to the Registration
Statement ("Warrant Agreement").
2.22 Agreements With Existing Stockholders.
2.22.1 INSIDER LETTERS. The Company has caused to be duly
executed legally binding and enforceable agreements (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or noncompete provision may be limited under
the federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought), the form of which is annexed as Exhibit
10.4 to the Registration Statement ("Insider Letters"), pursuant to which each
of the Existing 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 Sale Preliminary Prospectus and
Prospectus.
11
2.22.2 ESCROW AGREEMENT. The Company has caused the Existing
Stockholders to enter into an escrow agreement ("Escrow Agreement") with AST
("Escrow Agent"), substantially in the form annexed as Exhibit 10.2 to the
Registration Statement, whereby (i) the Ordinary Shares owned by the Existing
Stockholders (the "Existing Stockholders Shares") will be held in escrow by the
Escrow Agent, until one year from the date of consummation of a Business
Combination and (ii) the Placement Warrants will be held in escrow by the Escrow
Agent until such time that the Company consummates a Business Combination;
provided, however, that if the Escrow Agent is notified by the Company that the
Company is being liquidated at any time during the applicable Escrow Period (as
that term is defined in the Escrow Agreement), then immediately prior to the
effectiveness of such liquidation, the Escrow Agent shall promptly destroy the
certificates representing the Existing Stockholders Shares and the Placement
Warrants. During such escrow period, the Existing Stockholders shall be
prohibited from selling or otherwise transferring such shares (except to spouses
and children of Existing Stockholders and trusts established for their benefit
and as otherwise set forth in the Escrow Agreement) but will retain the right to
vote such shares. To the Company's knowledge, the Escrow Agreement is
enforceable against each of the Existing Stockholders and will not, with or
without the giving of notice or the lapse of time or both, result in a breach
of, or conflict with any of the terms and provisions of, or constitute a default
under, any agreement or instrument to which any of the Existing Stockholders is
a party. The Escrow Agreement shall not be amended, modified or otherwise
changed without the prior written consent of the Representative.
2.22.3 EXISTING STOCKHOLDERS WARRANT PURCHASE AGREEMENT. All
of the Company's officers and directors have executed and delivered an
agreement, annexed as Exhibit 10.6 of the Registration Statement (the "Warrant
Purchase Agreement"), pursuant to which such persons, among other things, have
purchased an aggregate of 900,000 warrants in a private placement intended to be
exempt from registration under the Act under Section 4(2) of the Act ("Private
Placement") at a purchase price of $1.20 per warrant ("Placement Warrants"). The
Existing Stockholders and the Company have delivered executed copies of the
Warrant Purchase Agreement and the Existing Stockholders have delivered the
purchase price on or before the Effective Date. Pursuant to the Warrant Purchase
Agreement, (i) the $1,080,000 of proceeds from the sale of the Placement
Warrants has been deposited by the Company in the Trust Fund in accordance with
the terms of the Trust Agreement on or prior to the Effective Date, and (ii) the
purchasers of the Placement Warrants have waived any and all rights and claims
that they may have to any proceeds, and any interest thereon, held in the Trust
in respect of the Placement Warrants in the event that a Business Combination is
not consummated and the Trust Fund is liquidated in accordance with the terms of
the Trust Agreement.
2.23 INVESTMENT MANAGEMENT TRUST AGREEMENT. The Company has
entered into the Trust Agreement with AST with respect to certain proceeds of
the Offering substantially in the form annexed as Exhibit 10.1 to the
Registration Statement.
2.24 NO EXISTING NON-COMPETITION AGREEMENTS. Other than as set
forth in the Registration Statement, no Existing Stockholder, employee, officer
or director of the Company is subject to any non competition agreement or
non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be an Existing Stockholder, employee, officer
and/or director of the Company.
2.25 INVESTMENTS. No more than 45% of the "value" (as defined
in Section 2(a)(41) of the Investment Company Act of 1940, as amended
("Investment Company Act")) of the Company's total assets (exclusive of
"Government Securities" (as defined in Section 2(a)(16) of the Investment
Company Act)) consist of, and no more than 45% of the Company's net income after
taxes is derived from, securities other than the Government Securities.
2.26 SUBSIDIARIES. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
12
2.27 RELATED PARTY TRANSACTIONS. There are no business
relationships or related party transactions involving the Company or any other
person required to be described in the Registration Statement, Sale Preliminary
Prospectus and the Prospectus that have not been described as required.
2.28 STANDARD & POOR'S APPLICATION. Unless the Securities are
listed or quoted, as the case may be, on the New York Stock Exchange, the
American Stock Exchange or quoted on the Nasdaq National Market on the Effective
Date, prior to the date hereof the Company has made application with Standard
and Poor's to have information regarding the Company and the Securities included
in the Standard & Poor's Daily News and Corporation Records Description so as to
allow for secondary trading of the Public Securities in the state jurisdictions
which allow for an exemption for non-issuer secondary trading.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver
to the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and the Company shall not file any such amendment or supplement to which
the Representative shall reasonably object in writing.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Public Securities in accordance with the provisions
hereof and the Prospectus. If at any time when a Sale Preliminary Prospectus or
Prospectus relating to the Public Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriters, the 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 light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Sale Preliminary Prospectus or the Prospectus
to comply with the Act, the Company will notify the Representative promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.
3.2.2 FILING OF FINAL PROSPECTUS. The Company will file the
Prospectus (in form and substance satisfactory to the Representative) with the
Commission following the Effective Date pursuant to the requirements of Rule 424
of the Regulations.
3.2.3 EXCHANGE ACT REGISTRATION. The Company will use its best
efforts to maintain the registration of the Public Securities under the
provisions of the Exchange Act (except in connection with a going-private
transaction) for a period of five years from the Effective Date, or until the
Company is required to be liquidated if earlier, or, in the case of the
Warrants, until the Warrants expire and are no longer exercisable. The Company
will not deregister the Public Securities under the Exchange Act without the
prior written consent of the Representative.
3.3 BLUE SKY FILING. Unless the Securities are listed or quoted,
as the case may be, on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market, the Company will endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts
13
to file and make such statements or reports at such times as are or may be
required by the laws of such jurisdiction. The Company shall pay all filings
fees in connection with the qualification of the Securities under the securities
laws of such jurisdictions as the Representative may reasonably designate.
3.4 DELIVERY TO UNDERWRITERS OF PRELIMINARY PROSPECTUS, SALE
PRELIMINARY PROSPECTUS AND PROSPECTUSES. The Company will deliver to each of the
several Underwriters, without charge, from time to time during the period when
the Prospectus is required to be delivered under the Act or the Exchange Act
such number of copies of each Preliminary Prospectus, Sale Preliminary
Prospectus and the Prospectus as such Underwriters may reasonably request and,
as soon as the Registration Statement or any amendment or supplement thereto
becomes effective, deliver to you two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all
exhibits filed therewith or incorporated therein by reference and a copy of all
original executed consents of certified experts.
3.5 EFFECTIVENESS AND EVENTS REQUIRING NOTICE TO THE
REPRESENTATIVE. The Company will use its best efforts to cause the Registration
Statement to remain effective and will notify the Representative immediately and
confirm the notice in writing (i) of the effectiveness of the Registration
Statement and any amendment thereto, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Public Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration
Statement or Prospectus, (v) of the receipt of any comments or request for any
additional information from the Commission, and (vi) of the happening of any
event during the period described in Section 3.2.3 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 or the Prospectus
untrue or that requires the making of any changes in the Registration Statement,
the Sale Preliminary Prospectus or the Prospectus in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Commission or any state securities commission shall enter
a stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
3.6 REVIEW OF QUARTERLY FINANCIAL STATEMENTS. Until the earlier of
five years from the Effective Date, or until such earlier time upon which the
Company is required to be liquidated, the Company, at its expense, shall cause
its regularly engaged independent registered public accounting firm 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 Existing
Stockholder unless the Company obtains an opinion from an independent investment
banking firm that is a member of the NASD that the Business Combination is fair
to the Company's stockholders from a financial perspective. No Existing
Stockholder or any affiliate of such person shall receive any fees of any type
(other than reimbursement of ordinary and customary expenses incurred on behalf
of the Company) in connection with any Business Combination
3.7.2 ADMINISTRATIVE SERVICES. The Company has entered into an
office services agreement ("Services Agreement") with Global Vestor Capital
Partners, LLC ("Affiliate") substantially in the form annexed as Exhibit 10.5 to
the Registration Statement pursuant to which the Affiliate will make available
to the Company general and administrative services, including office space,
utilities, administrative, technology and secretarial services for the Company's
use for up to $7,500 per month.
14
3.7.3 COMPENSATION TO EXISTING STOCKHOLDERS. Except as set
forth above in this Section 3.7, the Company shall not pay any Existing
Stockholder or any of their affiliates any fees or compensation from the
Company, for services rendered to the Company prior to, or in connection with,
the consummation of a Business Combination; provided that the Existing
Stockholders shall be entitled to reimbursement from the Company for their
reasonable out-of-pocket expenses incurred in connection with seeking and
consummating a Business Combination.
3.8 FINANCIAL PUBLIC RELATIONS FIRM. Promptly after the execution
of a definitive agreement for a Business Combination, the Company shall
consider, in good faith, retaining at its expense a financial public relations
firm reasonably acceptable to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. for a term to be agreed on by
the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co.
3.9 REPORTS TO THE REPRESENTATIVE.
3.9.1 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 (▇▇▇▇▇▇ ▇▇▇▇▇▇
& Co., Attn: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇) 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 6-K or
Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, (iv)
two(2) copies of each registration statement filed by the Company with the
Commission under the Securities Act, (v) a copy of monthly statements, if any,
setting forth such information regarding the Company's results of operations and
financial position (including balance sheet, profit and loss statements and data
regarding outstanding purchase orders) as is regularly prepared by management of
the Company and (vi) such additional documents and information with respect to
the Company and the affairs of any future subsidiaries of the Company as the
Representative may from time to time reasonably request. Documents filed with
the Commission pursuant to its ▇▇▇▇▇ system shall be deemed to have been
delivered to the Representative pursuant to this Section.
3.9.2 TRANSFER SHEETS. For a period of two years following the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company shall retain AST or another transfer and warrant
agent acceptable to the Representative ("TRANSFER AGENT") and will furnish to
the Underwriters at the Company's sole cost and expense, for a period of one
year following the Effective Date, such transfer sheets of the Company's
securities as the Representative may request, including the daily and monthly
consolidated transfer sheets of the Transfer Agent and DTC. The Underwriters
acknowledge that American Stock Transfer & Trust Company is an acceptable
Transfer Agent.
3.9.3 SECONDARY MARKET TRADING MAINTENANCE. Unless the
Securities are listed or quoted, as the case may be, on the New York Stock
Exchange, the American Stock Exchange or quoted on the Nasdaq National Market,
until such earlier time upon which the Company is required to be liquidated or
five (5) years from the date hereof, the Company shall maintain its listing in
Standards & Poors' Daily News and Corporation Records Corporate Descriptions at
its cost and expense and at the beginning of each fiscal quarter, shall provide
the Representative with a written report of counsel detailing those states in
which the Securities may be traded in non-issuer transactions under the Blue Sky
laws of the fifty States ("SECONDARY MARKET TRADING SURVEY").
3.9.4 TRADING REPORTS. During such time as any of the
Securities are quoted on the NASD OTC Bulletin Board (or any successor trading
market such as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar
publisher of quotations) and no other automated quotation system, the Company
shall provide to the Representative, at its expense, such reports published by
the NASD or the
15
Pink Sheets, LLC relating to price trading of the Securities, as the
Representative shall reasonably request.
3.10 DISQUALIFICATION OF FORM F-1. Until the earlier of seven years
from the date hereof or until the Warrants have expired and are no longer
exercisable, the Company will not take any action or actions which may prevent
or disqualify the Company's use of Form F-1 (or other appropriate form) for the
registration of the Warrants and the Representative's Warrants under the Act
(except in connection with a going-private transaction).
3.11 PAYMENT OF EXPENSES.
3.11.1 GENERAL EXPENSES RELATED TO THE OFFERING. The Company
hereby agrees to pay on each of the Closing Date and the Option Closing Date, if
any, to the extent not paid at Closing Date, all expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to (i) the preparation, printing, filing and mailing (including
the payment of postage with respect to such mailing) of the Registration
Statement, the Preliminary, the Preliminary Sale and Final Prospectuses and the
printing and mailing of this Agreement and related documents, including the cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriters in quantities as may be required by the Underwriters, (ii)
the printing, engraving, issuance and delivery of the Units, the Ordinary Shares
and the Warrants included in the Units and the Representative's Purchase Option,
including any transfer or other taxes payable thereon, (iii) filing fees, costs
and expenses (including disbursements for the Representative's counsel) incurred
in registering the Offering with the NASD and qualifying the Public Securities
under state or foreign securities or Blue Sky laws, (iv) fees, costs and
expenses incurred in listing the Company on the Over the Counter Bulletin Board,
(v) fees and disbursements of the transfer and warrant agent, (vi) the Company's
expenses associated with "due diligence" and "road show" meetings arranged by
the Representative, (vii) the preparation, binding and delivery of transaction
"bibles," in form and style reasonably satisfactory to the Representative and
transaction lucite cubes or similar commemorative items in a style and quantity
as reasonably requested by the Representative and (viii) all other costs and
expenses customarily borne by an issuer incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section 3.11.1. The Company also agrees that, if requested by the
Representative, it will engage and pay up to $9,000 for an investigative search
firm of the Representative's choice to conduct an investigation of the
principals of the Company as shall be mutually selected by the Representative
and the Company. The Representative may deduct from the net proceeds of the
Offering payable to the Company on the Closing Date, or the Option Closing Date,
if any, the expenses set forth in this Agreement to be paid by the Company to
the Representative and others. If the Offering contemplated by this Agreement is
not consummated for any reason whatsoever then the Company shall reimburse the
Underwriters in full for their actual out of pocket expenses, including, without
limitation, its legal fees and disbursements and "road show" and due diligence
expenses.
3.11.2 EXPENSES RELATED TO BUSINESS COMBINATION. The Company
further agrees that, in the event the Representative, at the request of the
Company, assists the Company in trying to obtain stockholder approval of a
proposed Business Combination, the Company agrees to reimburse the
Representative for all reasonable out-of-pocket expenses, including, but not
limited to, "road-show" and due diligence expenses.
3.12 APPLICATION OF NET PROCEEDS. The Company will apply the net
proceeds from the Offering and Private Placement received by it in a manner
consistent with the application described under the caption "Use of Proceeds" in
the Registration Statement, Sale Preliminary Prospectus and Prospectus.
3.13 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
16
Regulations, but which shall satisfy the provisions of Rule 158(a) under Section
11(a) of the Act) covering a period of at least twelve consecutive months
beginning after the Effective Date.
3.14 NOTICE TO NASD. In the event any person or entity (regardless
of any NASD affiliation or association) is engaged to assist the Company in its
search for a merger candidate or to provide any other merger and acquisition
services, the Company will provide the following to the NASD and to ▇▇▇▇▇▇
▇▇▇▇▇▇ & Co. prior to the consummation of the Business Combination: (i) complete
details of all services and copies of agreements governing such services; and
(ii) justification as to why the person or entity providing the merger and
acquisition services should not be considered an "underwriter and related
person" with respect to the Company's initial public offering, as such term is
defined in Rule 2710 of the NASD's Conduct Rules. The Company also agrees that
proper disclosure of such arrangement or potential arrangement will be made in
the proxy statement which the Company will file for purposes of soliciting
stockholder approval for the Business Combination.
3.15 STABILIZATION. Except with respect to the Insider Letters
between the Company and each of Xuechu He, ▇▇▇ ▇▇▇, XueSong Song, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, 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 Public
Securities.
3.16 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.
3.17 ACCOUNTANTS. Until the earlier of five years from the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company shall retain Berenson or another independent
registered public accounting firm reasonably acceptable to the Representative.
3.18 FORM 6-K. The Company shall, on the date hereof, retain its
independent registered public accounting firm to audit the financial statements
of the Company as of the Closing Date ("Audited Financial Statements")
reflecting the receipt by the Company of the proceeds of the Offering. As soon
as the Audited Financial Statements become available, the Company shall
immediately file a Current Report on Form 6-K with the Commission, which Report
shall contain the Company's Audited Financial Statements.
3.19 CORPORATE PROCEEDINGS. All corporate proceedings and other
legal matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
3.20 INVESTMENT COMPANY. The Company shall cause the proceeds of
the Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Registration Statement, Sale, Preliminary Prospectus or
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.
17
3.21 BUSINESS COMBINATION ANNOUNCEMENT. Within four (4) Business
Days following the consummation by the Company of a Business Combination, the
Company shall cause an announcement ("Business Combination Announcement") to be
placed, at its cost, in The Wall Street Journal, The New York Times and a third
publication to be selected by the Representative announcing the consummation of
the Business Combination and indicating that the Representative was the managing
underwriter in the Offering. The Company shall supply the Representative with a
draft of the Business Combination Announcement and provide the Representative
with a reasonable opportunity to comment thereon. The Company will not place the
Business Combination Announcement without the final approval of the
Representative, which such approval will not be unreasonably withheld.
3.22 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 ▇▇-▇▇-▇▇▇
and Rule 51-3.4 of the Colorado Securities Act.
3.23 AMENDMENTS TO ARTICLES. (i) The Company covenants and agrees,
that prior to its initial Business Combination it will not seek to amend or
modify any of the following provisions set forth in Article 166 through 170 of
the Articles:
166. Notwithstanding any other provision of
these Articles, this Article and the following Articles 166
to 171 shall apply during the period commencing upon the
adoption of these Articles and terminating upon the
consummation of any Business Combination (as defined below)
and may not be amended prior to the consummation of a
Business Combination. A "Business Combination" shall mean the
acquisition by the Company, whether by share capital
exchange, asset or share acquisition, or other similar type
of transaction of a Company (the "target business") which is
an operating business having its primary operations in the
People's Republic of China and in which the collective fair
market value of the target business or businesses is at least
80 per cent. of the net assets of the Company held in trust
(net of taxes) at the time of the Business Combination. In
the event of a conflict between Articles 166 to 171 and any
other Articles, the provisions of these Articles shall
prevail.
167. Prior to the consummation of any Business
Combination, the Company shall submit such Business
Combination to its Members for approval regardless of whether
the Business Combination is of a type that normally would
require such Member approval under applicable law. In the
event that a majority of the Ordinary Shares voted for the
Business Combination vote for the approval of the Business
Combination, the Company shall be authorised to consummate
the Business Combination, provided that the Company shall not
consummate any Business Combination if 20 per cent. or more
in interest of the holders of IPO shares (as defined in
Article 168) exercise their redemption rights described in
Article 168.
168. In the event that a Business Combination is
approved in accordance with Article 167, and is consummated
by the Company, any Member holding Ordinary Shares issued to
persons who are not officers, Directors or ten per cent or
greater Members of any of them in the Company's initial
public offering ("IPO") of securities (the "IPO Shares") who
voted against the Business Combination may, contemporaneously
with such vote, redeem his IPO Shares for cash. If so
demanded, the Company shall pay such redeeming Member a per
Share redemption price equal to the quotient determined by
dividing (i) the amount in the Trust Fund (as defined below)
inclusive of any interest thereon, as of two business days
prior to the consummation of the Business Combination,
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by (ii) the total number of IPO Shares. "Trust Fund" shall
mean the trust account established by the Company at the
consummation of the IPO and into which a certain amount of
the IPO proceeds are deposited.
169. In the event that the Company does not
consummate a Business Combination by the later of (i)
eighteen months after the consummation of the IPO or (ii)
twenty four months after the consummation of the IPO in the
event that either a letter of intent, an agreement in
principle or a definitive agreement to complete a Business
Combination was executed but was not consummated within such
eighteen month period, the affairs of the Company shall
promptly be wound-up and if the Directors deem it appropriate
to do so, they may take all necessary action to have the
Company struck-off by the Registrar of Companies of the
Cayman Islands. If the Directors do not deem it appropriate
to apply to have the Company struck-off by the Registrar of
Companies, this shall trigger automatic winding-up of the
Company ("Automatic Dissolution") and the Company shall be
dissolved and liquidated accordingly. In the event that the
Company is dissolved pursuant to either such procedure, only
the holders of the IPO Shares shall be entitled to receive
liquidating distributions and the Company shall pay no
liquidating distributions with respect to any other
outstanding securities of the Company.
170. A holder of IPO Shares shall be entitled to
receive distributions from the Trust Fund only in the event
of a liquidation of the Company or in the event he redeems
his IPO Shares in accordance with Article 167. In no other
circumstance shall a holder of IPO Shares have any right or
interest of any kind in the Trust Fund.
(ii) The Company acknowledges that the purchasers of the
Public Securities in the Offering shall be deemed to be third party
beneficiaries of this Agreement and specifically this Section 3.23.
(iii) The Representative specifically advises the Company that
it will not waive this Section 3.23 under any circumstances.
3.24 PRIVATE PLACEMENT PROCEEDS. Prior to the Effective Date and
execution of this Agreement, the Company shall deposit $1,080,000 of the
proceeds from the Private Placement in the Trust Fund and shall provide ▇▇▇▇▇▇
▇▇▇▇▇▇ & Co. with evidence of the same.
4. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several
Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1 Regulatory Matters.
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement shall have become effective not later than [4:30] p.m.,
New York time, on the date of this Agreement or such later date and time as
shall be consented to in writing by you, and, at each of the Closing Date and
the Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for the purpose
shall have been instituted or shall be pending or contemplated by the Commission
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of EGS, counsel to the
Underwriters.
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4.1.2 NASD CLEARANCE. By the Effective Date, the
Representative shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriters as described in the
Registration Statement.
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the sale of
the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing Date or the Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.1.4 THE OTC BULLETIN BOARD. The Securities shall have been
admitted and approved for trading on the OTC Bulletin Board.
4.2 Company Counsel Matters.
4.2.1 CLOSING DATE AND OPTION CLOSING DATE OPINION OF COUNSEL.
On the Closing Date and the Option Closing Date, if any, the Representative
shall have received the favorable opinions of DLA ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ US LLP
and [Cayman Island Counsel], dated the Closing Date or the Option Closing Date,
as the case may be, addressed to the Representative and in form and substance
reasonably satisfactory to EGS, covering the matters set forth on Appendix A
hereto.
4.2.2 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 EGS) of other counsel reasonably acceptable to EGS, familiar with the
applicable laws, and (ii) as to matters of fact, to the extent they deem proper,
on certificates or other written statements of officers of the Company and
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to the
Underwriters' counsel if requested. The opinion of counsel for the Company and
any opinion relied upon by such counsel for the Company shall include a
statement to the effect that it may be relied upon by counsel for the
Underwriters in its opinion delivered to the Underwriters.
4.3 COLD COMFORT LETTER. At the time this Agreement is executed,
and at each of the Closing Date and the Option Closing Date, if any, you shall
have received a letter, addressed to the Representative and in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to you and to
EGS from Berenson dated, respectively, as of the date of this Agreement and as
of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations and that they have not, during the periods covered by the financial
statements included in the Preliminary Prospectus, 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;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement, the Sale Preliminary
Prospectus and Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and the published Regulations
thereunder;
(iii) Stating that, on the basis of their review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe
20
that (a) the unaudited financial statements of the Company included in the
Registration Statement, the Sale Preliminary Prospectus and 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, the Sale Preliminary Prospectus
and Prospectus, or (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 stockholder's equity of the Company as compared with amounts shown in the
June 30, 2006 balance sheet included in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus, other than as set forth in or
contemplated by the Registration Statement, the Sale Preliminary Prospectus and
the Prospectus, or, if there was any decrease, setting forth the amount of such
decrease and (c) during the period from June 30, 2006 to a specified date not
later than five days prior to the Effective Date, Closing Date or Option Closing
Date, as the case may be, there was any decrease in revenues, net earnings or
net earnings per share of Common Stock, in each case as compared with the
corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, the Sale Preliminary Prospectus and
Prospectus or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Registration
Statement and the Sale Preliminary Prospectus and Prospectus, in each case to
the extent that such amounts, numbers, percentages, statements and information
may be derived from the general accounting records, including work sheets, of
the Company and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement;
(vi) Stating that they have not, since the Company's
incorporation, provided the Company's management with any written communication
in accordance with Statement on Auditing Standards No. 60 "Communication of
Internal Control Structure Related Matters Noted in an Audit"; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary or Assistant Secretary of the Company (in their capacities as
such), dated the Closing Date or the Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of Closing Date and
the Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct. In addition,
the Representative will have received such other and further certificates of
officers of the Company (in their capacities as such) as the Representative may
reasonably request.
21
4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing Date and
the Option Date, if any, the Representative shall have received a certificate of
the Company signed by the Secretary or Assistant Secretary of the Company, dated
the Closing Date or the Option Date, as the case may be, respectively,
certifying (i) that the Articles are true and complete, have not been modified
and are in full force and effect, (ii) that the resolutions relating to the
public offering contemplated by this Agreement are in full force and effect and
have not been modified, (iii) all correspondence between the Company or its
counsel and the Commission, and (iv) as to the incumbency of the officers of the
Company. The documents referred to in such certificate shall be attached to such
certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date
and the Option Closing Date, if any, (i) there shall have been no material
adverse change or development involving a prospective material adverse change in
the condition or prospects or the business activities, financial or otherwise,
of the Company from the latest dates as of which such condition is set forth in
the Registration Statement, 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 or any Existing 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 or supplements
thereto shall contain all material statements which are required to be stated
therein in accordance with the Act and the Regulations and shall conform in all
material respects to the requirements of the Act and the Regulations, and
neither the Registration Statement, the Sale Preliminary Prospectus nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.6 DELIVERY OF AGREEMENTS.
4.6.1 EFFECTIVE DATE DELIVERIES. On the Effective Date, the
Company shall have delivered to the Representative executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement, the Services Agreement,
and all of the Insider Letters and Warrant Purchase Agreements.
4.6.2 CLOSING DATE DELIVERIES. On the Closing Date, the
Company shall have delivered to the Representative executed copies of the
Representative's Purchase Option.
4.7 OPINION OF COUNSEL FOR THE UNDERWRITERS. All proceedings taken
in connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to EGS and you shall have received from such counsel a favorable
opinion, dated the Closing Date and the Option Closing Date, if any, with
respect to such matters as you and EGS may reasonably require. On or prior to
the Effective Date, the Closing Date and the Option Closing Date, as the case
may be, counsel for the Underwriters shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in this Section
4.7, or in order to evidence the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained.
4.8 SECONDARY MARKET TRADING AND STANDARD & POOR'S. Unless the
Securities are listed or quoted, as the case may be, on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market, the Company
(a) will apply to be included in Standard & Poor's Daily News and Corporation
Records Corporate Descriptions for a period of five years from the consummation
of a Business Combination, (b) shall take such steps as may be necessary to
obtain a secondary market trading exemption for the Company's securities in the
State of California and (c) shall also take such other action
22
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.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION OF UNDERWRITERS.
5.1.1 GENERAL. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, and each
dealer selected by you that participates in the offer and sale of the Securities
(each a "SELECTED DEALER") and each of their respective directors, officers and
employees and each person, if any, who controls any such Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
statute or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in (i) any Preliminary Prospectus, the Registration
Statement, Sale Preliminary Prospectus or the Prospectus (as from time to time
each may be amended and supplemented); (ii) any materials or information
provided to investors by, or with the approval of, the Company in connection
with the marketing of the offering of the Securities, including any "road show"
or investor presentations made to investors by the Company (whether in person or
electronically); (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, Nasdaq or
any securities exchange; or (iv) any post effective amendments to the
Registration Statement or Prospectus or new registration statement or prospectus
filed by the company with the Commission any state securities commission or
agency, Nasdaq or any securities exchange in which is included any of the
Representative's Securities, or the omission or alleged omission from any
Preliminary Prospectus, the Registration Statement, Sale Preliminary Prospectus
or the Prospectus or subsequent filing by the Company under clause (iv) above of
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to an Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement, Sale Preliminary
Prospectus or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. The Company agrees promptly to notify the
Representative of the commencement of any litigation or proceedings against the
Company or any of its officers, directors or controlling persons in connection
with the issue and sale of the Securities or in connection with the Registration
Statement, Sale Preliminary Prospectus or Prospectus.
5.1.2 PROCEDURE. If any action is brought against an
Underwriter, a Selected Dealer or a controlling person in respect of which
indemnity may be sought against the Company pursuant to Section 5.1.1, such
Underwriter or Selected Dealer shall promptly notify the Company in writing of
the institution of such action and the Company shall assume the defense of such
action, including the employment and fees of counsel (subject to the reasonable
approval of such Underwriter or Selected Dealer, as the case may be) and payment
of actual expenses. Such Underwriter, Selected Dealer or controlling person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter, Selected Dealer or controlling person unless (i) the employment of
such counsel at the expense of the Company shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) such indemnified party or parties shall have
23
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events the
reasonable fees and expenses of not more than one additional firm of attorneys
selected by the Underwriter, Selected Dealer and/or controlling person shall be
borne by the Company. Notwithstanding anything to the contrary contained herein,
if the Underwriter, Selected Dealer or controlling person shall assume the
defense of such action as provided above, the Company shall have the right to
approve the terms of any settlement of such action which approval shall not be
unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. Each Underwriter, severally
and not jointly, agrees to indemnify and hold harmless the Company, its
directors, officers and employees and agents who control the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions made in any Preliminary Prospectus, the Registration Statement, Sale
Preliminary Prospectus or Prospectus or any amendment or supplement thereto or
in any application, in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Underwriter by or on
behalf of the Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement, Sale Preliminary Prospectus or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement, Sale Preliminary
Prospectus or Prospectus or any amendment or supplement thereto or any
application, and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the several Underwriters by the provisions of Section
5.1.2.
5.3 CONTRIBUTION.
5.3.1 CONTRIBUTION RIGHTS. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each director,
officer and employee of an Underwriter or the Company, as applicable, and each
person, if any, who controls an Underwriter or the Company, as applicable,
within the meaning of Section 15 of the Act shall have the same rights to
contribution as the Underwriters or the Company, as applicable.
24
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after
receipt by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The contribution provisions contained in
this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available.
The Underwriters' obligations to contribute pursuant to this Section 5.3 are
several and not joint.
6. Default by an Underwriter.
6.1 DEFAULT NOT EXCEEDING 10% OF FIRM UNITS OR OPTION UNITS. If
any Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the Over-Allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
6.2 DEFAULT EXCEEDING 10% OF FIRM UNITS OR OPTION UNITS. In the
event that the default addressed in Section 6.1 above relates to more than 10%
of the Firm Units or Option Units, you may in your discretion arrange for
yourself or for another party or parties to purchase such Firm Units or Option
Units to which such default relates on the terms contained herein. If within one
Business Day after such default relating to more than 10% of the Firm Units or
Option Units you do not arrange for the purchase of such Firm Units or Option
Units, then the Company shall be entitled to a further period of one Business
Day within which to procure another party or parties satisfactory to you to
purchase said Firm Units or Option Units on such terms. In the event that
neither you nor the Company arrange for the purchase of the Firm Units or Option
Units to which a default relates as provided in this Section 6, this Agreement
will be terminated by you or the Company without liability on the part of the
Company (except as provided in Sections 3.11.1 and 5 hereof) or the several
Underwriters (except as provided in Section 5 hereof); provided, however, that
if such default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 POSTPONEMENT OF CLOSING DATE. In the event that the Firm Units
or Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five (5) Business Days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Sale Preliminary
Prospectus or Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment to the Registration Statement or
the Prospectus that in the opinion of counsel for the Underwriters may thereby
be made necessary. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 6 with like effect as if it had
originally been a party to this Agreement with respect to such Securities.
25
7. RIGHT TO APPOINT OBSERVER. Until the consummation of a Business
Combination, upon notice from ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. to the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇
& Co. shall have the right to send a representative (who need not be the same
individual from meeting to meeting) to observe each meeting of the Board of
Directors of the Company; provided that such representative shall sign a
Regulation FD compliant confidentiality agreement which is reasonably acceptable
to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. and its counsel in connection with such representative's
attendance at meetings of the Board of Directors; and provided further that upon
written notice to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., the Company may exclude the
representative from meetings where, in the written opinion of counsel for the
Company, the representative's presence would destroy the attorney-client
privilege. The Company agrees to give ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. written notice of each
such meeting and to provide ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. with an agenda and minutes of
the meeting no later than it gives such notice and provides such items to the
other directors and to reimburse the representative of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. for
its reasonable out-of-pocket expenses incurred in connection with its attendance
at the meeting, including but not limited to, food, lodging and transportation.
8. Additional Covenants.
8.1 ADDITIONAL SHARES OR OPTIONS. The Company hereby agrees that
until the consummation of a Business Combination, it shall not issue any
Ordinary Shares (except with respect to any exercise of Warrants) or any options
or other securities convertible into Ordinary Shares, or any shares of preferred
stock or other securities of the Company which participate or may participate in
any manner in the Trust Fund or which vote as a class with the Ordinary Shares
on a Business Combination.
8.2 AMENDMENTS TO INSIDER LETTERS, WARRANT PURCHASE AGREEMENT AND
TRUST FUND. The Company shall not take any action or omit to take any action
which would cause a breach of any of the Insider Letters or the Warrant Purchase
Agreement executed between each Existing Stockholder and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. and
will not allow any amendments to, or waivers of, such Insider Letters Warrant
Purchase Agreement or the Trust Fund without the prior written consent of the
Representative.
8.3 PROHIBITION ON AMENDMENT OF ARTICLES. 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 Articles. Except as set forth in Section 3.23, prior
to the consummation of a Business Combination, the Company will not amend its
Articles without the prior written consent of the Representative.
8.4 ACQUISITION/LIQUIDATION PROCEDURE. The Company agrees: (i)
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 the laws of the Cayman Islands;
and (ii) in the event that the Company does not effect a Business Combination
within eighteen (18) months from the consummation of the Offering (subject to
extension for up to an additional six-month period, as described in the Sale
Preliminary Prospectus or Prospectus) (the "Termination Date"), the Company and
the Existing Stockholders shall take all action necessary to dissolve the
Company and liquidate the Trust Account to holders of IPO Shares (as defined
below) in the manner described in the Sale Preliminary Prospectus and the
Prospectus as soon as reasonably practicable, and after approval of the
Company's stockholders and subject to the requirements of the laws of the Cayman
Islands, including the adoption of a resolution by the Company's Board of
Directors, prior to such Termination Date, which shall deem the dissolution of
the Company advisable and cause to be prepared such notices as are required by
the laws of the Cayman Islands within five days of the date thereof. For
purposes of this Section 8.4, the term "IPO Shares" means the Ordinary Shares
contained in the Public Securities.
8.4.1 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, within five (5)
Business Days of such adoption, prepare and file such notices to have the
Company struck off by the Registrar of
26
companies of the Cayman Islands. If the Directors do not deem it appropriate to
apply to have the Company struck-off by the Registrar of Companies, this shall
trigger automatic winding-up of the Company ("Automatic Dissolution") and the
Company shall be dissolved and liquidated accordingly.
8.4.2 Upon liquidation of the Trust Account, the Company will
distribute only to the holders of IPO Shares an aggregate sum equal to the
Company's Liquidation Value, which sum shall be distributed PRO RATA among the
holders of the IPO Shares. The Company's "LIQUIDATION VALUE" means: (i) all of
the all principal and accrued interest contained within the Trust Account, less
any amounts previously distributed to the Company out of the interest earned on
the Trust Account pursuant to the terms of the Trust Agreement (after payment
of, or provision for, applicable taxes and claims of creditors) PLUS (ii) all
cash and other liquid assets (which shall be reduced to cash as part of the
Company's winding up) then held by the Company outside of the Trust Account, all
as distributed in amounts to the holders as determined by AST, as trustee of the
Trust Account. Only holders of IPO Shares as of the record date for the
distribution shall be entitled to receive liquidating distributions with respect
to the IPO Shares they beneficially own and the Company shall pay no liquidating
distributions with respect to any other shares of capital stock of the Company,
including the shares of Ordinary Shares held by the Existing Stockholders prior
to the Offering (but shall include Ordinary Shares underlying the Placement
Warrants and ordinary Shares purchased by Existing Stockholders after the
Offering).
8.4.3 With respect to any vote for any plan of dissolution and
liquidation recommended by the Company's Board of Directors, the Existing
Stockholders shall vote all Ordinary Shares owned by them (including any
Ordinary Shares purchased after the Offering or issuable upon exercise of the
Placement Warrants) in favor of such plan of dissolution and liquidation. With
respect to the Business Combination Vote, the Existing Stockholders shall vote
all Ordinary Shares owned by them as of the record date of the vote in
accordance with the vote of holders of a majority of the IPO Shares present, in
person or by proxy, at a meeting of the Company's stockholders in connection
with the Business Combination Vote.
8.4.4 At the time the Company seeks approval of any potential
Business Combination (prior to the confirmation of its initial Business
Combination), the Company will offer each of the holders of the IPO Shares the
right to convert their IPO Shares into a pro rata share of the Trust Fund (the
"Conversion Price"). If holders of less than 20% in interest of the Company's
Ordinary Shares vote against such approval of a Business Combination, the
Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will redeem Ordinary
Shares, based upon the Conversion Price, from those holders of Ordinary Shares
who affirmatively requested such conversion and who voted against the Business
Combination as provided under the laws of the Caymen Islands. If holders of 20%
or more in interest of the Ordinary Shares vote against approval of any
potential Business Combination, the Company will not proceed with such Business
Combination and will liquidate.
8.5 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 "▇▇▇▇▇ stock" as defined in Rule 3a-51-1 under the Exchange
Act during such period.
8.6 AFFILIATED TRANSACTIONS. The Company shall cause each of the
Existing Stockholders to agree that, in order to minimize potential conflicts of
interest which may arise from multiple affiliations, the Existing Stockholders
will present to the Company for its consideration, prior to presentation to any
other person or company, any suitable opportunity to acquire an operating
business, until the earlier of the consummation by the Company of a Business
Combination, the liquidation of the Company or until such
27
time as the Existing Stockholders cease to be an officer or director of the
Company, subject to any pre-existing fiduciary or contractual obligations the
Existing Stockholders might have.
8.7 TARGET NET ASSETS. The Company agrees that the initial Target
Business that it acquires must have a fair market value equal to at least 80% of
the Company's net assets held in trust, net of taxes (all of the Company's
assets, including the funds held in the Trust Fund, less the Company's
liabilities and Deferred Fees) at the time of such Business Combination. The
fair market value of such business must be determined by the Board of Directors
of the Company based upon standards generally accepted by the financial
community, such as actual and potential sales, earnings and cash flow and book
value. If the Board of Directors of the Company is not able to independently
determine that the target business has a fair market value of at least 80% of
the Company's net assets held in trust, net of taxes, at the time of such
acquisition, or if the Target Business is affiliated with any of the Existing
Stockholders, 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.
8.8 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 $[34,200,000] (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 A and B, respectively.
8.9 PROXY AND OTHER INFORMATION. The Company shall provide counsel
to the Representative with ten copies of all proxy information and all related
material filed with the Commission in connection with a Business Combination
concurrently with such filing with the Commission. In addition, the Company
shall furnish any other state in which its initial public offering was
registered, such information as may be requested by such state.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements as of the Closing Dates and such representations, warranties and
agreements of the Underwriters and the 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.
28
10. Effective Date of This Agreement and Termination Thereof.
10.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
10.2 TERMINATION. You shall have the right to terminate this
Agreement at any time prior to the Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York Stock Exchange,
the American Stock Exchange, the Nasdaq Stock Market or on the NASD OTC Bulletin
Board (or successor trading market) shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been fixed, or maximum ranges for prices for
securities shall have been required on the New York Stock Exchange, the American
Stock Exchange, Nasdaq Stock Market or on the NASD OTC Bulletin Board (or
successor trading market) or by order of the Commission or any other government
authority having jurisdiction, or (iii) if the United States shall have become
involved in a new war or an increase in major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v) if
a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Public Securities, or (vii) if
any of the Company's representations, warranties or covenants hereunder are
breached, or (viii) if the Representative shall have become aware after the date
hereof of such a material adverse change in the conditions or prospects of the
Company, or such adverse material change in general market conditions, including
without limitation as a result of terrorist activities after the date hereof, as
in the Representative's judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Public Securities or to enforce contracts
made by the Underwriters for the sale of the Public Securities.
10.3 EXPENSES. In the event that this Agreement shall not be
carried out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the obligations of the Company
to pay the out of pocket expenses related to the transactions contemplated
herein shall be governed by Section 3.11 hereof.
10.4 INDEMNIFICATION. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 shall not be in any way effected by, such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Miscellaneous.
11.1 NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed by US
first class mail or delivered by courier and shall be deemed given five business
days after deposited in the mail or when delivered if sent by courier to the
following addresses:
If to the Representative:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
29
Copy to:
Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
ChinaGrowth South Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Chemical Industry Park
Shanghai, China 201417
Attn: President
Facsimile: ( )
Copy to:
DLA ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ US LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
11.2 HEADINGS. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
11.3 AMENDMENT. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
11.4 ENTIRE AGREEMENT. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5 BINDING EFFECT. This Agreement shall inure solely to the
benefit of and shall be binding upon the Representative, the Underwriters, the
Company and the controlling persons, directors and officers referred to in
Section 5 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of
the parties hereto and said controlling persons and their respective successors,
officers, directors, heirs and legal representatives, and it is not for the
benefit of any other person. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Securities from any of the
Underwriters. The Company acknowledges and agrees that: (i) the sale and
issuance of the Securities pursuant to this Agreement is an arm's-length
commercial transaction between the Company and the Underwriters; (ii) in
connection therewith and with the process leading to the Offering, the
Underwriters are acting solely as a principal and not the agent or fiduciary of
the Company; (iii) no Underwriter has assumed an advisory or fiduciary
responsibility in favor of the Company with respect to the Offering contemplated
hereby or the process leading thereto, including any negotiation related to the
pricing of the Securities; and (iv) the Company
30
has consulted its own legal and financial advisors to the extent it has deemed
appropriate in connection with this Agreement and the Offering.
11.6 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflicts of law principles that would result in the
application of the substantive laws of another jurisdiction. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
such process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
11.1 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The Company
agrees that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
11.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
11.8 WAIVER, ETC. The failure of any of the parties hereto to at
any time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
11.9 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 a fiduciary to the
Company, its management, stockholders, creditors or any 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
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 fiduciary or similar duty to the Company in
connection with the transactions contemplated by this Agreement or any matters
leading up to such transactions.
31
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,
CHINAGROWTH SOUTH ACQUISITION
CORPORATION
By: ___________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO
Accepted on the date first
above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO. INC.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. Inc.
By: ______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
For themselves and the other several
Underwriters named in Schedule I
to the foregoing Agreement
32
SCHEDULE I
CHINAGROWTH SOUTH ACQUISITION CORPORATION
5,175,000 UNITS
Number of Firm Units
Underwriter to be Purchased
----------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. Inc.
[Add other underwriters]
======================
APPENDIX A
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its place of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the assets, business or operations of the Company.
(ii) All issued and outstanding securities of the Company
(including, without limitation, the Placement Warrants) 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 Amended
and Restated Memorandum and Articles of Association ("Articles") of the Company.
The offers and sales of the outstanding Ordinary Shares prior to the Offering
were at all relevant times either registered under the Act or exempt from such
registration requirements. The authorized and, to such counsel's knowledge,
outstanding capital stock of the Company is as set forth in the Prospectus.
(iii) The Securities 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 Articles of the Company. When issued, the
Representative's Purchase Option, the Representative's Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment therefor, the number and type of securities of
the Company called for thereby and such Warrants, the Representative's Purchase
Option, and the Representative's Warrants, when issued, in each case, are
enforceable against the Company in accordance with their respective terms,
except (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (b) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The certificates representing the Securities
are in due and proper form.
(iv) 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 Ordinary Shares have been reserved for issuance upon exercise of the
Placement Warrants. The Ordinary Shares underlying the Placement Warrants will,
upon exercise of the 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 preemptive or, to such counsel's knowledge,
similar rights that entitle or will entitle any person to acquire any securities
from the Company upon issuance thereof.
(v) This Agreement, the Warrant Agreement, the Services
Agreement, the Trust Agreement, the Escrow Agreement and the Warrant Purchase
Agreement have each been duly and validly authorized and, when executed and
delivered by the Company, constitute, and the Representative's
Purchase Option has been duly and validly authorized by the Company and, when
executed and delivered, will constitute, the valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (b) as enforceability of any indemnification or contribution
provisions may be limited under the federal and state securities laws, and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(vi) The execution, delivery and performance of this
Agreement, the Warrant Agreement, the Representative's Purchase Option, the
Escrow Agreement, the Trust Agreement, the Services Agreement and the Warrant
Purchase Agreement and compliance by the Company with the terms and provisions
thereof and the consummation of the transactions contemplated thereby, and the
issuance and sale of the Securities, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) to such counsel's knowledge,
conflict with, or result in a breach of, any of the terms or provisions of, or
constitute a default under, or result in the creation or modification of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to the terms of, any mortgage, deed of trust,
note, indenture, loan, contract, commitment or other agreement or instrument
filed as an exhibit to the Registration Statement, (b) result in any violation
of the provisions of the Certificate of Incorporation or the Bylaws of the
Company, or (c) to such counsel's knowledge, violate any United States statute
or any judgment, order or decree, rule or regulation applicable to the Company
of any court, United States federal, state or other regulatory authority or
other governmental body having jurisdiction over the Company, its properties or
assets.
(vii) The Registration Statement, the Sale Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) each as of their respective dates appeared on their
face to comply as to form in all material respects with the requirements of the
Act and Regulations. The Securities and all other securities issued or issuable
by the Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus. The descriptions in
the Registration Statement, the Sale Preliminary Prospectus and in the
Prospectus, insofar as such statements constitute a summary of statutes, legal
matters, contracts, documents or proceedings referred to therein, fairly present
in all material respects the information required to be shown with respect to
such statutes, legal matters, contracts, documents and proceedings, and such
counsel does not know of any statutes or legal or governmental proceedings
required to be described in the Sale Preliminary Prospectus and the Prospectus
that are not described in the Registration Statement, the Sale Preliminary
Prospectus or the Prospectus or included as exhibits to the Registration
Statement that are not described or included as required.
(viii) The Registration Statement is effective under the Act.
To such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act or applicable state
securities laws.
(ix) To such counsel's knowledge, there is no action, suit or
proceeding before or by any court of governmental agency or body, domestic or
foreign, now pending, or threatened against the Company that is required to be
described in the Registration Statement.
The opinion of counsel shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriters and the independent registered public
accounting firm of the Company, at which conferences the contents of the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus
contained therein and related matters were discussed and, although such counsel
is not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, the Sale Preliminary Prospectus and the Prospectus contained therein
(except as otherwise set forth in the foregoing opinion), solely on the basis of
the foregoing without independent check and verification, no facts have come to
the attention of such counsel which lead them to believe that the Registration
Statement or any amendment thereto, at the time the Registration Statement or
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or the Prospectus or any amendment or
supplement thereto, at the time they were filed pursuant to Rule 424(b) or at
the date of such counsel's opinion, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
opinion with respect to the financial information and statistical data and
information included in the Registration Statement, the Sale Preliminary
Prospectus or the Prospectus).
EXHIBIT A
FORM OF TARGET BUSINESS LETTER
ChinaGrowth South Acquisition Corporation
_____________________________
_____________________________
Gentlemen:
Reference is made to the Final Prospectus of ChinaGrowth South
Acquisition Corporation (the "COMPANY"), dated _______________, 2006 (the
"PROSPECTUS"). Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in Prospectus.
We have read the Prospectus and understand that the Company has
established the Trust Fund, initially in an amount of at least $_____________
for the benefit of the Public Stockholders and the underwriters of the Company's
initial public offering (the "UNDERWRITERS") 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 redemption of their shares or the dissolution and liquidation of
the Company or (ii) to the Company and the Underwriters after it consummates a
Business Combination.
For and in consideration of the Company 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 (each, a "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 the Company and will not seek
recourse against the Trust Fund for any reason whatsoever.
_______________________________________________
Print Name of Target Business
_______________________________________________
Authorized Signature of Target Business
EXHIBIT B
FORM OF VENDOR LETTER
ChinaGrowth South Acquisition Corporation
_________________________________________
_________________________________________
Gentlemen:
Reference is made to the Final Prospectus of ChinaGrowth South
Acquisition Corporation (the "COMPANY"), dated _______________, 2006 (the
"PROSPECTUS"). Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in Prospectus.
We have read the Prospectus and understand that the Company has
established the Trust Fund, initially in an amount of at least $_______________
for the benefit of the Public Stockholders and the underwriters of the Company's
initial public offering (the "UNDERWRITERS") 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 redemption of their shares or the dissolution and liquidation of
the Company or (ii) to the Company and the Underwriters after it consummates a
Business Combination.
For and in consideration of the Company agreeing to use the 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
(each, a "CLAIM") and hereby waives any Claim it may have in the future as a
result of, or arising out of, any services provided to the Company and will not
seek recourse against the Trust Fund for any reason whatsoever.
____________________________________________
Print Name of Vendor
____________________________________________
Authorized Signature of Vendor