UNDERWRITING AGREEMENT between TM ENTERTAINMENT AND MEDIA, INC. and PALI CAPITAL, INC. Dated: ___________, 2007
between
TM ENTERTAINMENT AND MEDIA, INC.
and
PALI CAPITAL, INC.
Dated: ___________, 2007
TM ENTERTAINMENT AND MEDIA, INC.
___________, 2007
Pali Capital, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
As Representative of the
Several Underwriters named in Schedule I hereto
Several Underwriters named in Schedule I hereto
Re: Public Offering of Securities
Ladies and Gentlemen:
The undersigned, TM Entertainment and Media, Inc., a Delaware corporation (“Company”), hereby
confirms its agreement with Pali Capital, Inc. (“Pali Capital” and also referred to herein
variously as “you,” or the “Representative”) and with the other Underwriters named on Schedule I
hereto for which Pali Capital 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 9,000,000
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 common stock,
par value $.0001 per share (“Common Stock”), and one warrant (“Warrant”). The Common Stock and the
Warrants included in the Firm Units will not be separately transferable until 90 days after the
effective date (“Effective Date”) of the Registration Statement (as defined in Section 2.1.1
hereof) unless 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
8-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 in Section 1.2.1), if such option is
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exercised prior to the filing of the Form 8-K. Each Warrant entitles its holder to exercise
it to purchase one share of Common Stock for $5.50 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 Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP (“Xxxxxx
Xxxxx”) 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: $71,240,000 of the proceeds received by the Company for the Firm Units
and the Placement Warrants (as defined in Section 2.22.3 below),
including $2,880,000 of the
Deferred Fees (as defined in Section 1.1.3 below) shall be deposited (or with respect to the
$2,100,000 of proceeds from the sale of the Placement Warrants shall have been deposited on or
prior to the Closing Date) in the Trust Account established by the Company for the benefit of the
public stockholders as described in the Registration Statement (“Trust Account”) pursuant to the
terms of an Investment Management Trust Agreement (“Trust Agreement”) between the Company and
Continental Stock Transfer & Trust Company (“CST”) 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), Pali Capital agrees to deposit into the
Trust Account a portion of the Underwriters’ discount equal to
$0.32 per Unit in the Offering and,
if applicable, a portion of the discount equal to $0.32 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 Account. Upon the consummation of a Business Combination, Pali Capital shall promptly
receive the Deferred Fees. In the event that the Company is unable to consummate a Business
Combination and Continental Stock Transfer & Trust Company, the trustee of the Trust Account,
commences liquidation of the Trust Account, Pali Capital hereby
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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 Common
Stock included in the Units sold in the Offering along with any interest accrued thereon, net of
taxes.
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 1,350,000 units from the Company
(“Over-allotment Option”). Such additional 1,350,000 units, the net proceeds of which will be
deposited in the Trust Account, 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 Common
Stock and the Warrants included in the Units and the Common Stock 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
Xxxxxx Xxxxx 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 Account 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.
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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 700,000 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 Common Stock (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), and may be exercised on a cashless basis. The Representative’s Purchase Option,
the Representative’s Units, the Common Stock contained within the Representative’s Units, the
Representative’s Warrants and the Common Stock issuable upon exercise of the Representative’s
Warrants are hereinafter referred to collectively as the “Representative’s Securities.” The Public
Securities and the Representative’s Securities are hereinafter referred to collectively as the
“Securities.” The Representative understands and agrees that there are significant restrictions
against transferring the Representative’s 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 S-1 (File No. 333-143856), 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 S-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
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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 __________, 2007, 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.
2.1.2 Pursuant to the Exchange Act. The Company has filed with the Commission a Form
8-A (File Number 000-___) providing for the registration under the Securities Exchange Act of
1934, as amended (“Exchange Act”), of the Units, the Common Stock and the Warrants. The
registration of the Units, Common Stock and Warrants under the Exchange Act has been declared
effective by the Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the Company’s
knowledge, any state regulatory authority has issued any order or threatened to issue any order
preventing or suspending the use of any 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.
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
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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 under common control with the Company since the Company’s formation, except as
disclosed in the Registration Statement.
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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. Xxxxxxxxx Xxxxx Xxxxxxx LLP (“GGK”), 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 and the
Regulations. GGK 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.
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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 Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or otherwise acquire
any authorized but unissued shares of Common Stock of the Company or any security convertible into
Common Stock of the Company, or any contracts or commitments to issue or sell Common Stock or any
such options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities, Etc.
2.8.1 Outstanding Securities. All issued and outstanding securities of the Company
(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
shares of Common Stock 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 constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment of the
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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 Common Stock
issuable upon exercise of the Placement Warrants have been reserved for issuance upon the exercise
of the Placement Warrants and, when issued in accordance with the terms of the Placement Warrants,
will be duly and validly authorized, validly issued, fully paid and non-assessable, and the holders
thereof are not and will not be subject to personal liability by reason of being such holders.
2.8.4 No Integration. 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 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 Private
Placement 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 Private Placement 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
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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 Company’s Bylaws and Amended and Restated Certificate of Incorporation
(the “Certificate of Incorporation”); 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
Certificate of Incorporation 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 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
Private Placement 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
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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 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 Common
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Stock 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 CST substantially in the form annexed as
Exhibit 4.4 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 forms of which
are annexed as Exhibits 10.1 through 10.3 to the Registration Statement (“Insider Letters”),
pursuant to which each of the Existing Stockholders of the Company agree to certain
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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.
2.22.2 Escrow Agreement. The Company has caused the Existing Stockholders to enter
into an escrow agreement (“Escrow Agreement”) with CST (“Escrow Agent”), substantially in the form
annexed as Exhibit 10.5 to the Registration Statement, whereby (i) the Common Stock owned by the
Existing Stockholders (the “Existing Stockholders Shares”) will be held in escrow by the Escrow
Agent, until one (1) year from the date of consummation of a Business Combination or earlier if,
following a Business Combination, the last sales price of the Common Stock equals or exceeds $11.50
per share for any 20 trading days within any 30-trading day period and (ii) the Placement Warrants
will be held in escrow by the Escrow Agent until the later of one year from the Effective Date and
60 days following the consummation of 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 Private Placement Purchase Agreement. The Existing
Stockholders have executed and delivered an agreement, annexed as Exhibit 10.9 of the Registration
Statement (the “Private Placement Purchase Agreement”), pursuant to which such entity has purchased
an aggregate of 2,100,000 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 $1.00 per
warrant (“Placement Warrants”). The Existing Stockholders and the Company have delivered executed
copies of the Private Placement Purchase Agreement and the Existing Stockholders have delivered the
purchase price on or before the Closing Date. Pursuant to the Private Placement Purchase
Agreement, (i) the $2,100,000 of proceeds from the sale of the Placement Warrants has been
deposited by the Company in the Trust Account in accordance with the terms of the Trust Agreement
on or prior to the Closing 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 Account 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 CST with respect to certain proceeds of the Offering substantially in the form
annexed as Exhibit 10.4 to the Registration Statement.
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2.24 No Existing Non-Competition Agreements. 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.
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 American Stock Exchange Eligibility. As of the Effective Date, the Public
Securities have been approved for listing on the American Stock Exchange (“AMEX”).
2.29 Xxxxxxxx-Xxxxx Act. Solely to the extent that the Xxxxxxxx-Xxxxx Act of 2002, as
amended, and the rules and regulations promulgated by the Commission and the AMEX thereunder (the
“Xxxxxxxx-Xxxxx Act”) has been applicable to the Company, there is and has been no failure on the
part of the Company to comply in all material respects with any provision of the Xxxxxxxx-Xxxxx
Act. The Company has taken all necessary actions to ensure that it is in compliance in all
material respects with all provisions of the Xxxxxxxx-Xxxxx Act that are in effect and with which
the Company is required to comply and is actively taking steps to ensure that it will be in
compliance in all material respects with other provisions of the Xxxxxxxx-Xxxxx Act not currently
in effect or which will become applicable to the Company.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments To Registration Statement. The Company will deliver to the
Representative, prior to filing, any amendment or supplement to the Registration Statement or
Prospectus proposed to be filed after the Effective Date and 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
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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.
3.2.4 Ineligible Issuer. At the time of filing the Registration Statement and at the
date hereof, the Company was and is an “ineligible issuer,” as defined in Rule 405 under the
Securities Act. The Company has not made and will not make any offer relating to the Public
Securities that would constitute an “issuer free writing Prospectus,” as defined in Rule 433, or
that would otherwise constitute a “free writing Prospectus,” as defined in Rule 405.
3.3 Xxxxxxxx-Xxxxx Act; American Stock Exchange. The Company will take all necessary
actions to ensure that, upon and at all times after the effectiveness of the Registration
Statement, it will be in compliance in all material respects with (i) all provisions of the
Xxxxxxxx-Xxxxx Act that are then in effect and applicable to it and shall take such steps as are
necessary to ensure that it will be in compliance in all material respects with other provisions of
the Xxxxxxxx-Xxxxx Act not currently in effect upon the effectiveness of such provisions to the
extent they are applicable to the Company and (ii) the requirements of the American Stock
Exchange’s AMEX Company Guide.
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.
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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 administrative
services agreement (“Services Agreement”) with Xxxxxxxx X. Xxxxx and Xxxxxxx Xxxx (collectively,
“Affiliate”) substantially in the form annexed as Exhibit 10.6 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.
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
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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 Pali Capital for a term to be
agreed on by the Company and Pali Capital.
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 (Pali Capital, Inc., Attn: Xxxxxxx Xxxxxx) and its counsel copies of
such financial statements and other periodic and special reports as the Company from time to time
furnishes generally to holders of any class of its securities, and promptly furnish to the
Representative (i) a copy of each periodic report the Company shall be required to file with the
Commission, (ii) a copy of every press release and every news item and article with respect to the
Company or its affairs which was released by the Company, (iii) a copy of each Form 8-K or
Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, (iv) 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 XXXXX 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 CST 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 Continental Stock Transfer & Trust
Company is an acceptable Transfer Agent.
3.10 Disqualification of Form S-1. Until the earlier of seven years from the date
hereof or until the Warrants have expired and are no longer exercisable, the Company will not take
any action or actions which may prevent or disqualify the Company’s use of Form S-1 (or other
appropriate form) for the registration of the Warrants and the Representative’s Warrants under the
Act (except in connection with a going-private transaction).
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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 Common Stock
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,
(iv) fees, costs and expenses incurred in listing the Company on the AMEX, (v) fees and
disbursements of the transfer, escrow 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 $10,000 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.
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 Regulations, but which shall satisfy the provisions of Rule 158(a)
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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 Pali Capital 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. 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 GGK
or another independent registered public accounting firm reasonably acceptable to the
Representative.
3.18 Form 8-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 8-K with the Commission, which report shall contain the
Company’s Audited Financial Statements.
Upon the earlier to occur of (i) the expiration or termination of the Over-allotment Option
and (ii) the exercise in full of the Over-allotment Option, the Company shall, subject to having
filed the Current Report(s) on Form 8-K pursuant to the previous paragraph, promptly issue a
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press release announcing that separate trading of the Warrants and Common Stock will begin on
the AMEX.
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 Account to be invested only in “Government Securities” (as defined 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.
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 American Stock Exchange. The Company will use its commercially reasonable
efforts to effect and maintain the listing of the Securities on the AMEX.
3.23 Amendments to Certificate of Incorporation.
(i) The Company covenants and agrees, that prior to its initial Business Combination it will
not seek to amend or modify any of provisions (A) — (F) of Article Sixth of its Certificate of
Incorporation.
(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 Closing Date, the Company shall deposit
$2,100,000 of the proceeds from the Private Placement in the Trust Account and shall provide Pali
Capital 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
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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 Xxxxxx
Xxxxx, counsel to the Underwriters.
4.1.2 NASD Clearance. By the Effective Date, the Representative shall have received
clearance from the NASD as to the amount of compensation allowable or payable to the Underwriters
as described in the Registration Statement.
4.1.3 American Stock Exchange Listing. The Firm Units and Option Units, if any, have
been duly listed on the AMEX.
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 opinion
of Xxxxxxxx Xxxxx LLP, 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 Xxxxxx Xxxxx,
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 Xxxxxx Xxxxx) of other counsel reasonably acceptable to Xxxxxx Xxxxx, 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-
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material nature of the changes or decreases, if any, referred to in clause (iii) below) to you
and to Xxxxxx Xxxxx from GGK dated, respectively, as of the date of this Agreement and as of the
Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect to the Company within the
meaning of the Act and the applicable Regulations and that they have not, during the periods
covered by the financial statements included in the 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 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 __________, 2007 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
__________, 2007 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);
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(v) Stating that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, statements and other financial information pertaining to the
Company set forth in the 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 Chief Executive Officer 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.
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 Certificate of Incorporation is true and complete, has not
been modified and is 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
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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, the Private Placement Purchase Agreement and all of the
Insider Letters.
4.6.2 Closing Date Deliveries. On the Closing Date, the Company shall have delivered
to the Representative executed copies of the Representative’s Purchase Option.
4.7 Opinion of Counsel for the Underwriters. All proceedings taken in connection with
the authorization, issuance or sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to you and to Xxxxxx Xxxxx 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 Xxxxxx Xxxxx 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.
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)
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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. With respect to any untrue
statement or omission or alleged untrue statement or omission made in the Preliminary Prospectus,
the indemnity agreement contained in this paragraph shall not inure to the benefit of any
Underwriter to the extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to the person asserting
any such loss, liability, claim or damage at or prior to the written confirmation of sale of the
Securities to such person as required by the Act and the Regulations, and if the untrue statement
or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was
a result of non-compliance by the Company with its obligations under Section 3.4 hereof. The
Company agrees promptly to notify the Representative of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Securities or in connection with the Registration
Statement, 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
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of such Underwriter or Selected Dealer, as the case may be) and payment of actual expenses.
Such Underwriter, Selected Dealer or controlling person shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of
such Underwriter, Selected Dealer or controlling person unless (i) the employment of such counsel
at the expense of the Company shall have been authorized in writing by the Company in connection
with the defense of such action, or (ii) the Company shall not have employed counsel to have charge
of the defense of such action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different from or additional
to those available to the Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of which events the
reasonable fees and expenses of not more than one additional firm of attorneys selected by the
Underwriter, Selected Dealer and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if the Underwriter, Selected Dealer or
controlling person shall assume the defense of such action as provided above, the Company shall
have the right to approve the terms of any settlement of such action which approval shall not be
unreasonably withheld.
5.2 Indemnification of the Company. Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors, officers and employees and agents
who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act against any and all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions made in any Preliminary
Prospectus, the Registration Statement, 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
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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.
If the allocation provided by the immediately preceding sentence is unavailable for any reason, the
Company and the Underwriters shall contribute in such proportion as is appropriate to reflect the
relative fault of the Company and the Underwriters in connection with the actions or omissions
which resulted in such loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of the Company and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. Notwithstanding the
provisions of this Section 5.3.1, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Public Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay in respect of such losses, liabilities, claims,
damages and expenses. For purposes of this Section, each director, officer and employee of an
Underwriter or the Company, as applicable, and each person, if any, who controls an Underwriter or
the Company, as applicable, within the meaning of Section 15 of the Act shall have the same rights
to contribution as the Underwriters or the Company, as applicable.
5.3.2 Contribution Procedure. Within fifteen days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action, suit or proceeding,
such party will, if a claim for contribution in respect thereof is to be made against another party
(“contributing party”), notify the contributing party of the commencement thereof, but the omission
to so notify the contributing party will not relieve it from any liability which it may have to any
other party other than for contribution hereunder. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party or its representative of
the commencement thereof within the aforesaid fifteen days, the contributing party will be entitled
to participate therein with the notifying party and any other contributing party similarly
notified. Any such contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such party seeking
contribution on account of any settlement of any claim, action or proceeding effected by such party
seeking contribution without the written consent of such contributing party. The contribution
provisions contained in this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available. The Underwriters’
obligations to contribute pursuant to this Section 5.3 are several and not joint.
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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.
7. Intentionally Omitted.
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 Common Stock (except with respect to
any exercise of Warrants) or any options or other securities convertible into Common Stock, or any
shares of preferred stock or other securities of the Company which participate or
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may participate in any manner in the Trust Account or which vote as a class with the Common
Stock on a Business Combination.
8.2 Amendments to Insider Letters, Private Placement Purchase Agreement and Trust
Account. The Company shall not take any action or omit to take any action which would cause a
breach of any of the Insider Letters executed between each existing stockholder and Pali Capital or
the Private Placement Purchase Agreement executed by the Existing Stockholders and the Company and
will not allow any amendments to, or waivers of, such Insider Letters, Private Placement Purchase
Agreement or the Trust Account without the prior written consent of the representative.
8.3 Prohibition on Amendment of Certificate of Incorporation. The Company shall not
take any action or omit to take any action that would cause the Company to be in breach or
violation of its Certificate of Incorporation. Except as set forth in Section 3.23, prior to the
consummation of a Business Combination, the Company will not amend its Certificate of Incorporation
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 state of
Delaware; and (ii) in the event that the Company does not effect a Business Combination within
twenty-four (24) months from the consummation of the offering (the “Termination Date”), this shall
trigger an automatic winding-up of the Company and the trust account will be liquidated to holders
of IPO shares in the manner described in the Sale Preliminary Prospectus and the Prospectus as soon
as reasonably practicable, and subject to the requirements of the laws of the state of Delaware.
For purposes of this Section 8.4, the term “IPO shares” means the Common Stock contained in the
public securities.
8.4.1 Upon liquidation of the Trust Account, subject to the requirements of the laws of the
State of Delaware, 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 CST, 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 Common Stock held by the Existing Stockholders prior to the Offering (but shall include
Common Stock underlying the Placement Warrants and Common Stock purchased by Existing Stockholders
after the Offering).
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8.4.2 With respect to the Business Combination Vote, the Existing Stockholders shall vote all
Common Stock 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.
8.4.3 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 Account
(the “Conversion Price”). If holders of less than 30% in interest of the Common Stock vote against
such approval of a Business Combination, the Company may, but will not be required to, proceed with
such Business Combination. If the Company elects to so proceed, it will convert shares of Common
Stock, based upon the Conversion Price, from those holders of Common Stock who affirmatively
requested such conversion and who voted against the Business Combination as provided under the laws
of the State of Delaware. If holders of 30% or more in interest of the Common Stock 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 “Xxxxx Stock” as defined in Rule 3a-51-1 under the
Exchange Act during such period.
8.6 Affiliated Transactions. Except as disclosed on the Registration Statement, 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 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 Account,
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
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directors independently determines that the target business does have sufficient fair market
value.
8.8 Trust Account 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 Account, initially in an amount of
$71,240,000 (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 Account, the Company may disburse monies from the Trust Account only: (i) to the
public stockholders in the event of the conversion of their shares or the dissolution and
liquidation of the Trust Account 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 Account (“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 Account for any reason whatsoever. The
foregoing letters shall substantially be in the form attached hereto as Exhibits 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.
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.
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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
AMEX, 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 AMEX, 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) the suspension of trading of the Company’s securities by the AMEX, the
Commission, or any other governmental authority, or (viii) if any of the Company’s representations,
warranties or covenants hereunder are breached, or (ix) 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:
Pali Capital, Inc.
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000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
Copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company:
TM Entertainment and Media, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Chairman and Co-Chief Executive Officer
Facsimile: (212) -
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Chairman and Co-Chief Executive Officer
Facsimile: (212) -
Copy to:
Xxxxxxxx Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxx, Esq.
Facsimile: (000) 000-0000
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxx, Esq.
Facsimile: (000) 000-0000
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
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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 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.
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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.
[signature page follows]
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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, | ||||
| TM ENTERTAINMENT AND MEDIA, INC. | ||||
By: |
||||
| Title: | ||||
| Accepted on the date first above written. | ||||
| PALI CAPITAL, INC. | ||||
By: |
||||
| Name: | ||||
| Title: | ||||
| For themselves and the other several Underwriters named in Schedule I to the foregoing Agreement | ||||
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SCHEDULE I
TM ENTERTAINMENT AND MEDIA, INC.
9,000,000 UNITS
| Number of Firm Units | ||||
| Underwriter | To be Purchased | |||
Pali Capital, Inc. |
||||
| Maxim Group LLC | ||||
Total
|
9,000,000 | |||
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APPENDIX A
| 1. | 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. | ||
| 2. | 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 Certificate of Incorporation (“Certificate”) or Bylaws of the Company. The offers and sales of the outstanding Common Stock 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. | ||
| 3. | 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. | ||
| 4. | 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 |
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| securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. A sufficient number of shares of Common Stock have been reserved for issuance upon exercise of the Placement Warrants. The Common Stock 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. | |||
| 5. | This Agreement, the Warrant Agreement, the Services Agreement, the Trust Agreement, the Escrow Agreement and the Private Placement 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. | ||
| 6. | 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 Private Placement 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. | ||
| 7. | 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 |
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| 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. | |||
| 8. | 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. | ||
| 9. | 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).
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EXHIBIT A
FORM OF TARGET BUSINESS LETTER
TM Entertainment and Media, Inc.
Gentlemen:
Reference is made to the Final Prospectus of TM Entertainment and Media, Inc. (the “COMPANY”),
dated , 2007 (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 Account,
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 Account, the Company may disburse
monies from the Trust Account only: (i) to the Public Stockholders in the event of the conversion
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 Account (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 Account for any reason whatsoever.
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EXHIBIT B
FORM OF VENDOR LETTER
TM Entertainment and Media, Inc.
Gentlemen:
Reference is made to the Final Prospectus of TM Entertainment and Media, Inc. (the “COMPANY”),
dated , 2007 (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 Account,
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 Account, the Company may disburse
monies from the Trust Account only: (i) to the Public Stockholders in the event of the conversion
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 Account (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 Account for any reason whatsoever.
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