UNDERWRITING AGREEMENT
BETWEEN
PHARMAMATRIX ACQUISITION CORPORATION
AND
JESUP & XXXXXX SECURITIES CORPORATION
Dated: _____________, 2005
PHARMAMATRIX ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
New York, New York
_______________, 2005
Jesup & Xxxxxx Securities Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Pharmamatrix Acquisition Corporation, a Delaware corporation
("COMPANY"), hereby confirms its agreement with Jesup & Xxxxxx Securities
Corporation (being referred to herein variously as "YOU," "JESUP & XXXXXX" or
the "REPRESENTATIVE") and with the other underwriters named on Schedule I hereto
for which Jesup & Xxxxxx 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 5,333,334 units ("FIRM
UNITS") of the Company, at a purchase price (net of discounts and commissions)
of $5.52 per Firm Unit. The Underwriters, severally and not jointly, agree to
purchase from the Company the number of Firm Units set forth opposite their
respective names on Schedule I attached hereto and made a part hereof at a
purchase price (net of discounts and commissions) of $5.52 per Firm Unit. The
Firm Units are to be offered initially to the public ("OFFERING") at the
offering price of $6.00 per Firm Unit. Each Firm Unit consists of one share of
the Company's common stock, par value $.0001 per share ("COMMON STOCK"), and two
warrants ("WARRANT(S)"). The shares of Common Stock and the Warrants included in
the Firm Units will not be separately transferable until 20 trading days
following the earlier to occur of the expiration of Jesup & Lamont's
over-allotment option or its exercise in full unless Jesup & Xxxxxx informs the
Company of its decision to allow earlier separate trading, but in no event will
Jesup & Xxxxxx allow separate trading until the preparation of an audited
balance sheet of the Company reflecting receipt by the Company of the proceeds
of the Offering and the filing of a Form 8-K by the Company which includes such
balance sheet. Each Warrant entitles its holder to exercise it to purchase one
share of Common Stock for $5.00 during the period commencing on the later of the
consummation by the Company of its "Business Combination" or one year from the
effective date of the Registration Statement (as defined in Section 2.1.1
hereof) ("EFFECTIVE DATE") and terminating on the four-year anniversary of the
Effective Date. "BUSINESS COMBINATION" shall mean any merger, capital stock
exchange, asset acquisition or other similar business combination consummated by
the Company with an operating business (as described more fully in the
Registration Statement).
1.1.2 PAYMENT AND DELIVERY. Delivery and payment for
the Firm Units shall be made at 10:00 A.M., New York City local time, on the
third business day following the effective date of the Registration Statement
(or the fourth business day following the effective date, if the Registration
Statement is declared effective after 4:30 p.m.) or at such earlier time as
shall be agreed upon by the Representative and the Company at the offices of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and payment for
the Firm Units are called "CLOSING DATE." Payment for the Firm Units shall be
made on the Closing Date at the Representative's election by wire transfer in
Federal (same day) funds or by certified or bank cashier's check(s) in New York
Clearing House funds, payable as follows: $27,800,000 of the proceeds received
by the Company for the Firm Units shall be deposited in the trust fund
established by the Company for the benefit of the public stockholders as
described in the Registration Statement ("TRUST FUND") pursuant to the terms of
an Investment Management Trust Agreement ("TRUST Agreement") and the remaining
proceeds shall be paid to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units (or through the facilities of the Depository Trust
Company ("DTC")) for the account of the Underwriters. The Firm Units shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two full business days prior to
the Closing Date. The Company will permit the Representative to examine and
package the Firm Units for delivery, at least one full business day prior to the
Closing Date. The Company shall not be obligated to sell or deliver the Firm
Units except upon tender of payment by the Representative for all the Firm
Units.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION UNITS. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 800,000 units from the Company ("OVER-ALLOTMENT
OPTION"). Such additional 800,000 units are hereinafter referred to as "OPTION
UNITS." The Firm Units and the Option Units are hereinafter collectively
referred to as the "UNITS," and the Units, the shares of Common Stock and the
Warrants included in the Units and the shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to collectively as the "PUBLIC
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SECURITIES." The purchase price to be paid for the Option Units will be the same
price per Option Unit as the price per Firm Unit set forth in Section 1.1.1
hereof.
1.2.2 EXERCISE OF OPTION. The Over-allotment Option
granted pursuant to Section 1.2.1 hereof may be exercised by the Representative
as to all (at any time) or any part (from time to time) of the Option Units
within 45 days after the Effective Date. The Underwriters will not be under any
obligation to purchase any Option Units prior to the exercise of the
Over-allotment Option. The Over-allotment Option granted hereby may be exercised
by the giving of oral notice to the Company by the Representative, which must be
confirmed in writing by overnight mail or facsimile transmission setting forth
the number of Option Units to be purchased and the date and time for delivery of
and payment for the Option Units (the "OPTION CLOSING DATE"), which will not be
later than five full business days after the date of the notice or such other
time as shall be agreed upon by the Company and the Representative, at the
offices of the Representative or at such other place as shall be agreed upon by
the Company and the Representative. Upon exercise of the Over-allotment Option,
the Company will become obligated to convey to the Underwriters, and, subject to
the terms and conditions set forth herein, the Underwriters will become
obligated to purchase, the number of Option Units specified in such notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option
Units shall be made on the Option Closing Date at the \Representative's election
by wire transfer in Federal (same day) funds or by certified or bank cashier's
check(s) in New York Clearing House funds, payable as follows: $5.52 per Option
Unit shall be deposited in the Trust Fund pursuant to the Trust Agreement and
the remaining proceeds shall be paid to the order of the Company upon delivery
to you of certificates (in form and substance satisfactory to the Underwriters)
representing the Option Units (or through the facilities of DTC) for the account
of the Underwriters. The certificates representing the Option Units to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Representative for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to such Closing Date.
1.3 REPRESENTATIVE'S PURCHASE OPTION.
1.3.1 PURCHASE OPTION. The Company hereby agrees to
issue and sell to the Representative (and/or their designees) on the Effective
Date an option ("REPRESENTATIVE'S PURCHASE OPTION") for the purchase of an
aggregate of 426,667 units ("REPRESENTATIVE'S UNITS") for an aggregate purchase
price of $100. Each of the Representative's Units is identical to the Firm
Units, except that the exercise price of the Warrant shall be $6.25, which is
equal to one hundred twenty-five percent (125%) of the exercise price of the
warrants included in the Firm Units ("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 or one
year from the Effective Date and expiring on the five-year anniversary of the
Effective
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Date at an initial exercise price per Representative's Unit of $7.50, which is
equal to one hundred twenty-five percent (125%) of the initial public offering
price of a Unit. The Representative's Purchase Option, the Representative's
Units, the Representative's Warrants and the shares of Common Stock issuable
upon exercise of the Representative's Warrants are hereinafter referred to
collectively as the "REPRESENTATIVE'S SECURITIES." The Public Securities and the
Representative's Securities are hereinafter referred to collectively as the
"SECURITIES." The Representative understands and agrees that there are
significant restrictions against transferring the Representative's Purchase
Option during the first year after the Effective Date, as set forth in Section 3
of the Representative's Purchase Option.
1.3.2 PAYMENT AND DELIVERY. Delivery and payment for
the Representative's Purchase Option shall be made on the Closing Date. The
Company shall deliver to the Underwriters, upon payment therefor, certificates
for the Representative's Purchase Option in the name or names and in such
authorized denominations as the Representative may request.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Underwriters as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with
the Securities and Exchange Commission ("COMMISSION") a registration statement
and an amendment or amendments thereto, on Form S-1 (File No. 333-125691),
including any related preliminary prospectus ("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 ("REGULATIONS") of the Commission under the Act. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "REGISTRATION
STATEMENT," and the form of the final prospectus dated the Effective Date
included in the Registration Statement (or, if applicable, the form of final
prospectus filed with the Commission pursuant to Rule 424 of the Regulations),
is hereinafter called the "PROSPECTUS." The Registration Statement has been
declared effective by the Commission on the date hereof.
2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has
filed with the Commission a Form 8-A (File Number 000-______) providing for the
registration under the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), of the Units, the Common Stock and the Warrants. The registration of the
Units, Common Stock and Warrants under the Exchange Act has been declared
effective by the Commission on the date hereof.
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2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the best of
the Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 Disclosures in Registration Statement.
2.3.1 10B-5 REPRESENTATION. At the time the
Registration Statement became effective and at all times subsequent thereto up
to the Closing Date and the Option Closing Date, if any, the Registration
Statement and the Prospectus will contain all material statements that are
required to be stated therein in accordance with the Act and the Regulations,
and will in all material respects conform to the requirements of the Act and the
Regulations; and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, on such dates, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When any Preliminary
Prospectus was first filed with the Commission (whether filed as part of the
Registration Statement for the registration of the Securities or any amendment
thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment
thereof or supplement thereto was first filed with the Commission, such
Preliminary Prospectus and any amendments thereof and supplements thereto
complied or will comply in all material respects with the applicable provisions
of the Act and the Regulations and did not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The representation
and warranty made in this Section 2.3.1 does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by the Representative
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
2.3.2 DISCLOSURE OF AGREEMENTS. The agreements and
documents described in the Registration Statement and the Prospectus conform to
the descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i) that
is referred to in the Prospectus, or (ii) is material to the Company's business,
has been duly and validly executed by the Company, is in full force and effect
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
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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 material 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 within the three years prior to the date hereof, except
as disclosed in the Registration Statement.
2.3.4 REGULATIONS. The disclosures in the Registration
Statement concerning the effects of Federal, State and local regulation on the
Company's business purpose 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 and the
Prospectus, except as otherwise specifically stated therein, (i) there has been
no material adverse change in the condition, financial or otherwise, or business
prospects of the Company, (ii) there have been no material transactions entered
into by the Company, other than as contemplated pursuant to this Agreement, and
(iii) no member of the Company's management has resigned from any position with
the Company.
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any securities or
incurred any material 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. Xxxxxx, Xxxxx & Company, LLP
("XXXXXX XXXXX"), whose report is filed with the Commission as part of the
Registration Statement, are independent accountants as required by the Act and
the Regulations. Xxxxxx Xxxxx has not, during the periods covered by the
financial statements included in the Prospectus, provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
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2.6 FINANCIAL STATEMENTS. The financial statements, including
the notes thereto and supporting schedules included in the Registration
Statement and Prospectus fairly present the financial position, the results of
operations and the cash flows of the Company at the dates and for the periods to
which they apply; such financial statements have been prepared in conformity
with generally accepted accounting principles, consistently applied throughout
the periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company's financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the
date or dates indicated in the Prospectus duly authorized, issued and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. Based on the assumptions stated in the Registration Statement and
the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 VALID ISSUANCE OF SECURITIES; ETC.
2.8.1 OUTSTANDING SECURITIES. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by the Company. The authorized Common
Stock conforms to all statements relating thereto contained in the Registration
Statement and the Prospectus. The offers and sales of the outstanding Common
Stock were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky laws or, based in part on the
representations and warranties of the purchasers of such shares of Common Stock,
exempt from such registration requirements.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
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authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement. When issued, the
Representative's Purchase Option, the Representative's Warrant, and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment of the respective exercise prices therefor,
the number and type of securities of the Company called for thereby in
accordance with the terms thereof and such Representative's Purchase Option, the
Representative's Warrants, and Warrants are enforceable against the Company in
accordance with their respective terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws, and (iii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth
in the Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement,
the Warrant Agreement (as defined in Section 2.20 hereof), the Trust Agreement,
the Services Agreement (as defined in Section 3.7.2 hereof) and the Escrow
Agreement (as defined in Section 2.21.2 hereof) have been duly and validly
authorized by the Company and constitute, and the Representative's Purchase
Option has been duly and validly authorized by the Company and, when executed
and delivered, will constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.11 NO CONFLICTS, ETC. The execution, delivery, and performance
by the Company of this Agreement, the Representative's Purchase Option, the
Warrant Agreement, the Trust Agreement, the Services Agreement and the Escrow
Agreement, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party except pursuant to the Trust
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Agreement referred to in Section 2.22 hereof; (ii) result in any violation of
the provisions of the Certificate of Incorporation or the Bylaws of the Company;
or (iii) violate any existing applicable law, rule, regulation, judgment, order
or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business.
2.12 NO DEFAULTS; VIOLATIONS. No material default exists in the
due performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, deed of trust, note, loan or
credit agreement, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or Bylaws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
businesses.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all
requisite corporate power and authority, and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies that it needs as of the date hereof
to conduct its business purpose as described in the Prospectus. The disclosures
in the Registration Statement concerning the effects of federal, state and local
regulation on this offering and the Company's business purpose as currently
contemplated are correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has
all corporate power and authority to enter into this Agreement and to carry out
the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid issuance, sale and delivery, of
the Securities and the consummation of the transactions and agreements
contemplated by this Agreement, the Warrant Agreement, the Representative's
Purchase Option, the Trust Agreement and the Escrow Agreement and as
contemplated by the Prospectus, except with respect to applicable federal and
state securities laws.
2.14 D&O QUESTIONNAIRES. To the best of the Company's knowledge,
all information contained in the questionnaires ("QUESTIONNAIRES") completed by
each of the Company's stockholders immediately prior to the Offering ("INITIAL
STOCKHOLDERS") and provided to the Underwriters as an exhibit to his or her
Insider Letter (as defined in Section 2.21.1) is true and correct and the
Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by each Initial
Stockholder to become inaccurate and incorrect.
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2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. There is no action,
suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding pending or, to the best of the Company's knowledge,
threatened against, or involving the Company or, to the best of the Company's
knowledge, any Initial Stockholder which has not been disclosed in the
Registration Statement or the Questionnaires.
2.16 GOOD STANDING. The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the conduct of business requires such qualification, except
where the failure to qualify would not have a material adverse effect on the
Company.
2.17 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.17.1 FINDER'S FEES. Except as described in the
Prospectus, there are no claims, payments, arrangements, agreements or
understandings relating to the payment of a finder's, consulting or origination
fee by the Company or any Initial Stockholder with respect to the sale of the
Securities hereunder or any other arrangements, agreements or understandings of
the Company or, to the best of the Company's knowledge, any Initial Stockholder
that may affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
2.17.2 PAYMENTS WITHIN TWELVE MONTHS. The Company has
not made any direct or indirect payments (in cash, securities or otherwise) (i)
to any person, as a finder's fee, consulting fee or otherwise, in consideration
of such person raising capital for the Company or introducing to the Company
persons who raised or provided capital to the Company, (ii) to any NASD member
or (iii) to any person or entity that has any direct or indirect affiliation or
association with any NASD member, within the twelve months prior to the
Effective Date, other than payments to Jesup & Xxxxxx.
2.17.3 USE OF PROCEEDS. None of the net proceeds of the
Offering will be paid by the Company to any participating NASD member or its
affiliates, except as specifically authorized herein and except as may be paid
in connection with a Business Combination as contemplated by the Prospectus.
2.17.4 INSIDERS' NASD AFFILIATION. Based on
questionnaires distributed to such persons, except as set forth on Schedule
2.17.4, no officer, director or any beneficial owner of the Company's
unregistered securities has any direct or indirect affiliation or association
with any NASD member. The Company will advise the Representative and its counsel
if it learns that any officer, director or owner of at least 5% of the Company's
outstanding Common Shares is or becomes an affiliate or associated person of an
NASD member participating in the offering.
2.18 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
of the Initial Stockholders or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal
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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 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.
2.20 WARRANT AGREEMENT. The Company has entered into a warrant
agreement with respect to the Warrants and the Representative's Warrants with
Continental Stock Transfer & Trust Company substantially in the form filed as an
exhibit to the Registration Statement ("WARRANT AGREEMENT").
2.21 AGREEMENTS WITH INITIAL STOCKHOLDERS.
2.21.1 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) a form of which is annexed as Exhibit 10.7
to the Registration Statement ("INSIDER LETTER"), pursuant to which each of the
Initial Stockholders of the Company agree to certain matters, including but not
limited to, certain matters described as being agreed to by them under the
"Proposed Business" section of the Prospectus.
2.21.2 ESCROW AGREEMENT. The Company has caused the
Initial Stockholders to enter into an escrow agreement ("ESCROW AGREEMENT") with
Continental Stock Transfer & Trust Company ("ESCROW AGENT"), substantially in
the form annexed as Exhibit 10.3 to the Registration Statement, whereby the
Common Stock owned by the Initial Stockholders will be held in escrow by the
Escrow Agent, until the first anniversary of the Business Combination. During
such escrow period, the Initial Stockholders shall be prohibited from selling or
otherwise transferring such shares (except to spouses and children of Initial
Stockholders and trusts established for their
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benefit and as otherwise set forth in the Escrow Agreement) but will retain the
right to vote such shares. To the Company's knowledge, the Escrow Agreement is
enforceable against each of the Initial Stockholders and will not, with or
without the giving of notice or the lapse of time or both, result in a breach
of, or conflict with any of the terms and provisions of, or constitute a default
under, any agreement or instrument to which any of the Initial Stockholders is a
party. The Escrow Agreement shall not be amended, modified or otherwise changed
without the prior written consent of Jesup & Xxxxxx.
2.22 INVESTMENT MANAGEMENT TRUST AGREEMENT. The Company has
entered into the Trust Agreement with respect to certain proceeds of the
Offering substantially in the form annexed as Exhibit 10.2 to the Registration
Statement.
2.23 COVENANTS NOT TO COMPETE. No Initial Stockholder, employee,
officer or director of the Company is subject to any noncompetition agreement or
non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be an Initial Stockholder, employee, officer
and/or director of the Company.
2.24 INVESTMENTS. No more than 45% of the "value" (as defined in
Section 2(a)(41) of the Investment Company Act of 1940 ("INVESTMENT COMPANY
ACT")) of the Company's total assets consist of, and no more than 45% of the
Company's net income after taxes is derived from, securities other than
"Government securities" (as defined in Section 2(a)(16) of the Investment
Company Act).
2.25 SUBSIDIARIES. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.26 RELATED PARTY TRANSACTIONS. There are no business
relationships or related party transactions involving the Company or any other
person required to be described in the Prospectus that have not been described
as required.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will
deliver to the Representative, prior to filing, any amendment or supplement to
the Registration Statement or Prospectus proposed to be filed after the
Effective Date and not file any such amendment or supplement to which the
Representative shall reasonably object in writing.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions hereof
and the Prospectus. If at any time when a Prospectus relating to the Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
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Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 FILING OF FINAL PROSPECTUS. The Company will file
the Prospectus (in form and substance satisfactory to the Representative) with
the Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 EXCHANGE ACT REGISTRATION. For a period of five
years from the Effective Date, or until such earlier time upon which the Company
is required to be liquidated, the Company will use its best efforts to maintain
the registration of the Units, Common Stock and Warrants under the provisions of
the Exchange Act (except in connection with a going private transaction). For a
period of five years from the Effective Date, the Company will not deregister
the Units, Common Stock and Warrants under the Exchange Act without the prior
written consent of Jesup & Xxxxxx.
3.3 BLUE SKY FILING. The Company will endeavor in good faith,
in cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 DELIVERY TO UNDERWRITERS OF PROSPECTUSES. The Company will
deliver to each of the several Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the Act
or the Exchange Act such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 EFFECTIVENESS AND EVENTS REQUIRING NOTICE TO THE
REPRESENTATIVE. The Company will use its best efforts to cause the Registration
Statement to remain effective and will notify the Representative 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
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of any proceedings for the suspension of the qualification of the 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, makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Commission or any state securities commission shall enter a
stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five years
from the Effective Date, or until such earlier time upon which the Company is
required to be liquidated, the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to review (but not
audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's Form 10-Q quarterly report and the mailing of quarterly
financial information to stockholders.
3.7 AFFILIATED TRANSACTIONS.
3.7.1 BUSINESS COMBINATIONS. The Company will not
consummate a Business Combination with any entity which is affiliated with any
Initial Stockholder unless the Company obtains an opinion from an independent
investment banking firm that the Business Combination is fair to the Company's
stockholders from a financial perspective.
3.7.2 ADMINISTRATIVE SERVICES. The Company has entered
into an agreement ("SERVICES AGREEMENT") with Pharmamatrix, Inc.
("PHARMAMATRIX") substantially in the form annexed as Exhibit 10.4 to the
Registration Statement pursuant to which Pharmamatrix will make available to the
Company administrative, technology and secretarial services, as well as the use
of certain limited office space, in 000 X. Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxx
00000 for $7,500 per month.
3.7.3 COMPENSATION. Except as set forth above in this
Section 3.7, the Company shall not pay any Initial Stockholder or any of their
affiliates any fees or compensation from the Company, for services rendered to
the Company prior to, or in connection with, the consummation of a Business
Combination; provided that the Initial Stockholders shall be entitled to
reimbursement from the Company for their reasonable out-of-pocket expenses
incurred in connection with seeking and consummating a Business Combination.
3.8 SECONDARY MARKET TRADING AND STANDARD & POOR'S. The Company
will apply to be included in Standard & Poor's Daily News and Corporation
Records
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Corporate Descriptions for a period of five years from the consummation of a
Business Combination. Promptly after the consummation of the Offering, the
Company shall take such steps as may be necessary to obtain a secondary market
trading exemption for the Company's securities in the State of California. The
Company shall also take such other action as may be reasonably requested by the
Representative to obtain a secondary market trading exemption in such other
states as may be requested by the Representative.
3.9 INTENTIONALLY OMITTED.
3.10 FINANCIAL PUBLIC RELATIONS FIRM. Promptly after the
execution of a definitive agreement for a Business Combination, the Company
shall retain a financial relations firm.
3.11 REPORTS TO THE REPRESENTATIVE.
3.11.1 PERIODIC REPORTS, ETC. For a period of five years
following the Effective Date or until such earlier time upon which the Company
is required to be liquidated, the Company will furnish to the Representative and
its counsel, as reasonably requested from time to time, (i) 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, (ii)
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 (iii) such
additional documents and information with respect to the Company and the affairs
of any future subsidiaries of the Company as the Representative may reasonably
request; PROVIDED that the Representative shall sign, if requested by the
Company, a Regulation FD-compliant confidentiality agreement which is reasonably
acceptable to the Representative and its counsel in connection with the
Representative's receipt of such information.
3.11.2 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 a transfer and warrant
agent acceptable to the Representative ("TRANSFER AGENT") and will furnish to
the Underwriters at the Company's sole cost and expense, 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.
3.11.3 SECONDARY MARKET TRADING SURVEY. Until such time
as the Securities are listed or quoted, as the case may be, on the New York
Stock Exchange, the American Stock Exchange or quoted on the Nasdaq National
Market, or until such earlier time upon which the Company is required to be
liquidated, the Company shall engage Xxxxxx Xxxx & Priest LLP, counsel to the
Underwriters ("Xxxxxx"), for a one-time fee of $5,000 payable on the Closing
Date, to deliver and update to the Underwriters on a
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timely basis, but in any event on the Effective Date and at the beginning of
each fiscal quarter, a written report detailing those states in which the
Securities may be traded in non-issuer transactions under the Blue Sky laws of
the fifty States ("SECONDARY MARKET TRADING SURVEY").
3.11.4 TRADING REPORTS. During such time as any of the
Securities are quoted on the NASD OTC Bulletin Board (or any successor trading
market such as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar
publisher of quotations) and no other automated quotation system, the Company
shall provide to the Representative, at its expense, such reports published by
the NASD or the Pink Sheets, LLC relating to price trading of the Securities, as
the Representative shall reasonably request.
3.12 DISQUALIFICATION OF FORM S-3. For a period equal to four
years from the date hereof, the Company will not take any action or actions
which may prevent or disqualify the Company's use of Form S-3 (or other
appropriate form) for the registration of the Warrants under the Act (except in
connection with a going-private transaction).
3.13 PAYMENT OF EXPENSES.
3.13.1 GENERAL EXPENSES RELATED TO THE OFFERING. The
Company hereby agrees to pay on each of the Closing Date and the Option Closing
Date, if any, to the extent not paid at the Closing Date, all expenses incident
to the performance of the obligations of the Company under this Agreement,
including but not limited to (i) the preparation, printing, filing and mailing
(including the payment of postage with respect to such mailing) of the
Registration Statement, the Preliminary and Final Prospectuses and the printing
and mailing of this Agreement and related documents, including the cost of all
copies thereof and any amendments thereof or supplements thereto supplied to the
Underwriters in quantities as may be required by the Underwriters, (ii) the
printing, engraving, issuance and delivery of the Units, the shares of Common
Stock and the Warrants included in the Units, including any transfer or other
taxes payable thereon, (iii) the qualification of the Securities under state or
foreign securities or Blue Sky laws, including the costs of printing and mailing
the "Preliminary Blue Sky Memorandum," and all amendments and supplements
thereto, fees and disbursements of Xxxxxx retained for such purpose (such fees
shall be [$35,000] in the aggregate (of which $____ has previously been paid)),
and a one-time fee of $5,000 payable to Xxxxxx for the preparation of the
Secondary Market Trading Survey, (iv) filing fees, costs and expenses (including
disbursements for the Representative's counsel) incurred in registering the
Offering with the NASD, (v) fees and disbursements of the Transfer Agent, (vi)
the Company's expenses associated with "due diligence" meetings arranged by the
Representative, and (vii) all other costs and expenses customarily borne by an
issuer incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section 3.13. The Company also
agrees that, if requested by the Representative, it will engage and pay up to
$5,000 or such greater amount as may be mutually agreed to by the Representative
and the Company 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
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Representative may deduct from the net proceeds of the Offering payable to the
Company on the Closing Date, or the Option Closing Date, if any, the expenses
set forth in this Agreement to be paid by the Company to the Representative and
others. If the Offering contemplated by this Agreement is not consummated for
any reason whatsoever then the Company shall reimburse the Underwriters in full
for their out of pocket expenses, including, without limitation, its legal fees
and disbursements and "road show" and due diligence expenses of which not more
than $50,000 may be for expenses relating to the "road show".
3.13.2 EXPENSES RELATED TO BUSINESS COMBINATION. The
Company further agrees that, in the event the Representative assists the Company
in trying to obtain stockholder approval of a proposed Business Combination, the
Company will reimburse the Representative for all out-of-pocket expenses,
including, but not limited to, "road-show" and due diligence expenses in an
amount not to exceed $100,000.
3.14 APPLICATION OF NET PROCEEDS. The Company will apply the net
proceeds from the Offering received by it in a manner consistent with the
application described under the caption "Use Of Proceeds" in the Prospectus.
3.15 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS. The
Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of
at least twelve consecutive months beginning after the Effective Date.
3.16 NOTICE TO NASD. In the event any person or entity
(regardless of any NASD affiliation or association) is engaged to assist the
Company in its search for a merger candidate or to provide any other merger and
acquisition services, the Company will provide the following to the NASD and to
Jesup & Xxxxxx prior to the consummation of the Business Combination: (i)
complete details of all services and copies of agreements governing such
services; and (ii) justification as to why the person or entity providing the
merger and acquisition services should not be considered an "underwriter and
related person" with respect to the Company's initial public offering, as such
term is defined in Rule 2710 of the NASD's Conduct Rules. The Company also
agrees that proper disclosure of such arrangement or potential arrangement will
be made in the proxy statement which the Company will file for purposes of
soliciting stockholder approval for the Business Combination.
3.17 STABILIZATION. Neither the Company, nor, to its knowledge,
any of its employees, directors or stockholders (without the consent of Jesup &
Xxxxxx) has taken or will take, directly or indirectly, any action designed to
or that has constituted or that might reasonably be expected to cause or result
in, under the Exchange Act, or otherwise, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Units.
-17-
3.18 INTERNAL CONTROLS. The Company will maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.19 ACCOUNTANTS. For a period of five years from the Effective
Date or until such earlier time upon which the Company is required to be
liquidated, the Company shall retain Xxxxxx Xxxxx, one of the "Big Four"
accounting firms or other independent public accountants reasonably acceptable
to Jesup & Xxxxxx.
3.20 FORM 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date ("AUDITED FINANCIAL STATEMENTS") that reflect the receipt
by the Company of the proceeds of the initial public offering. As soon as the
Audited Financial Statements become available, the Company shall immediately
file a Current Report on Form 8-K with the Commission, which Report shall
contain the Company's Audited Financial Statements. If the Over-allotment Option
is exercised following the initial filing of such Form 8-K, an amended Form 8-K
will be filed to provide updated financial information to reflect the exercise
of the over-allotment option.
3.21 NASD. The Company shall advise the NASD if it is aware that
any 5% or greater stockholder of the Company becomes an affiliate or associated
person of an NASD member participating in the distribution of the Company's
Securities.
3.22 CORPORATE PROCEEDINGS. All corporate proceedings and other
legal matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
3.23 INVESTMENT COMPANY. The Company shall cause the proceeds of
the Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Prospectus. The Company will otherwise conduct its business in
a manner so that it will not become subject to the Investment Company Act.
Furthermore, once the Company consummates a Business Combination, it shall be
engaged in a business other than that of investing, reinvesting, owning, holding
or trading securities.
3.24 BUSINESS COMBINATION ANNOUNCEMENT. Within five business
days following the consummation by the Company of a Business Combination, the
Company shall cause an announcement ("BUSINESS COMBINATION ANNOUNCEMENT") to be
placed, at its cost, in The Wall Street Journal. Such announcement shall
describe the consummation of the Business Combination and indicate that the
Representative was the
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managing underwriter in the Offering. The Company shall supply the
Representative with a draft of the Business Combination Announcement and provide
the Representative with a reasonable opportunity to comment thereon. The Company
will not place the Business Combination Announcement without the final approval
of the Representative, which such approval will not be unreasonably withheld.
3.25 COLORADO TRUST FILING. In the event the Securities are
registered in the State of Colorado, the Company will cause a Colorado Form ES
to be filed with the Commissioner of the State of Colorado no less than 10 days
prior to the distribution of the Trust Fund in connection with a Business
Combination and will do all things necessary to comply with Section 00-00-000
and Rule 51-3.4 of the Colorado Securities Act.
4. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several
Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1 REGULATORY MATTERS.
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement shall have become effective not later than 5:00 P.M., New
York City local 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 that
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).
4.1.2 NASD CLEARANCE. By the Effective Date, the
Representative shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriters as described in the
Registration Statement.
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the
sale of the Units in any jurisdiction designated by you pursuant to Section 3.3
hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. On the
Effective Date, the Representative shall have received the favorable opinion of
Xxxxxxxxx Xxxxxxx LLP, counsel to the Company ("GT"), dated the Effective Date,
addressed to the Representative and in form and substance satisfactory to Xxxxxx
to the effect that:
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(i) The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on the Company.
(ii) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof are not subject to personal liability by
reason of being such holders and none of such securities were issued in
violation of the preemptive rights of any stockholder of the Company arising by
operation of law or under the Certificate of Incorporation or Bylaws of the
Company. The offers and sales of the outstanding Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration. The authorized and
outstanding capital stock of the Company is as set forth in the Prospectus.
(iii) The Securities have been duly authorized
and, when issued and paid for, will be validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to personal
liability by reason of being such holders. The Securities are not and will not
be subject to the preemptive rights of any holders of any security of the
Company arising by operation of law or under the Certificate of Incorporation,
as amended, or Bylaws of the Company. When issued, the Warrants, the
Representative's Purchase Option and the Representative's Warrants will
constitute valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of securities of the
Company called for thereby and such Warrants, the Representative's Purchase
Option and the Representative's Warrants, when issued, in each case, are
enforceable against the Company in accordance with their respective terms,
except (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (b) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The certificates representing the Securities
are in due and proper form.
(iv) This Agreement, the Warrant Agreement, the
Representative's Purchase Option, the Services Agreement, the Trust Agreement
and the Escrow Agreement have each been duly and validly authorized and, when
executed and delivered by the Company, constitute 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
-20-
may be subject to the equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(v) The execution, delivery and performance of
this Agreement, the Warrant Agreement, the Representative's Purchase Option, the
Escrow Agreement, the Trust Agreement and the Services Agreement, the issuance
and sale of the Securities, the consummation of the transactions contemplated
hereby and thereby, and compliance by the Company with the terms and provisions
hereof and thereof, do not and will not, with or without the giving of notice or
the lapse of time, or both, (a) to such counsel's knowledge, conflict with, or
result in a breach of, any of the terms or provisions of, or constitute a
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 statute or any judgment, order or decree, rule
or regulation applicable to the Company of any court, domestic or foreign, or of
any federal, state or other regulatory authority or other governmental body
having jurisdiction over the Company, its properties or assets.
(vi) The Registration Statement, each Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) each as of their respective dates complied as to form
in all material respects with the requirements of the Act and Regulations. The
Securities and each agreement filed as an exhibit to the Registration Statement
conform in all material respects to the description thereof contained in the
Registration Statement and the Prospectus. No statute or regulation required to
be described in the Prospectus is not described as required, nor are any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement not so described or filed as required.
(vii) Counsel has participated in conferences
with officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriters at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise set forth in this opinion), no facts have come
to the attention of such counsel which should lead them to believe that either
the Registration Statement or the Prospectus or any amendment or supplement
thereto, as of the date of such opinion contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial
-21-
statements and schedules and other financial and statistical data included in
the Registration Statement or Prospectus).
(viii) The Registration Statement is effective
under the Act. To such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under the Act
or applicable state securities laws.
(ix) To such counsel's knowledge, there is no
action, suit or proceeding before or by any court of governmental agency or
body, domestic or foreign, now pending, or threatened against the Company that
is required to be described in the Registration Statement.
4.2.2 CLOSING DATE AND OPTION CLOSING DATE OPINION OF
COUNSEL. On each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the favorable opinion of GT, 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,
confirming as of the Closing Date and, if applicable, the Option Closing Date,
the statements made by GT in their opinion delivered on the Effective Date.
4.2.3 RELIANCE. In rendering such opinion, such counsel
may rely (i) as to matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to Xxxxxx) of other counsel reasonably acceptable to Xxxxxx, familiar with the
applicable laws, and (ii) as to matters of fact, to the extent they deem proper,
on certificates or other written statements of officers of the Company and
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to the
Underwriters' counsel if requested. The opinion of counsel for the Company and
any opinion relied upon by such counsel for the Company shall include a
statement to the effect that it may be relied upon by counsel for the
Underwriters in its opinion delivered to the Underwriters.
4.3 COLD COMFORT LETTER. At the time this Agreement is
executed, and at each of the Closing Date and the Option Closing Date, if any,
you shall have received a letter, addressed to the Representative and in form
and substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to you and
to Xxxxxx from Xxxxxx Xxxxx dated, respectively, as of the date of this
Agreement and as of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent
accountants with respect to the Company within the meaning of the Act and the
applicable Regulations and that they have not, during the periods covered by the
financial statements included in the Prospectus, provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange Act;
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(ii) Stating that in their opinion the financial
statements of the Company included in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited
review which included a reading of the latest available unaudited interim
financial statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the board of directors, consultations with officers and
other employees of the Company responsible for financial and accounting matters
and other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (a) the unaudited financial
statements of the Company included in the Registration Statement do not comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company included
in the Registration Statement, (b) at a date not later than five days prior to
the Effective Date, Closing Date or Option Closing Date, as the case may be,
there was any change in the capital stock or long-term debt of the Company, or
any decrease in the stockholders' equity of the Company as compared with amounts
shown in the May 31, 2005 balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any decrease, setting forth the amount of such decrease, and (c)
during the period from May 31, 2005 to a specified date not later than five days
prior to the Effective Date, Closing Date or Option Closing Date, as the case
may be, there was any decrease in revenues, net earnings or net earnings per
share of Common Stock, in each case as compared with the corresponding period in
the preceding year and as compared with the corresponding period in the
preceding quarter, other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease, setting forth the
amount of such decrease;
(iv) Setting forth, at a date not later than five
days prior to the Effective Date, the amount of liabilities of the Company
(including a break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company set forth
in the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement;
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(vi) Stating that they have not during the
immediately preceding five year period brought to the attention of the Company's
management any reportable condition related to internal structure, design or
operation as defined in the Statement on Auditing Standards No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,"
in the Company's internal controls; and
(vii) Statements as to such other matters
incident to the transaction contemplated hereby as you may reasonably request.
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing
Date and the Option Closing Date, if any, the Representative shall have received
a certificate of the Company signed by the Chairman of the Board or the
President and the Secretary or Assistant Secretary of the Company, dated the
Closing Date or the Option Closing Date, as the case may be, respectively, to
the effect that the Company has performed all covenants and complied with all
conditions required by this Agreement to be performed or complied with by the
Company prior to and as of the Closing Date, or the Option Closing Date, as the
case may be, and that the conditions set forth in Section 4.5 hereof have been
satisfied as of such date and that, as of the Closing Date and the Option
Closing Date, as the case may be, the representations and warranties of the
Company set forth in Section 2 hereof are true and correct. In addition, the
Representative will have received such other and further certificates of
officers of the Company as the Representative may reasonably request.
4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing
Date and the Option Closing Date, if any, the Representative shall have received
a certificate of the Company signed by the Secretary or Assistant Secretary of
the Company, dated the Closing Date or the Option Closing Date, as the case may
be, respectively, certifying (i) that the Bylaws and Certificate of
Incorporation of the Company are true and complete, have not been modified and
are in full force and effect, (ii) that the resolutions relating to the public
offering contemplated by this Agreement are in full force and effect and have
not been modified, (iii) all correspondence between the Company or its counsel
and the Commission, and (iv) as to the incumbency of the officers of the
Company. The documents referred to in such certificate shall be attached to such
certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing
Date and the Option Closing Date, if any, (i) there shall have been no material
adverse change or development involving a prospective material adverse change in
the condition or prospects or the business activities, financial or otherwise,
of the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus, (ii) no action suit or proceeding, at
law or in equity, shall have been pending or threatened against the Company or
any Initial Stockholder before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus, (iii) no stop order shall have been
issued under
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the Act and no proceedings therefor shall have been initiated or threatened by
the Commission, and (iv) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all material statements which
are required to be stated therein in accordance with the Act and the Regulations
and shall conform in all material respects to the requirements of the Act and
the Regulations, and neither the Registration Statement nor the Prospectus nor
any amendment or supplement thereto shall contain any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 DELIVERY OF AGREEMENTS. 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 Warrant Purchase
Agreement, the Services Agreement and all of the Insider Letters. 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 and you shall have received from such counsel a favorable
opinion, dated the Closing Date and the Option Closing Date, if any, with
respect to such of these proceedings as you may reasonably require. On or prior
to the Effective Date, the Closing Date and the Option Closing Date, as the case
may be, counsel for the Underwriters shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in this Section
4.7, or in order to evidence the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained.
4.8 SECONDARY MARKET TRADING SURVEY. On the Closing Date, the
Representative shall have received the Secondary Market Trading Survey from
Xxxxxx.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION OF UNDERWRITERS.
5.1.1 GENERAL. Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless each of the
Underwriters, and each dealer selected by you that participates in the offer and
sale of the Securities (each a "SELECTED DEALER") and each of their respective
directors, officers and employees and each person, if any, who controls any such
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, whether arising out of any action between any of the Underwriters
and the Company or between any of the Underwriters and any third party or
otherwise) to which they or any of them may become subject under the Act, the
Exchange Act or any other statute or at common law or
-25-
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) any Preliminary Prospectus, the Registration Statement or the Prospectus (as
from time to time each may be amended and supplemented); (ii) 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); or (iii) any application or other document or
written communication (in this Section 5, collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Units under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, Nasdaq or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to an Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be. With
respect to any untrue statement or omission or alleged untrue statement or
omission made in the Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of any Underwriter to the
extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to the
person asserting any such loss, liability, claim or damage at or prior to the
written confirmation of sale of the Securities to such person as required by the
Act and the Regulations, and if the untrue statement or omission has been
corrected in the Prospectus, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with its obligations under Section 3.4
hereof. The Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the issue and sale
of the Securities or in connection with the Registration Statement or
Prospectus.
5.1.2 PROCEDURE. If any action is brought against an
Underwriter, a Selected Dealer or a controlling person in respect of which
indemnity may be sought against the Company pursuant to Section 5.1.1, such
Underwriter or Selected Dealer shall promptly notify the Company in writing of
the institution of such action and the Company shall assume the defense of such
action, including the employment and fees of counsel (subject to the reasonable
approval of such Underwriter or Selected Dealer, as the case may be) and payment
of actual expenses. Such Underwriter, Selected Dealer or controlling person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter, Selected Dealer or controlling person unless (i) the employment of
such counsel at the expense of the Company shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel 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
-26-
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the reasonable fees and expenses of not more than one additional
firm of attorneys selected by the Underwriter, Selected Dealer and/or
controlling person shall be borne by the Company. Notwithstanding anything to
the contrary contained herein, if the Underwriter, Selected Dealer or
controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. Each Underwriter, severally
and not jointly, agrees to indemnify and hold harmless the Company, its
directors, officers and employees and agents who control the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or in any application, in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to such Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or in any such application. In
case any action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or any application, and in
respect of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the several Underwriters by the provisions of Section 5.1.2.
5.3 CONTRIBUTION.
5.3.1 CONTRIBUTION RIGHTS. In order to provide for just
and equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters 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
-27-
who was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 5.3.1, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
an Underwriter or the Company, as applicable, and each person, if any, who
controls an Underwriter or the Company, as applicable, within the meaning of
Section 15 of the Act shall have the same rights to contribution as the
Underwriters or the Company, as applicable.
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after
receipt by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The contribution provisions contained in
this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available.
The Underwriters' obligations to contribute pursuant to this Section 5.3 are
several and not joint.
6. DEFAULT BY AN UNDERWRITER.
6.1 DEFAULT NOT EXCEEDING 10% OF FIRM UNITS OR OPTION UNITS. If
any Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the over-allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
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
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Units or Option Units to which a default relates as provided in this Section 6,
this Agreement will be terminated by you or the Company without liability on the
part of the Company (except as provided in Sections 3.13 and 5 hereof) or the
several Underwriters (except as provided in Section 5 hereof); provided,
however, that if such default occurs with respect to the Option Units, this
Agreement will not terminate as to the Firm Units; and provided further that
nothing herein shall relieve a defaulting Underwriter of its liability, if any,
to the other several Underwriters and to the Company for damages occasioned by
its default hereunder.
6.3 POSTPONEMENT OF CLOSING DATE. In the event that the Firm
Units or Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"UNDERWRITER" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7. RIGHT TO APPOINT OBSERVER. Until the consummation of a Business Combination,
upon notice from Jesup & Xxxxxx to the Company, Jesup & Xxxxxx shall have the
right to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting of the Board of Directors of the Company;
provided that such representative shall sign a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to Jesup & Xxxxxx and
its counsel in connection with such representative's attendance at meetings of
the Board of Directors; and provided further that upon written notice to Jesup &
Xxxxxx, the Company may exclude the representative from meetings where, in the
written opinion of counsel for the Company, the representative's presence would
destroy the attorney-client privilege. The Company agrees to give Jesup & Xxxxxx
written notice of each such meeting and to provide Jesup & Xxxxxx with an agenda
and minutes of the meeting no later than it gives such notice and provides such
items to the other directors and to reimburse the representative of Jesup &
Xxxxxx for its reasonable out-of-pocket expenses incurred in connection with its
attendance at the meeting, including but not limited to, food, lodging and
transportation.
8. ADDITIONAL COVENANTS.
8.1 NO DIVIDENDS; ADDITIONAL SHARES OR OPTIONS. The Company
hereby agrees that until the Company consummates a Business Combination, it has
not paid any dividends on the Common Stock and it shall not (a) pay any
dividends on the Common Stock or (b) issue any shares of Common Stock or any
options or other securities
-29-
convertible into Common Stock, or any shares of Preferred Stock which
participate in any manner in the Trust Fund or which vote as a class with the
Common Stock on a Business Combination.
8.2 TRUST FUND WAIVER ACKNOWLEDGMENT. Prior to the commencement
by the Company of its due diligence investigation of any operating business
which the Company seeks to acquire ("TARGET BUSINESS") or the obtaining of the
services of any vendor, the Company shall seek to have such Target Business or
vendor acknowledge in writing, whether through a letter of intent, memorandum of
understanding or other similar document (and subsequently acknowledge the same
in any definitive document replacing any of the foregoing), that (a) it has read
the Prospectus and understands that the Company has established the Trust Fund,
initially in an amount of $27,800,000 for the benefit of the Public Stockholders
and that the Company may disburse monies from the Trust Fund only (i) to the
Public Stockholders in the event of the conversion of their shares or the
liquidation of the Company or (ii) to the Company after it consummates a
Business Combination and (b) for and in consideration of the Company (1)
agreeing to evaluate such Target Business for purposes of consummating a
Business Combination with it or (2) agreeing to engage the services of the
vendor, as the case may be, such Target Business or vendor agrees that it does
not have any right, title, interest or claim of any kind in or to any monies in
the Trust Fund ("CLAIM") and waives any Claim it may have in the future as a
result of, or arising out of, any negotiations, contracts or agreements with the
Company and will not seek recourse against the Trust Fund for any reason
whatsoever.
8.3 INSIDER LETTERS. The Company shall not take any action or
omit to take any action which would cause a breach of any of the Insider Letters
executed between each Initial Stockholder, officer and director and Jesup &
Xxxxxx and will not allow any amendments to, or waivers of, such Insider Letters
without the prior written consent of Jesup & Xxxxxx.
8.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company shall
not take any action or omit to take any action that would cause the Company to
be in breach or violation of its Certificate of Incorporation or Bylaws. Prior
to the consummation of a Business Combination, the Company will not amend its
Certificate of Incorporation without the prior written consent of Jesup &
Xxxxxx.
8.5 BLUE SKY REQUIREMENTS. The Company shall provide counsel to
the Representative with ten copies of all proxy information and all related
material filed with the Commission in connection with a Business Combination
concurrently with such filing with the Commission. In addition, the Company
shall furnish any other state in which its initial public offering was
registered, such information as may be requested by such state.
8.6 ACQUISITION/LIQUIDATION PROCEDURE. The Company agrees: (i)
that, prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("BUSINESS
COMBINATION VOTE") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval
-30-
under applicable state law; and (ii) that, in the event that the Company does
not effect a Business Combination within 18 months from the consummation of this
Offering (subject to extension for an additional six-month period, as described
in the Prospectus), the Company will be liquidated and will distribute to all
holders of IPO Shares (defined below) an aggregate sum equal to the Company's
"Liquidation Value." The Company's "LIQUIDATION VALUE" shall mean the Company's
book value, as determined by the Company and approved by Xxxxxx. In no event,
however, will the Company's Liquidation Value be less than the Trust Fund,
inclusive of any net interest income thereon. Only holders of IPO Shares shall
be entitled to receive liquidating distributions and the Company shall pay no
liquidating distributions with respect to any other shares of capital stock of
the Company. With respect to the Business Combination Vote, the Company shall
cause all of the Initial Stockholders to, and each of the Underwriters shall,
vote the shares of Common Stock owned by them in accordance with the vote of the
holders of a majority of the IPO Shares present, in person or by proxy, at a
meeting of the Company's stockholders called for such purpose. At the time the
Company seeks approval of any potential Business Combination, the Company will
offer each holder of the Company's Common Stock issued in this Offering ("IPO
SHARES") the right to convert their IPO Shares at a per share price ("CONVERSION
PRICE") equal to the amount in the Trust Fund (inclusive of any interest income
therein) calculated as of two business days prior to the consummation of the
proposed Business Combination divided by the total number of IPO Shares. If
holders of less than 20% in interest of the Company's IPO Shares elect to
convert their IPO Shares, the Company may, but will not be required to, proceed
with such Business Combination. If the Company elects to so proceed, it will
convert shares, based upon the Conversion Price, from those holders of IPO
Shares who affirmatively requested such conversion and who voted against the
Business Combination. If holders of 20% or more in interest of the IPO Shares,
who vote against approval of any potential Business Combination, elect to
convert their IPO Shares, the Company will not proceed with such Business
Combination and will not convert such shares.
8.7 RULE 419. The Company agrees that it will use its best
efforts to prevent the Company from becoming subject to Rule 419 under the Act
prior to the consummation of any Business Combination, including but not limited
to using its best efforts to prevent any of the Company's outstanding securities
from being deemed to be a "xxxxx stock" as defined in Rule 3a-51-1 under the
Exchange Act during such period.
8.8 AFFILIATED TRANSACTIONS. Except as set forth on Schedule
8.8, the Company shall cause each of the officers to agree that, in order to
minimize potential conflicts of interest which may arise from multiple
affiliations, the officers 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 officers cease to be an officer of the Company, subject to any
pre-existing fiduciary obligations the officers might have.
8.9 TARGET NET ASSETS. The Company agrees that the initial
Target Business that it acquires must have a fair market value equal to at least
80% of the Company's net assets at the time of such acquisition. The fair market
value of such business must be
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determined by the Board of Directors of the Company based upon standards
generally accepted by the financial community, such as actual and potential
sales, earnings and cash flow and book value. If the Board of Directors of the
Company is not able to independently determine that the target business has a
fair market value of at least 80% of the Company's fair market value at the time
of such acquisition, the Company will obtain an opinion from an unaffiliated,
independent investment banking firm which is a member of the NASD with respect
to the satisfaction of such criteria. The Company is not required to obtain an
opinion from an investment banking firm as to the fair market value if the
Company's Board of Directors independently determines that the Target Business
does have sufficient fair market value.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
as of the Closing Date or the Option Closing Date, if any, and such
representations, warranties and agreements of the Underwriters and Company,
including the indemnity agreements contained in Section 5 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the several Underwriters until the earlier of the expiration of
any applicable statute of limitations and the seventh anniversary of the later
of the Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
10.1 EFFECTIVE DATE. This Agreement shall become effective on
the Effective Date at the time the Registration Statement is declared effective
by the Commission.
10.2 TERMINATION. You shall have the right to terminate this
Agreement at any time prior to the Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York Stock Exchange,
the American Stock Exchange, the Nasdaq Stock Market or on the NASD OTC Bulletin
Board (or successor trading market) shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been fixed, or maximum ranges for prices for
securities shall have been required on the NASD OTC Bulletin Board or by order
of the Commission or any other government authority having jurisdiction, or
(iii) if the United States shall have become involved in a new war or an
increase in major hostilities, or (iv) if a banking moratorium has been declared
by a New York State or federal authority, or (v) if a moratorium on foreign
exchange trading has been declared which materially and adversely impacts the
United States securities market, or (vi) if the Company shall have sustained a
material loss by fire, explosion, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act which, whether or not such loss
shall have been insured, will, in your opinion, make it inadvisable to proceed
with the delivery of the Units, or (vii) if any of the Company's
representations,
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warranties or covenants hereunder are breached, or (viii) if the Representative
shall have become aware after the date hereof of such a material adverse change
in the conditions or prospects of the Company, or such adverse material change
in general market conditions, including without limitation as a result of
terrorist activities after the date hereof, as in the Representative's judgment
would make it impracticable to proceed with the offering, sale and/or delivery
of the Units or to enforce contracts made by the Underwriters for the sale of
the Securities.
10.3 EXPENSES. In the event that this Agreement shall not be
carried out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the obligations of the Company
to pay the out of pocket expenses related to the transactions contemplated
herein shall be governed by Section 3.13 hereof.
10.4 INDEMNIFICATION. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 shall not be in any way affected by, such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. MISCELLANEOUS.
11.1 NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telecopied and confirmed and shall be deemed given when so
delivered or telecopied and confirmed or if mailed, two days after such mailing
If to the Representative:
Jesup & Xxxxxx Securities Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx XxXxxxx
Copy to:
Xxxxxx Xxxx & Priest LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
If to the Company:
Pharmamatrix Acquisition Corporation
000 X. Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Chief Executive Officer
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Copy to:
Xxxxxxxxx Traurig LLP
MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Annex, Esq.
11.2 HEADINGS. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
11.3 AMENDMENT. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
11.4 ENTIRE AGREEMENT. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5 BINDING EFFECT. This Agreement shall inure solely to the
benefit of and shall be binding upon the Representative, the Underwriters, the
Company and the controlling persons, directors and officers referred to in
Section 5 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
11.6 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The Company hereby agrees that any
action, proceeding or claim against it arising out of, relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum. Any such process or summons to be
served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 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
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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 affect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
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,
PHARMAMATRIX ACQUISITION CORPORATION
By:
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
Accepted on the date first above written.
JESUP & XXXXXX SECURITIES CORPORATION
By:
--------------------------------
Name:
Title:
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SCHEDULE I
PHARMAMATRIX ACQUISITION CORPORATION
5,333,334 Units
Number of Firm Units to
Underwriter be Purchased
Jesup & Xxxxxx Securities Corporation 2,666,667
Granite Financial Group, Inc. 2,666,667
=========
Total......... 5,333,334
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