UNDERWRITING AGREEMENT
BETWEEN
INTERAMERICAN ACQUISITION GROUP INC.
AND
CHARDAN CAPITAL MARKETS, LLC
Dated: , 2007
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INTERAMERICAN ACQUISITION GROUP INC.
UNDERWRITING AGREEMENT
, 2007
---------------
Chardan Capital Markets, LLC
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, InterAmerican Acquisition Group Inc., a Delaware corporation
("COMPANY"), hereby confirms its agreement with Chardan Capital Markets, LLC
(being referred to herein variously as "YOU," "CHARDAN" or the "REPRESENTATIVE")
and with the other underwriters named on Schedule I hereto for which Chardan 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 5,000,000 units ("FIRM UNITS") of the
Company at a purchase price (net of discounts and commissions, but before
deduction of the non-accountable expense allowance referenced in Section 3.13.2
hereof) of $7.36 per Firm Unit. The Underwriters, severally and not jointly,
agree to purchase from the Company the number of Firm Units set forth opposite
their respective names on Schedule I attached hereto and made a part hereof at a
purchase price (net of discounts and commissions) of $7.36 per Firm Unit. The
Firm Units are to be offered initially to the public ("OFFERING") at the
offering price of $8.00 per Firm Unit. Each Firm Unit consists of one share of
the Company's common stock, par value $.0001 per share ("COMMON STOCK"), and one
warrant (each, a "WARRANT" and collectively, the "WARRANTS"). The shares of
Common Stock and the Warrants included in the Firm Units will not be separately
transferable until 90 days after the effective date ("EFFECTIVE DATE") of the
Registration Statement (as defined in Section 2.1.1 hereof) unless Chardan
informs the Company of its decision to allow earlier separate trading, but in no
event will Chardan allow separate trading until the preparation of an audited
balance sheet of the Company reflecting receipt by the Company of the proceeds
of the Offering and the filing of a Form 8-K by the Company which
includes such balance sheet. Each Warrant entitles its holder to exercise it to
purchase one share of Common Stock for $5.00 during the period commencing on the
later of the consummation by the Company of its "BUSINESS COMBINATION" or one
year from the Effective Date of the Registration Statement and terminating on
the four-year anniversary of the Effective Date. "BUSINESS COMBINATION" shall
mean any merger, capital stock exchange, asset or stock 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 time, on the third business day following
the Effective Date (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: $35,950,000 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 (or
through the facilities of the Depository Trust Company ("DTC") of certificates
(in form and substance satisfactory to the Underwriters) representing the Firm
Units) 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 any of 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 750,000 units from the Company ("OVER-ALLOTMENT OPTION"). Such
additional 750,000 units are hereinafter referred to as "OPTION UNITS." The Firm
Units and the Option Units are hereinafter collectively referred to as the
"UNITS," and the Units, the shares of Common Stock and the Warrants included in
the Units and the shares of Common Stock issuable upon exercise of the Warrants
are hereinafter referred to collectively as the "PUBLIC SECURITIES." The
purchase price to be paid for the Option Units will be the same price per Option
Unit as the price per Firm Unit set forth in Section 1.1.1 hereof.
1.2.2. Exercise of Option. The Over-allotment Option granted pursuant
to Section 1.2.1 hereof may be exercised by the Representative as to all (at any
time) or any part (from time to time) of the Option Units within 45 days after
the Effective Date. The Underwriters will not be under any obligation to
purchase any Option Units prior to the exercise
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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, 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. If such delivery and payment for the Option Units does not
occur on the Closing Date, the date and time of the Closing for such Option
Units will be as set forth in the notice (hereinafter the "OPTION CLOSING
DATE"). Upon exercise of the Over-allotment Option, the Company will become
obligated to convey to the Underwriters, and, subject to the terms and
conditions set forth herein, the Underwriters will become obligated to purchase,
the number of Option Units specified in such notice.
1.2.3. Payment and Delivery. Payment for the Option Units shall be made
on the Option Closing Date at the Representative's election by wire transfer in
Federal (same day) funds or by certified or bank cashier's check(s) in New York
Clearing House funds, payable as follows: $7.88 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 (or
through the facilities of DTC) of certificates (in form and substance
satisfactory to the Underwriters) representing the Option Units 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. Contingent Portion of Underwriters' Discount. The Representative, on
behalf of itself and the other Underwriters, agrees that 4.5% of the gross
proceeds from the sale of the Firm Units ($1,800,000) and the Option Units (a
total amount of $2,070,000 if the over-allotment option is exercised in full)
(the "Contingent Discount") will be deposited in and held in the Trust Fund and
payable to the Underwriters, along with any interest accrued thereon (net of
taxes payable), in respect of any IPO Shares (defined in Section 8.6 hereof)
which are not redeemed pursuant to Section 8.6 hereof, upon the consummation of
a Business Combination. The Representative, on behalf of itself and the other
Underwriters, agrees that in the event that the Company is unable to consummate
a Business Combination and Continental Stock Transfer & Trust Company, the
trustee of the Trust Fund, commences liquidation of the Trust Fund as provided
in the Trust Agreement, the Representative, on behalf of itself and the other
Underwriters, agrees that (i) the several Underwriters shall forfeit any rights
or claims to the Contingent Discount and any interest accrued thereon (net of
taxes payable); and (ii) the Contingent Discount, together with the all other
amounts on deposit in the Trust Fund, and any accrued interest thereon (net of
taxes payable), shall be distributed on a pro-rata basis among the holders of
the shares of Common Stock included in the Units sold in the Offering along with
any interest accrued thereon.
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1.4. Representative's Purchase Option.
1.4.1. 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 500,000
units ("REPRESENTATIVE'S UNITS") for an aggregate purchase price of $100.00.
Each of the Representative's Units is identical to the Firm Units, except that
the Warrants included in the Representative's Units ("REPRESENTATIVE'S
WARRANTS") will expire five years after the Effective Date. The Representative's
Purchase Option shall be exercisable, in whole or in part, commencing on the
later of the consummation of a Business Combination or one year from the
Effective Date and expiring on the five-year anniversary of the Effective Date
at an initial exercise price per Representative's Unit of $8.80, which is equal
to one hundred and ten percent (110%) of the initial public offering price of a
Unit. The Representative's Purchase Option, the Representative's Units, the
Warrants included in the Representatives Units (the "REPRESENTATIVE 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.
1.4.2. Delivery and Payment. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Representative, 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 of the Applicable Time and as of the Closing
Date and as of the Option Closing Date, if any, 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. 333-125558), including any related
preliminary prospectus (including, without limitation, the Sale Preliminary
Prospectus (as hereinafter defined) ("PRELIMINARY PROSPECTUS"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("ACT"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations ("REGULATIONS") of the Commission under the Act. The
prospectus subject to completion dated _, 2007 is hereinafter referred
to as the "Sale Preliminary Prospectus". 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 through the Applicable Time), 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
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Rule 424 of the Regulations), is hereinafter called the "PROSPECTUS." The
Registration Statement has been declared effective by the Commission on the date
hereof. "APPLICABLE TIME" means the time of sale with respect to each applicable
investor at or prior to the Closing Date.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A (File Number 000-51510) providing for the registration
under the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
2.2. No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
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 respective times the Registration
Statement , Prospectus and any post-effective amendments thereto become
effective and at all times subsequent thereto up to the Applicable Time, Closing
Date and the Option Closing Date, if any, the Registration Statement, the Sale
Preliminary Prospectus 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 any
Preliminary Prospectus or the Prospectus, nor any amendment or supplement
thereto, on such dates, nor the Sale Preliminary Prospectus as of the Applicable
Time, did or will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus 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 have been corrected
in the Sale Preliminary Prospectus and the Prospectus to 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, the Sale Preliminary Prospectus or Prospectus or any amendment
thereof or supplement thereto.
2.3.2. Disclosure of Agreements. The agreements and documents described
in the Registration Statement, the Sale Preliminary Prospectus and the
Prospectus conform to the descriptions thereof contained therein and there are
no agreements or other documents required to be described in the Registration
Statement, the Sale Preliminary Prospectus or the Prospectus
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or to be filed with the Commission as exhibits to the Registration Statement,
that have not been so described or filed. Each agreement or other instrument
(however characterized or described) to which the Company is a party or by which
its property or business is or may be bound or affected and (i) that is referred
to in the Prospectus, or (ii) is material to the Company's business, has been
duly and validly executed by the Company, is in full force and effect and is
enforceable against the Company and, to the Company's knowledge, the other
parties thereto, in accordance with its terms, except (x) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
2.3.3. Prior Securities Transactions. No securities of the Company have
been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under 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, the Sale Preliminary
Prospectus and the Prospectus, except as otherwise specifically stated therein,
(i) there has been no material adverse change in the condition, financial or
otherwise, or business prospects of the Company, (ii) there have been no
material transactions entered into by the Company, other than as contemplated
pursuant to this Agreement, (iii) no member of the Company's management has
resigned from any position with the Company, and (iv) no event or occurrence has
taken place which materially impairs or would likely materially impair, with the
passage of time, the ability of the members of the Company's board of directors
or management to act in their capacities with the Company as described in the
Registration Statement sent, the Sale Preliminary Prospectus and the Prospectus.
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2.4.2. Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement,
the Sale Preliminary Prospectus and the Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any 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 capital stock.
2.5. Independent Accountants. Xxxxxxxxx Xxxxx Xxxxxxx LLP ("GGK"), whose
report is filed with the Commission as part of the Registration Statement are
independent accountants as required by the Act and the Regulations. GGK has not,
during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Exchange Act.
2.6. Financial Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus fairly present the financial position, the results of operations and
the cash flows of the Company at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company's financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.
2.7. Authorized Capital; Options; Etc. The Company had at the date or dates
indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8. Valid Issuance of Securities; Etc.
2.8.1. Outstanding Securities. All issued and outstanding securities of
the Company have 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 in all
material respects to all statements relating thereto contained in the
Registration Statement, the Sale Preliminary Prospectus and the Prospectus. The
offers and sales of the outstanding Common
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Stock were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky laws or, based in part on the
representations and warranties of the purchasers of such shares of Common Stock,
exempt from such registration requirements.
2.8.2. Securities Sold Pursuant to this Agreement. The Securities have
been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. The Securities
conform in all material respects to all statements with respect thereto
contained in the Registration Statement. When issued, the Representative's
Purchase Option, the Representative's 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 Sale
Preliminary Prospectus and the Prospectus, no holders of any securities of the
Company or any rights exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company.
2.10. Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.20 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
9
Company with the terms hereof and thereof do not and will not, with or without
the giving of notice or the lapse of time or both: (i) result in a breach of, or
conflict with any of the terms and provisions of, or constitute a default under,
or result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any agreement or instrument to which the Company is a party except
pursuant to the Trust Agreement 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 Sale Preliminary Prospectus and 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 requisite
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities and the consummation of the transactions and agreements contemplated
by this Agreement, the Warrant Agreement, the Representative's Purchase Option,
the Trust Agreement, the Services Agreement and the Escrow Agreement and as
contemplated by the Sale Preliminary Prospectus and 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
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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.
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 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, 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 shares of Common Stock is or becomes an affiliate or associated
person of an NASD member participating in the offering.
11
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 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, in connection with the Offering, 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"), providing for, among other
things, the payment of a warrant solicitation fee as contemplated by Section 3.9
hereof.
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 10.1 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 10.8 to the Registration Statement, whereby the
Common Stock owned by each of the Initial Stockholders will be held in escrow by
the Escrow Agent, until the third anniversary of the Effective Date. During such
escrow period, the Initial Stockholders shall be prohibited from selling or
otherwise
12
transferring such shares (except to spouses and children of Initial Stockholders
and trusts established for their benefit and as otherwise set forth in the
Escrow Agreement), but will retain the right to vote such shares and receive any
distributions with respect to 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 Xxxxxx.
2.21.3. Private Placement. The Company has entered into an agreement
with InterAmerican Capital Partners II LLC ("ICPII"), an entity wholly-owned by
certain of the Initial Stockholders, and Xxxxxxx Xxxxxxx ("Propper" and
collectively with ICPII, the "Private Placement Purchasers") for the purchase by
the Private Placement Purchasers of $1,500,000 of Warrants in a private
placement to be completed on or prior to the Closing Date (the "Warrant Purchase
Agreement"). The proceeds will be deposited into the trust account pursuant to
the terms of the Trust Agreement.
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 10.7 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.
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3.2. Federal Securities Laws.
3.2.1. Compliance. During the time when a Prospectus is required to be
delivered under the Act, the Company will use all reasonable efforts to comply
with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2. Filing of Final Prospectus. The Company will file the Prospectus
(in form and substance satisfactory to the Representative) with the Commission
pursuant to the requirements of Rule 424 of the Regulations.
3.2.3. Exchange Act Registration. For a period of five years from the
Effective Date, or until such earlier time upon which the Company is required to
be liquidated or is acquired in a transaction approved by the requisite number
of stockholders, 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 and, the Company will not deregister the Units, Common Stock and
Warrants under the Exchange Act without the prior written consent of 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 Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4. Delivery to Underwriters of Prospectuses. The Company will deliver to
each of the several Underwriters, without charge, from time to time during the
period when the Prospectus is required to be delivered under the Act or the
Exchange Act such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
14
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 when
the Company becomes aware of such; (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Public Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose when the Company becomes
aware of such; (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. Office Space and Administrative Services. The Company has
entered into an agreement ("SERVICES AGREEMENT") with InterAmerican Advisors,
LLC ("IALLC") substantially in the form annexed as Exhibit 10.9 to the
Registration Statement pursuant to which IALLC will make available to the
Company administrative, technology and secretarial services, as well as the use
of certain limited office space, in San Diego, California for $10,000 per month.
3.7.3. Affiliate Compensation. Except as set forth above in this
Section 3.7, the Company shall not pay any Initial Stockholder or any of their
affiliates any fees or compensation from the Company, for services rendered to
the Company prior to, or in connection with, the consummation of a Business
Combination; provided that the Initial Stockholders shall be entitled to
reimbursement from the Company for their reasonable out-of-pocket expenses
incurred in connection with seeking and consummating a Business Combination.
Notwithstanding the foregoing to the contrary, the Company may pay an Initial
Stockholder or any of its affiliates
15
fees or compensation in connection with bona fide services to be rendered to the
Company that (i) are expressly approved by a majority of the Company's
disinterested directors, (ii) are legitimately required by the Company and the
Company would otherwise contract such services from a third party, and (iii) all
fees and compensation to be paid to any Initial Stockholder or its affiliates
are determined on an arm's length basis and in good faith and such fees and
compensation are customarily charged by unrelated third party service providers
of a similar nature.
3.8. Secondary Market Trading and Standard & Poor's. The Company will apply
to be included in Standard & Poor's Daily News and Corporation Records Corporate
Descriptions for a period of five years from the consummation of a Business
Combination. Promptly after the consummation of the Offering, the Company shall
take such steps as may be necessary to obtain a secondary market trading
exemption for the Company's securities in the State of California. The Company
shall also take such other action as may be reasonably requested by the
Representative to obtain a secondary market trading exemption in such other
states as may be requested by the Representative.
3.9. Warrant Solicitation Fees. The Company hereby engages Chardan, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Company will (i) assist Chardan with respect to such solicitation,
if requested by Chardan, and (ii) at Chardan's request, provide Chardan, and
direct the Company's transfer and warrant agent to provide to Chardan, at the
Company's cost, lists of the record and, to the extent known, beneficial owners
of, the Warrants. Commencing one year from the Effective Date, the Company will
pay Chardan a commission of five percent of the exercise price of the Warrants
for each Warrant exercised within three (3) business days of the date the
exercise price is paid, on the terms provided for in the Warrant Agreement, only
if permitted under the rules and regulations of the NASD and only to the extent
that an investor who exercises his Warrants specifically designates, in writing,
that Chardan solicited his exercise. Chardan may engage sub-agents in its
solicitation efforts. The Company agrees to disclose the arrangement to pay such
solicitation fees to Chardan in any prospectus used by the Company in connection
with the registration of the shares of Common Stock underlying the Warrants.
3.10. Financial Public Relations Firm. Promptly after the execution of a
definitive agreement for a Business Combination, the Company shall retain a
financial public relations firm reasonably acceptable to, but not affiliated
with, the Representative for a term not less than five years, subject to earlier
termination in the event the Company is liquidated.
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 (Attn: Xxxxxx
Xxxxxxx) and its counsel copies of such financial statements and other periodic
and special reports as the Company from time to time furnishes generally to
holders of any class of its securities, and promptly furnish to the
Representative (i) a copy of every press release and every news item and article
with respect to the Company or its affairs which was released by the Company;
(ii) a copy of each Schedule 13D, 13G, 14D-1 or 13E-4 received or prepared by
the Company; and (iii) five copies of each
16
Registration Statement. In addition, upon Chardan's request, the Company shall
furnish Chardan (i) 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 (ii) such additional documents and information with respect to the
Company and the affairs of any future subsidiaries of the Company as the
Representative may from time to time reasonably request; provided that the
Representative shall sign, if requested by the Company, a Regulation FD
compliant confidentiality agreement which is reasonably acceptable to the
Company, the Representative, and their respective 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 such transfer sheets of the Company's
securities as the Representative may request, including the daily, weekly and
monthly consolidated transfer sheets of the Transfer Agent and DTC and the
Company's weekly Depository Trust Company Security Position Reports. The
Underwriters acknowledge that Continental Stock Transfer & Trust Company is an
acceptable Transfer Agent.
3.11.3. Secondary Market Trading Survey. Until such time as the Public
Securities are listed or quoted, as the case may be, on the New York Stock
Exchange, the American Stock Exchange or quoted on the Nasdaq National Market,
or until such earlier time upon which the Company is required to be liquidated,
the Company shall engage Loeb & Loeb LLP ("LOEB"), for a one-time fee of $5,000
payable on the Closing Date, to deliver and update to the Underwriters on a
timely basis, but in any event on the Effective Date and at the beginning of
each fiscal quarter, a written report detailing those states in which the Public
Securities may be traded in non-issuer transactions under the Blue Sky laws of
the fifty States ("SECONDARY MARKET TRADING SURVEY").
3.11.4. Trading Reports. During such time the Public Securities are
quoted on the NASD OTC Bulletin Board (or any successor trading market such as
the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar publisher of
quotations) and no other automated quotation system, the Company shall provide
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-1. For a period equal to seven years from
the date hereof, or until such earlier time upon which the Company is required
to be liquidated, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form S-1 (or other appropriate form)
for the registration of the Warrants and the Representative's Warrants under the
Act.
3.13. Payment of Expenses.
3.13.1. General Expenses Related to the Offering. The Company hereby
agrees to pay on each of the Closing Date and the Option Closing Date, if any,
to the extent not paid at the Closing Date, all expenses incident to the
performance of the obligations of the Company under
17
this Agreement, including, but not limited to: (i) the preparation, printing,
filing and mailing (including the payment of postage with respect to such
mailing) of the Registration Statement, the Preliminary and final Prospectuses
and the printing and mailing of this Agreement and related documents, including
the cost of all copies thereof and any amendments thereof or supplements thereto
supplied to the Underwriters in quantities as may be required by the
Underwriters; (ii) the printing, engraving, issuance and delivery of the Units,
the shares of Common Stock and the Warrants included in the Units and the
Representative's Purchase Option, including any transfer or other taxes payable
thereon; (iii) the qualification of the Public Securities under state or foreign
securities or Blue Sky laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," and all amendments and supplements thereto,
fees and disbursements for the Counsel to the Underwriters retained for such
purpose of $35,000 in the aggregate (of which $5,000 has previously been paid)),
and a one-time fee of $5,000 payable to Loeb for the preparation of the
Secondary Market Trading Survey; (iv) filing fees, costs and expenses (including
fees of Representative's counsel and disbursements for the Representative's
counsel) incurred in registering the Offering with the NASD; (v) fees and
disbursements of the transfer and warrant agent; (vi) the Company's expenses
associated with "due diligence" meetings arranged by the Representative; (vii)
the preparation, binding and delivery of transaction "bibles," in form and style
reasonably satisfactory to the Representative and transaction lucite cubes or
similar commemorative items in a style and quantity as reasonably requested by
the Representative; and (viii) all other costs and expenses 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 it will reimburse Representative for the cost of the investigative
search firm of the Representative's choice that conducted an investigation of
the principals of the Company. The Representative may deduct from the net
proceeds of the Offering payable to the Company on the Closing Date, or the
Option Closing Date, if any, the expenses set forth in this Agreement to be paid
by the Company to the Representative and, with the prior consent of the Company,
others.
3.13.2. Nonaccountable Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.13.1, on the Closing
Date, it will pay to the Representative a nonaccountable expense allowance equal
to one percent (2%) of the gross proceeds received by the Company from the sale
of the Firm Units by deduction from the proceeds of the Offering contemplated
herein.
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)
18
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 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. Except with respect to the agreement between Xxxxxx
and ICPII (the "WARRANT PURCHASE AGREEMENT") annexed as Exhibit 10.12 to the
Registration Statement, neither ICPII, Propper, the Company, nor, to its
knowledge, any of its employees, directors or stockholders (without the consent
of Chardan) has taken or will take, directly or indirectly, any action designed
to or that has constituted or that might reasonably be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Units.
3.18. Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.19. Accountants. For a period of five years from the Effective Date or
until such earlier time upon which the Company is required to be liquidated, the
Company shall retain GGK, or an independent public accounting firm of national
scope or reputation.
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.
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.
19
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 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 Key Man Insurance. Prior to the consummation of a Business
Combination, the Company shall have procured and shall covenant to maintain "key
man" life insurance (in amounts agreed to by Chardan and with the Company as the
sole beneficiary thereof) with an insurer rated at least AA or better in the
most recent edition of "Best's Life Reports" on the lives of to be determined
executive officers or officers of the Company.
3.26. 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 Loeb
& Loeb LLP, counsel to the Underwriters ("LOEB").
20
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. Closing Date Opinion of Counsel. On the Closing Date, the
Representative shall have received the favorable opinion of Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP, counsel to the Company ("XXXXXX XXXXX"), dated the
Effective Date, addressed to the Representative and in form and substance
satisfactory to Loeb to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the Company.
(ii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof are not subject to personal liability by reason of being
such holders and none of such securities were issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of law
or under the Certificate of Incorporation or Bylaws of the Company. The offers
and sales of the outstanding Common Stock were at all relevant times either
registered under the Act and the applicable state securities or Blue Sky Laws or
exempt from such registration. 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
21
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 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 Sale Preliminary Prospectus, the
Prospectus and related matters were discussed and although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and
22
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 statements and schedules and
other financial and statistical data included in the Registration Statement, the
Sale Preliminary Prospectus 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. 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
Loeb) of other counsel reasonably acceptable to Loeb, 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 Loeb from
GGK dated, respectively, as of the date of this Agreement and as of the Closing
Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations and that they have not, during the periods covered by the financial
statements included in the Prospectus, provided to the Company any non-audit
services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all
23
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, the Sale Preliminary Prospectus and the Prospectus, (b)
at a date not later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any change in the capital
stock or long-term debt of the Company, or any decrease in the stockholders'
equity of the Company as compared with amounts shown in the February 28, 2006
balance sheet included in the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus other than as set forth in or contemplated by the
Registration Statement or, if there was any decrease, setting forth the amount
of such decrease, and (c) during the period from February 28, 2006 to a
specified date not later than five days prior to the Effective Date, Closing
Date or Option Closing Date, as the case may be, there was any decrease in
revenues, net earnings or net earnings per share of Common Stock, in each case
as compared with the corresponding period in the preceding year and as compared
with the corresponding period in the preceding quarter, other than as set forth
in or contemplated by the Registration Statement the Sale Preliminary Prospectus
and the Prospectus or, if there was any such decrease, setting forth the amount
of such decrease;
(iv) Setting forth, at a date not later than five days prior to
the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Sale
Preliminary Prospectus and the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement;
(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
24
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, the Sale Preliminary Prospectus and the 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, the Sale Preliminary
Prospectus and the Prospectus, (iii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated or threatened by
the Commission, and (iv) the Registration Statement, the Sale Preliminary
Prospectus and the Prospectus and any amendments or supplements thereto shall
contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations and shall conform in all material
25
respects to the requirements of the Act and the Regulations, and neither the
Registration Statement, the Sale Preliminary Prospectus nor the Prospectus nor
any amendment or supplement thereto shall contain any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6. Delivery of Agreements. 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 Loeb 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
Loeb.
5. Indemnification.
5.1. Indemnification of Underwriters.
5.1.1. General. Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless each of the Underwriters, and each dealer
selected by you that participates in the offer and sale of the Securities (each
a "SELECTED DEALER") and each of their respective directors, officers and
employees and each person, if any, who controls any such Underwriter
("CONTROLLING PERSON") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
statute or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in (i) any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time each may be amended and
supplemented); (ii) 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
26
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. Each of the Underwriters and each Selected
Dealer hereby waives any right, interest or claim of any kind that it may have
in or to any monies held in the trust account for the benefit of the holders of
the Public Securities and agrees not to seek any payment of any indemnity of the
Company under this Section 5.1 from any monies held in the trust account for the
benefit of the holders of the Public Securities. With respect to any untrue
statement or omission or alleged untrue statement or omission made in the
Preliminary Prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of any Underwriter to the extent that any loss,
liability, claim, damage or expense of such Underwriter results from the fact
that a copy of the Prospectus was not given or sent to the person asserting any
such loss, liability, claim or damage at or prior to the written confirmation of
sale of the Securities to such person as required by the Act and the
Regulations, and if the untrue statement or omission has been corrected in the
Prospectus, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with its obligations under Section 3.4 hereof. The
Company agrees promptly to notify the Representative of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or Prospectus.
5.1.2. Procedure. If any action is brought against an Underwriter, a
Selected Dealer or a controlling person in respect of which indemnity may be
sought against the Company pursuant to Section 5.1.1, such Underwriter or
Selected Dealer shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action,
including the employment and fees of counsel (subject to the reasonable approval
of such Underwriter or Selected Dealer, as the case may be) and payment of
actual expenses. Such Underwriter, Selected Dealer or controlling person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Underwriter,
Selected Dealer or controlling person unless (i) the employment of such counsel
at the expense of the Company shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company shall
not have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of not more
than one additional firm of attorneys selected by the Underwriter, Selected
Dealer and/or controlling person shall be borne by the Company. Notwithstanding
anything to the contrary contained herein, if the Underwriter, Selected Dealer
or controlling person shall assume the defense of such action as
27
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 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
28
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 Units or Option Units to which a
default relates as provided in this Section 6, this Agreement may be terminated
by you or the Company without liability on the part of the Company (except as
provided in Sections 3.13 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.
29
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 Advisor. For a period of no less than two (2) years from the
Closing Date, such Advisor shall attend meetings of the Board of Directors of
the Company; provided that such Advisor shall sign a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to Chardan and its
counsel in connection with such Advisor's attendance at meetings of the Board of
Directors; and provided further that upon written notice to Chardan, the Company
may exclude the Advisor from meetings where, in the written opinion of counsel
for the Company, the Advisor's presence would destroy the attorney-client
privilege. The Company agrees to give Chardan written notice of each such
meeting and to provide Chardan 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 Advisor for his or her reasonable out-of-pocket expenses
incurred in connection with its attendance at the meeting, including but not
limited to, food, lodging and transportation. The Company further agrees that
during such two year period, that it shall schedule no less than four (4)
meetings of its Board of Directors in each such year at which meetings the
Advisor shall be permitted to attend or otherwise participate, such meetings
shall be held quarterly each year and ten (10) days advance notice of such
meetings shall be given to the Advisor. Furthermore, during such two (2) year
period, the Company shall give notice to Chardan with respect to any proposed
acquisitions, mergers, reorganizations or other similar transactions.
8. Additional Covenants.
8.1. Additional Shares or Options. The Company hereby agrees that until the
Company consummates a Business Combination, it shall not issue any shares of
Common Stock or any options or other securities convertible into Common Stock,
or any shares of Preferred Stock which participate in any manner in the Trust
Fund or which vote as a class with the Common Stock on a Business Combination.
8.2. 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
acknowledges in writing, whether through a letter of intent, memorandum of
understanding or other similar document (and subsequently acknowledges the same
in any definitive document replacing any of the foregoing), that (a) it has read
the Prospectus and understands that the Company has established the Trust Fund,
initially in an amount of $35,950,000 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
30
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 Xxxxxx and will not
allow any amendments to, or waivers of, such Insider Letters without the prior
written consent of 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 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 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 GGK. In no event, however, will the Company's
Liquidation Value be less than the Trust Fund, inclusive of any net interest
income thereon (net of taxes payable). 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 vote the shares of Common Stock owned
by them immediately prior to this Offering in accordance with the vote of the
holders of a majority of the IPO Shares 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
31
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 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.
32
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,
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
33
If to the Representative:
Chardan Capital Markets, LLC
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx, Chief Executive Officer
Copy to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx Xxxxxxxx, Esq.
If to the Company:
InterAmerican Acquisition Group, Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Chief Executive Officer
Copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxxxx X. Xxxxxxx, 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.
34
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, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The Company
hereby waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 11.1 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the Company in any action,
proceeding or claim. The Company agrees that the prevailing party(ies) in any
such action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
11.7. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
11.8. Waiver, Etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way 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.
35
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,
INTERAMERICAN ACQUISITION GROUP INC.
By:
-------------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
Accepted on the date first above written.
CHARDAN CAPITAL MARKETS, LLC
By:
-------------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
36
SCHEDULE I
INTERAMERICAN ACQUISITION GROUP INC.
5,000,000 Units
UNDERWRITER NUMBER OF FIRM UNITS TO BE PURCHASED
CHARDAN CAPITAL MARKETS, LLC
