EXHIBIT 1.1
UNDERWRITING AGREEMENT
BETWEEN
ITHAKA ACQUISITION CORP.
AND
EARLYBIRDCAPITAL, INC.
DATED: _____________________, 2005
ITHAKA ACQUISITION CORP.
UNDERWRITING AGREEMENT
New York, New York
_________, 0000
XxxxxXxxxXxxxxxx, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Ithaka Acquisition Corp., a Delaware
corporation ("Company"), hereby confirms its agreement with EarlyBirdCapital,
Inc. (being referred to herein variously as "you," "EBC" or the
"Representative") and with the other underwriters named on Schedule I hereto for
which EBC 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 8,500,000 units ("Firm
Units") of the Company, at a purchase price (net of discounts and commissions)
of $5.58 per Firm Unit. The Underwriters, severally and not jointly, agree to
purchase from the Company the number of Firm Units set forth opposite their
respective names on Schedule I attached hereto and made a part hereof at a
purchase price (net of discounts and commissions) of $5.58 per Firm Unit. The
Firm Units are to be offered initially to the public ("Offering") at the
offering price of $6.00 per Firm Unit. Each Firm Unit consists of one share of
the Company's common stock, par value $.0001 per share ("Common Stock"), and two
warrants ("Warrant(s)"). The shares of Common Stock and the Warrants included in
the Firm Units will not be separately transferable until 90 days after the
effective date ("Effective Date") of the Registration Statement (as defined in
Section 2.1.1 hereof) unless EBC informs the Company of its decision to allow
earlier separate trading, but in no event will EBC 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 and terminating on the
four-year anniversary of the Effective Date. "Business Combination" shall mean
any merger, capital stock exchange, asset acquisition or other similar business
combination consummated by the Company with an operating business (as described
more fully in the Registration Statement).
1.1.2 PAYMENT AND DELIVERY. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on the fourth business day
following the effective date 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
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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: $45,050,000 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 (subject to Section 3.13 hereof) to the order
of the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Firm Units (or through the
facilities of the Depository Trust Company ("DTC")) for the account of the
Underwriters. The Firm Units shall be registered in such name or names and in
such authorized denominations as the Representative may request in writing at
least two full business days prior to the Closing Date. The Company will permit
the Representative to examine and package the Firm Units for delivery, at least
one full business day prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Units except upon tender of payment by the
Representative for all the Firm Units.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION UNITS. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 1,275,000 units from the Company ("Over-allotment
Option"). Such additional 1,275,000 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 of the Over-allotment Option.
The Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company by the Representative, which must be confirmed in writing
by overnight mail or facsimile transmission setting forth the number of Option
Units to be purchased and the date and time for delivery of and payment for the
Option Units (the "Option Closing Date"), which will not be later than five full
business days after the date of the notice or such other time as shall be agreed
upon by the Company and the Representative, at the offices of the Representative
or at such other place as shall be agreed upon by the Company and the
Representative. Upon exercise of the Over-allotment Option, the Company will
become obligated to convey to the Underwriters, and, subject to the terms and
conditions set forth herein, the Underwriters will become obligated to purchase,
the number of Option Units specified in such notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option Units shall
be made on the Option Closing Date at the Representative's election by wire
transfer in Federal (same day) funds or by certified or bank cashier's check(s)
in New York Clearing House funds, payable as follows: $5.58 per Option Unit
shall be deposited in the Trust Fund pursuant to the Trust Agreement upon
delivery to you of certificates (in form and substance satisfactory to the
Underwriters) representing the Option Units (or through the facilities of DTC)
for the account of the Underwriters. The certificates representing the Option
Units to be delivered will be in such denominations and registered in such names
as the Representative requests not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Representative for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to such Closing Date.
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1.3 REPRESENTATIVE'S PURCHASE OPTION.
1.3.1 PURCHASE OPTION. The Company hereby agrees to issue and
sell to the Representative (and/or their designees) on the Effective Date an
option ("Representative's Purchase Option") for the purchase of an aggregate of
______ units ("Representative's Units") for an aggregate purchase price of $100.
Each of the Representative's Units is identical to the Firm Units except that
the Warrants included in the Representative's Units ("Representative's
Warrants") have an exercise price of $____ (___% of the exercise price of the
Warrants included in the Units sold to the public). The Representative's
Purchase Option shall be exercisable, in whole or in part, commencing on the
later of the consummation of a Business Combination and one year from the
Effective Date and expiring on the five-year anniversary of the Effective Date
at an initial exercise price per Representative's Unit of $___, which is equal
to _________ (___%) of the initial public offering price of a Unit. The
Representative's Purchase Option, the Representative's Units, the
Representative's Warrants and the shares of Common Stock issuable upon exercise
of the Representative's Warrants are hereinafter referred to collectively as the
"Representative's Securities." The Public Securities and the Representative's
Securities are hereinafter referred to collectively as the "Securities." The
Representative understands and agrees that there are significant restrictions
against transferring the Representative's Purchase Option during the first year
after the Effective Date, as set forth in Section 3 of the Representative's
Purchase Option.
1.3.2 PAYMENT AND DELIVERY. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for the
Representative's Purchase Option in the name or names and in such authorized
denominations as the Representative may request.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Underwriters as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form S-1 (File No. 333-124521), including
any related preliminary prospectus ("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.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Regulations), is hereinafter called the
"Registration Statement," and the form of the final prospectus dated the
Effective Date included in the Registration Statement (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration Statement
has been declared effective by the Commission on the date hereof.
2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has filed with
the Commission a Form 8-A (File Number 000-51362) providing for the registration
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
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2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 DISCLOSURES IN REGISTRATION STATEMENT.
2.3.1 10b-5 REPRESENTATION. At the time the Registration
Statement became effective and at all times subsequent thereto up to the Closing
Date and the Option Closing Date, if any, the Registration Statement and the
Prospectus does and 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;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, on such dates, does or will contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
for the registration of the Securities or any amendment thereto or pursuant to
Rule 424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this Section
2.3.1 does not apply to statements made or statements omitted in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
2.3.2 DISCLOSURE OF AGREEMENTS. The agreements and documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i) that
is referred to in the Prospectus, or (ii) is material to the Company's business,
has been duly and validly executed by the Company, is in full force and effect
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company since the Company's formation, except as disclosed in the
Registration Statement.
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2.3.4 REGULATIONS. The disclosures in the Registration
Statement concerning the effects of Federal, State and local regulation on the
Company's business as currently contemplated are correct in all material
respects and do not omit to state a material fact.
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO MATERIAL ADVERSE CHANGE. Since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, except as otherwise specifically stated therein, (i) there has been
no material adverse change in the condition, financial or otherwise, or business
prospects of the Company, (ii) there have been no material transactions entered
into by the Company, other than as contemplated pursuant to this Agreement, and
(iii) no member of the Company's management has resigned from any position with
the Company.
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its equity securities.
2.5 INDEPENDENT ACCOUNTANTS. Xxxxxxxxx Xxxxx Xxxxxxx LLP ("GGK"), whose
report is filed with the Commission as part of the Registration Statement, 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
summary financial data included in the Registration Statement and the Prospectus
present fairly the information shown thereon and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement or the Prospectus. 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
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been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or similar contractual rights granted by the
Company. The authorized Common Stock conforms to all statements relating thereto
contained in the Registration Statement and the Prospectus. The offers and sales
of the outstanding Common Stock were at all relevant times either registered
under the Act and the applicable state securities or Blue Sky laws or, based in
part on the representations and warranties of the purchasers of such shares of
Common Stock, exempt from such registration requirements.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
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 Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment of the respective exercise prices therefor,
the number and type of securities of the Company called for thereby in
accordance with the terms thereof and such Representative's Purchase Option, the
Representative's Warrants and the Warrants are enforceable against the Company
in accordance with their respective terms, except (i) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws, and (iii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth in the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement, the
Warrant Agreement (as defined in Section 2.21 hereof), the Trust Agreement and
the Escrow Agreement (as defined in Section 2.22.2 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 Warrant Agreement, the Representative's Purchase
Option, the Trust Agreement and the Escrow Agreement, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms hereof and thereof do not and will not, with or
without the giving of notice or the lapse of time or both (i) result in a breach
of, or conflict with any of the terms and provisions of, or constitute a default
under, or result in the creation, modification, termination or imposition of any
lien, charge or encumbrance upon any property or assets of the Company pursuant
to the terms of any agreement or instrument to which the Company is a party
except pursuant to the Trust Agreement referred to in Section 2.24 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
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of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or business.
2.12 NO DEFAULTS; VIOLATIONS. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or Bylaws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
businesses.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies that it needs as of the date hereof to conduct
its business purpose as described in the Prospectus. The disclosures in the
Registration Statement concerning the effects of federal, state and local
regulation on this offering and the Company's business purpose as currently
contemplated are correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities and the consummation of the transactions and agreements contemplated
by this Agreement, the Warrant Agreement, the Representative's Purchase Option,
the Trust Agreement and the Escrow Agreement and as contemplated by the
Prospectus, except with respect to applicable federal and state securities laws.
2.14 D&O QUESTIONNAIRES. To the best of the Company's knowledge, all
information contained in the questionnaires ("Questionnaires") completed by each
of the Company's stockholders immediately prior to the Offering ("Initial
Stockholders") and provided to the Underwriters as an exhibit to his or her
Insider Letter (as defined in Section 2.22.1) 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 assets,
business or operations of the Company.
2.17 STOP ORDERS. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or any part
thereof and has not threatened to issue any such order.
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2.18 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.18.1 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").
2.18.2 PAYMENTS WITHIN TWELVE MONTHS. Other than payments to
EBC, the Company has not within the twelve months prior to the Effective Date
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.
2.18.3 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.
2.18.4 INSIDERS' NASD AFFILIATION. Based on questionnaires
distributed to such persons, except as set forth on Schedule 2.18.4, no officer,
director or any beneficial owner of the Company's unregistered securities has
any direct or indirect affiliation or association with any NASD member. The
Company will advise the Representative and its counsel if it learns that any
officer, director or owner of at least 5% of the Company's outstanding Common
Stock is or becomes an affiliate or associated person of an NASD member
participating in the offering.
2.19 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.
2.20. OFFICERS' CERTIFICATE. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
2.21 WARRANT AGREEMENT. The Company has entered into a warrant
agreement with respect to the Warrants and the Representative's Warrants with
Continental Stock Transfer & Trust Company substantially in the form annexed as
Exhibit 4.5 to the Registration Statement ("Warrant Agreement").
2.22 AGREEMENTS WITH INITIAL STOCKHOLDERS.
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2.22.1 INSIDER LETTERS. The Company has caused to be duly
executed legally binding and enforceable agreements (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or noncompete provision may be limited under
the federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought) annexed as Exhibits 10.1, 10.2, 10.3 and
10.4 to the Registration Statement ("Insider Letters"), pursuant to which each
of the Initial Stockholders of the Company agrees 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.
2.22.2 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 10.6 to the Registration Statement, whereby the Common
Stock owned by 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
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. 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
EBC.
2.23 INTENTIONALLY OMITTED.
2.24 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 10.5 to the Registration Statement.
2.25 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.
2.26 INVESTMENT COMPANY ACT; INVESTMENTS. The Company has been advised
concerning the Investment Act of 1940, as amended (the "Investment Company
Act"), and the rules and regulations thereunder and has in the past conducted,
and intends in the future to conduct, its affairs in such a manner as to ensure
that it will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations. The Company is not, nor will the Company become upon the
sale of the Units and the application of the proceeds therefore as described in
the Prospectus under the caption "Use of Proceeds", an "investment company" or a
person controlled by an "investment company" within the meaning of the
Investment Company Act. 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 (exclusive of cash items and "Government Securities"
(as defined in Section 2(a)(16) of the Investment Company Act) consist of, and
no more than 45% of the Company's net income after taxes is derived from,
securities other than the Government Securities.
2.27 SUBSIDIARIES. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.28 RELATED PARTY TRANSACTIONS. 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. There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees of indebtedness by the Company
to or for the benefit of any of the officers or directors or Initial
Stockholders of the Company or any of the members of the families of any of
them, except as disclosed in the Registration Statement and the Prospectus.
2.29 NO DISTRIBUTION OF OFFERING MATERIAL. The Company has not
distributed and will not distribute prior to the Closing Date any offering
material in connection with the offering and sale of the Units other than any
Preliminary Prospectuses, the Prospectus, the Registration Statement and other
materials, if any, permitted by the Act.
9
2.30 TITLE TO ASSETS. Except as set forth in the Registration Statement
and Prospectus, the Company has good and marketable title to all properties and
assets described in the Registration Statement and Prospectus as owned by it,
free and clear of any pledge, lien, security interest, encumbrances, claim or
equitable interest, other than such as would not have a material adverse effect
on the financial condition, earnings, operations, business or business prospects
of the Company.
2.31 TAXES. The Company has timely filed all necessary federal, state
and foreign income and franchise tax returns and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, might be asserted against the Company that might have a
material adverse effect on the financial condition, earnings, operations,
business or business prospects of the Company, and all material tax liabilities
are adequately provided for on the books of the Company.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object in writing.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when a Prospectus is
required to be delivered under the Act, the Company will use its best 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. 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 for a period of five years from the
Effective Date, or until the Company is required to be liquidated, if earlier
or, in the case of the Warrants, until the Warrants expire and are no longer
exercisable. The Company will not deregister the Units under the Exchange Act
without the prior written consent of EBC.
3.3 BLUE SKY FILINGS. The Company will use its best efforts, 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
10
its best efforts to file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction.
3.4 DELIVERY TO UNDERWRITERS OF PROSPECTUSES. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 EFFECTIVENESS AND EVENTS REQUIRING NOTICE TO THE REPRESENTATIVE.
The Company will use its best efforts to cause the Registration Statement to
remain effective and will notify the Representative immediately and confirm the
notice in writing (i) of the effectiveness of the Registration Statement and any
amendment thereto, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding for that purpose, (iii)
of the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v) of
the receipt of any comments or request for any additional information from the
Commission, and (vi) of the happening of any event during the period described
in Section 3.4 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 use commercially reasonable effort
to obtain promptly the lifting of such order.
3.6 REVIEW OF FINANCIAL STATEMENTS. Until the earlier of five years
from the Effective Date, or until such earlier 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 INTENTIONALLY OMITTED.
3.7.3 COMPENSATION. Except as set forth above in this Section
3.7, the Company shall not pay any Initial Stockholder or any of their
affiliates any fees or compensation from the Company, for services rendered to
the Company prior to, or in connection with, the consummation of a Business
Combination; provided that the Initial Stockholders shall be entitled to
reimbursement from the Company for their reasonable out-of-pocket expenses
incurred in connection with seeking and consummating a Business Combination.
11
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 INTENTIONALLY OMITTED.
3.10 FINANCIAL PUBLIC RELATIONS FIRM. Promptly after the execution of a
definitive agreement for a Business Combination, the Company shall retain a
financial public relations firm.
3.11 REPORTS TO THE REPRESENTATIVE.
3.11.1 PERIODIC REPORTS, ETC. For a period of five years from
the Effective Date or until such earlier time upon which the Company is required
to be liquidated, the Company will furnish to the Representative (Attn: Xxxxxx
Xxxxxx, President and Managing Director of Investment Banking) and its counsel
copies of such financial statements and other periodic and special reports as
the Company from time to time furnishes generally to holders of any class of its
securities, and promptly furnish to the Representative (i) a copy of each
periodic report the Company shall be required to file with the Commission, (ii)
a copy of every press release and every news item and article with respect to
the Company or its affairs which was released by the Company, (iii) a copy of
each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company, (iv) five copies of each registration statement filed by the Company
with the Commission under the Securities Act, (v) a copy of monthly statements,
if any, setting forth such information regarding the Company's results of
operations and financial position (including balance sheet, profit and loss
statements and data regarding outstanding purchase orders) as is regularly
prepared by management of the Company and (vi) such additional documents and
information with respect to the Company and the affairs of any future
subsidiaries of the Company as the Representative may from time to time
reasonably request.
3.11.2 INTENTIONALLY OMITTED.
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 Xxxxxxxx Xxxxxx ("GM"), 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 INTENTIONALLY OMITTED.
3.12 DISQUALIFICATION OF FORM S-1. Until the earlier of seven years
from the date hereof or until the Warrants have expired and are no longer
exercisable, the Company will not take any action or actions which may prevent
or disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration of the Warrants and the Representative's Warrants under the Act.
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 Closing Date, all expenses incident to the
performance of the obligations of the Company under this Agreement, including
but
12
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 of GM retained for
such purpose (such fees shall be $35,000 in the aggregate (of which $15,000 has
previously been paid)), and a one-time fee of $5,000 payable to GM for the
preparation of the Secondary Market Trading Survey, (iv) filing fees, costs and
expenses (including disbursements for the Representative's counsel but excluding
legal fees) 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 3.13.1. The Company also
agrees that, if requested by the Representative, it will engage and pay for an
investigative search firm of the Representative's choice to conduct an
investigation of the principals of the Company as shall be mutually selected by
the Representative and the Company. If the Offering is successfully consummated,
any such amounts paid by the Company pursuant to the immediately preceding
sentence shall be credited against the Representative's nonaccountable expense
allowance (described below in Section 3.13.2). The Representative may deduct
from the net proceeds of the Offering payable to the Company on the Closing
Date, or the Option Closing Date, if any, the expenses set forth in this
Agreement to be paid by the Company to the Representative and others. If the
Offering contemplated by this Agreement is not consummated for any reason
whatsoever then the Company shall reimburse the Underwriters in full for their
out of pocket expenses, including, without limitation, its legal fees (up to a
maximum of $50,000) and disbursements and "road show" and due diligence
expenses. The Representative shall retain such part of the nonaccountable
expense allowance previously paid as shall equal its actual out-of-pocket
expenses and refund the balance. If the amount previously paid is insufficient
to cover such actual out-of-pocket expenses, the Company shall remain liable for
and promptly pay any other actual out-of-pocket expenses.
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 (1%) of the gross proceeds received by the
Company from the sale of the Firm Units (of which $25,000 has previously been
paid), by deduction from the proceeds of the Offering contemplated herein.
3.13.3 Intentionally Omitted.
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.
13
3.15 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.16 NOTICE TO NASD. In the event any person or entity (regardless of
any NASD affiliation or association) is engaged to assist the Company in its
search for a merger candidate or to provide any other merger and acquisition
services, the Company will provide the following to the NASD and EBC 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 agreements between the
Company and each of the Initial Stockholders, the form of which is annexed as
Exhibit 10.9 to the Registration Statement ("Warrant Purchase Letters"), neither
the Company, nor, to its knowledge, any of its employees, directors or
stockholders (without the consent of EBC) 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. Until the earlier of five years from the Effective
Date or until such earlier time upon which the Company is required to be
liquidated, the Company shall retain GGK or another independent public
accountant.
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") reflecting 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 Public
Securities.
3.22 CORPORATE PROCEEDINGS. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
14
3.23 INVESTMENT COMPANY. The Company shall cause a portion of the
proceeds of the Offering to be held in the Trust Fund to be invested only 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 will be engaged in a business other than that of investing,
reinvesting, owning, holding or trading securities.
3.24 BUSINESS COMBINATION ANNOUNCEMENT. Within five business days
following the consummation by the Company of a Business Combination, the Company
shall cause an announcement ("Business Combination Announcement") to be placed,
at its cost, in THE WALL STREET JOURNAL, THE NEW YORK TIMES and a third
publication to be selected by the Representative announcing the consummation of
the Business Combination and indicating that the Representative was the managing
underwriter in the Offering. The Company shall supply the Representative with a
draft of the Business Combination Announcement and provide the Representative
with a reasonable opportunity to comment thereon. The Company will not place the
Business Combination Announcement without the final approval of the
Representative, which such approval will not be unreasonably withheld.
3.25 COLORADO TRUST FILING. In the event the Securities are registered
in the State of Colorado, the Company will cause a Colorado Form ES to be filed
with the Commissioner of the State of Colorado no less than 10 days prior to the
distribution of the Trust Fund in connection with a Business Combination and
will do all things necessary to comply with Section 00-00-000 and Rule 51-3.4 of
the Colorado Securities Act.
3.26 INSIDER WARRANTS. The Company hereby acknowledges and agrees that,
in the event the Company calls the Warrants for redemption pursuant to the
Warrant Agreement, the Company shall allow the Initial Stockholders to pay the
exercise price of any Warrants purchased pursuant to the Warrant Purchase
Letters by surrendering the Warrant for that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the product of the number of
shares of Common Stock underlying the Warrant, multiplied by the difference
between the Warrant Price and the "Fair Market Value" (defined below) by (y) the
Fair Market Value. The "Fair Market Value" shall mean the average reported last
sale price of the Common Stock for the 10 trading days ending on the third
business day prior to the date on which the notice of redemption is sent to
holders of Warrant.
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 time, on the date of this Agreement or such later date and time as shall be
consented to in writing by you, and, at each of the Closing Date and the Option
Closing Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for the purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Xxxxx & Xxxxxxx LLP, counsel to
the Underwriters ("F&L").
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.
15
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the sale of
the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing Date or the Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. On the Effective
Date, the Representative shall have received the favorable opinion of GM,
counsel to the Company, dated the Effective Date, addressed to the
Representative and in form and substance satisfactory to F&L 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 assets, business or operations of the Company.
The Company had the corporate power to own, lease and operate its properties and
to conduct its business as described in the Prospectus. To such counsel's
knowledge, the Company is not in violation of any term or provision of its
Certificate of Incorporation or By-laws or other governing instrument.
(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 or exempt from such registration
requirements. The authorized and, to such counsel's knowledge, outstanding
capital stock of the Company is as set forth in the Prospectus. To such
counsel's knowledge, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities other than as described 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 or Bylaws of the
Company. When issued, the Representative's Purchase Option, the Representative's
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and such
Warrants, the Representative's Purchase Option, and the Representative's
Warrants, when issued, in each case, are enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form.
(iv) The Company has the corporate power and
authority to enter into and consummate the transactions contemplated by each of
this Agreement, the Warrant Agreement, the Trust Agreement and the Escrow
Agreement and each such agreement has been duly and validly authorized and, when
executed and delivered by the Company, constitute, and the Representative's
Purchase Option has been duly and validly authorized by the Company and, when
executed and delivered, will constitute, the valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
16
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 compliance by the Company with the
terms and provisions thereof and the consummation of the transactions
contemplated thereby, and the issuance and sale of the Securities, do not and
will not, with or without the giving of notice or the lapse of time, or both,
(a) to such counsel's knowledge, conflict with, or result in a breach of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or modification of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to the terms of,
any mortgage, deed of trust, note, indenture, loan, contract, commitment or
other agreement or instrument filed as an exhibit to the Registration Statement,
(b) result in any violation of the provisions of the Certificate of
Incorporation or the Bylaws of the Company, or (c) to such counsel's knowledge,
violate any United States statute or any judgment, order or decree, rule or
regulation applicable to the Company of any court, United States federal, state
or other regulatory authority or other governmental body having jurisdiction
over the Company, its properties or assets. No consent, approval, authorization
or order, and no filing with, any federal or state court, regulatory body,
government agency or other body (other than such as have been effected under the
Act and the Exchange Act and such as may be required under Blue Sky or state
securities laws or the rules of the NASD in connection with the purchase and
distribution of the Securities by the Underwriters, as to which no opinion need
be rendered) is required in connection with the issuance of the Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement and the transactions contemplated hereby.
(vi) The Registration Statement, the Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) each as of their respective dates appeared on their
face to comply as to form in all material respects with the requirements of the
Act and Regulations. The Securities and all other securities issued or issuable
by the Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus. The descriptions in
the Registration Statement and in the Prospectus, insofar as such statements
constitute a summary of statutes, legal matters, contracts, documents or
proceedings referred to therein, fairly present in all material respects the
information required to be shown with respect to such statutes, legal matters,
contracts, documents and proceedings, and such counsel does not know of any
statutes or legal or governmental proceedings required to be described in the
Prospectus that are not described in the Registration Statement or the
Prospectus or included as exhibits to the Registration Statement that are not
described or included as required.
(vii) 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.
(viii) 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
(a) is required to be described in the Registration Statement or (b) questions
the validity of the capital stock of the Company, this Agreement or any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement.
The opinion of counsel shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriters and the independent public accountants of the
Company, at which conferences the contents of the Registration Statement and the
17
Prospectus contained therein and related matters were discussed and, although
such counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus contained therein (except as otherwise
set forth in the foregoing opinion), solely on the basis of the foregoing
without independent check and verification, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statement or
any amendment thereto, at the time the Registration Statement or amendment
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or the Prospectus or any amendment or
supplement thereto, at the time they were filed pursuant to Rule 424(b) or at
the date of such counsel's opinion, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
opinion with respect to the financial information and statistical data and
information included in the Registration Statement or the Prospectus).
4.2.2 CLOSING DATE AND OPTION CLOSING DATE OPINION OF COUNSEL.
On each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the favorable opinion of GM, dated the
Closing Date or the Option Closing Date, as the case may be, addressed to the
Representative and in form and substance reasonably satisfactory to F&L,
confirming as of the Closing Date and, if applicable, the Option Closing Date,
the statements made by GM in its opinion delivered on the Effective Date.
4.2.3 RELIANCE. In rendering such opinion, such counsel may
rely (i) as to matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to F&L) of other counsel reasonably acceptable to F&L, 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 F&L 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 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
18
unaudited financial statements of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not fairly
presented in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement, (b) at a date not later
than five days prior to the Effective Date, Closing Date or Option Closing Date,
as the case may be, there was any change in the capital stock or long-term debt
of the Company, or any decrease in the stockholders' equity of the Company as
compared with amounts shown in the April 22, 2005 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth the amount
of such decrease, and (c) during the period from April 22, 2005 to a specified
date not later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any decrease in revenues, net
earnings or net earnings per share of Common Stock, in each case as compared
with the corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary or Assistant Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed all covenants and complied with all conditions
required by this Agreement to be performed or complied with by the Company prior
to and as of the Closing Date, or the Option Closing Date, as the case may be,
and that the conditions set forth in Section 4.5 hereof have been satisfied as
of such date and that, as of 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 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
19
been modified and are in full force and effect, (ii) that the resolutions
relating to the public offering contemplated by this Agreement are in full force
and effect and have not been modified, (iii) all correspondence between the
Company or its counsel and the Commission, and (iv) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or any
Initial Stockholder before or by any court or federal or state commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus, (iii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission, and (iv) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.6 DELIVERY OF AGREEMENTS.
4.6.1 EFFECTIVE DATE DELIVERIES. On the Effective Date, the
Company shall have delivered to the Representative executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement and all of the Insider
Letters.
4.6.2 CLOSING DATE DELIVERIES. On the Closing Date, the
Company shall have delivered to the Representative executed copies of the
Representative's Purchase Option.
4.7 OPINION OF COUNSEL FOR THE UNDERWRITERS. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to F&L 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 GM.
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
20
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) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Representative's Purchase
Option; 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 Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to an Underwriter
by or on behalf of such Underwriter expressly for use in any Preliminary
Prospectus, the Registration Statement or Prospectus, or any amendment or
supplement thereof, or in any application, as the case may be. With respect to
any untrue statement or omission or alleged untrue statement or omission made in
the Preliminary Prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of any Underwriter to the extent that any loss,
liability, claim, damage or expense of such Underwriter results from the fact
that a copy of the Prospectus was not given or sent to the person asserting any
such loss, liability, claim or damage at or prior to the written confirmation of
sale of the Securities to such person as required by the Act and the
Regulations, and if the untrue statement or omission has been corrected in the
Prospectus, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with its obligations under Section 3.4 hereof. The
Company agrees promptly to notify the Representative of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or Prospectus.
5.1.2 PROCEDURE. If any action is brought against an
Underwriter, a Selected Dealer or a controlling person in respect of which
indemnity may be sought against the Company pursuant to Section 5.1.1, such
Underwriter or Selected Dealer shall promptly notify the Company in writing of
the institution of such action and the Company shall assume the defense of such
action, including the employment and fees of counsel (subject to the reasonable
approval of such Underwriter or Selected Dealer, as the case may be) and payment
of actual expenses. Such Underwriter, Selected Dealer or controlling person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter, Selected Dealer or controlling person unless (i) the employment of
such counsel at the expense of the Company shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the reasonable fees and
expenses of not more than one additional firm of attorneys selected by the
Underwriter, Selected Dealer and/or controlling person shall be borne by the
Company. Notwithstanding anything to the contrary contained herein, if the
Underwriter, Selected Dealer or controlling person shall assume the defense of
such action as provided above, the Company shall have the right to approve the
terms of any settlement of such action which approval shall not be unreasonably
withheld. This Indemnification provided for in this Section 5.1 shall not be
available to any party who shall fail to give notice as provided in this Section
5.1.2 if the Company was unaware of the proceeding to which such notice would
have related and was actually prejudiced by the failure to give such notice;
PROVIDED, HOWEVER, that indemnification shall only be limited to the extent of
such prejudice; PROVIDED, FURTHER, that, the omission so to notify the Company
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 5.1. The Company shall not without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceedings.
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
21
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 Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each director,
officer and employee of an Underwriter or the Company, as applicable, and each
person, if any, who controls an Underwriter or the Company, as applicable,
within the meaning of Section 15 of the Act shall have the same rights to
contribution as the Underwriters or the Company, as applicable.
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after
receipt by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing
22
party or its representative of the commencement thereof within the aforesaid
fifteen days, the contributing party will be entitled to participate therein
with the notifying party and any other contributing party similarly notified.
Any such contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or proceeding
effected by such party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The contribution provisions
contained in this Section are intended to supersede, to the extent permitted by
law, any right to contribution under the Act, the Exchange Act or otherwise
available. The Underwriters' obligations to contribute pursuant to this Section
5.3 are several and not joint.
6 DEFAULT BY AN UNDERWRITER.
6.1 DEFAULT NOT EXCEEDING 10% OF FIRM UNITS OR OPTION UNITS. If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the over-allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
6.2 DEFAULT EXCEEDING 10% OF FIRM UNITS OR OPTION UNITS. In the event
that the default addressed in Section 6.1 above relates to more than 10% of the
Firm Units or Option Units, you may in your discretion arrange for yourself or
for another party or parties to purchase such Firm Units or Option Units to
which such default relates on the terms contained herein. If within one business
day after such default relating to more than 10% of the Firm Units or Option
Units you do not arrange for the purchase of such Firm Units or Option Units,
then the Company shall be entitled to a further period of one business day
within which to procure another party or parties satisfactory to you to purchase
said Firm Units or Option Units on such terms. In the event that neither you nor
the Company arrange for the purchase of the Firm Units or Option Units to which
a default relates as provided in this Section 6, this Agreement will be
terminated by you or the Company without liability on the part of the Company
(except as provided in Sections 3.13 and 5 hereof) or the several Underwriters
(except as provided in Section 5 hereof); provided, however, that if such
default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 POSTPONEMENT OF CLOSING DATE. In the event that the Firm Units or
Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7 INTENTIONALLY OMITTED.
8 ADDITIONAL COVENANTS.
8.1 INTENTIONALLY OMITTED.
8.2 ADDITIONAL SHARES OR OPTIONS. The Company hereby agrees that until
the consummation of a Business Combination, it shall not issue any shares of
Common Stock or any options or other securities
23
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.
8.3 TRUST FUND WAIVER ACKNOWLEDGMENT. The Company hereby agrees that it
will not commence its due diligence investigation of any operating business
which the Company seeks to acquire ("Target Business") or obtain the services of
any vendor unless and until such Target Business or vendor acknowledges in
writing, whether through a letter of intent, memorandum of understanding or
other similar document (and subsequently acknowledges the same in any definitive
document replacing any of the foregoing), that (a) it has read the Prospectus
and understands that the Company has established the Trust Fund, initially in an
amount of $45,050,000 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 they elect to convert their IPO Shares (as defined
below in Section 8.8), (ii) to the public stockholders upon the liquidation of
the Company if the Company fails to consummate a Business Combination or (iii)
to the Company after, or concurrently with, the consummation of a Business
Combination and (b) for and in consideration of the Company (1) agreeing to
evaluate such Target Business for purposes of consummating a Business
Combination with it or (2) agreeing to engage the services of the vendor, as the
case may be, such Target Business or vendor agrees that it does not have any
right, title, interest or claim of any kind in or to any monies in the Trust
Fund ("Claim") and waives any Claim it may have in the future as a result of, or
arising out of, any negotiations, contracts or agreements with the Company and
will not seek recourse against the Trust Fund for any reason whatsoever.
8.4 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 and EBC and will not allow any
amendments to, or waivers of, such Insider Letters without the prior written
consent of EBC.
8.5 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 EBC.
8.6 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.
8.7 INTENTIONALLY OMITTED.
8.8 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. 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 Common
Stock issued
24
in this Offering ("IPO Shares") the right to convert their IPO Shares at a per
share price ("Conversion Price") equal to the amount in the Trust Fund
(inclusive of any interest income therein) calculated as of two business days
prior to the consummation of the proposed Business Combination divided by the
total number of IPO Shares. If holders of less than 20% in interest of the
Company's IPO Shares elect to convert their IPO Shares, the Company may, but
will not be required to, proceed with such Business Combination. If the Company
elects to so proceed, it will convert shares, based upon the Conversion Price,
from those holders of IPO Shares who affirmatively requested such conversion and
who voted against the Business Combination. If holders of 20% or more in
interest of the IPO Shares, who vote against approval of any potential Business
Combination, elect to convert their IPO Shares, the Company will not proceed
with such Business Combination and will not convert such shares.
8.9 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.
8.10 AFFILIATED TRANSACTIONS. The Company shall cause each of the
Initial Stockholders to agree that, in order to minimize potential conflicts of
interest which may arise from multiple affiliations, the Initial Stockholders
will present to the Company for its consideration, prior to presentation to any
other person or company, any suitable opportunity to acquire an operating
business, until the earlier of the consummation by the Company of a Business
Combination, the liquidation of the Company or until such time as the Initial
Stockholders cease to be an officer or director of the Company, subject to any
pre-existing fiduciary or contractual obligations the Initial Stockholders might
have.
8.11 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 (all of the Company's assets, including the funds held
in the Trust Fund, less the Company's liabilities) 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 net assets 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
at the Closing Date or Option Closing Date and such representations, warranties
and agreements of the Underwriters and Company, including the indemnity
agreements contained in Section 5 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the several Underwriters until the earlier of the expiration of any applicable
statute of limitations and the seventh anniversary of the later of the Closing
Date or the Option Closing Date, if any, at which time the representations,
warranties and agreements shall terminate and be of no further force and effect.
10 EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
10.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
10.2 TERMINATION. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your
25
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 Boston Stock Exchange 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 adversely impacts the United
States securities market, or (vi) if the Company shall have sustained a material
loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the 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 effected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11 MISCELLANEOUS.
11.1 NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed and shall be deemed given when so delivered or
telecopied and confirmed or if mailed, two days after such mailing
If to the Representative:
EarlyBirdCapital, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Chairman
Copy to:
Xxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
26
If to the Company:
Ithaka Acquisition Corp.
000 Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Copy to:
Xxxxxxxx Xxxxxx
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
11.2 HEADINGS. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
11.3 AMENDMENT. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
11.4 ENTIRE AGREEMENT. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5 BINDING EFFECT. This Agreement shall inure solely to the benefit
of and shall be binding upon the Representative, the Underwriters, the Company
and the controlling persons, directors and officers referred to in Section 5
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained.
11.6 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to conflicts of law principles that would result in the
application of the substantive laws of another jurisdiction. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
such process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
11 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.
27
11.8 WAIVER, ETC. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
28
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,
ITHAKA ACQUISITION CORP.
By: ___________________________________
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
Accepted on the date first
above written.
EARLYBIRDCAPITAL, INC.
By: ______________________________
Name: Xxxxxx Xxxxxx
Title: Managing Director
29
SCHEDULE I
ITHAKA ACQUISITION CORP.
8,500,000 UNITS
NUMBER OF FIRM UNITS
UNDERWRITER TO BE PURCHASED
----------- --------------------
EarlyBirdCapital, Inc.
8,500,000
