EXHIBIT 1.1
UNDERWRITING AGREEMENT
BETWEEN
MILLSTREAM II ACQUISITION CORPORATION
AND
EARLYBIRDCAPITAL, INC.
DATED: _____________________, 2004
MILLSTREAM II ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
New York, New York
_________, 2004
EarlyBirdCapital, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Millstream II Acquisition Corporation, 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 3,500,000 units ("Firm
Units") of the Company, at a purchase price (net of discounts and commissions)
of $5.52 per Firm Unit. The Underwriters, severally and not jointly, agree to
purchase from the Company the number of Firm Units set forth opposite their
respective names on Schedule I attached hereto and made a part hereof at a
purchase price (net of discounts and commissions) of $5.52 per Firm Unit. The
Firm Units are to be offered initially to the public ("Offering") at the
offering price of $6.00 per Firm Unit. Each Firm Unit consists of one share of
the Company's common stock, par value $.0001 per share ("Common Stock"), and two
warrants ("Warrant(s)"). The shares of Common Stock and the Warrants included in
the Firm Units will not be separately transferable until 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 of the Registration Statement
and terminating on the four-year anniversary of the Effective Date. "Business
Combination" shall mean any merger, capital stock exchange, asset acquisition or
other similar business combination consummated by the Company with an operating
business (as described more fully in the Registration Statement).
1.1.2 Payment and Delivery. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on the third business day
following the effective date of the Registration Statement (or the fourth
business day following the effective date, if the Registration Statement is
declared
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effective after 4:30 p.m.) or at such earlier time as shall be agreed upon by
the Representative and the Company at the offices of the Representative or at
such other place as shall be agreed upon by the Representative and the Company.
The hour and date of delivery and payment for the Firm Units are called "Closing
Date." Payment for the Firm Units shall be made on the Closing Date at the
Representative's election by wire transfer in Federal (same day) funds or by
certified or bank cashier's check(s) in New York Clearing House funds, payable
as follows: $17,850,000 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 (defined in Section 8.8) as described in the
Registration Statement ("Trust Fund") pursuant to the terms of an Investment
Management Trust Agreement ("Trust Agreement") and the remaining proceeds shall
be paid to the order of the Company upon delivery to you of certificates (in
form and substance satisfactory to the Underwriters) representing the Firm Units
(or through the facilities of the Depository Trust Company ("DTC")) for the
account of the Underwriters. The Firm Units shall be registered in such name or
names and in such authorized denominations as the Representative may request in
writing at least two full business days prior to the Closing Date. The Company
will permit the Representative to examine and package the Firm Units for
delivery, at least one full business day prior to the Closing Date. The Company
shall not be obligated to sell or deliver the Firm Units except upon tender of
payment by the Representative for all the Firm Units.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 525,000 units from the Company ("Over-allotment
Option"). Such additional 525,000 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: $________ per Option Unit
shall be deposited in the Trust Fund pursuant to the Trust Agreement and the
remaining proceeds shall be paid to the order of the Company upon delivery to
you of certificates (in form and substance satisfactory to the Underwriters)
representing the Option Units (or through the facilities of DTC) for the account
of the Underwriters. The certificates representing the Option Units to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Representative for
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inspection, checking and packaging at the aforesaid office of the Company's
transfer agent or correspondent not less than one full business day prior to
such Closing Date.
1.3 Representative's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Representative (and/or their designees) on the Effective Date an
option ("Representative's Purchase Option") for the purchase of an aggregate of
227,500 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 $6.25 (125% 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 (i) one year from the Effective Date and (ii) the earlier of the
consummation of a Business Combination or the distribution of the Trust Fund to
the Public Stockholders and expiring on the five-year anniversary of the
Effective Date at an initial exercise price per Representative's Unit of $9.90,
which is equal to one hundred sixty five percent (165%) 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-_________),
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.
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2.1.2 Pursuant to the Exchange Act. The Company has filed with
the Commission a Form 8-A (File Number 000-_____) providing for the registration
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 Disclosures in Registration Statement.
2.3.1 10b-5 Representation. At the time the Registration
Statement became effective and at all times subsequent thereto up to the Closing
Date and the Option Closing Date, if any, the Registration Statement and the
Prospectus will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this Section
2.3.1 does not apply to statements made or statements omitted in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
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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 within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.3.4 Regulations. The disclosures in the Registration
Statement concerning the effects of Federal, State and local regulation on the
Company's business 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.
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2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus fairly present the financial position, the results of operations and
the cash flows of the Company at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company's financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The authorized Common Stock conforms
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.
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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, the
Services Agreement (as defined in Section 3.7.2 hereof) 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, the Services Agreement and the Escrow Agreement,
the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and thereof
do not and will not, with or without the giving of notice or the lapse of time
or both (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party except pursuant to the Trust
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 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,
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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 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.
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. The Company has not made
any direct or indirect payments (in cash, securities or otherwise) (i) to any
person, as a finder's fee, consulting fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
raised or provided capital to the Company, (ii) to any NASD member or (iii) to
any person or entity that has any direct or indirect affiliation or association
with any NASD member, within the twelve months prior to the Effective Date,
other than payments to EBC.
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.
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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
Shares 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.
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, 10.4
and 10.5 to the Registration Statement ("Insider Letter"), 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 10.7 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
9
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 10.6 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 Investments. No more than 45% of the "value" (as defined in
Section 2(a)(41) of the Investment Company Act of 1940 ("Investment Company
Act")) of the Company's total assets consist of, and no more than 45% of the
Company's net income after taxes is derived from, securities other than
"Government securities" (as defined in Section 2(a)(16) of the Investment
Company Act).
2.27 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.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the 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.
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3.2.3 Exchange Act Registration. Until the earlier of five
years from the Effective Date or the distribution of the Trust Fund referred to
in Section 8.8 hereof, 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. 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 endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 Delivery to Underwriters of Prospectuses. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
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 make every 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 the distribution of the Trust Fund referred to in
Section 8.8 hereof, 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.
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3.7.2 Administrative Services. The Company has entered into an
agreement ("Services Agreement") with 400 Building LLC ("Affiliate")
substantially in the form annexed as Exhibit 10.8 to the Registration Statement
pursuant to which the Affiliate will make available to the Company general and
administrative services including office space, utilities and secretarial
support for the Company's use for $7,500 per month.
3.7.3 Compensation. Except as set forth above in this Section 3.7, the
Company shall not pay any Initial Stockholder or any of their affiliates any
fees or compensation from the Company, for services rendered to the Company
prior to, or in connection with, the consummation of a Business Combination;
provided that the Initial Stockholders shall be entitled to reimbursement from
the Company for their reasonable out-of-pocket expenses incurred in connection
with seeking and consummating a Business Combination.
3.8 Secondary Market Trading and Standard & Poor's. The Company will
apply to be included in Standard & Poor's Daily News and Corporation Records
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, 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, 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").
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3.11.4 Intentionally Omitted.
3.12 Disqualification of Form S-1. For a period equal to seven years
from the date hereof, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form S-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 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 capped at $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) 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
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 (described below
in Section 3.13.2) 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 two percent (2%) of the gross proceeds received by the
Company from the sale of the Firm Units, by deduction from the proceeds of the
Offering contemplated herein.
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3.13.3 Expenses Related to Business Combination. The Company
further agrees that, in the event the Representative assists the Company in
trying to obtain stockholder approval of a proposed Business Combination, the
Company agrees to reimburse the Representative for all out-of-pocket expenses,
including, but not limited to, "road-show" and due diligence expenses.
3.14 Application of Net Proceeds. The Company will apply the net
proceeds from the Offering received by it in a manner consistent with the
application described under the caption "Use Of Proceeds" in the Prospectus.
3.15 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.16 Notice to NASD. In the event any person or entity (regardless of
any NASD affiliation or association) is engaged to assist the Company in its
search for a merger candidate or to provide any other merger and acquisition
services, the Company will provide the following to the NASD and 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 agreement between the
Company and Xxxxxx Xxxxxxx annexed as Exhibit 10.11 to the Registration
Statement, 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 the distribution of the Trust Fund referred to in Section 8.8 hereof,
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.
14
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.
3.23 Investment Company. The Company shall cause the proceeds of the
Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Prospectus. The Company will otherwise conduct its business in
a manner so that it will not become subject to the Investment Company Act.
Furthermore, once the Company consummates a Business Combination, it 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.
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 Xxxxxxx XxXxxxxxx LLP, counsel
to the Underwriters ("BM").
4.1.2 NASD Clearance. By the Effective Date, the
Representative shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriters as described in the
Registration Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of
the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing
15
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 BM to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on the Company.
(ii) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and non-
assessable; the holders thereof are not subject to personal liability by reason
of being such holders; and none of such securities were issued in violation of
the preemptive rights of any stockholder of the Company arising by operation of
law or under the Certificate of Incorporation or Bylaws of the Company. The
offers and sales of the outstanding Common Stock were at all relevant times
either registered under the Act and the applicable state securities or Blue Sky
Laws or exempt from such registration requirements. The authorized and
outstanding capital stock of the Company is as set forth in the Prospectus.
(iii) The Securities have been duly authorized and,
when issued and paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders. The Securities are not and will not be subject to
the preemptive rights of any holders of any security of the Company arising by
operation of law or under the Certificate of Incorporation 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) This Agreement, the Warrant Agreement, the
Services Agreement, the Trust Agreement and the Escrow Agreement have each been
duly and validly authorized and, when executed and delivered by the Company,
constitute, and the Representative's Purchase Option has been duly and validly
authorized by the Company and, when executed and delivered, will constitute, the
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification or
contribution provisions may be limited under the federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
16
(v) The execution, delivery and performance of this
Agreement, the Warrant Agreement, the Representative's Purchase Option, the
Escrow Agreement, the Trust Agreement and the Services Agreement, the issuance
and sale of the Securities, the consummation of the transactions contemplated
hereby and thereby, and compliance by the Company with the terms and provisions
hereof and thereof, do not and will not, with or without the giving of notice or
the lapse of time, or both, (a) to such counsel's knowledge, conflict with, or
result in a breach of, any of the terms or provisions of, or constitute a
default under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of, any mortgage, deed of trust, note, indenture,
loan, contract, commitment or other agreement or instrument filed as an exhibit
to the Registration Statement, (b) result in any violation of the provisions of
the Certificate of Incorporation or the Bylaws of the Company, or (c) to such
counsel's knowledge, violate any statute or any judgment, order or decree, rule
or regulation applicable to the Company of any court, domestic or foreign, or of
any federal, state or other regulatory authority or other governmental body
having jurisdiction over the Company, its properties or assets.
(vi) The Registration Statement, each Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) each as of their respective dates complied as to form
in all material respects with the requirements of the Act and Regulations. The
Securities and each agreement filed as an exhibit to the Registration Statement
conform in all material respects to the description thereof contained in the
Registration Statement and the Prospectus. No statute or regulation required to
be described in the Prospectus is not described as required, nor are any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement not so described or filed as required.
(vii) Counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriters at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise set forth in this opinion), no facts have come
to the attention of such counsel which should lead them to believe that either
the Registration Statement or the Prospectus or any amendment or supplement
thereto, as of the date of such opinion contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Registration Statement or
Prospectus).
(viii) The Registration Statement is effective under
the Act. To such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the Act or
applicable state securities laws.
(ix) To such counsel's knowledge, there is no action,
suit or proceeding before or by any court of governmental agency or body,
domestic or foreign, now pending, or threatened against the Company that is
required to be described in the Registration Statement.
4.2.2 Closing Date and Option Closing Date Opinion of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the favorable opinion of 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 BM,
confirming as of the Closing Date and, if applicable, the Option Closing Date,
the statements made by GM in their opinion delivered on the Effective Date.
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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 BM) of other counsel reasonably acceptable to BM, 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 BM 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 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 October 15, 2004 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 October 15, 2004 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);
18
(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 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
19
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.6 Delivery of Agreements.
4.6.1 Effective Date Deliveries. On the Effective Date, the
Company shall have delivered to the Representative executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement, the Services Agreement
and all of the Insider Letters.
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 BM 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
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
20
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.
5.2 Indemnification of the Company. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company, its directors,
officers and employees and agents who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to the several Underwriters, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions
made in any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment or supplement thereto or in any application, in reliance upon, and
in strict conformity with, written information furnished to the Company with
respect to such Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the
21
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 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
22
than 10% of the Firm Units or Option Units you do not arrange for the purchase
of such Firm Units or Option Units, then the Company shall be entitled to a
further period of one business day within which to procure another party or
parties satisfactory to you to purchase said Firm Units or Option Units on such
terms. In the event that neither you nor the Company arrange for the purchase of
the Firm Units or Option Units to which a default relates as provided in this
Section 6, this Agreement may be terminated by you or the Company without
liability on the part of the Company (except as provided in Sections 3.15 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 earlier of the consummation of a Business Combination or the distribution of
the Trust Fund referred to in Section 8.8 hereof, it shall not issue any shares
of Common Stock or any options or other securities convertible into Common
Stock, or any shares of Preferred Stock which participate in any manner in the
Trust Fund or which vote as a class with the Common Stock on a Business
Combination.
8.3 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 $17,850,000 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 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 6-month
period, as described in the Prospectus) or (iii) to the Company after it
consummates a Business Combination and (b) for and in consideration of the
Company (1) agreeing to evaluate such Target Business for purposes of
consummating a Business Combination with it or (2) agreeing to engage the
services of the vendor, as the case may be, such Target Business or vendor
agrees that it does not have any right, title, interest or claim of any kind in
or to any monies in the Trust Fund ("Claim") and waives any Claim it may have in
the future as a result of, or arising out of, any negotiations, contracts or
agreements with the Company and will not seek recourse against the Trust Fund
for any reason whatsoever.
23
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 or until the distribution of the Trust
Fund referred to in Section 8.8 hereof, 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/Distribution 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 Trust
Fund will be distributed to all holders ("Public Stockholders") of the Company's
Common Stock issued in this Offering ("IPO Shares"). 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. At the time the Company seeks approval of any potential Business
Combination, the Company will offer each holder of IPO Shares the right to
convert their IPO Shares at a per share price equal to the amount in the Trust
Fund (inclusive of any interest income therein) calculated as of two business
days prior to the proposed consummation of such Business Combination
("Conversion Price") divided by the total number of IPO Shares. If holders of
less than 20% in interest of the Company's IPO Shares vote against such approval
of a Business Combination, the Company may, but will not be required to, proceed
with such Business Combination. If the Company elects to so proceed, it will
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. Only holders of IPO Shares shall be entitled to receive
distributions from the Trust Fund and the Company shall pay no distributions
with respect to any other shares of capital stock of the Company. If holders of
20% or more in interest of the IPO Shares vote against approval of any potential
Business Combination, 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 distribution of the Trust Fund or until such time as the
Initial
24
Stockholders cease to be an officer or director of the Company, subject to any
pre-existing fiduciary 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 at the time of such acquisition. The fair market value
of such business must be determined by the Board of Directors of the Company
based upon standards generally accepted by the financial community, such as
actual and potential sales, earnings and cash flow and book value. If the Board
of Directors of the Company is not able to independently determine that the
target business has a fair market value of at least 80% of the Company's fair
market value at the time of such acquisition, the Company will obtain an opinion
from an unaffiliated, independent investment banking firm which is a member of
the NASD with respect to the satisfaction of such criteria. The Company is not
required to obtain an opinion from an investment banking firm as to the fair
market value if the Company's Board of Directors independently determines that
the Target Business does have sufficient fair market value.
9 Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates 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 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
25
Company to pay the out of pocket expenses related to the transactions
contemplated herein shall be governed by Section 3.13.1 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.
117 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 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Chairman
Copy to:
Xxxxxxx XxXxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
If to the Company:
Millstream II Acquisition Corporation
000 Xxxxx Xxxx Xxxxx
Xxxxxxxx 000
Xxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx 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
26
hereto with respect to the subject matter hereof and thereof, and supersede all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
11.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon the Representative, the Underwriters, the Company
and the controlling persons, directors and officers referred to in Section 5
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained.
11.6 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to conflict of laws. The Company hereby agrees that any action,
proceeding or claim against it arising out of, relating in any way to this
Agreement shall be brought and enforced in the courts of the State of New York
of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum. Any such process or summons to be
served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 10 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the Company
in any action, proceeding or claim. The Company agrees that the prevailing
party(ies) in any such action shall be entitled to recover from the other
party(ies) all of its reasonable attorneys' fees and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
11.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
11.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
27
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,
MILLSTREAM II ACQUISITION CORPORATION
By: _____________________________________
Name: Xxxxxx Xxxxxxx
Title: Chairman
Accepted on the date first
above written.
EARLYBIRDCAPITAL, INC.
By: ______________________________
Name: Xxxxxx Xxxxxx
Title: Managing Director
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SCHEDULE I
MILLSTREAM II ACQUISITION CORPORATION
3,500,000 UNITS
Number of Firm Units
Underwriter to be Purchased
----------- ---------------
EarlyBirdCapital, Inc.
3,500,000
