DRAFT - 9.01.05
UNDERWRITING AGREEMENT
between
SANTA ▇▇▇▇▇▇ MEDIA CORPORATION
and
THE SHEMANO GROUP, INC.
Dated: _____________________, 2005
25
118952.00105/6423882v1 DRAFT - FOR DISCUSSION PURPOSES
UNDERWRITING AGREEMENT
New York, New York
_________, 2005
The Shemano Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned, Santa ▇▇▇▇▇▇ Media Corporation, a Delaware
corporation ("Company"), hereby confirms its agreement with The Shemano Group,
Inc. (being referred to herein variously as "you," "Shemano" or the
"Representative") and with the other underwriters named on Schedule I hereto for
which Shemano 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 ________ units ("Firm
Units") of the Company, at a purchase price (net of discounts and commissions)
of $_____ 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 $_____ 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 $____ per share ("Common Stock"), and one
warrant ("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 Shemano informs the Company of its decision to
allow earlier separate trading, but in no event will Shemano 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
$6.00 during the period commencing on the later of the consummation by the
Company of its "Business Combination" or one year from the Effective Date and
terminating on the four-year anniversary of the Effective Date. "Business
Combination" shall mean any merger, capital stock exchange, asset acquisition or
other similar business combination consummated by the Company with an operating
business in the media, gaming and/or entertainment industries (as described more
fully in the Registration Statement). The Company has the right to redeem the
Warrants upon not less than thirty (30) days' written notice at a price of $0.01
per Warrant at any time after the Warrants become exercisable, so long as the
last sales price of the Company's Common Stock has been at least $11.50 for any
twenty (20) trading days within a thirty (30) trading day period ending on the
third business day prior to the day on which notice is given.
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1.1.2 Payment and Delivery. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on the fourth business day
following the Effective Date of the Registration Statement 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: $____________ of the proceeds received
by the Company for the Firm Units shall be deposited in the trust fund
established by the Company for the benefit of the public stockholders as
described in the Registration Statement ("Trust Fund") pursuant to the terms of
an Investment Management Trust Agreement ("Trust Agreement") and the remaining
proceeds shall be paid (subject to Section 3.13 hereof) to the order of the
Company upon delivery to you of certificates (in form and substance satisfactory
to the Underwriters) representing the Firm Units (or through the facilities of
the Depository Trust Company ("DTC")) for the account of the Underwriters. The
Firm Units shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two full
business days prior to the Closing Date. The Company will permit the
Representative to examine and package the Firm Units for delivery, at least one
full business day prior to the Closing Date. The Company shall not be obligated
to sell or deliver the Firm Units except upon tender of payment by the
Representative for all the Firm Units.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional ________ units from the Company ("Over-allotment
Option"). Such additional ________ 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 (subject to Section 3.l3 hereof) to the order
of the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Option Units (or through the
facilities of DTC) for the account of the Underwriters. The certificates
representing the Option Units to be delivered will be in such denominations and
registered in such names as the Representative requests not less than two full
business days prior to the Closing Date or the Option Closing Date, as the case
may be, and will be made available to the Representative for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one full business day prior to such Closing Date.
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1.3 Representative's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Representative (and/or their designees) on the Effective Date an
option ("Representative's Purchase Option") for the purchase of an aggregate of
________ units ("Representative's Units") for an aggregate purchase price of
$100. Each of the Representative's Units is identical to the Firm Units except
that the exercise price of the Warrants included in the Representative's Units
("Representative's Warrants") shall be $____ (___% of the exercise price of the
Warrants included in the Units sold to the public). The Representative's
Purchase Option shall be exercisable, in whole or in part, commencing on the
later of the consummation of a Business Combination and one year from the
Effective Date and expiring on the fourth anniversary of the Effective Date at
an initial exercise price per Representative's Unit of $____, which is equal to
one hundred twenty-five percent (125%) of the initial public offering price of a
Unit. The Representative's Purchase Option, the Representative's Units, the
Representative's Warrants and the shares of Common Stock issuable upon exercise
of the Representative's Units and 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 does and will contain all material statements that are required to be
stated therein in accordance with the Act and the Regulations, and will in all
material respects conform to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, on such dates, does or will contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
for the registration of the Securities or any amendment thereto or pursuant to
Rule 424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this Section
2.3.1 does not apply to statements made or statements omitted in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
2.3.2 Disclosure of Agreements. The agreements and documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i) that
is referred to in the Prospectus, or (ii) is material to the Company's business,
has been duly and validly executed by the Company, is in full force and effect
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
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2.3.3 Prior Securities Transactions. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company since the Company's formation, except as disclosed in the
Registration Statement.
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,
(iii) no member of the Company's Board of Directors or management has resigned
from any position with the Company, and (iv) no event or occurrence has taken
place which materially impairs, or would likely materially impair, with the
passage of time, the ability of the members of the Company's Board of Directors
or management to act in their capacities with the Company as described in the
Registration Statement and the Prospectus.
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. ▇▇▇▇▇▇▇▇, Savett, Finkel, Fingleson &
Rose, Inc. ("GSFFR"), whose report is filed with the Commission as part of the
Registration Statement, are independent accountants as required by the Act and
the Regulations and the Public Company Accounting Oversight Board (including the
rules and regulations promulgated by such entity, the "PCAOB"). GSFFR is duly
registered and in good standing with the PCAOB. GSFFR has not, during the
periods covered by the financial statements included in the Prospectus, provided
to the Company any non-audit services, as such term is used in Section 10A(g) of
the Exchange Act.
2.6 Financial Statements; Statistical Data. 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. There are no pro forma or as adjusted financial statements which
are required to be included in the Registration Statement and the Prospectus in
accordance with Regulation S-X which have not been included as so required. The
statistical, industry-related and market-related data included in the
Registration Statement and the Prospectus are based on or derived from sources
which the Company reasonably and in good faith believes are reliable and
accurate, and such data agree with the sources from which they are derived.
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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 equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. The
shares of Common Stock issuable upon exercise of the Warrants and included in
the Representative's Purchase Option (and the shares of Common Stock issuable
upon exercise of the Representative's Warrants) have been reserved for issuance
upon the exercise of the Warrants, the Representative's Purchase Option and the
Representative's Warrants and when issued in accordance with the terms of such
securities, will be duly and validly authorized, 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.
2.8.3 No Integration. Neither the Company nor any of its
affiliates has, prior to the date hereof, made any offer or sale of any
securities which are required to be "integrated" pursuant to the Act or the
Regulations with the offer and sale of the Public Securities pursuant to the
Registration Statement.
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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
Insider Letters (as defined in Section 2.24.1 hereof), those certain letter
agreements (each substantially in the form filed as Exhibit __ to the
Registration Statement), pursuant to which _______ (the "Insider Warrant
Purchasers") agrees to purchase a certain number of the Company's warrants after
the Offering as described under the "Principal Stockholders" section of the
Prospectus ("Warrant Purchase Commitment Letters"), 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,
businesses or assets.
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.
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2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement, the Warrant
Agreement, the Services Agreement, the Representative's Purchase Option, the
Trust Agreement and the Escrow Agreement and to carry out the provisions and
conditions hereof and thereof, and all consents, authorizations, approvals,
licenses, certifications, permits 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
Services 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.
2.13.3 Ownership. Except as set forth in the Prospectus, the
Company owns no real property, has no leasehold interests in any real property,
and has no personal property that is, in each case, material to the operations,
financial condition or business of the Company.
2.14 D&O Questionnaires. All information contained in the
questionnaires ("Questionnaires") completed by each of the Company's
securityholders, including all of the Company's officers and directors,
immediately prior to the Offering ("Initial Securityholders") 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 Securityholder 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 Securityholder, which has not been disclosed in the
Registration Statement or the Questionnaires.
2.16 Good Standing. The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the conduct of business requires such qualification, except
where the failure to qualify would not have a material adverse effect on the
assets, business or operations of the Company.
2.17 No Contemplation of a Business Combination. Prior to the date
hereof, neither the Company, its officers and directors nor the Initial
Securityholders had, and as of the Closing, the Company and such officers and
directors and Initial Securityholders will not have had: (a) any specific
Business Combination under consideration or contemplation or (b) any substantive
interactions or discussions with any target business regarding a possible
Business Combination.
2.18 Stop Orders. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus or
any part thereof and has not threatened to issue any such order.
2.19 Transactions Affecting Disclosure to NASD.
2.19.1 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 Securityholder 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 Securityholder that may
affect the Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD").
8
2.19.2 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 Shemano.
2.19.3 Use of Proceeds. None of the net proceeds of the
Offering will be paid by the Company to any participating NASD member or its
affiliates, except as specifically authorized herein and except as may be paid
in connection with a Business Combination as contemplated by the Prospectus.
2.19.4 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
(collectively, "Company Affiliates") 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 securities is or becomes an affiliate or associated
person of an NASD member participating in the offering.
2.19.5 No Company Affiliate is an owner of stock or other
securities of any member of the NASD (other than securities purchased on the
open market).
2.19.6 No Company Affiliate has made a subordinated loan to
any member of the NASD
2.19.7 No proceeds from the sale of the Public Securities
(excluding underwriting compensation) will be paid to any NASD member, or any
persons associated or affiliated with a member of the NASD.
2.19.8 Except with respect to Shemano, the Company has not
issued any warrants or other securities, or granted any options, directly or
indirectly, to anyone who is a potential underwriter in the Offering or a
related person (as defined by NASD rules) of such an underwriter within the
180-day period prior to the initial filing date of the Registration Statement.
2.19.9 No person to whom securities of the Company have been
privately issued within the 180-day period prior to the initial filing date of
the Registration Statement has any relationship or affiliation or association
with any member of the NASD.
2.19.10 No NASD member intending to participate in the
Offering has a conflict of interest with the Company. For this purpose, a
"conflict of interest" exists when a member of the NASD and/or its associated
persons, parent or affiliates in the aggregate beneficially own 10% or more of
the Company's outstanding subordinated debt or common equity, or 10% or more of
the Company's preferred equity. "Members participating in the Offering" include
managing agents, syndicate group members and all dealers which are members of
the NASD.
2.19.11 Except with respect to Shemano, the Company has not
entered into any agreement or arrangement (including, without limitation, any
consulting agreement or any other type of agreement) during the 180-day period
prior to the initial filing date of the Registration Statement, which
arrangement or agreement provides for the receipt of any item of value and/or
the transfer of any warrants, options, or other securities from the Company to
an NASD member, any person associated with a member (as defined by NASD rules),
any potential underwriters in the Offering and/or any related persons.
9
2.20 Foreign Corrupt Practices Act. Neither the Company nor any of
the Initial Securityholders 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.
2.21 Patriot Act. Neither the Company nor any officer, director or
Initial Securityholder has violated: (a) the Bank Secrecy Act, as amended, (b)
the Money Laundering Control Act of 1986, as amended, or (c) the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and/or the rules and
regulations promulgated under any such law, or any successor law.
2.22 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, providing for, among other things, the payment of
the warrant solicitation fee contemplated by Section 3.9 hereof.
2.23 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").
2.24 Agreements With Initial Securityholders.
2.24.12 Insider Letters. The Company has caused to be duly
executed legally binding and enforceable agreements (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or noncompete provision may be limited under
the federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought) annexed as Exhibits 10.1, 10.2, 10.3 and
10.4 to the Registration Statement ("Insider Letters"), pursuant to which each
of the Initial Securityholders 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.
2.24.13 Escrow Agreement. The Company has caused the Initial
Securityholders to enter into an escrow agreement ("Escrow Agreement") with
Continental Stock Transfer & Trust Company ("Escrow Agent") substantially in the
form annexed as Exhibit 10.8 to the Registration Statement, whereby the Common
Stock owned by the Initial Securityholders will be held in escrow by the Escrow
Agent, until the third anniversary of the Effective Date. During such escrow
period, the Initial Securityholders shall be prohibited from selling or
otherwise transferring such shares (except to spouses and children of Initial
Securityholders 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 Securityholders and will not, with or without the giving of notice or
the lapse of time or both, result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, any agreement or
instrument to which any of the Initial Securityholders is a party. The Escrow
Agreement shall not be amended, modified or otherwise changed without the prior
written consent of Shemano.
10
2.25 Investment Management Trust Agreement. The Company has entered
into the Trust Agreement with respect to certain proceeds of the Offering
substantially in the form annexed as Exhibit 10.7 to the Registration Statement.
2.26 Covenants Not to Compete. No Initial Securityholder, 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 Securityholder, employee, officer
and/or director of the Company.
2.27 Investment Company Act; Investments. The Company has been
advised concerning the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations thereunder and has in
the past conducted, and intends in the future to conduct, its affairs in such a
manner as to ensure that it will not become an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act and such rules and regulations. The Company is not, nor will the
Company become upon the sale of the Units and the application of the proceeds
thereof as described in the Prospectus under the caption "Use of Proceeds", an
"investment company" or a person controlled by an "investment company" within
the meaning of the Investment Company Act. No more than 45% of the "value" (as
defined in Section 2(a)(41) of the Investment Company Act) of the Company's
total assets (exclusive of cash items and "Government Securities" (as defined in
Section 2(a)(16) of the Investment Company Act) consist of, and no more than 45%
of the Company's net income after taxes is derived from, securities other than
the Government Securities.
2.28 Subsidiaries. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.29 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.
2.30 No Influence. The Company has not offered, or caused the
Underwriters to offer, the Firm Units to any person or entity with the intention
of unlawfully influencing: (a) a customer or supplier of the Company or any
affiliate of the Company to alter the customer's or supplier's level or type of
business with the Company or such affiliate or (b) a journalist or publication
to write or publish favorable information about the Company or any such
affiliate.
2.31 ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The Company is in material compliance with the
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations
promulgated thereunder or promulgated by any other governmental or self
regulatory entity or agency, except for such violations which, singly or in the
aggregate, would not have a material adverse effect. Without limiting the
generality of the foregoing, as of the Effective Date of the Registration
Statement: (i) all members of the Company's Board of Directors who are required
to be "independent" (as that term is defined under applicable laws, rules and
regulations), including, without limitation, all members of the audit committee
of the Company's Board of Directors, meet the qualifications of independence as
set forth under applicable laws, rules and regulations and (ii) the audit
committee of the Company's Board of Directors has at least one member who is an
"audit committee financial expert" (as that term is defined under applicable
laws, rules and regulations).
2.32 Definition of "Knowledge." As used in herein, the term
"Knowledge of the Company" (or similar language) shall mean the knowledge of the
officers and directors of the Company who are named in the Prospectus, with the
assumption that such officers and directors shall have made reasonable and
diligent inquiry of the matters presented.
11
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.
3.2.3 Exchange Act Registration. The Company will use its best
efforts to maintain the registration of the Units, Common Stock and Warrants
under the provisions of the Exchange Act for a period of five years from the
Effective Date, or until the Company is required to be liquidated, if earlier
or, in the case of the Warrants, until the Warrants expire and are no longer
exercisable. The Company will not deregister the Units under the Exchange Act
without the prior written consent of Shemano.
3.2.4 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Compliance. The Company shall take all
actions necessary to obtain and maintain material compliance with each
applicable provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and
regulations promulgated thereunder and related or similar rules and regulations
promulgated by any other governmental or self regulatory entity or agency with
jurisdiction over the Company.
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.
12
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 such time upon which the Company is required to
be liquidated, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the Company's
financial statements for each of the first three fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
Form 10-Q quarterly report and the mailing of quarterly financial information to
stockholders.
3.7 Affiliated Transactions.
3.7.1 Business Combinations. The Company will not consummate a
Business Combination with any entity which is affiliated with any Initial
Securityholder unless the Company obtains an opinion from an independent
investment banking firm that the Business Combination is fair to the Company's
stockholders from a financial perspective.
3.7.2 Administrative Services. The Company has entered into an
agreement ("Services Agreement") with Santa ▇▇▇▇▇▇ Capital Corp. ("Affiliate")
substantially in the form annexed as Exhibit 10.7 to the Registration Statement
pursuant to which the Affiliate has made and 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 Securityholder 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 Securityholders 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.
13
3.9 Warrant Solicitation Fees. The Company hereby engages Shemano,
on a non-exclusive basis, as its agent for the solicitation of the exercise of
the Warrants. The Company will (i) assist Shemano with respect to such
solicitation, if requested by Shemano, and (ii) at Shemano's request, provide
Shemano, and direct the Company's transfer and warrant agent to provide to
Shemano, at the Company's cost, lists of the record and, to the extent known,
beneficial owners of, the Warrants. Commencing one year from the Effective Date,
the Company will pay Shemano a commission of five percent of the exercise price
of the Warrants for each Warrant exercised, payable on the date of such
exercise, on the terms provided for in the Warrant Agreement, only if permitted
under the rules and regulations of the NASD and only to the extent that an
investor who exercises his Warrants specifically designates, in writing, that
Shemano solicited his exercise. Shemano may engage sub-agents in its
solicitation efforts. The Company agrees to disclose the arrangement to pay such
solicitation fees to Shemano in any prospectus used by the Company in connection
with the registration of the shares of Common Stock underlying the Warrants.
3.10 Financial Public Relations Firm. Promptly after the execution
of a definitive agreement for a Business Combination, the Company shall retain a
financial public relations firm.
3.11 Reports to the Representative.
3.11.1 Periodic Reports, Etc. For a period of five years from
the Effective Date or until such earlier time upon which the Company is required
to be liquidated, the Company will furnish to the Representative (Attn: ▇▇▇▇▇▇
▇▇▇▇▇, Managing Director - 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 Transfer Sheets. For a period of five years following
the Effective Date or until such earlier time upon which the Company is required
to be liquidated, the Company shall retain a transfer and warrant agent
acceptable to the Representative ("Transfer Agent") and will furnish to the
Underwriters at the Company's sole cost and expense such transfer sheets of the
Company's securities as the Representative may request, including the daily and
monthly consolidated transfer sheets of the Transfer Agent and DTC. The
Underwriters acknowledge that Continental Stock Transfer & Trust Company is an
acceptable Transfer Agent.
3.11.3 Secondary Market Trading Survey. Until such time as the
Public Securities are listed or quoted, as the case may be, on the New York
Stock Exchange, the American Stock Exchange or quoted on the Nasdaq National
Market, or until such earlier time upon which the Company is required to be
liquidated, the Company shall engage _______ ("___"), 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").
14
3.11.4 Trading Reports. During such time as the Public
Securities are quoted on the NASD OTC Bulletin Board (or any successor trading
market such as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar
publisher of quotations) and no other automated quotation system, the Company
shall provide to the Representative, at its expense, such reports published by
the NASD or the Pink Sheets, LLC relating to price trading of the Public
Securities, as the Representative shall reasonably request. In addition to the
requirements of the preceding sentence, for a period of two (2) years from the
Closing Date, the Company, at its expense, shall provide the Representative a
subscription to the Company's weekly Depository Transfer Company Security
Position Reports.
3.12 Disqualification of Form S-1. Until the earlier of seven years
from the date hereof or until the Warrants have expired and are no longer
exercisable, the Company will not take any action or actions which may prevent
or disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration of the Warrants and the Representative's Warrants under the Act.
3.13 Payment of Expenses.
3.13.1 General Expenses Related to the Offering. The Company
hereby agrees to pay on each of the Closing Date and the Option Closing Date, if
any, to the extent not paid at Closing Date, all expenses incident to the
performance of the obligations of the Company under this Agreement, including
but 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 ___ retained for such purpose (such fees shall be $________ in the aggregate
(of which $________ has previously been paid)), and a one-time fee of $5,000
payable to ___ for the preparation of the Secondary Market Trading Survey, (iv)
filing fees, costs and expenses (including fees of Representative's counsel and
disbursements for the Representative's counsel) incurred in registering the
Offering with the NASD (including all COBRADesk fees), (v) costs of placing
"tombstone" advertisements in The Wall Street Journal, The New York Times and a
third publication to be selected by the Representative (not to exceed $_______
in the aggregate); (vi) fees and disbursements of the transfer and warrant
agent, (vii) the Company's expenses associated with "due diligence" meetings
arranged by the Representative, (viii) the preparation, binding and delivery of
four sets of leather bound 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 (ix) 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 (at
a cost not to exceed $10,000) an investigative search firm of the
Representative's choice to conduct an investigation of the principals of the
Company as shall be selected by the Representative. If the Offering is
successfully consummated, any such amounts paid by the Company pursuant to the
immediately preceding sentence shall be credited against the Representative's
nonaccountable expense allowance (described below in Section 3.13.2). The
Representative may deduct from the net proceeds of the Offering payable to the
Company on the Closing Date, or the Option Closing Date, if any, the expenses
set forth in this Agreement to be paid by the Company to the Representative and
others. If the Offering contemplated by this Agreement is not consummated for
any reason whatsoever then the Company shall reimburse the Underwriters in full
for their out of pocket expenses, including, without limitation, its legal fees
(up to a maximum of $50,000) and disbursements and "road show" and due diligence
expenses. The Representative shall retain such part of the nonaccountable
expense allowance previously paid as shall equal its actual out-of-pocket
expenses and refund the balance. If the amount previously paid is insufficient
to cover such actual out-of-pocket expenses, the Company shall remain liable for
and promptly pay any other actual out-of-pocket expenses.
15
3.13.2 Nonaccountable Expenses. The Company further agrees
that, in addition to the expenses payable pursuant to Section 3.13.1, on the
Closing Date, it will pay to the Representative a nonaccountable expense
allowance equal to one and one-half percent (1- 1/2%) of the gross proceeds
received by the Company from the sale of the Firm Units (of which $_______ has
previously been paid), by deduction from the proceeds of the Offering
contemplated herein.
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 Shemano 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 Warrant Purchase
Commitment Letter with the Insider Warrant Purchasers, neither the Company, nor,
to its knowledge, any of its employees, directors or securityholders (without
the consent of Shemano) 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.
16
3.19 Accountants. Until the earlier of five years from the
Effective Date or such time at which the Company is required to be liquidated,
the Company shall retain GSFFR or another registered independent public
accountant reasonably acceptable to Shemano.
3.20 Form 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date ("Audited Financial Statements") reflecting the receipt
by the Company of the proceeds of the initial public offering. As soon as the
Audited Financial Statements become available, the Company shall immediately
file a Current Report on Form 8-K with the Commission, which Report shall
contain the Company's Audited Financial Statements.
3.21 NASD. The Company shall advise the NASD if it is aware that
any 5% or greater stockholder of the Company becomes an affiliate or associated
person of an NASD member participating in the distribution of the Company's
Public Securities.
3.22 Corporate Proceedings. All corporate proceedings and other
legal matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
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 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 ▇▇-▇▇-▇▇▇
and Rule 51-3.4 of the Colorado Securities Act.
3.26 Insider Warrants. The Company hereby acknowledges and agrees
that, in the event the Company calls the Warrants for redemption pursuant to the
Warrant Agreement, the up to $1,000,000 of Warrants purchased by the Insider
Warrant Purchasers within the twenty-trading day period following separate
trading of the Warrants at a purchase price not more than $1.20 per Warrant
pursuant to the form of agreement set forth as Exhibit ___ to the Registration
Statement shall not be redeemable by the Company as long as such Warrants
continue to be held by such individuals or their affiliates.
3.27 Life Insurance. Until the consummation as a Business
Combination, the Company shall at all times maintain in full force a policy of
life insurances from an insurer rated "A" or better (General Policyholders
Rating) in the most recent edition of "Best's Life Reports", on the lives of
individuals to be specified by Shemano. The Company shall be the sole
beneficiary of each such policy, which shall be in the face amount of at least
$2 million each.
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3.28 Electronic Prospectus. The Company shall cause to be prepared
and delivered to the Representative, at its expense, within one (1) business day
from the Effective Date of this Agreement, an Electronic Prospectus to be used
by the Underwriters in connection with the Offering. As used herein, the term
"Electronic Prospectus" means a form of prospectus, and any amendment or
supplement thereto, that meets each of the following conditions: (i) it shall be
encoded in an electronic format, satisfactory to the Representative, that may be
transmitted electronically by the other Underwriters to offerees and purchasers
of the Units for at least the period during which a Prospectus relating to the
Units is required to be delivered under the Securities Act; (ii) it shall
disclose the same information as the paper prospectus and prospectus filed
pursuant to ▇▇▇▇▇, except to the extent that graphic and image material cannot
be disseminated electronically, in which case such graphic and image material
shall be replaced in the electronic prospectus with a fair and accurate
narrative description or tabular representation of such material, as
appropriate; and (iii) it shall be in or convertible into a paper format or an
electronic format, satisfactory to the Representative, that will allow
recipients thereof to store and have continuously ready access to the prospectus
at any future time, without charge to such recipients (other than any fee
charged for subscription to the Internet as a whole and for on-line time). The
Company hereby confirms that it has included or will include in the Prospectus
filed pursuant to ▇▇▇▇▇ or otherwise with the Commission and in the Registration
Statement at the time it was declared effective an undertaking that, upon
receipt of a request by an investor or his or her representative within the
period when a prospectus relating to the Units is required to be delivered under
the Securities Act, the Company shall transmit or cause to be transmitted
promptly, without charge, a paper copy of the Prospectus.
3.29 Reservation of Shares. The Company will reserve and keep
available that maximum number of its authorized but unissued securities which
are issuable upon exercise of the Warrants and the Representative's Purchase
Option and Representative's Warrants outstanding from time to time.
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 Blank Rome LLP, counsel to the
Underwriters ("Blank Rome").
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 Commission Stop Order. As of either the Closing Date
or the Option Closing Date, the Commission has not issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus, the Prospectus, or any part thereof, and has not
instituted or threatened to institute any proceedings with respect to such an
order.
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4.1.4 No Blue Sky Stop Orders. No order suspending the sale of
the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing Date or the Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective
Date, the Representative shall have received the favorable opinion of ▇▇▇▇ &
▇▇▇▇▇ Professional Corporation ("▇▇▇▇ & ▇▇▇▇▇"), counsel to the Company, dated
the Effective Date, addressed to the Representative and in form and substance
satisfactory to Blank Rome to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the assets, business or operations of the Company.
(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 all applicable state
securities or Blue Sky laws or exempt from such registration requirements. The
authorized and, to such counsel's knowledge, outstanding capital stock of the
Company is as set forth in the Prospectus. The Units, the Common Stock and the
Warrants conform to the descriptions thereof contained in the Registration
Statement and 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 or, to such counsel's knowledge, similar rights that entitle or will
entitle any person to acquire any security from the Company upon issuance or
sale thereof. 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. A sufficient number of shares of Common Stock have been reserved
for issuance upon exercise of the Warrants and the Representative's Purchase
Option. The shares of Common Stock underlying the Warrants and the
Representative's Purchase Option will, upon exercise of the Warrants and the
Representative's Purchase Option and payment of the exercise price thereof, be
duly and validly issued, fully paid and non-assessable and will not have been
issued in violation of or subject to preemptive or, to such counsel's knowledge,
similar rights that entitle or will entitle any person to acquire any securities
from the Company upon issuance thereof.
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(iv) The Company has full right, power and authority
to execute and deliver this Agreement, the Warrant Agreement, the Services
Agreements, the Trust Agreement, the Escrow Agreement and the Representative's
Purchase Option and to perform its obligations thereunder, and all corporate
action required to be taken for the due and proper authorization, execution and
delivery of this Agreement, the Warrant Agreement, the Service Agreements, the
Trust Agreement, the Escrow Agreement and the Representative's Purchase Option
and consummation of the transactions contemplated by the Underwriting Agreement,
the Registration Statement and the Prospectus and as described in the
Registration Statement and the Prospectus have been duly and validly taken.
(v) 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.
(vi) 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 and compliance
by the Company with the terms and provisions thereof and the consummation of the
transactions contemplated thereby, and the issuance and sale of the Securities,
do not and will not, with or without the giving of notice or the lapse of time,
or both, (a) to such counsel's knowledge, conflict with, or result in a breach
of, any of the terms or provisions of, or constitute a default under, or result
in the creation or modification of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to the
terms of, any mortgage, deed of trust, note, indenture, loan, contract,
commitment or other agreement or instrument filed as an exhibit to the
Registration Statement, (b) result in any violation of the provisions of the
Certificate of Incorporation or the Bylaws of the Company, or (c) to such
counsel's knowledge, violate any 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.
(vii) The Registration Statement, the Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) each as of their respective dates 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 in the Prospectus. The descriptions in the
Registration Statement and in the Prospectus, insofar as such statements
constitute a summary of statutes, legal matters, contracts, documents or
proceedings referred to therein, fairly present in all material respects the
information required to be shown with respect to such statutes, legal matters,
contracts, documents and proceedings, and such counsel does not know of any
statutes or legal or governmental proceedings required to be described in the
Prospectus that are not described in the Registration Statement or the
Prospectus or included as exhibits to the Registration Statement that are not
described or included as required.
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(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.
(x) No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
any judicial, regulatory or other legal or governmental agency or body is
required for the execution, delivery and performance of the Underwriting
Agreement or consummation of the transactions contemplated by the Underwriting
Agreement, the Registration Statement and the Prospectus, except for (a) such as
may be required under state securities or blue sky laws in connection with the
purchase and distribution of the Units by the Underwriters (as to which such
counsel need express no opinion), (b) such as have been made or obtained under
the Securities Act and (c) such as are required by the NASD.
The opinion of counsel shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriters and the independent public accountants of the
Company, at which conferences the contents of the Registration Statement and the
Prospectus contained therein and related matters were discussed and, although
such counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus contained therein (except as otherwise
set forth in the foregoing opinion), solely on the basis of the foregoing
without independent check and verification, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statement or
any amendment thereto, at the time the Registration Statement or amendment
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or the Prospectus or any amendment or
supplement thereto, at the time they were filed pursuant to Rule 424(b) or at
the date of such counsel's opinion, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
opinion with respect to the financial information and statistical data and
information included in the Registration Statement or the Prospectus).
4.2.2 Closing Date and Option Closing Date Opinion of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the favorable opinion of ▇▇▇▇ & ▇▇▇▇▇, 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 Blank
Rome, confirming as of the Closing Date and, if applicable, the Option Closing
Date, the statements made by ▇▇▇▇ & ▇▇▇▇▇ in their opinion delivered on the
Effective Date.
4.2.3 Reliance. In rendering such opinion, such counsel may
rely (i) as to matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted (other than as to
the Delaware General Corporation Law), 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 Blank Rome) of other
counsel reasonably acceptable to Blank Rome, 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.
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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
Blank Rome from GSFFR 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 _______ __, 2005 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any decrease, setting forth the amount of such
decrease, and (c) during the period from _______ __, 2005 to a specified date
not later than five days prior to the Effective Date, Closing Date or Option
Closing Date, as the case may be, there was any decrease in revenues, net
earnings or net earnings per share of Common Stock, in each case as compared
with the corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
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(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary or Assistant Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed all covenants and complied with all conditions
required by this Agreement to be performed or complied with by the Company prior
to and as of the Closing Date, or the Option Closing Date, as the case may be,
and that the conditions set forth in Section 4.5 hereof have been satisfied as
of such date and that, as of 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 Securityholder before or by any court or federal or state
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus, (iii) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated or threatened by the Commission, and (iv) the Registration Statement
and the Prospectus and any amendments or supplements thereto shall contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.6 Delivery of Agreements.
4.6.1 Effective Date Deliveries. On the Effective Date, the
Company shall have delivered to the Representative executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement, the Services Agreement
and all of the Insider Letters.
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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 Blank Rome 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 ___.
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, the NASD OTC Bulletin
Board, Nasdaq or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to an Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be. With
respect to any untrue statement or omission or alleged untrue statement or
omission made in the Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of any Underwriter to the
extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to the
person asserting any such loss, liability, claim or damage at or prior to the
written confirmation of sale of the Securities to such person as required by the
Act and the Regulations, and if the untrue statement or omission has been
corrected in the Prospectus, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with its obligations under Section 3.4
hereof. The Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the issue and sale
of the Securities or in connection with the Registration Statement or
Prospectus.
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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 reasonably acceptable to the Underwriter
or Selected Dealer, as the case may be, 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 (in addition to a
local firm of attorneys in any applicable jurisdiction) 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. The Company shall not settle any action without the prior consent of
the Representative, unless such settlement provides for a full release of the
Underwriters and Selected Dealers (whether or not named as a party to the
action) without any admission of wrongdoing.
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 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.
25
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each director,
officer and employee of an Underwriter or the Company, as applicable, and each
person, if any, who controls an Underwriter or the Company, as applicable,
within the meaning of Section 15 of the Act shall have the same rights to
contribution as the Underwriters or the Company, as applicable.
5.3.2 Contribution Procedure. Within fifteen days after
receipt by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The contribution provisions contained in
this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available.
The Underwriters' obligations to contribute pursuant to this Section 5.3 are
several and not joint.
6 Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Units or Option Units. If
any Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the over-allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Units or Option Units. In the
event that the default addressed in Section 6.1 above relates to more than 10%
of the Firm Units or Option Units, you may in your discretion arrange for
yourself or for another party or parties to purchase such Firm Units or Option
Units to which such default relates on the terms contained herein. If within one
business day after such default relating to more than 10% of the Firm Units or
Option Units you do not arrange for the purchase of such Firm Units or Option
Units, then the Company shall be entitled to a further period of one business
day within which to procure another party or parties satisfactory to you to
purchase said Firm Units or Option Units on such terms. In the event that
neither you nor the Company arrange for the purchase of the Firm Units or Option
Units to which a default relates as provided in this Section 6, this Agreement
will be terminated by you or the Company without liability on the part of the
Company (except as provided in Sections 3.13 and 5 hereof) or the several
Underwriters (except as provided in Section 5 hereof); provided, however, that
if such default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
26
6.3 Postponement of Closing Date. In the event that the Firm Units
or Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7 Right to Appoint Representative.
7.1 For a period of three (3) years from the Effective Date
("Board Period"), upon notice from Shemano to the Company, Shemano shall have
the right to send a representative (who need not be the same individual from
meeting to meeting) to observe each meeting of the Board of Directors of the
Company; provided that such representative shall sign a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to Shemano and its
counsel in connection with such representative's attendance at meetings of the
Board of Directors. The Company agrees to give Shemano written notice of each
such meeting and to provide Shemano with an agenda and minutes of the meeting no
later than it gives such notice and provides such items to the other directors,
and reimburse the representative of Shemano for its reasonable out-of-pocket
expenses incurred in connection with its attendance at the meeting, including
but not limited to, food, lodging and transportation. 7.2 Designee Right. Upon
consummation of a Business Combination and until the expiration of the Board
Period, Shemano shall be entitled to appoint a designee to the Board of
Directors of the Company.
8 Additional Covenants.
8.1 Intentionally Omitted.
8.2 Additional Shares or Options. The Company hereby agrees that
until the consummation of a Business Combination, it shall not issue any shares
of Common Stock or any options or other securities convertible or exercisable or
exchangeable 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 $________ 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) and the liquidation of the Company or (ii) to the
Company after, or concurrently with, the consummation of a Business Combination
and (b) for and in consideration of the Company (1) agreeing to evaluate such
Target Business for purposes of consummating a Business Combination with it or
(2) agreeing to engage the services of the vendor, as the case may be, such
Target Business or vendor agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund ("Claim")
and waives any Claim it may have in the future as a result of, or arising out
of, any negotiations, contracts or agreements with the Company and will not seek
recourse against the Trust Fund for any reason whatsoever.
27
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 Securityholder and Shemano and will not allow any
amendments to, or waivers of, such Insider Letters without the prior written
consent of Shemano.
8.5 Warrant Purchase Commitment Letters. The Company shall not
take any action or omit to take any action that would cause a breach of any
Warrant Purchase Commitment Letters executed by _______ and Shemano, and will
not allow any amendments to, or waivers of any provisions of, such Warrant
Purchase Commitment Letters without the prior written consent of Shemano.
8.6 Certificate of Incorporation and Bylaws. The Company shall not
take any action or omit to take any action that would cause the Company to be in
breach or violation of its Certificate of Incorporation or Bylaws. Prior to the
consummation of a Business Combination, the Company will not amend its
Certificate of Incorporation without the prior written consent of Shemano.
8.7 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.
8.8 Acquisition/Liquidation Procedure. The Company agrees: (i)
that, prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("Business
Combination Vote") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law; and (ii)
that, in the event that the Company does not effect a Business Combination
within 18 months from the consummation of this Offering (subject to extension
for an additional six-month period, as described in the Prospectus), the Company
will be liquidated and will distribute to all holders of IPO Shares (defined
below) an aggregate sum equal to the Company's "Liquidation Value." The
Company's "Liquidation Value" shall mean the Company's book value, as determined
by the Company and approved by GSFFR. In no event, however, will the Company's
Liquidation Value be less than the Trust Fund, inclusive of any net interest
income thereon. Only holders of IPO Shares shall be entitled to receive
liquidating distributions and the Company shall pay no liquidating distributions
with respect to any other shares of capital stock of the Company. With respect
to the Business Combination Vote, the Company shall cause all of the Initial
Securityholders to vote the shares of Common Stock owned by them immediately
prior to this Offering in accordance with the vote of the holders of a majority
of the IPO Shares present, in person or by proxy, at a meeting of the Company's
stockholders called for such purpose. At the time the Company seeks approval of
any potential Business Combination, the Company will offer each holder of Common
Stock issued in this Offering ("IPO Shares") the right to convert their IPO
Shares at a per share price ("Conversion Price") equal to the amount in the
Trust Fund (inclusive of any interest income therein) calculated as of two
business days prior to the consummation of the proposed Business Combination
divided by the total number of IPO Shares. If holders of less than 20% in
interest of the Company's IPO Shares elect to convert their IPO Shares, the
Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will convert shares, based
upon the Conversion Price, from those holders of IPO Shares who affirmatively
requested such conversion and who voted against the Business Combination. If
holders of 20% or more in interest of the IPO Shares, who vote against approval
of any potential Business Combination, elect to convert their IPO Shares, the
Company will not proceed with such Business Combination and will not convert
such shares.
28
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 "▇▇▇▇▇ 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 Securityholders to agree that, in order to minimize potential conflicts
of interest which may arise from multiple affiliations, the Initial
Securityholders will present to the Company for its consideration, prior to
presentation to any other person or company, any suitable opportunity to acquire
an operating business, until the earlier of the consummation by the Company of a
Business Combination, the liquidation of the Company or until such time as the
Initial Securityholders cease to be an officer or director of the Company,
subject to any pre-existing fiduciary and contractual obligations the Initial
Securityholders might have.
8.11 Target Net Assets. The Company agrees that the initial Target
Business that it acquires must have a fair market value equal to at least 80% of
the Company's net assets (all of the Company's assets, including the funds held
in the Trust Fund, less the Company's liabilities) at the time of such
acquisition. The fair market value of such business must be determined by the
Board of Directors of the Company based upon standards generally accepted by the
financial community, such as actual and potential sales, earnings and cash flow
and book value. If the Board of Directors of the Company is not able to
independently determine that the target business has a fair market value of at
least 80% of the Company's net assets at the time of such acquisition, the
Company will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the NASD with respect to the satisfaction of
such criteria. The Company is not required to obtain an opinion from an
investment banking firm as to the fair market value if the Company's Board of
Directors independently determines that the Target Business does have sufficient
fair market value.
8.12. Purchases by Shemano. Within three (3) months of the Warrants
and the Common Stock trading separately, and subject in all instances to the
requirements of applicable laws, rules and regulations, Shemano hereby agrees
that either it or certain of its principals, affiliates or designees, shall
purchase up to $500,000 of Warrants for its own account in the open market at a
price not to exceed $1.20 per Warrant.
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.
29
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 Company
to pay the out of pocket expenses related to the transactions contemplated
herein shall be governed by Section 3.13 hereof.
10.4 Indemnification. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 shall not be in any way effected by, such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11 Miscellaneous.
11.1 Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telecopied and confirmed and shall be deemed given when so
delivered or telecopied and confirmed or if mailed, two days after such mailing
If to the Representative:
The Shemano Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Copy to:
Blank Rome LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
30
If to the Company:
Santa ▇▇▇▇▇▇ Media Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman and Chief Executive Officer
Copy to:
▇▇▇▇ & ▇▇▇▇▇ Professional Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
11.2 Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
11.3 Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
11.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5 Binding Effect. This Agreement shall inure solely to the
benefit of and shall be binding upon the Representative, the Underwriters, the
Company and the controlling persons, directors and officers referred to in
Section 5 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
11.6 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflicts of law principles that would result in the
application of the substantive laws of another jurisdiction. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
such process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
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. Facsimile signatures
will be binding and effective as originals.
11.8 Waiver, Etc. The failure of any of the parties hereto to at
any time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
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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,
SANTA ▇▇▇▇▇▇ MEDIA CORPORATION
By: ___________________________________
Name:
Title:
Accepted on the date first above written.
THE SHEMANO GROUP, INC.
By: ______________________________
Name:
Title:
33
SCHEDULE I
_____________ Units
Number of Firm Units
Underwriter to be Purchased
----------- ---------------
The Shemano Group, Inc.
-------------
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