EXHIBIT 1.1
4,800,000 Units (1)
COASTAL BANCSHARES ACQUISITION CORP.
UNDERWRITING AGREEMENT
February 14, 2005
I-Bankers Securities Incorporated
Newbridge Securities Corporation
As Representatives of the several
Underwriters named in Schedule I hereto
c/o I-Bankers Securities Incorporated
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
Coastal Bancshares Acquisition Corp., a Delaware corporation (the
"Company") proposes, subject to the terms and conditions contained herein, to
sell to you and the other underwriters named on Schedule I to this Agreement
(the "Underwriters") for whom you are acting as Representatives (the
"Representatives"), an aggregate of 4,800,000 Units (the "Firm Units") of the
Company, at a purchase price (net of discounts and commissions) of $5.52 per
Firm Unit. The Underwriters, severally and not jointly, agree to purchase from
the Company the number of Firm Units set forth opposite their respective names
on Schedule I attached hereto and made a part hereof at a purchase price (net of
discounts and commissions) of $5.52 per Firm Unit. The Firm Units are to be
offered initially to the public ("Offering") at the offering price of $6.00 per
Firm Unit. Each Firm Unit consists of one share of the Company's common stock,
par value $0.01 per share ("Common Stock"), and two warrants ("Warrant(s)"). The
shares of Common Stock and the Warrants included in the Firm Units will not be
separately transferable until 90 days after the effective date ("Effective
Date") of the Registration Statement (as hereinafter defined) unless the
Representatives inform the Company of their decision to allow earlier separate
trading, but in no event will the Representatives allow separate trading until
the preparation of an audited balance sheet of the Company reflecting receipt by
the Company of the proceeds of the Offering and the filing of a Form 8-K by the
Company which includes such balance sheet. Each Warrant entitles its holder to
exercise it to purchase one share of Common Stock for $5.00 during the period
commencing on the later of the consummation by the Company of its "Business
Combination" or one year from the Effective Date of the Registration Statement
and terminating on the five-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
company in the IT security industry (as described more fully in the Registration
Statement).
The Company has prepared and filed in conformity with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission") a Registration Statement (as hereinafter
_______________________
(1) Plus an option to purchase up to 720,000 additional Units to cover
over-allotments.
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defined) on Form S-1 (No. 333-118294), including a Preliminary Prospectus (as
hereinafter defined) relating to the Securities, and such amendments thereof as
may have been required to the date of this Agreement. Copies of such
Registration Statement (including all amendments thereof) and of the related
Preliminary Prospectus have heretofore been delivered by the Company to you. The
term "Preliminary Prospectus" means any preliminary prospectus included at any
time as a part of the Registration Statement or filed with the Commission by the
Company pursuant to Rule 424(a) of the Rules. The term "Registration Statement"
as used in this Agreement means the initial registration statement (including
all exhibits, financial schedules and all documents and information deemed to be
a part of the Registration Statement through incorporation by reference or
otherwise), as amended at the time and on the date it becomes effective (the
"Effective Date"), including the information (if any) contained in the form of
final Prospectus filed with the Commission pursuant to Rule 424(b) of the Rules
and deemed to be part thereof at the time of effectiveness pursuant to Rule 430A
of the Rules. If the Company has filed an abbreviated registration statement to
register additional Securities pursuant to Rule 462(b) under the Rules (the
"462(b) Registration Statement"), then any reference herein to the Registration
Statement shall also be deemed to include such 462(b) Registration Statement.
The term "Prospectus" as used in this Agreement means the Prospectus in the form
included in the Registration Statement at the time of effectiveness or, if Rule
430A of the Rules is relied on, the term Prospectus shall also include the final
Prospectus filed with the Commission pursuant to Rule 424(b) of the Rules.
The Company understands that the Underwriters propose to make a public
offering of the Units, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each Preliminary
Prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
1. Sale, Purchase, Delivery and Payment for the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $6.00 per Unit ($5.52 net of discounts and
commissions) (the "Initial Price"), the number of Firm Units set forth opposite
the name of such Underwriter under the column "Number of Firm Units to be
Purchased" on Schedule I to this Agreement, subject to adjustment in accordance
with Section 6 hereof.
(b) For the purposes of covering any over-allotments in connection with the
distribution and sale of the Firm Units, the Company hereby grants to the
Underwriters, severally and not jointly, an option to purchase up to an
additional 720,000 units from the Company ("Over-allotment Option"). Such
additional 720,000 Units are hereinafter referred to as "Option Units." The Firm
Units and the Option Units are hereinafter collectively referred to as the
"Units," and the Units, the shares of Common Stock and the Warrants included in
the Units and the shares of Common Stock issuable upon exercise of the Warrants
are hereinafter referred to collectively as the "Public Securities." The
purchase price to be paid for the Option Units will be the same price per Option
Unit as the price per Firm Unit set forth in Section 1(a) hereof.
The Over-allotment Option granted pursuant to Section 1(b) hereof may be
exercised by the Representatives 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
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hereby may be exercised by the giving of oral notice to the Company by the
Representatives, 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 nor
earlier than two full business days after the date of the notice or such other
time as shall be agreed upon by the Company and the Representatives, at the
offices of the I-Bankers Securities Incorporated ("I-Bankers") or at such other
place as shall be agreed upon by the Company and the Representatives. 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.
(c) Payment of the purchase price for, and delivery of the certificates
for, the Firm Units shall be made at 10:00 A.M., New York time, on February 18,
2005, or such other date, not later than the fifth business day thereafter, or
at such earlier time as shall be agreed upon by the Representatives and the
Company at the offices of I-Bankers or at such other place as shall be agreed
upon by the Representatives 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 Representatives' 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: $24,768,000 of the
proceeds received by the Company for the Firm Units shall be deposited in the
trust fund established by the Company for the benefit of the public stockholders
as described in the Registration Statement ("Trust Fund") pursuant to the terms
of an Investment Management Trust Agreement ("Trust Agreement") and the
remaining proceeds shall be paid to the order of the Company upon delivery to
you of certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units (or through the facilities of the Depository Trust
Company ("DTC")) for the account of the Underwriters. The Firm Units shall be
registered in such name or names and in such authorized denominations as the
Representatives may request in writing at least two full business days prior to
the Closing Date. The Company will permit the Representatives 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 Representatives for all the Firm
Units.
In addition, in the event that any or all of the Option Units are purchased
by the Underwriters, payment of the purchase price, and delivery of the
certificates for, the Option Units shall be made on the Option Closing Date at
the Representatives' 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
to the Trust Fund at the offices of I-Bankers or at such other place as shall be
agreed upon by the Representatives and the Company upon delivery to you of
certificates representing such securities (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 Representatives request 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 Representatives 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.
(d) The Company hereby agrees to issue and sell to the Representatives
(and/or their designees) on the Effective Date an option ("Representatives'
Purchase Option") for the purchase of an aggregate of 325,000 units
("Representatives' Units") for an aggregate purchase price of $100. Each of the
Representatives' Units is identical to the Firm Units. The Representatives'
Purchase Option shall be exercisable, in whole or in part, commencing on the
later of the consummation of a Business Combination or one year from the
Effective Date and expiring on the five-year anniversary of the Effective Date
at an initial exercise price per Representatives' Unit of $7.50, which is equal
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to one hundred twenty-five percent (125%) of the initial public offering price
of a Unit. the Representatives' Purchase Option, the Representatives' Units, the
Representatives' Warrants and the shares of Common Stock issuable upon exercise
of the Representatives' Warrants are hereinafter referred to collectively as the
"Representatives' Securities." The Representative's Securities will be identical
to those offered to the public except that the Representative's Warrants shall
have an exercise price of $6.65. The Public Securities and the Representatives'
Securities are hereinafter referred to collectively as the "Securities." The
Representatives understand and agree that there are significant restrictions
against transferring the Representatives' Purchase Option during the first one
hundred eighty (180) days after the Effective Date, as set forth in Section 3 of
the Representatives' Purchase Option.
Payment of the purchase price of, and delivery of the certificates for, the
Representatives' Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Representatives, upon payment therefor, certificates for
the Representatives' Purchase Option in the name or names and in such authorized
denominations as the Representatives may request.
2. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter, as of the date hereof, as of the Closing Date
and as of each Option Closing Date (if any), as follows:
(a) At the time the Registration Statement became effective and at all
times subsequent thereto up to the Closing Date and the Option Closing Date, if
any, the Registration Statement and the Prospectus will contain all material
statements that are required to be stated therein in accordance with the Act and
the Regulations, and will in all material respects conform to the requirements
of the Act and the Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, on such dates, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. When any
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Securities or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus and any amendments thereof and supplements thereto
complied or will comply in all material respects with the applicable provisions
of the Act and the Regulations and did not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The representation
and warranty made in this Section 2(a) 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 Representatives
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
(b) The Company has filed with the Commission a Form 8-A registration
statement providing for the registration under the Securities Exchange Act of
1934, as amended ("Exchange Act"), of the Units, the Common Stock and the
Warrants, which registration statement complies in all material respects with
the Exchange Act. The registration of the Units, Common Stock and Warrants under
the Exchange Act has been declared effective by the Commission on the date
hereof. 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.
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(c) 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.
(d) No securities of the Company have been sold by the Company or by or on
behalf of, or for the benefit of, any person or persons controlling, controlled
by, or under common control with the Company within the three years prior to the
date hereof, except as disclosed in the Registration Statement.
(e) The disclosures in the Registration Statement summarizing the effects
of Federal, State and local regulation on the Company's business as currently
contemplated are correct summaries in all material respects and do not omit to
state a material fact.
(f) The statistical and related data included in the Registration Statement
are based on or derived from sources that the Company believes to be reliable
and accurate.
(g) 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 of the Company, (ii) there have been no
material transactions entered into by the Company, other than as contemplated
pursuant to this Agreement, and (iii) no member of the Company's management has
resigned from any position with the Company.
(h) 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.
(i) ▇▇▇▇ & Associates LLP ("▇▇▇▇"), whose report is filed with the
Commission as part of the Registration Statement, are independent accountants as
5
required by the Act and the Regulations and such accountants, in the performance
of their work for the Company, are not in violation of the auditor independence
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. ▇▇▇▇ 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. There are no material off-balance sheet transactions,
arrangements, obligations (including contingent obligations) or any other
relationships with unconsolidated entities or other persons, that may have a
material current or, to the Company's knowledge, a material 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.
(j) The financial statements, including the notes thereto and supporting
schedules included in the Registration Statement and Prospectus fairly present
in all material respects 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 in all material respects 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.
(k) 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.
(l) All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; except as
described in or expressly contemplated by the Registration Statement, there are
no outstanding rights (including, without limitation, pre-emptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind
relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or options.
The authorized Common Stock conforms in all material respects 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.
(m) 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
6
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
Representatives' Purchase Option, the Representatives' 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 Representatives' Purchase Option, the
Representatives' Warrants and the Warrants are enforceable against the Company
in accordance with their respective terms, except (i) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws, and (iii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(n) 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.
(o) This Agreement, the Warrant Agreement (as hereinafter defined), the
Trust Agreement, the Services Agreement (as hereinafter defined) and the Escrow
Agreement (as hereinafter defined) have been duly and validly authorized by the
Company and constitute, and the Representatives' 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.
(p) The execution, delivery, and performance by the Company of this
Agreement, the Warrant Agreement, the Representatives' 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(gg) hereof (ii) result in any violation of the provisions of the certificate
of incorporation or the by-laws 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.
(q) 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
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certificate of incorporation or by-laws or in violation of any material
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or businesses.
(r) 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 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.
(s) The Company has all corporate power and authority to enter into this
Agreement and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required in connection therewith
have been obtained. No consent, authorization or order of, and no filing with,
any court, government agency or other body is required for the valid issuance,
sale and delivery, of the Securities and the consummation of the transactions
and agreements contemplated by this Agreement, the Warrant Agreement, the
Representatives' 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.
(t) To the best of the Company's knowledge, all information contained in
the questionnaires ("Questionnaires") completed by each of the Company's
officers, directors, and stockholders immediately prior to the Offering
("Initial Stockholders") and provided to the Underwriters as an exhibit to his
or her Insider Letter (as defined in Section 2(ff)) is true and correct in all
material respects and the Company has not become aware of any information which
would cause the information disclosed in the Questionnaires completed by each
Initial Stockholder to become inaccurate and incorrect in all material respects.
(u) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the best of
the Company's knowledge, threatened against, or involving the Company or, to the
best of the Company's knowledge, any Initial Stockholder which has not been
disclosed in the Registration Statement or the Questionnaires.
(v) The Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the Company.
(w) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus or any part thereof.
(x) Except as described in the Prospectus, there are no claims, payments,
arrangements, agreements or understandings relating to the payment of a
finder's, consulting or origination fee by the Company or any Initial
Stockholder with respect to the sale of the Securities hereunder or any other
arrangements, agreements or understandings of the Company or, to the best of the
Company's knowledge, any Initial Stockholder that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
8
(y) 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 date on which the Registration Statement was filed
with the Commission or thereafter, other than payments to the Representatives.
(z) 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.
(aa) Based on the Questionnaires, except as set forth on Schedule 2(aa), no
officer, director or any beneficial owner of the Company's unregistered
securities has any direct or indirect affiliation or association with any NASD
member. The Company will advise the Representatives and their counsel, if it
learns that any officer, director or owner of at least 5% of the Company's
outstanding Common Shares is or becomes an affiliate or associated person of an
NASD member participating in the offering.
(bb) Neither the Company nor any of the Initial Stockholders or any other
person acting on behalf of the Company has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign) or
any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist it in connection with any actual or proposed transaction)
that (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, might have had a material adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(cc) 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.
(dd) The Company has entered into a warrant agreement with respect to the
Warrants and the Representatives' Warrants with Continental Stock Transfer &
Trust Company ("Continental") substantially in the form filed as an exhibit to
the Registration Statement ("Warrant Agreement"), providing for, among other
things, the payment of a warrant solicitation fee as contemplated by Section
3(l) hereof.
(ee) 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
non-compete 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) the
form of which is annexed as Exhibit 10.1 to the Registration Statement ("Insider
Letter"), pursuant to which each of the Initial Stockholders of the Company
9
agrees to certain matters, including but not limited to, the matters described
as being agreed to by them under the "Proposed Business" section of the
Prospectus.
(ff) The Company has caused the Initial Stockholders to enter into an
escrow agreement ("Escrow Agreement") with Continental ("Escrow Agent") in form
and substance satisfactory to the Underwriters, whereby the Common Stock owned
by the Initial Stockholders will be held in escrow by the Escrow Agent, until
the third anniversary of the Effective Date unless released earlier as provided
for in the Escrow Agreement. During such escrow period, the Initial Stockholders
shall be prohibited from selling or otherwise transferring such shares (except
to spouses and children of Initial Stockholders, trusts established for their
benefit, family partnerships, to a transferee that does not affect beneficial
ownership and as otherwise set forth in the Escrow Agreement) but will retain
the right to vote such shares. To the Company's knowledge, the Escrow Agreement
is enforceable against each of the Initial Stockholders and will not, with or
without the giving of notice or the lapse of time or both, result in a breach
of, or conflict with any of the terms and provisions of, or constitute a default
under, any agreement or instrument to which any of the Initial Stockholders is a
party. The Escrow Agreement shall not be amended, modified or otherwise changed
without the prior written consent of the Representatives.
(gg) The Company has entered into the Trust Agreement with respect to
certain proceeds of the Offering in form and substance satisfactory to the
Representatives, which agreement shall not be amended, modified or otherwise
changed without the prior written consent of the Representatives.
(hh) No Initial Stockholder, employee, officer or director of the Company
is subject to any noncompetition agreement or non-solicitation agreement with
any employer or prior employer which could materially affect his ability to be
an Initial Stockholder, employee, officer and/or director of the Company.
(ii) No more than 45% of the "value" (as defined in Section 2(a)(41) of the
Investment Company Act of 1940 ("Investment Company Act")) of the Company's
total assets consist of, and no more than 45% of the Company's net income after
taxes is derived from, securities other than "Government securities" (as defined
in Section 2(a)(16) of the Investment Company Act).
(jj) The Company does not own an interest in any corporation, partnership,
limited liability company, joint venture, trust or other business entity.
(kk) There are no business relationships or related party transactions
involving the Company or any other person required to be described in the
Prospectus that have not been described as required.
3. Covenants of the Company. The Company covenants and agrees as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto, to become effective as promptly as possible. The Company
shall prepare the Prospectus in a form approved by the Representatives and file
such Prospectus pursuant to Rule 424(b) under the Securities Act no later than
the Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by the Rules.
(b) The Company shall promptly advise the Representatives in writing (i)
when any post-effective amendment to the Registration Statement shall have
become effective, (ii) of any request by the Commission for any amendment of the
10
Registration Statement or the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the institution or
threatening of any proceeding for that purchase, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose and (v) of the happening of any event during the
period described in Section 3(c) 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. The Company shall
not file any amendment of the Registration Statement or supplement to the
Prospectus or any document incorporated by reference in the Registration
Statement unless the Company has furnished the Representatives a copy for review
prior to filing and shall not file any such proposed amendment or supplement to
which the Representatives reasonably object. The Company shall use its best
efforts to prevent the issuance of any such stop order and, if issued, to obtain
as soon as possible the withdrawal thereof.
(c) During the time when a Prospectus is required to be delivered under the
Act, or the Exchange 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, or the Exchange 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 Representatives promptly and prepare and file with the
Commission, subject to Section 3(b) hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
(d) For a period of five years from the Effective Date, or until such
earlier time upon which the Company is required to be liquidated, the Company
will use its best efforts to maintain the registration of the Units, Common
Stock and Warrants under the provisions of the Exchange Act. The Company will
not deregister the Units under the Exchange Act without the prior written
consent of the Representatives.
(e) The Company will endeavor in good faith, in cooperation with the
Representatives, 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 Representatives may reasonably
designate within the United States, 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 Representatives
agree 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. The Company and the
Representatives agree that with respect to qualifying the Public Securities for
offering and sale under securities laws outside of the United States, the
Company will be relying solely on the Underwriters and their agents to perfect
all filings required by such foreign jurisdictions and to make all such
statements and reports at such times as are or may be required by the laws of
11
such foreign jurisdictions; provided that the Company will provide any
assistance as reasonably requested by the Underwriters for such perfection.
(f) 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.
(g) For a period of five years from the Effective Date, or until such
earlier date 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 (or 10-QSB)
quarterly report and the mailing of quarterly financial information to
stockholders.
(h) The Company will not consummate a Business Combination with any
entity which is affiliated with any Initial Stockholder unless the Company
obtains an opinion from an independent investment banking firm that the Business
Combination is fair to the Company's stockholders from a financial perspective.
(i) The Company has entered into an agreement ("Services Agreement") with
Coastal Acquisition, LLC pursuant to which the Coastal Acquisition, LLC 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.
(j) Except as set forth above in Section 3(h) or 3(i), the Company shall
not pay any Initial Stockholder or any of their affiliates any fees or
compensation from the Company for services rendered to the Company prior to, or
in connection with, the consummation of a Business Combination; provided that
the Initial Stockholders shall be entitled to reimbursement from the Company for
their reasonable out-of-pocket expenses incurred in connection with seeking and
consummating a Business Combination; and provided, further, that such persons
shall be entitled to receive, upon consummation of a Business Combination,
commissions for monies raised by them for the Company in connection with such
Business Combination, at rates which are no less favorable to the Company than
those which the Company would pay to unaffiliated third parties.
(k) 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 Representatives to obtain a secondary market trading exemption
in such other states as may be requested by the Representatives.
(l) The Company hereby engages the Representatives, on a non-exclusive
basis, as its agents for the solicitation of the exercise of the Warrants. The
Company will (i) assist the Representatives with respect to such solicitation,
if requested by the Representatives, and (ii) at the Representatives' request,
12
provide the Representatives, and direct the Company's transfer and warrant agent
to provide to the Representatives, 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 the Representatives 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 the Representatives solicited his
exercise. The Representatives may engage sub-agents in their solicitation
efforts. The Company agrees to disclose the arrangement to pay such solicitation
fees to the Representatives in any Prospectus used by the Company in connection
with the registration of the shares of Common Stock underlying the Warrants.
(m) Promptly after the execution of a definitive agreement for a Business
Combination, the Company shall retain a financial public relations firm
reasonably acceptable to the Representatives for a term to be agreed upon by the
Company and the Representatives.
(n) For a period of five years from the Effective Date or until such
earlier time at which the Company is liquidated, the Company will furnish to the
Representatives and their counsel copies (which may be electronic 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 Representatives (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, l3G, 14D-l 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
Representatives may from time to time reasonably request.
(o) For a period of five years following the Effective Date or until such
earlier time at which the Company is liquidated, the Company shall retain a
transfer and warrant agent acceptable to the Representatives ("Transfer Agent")
and will furnish to the Representatives at the Company's sole cost and expense
such transfer sheets of the Company's securities as the Representatives may
request, including the daily and monthly consolidated transfer sheets of the
Transfer Agent and DTC. The Representatives acknowledge that Continental is an
acceptable Transfer Agent.
(p) 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
LLP ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇"), 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 Closing Date, 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").
(q) 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
Representatives, at its expense, such reports published by the NASD or the Pink
Sheets, LLC relating to price trading of the Public Securities, as the
Representatives shall reasonably request.
13
(r) For a period equal to seven years from the date hereof, the Company
will not take any action or actions which may prevent or disqualify the
Company's use of Form S-1 (or other appropriate form) for the registration of
the Warrants and the Representatives' Warrants under the Act.
(s) The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date, if any, to the extent not paid on the Closing Date, all
expenses incident to the performance of the obligations of the Company under
this Agreement, including but not limited to (i) the preparation, printing,
filing and mailing (including the payment of postage with respect to such
mailing) of the Registration Statement and exhibits thereto, 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 and Final Blue Sky Memoranda and all
amendments and supplements thereto, fees and disbursements of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
retained for such purpose 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 disbursements for the Representatives'
counsel) incurred in registering the Offering with the NASD, (v) costs of
placing "tombstone" advertisements in The Wall Street Journal, The New York
Times and a third publication to be selected by the Representatives not to
exceed $10,000, (vi) fees and disbursements of the transfer and warrant agent,
(vii) the Company's expenses associated with "due diligence" meetings arranged
by the Representatives including a videotape or powerpoint presentation, (viii)
the preparation, binding and delivery of transaction "bibles," in form and style
reasonably satisfactory to the Representatives and transaction lucite cubes or
similar commemorative items in a style and quantity as reasonably requested by
the Representatives, and (ix) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3(s). The Company also agrees that it will engage
and pay for an investigative search firm of the Representatives' choice to
conduct an investigation of the principals of the Company as shall be mutually
selected by the Representatives and the Company. The Representatives 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 herein to be
paid by the Company to the Representatives and others. If the Offering
contemplated by this Agreement is not consummated for any reason whatsoever for
reasons not attributable to the Underwriters, then the Company shall reimburse
the Underwriters in full for their out of pocket accountable expenses actually
incurred by the Representatives. The Representatives shall retain such part of
the nonaccountable expense allowance (described below in Section 3(t))
previously paid, if any, as shall equal its actual out-of-pocket accountable
expenses and refund the balance. If the amount previously paid is insufficient
to cover such actual out-of-pocket accountable expenses, the Company shall
remain liable for and promptly pay any other actual out-of-pocket accountable
expenses.
(t) The Company further agrees that, in addition to the expenses payable
pursuant to Section 3(s), on the Closing Date, it will pay to the
Representatives a nonaccountable expense allowance equal to one and one-half
percent (1.5%) of the gross proceeds received by the Company from the sale of
the Firm Units (less any amounts previously paid) by deduction from the proceeds
of the Offering contemplated herein.
(u) The Company further agrees that, in the event the Representatives
assist the Company in trying to obtain stockholder approval of a proposed
Business Combination, the Company agrees to reimburse the Representatives for
all out-of-pocket expenses, including, but not limited to, "road-show" and due
diligence expenses.
14
(v) 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.
(w) 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.
(x) 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 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.
(y) Except with respect to the agreement between the Company and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ annexed as Exhibit 10.13 to the Registration
Statement, neither the Company, nor, to its knowledge, any of its employees,
directors or stockholders (without the consent of the Representatives) 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.
(z) 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.
(aa) For a period of five years from the Effective Date or until such
earlier time upon which the Company is required to be liquidated, the Company
shall retain ▇▇▇▇ or other independent public accountants reasonably acceptable
to the Representatives.
(bb) 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.
15
(cc) 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.
(dd) 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.
(ee) 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.
(ff) From the Effective Date, and for a period of one hundred twenty (120)
days thereafter, the Company shall not, without the prior written consent of the
Representatives, issue, sell, offer to sell, grant any option for the sale of,
to otherwise dispose of, directly or indirectly, any equity securities or other
securities convertible into, exercisable for, or exchangeable for equity
securities except with respect to the Offering. Further, the Company shall not
designate or issue any of its "blank check" preferred stock prior to or in
connection with the proposed business combination without the prior written
consent of the Representatives.
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:
(a) The Registration Statement has been declared effective on the date of
this Agreement, 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 such 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel to the Underwriters.
(b) By the Effective Date, the Representatives 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.
(c) No order suspending the sale of the Units in any jurisdiction
designated by you pursuant to Section 3(e) hereof shall have been issued on or
before either the Closing Date or the Option Closing Date, and no proceedings
for that purpose shall have been instituted or shall be contemplated.
(d) On the Closing Date, the Representatives shall have received the
favorable opinion of Jenkens & ▇▇▇▇▇▇▇▇▇, P.C. ("Jenkens & ▇▇▇▇▇▇▇▇▇") counsel
to the Company, dated the Closing Date, addressed to the Representatives and in
form and substance satisfactory to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to the effect that:
16
(i) The Company has been duly incorporated 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 it has certified to us
that it owns or leases any properties or maintains employees, except where the
failure to qualify would not have a material adverse effect on the Company.
(ii) All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; except
as described in or expressly contemplated by the Registration Statement, there
are no outstanding rights (including, without limitation, pre-emptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind
relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or options.
The authorized Common Stock conforms in all material respects 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. The
authorized and outstanding capital stock of the Company is as set forth in the
Prospectus.
(iii) The Securities have been duly authorized and, when issued and
paid for, will be validly issued, fully paid and non-assessable. The Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company arising by operation of law or under the Certificate of
Incorporation or Bylaws of the Company. When issued, the Representatives'
Purchase Option, the Representatives' 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 Representatives' Purchase Option, and
the Representatives' Warrants, when issued, in each case, are enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The certificates representing the Securities are in due and
proper form.
(iv) This Agreement has been duly authorized, executed and delivered
by the Company. 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
Representatives' 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.
(v) The execution, delivery and performance of this Agreement, the
Warrant Agreement, the Representatives' Purchase Option, the Escrow Agreement,
the Trust Agreement and the Services Agreement, the issuance and sale of the
17
Securities, the consummation of the transactions contemplated hereby and
thereby, and compliance by the Company with the terms and provisions hereof and
thereof, do not and will not, with or without the giving of notice or the lapse
of time, or both, (a) to such counsel's knowledge, conflict with, or result in a
breach of, any of the terms or provisions of, or constitute a default under, or
result in the creation or modification of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to the
terms of, any mortgage, deed of trust, note, indenture, loan, contract,
commitment or other agreement or instrument filed as an exhibit to the
Registration Statement, (b) result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company, or (c) to such
counsel's knowledge, violate any United States statute or any judgment, order or
decree, rule or regulation applicable to the Company of any court, United States
federal, state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets.
(vi) The Registration Statement, each Preliminary Prospectus and the
Prospectus and any post-effective amendments or supplements thereto (other than
the financial statements included therein, as to which no opinion need be
rendered) each as of their respective dates complied as to form in all material
respects with the requirements of the Act and Regulations. The Securities and
each agreement filed as an exhibit to the Registration Statement conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. No United States federal or state statute or
regulation required to be described in the Prospectus is not described as
required, nor , to such counsel's knowledge, are any contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement not so
described or filed as required.
(vii) The Registration Statement is effective under the Act. To such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act or applicable state
securities laws.
(viii) To such counsel's knowledge, there is no action, suit or
proceeding before or by any court of governmental agency or body, domestic or
foreign, now pending, or threatened against the Company that is required to be
described in the Registration Statement.
In addition, Counsel has participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriters at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed and although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as otherwise set
forth in this opinion), on the basis of the foregoing (relying as to materiality
to a large extent upon facts provided by officers and other representatives of
the Company) no facts have come to the attention of such counsel which should
lead them to believe that either the Registration Statement at the time it
became effective (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A(b)),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus as of its date and as of the Closing Date
contained or contains an untrue statement of a material fact or omitted 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 (it being understood that such counsel need express no
opinion with respect to the exhibits (other than with respect to the summaries
thereof contained in the Registration Statement and Prospectus), financial
statements and schedules and other financial and statistical data included in
the Registration Statement or Prospectus).
18
(e) On each of the Closing Date and the Option Closing Date, if any, the
Representatives shall have received the favorable opinion of Jenkens &
▇▇▇▇▇▇▇▇▇, dated the Closing Date or the Option Closing Date, as the case may
be, addressed to the Representatives and in form and substance reasonably
satisfactory to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, confirming as of the Closing Date and, if
applicable, the Option Closing Date, the statements made by Jenkens & ▇▇▇▇▇▇▇▇▇
in its opinion delivered on the Effective Date.
In rendering its opinion, Jenkens & ▇▇▇▇▇▇▇▇▇ may rely (i) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent Jenkens & ▇▇▇▇▇▇▇▇▇
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 ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇) of other counsel reasonably acceptable to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 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 Jenkens & ▇▇▇▇▇▇▇▇▇ and any
opinion relied upon by Jenkens & ▇▇▇▇▇▇▇▇▇ 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.
(f) 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 Representatives 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ from ▇▇▇▇ 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 November 30, 2004
balance sheet included in the Registration Statement, other than as set forth in
or contemplated by the Registration Statement, or, if there was any decrease,
setting forth the amount of such decrease, and (c) during the period from
November 30, 2004 to a specified date not later than five days prior to the
19
Effective Date, Closing Date or Option Closing Date, as the case may be, there
was any decrease in revenues, net earnings or net earnings per share of Common
Stock, in each case as compared with the corresponding period in the preceding
year and as compared with the corresponding period in the preceding quarter,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior to the
Effective Date, the amount of liabilities of the Company (including a break-down
of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding five
year period brought to the attention of the Company's management any reportable
condition related to internal structure, design or operation as defined in the
Statement on Auditing Standards No. 60 "Communication of Internal Control
Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the transaction
contemplated hereby as you may reasonably request.
(g) At each of the Closing Date and the Option Closing Date, if any, the
Representatives 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 (i) the Company has performed all
covenants and agreements 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; (ii) the
conditions set forth in Section 4(h) hereof have been satisfied as of such date;
(iii) 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; (iv) they have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue statement of a
material fact and did not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (B) since the
Effective Date no event has occurred which should have been set forth in a
supplement or otherwise required an amendment to the Registration Statement or
the Prospectus; and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and, to their knowledge, no proceedings
for that purpose have been instituted or are pending under the Act. In addition,
the Representatives will have received such other and further certificates of
officers of the Company as the Representatives may reasonably request.
(h) At each of the Closing Date and the Option Closing Date, if any, the
Representatives shall have received a certificate of the Company signed by the
20
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 copies of
the by-laws and certificate of incorporation of the Company attached thereto 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.
(i) 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 the business
activities, financial or otherwise, of the Company from the latest dates as of
which such condition is set forth in the Registration Statement and Prospectus,
(ii) no action suit or proceeding, at law or in equity, shall have been pending
or threatened against the Company or any Initial Stockholder before or by any
court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations 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 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.
(j) On the Closing Date, the Company shall have delivered to the
Representatives executed copies of the Escrow Agreement, the Trust Agreement,
the Warrant Agreement, the Services Agreement, the Warrant Purchase Agreement,
all of the Insider Letters and lock-up letters executed by the officers and
directors and their affiliates in such form acceptable to the Representatives.
(k) On the Closing Date, the Company shall have delivered to the
Representatives executed copies of the Representatives' Purchase Option.
(l) 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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(k), or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
(m) On the Closing Date, the Representatives shall have received the
Secondary Market Trading Survey from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
5. Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each of the Underwriters, and each dealer selected
21
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 Representatives' 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 Units under the securities laws thereof or filed with the
Commission, any state securities commission or agency, Nasdaq or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to an Underwriter
by or on behalf of such Underwriter expressly for use in any Preliminary
Prospectus, the Registration Statement or Prospectus, or any amendment or
supplement thereof, or in any application, as the case may be. With respect to
any untrue statement or omission or alleged untrue statement or omission made in
the Preliminary Prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of any Underwriter to the extent that any loss,
liability, claim, damage or expense of such Underwriter results from the fact
that a copy of the Prospectus was not given or sent to the person asserting any
such loss, liability, claim or damage at or prior to the written confirmation of
sale of the Securities to such person as required by the Act and the
Regulations, and if the untrue statement or omission has been corrected in the
Prospectus, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with its obligations under Section 3(f) hereof.
The Company agrees promptly to notify the Representatives 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.
(b) 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(a), such Underwriter or Selected Dealer shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the reasonable approval of such Underwriter or
Selected Dealer, as the case may be) and payment of actual expenses. Such
Underwriter, Selected Dealer or controlling person shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Underwriter, Selected Dealer or
controlling person unless (i) the employment of such counsel at the expense of
the Company shall have been authorized in writing by the Company in connection
with the defense of such action, or (ii) the Company shall not have employed
counsel to have charge of the defense of such action, or (iii) such indemnified
party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of not more
than one additional firm of attorneys selected by the Underwriter, Selected
Dealer and/or controlling person shall be borne by the Company. Notwithstanding
22
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.
(c) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company, its directors, officers and employees and agents who
control the Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act against any and all loss, liability, claim, damage and expense
described in the foregoing indemnity from the Company to the several
Underwriters, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application, in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
such Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5(b).
(e) 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(e), 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.
(f) Within fifteen days after receipt by any party to this Agreement (or
its representatives) 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
23
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 representatives 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(f) are several and not joint.
6. Default by an Underwriter.
(a) 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.
(b) In the event that the default addressed in Section 6(a) 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 terminate without liability on the part of the Company (except as provided
in Sections 3(s) 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.
(c) 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 Representatives. For a period of five years from the
Effective Date, upon notice from the Representatives to the Company, the
Representatives shall have the right to send a representative (who need not be
24
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 the Representatives and its counsel in connection with such
representative's attendance at meetings of the Board of Directors; and provided
further that upon written notice to the Representatives, the Company may exclude
the representative from meetings where, in the written opinion of counsel for
the Company, the representative's presence would destroy the attorney-client
privilege. The Company agrees to give the Representatives written notice of each
such meeting and to provide the Representatives 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 the Representatives for his
reasonable out-of-pocket expenses incurred in connection with its attendance at
the meeting, including but not limited to, food, lodging and transportation.
8 Additional Covenants.
(a) The Company hereby agrees that until the Company consummates a Business
Combination, it shall not issue any shares of Common Stock or any options or
other securities convertible into Common Stock, or any shares of Preferred Stock
which participate in any manner in the Trust Fund or which vote as a class with
the Common Stock on a Business Combination.
(b) 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 the
Target Business or the vendor executes a waiver letter in the form attached
hereto as Exhibit A and B, respectively. Furthermore, each officer and director
of the Company shall execute a waiver letter in the form attached hereto as
Exhibit C.
(c) The Company shall not take any action or omit to take any action which
would cause a breach of any of the Insider Letters executed between each Initial
Stockholder and the Representatives and will not allow any amendments to, or
waivers of, such Insider Letters without the prior written consent of the
Representatives.
(d) 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 By-Laws. Prior to the consummation of a Business Combination,
the Company will not amend its Certificate of Incorporation with the prior
written consent of the Representatives.
(e) The Company shall provide counsel to the Representatives 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.
(f) 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." With respect to the Business Combination Vote, the Company
shall cause all of the Initial Stockholders to vote the shares of Common Stock
owned by them immediately prior to this Offering in accordance with the vote of
25
the holders of a majority of the IPO Shares. At the time the Company seeks
approval of any potential Business Combination, the Company will offer each of
holders of the Company's Common Stock issued in this Offering ("IPO Shares") the
right to convert their IPO Shares at a per share price equal to the amount in
the Trust Fund (inclusive of any interest income therein) on the record date
("Conversion Price") for determination of stockholders entitled to vote upon the
proposal to approve such Business Combination ("Record Date") divided by the
total number of IPO Shares. The Company's "Liquidation Value" shall mean the
Company's book value, as determined by the Company and audited by ▇▇▇▇. In no
event, however, will the Company's Liquidation Value be less than the Trust
Fund, inclusive of any net interest income thereon. If holders of less than 20%
in interest of the Company's IPO Shares vote against such approval of a Business
Combination, the Company may, but will not be required to, proceed with such
Business Combination. If the Company elects to so proceed, it will convert
shares, based upon the Conversion Price, from those holders of IPO Shares who
affirmatively requested such conversion and who voted against the Business
Combination. Only holders of IPO Shares shall be entitled to receive liquidating
distributions and the Company shall pay no liquidating distributions with
respect to any other shares of capital stock of the Company. If holders of 20%
or more in interest of the IPO Shares vote against approval of any potential
Business Combination, the Company will not proceed with such Business
Combination and will not convert such shares.
(i) 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-5l-1 under the Exchange Act
during such period.
(j) The Company shall cause each of the Initial Stockholders to agree that,
in order to minimize potential conflicts of interest which may arise from
multiple affiliations, the Initial Stockholders will present to the Company for
its consideration, prior to presentation to any other person or company, any
suitable opportunity to acquire an operating business, until the earlier of the
consummation by the Company of a Business Combination, the liquidation of the
Company or until such time as the Initial Stockholders cease to be an officer or
director of the Company, subject to any pre-existing fiduciary obligations the
Initial Stockholders might have.
(k) The Company agrees that the initial Target Business that it acquires
must have a fair market value equal to at least 80% of the Company's net assets
at the time of such acquisition. The fair market value of such business must be
determined by the Board of Directors of the Company based upon standards
generally accepted by the financial community, such as actual and potential
sales, earnings and cash flow and book value. If the Board of Directors of the
Company is not able to independently determine that the target business has a
fair market value of at least 80% of the Company's fair market value at the time
of such acquisition, the Company will obtain an opinion from an unaffiliated,
independent investment banking firm which is a member of the NASD with respect
to the satisfaction of such criteria. The Company is not required to obtain an
opinion from an investment banking firm as to the fair market value if the
Company's Board of Directors independently determines that the Target Business
does have sufficient fair market value.
(l) The Company agrees that, until the consummation of a Business
Combination as contemplated in the Prospectus, in the event that it intends to
engage any person or entity, regardless of NASD association or affiliation, to
assist it in its search for a merger candidate or to provide any other merger
and acquisition services, the Company will, prior to such engagement (a) provide
the following information to the Representatives (i) complete details of all
26
services and copies of agreements governing said services and (ii) any documents
or materials reasonably requested by the Representatives, such that the
Representatives may provide to the NASD a justification as to why the person or
entity providing the merger and acquisition services should not be considered an
"underwriter and related person" as defined in Rule 2710(a)(6) of the NASD
Conduct Rules; (b) make proper disclosure of such arrangement or potential
arrangement in the Registration Statement and (c) and cooperate with the
Representatives in submitting such information to the NASD for review and
approval. The Company agrees that it will not enter into any such engagement
without the prior written approval of the Representatives.
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 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.
(a) This Agreement shall become effective on the Effective Date at the
time the Registration Statement is declared effective by the Commission.
(b) 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, and
if not otherwise qualified by materiality, there is a material adverse effect or
(viii) if the Representatives 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
Representatives' 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.
(c) 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(s) hereof.
27
(d) 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.
(a) 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 Representatives:
I-Bankers Securities Incorporated
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Newbridge Securities Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, President
Newbridge Securities Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President Investment Banking
Copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇▇, Esq.
If to the Company:
Coastal Bancshares Acquisition Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Copy to: Jenkens & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) 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.
(c) This Agreement may only be amended by a written instrument executed by
each of the parties hereto.
(d) 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.
(e) This Agreement shall inure solely to the benefit of and shall be
binding upon the Representatives, the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
28
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.
(f) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to
conflict of laws. The Company hereby agrees that any action, proceeding or claim
against it arising out of, relating in any way to this Agreement shall be
brought and enforced in the courts of the State of New York of the United States
of America for the Southern District of New York, and irrevocably submits to
such jurisdiction, which jurisdiction shall be exclusive. The Company hereby
waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 11 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.
(g) 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.
(h) 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.
[Balance of page intentionally left blank]
29
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,
COASTAL BANCSHARES ACQUISITION CORP.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
Accepted on the date first above written.
I-BANKERS SECURITIES INCORPORATED
Acting severally on behalf of itself and as one
of the Representatives of the several Underwriters
named in Schedule I annexed hereto
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
30
SCHEDULE I
COASTAL BANCSHARES ACQUISITION CORP.
4,800,000 UNITS
Underwriter Number of Firm Units to be Purchased
----------- ------------------------------------
I-Bankers Securities Incorporated
Newbridge Securities Corporation
Total 4,800,000
31
EXHIBIT A
Coastal Bancshares Acquisition Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
Reference is made to the Final Prospectus of Coastal Bancshares Acquisition
Corp ("Coastal"), dated _______________, 2005 ("Prospectus"). Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to them
in Prospectus.
We have read the Prospectus and understand that Coastal has established the
Trust Fund, initially in an amount of $__________ for the benefit of the Public
Stockholders and that Coastal may disburse monies from the Trust Fund only (i)
to the Public Stockholders in the event of the redemption of their shares or the
liquidation of Coastal or (ii) to Coastal after it consummates a Business
Combination.
For and in consideration of Coastal agreeing to evaluate the undersigned
for purposes of consummating a Business Combination with it, the undersigned
hereby 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 hereby waives any Claim
it may have in the future as a result of, or arising out of, any negotiations,
contracts or agreements with Coastal and will not seek recourse against the
Trust Fund for any reason whatsoever.
----------------------------------------
Print Name of Officer/Director
----------------------------------------
Authorized Signature of Officer/Director
32
EXHIBIT B
Coastal Bancshares Acquisition Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
Reference is made to the Final Prospectus of Coastal Bancshares Acquisition
Corp. ("Coastal"), dated __________, 2005 ("Prospectus"). Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to them in
Prospectus.
We have read the Prospectus and understand that Coastal has established the
Trust Fund, initially in an amount of $________________ for the benefit of the
Public Stockholders and that Coastal may disburse monies from the Trust Fund
only (i) to the Public Stockholders in the event of the redemption of their
shares or the liquidation of Coastal or (ii) to Coastal after it consummates a
Business Combination.
For and in consideration of Coastal engaging the services of the
undersigned, the undersigned hereby 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 hereby waives any Claim it may have in the future as a result of,
or arising out of, any contracts or agreements with Coastal and will not seek
recourse against the Trust Fund for any reason whatsoever.
----------------------------------------
Print Name of Officer/Director
----------------------------------------
Authorized Signature of Officer/Director
33
EXHIBIT C
Coastal Bancshares Acquisition Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
The undersigned officer or director of Coastal Bancshares Acquisition Corp.
("Coastal") hereby acknowledges that Coastal has established the Trust Fund,
initially in an amount of $_________ for the benefit of the Public Stockholders
and that Coastal may disburse monies from the Trust Fund only (i) to the Public
Stockholders in the event of the redemption of their shares or the liquidation
of Coastal or (ii) to Coastal after it consummates a Business Combination.
The undersigned hereby 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 hereby waives any Claim it may have in the future as a result of, or arising
out of, any contracts or agreements with Coastal and will not seek recourse
against the Trust Fund for any reason whatsoever.
Notwithstanding the foregoing, such waiver shall not apply to any shares
acquired by the undersigned in the public market.
----------------------------------------
Print Name of Officer/Director
----------------------------------------
Authorized Signature of Officer/Director
34