UNDERWRITING AGREEMENT between ARGYLE SECURITY ACQUISITION CORPORATION and RODMAN & RENSHAW, LLC, as Representative of the Underwriters named on Schedule I hereto Dated: January __, 2006
between
and
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC, as Representative
of
the Underwriters named on Schedule I hereto
Dated:
January __, 2006
3,625,000
UNITS
New
York,
NewYork
January
__, 2006
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
as
Representative of the Underwriters
named
on
Schedule
I
hereto
Dear
Sirs:
The
undersigned, ARGYLE SECURITY ACQUISITION CORPORATION, a Delaware corporation
(“Company”),
hereby confirms its agreement with ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC (being referred to
herein variously as “you,”
“▇▇▇▇▇▇”
or the
“Representative”)
and
with the other underwriters named on Schedule I hereto for which ▇▇▇▇▇▇ is
acting as Representative (the Representative and the other Underwriters being
collectively called the “Underwriters”
or,
individually, an “Underwriter”)
as
follows:
1. Purchase
and Sale of Securities.
1.1. Firm
Securities.
1.1.1. Purchase
of Firm Units.
On the
basis of the representations and warranties herein contained, but subject
to the
terms and conditions herein set forth, the Company agrees to issue and sell,
severally and not jointly, to the several Underwriters, an aggregate
of 3,625,000 units (“Firm
Units”)
of the
Company at a purchase price (net of discounts and commissions) of $7.52 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 $7.52 per Firm Unit. The Firm Units are to
be
offered initially to the public (“Offering”)
at the
offering price of $8.00 per Firm Unit. Each Firm Unit consists of one share
of
the Company’s common stock, par value $.0001 per share (“Common
Stock”),
and
one warrant (“Warrants”).
The
shares of Common Stock and the Warrants included in the Firm Units will not
be
separately transferable until __ days after the effective date (“Effective
Date”)
of the
Registration Statement (as defined in Section 2.1.1 hereof) unless the
Representative informs the Company of its decision to allow earlier separate
trading, but in no event will the Representative 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 $5.50 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 or stock acquisition or other
similar business combination consummated by the Company with an operating
business (as described more fully in the Registration Statement).
1.1.2. Payment
and Delivery.
Delivery and payment for the Firm Units shall be made at 10:00 A.M., New
York
time, on the third business day following the Effective Date (or the fourth
business day following the Effective Date, if the Registration Statement
is
declared effective after 4:30 p.m.) or at such earlier time as shall be agreed
upon by the Representative and the Company at the offices of the Representative
or at such other place as shall be agreed upon by the Representative and
the
Company. The hour and date of delivery and payment for the Firm Units are
called
“Closing
Date.”
Payment for the Firm Units shall be made on the Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House funds, payable
as follows: $28,130,000 of the proceeds received by the Company for the Firm
Units shall be deposited in the trust fund established by the Company for
the
benefit of the public stockholders as described in the Registration Statement
(“Trust
Fund”)
pursuant to the terms of an Investment Management Trust Agreement (“Trust
Agreement”)
and
the remaining proceeds shall be paid to the order of the Company upon delivery
to you (or through the facilities of the Depository Trust Company (“DTC”)
of
certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units) for the account of the Underwriters. The Firm
Units
shall be registered in such name or names and in such authorized denominations
as the Representative may request in writing at least two full business days
prior to the Closing Date. The Company will permit the Representative to
examine
and package the Firm Units for delivery, at least one full business day prior
to
the Closing Date. The Company shall not be obligated to sell or deliver any
of
the Firm Units except upon tender of payment by the Representative for all
the
Firm Units.
1.1.3. Escrow
of a Portion of Underwriters’ Discount.
On the
Closing Date, ▇▇▇▇▇▇ and I-Bankers Securities, Inc., one of the Underwriters
(together with ▇▇▇▇▇▇, the “Co-Managers”)
agree
to deposit into the Trust Fund a portion of the discount equal to $0.36 per
Firm
Unit in the Offering (the “Escrowed
Fees”)
until
the earlier of the completion of a Business Combination or the liquidation
of
the Trust Fund. Upon the consummation of a Business Combination, the Co-Managers
shall promptly receive the Escrowed Fees along with any interest accrued
thereon
(if any, net of taxes payable). In the event that the Company is unable to
consummate a Business Combination and American Stock Transfer & Trust
Company, the trustee of the Trust Fund, commences liquidation of the Trust
Fund,
the Co-Managers hereby agree to the following: (i) to forfeit any rights
or
claims to the Escrowed Fees and any interest accrued thereon; and (ii) that
the
Escrowed Fees shall be distributed on a pro-rata basis among the holders
of the
Public Securities (defined below) along with any interest accrued
thereon.
1.2. Over-Allotment
Option.
1.2.1. Option
Units.
For the
purposes of covering any over-allotments in connection with the distribution
and
sale of the Firm Units, the Underwriters are hereby granted, severally and
not
jointly, an option to purchase up to an additional 543,750 units from
the
Company (“Over-Allotment
Option”).
Such
additional 543,750 units are hereinafter referred to as “Option
Units.”
The
Firm Units and the Option Units are hereinafter collectively referred to
as the
“Units,”
and
the Units, the shares of Common Stock and the Warrants included in the Units
and
the shares of Common Stock issuable upon exercise of the Warrants are
hereinafter referred to collectively as the “Public
Securities.”
The
purchase price to be paid for the Option Units will be the same price per
Option
Unit as the price per Firm Unit set forth in Section 1.1.1 hereof.
2
1.2.2. Exercise
of Option.
The
Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised
by the Representative as to all (at any time) or any part (from time to time)
of
the Option Units within 45 days after the Effective Date. The Underwriters
will
not be under any obligation to purchase any Option Units prior to the exercise
of the Over-allotment Option. The Over-allotment Option granted hereby may
be
exercised by the giving of oral notice to the Company by the Representative,
which must be confirmed in writing by overnight mail or facsimile transmission
setting forth the number of Option Units to be purchased and the date and
time
for delivery of and payment for the Option Units, which will not be later
than
five full business days after the date of the notice or such other time as
shall
be agreed upon by the Company and the Representative, at the offices of the
Representative or at such other place as shall be agreed upon by the Company
and
the Representative. If such delivery and payment for the Option Units does
not
occur on the Closing Date, the date and time of the Closing for such Option
Units will be as set forth on the notice (hereinafter the “Option
Closing Date”).
Upon
exercise of the Over-allotment Option, the Company will become obligated
to
convey to the Underwriters, and, subject to the terms and conditions set
forth
herein, the Underwriters will become obligated to purchase, the number of
Option
Units specified in such notice.
1.2.3. Payment
and Delivery.
Payment
for the Option Units shall be made on the Option Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House funds, payable
as follows: $7.52 per Option Unit shall be deposited in the Trust Fund pursuant
to the Trust Agreement and the remaining proceeds shall be paid to the order
of
the Company upon delivery to you (or through the facilities of DTC) of
certificates (in form and substance satisfactory to the Underwriter)
representing the Option Units for the account of the Underwriters. The
certificates representing the Option Units to be delivered will be in such
denominations and registered in such names as the Representative requests
not
less than two full business days prior to the Closing Date or the Option
Closing
Date, as the case may be, and will be made available to the Representative
for
inspection, checking and packaging at the aforesaid office of the Company’s
transfer agent or correspondent not less than one full business day prior
to
such Closing Date.
1.3 Private
Placement to Officers and Directors and Affiliates.
Certain officers and directors of the Company and their affiliates purchased
from the Company pursuant to the Placement Unit Purchase Agreement (as defined
in Section 2.23.2 hereof) an aggregate of 125,000 units identical to the
Units
(the “Placement
Units”)
at a purchase price of $8.00 per Placement Unit in a private placement that
occurred immediately prior to the entering into of this agreement (the
“Private
Placement”).
The Placement Units, the shares of Common Stock and the Warrants included
in the
Placement Units (the “Placement
Warrants”)
and the shares of Common Stock issuable upon exercise of the Placement Warrants
are hereinafter referred to collectively as the “Placement
Securities.”
1.4. Representative’s
Purchase Option.
1.4.1. Purchase
Option.
The
Company hereby agrees to issue and sell to the Representative (and/or their
designees) on the Effective Date an option (“Representative’s
Purchase Option”)
for
the purchase of an aggregate of 187,500 units (“Representative’s
Units”)
for an
aggregate purchase price of $100.00. The Representative’s Purchase Option shall
be exercisable, in whole or in part, commencing on the later of the consummation
of a Business Combination or one year from the Effective Date and expiring
on
the five-year anniversary of the Effective Date at an initial exercise price
per
Representative’s Unit of $8.80, which is equal to one hundred and ten percent
(110%) of the initial public offering price of a Unit. The Representative’s
Purchase Option, the Representative’s Units, the Warrants included in
Representative’s Units (the “Representative’s
Warrants”)
and
the shares of Common Stock issuable upon exercise of the Representative’s
Warrants are hereinafter referred to collectively as the “Representative’s
Securities.”
The
Public Securities and the Representative’s Securities are hereinafter referred
to collectively as the “Securities.”
The
Representative understands and agrees that there are significant restrictions
against transferring the Representative’s Purchase Option during the first year
after the Effective Date and by its acceptance thereof shall agree that it
will
not, assign, pledge or hypothecate the Representative’s Purchase Option, or any
potion thereof, for a period of one year following the Effective Date to
anyone
other than (i) ▇▇▇▇▇▇ or an Underwriter or a selected dealer in connection
with
the Offering, or (ii) a bona fide officer or partner of ▇▇▇▇▇▇ or of any
such
Underwriter or selected dealer.
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1.4.2. Delivery
and Payment.
Delivery and payment for the Representative’s Purchase Option shall be made on
the Closing Date. The Company shall deliver to the Representative, upon payment
therefor, certificates for the Representative’s Purchase Option in the name or
names and in such authorized denominations as the Representative may
request.
1.5 Contingent
Portion of Underwriters’ Discount.
The Representative, on behalf of itself and the other Underwriters, agrees
that
4.5% of the gross proceeds from the sale of the Firm Units any Option Units
($1,305,000, or $1,500,750 if the over-allotment option is exercised in full)
(the “Contingent
Discount”)
will be deposited in and held in the Trust Fund and payable to the Underwriters,
along with any interest accrued thereon (net of taxes payable), in respect
of
any IPO Shares (defined in Section 8.6 hereof) which are not redeemed pursuant
to Section 8.6 hereof, upon the consummation of a Business Combination. The
Representative, on behalf of itself and the other Underwriters, agrees that
the
several Underwriters shall forfeit any rights or claims to the Contingent
Discount and any interest accrued thereon (net of taxes payable) in respect
of
any IPO Shares that are redeemed pursuant to Section 8.6 hereof. In addition,
in
the event that the Company is unable to consummate a Business Combination
and
American Stock Transfer & Trust Company (“AST”),
the trustee of the Trust Fund, commences liquidation of the Trust Fund as
provided in the Trust Agreement, the Representative, on behalf of itself
and the
other Underwriters, agrees that (i) the several Underwriters shall forfeit
any
rights or claims to the Contingent Discount and any interest accrued thereon
(net of taxes payable); and (ii) the Contingent Discount, together with the
all
other amounts on deposit in the Trust Fund, and any accrued interest thereon
(net of taxes payable), shall be distributed on a pro-rata basis among the
holders of the shares of Common Stock included in the Units sold in the
Offering.
2. Representations
and Warranties of the Company.
The
Company represents and warrants to the Underwriters as follows:
2.1. Filing
of Registration Statement.
2.1.1. Pursuant
to the Act.
The
Company has filed with the Commission a registration statement on Form S-1
(File
No. 333-126569),
and
one or more amendments thereto, and related preliminary prospectuses for
the
registration under the Securities Act of 1933, as amended (the “Act”),
of
the offering and sale of the Securities, which registration statement, as
so
amended (including post-effective amendments, if any), has been declared
effective by the Commission and copies of which have heretofore been delivered
to the Underwriters. The conditions for use of Form S-1 to register the Offering
under the Act, as set forth in the General Instructions to such Form, have
been
satisfied. The registration statement, as amended at the time it became
effective, including the prospectus, financial statements, schedules, exhibits
and other information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the “Registration
Statement.”
If the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional Securities of any type (a “Rule
462(b) Registration Statement”),
then,
unless otherwise specified, any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration Statement.
Other than a Rule 462(b) Registration Statement, which, if filed, becomes
effective upon filing, no other document with respect to the Registration
Statement has heretofore been filed with the Commission. The offering and
sale
of all of the Securities have been registered under the Securities Act pursuant
to the Registration Statement or, if any Rule 462(b) Registration Statement
is
filed, will be duly registered under the Act with the filing of such Rule
462(b)
Registration Statement. The Company, if required by the Securities Act and
the
rules and regulations of the Commission (the “Regulations”),
proposes to file the Prospectus with the Commission pursuant to Rule 424(b)
under the Securities Act (“Rule
424(b)”).
The
prospectus, in the form in which it is to be filed with the Commission pursuant
to Rule 424(b), or, if the prospectus is not to be filed with the Commission
pursuant to Rule 424(b), the prospectus in the form included as part of the
Registration Statement at the time the Registration Statement became effective,
is hereinafter referred to as the “Prospectus,”
except
that if any revised prospectus or prospectus supplement shall be provided
to the
Underwriters by the Company for use in connection with the Offering which
differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to
Rule
424(b)), the term “Prospectus” shall also refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is
first
provided to the Underwriters for such use. Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or
filed
with the Commission pursuant to Rule 424 under the Act (including, without
limitation, the Sale Preliminary Prospectus (as hereinafter defined)) is
hereafter called a “Preliminary
Prospectus.”
The
prospectus, subject to completion, dated November 23, 2005, is hereinafter
referred to as the “Sale
Preliminary Prospectus.”
Any
reference herein to the Registration Statement, any Preliminary Prospectus
or
the Prospectus shall be deemed to refer to and include the exhibits and other
documents (if any) incorporated by reference therein pursuant to the Regulations
on or before the effective date of the Registration Statement, the date of
such
Preliminary Prospectus or the date of the Prospectus, as the case may be.
Any
reference herein to the terms “amend”, “amendment” or “supplement” with respect
to the Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include: (i) the filing of any document under
the Securities Exchange Act of 1934, as amended (together with the Rules
and
Regulations promulgated thereunder (the “Exchange
Act”)),
after the effective date of the Registration Statement, the date of such
Preliminary Prospectus or the date of the Prospectus, as the case may be,
which
is incorporated therein by reference, and (ii) any such document so filed.
All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus and the Prospectus, or any
amendments or supplements to any of the foregoing shall be deemed to include
any
copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System (“▇▇▇▇▇”).
4
2.1.2. Pursuant
to the Exchange Act.
The
Company has filed with the Commission a Form 8-A (File Number 000-51639)
providing for the registration under the Securities Exchange Act of 1934,
as
amended (“Exchange
Act”),
of
the Units, the Common Stock and the Warrants. The registration of the Units,
Common Stock and Warrants under the Exchange Act has been declared effective
by
the Commission on the date hereof.
2.2. No
Stop Orders, Etc.
Neither
the Commission nor, to the best of the Company’s knowledge, any state regulatory
authority has issued any order or threatened to issue any order preventing
or
suspending the use of any Preliminary Prospectus or has instituted or, to
the
best of the Company’s knowledge, threatened to institute any proceedings with
respect to such an order.
2.3. Disclosures
in Registration Statement.
2.3.1. 10b-5
Representation.
At the
time the Registration Statement became effective and at all times subsequent
thereto up to the Closing Date and the Option Closing Date, if any, the
Registration Statement and the Prospectus will contain all material statements
that are required to be stated therein in accordance with the Act and the
Regulations, and will in all material respects conform to the requirements
of
the Act and the Regulations and 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 have been corrected in the Prospectus to comply in all material
respects with the applicable provisions of the Act and the Regulations and
did
not and will not contain an untrue statement of a material fact or omit to
state
any material fact required to be stated therein or necessary in order to
make
the statements therein, in light of the circumstances under which they were
made, not misleading. The representation and warranty made in this Section
2.3.1
does not apply to statements made or statements omitted in reliance upon
and in
conformity with written information furnished to the Company with respect
to the
Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto,
which
information, it is agreed, shall consist solely of the names of the several
Underwriters and the information with respect to dealers’ concessions and
reallowances contained in the section of the Prospectus entitled
“Underwriting,”
and the identity of counsel to the Underwriters contained in the section
of the
Prospectus entitled “Legal Matters.”
5
2.3.2. Disclosure
of Agreements.
The
agreements and documents described in the Registration Statement and the
Prospectus conform to the descriptions thereof contained therein and there
are
no agreements or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits
to
the Registration Statement, that have not been so described or filed. Each
agreement or other instrument (however characterized or described) to which
the
Company is a party or by which its property or business is or may be bound
or
affected and (i) that is referred to in the Prospectus, or (ii) is material
to
the Company’s business, has been duly and validly executed by the Company, is in
full force and effect and is enforceable against the Company and, to the
Company’s knowledge, the other parties thereto, in accordance with its terms,
except (x) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally, (y) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (z) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, and none of such agreements or instruments
has been assigned by the Company, and neither the Company nor, to the best
of
the Company’s knowledge, any other party is in breach or default thereunder and,
to the best of the Company’s knowledge, no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a breach
or
default thereunder. To the best of the Company’s knowledge, performance by the
Company of the material provisions of such agreements or instruments will
not
result in a violation of any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its assets or
businesses, including, without limitation, those relating to environmental
laws
and regulations.
2.3.3. Prior
Securities Transactions.
No
securities of the Company have been sold by the Company or by or on behalf
of,
or for the benefit of, any person or persons controlling, controlled by,
or
under common control with the Company within the three years prior to the
date
hereof, except as disclosed in the Registration Statement.
2.3.4. Regulations.
The
disclosures in the Registration Statement concerning the effects of Federal,
State and local regulation on the Company’s business purpose as currently
contemplated are correct in all material respects and do not omit to state
a
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
6
2.4. Changes
After Dates in Registration Statement.
2.4.1. No
Material Adverse Change.
Since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise specifically stated therein,
(i) there has been no material adverse change in the condition, financial
or
otherwise, or business prospects of the Company, (ii) there have been no
material transactions entered into by the Company, other than as contemplated
pursuant to this Agreement, (iii) no member of the Company’s board of directors
or management has resigned from any position with the Company and
(iv) no event or occurrence has taken place which materially impairs, or
would
likely materially impair, with the passage of time, the ability of the members
of the Company’s board of directors or management to act in their capacities
with the Company as described in the Registration Statement, the Sale
Preliminary Prospectus and the Prospectus.
.
2.4.2. Recent
Securities Transactions, etc.
Subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, the Company has not (i) issued
any
securities or incurred any material liability or obligation, direct or
contingent, for borrowed money; or (ii) declared or paid any dividend or
made
any other distribution on or in respect to its capital stock.
2.5. Independent
Accountants.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP (“GGK”),
whose
report is filed with the Commission as part of the Registration Statement,
are
independent accountants as required by the Act and the Regulations. GGK has
not,
during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term
is used
in Section 10A(g) of the Exchange Act.
2.6. Financial
Statements.
The
financial statements, including the notes thereto and supporting schedules
included in the Registration Statement and Prospectus fairly present the
financial position, the results of operations and the cash flows of the Company
at the dates and for the periods to which they apply; and such financial
statements have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved; and the
supporting schedules included in the Registration Statement present fairly
the
information required to be stated therein. The Registration Statement discloses
all material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company
with
unconsolidated entities or other persons that may have a material current
or
future effect on the Company’s financial condition, changes in financial
condition, results of operations, liquidity, capital expenditures, capital
resources, or significant components of revenues or expenses. There
are no pro forma or as adjusted financial statements which are required to
be
included in
the Registration Statement, the Sale Preliminary Prospectus and
the Prospectus in accordance with Regulation
S-X which have not been included as so required.
2.7. Authorized
Capital; Options; Etc.
The
Company had at the date or dates indicated in the Prospectus duly authorized,
issued and outstanding capitalization as set forth in the Registration Statement
and the Prospectus. Based on the assumptions stated in the Registration
Statement and the Prospectus, the Company will have on the Closing Date the
adjusted stock capitalization set forth therein. Except as set forth in,
or
contemplated by, the Registration Statement and the Prospectus, on the Effective
Date and on the Closing Date, there will be no options, warrants, or other
rights to purchase or otherwise acquire any authorized but unissued shares
of
Common Stock of the Company or any security convertible into shares of Common
Stock of the Company, or any contracts or commitments to issue or sell shares
of
Common Stock or any such options, warrants, rights or convertible
securities.
7
2.8. Valid
Issuance of Securities; Etc.
2.8.1. Outstanding
Securities.
All
issued and outstanding securities of the Company (including,
without limitation, the Placement Securities) have
been
duly authorized and validly issued and are fully paid and non-assessable;
the
holders thereof have no rights of rescission with respect thereto, and are
not
subject to personal liability by reason of being such holders; and none of
such
securities were issued in violation of the preemptive rights of any holders
of
any security of the Company or similar contractual rights granted by the
Company. The authorized Common Stock conforms in all material respects to
all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock were at
all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or, based in part on the representations and
warranties of the purchasers of such shares of Common Stock, exempt from
such
registration requirements.
2.8.2. Securities
Sold Pursuant to this Agreement.
The
Public Securities have been duly authorized and, when issued and paid for,
will
be validly issued, fully paid and non-assessable; the holders thereof are
not
and will not be subject to personal liability by reason of being such holders;
the Securities are not and will not be subject to the preemptive rights of
any
holders of any security of the Company or similar contractual rights granted
by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements
with
respect thereto contained in the Registration Statement. When issued, the
Representative’s Purchase Option, the Representative’s Warrant, and the Warrants
will constitute valid and binding obligations of the Company to issue and
sell,
upon exercise thereof and payment of the respective exercise prices therefor,
the number and type of securities of the Company called for thereby in
accordance with the terms thereof and such Representative’s Purchase Option, the
Representative’s Warrants, and Warrants are enforceable against the Company in
accordance with their respective terms, except (i) as such enforceability
may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally; (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws; and (iii) that the remedy of specific performance and injunctive and
other
forms of equitable relief may be subject to the equitable defenses and to
the
discretion of the court before which any proceeding therefor may be brought.
The
shares of Common Stock issuable upon exercise of the Warrants have been reserved
for issuance upon the exercise of the Warrants and, when issued in accordance
with the terms of the Warrants, will be duly and validly authorized, validly
issued, fully paid and non-assessable, and the holders thereof are not and
will
not be subject to personal liability by reason of being such
holders.
2.8.3 Placement
Warrants.
The
Placement Warrants 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 Placement 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 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
shares of Common Stock issuable upon exercise of the Placement Warrants have
been reserved for issuance upon the exercise of the Placement Warrants and,
when
issued in accordance with the terms of the Placement Warrants, will be duly
and
validly authorized, validly issued, fully paid and non-assessable, and the
holders thereof are not and will not be subject to personal liability by
reason
of being such holders.
8
2.8.4 No
Integration.
Neither
the Company nor any of its affiliates has, prior to the date hereof, made
any
offer or sale of any securities which are required to be “integrated” pursuant
to the Act or the Regulations with the offer and sale of the Securities pursuant
to the Registration Statement.
2.9. Registration
Rights of Third Parties.
Except
as set forth in the Prospectus, no holders of any securities of the Company
or
any rights exercisable for or convertible or exchangeable into securities
of the
Company have the right to require the Company to register any such securities
of
the Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10. Validity
and Binding Effect of Agreements.
This
Agreement, the Warrant Agreement (as defined in Section 2.20 hereof), the
Trust
Agreement, the Services Agreement (as defined in Section 3.7.2 hereof)
the
Placement Unit Purchase Agreement (as defined in Section 2.23.2
hereof)
and
the
Escrow Agreement (as defined in Section 2.21.2 hereof) have been duly and
validly authorized by the Company and constitute, and the Representative’s
Purchase Option, has been duly and validly authorized by the Company and,
when
executed and delivered, will constitute, the valid and binding agreements
of the
Company, enforceable against the Company in accordance with their respective
terms, except: (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and
(iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.11. No
Conflicts, Etc.
The
execution, delivery, and performance by the Company of this Agreement, the
Representative’s Purchase Option, the Warrant Agreement, the Trust Agreement,
the Services Agreement, the Placement Unit Purchase 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 2.22 hereof; (ii) result in any violation
of
the provisions of the Certificate of Incorporation or the Bylaws of the Company;
or (iii) violate any existing applicable law, rule, regulation, judgment,
order
or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business.
2.12. No
Defaults; Violations.
No
material default exists in the due performance and observance of any term,
covenant or condition of any material license, contract, indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the properties or assets of the Company is
subject. The Company is not in violation of any term or provision of its
Certificate of Incorporation or Bylaws or in violation of any material
franchise, license, permit, applicable law, rule, regulation, judgment or
decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or businesses.
9
2.13. Corporate
Power; Licenses; Consents.
2.13.1. Conduct
of Business.
The
Company has all requisite corporate power and authority, and has all necessary
authorizations, approvals, orders, licenses, certificates and permits of
and
from all governmental regulatory officials and bodies that it needs as of
the
date hereof to conduct its business purpose as described in the Prospectus.
The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on this offering and the Company’s business purpose
as currently contemplated are correct in all material respects and do not
omit
to state a material fact required to be stated therein or necessary in order
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading.
2.13.2. Transactions
Contemplated Herein.
The
Company has all requisite corporate power and authority to enter into this
Agreement and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required in connection therewith
have been obtained. No consent, authorization or order of, and no filing
with,
any court, government agency or other body is required for the valid issuance,
sale and delivery, of the Securities and the consummation of the transactions
and agreements contemplated by this Agreement, the Warrant Agreement, the
Representative’s Purchase Option, the Trust Agreement, the Services Agreement,
the Placement Unit Purchase Agreement and the Escrow Agreement and as
contemplated by the Prospectus, except with respect to applicable federal
and
state securities laws.
2.14. D&O
Questionnaires.
To the
best of the Company’s knowledge, all information contained in the questionnaires
(“Questionnaires”)
completed by each of the Company’s stockholders immediately prior to the
Offering (“Initial
Stockholders”)
and
provided to the Representative as an exhibit to his or her Insider Letter
(as
defined in Section 2.21.1) is true and correct and the Company has not become
aware of any information which would cause the information disclosed in the
questionnaires completed by each Initial Stockholder to become inaccurate
and
incorrect.
2.15. Litigation;
Governmental Proceedings.
There
is no action, suit, proceeding, inquiry, arbitration, investigation, litigation
or governmental proceeding pending or, to the best of the Company’s knowledge,
threatened against, or involving the Company or, to the best of the Company’s
knowledge, any Initial Stockholder which has not been disclosed in the
Registration Statement or the Questionnaires.
2.16. Good
Standing.
The
Company has been duly organized and is validly existing as a corporation
and is
in good standing under the laws of its state of incorporation and is duly
qualified to do business and is in good standing as a foreign corporation
in
each jurisdiction in which its ownership or lease of property or the conduct
of
business requires such qualification, except where the failure to qualify
would
not have a material adverse effect on the Company.
2.17 No
Contemplation of a Business Combination.
Prior
to the date hereof, neither the Company, its officers and directors nor the
Initial Stockholders had, and as of the Closing, the Company and such officers
and directors and Initial Stockholders will not have had: (i) any specific
Business Combination under consideration or contemplation; or (ii) any
discussions with any target business regarding a possible Business Combination.
2.18 Transactions
Affecting Disclosure to NASD.
2.18.1 Except
as described in the Sale Preliminary Prospectus and the Prospectus, there
are no
claims, payments, arrangements, contracts, agreements or understandings relating
to the payment of a brokerage commission or finder’s, consulting, origination or
similar 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 any Initial Stockholder that may affect
the
Underwriters’ compensation, as determined by the NASD.
10
2.18.2 The
Company has not made any direct or indirect payments (in cash, securities
or
otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise,
in consideration of such person raising capital for the Company or introducing
to the Company persons who raised or provided capital to the Company; (ii)
to
any NASD member; or (iii) to any person or entity that has any direct or
indirect affiliation or association with any NASD member, within the twelve
months prior to the Effective Date.
2.18.3 No
officer, director or beneficial owner of any class of the Company’s securities
(whether debt or equity, registered or unregistered, regardless of the time
acquired or the source from which derived) (any such individual or entity,
a
“Company
Affiliate”)
is a
member of or a person associated or affiliated with a member of, the NASD.
2.18.4 No
Company Affiliate is an owner of stock or other securities of any member
of the
NASD (other than securities purchased on the open market).
2.18.5 No
Company Affiliate has made a subordinated loan to any member of the
NASD.
2.18.6 No
proceeds from the sale of the Securities or the Placement Securities will
be
paid to any NASD member, or any persons associated or affiliated with a member
of the NASD, except as specifically authorized herein and the Placement Unit
Purchase Agreement and except as may be paid in connection with a Business
Combination as contemplated by the
Sale Preliminary Prospectus and the
Prospectus.
2.18.7 The
Company has not issued any warrants or other securities, or granted any options,
directly or indirectly, to anyone who is a potential underwriter in the Offering
or a related person (as defined by NASD rules) of such an underwriter within
the
180-day period prior to the initial filing date of the Registration Statement.
2.18.8 No
person
to whom securities of the Company have been privately issued within the 180-day
period prior to the initial filing date of the Registration Statement has
any
relationship or affiliation or association with any member of the NASD.
2.18.9 No
NASD
member intending to participate in the Offering has a conflict of interest
with
the Company. For this purpose, a “conflict of interest” exists when a member of
the NASD and/or its associated persons, parent or affiliates in the aggregate
beneficially own 10% or more of the Company’s outstanding subordinated debt or
common equity, or 10% or more of the Company’s preferred equity. “Members
participating in the Offering” include managing agents, syndicate group members
and all dealers which are members of the NASD.
2.18.10 The
Company has not entered into any agreement or arrangement (including, without
limitation, any consulting agreement or any other type of agreement) during
the
180-day period prior to the initial filing date of the Registration Statement,
which arrangement or agreement provides for the receipt of any item of value
and/or the transfer of any warrants, options, or other securities from the
Company to an NASD member, any person associated with a member (as defined
by
NASD rules), any potential underwriters in the Offering and/or any related
persons, other than the arrangements the Company has entered into with ▇▇▇▇▇▇
in
connection with the Offering and the Private Placement.
11
2.19. Foreign
Corrupt Practices Act.
Neither
the Company nor any of the Initial Stockholders or any other person acting
on
behalf of the Company has, directly or indirectly, given or agreed to give
any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or
agent
of a customer or supplier, or official or employee of any governmental agency
or
instrumentality of any government (domestic or foreign) or any political
party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or
may
be in a position to help or hinder the business of the Company (or assist
it in
connection with any actual or proposed transaction) that (i) might subject
the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company
as
reflected in any of the financial statements contained in the Prospectus
or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company’s internal
accounting controls and procedures are sufficient to cause the Company to
comply
with the Foreign Corrupt Practices Act of 1977, as amended.
2.20. Officers’
Certificate.
Any
certificate signed by any duly authorized officer of the Company, in connection
with the Offering, and delivered to you or to your counsel shall be deemed
a
representation and warranty by the Company to the Underwriters as to the
matters
covered thereby.
2.21. Warrant
Agreement.
The
Company has entered into a warrant agreement with respect to the Warrants,
the
Placement Warrants and the Representative’s Warrants with American Stock
Transfer & Trust Company substantially in the form filed as an exhibit to
the Registration Statement (“Warrant
Agreement”),
providing for, among other things, the payment of a warrant solicitation
fee as
contemplated by Section 3.9 hereof.
2.22. Agreements
With Initial Stockholders.
2.22.1. Letters.
The
Company has caused to be duly executed legally binding and enforceable
agreements (except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally, (ii) as enforceability of any indemnification, contribution or
noncompete provision may be limited under the federal and state securities
laws,
and (iii) that the remedy of specific performance and injunctive and other
forms
of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought)
a
form of which is annexed as Exhibit 10.1 to the Registration Statement
(“Insider
Letter”),
pursuant to which each of the Initial Stockholders of the Company agree to
certain matters, including but not limited to, certain matters described
as
being agreed to by them under the “Proposed Business” Section of the
Prospectus.
2.22.2 Placement
Unit Purchase Agreement.
Certain of the Company’s officers and directors and their affiliates have
executed and delivered an agreement, annexed as Exhibit 10.14 of the
Registration Statement (the “Placement
Unit Purchase Agreement”),
pursuant to which such persons, among other things, have purchased an aggregate
of 125,000 Placement Units in the Private Placement. Pursuant to the Placement
Unit Purchase Agreement, (i) $985,000 of the proceeds from the sale of the
Placement Units will be deposited by the Company in the Trust Fund in accordance
with the terms of the Trust Agreement prior to the Closing, and (ii) the
purchasers of the Placement Units have waived any and all rights and claims
that
they may have to any proceeds, and any interest thereon, held in the Trust
in
respect of the shares of Common Stock included in such Placement Units in
the
event that a Business Combination is not consummated and the Trust Fund is
liquidated in accordance with the terms of the Trust Agreement.
12
2.22.3. Escrow
Agreement.
The
Company has caused the Initial Stockholders to enter into an escrow agreement
(“Escrow
Agreement”)
with
American Stock Transfer & Trust Company (“Escrow
Agent”),
substantially in the form annexed as Exhibit 10.8 to the Registration Statement,
whereby the Common Stock owned by each of the Initial Stockholders (not
including any shares of Common Stock included in the Placement Units which
any
of them may have purchased) will
be
held in escrow by the Escrow Agent, until the third anniversary of the Effective
Date. During such escrow period, the Initial Stockholders shall be prohibited
from selling or otherwise transferring such shares (except to spouses and
children of Initial Stockholders and trusts established for their benefit
and as
otherwise set forth in the Escrow Agreement
and except for shares which they may be required to surrender to the Company
as
described in the Registration Statement, the Preliminary Sale Prospectus
and the
Prospectus),
but
will retain the right to vote such shares and receive any distributions with
respect to such shares. To the Company’s knowledge, the Escrow Agreement is
enforceable against each of the Initial Stockholders and will not, with or
without the giving of notice or the lapse of time or both, result in a breach
of, or conflict with any of the terms and provisions of, or constitute a
default
under, any agreement or instrument to which any of the Initial Stockholders
is a
party. The Escrow Agreement shall not be amended, modified or otherwise changed
without the prior written consent of the Representative.
2.23. Investment
Management Trust Agreement.
The
Company has entered into the Trust Agreement with respect to certain proceeds
of
the Offering substantially in the form annexed as Exhibit 10.7 to the
Registration Statement.
2.24. Covenants
Not to Compete.
No
Initial Stockholder, employee, officer or director of the Company is subject
to
any noncompetition agreement or non-solicitation agreement with any employer
or
prior employer which could materially affect his ability to be an Initial
Stockholder, employee, officer and/or director of the Company.
2.25. Investments.
No more
than 45% of the “value” (as defined in Section 2(a)(41) of the Investment
Company Act of 1940 (“Investment
Company Act”))
of
the Company’s total assets consist of, and no more than 45% of the Company’s net
income after taxes is derived from, securities other than “Government
securities” (as defined in Section 2(a)(16) of the Investment Company
Act).
2.26. Subsidiaries.
The
Company does not own an interest in any corporation, partnership, limited
liability company, joint venture, trust or other business entity.
2.27. Related
Party Transactions.
No
relationship, direct or indirect, exists between or among any of the Company
or
any affiliate of the Company, on the one hand, and any director, officer,
shareholder, customer or supplier of the Company or any affiliate of the
Company, on the other hand, which is required by the Act, the Exchange Act
or
the Regulations to be described in the Registration Statement, the
Sale Preliminary Prospectus
or the
Prospectus which is not so described and described as required. There are
no
outstanding loans, advances (except normal advances for business expenses
in the
ordinary course of business) or guarantees of indebtedness by the Company
to or
for the benefit of any of the officers or directors of the Company or any
of
their respective family members, except as disclosed in the Registration
Statement, the
Sale Preliminary Prospectus and
the
Prospectus. The Company has not extended or maintained credit, arranged for
the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or officer of the Company.
2.28 Patriot
Act.
Neither the Company
nor any officer, director or Initial Stockholder has violated: (i) the Bank
Secrecy Act, as amended; (ii) the Money Laundering Control Act of 1986, as
amended; or (iii) the Uniting and Strengthening of America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT)
Act of 2001, and/or the rules and regulations promulgated under any such
law, or
any successor law.
13
3. Covenants
of the Company.
The
Company covenants and agrees as follows:
3.1. Amendments
to Registration Statement.
The
Company will deliver to the Representative, prior to filing, any amendment
or
supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to
which
the Representative shall reasonably object in writing.
3.2. Federal
Securities Laws.
3.2.1. Compliance.
During
the time when a Prospectus is required to be delivered under the Act, the
Company will use all reasonable efforts to comply with all requirements imposed
upon it by the Act, the Regulations and the Exchange Act and by the regulations
under the Exchange Act, as from time to time in force, so far as necessary
to
permit the continuance of sales of or dealings in the Public Securities in
accordance with the provisions hereof and the Prospectus. If at any time
when a
Prospectus relating to the Public Securities is required to be delivered
under
the Act, any event shall have occurred as a result of which, in the opinion
of
counsel for the Company or counsel for the Representative, the Prospectus,
as
then amended or supplemented, includes an untrue statement of a material
fact or
omits to state any material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Representative promptly
and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the
Act.
3.2.2. Filing
of Final Prospectus.
The
Company will file the Prospectus (in form and substance satisfactory to the
Representative) with the Commission pursuant to the requirements of Rule
424 of
the Regulations.
3.2.3. Exchange
Act Registration.
For a
period of five years from the Effective Date, or until such earlier time
upon
which the Company is required to be liquidated or is acquired in a transaction
approved by the requisite number of stockholders, the Company will use its
best
efforts to maintain the registration of the Units, Common Stock and Warrants
under the provisions of the Exchange Act and, the Company will not deregister
the Units, Common Stock and Warrants under the Exchange Act without the prior
written consent of the Representative.
3.2.4 ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Compliance.
As soon as it is legally required to do so, the
Company shall take all actions necessary to obtain and thereafter maintain
material compliance with each applicable provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of
2002 and the rules and regulations promulgated thereunder and related or
similar
rules and regulations promulgated by any other governmental or self regulatory
entity or agency with jurisdiction over the Company.
3.3. Blue
Sky Filing.
The
Company will endeavor in good faith, in cooperation with the Representative,
at
or prior to the time the Registration Statement becomes effective, to qualify
the Public Securities for offering and sale under the securities laws of
such
jurisdictions as the Representative may reasonably designate, provided that
no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction. In
each
jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use all reasonable efforts to file and make such statements
or
reports at such times as are or may be required by the laws of such
jurisdiction.
14
3.4. Delivery
to Underwriters of Prospectuses.
The
Company will deliver to the Underwriters, without charge, from time
to
time during the period when the Prospectus is required to be delivered under
the
Act or the Exchange Act such number of copies of each Preliminary Prospectus
and
the Prospectus as such Underwriters may reasonably request and, as soon as
the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5. Effectiveness
and Events Requiring Notice to the Representative.
The
Company will use its best efforts to cause the Registration Statement to
remain
effective and will notify the Representative immediately and confirm the
notice
in writing: (i) of the effectiveness of the Registration Statement and any
amendment thereto; (ii) of the issuance by the Commission of any stop order
or
of the initiation, or the threatening, of any proceeding for that purpose
when
the Company becomes aware of such; (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of
the
Public Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose when the Company becomes
aware of such; (iv) of the mailing and delivery to the Commission for filing
of
any amendment or supplement to the Registration Statement or Prospectus;
(v) of
the receipt of any comments or request for any additional information from
the
Commission; and (vi) of the happening of any event during the period described
in Section 3.2.3 hereof that, in the judgment of the Company, makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. If the Commission
or any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort
to
obtain promptly the lifting of such order.
3.6. Review
of Financial Statements.
For a
period of five years from the Effective Date, or until such earlier time
upon
which the Company is required to be liquidated, the Company, at its expense,
shall cause its regularly engaged independent certified public accountants
to
review (but not audit) the Company’s financial statements for each of the first
three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company’s Form 10-Q quarterly report and the
mailing of quarterly financial information to stockholders.
3.7. Affiliated
Transactions.
3.7.1. Business
Combinations.
The
Company will not consummate a Business Combination with any entity which
is
affiliated with any Initial Stockholder unless the Company obtains an opinion
from an independent investment banking firm that the Business Combination
is
fair to the Company’s stockholders from a financial perspective.
3.7.2. Affiliate
Compensation.
Except
as set forth above in this Section 3.7, the Company shall not pay any Initial
Stockholder or any of their affiliates any fees or compensation from the
Company, for services rendered to the Company prior to, or in connection
with,
the consummation of a Business Combination; provided that the Initial
Stockholders shall be entitled to reimbursement from the Company for their
reasonable out-of-pocket expenses incurred in connection with seeking and
consummating a Business Combination. Notwithstanding the foregoing to the
contrary, the Company may pay an Initial Stockholder or any of its affiliates
fees or compensation in connection with bona fide services to be rendered
to the
Company that (i) are expressly approved by a majority of the Company’s
disinterested directors, (ii) are legitimately required by the Company and
the
Company would otherwise contract such services from a third party, and (iii)
all
fees and compensation to be paid to any Initial Stockholder or its affiliates
are determined on an arm’s length basis and in good faith and such fees and
compensation are customarily charged by unrelated third party service providers
of a similar nature.
15
3.8. Secondary
Market Trading and Standard & Poor’s.
The
Company will apply to be included in Standard & Poor’s Daily News and
Corporation Records Corporate Descriptions for a period of five years from
the
consummation of a Business Combination. Promptly after the consummation of
the
Offering, the Company shall take such steps as may be necessary to obtain
a
secondary market trading exemption for the Company’s securities in the State of
California. The Company shall also take such other action as may be reasonably
requested by the Representative to obtain a secondary market trading exemption
in such other states as may be requested by the Representative.
3.9. Warrant
Solicitation Fees.
The
Company hereby engages ▇▇▇▇▇▇, on a non-exclusive basis, as its agent for
the
solicitation of the exercise of the Warrants. The Company will (i) assist
▇▇▇▇▇▇
with respect to such solicitation, if requested by ▇▇▇▇▇▇, and (ii) at ▇▇▇▇▇▇’▇
request, provide ▇▇▇▇▇▇, and direct the Company’s transfer and warrant agent to
provide to ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ a commission of five percent
of the
exercise price of the Warrants for each Warrant exercised within three (3)
business days of the date the exercise price is paid, on the terms provided
for
in the Warrant Agreement, only if permitted under the rules and regulations
of
the NASD and only to the extent that an investor who exercises his Warrants
specifically designates, in writing, that ▇▇▇▇▇▇ solicited his exercise.
▇▇▇▇▇▇
may engage sub-agents in its solicitation efforts. The Company agrees to
disclose the arrangement to pay such solicitation fees to ▇▇▇▇▇▇ in any
prospectus used by the Company in connection with the registration of the
shares
of Common Stock underlying the Warrants.
3.10. Financial
Public Relations Firm.
Promptly after the execution of a definitive agreement for a Business
Combination, the Company shall retain a financial public relations firm
reasonably acceptable to, but not affiliated with, ▇▇▇▇▇▇ for a term not
less
than five years, subject to earlier termination in the event the Company
is
liquidated.
3.11. Reports
to the Representative.
3.11.1. Periodic
Reports, Etc.
For a
period of five years following the Effective Date or until such earlier time
upon which the Company is required to be liquidated, the Company will furnish
to
the Representative (Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇) and its counsel copies of such
financial statements and other periodic and special reports as the Company
from
time to time furnishes generally to holders of any class of its securities,
and
promptly furnish to the Representative (i) a copy of every press release
and
every news item and article with respect to the Company or its affairs which
was
released by the Company; (ii) a copy of each Schedule 13D, 13G, 14D-1 or
13E-4
received or prepared by the Company; and (iii) five copies of each Registration
Statement. In addition, upon the Representative’s request, the Company shall
furnish the Representative (i) a copy of monthly statements, if any, setting
forth such information regarding the Company’s results of operations and
financial position (including balance sheet, profit and loss statements and
data
regarding outstanding purchase orders) as is regularly prepared by management
of
the Company; and (ii) such additional documents and information with respect
to
the Company and the affairs of any future subsidiaries of the Company as
the
Representative may from time to time reasonably request; provided that the
Representative shall sign, if requested by the Company, a Regulation FD
compliant confidentiality agreement which is reasonably acceptable to the
Company, the Representative, and their respective counsel in connection with
the
Representative’s receipt of such information.
16
3.11.2. Transfer
Sheets.
For a
period of two years following the Effective Date or until such earlier time
upon
which the Company is required to be liquidated, the Company shall retain
a
transfer and warrant agent acceptable to the Representative (“Transfer
Agent”)
and
will furnish to the Underwriters at the Company’s sole cost and expense such
transfer sheets of the Company’s securities as the Representative may request,
including the daily and monthly consolidated transfer sheets of the Transfer
Agent and DTC. The Representative acknowledges that American Stock
Transfer & Trust Company is an acceptable Transfer Agent.
3.11.3. Secondary
Market Trading Survey.
Until
such time as the Public Securities are listed or quoted, as the case may
be, on
the New York Stock Exchange, the American Stock Exchange or quoted on the
Nasdaq
National Market, or until such earlier time upon which the Company is required
to be liquidated, the Company shall engage Loeb & Loeb LLP, counsel to the
Company (“Loeb”),
to
deliver and update to the Representative on a timely basis, but in any event
on
the Effective Date and at the beginning of each fiscal quarter, a written
report
detailing those states in which the Public Securities may be traded in
non-issuer transactions under the Blue Sky laws of the fifty States
(“Secondary
Market Trading Survey”).
3.11.4. Trading
Reports.
During
such time the Public Securities are quoted on the NASD OTC Bulletin Board
(or
any successor trading market such as the Bulletin Board Exchange) or the
Pink
Sheets, LLC (or similar publisher of quotations) and no other automated
quotation system, the Company shall provide to the Representative, at the
Company’s expense, such reports published by the NASD or the Pink Sheets, LLC
relating to price trading of the Securities, as the Representative shall
reasonably request.
3.12. Disqualification
of Form S-1.
For a
period equal to seven years from the date hereof, or until such earlier time
upon which the Company is required to be liquidated, the Company will not
take
any action or actions which may prevent or disqualify the Company’s use of Form
S-1 (or other appropriate form) for the registration of the Warrants and
the
Representative’s Warrants under the Act.
3.13. Payment
of Expenses.
The
Company hereby agrees to pay on each of the Closing Date and the Option Closing
Date, if any, to the extent not paid at the Closing Date, all expenses incident
to the performance of the obligations of the Company under this Agreement,
including, but not limited to: (i) the preparation, printing, filing and
mailing
(including the payment of postage with respect to such mailing) of the
Registration Statement, the Preliminary and final Prospectuses and the printing
and mailing of this Agreement and related documents, including the cost of
all
copies thereof and any amendments thereof or supplements thereto supplied
to the
Underwriters in quantities as may be required by the Underwriters; (ii) the
printing, engraving, issuance and delivery of the Units, the shares of Common
Stock and the Warrants included in the Units and the Representative’s Purchase
Option, including any transfer or other taxes payable thereon; (iii) the
qualification of the Public Securities under state or foreign securities
or Blue
Sky laws, including the costs of printing and mailing the “Preliminary Blue Sky
Memorandum,” and all amendments and supplements thereto, fees and disbursements
for the retained for such purpose, and a one-time fee of $5,000 payable to
Loeb
for the preparation of the Secondary Market Trading Survey; (iv) filing fees,
costs and expenses incurred in registering the Offering with the NASD (including
fees of the Representative’s counsel and disbursements for the Representative’s
counsel not to exceed $10,000 in the aggregate); (v) fees and disbursements
of
the transfer and warrant agent; (vi) the Company’s expenses associated with “due
diligence” meetings arranged by the Representative; (vii) the preparation,
binding and delivery of transaction “bibles,” in form and style reasonably
satisfactory to the Representative and transaction lucite cubes or similar
commemorative items in a style and quantity as reasonably requested by the
Representative; (viii) the cost of investigative reports on each member of
the
Company’s management team (not to exceed $10,000 in the aggregate); and (ix) all
other costs and expenses customarily borne by an issuer incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3.13. The Company also agrees that it will
reimburse Representative for the cost of the investigative search firm of
the
Representative’s choice that conducted an investigation of the principals of the
Company (not to exceed $10,000 in the aggregate). The Representative may
deduct
from the net proceeds of the Offering payable to the Company on the Closing
Date, or the Option Closing Date, if any, the expenses set forth in this
Agreement to be paid by the Company to the Representative and, with the prior
consent of the Company, others.
17
3.14. Application
of Net Proceeds.
The
Company will apply the net proceeds from the Offering and the Private Placement
received by it in a manner consistent with the application described under
the
caption “Use Of Proceeds” in the Prospectus.
3.15. Delivery
of Earnings Statements to Security Holders.
The
Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not
be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Act) covering a period
of
at least twelve consecutive months beginning after the Effective
Date.
3.16. Notice
to NASD.
In the
event any person or entity (regardless of any NASD affiliation or association)
is engaged to assist the Company in its search for a merger candidate or
to
provide any other merger and acquisition services, the Company will provide
the
following to the NASD and to the Representative prior to the consummation
of the
Business Combination: (i) complete details of all services and copies of
agreements governing such services; and (ii) justification as to why the
person
or entity providing the merger and acquisition services should not be considered
an “underwriter and related person” with respect to the Company’s initial public
offering, as such term is defined in Rule 2710 of the NASD’s Conduct Rules. The
Company also agrees that proper disclosure of such arrangement or potential
arrangement will be made in the proxy statement which the Company will file
for
purposes of soliciting stockholder approval for the Business
Combination.
3.17. Stabilization.
Neither
the Company, nor, to its knowledge, any of its employees, directors or
stockholders (without the consent of the Representative) has taken or will
take,
directly or indirectly, any action designed to or that has constituted or
that
might reasonably be expected to cause or result in, under the Exchange Act,
or
otherwise, stabilization or manipulation of the price of any security of
the
Company to facilitate the sale or resale of the Units.
3.18. Internal
Controls.
The
Company will maintain a system of internal accounting controls sufficient
to
provide reasonable assurances that: (i) transactions are executed in accordance
with management’s general or specific authorization, (ii) transactions are
recorded as necessary in order to permit preparation of financial statements
in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.19. Accountants.
For a
period of five years from the Effective Date or until such earlier time upon
which the Company is required to be liquidated, the Company shall retain
GGK, or
an independent public accounting firm of national scope or
reputation.
18
3.20. Form
8-K.
The
Company shall, on the date hereof, retain its independent public accountants
to
audit the financial statements of the Company as of the Closing Date
(“Audited
Financial Statements”)
that
reflect the receipt by the Company of the proceeds of the initial public
offering. As soon as the Audited Financial Statements become available, the
Company shall immediately file a Current Report on Form 8-K with the Commission,
which Report shall contain the Company’s Audited Financial
Statements.
3.21. NASD.
The
Company shall advise the NASD if it is aware that any 5% or greater stockholder
of the Company becomes an affiliate or associated person of an NASD member
participating in the distribution of the Company’s Securities.
3.22. Corporate
Proceedings.
All
corporate proceedings and other legal matters necessary to carry out the
provisions of this Agreement and the transactions contemplated hereby shall
have
been done to the reasonable satisfaction to counsel for the
Representative.
3.23. Investment
Company.
The
Company shall cause the proceeds of the Offering to be held in the Trust
Fund to
be invested only in “government securities” with specific maturity dates as set
forth in the Trust Agreement and disclosed in the Prospectus. The Company
will
otherwise conduct its business in a manner so that it will not become subject
to
the Investment Company Act. Furthermore, once the Company consummates a Business
Combination, it shall be engaged in a business other than that of investing,
reinvesting, owning, holding or trading securities.
3.24. Business
Combination Announcement.
Within
five business days following the consummation by the Company of a Business
Combination, the Company shall cause an announcement (“Business
Combination Announcement”)
to be
placed, at its cost, in The Wall Street Journal. Such announcement shall
describe the consummation of the Business Combination and indicate that the
Representative was the managing underwriter in the Offering. The Company
shall
supply the Representative with a draft of the Business Combination Announcement
and provide the Representative with a reasonable opportunity to comment thereon.
The Company will not place the Business Combination Announcement without
the
final approval of the Representative, which such approval will not be
unreasonably withheld.
3.25. Colorado
Trust Filing.
In the
event the Securities are registered in the State of Colorado, the Company
will
cause a Colorado Form ES to be filed with the Commissioner of the State of
Colorado no less than 10 days prior to the distribution of the Trust Fund
in
connection with a Business Combination and will do all things necessary to
comply with Section ▇▇-▇▇-▇▇▇ and Rule 51-3.4 of the Colorado Securities
Act.
3.26 Press
Releases.
The
Company will not issue press releases or engage in any other publicity, without
▇▇▇▇▇▇’▇ prior written consent, for a period ending at 5:00 p.m., New York City
time, on the first Business Day following the fortieth (40th) day following
the
Closing Date.
3.27 Electronic
Prospectus.
The
Company shall cause to be prepared and delivered to the Representative, at
the
Company’s expense, within one Business Day from the effective date of this
Agreement, an Electronic Prospectus
to be used by the Underwriters in connection with the Offering. As used herein,
the term “Electronic Prospectus” means a form of prospectus, and any amendment
or supplement thereto, that meets each of the following conditions: (i) it
shall
be encoded in an electronic format, satisfactory to the Representative, that
may
be transmitted electronically by the Underwriters to offerees and purchasers
of
the Securities for at least the period during which a prospectus relating
to the
Securities is required to be delivered under the Securities Act; (ii) it
shall
disclose the same information as the paper prospectus and prospectus filed
pursuant to ▇▇▇▇▇, except to the extent that graphic and image material cannot
be disseminated electronically, in which case such graphic and image material
shall be replaced in the electronic prospectus with a fair and accurate
narrative description or tabular representation of such material, as
appropriate; and (iii) it shall be in or convertible into a paper format
or an
electronic format, satisfactory to the Representative, that will allow
recipients thereof to store and have continuously ready access to the prospectus
at any future time, without charge to such recipients (other than any fee
charged for subscription to the Internet as a whole and for on-line time).
The
Company hereby confirms that it has included or will include in the Prospectus
filed pursuant to ▇▇▇▇▇ or otherwise with the Commission and in the Registration
Statement at the time it was declared effective an undertaking that, upon
receipt
of a request by an investor or his or her representative within the period
when
a prospectus relating to the Securities is required to be delivered under
the
Securities Act, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus.
19
3.28 Reservation
of Shares.
The
Company will reserve and keep available that maximum number of its authorized
but unissued securities which are issuable upon exercise of any of the
Securities outstanding from time to time.
3.29 Private
Placement Proceeds.
Immediately upon establishment of the Trust Fund and prior to the Closing,
the
Company shall deposit $985,000 of the proceeds from the Private Placement
in the
Trust Fund and shall provide ▇▇▇▇▇▇ with evidence of the same.
4. Conditions
of Underwriters’ Obligations.
The
obligations of the Underwriters to purchase and pay for the Units, as provided
herein, shall be subject to the continuing accuracy of the representations
and
warranties of the Company as of the date hereof and as of each of the Closing
Date and the Option Closing Date, if any, to the accuracy of the statements
of
officers of the Company made pursuant to the provisions hereof and to the
performance by the Company of its obligations hereunder and to the following
conditions:
4.1. Regulatory
Matters.
4.1.1. Effectiveness
of Registration Statement.
The
Registration Statement shall have become effective not later than 5:00 P.M.,
New
York City local time, on the date of this Agreement or such later date and
time
as shall be consented to in writing by you, and, at each of the Closing Date
and
the Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or contemplated by
the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction
of
Morse, Zelnick, Rose & Lander, LLP, counsel to the Representative
(“MZRL”).
4.1.2. NASD
Clearance.
By the
Effective Date, the Representative shall have received clearance from the
NASD
as to the amount of compensation allowable or payable to the Underwriters
as
described in the Registration Statement.
4.1.3 No
Commission Stop Order.
As of either on the Closing Date or the Option Closing Date, the Commission
has
not issued any order or threatened to issue any order preventing or suspending
the use of any Preliminary Prospectus, the Prospectus or any part thereof,
and
has not instituted or threatened to institute any proceedings with respect
to
such an order.
4.1.4. No
Blue Sky Stop Orders.
No
order suspending the sale of the Units in any jurisdiction designated by
you
pursuant to Section 3.3 hereof shall have been issued on either on the Closing
Date or the Option Closing Date, and no proceedings for that purpose shall
have
been instituted or shall be contemplated.
20
4.2. Company
Counsel Matters.
4.2.1. Effective
Date Opinion of Counsel.
On the
Effective Date, the Representative shall have received the favorable opinion
of
Loeb, dated the Effective Date, addressed to the Representative and in form
and
substance satisfactory to MZRL to the effect that:
(i) The
Company has been duly organized and is validly existing as a corporation
and is
in good standing under the laws of its state of incorporation. The Company
is
duly qualified and licensed and in good standing as a foreign corporation
in
each jurisdiction in which its ownership or leasing of any properties or
the
character of its operations requires such qualification or licensing, except
where the failure to qualify would not have a material adverse effect on
the
Company.
(ii) All
issued and outstanding securities of the Company (including, without limitation,
the Placement Securities) have been duly authorized and validly issued and
are
fully paid and non-assessable; the holders thereof are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any stockholder of the Company
arising by operation of law or under the Company Certificate or Bylaws. The
offers and sales of the outstanding Common Stock were at all relevant times
either registered under the Act and the applicable state securities or Blue
Sky
Laws or exempt from such registration requirements. The authorized and
outstanding capital stock of the Company is as described in the
Sale Preliminary Prospectus and the
Prospectus. The Securities conform to the descriptions thereof contained
in the
Registration Statement, the
Sale Preliminary Prospectus and
the
Prospectus.
(iii) The
Securities have been duly authorized and, when issued and paid for, will
be
validly issued, fully paid and non-assessable; the holders thereof are not
and
will not be subject to personal liability by reason of being such holders.
The
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company arising by operation of law or under
the
Certificate of Incorporation, as amended, or Bylaws of the Company. When
issued,
the Warrants, the Representative’s Purchase Option and the Representative’s
Warrants will constitute valid and binding obligations of the Company to
issue
and sell, upon exercise thereof and payment therefor, the number and type
of
securities of the Company called for thereby and such Warrants, the
Representative’s Purchase Option and the Representative’s Warrants, when issued,
in each case, are enforceable against the Company in accordance with their
respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally, (b) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and
(c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form. The
certificates representing the Securities are in due and proper form. A
sufficient number of shares of Common Stock have been reserved for issuance
upon
exercise of the Warrants. The shares of Common Stock underlying the Warrants
will, upon exercise of the Warrants and payment of the exercise price thereof,
be duly and validly issued, fully paid and non-assessable and will not have
been
issued in violation of or subject to preemptive or, to such counsel’s knowledge,
similar rights that entitle or will entitle any person to acquire any securities
from the Company upon issuance thereof.
(iv) The
Placement Warrants 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 Placement 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 federal and state securities laws; and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. A
sufficient number of shares of Common Stock have been reserved for issuance
upon
exercise of the Placement Warrants. The shares of Common Stock underlying
the
Placement Warrants will, upon exercise of the Warrants and payment of the
exercise price thereof, be duly and validly issued, fully paid and
non-assessable and will not have been issued in violation of or subject to
preemptive or, to such counsel’s knowledge, similar rights that entitle or will
entitle any person to acquire any securities from the Company upon issuance
thereof.
21
(v) The
Company has full right, power and authority to execute and deliver this
Agreement, the Warrant Agreement, the Services Agreements, the Trust Agreement,
the Placement Unit Purchase Agreement and the Escrow Agreement and to perform
its obligations thereunder, and all corporate action required to be taken
for
the due and proper authorization, execution and delivery of this Agreement,
the
Warrant Agreement, the Services Agreements, the Trust Agreement, the Placement
Unit Purchase Agreement and the Escrow Agreement and consummation of the
transactions contemplated by the Underwriting Agreement, the Registration
Statement, the
Sale Preliminary Prospectus
and the
Prospectus and as described in the Registration Statement and the Prospectus
have been duly and validly taken.
(vi) This
Agreement, the Warrant Agreement, the Representative’s Purchase Option, the
Services Agreement, the Trust Agreement, the Placement Unit Purchase Agreement
and the Escrow Agreement have each been duly and validly authorized and,
when
executed and delivered by the Company, constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance
with
their respective terms, except (a) as such enforceability may be limited
by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally, (b) as enforceability of any indemnification or contribution
provisions may be limited under the federal and state securities laws, and
(c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(vii) The
Insider Letters, the Placement Unit Purchase Agreement and the Escrow Agreement
have been duly authorized, executed and delivered by the Initial Stockholders
(or, if applicable, their affiliates) party thereto and constitute the valid
and
binding obligations of such Initial Stockholders enforceable against them
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.
(viii) The
execution, delivery and performance of this Agreement, the Warrant Agreement,
the Representative’s Purchase Option, the Escrow Agreement, the Trust Agreement
and the Services Agreement, the issuance and sale of the Securities, the
consummation of the transactions contemplated hereby and thereby, and compliance
by the Company with the terms and provisions hereof and thereof, do not and
will
not, with or without the giving of notice or the lapse of time, or both,
(a) to
such counsel’s knowledge, conflict with, or result in a breach of, any of the
terms or provisions of, or constitute a default under, or result in the creation
or modification of any lien, security interest, charge or encumbrance upon
any
of the properties or assets of the Company pursuant to the terms of, any
mortgage, deed of trust, note, indenture, loan, contract, commitment or other
agreement or instrument filed as an exhibit to the Registration Statement,
(b)
result in any violation of the provisions of the Certificate of Incorporation
or
the Bylaws of the Company, or (c) to such counsel’s knowledge, violate any
statute or any judgment, order or decree, rule or regulation applicable to
the
Company of any court, domestic or foreign, or of any federal, state or other
regulatory authority or other governmental body having jurisdiction over
the
Company, its properties or assets.
22
(ix) The
Registration Statement, each Preliminary Prospectus and the Prospectus and
any
post-effective amendments or supplements thereto (other than the financial
statements included therein, as to which no opinion need be rendered) each
as of
their respective dates complied as to form in all material respects with
the
requirements of the Act and Regulations. The Securities and each agreement
filed
as an exhibit to the Registration Statement conform in all material respects
to
the description thereof contained in the Registration Statement and the
Prospectus. No statute or regulation required to be described in the Prospectus
is not described as required, nor are any contracts or documents of a character
required to be described in the Registration Statement or the Prospectus
or to
be filed as exhibits to the Registration Statement not so described or filed
as
required.
(x) 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.
To such
counsel’s knowledge, neither
the Company nor any of its affiliates has, prior to the date hereof, made
any
offer or sale of any securities which are required to be “integrated” pursuant
to the Act or the Regulations with the offer and sale of the Securities pursuant
to the Registration Statement.
(xi) 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 Representative at which the contents of the
Registration Statement, the Prospectus and related matters were discussed
and
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in
the
Registration Statement and Prospectus (except as otherwise set forth in this
opinion), no facts have come to the attention of such counsel which should
lead
them to believe that either the Registration Statement or the Prospectus
or any
amendment or supplement thereto, as of the date of such opinion contained
any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(xii) 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.
To
such counsel’s knowledge, neither
the Company nor any of its affiliates has, prior to the date hereof, made
any
offer or sale of any securities which are required to be “integrated” pursuant
to the Act or the Regulations with the offer and sale of the Securities pursuant
to the Registration Statement.
(xiii) 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.
23
(xiv)
No
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any judicial, regulatory or other
legal or governmental agency or body is required for the execution, delivery
and
performance of the Underwriting Agreement or consummation of the transactions
contemplated by the Underwriting Agreement, the Registration Statement,
the
Sale Preliminary Prospectus
and the
Prospectus, except for; (a) such as may be required under state securities
or
blue sky laws in connection with the purchase and distribution of the Units
by
the Underwriters (as to which such counsel need express no opinion); (b)
such as
have been made or obtained under the Securities Act; and (c) such as are
required by the NASD.
(xv)
The
statements under the captions “Description of Securities” and Item 14 of Part II
of the Registration Statement, insofar as such statements constitute a summary
of the legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters, documents
and proceedings.
4.2.2. Closing
Date and Option Closing Date Opinion of Counsel.
On each
of the Closing Date and the Option Closing Date, if any, the Representative
shall have received the favorable opinion of Loeb, dated the Closing Date
or the
Option Closing Date, as the case may be, addressed to the Representative
and in
form and substance reasonably satisfactory to MZRL, confirming as of the
Closing
Date and, if applicable, the Option Closing Date, the statements made by
Loeb in
their opinion delivered on the Effective Date.
4.2.3. Reliance.
In
rendering such opinion, such counsel may rely (i) as to matters involving
the
application of laws other than the laws of the United States and jurisdictions
in which they are admitted, to the extent such counsel deems proper and to
the
extent specified in such opinion, if at all, upon an opinion or opinions
(in
form and substance reasonably satisfactory to MZRL) of other counsel reasonably
acceptable to MZRL, 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 Representative’s counsel if requested.
The opinion of counsel for the Company and any opinion relied upon by such
counsel for the Company shall include a statement to the effect that it may
be
relied upon by counsel for the Representative in its opinion delivered to
the
Representative.
4.3. Cold
Comfort Letter.
At the
time this Agreement is executed, and at each of the Closing Date and the
Option
Closing Date, if any, you shall have received a letter, addressed to the
Representative and in form and substance satisfactory in all respects (including
the non-material nature of the changes or decreases, if any, referred to
in
clause (iii) below) to you and to MZRL from GGK dated, respectively, as of
the
date of this Agreement and as of the Closing Date and the Option Closing
Date,
if any:
(i) Confirming
that they are independent accountants with respect to the Company within
the
meaning of the Act and the applicable Regulations and that they have not,
during
the periods covered by the financial statements included in the Prospectus,
provided to the Company any non-audit services, as such term is used in Section
10A(g) of the Exchange Act;
(ii) Stating
that in their opinion the financial statements of the Company included in
the
Registration Statement and Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the published
Regulations thereunder;
24
(iii) Stating
that, on the basis of a limited review which included a reading of the latest
available unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the stockholders
and
board of directors and the various committees of the board of directors,
consultations with officers and other employees of the Company responsible
for
financial and accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe that
(a)
the unaudited financial statements of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not fairly
presented in conformity with generally accepted accounting principles applied
on
a basis substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement, (b) at a date not
later
than five days prior to the Effective Date, Closing Date or Option Closing
Date,
as the case may be, there was any change in the capital stock or long-term
debt
of the Company, or any decrease in the stockholders’ equity of the Company as
compared with amounts shown in the ________, 2005 balance sheet included
in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth the
amount
of such decrease, and (c) during the period from ________, 2005 to a specified
date not later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any decrease in revenues,
net
earnings or net earnings per share of Common Stock, in each case as compared
with the corresponding period in the preceding year and as compared with
the
corresponding period in the preceding quarter, other than as set forth in
or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) Setting
forth, at a date not later than five days prior to the Effective Date, the
amount of liabilities of the Company (including a break-down of commercial
papers and notes payable to banks);
(v) Stating
that they have compared specific dollar amounts, numbers of shares, percentages
of revenues and earnings, statements and other financial information pertaining
to the Company set forth in the Prospectus in each case to the extent that
such
amounts, numbers, percentages, statements and information may be derived
from
the general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel, with
the
results obtained from the application of specified readings, inquiries and
other
appropriate procedures (which procedures do not constitute an examination
in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement;
(vi) Stating
that they have not during the immediately preceding five year period brought
to
the attention of the Company’s management any reportable condition related to
internal structure, design or operation as defined in the Statement on Auditing
Standards No. 60 “Communication of Internal Control Structure Related Matters
Noted in an Audit,” in the Company’s internal controls; and
(vii) Statements
as to such other matters incident to the transaction contemplated hereby
as you
may reasonably request.
4.4. Officers’
Certificates.
4.4.1. Officers’
Certificate.
At each
of the Closing Date and the Option Closing Date, if any, the Representative
shall have received a certificate of the Company signed by the Chairman of
the
Board or the President and the Secretary or Assistant Secretary of the Company,
dated the Closing Date or the Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants
and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the
Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of the Closing
Date
and the Option Closing Date, as the case may be, the representations and
warranties of the Company set forth in Section 2 hereof are true and correct.
In
addition, the Representative will have received such other and further
certificates of officers of the Company as the Representative may reasonably
request.
25
4.4.2. Secretary’s
Certificate.
At each
of the Closing Date and the Option Closing Date, if any, the Representative
shall have received a certificate of the Company signed by the Secretary
or
Assistant Secretary of the Company, dated the Closing Date or the Option
Closing
Date, as the case may be, respectively, certifying (i) that the Bylaws and
Certificate of Incorporation of the Company are true and complete, have not
been
modified and are in full force and effect, (ii) that the resolutions relating
to
the public offering contemplated by this Agreement are in full force and
effect
and have not been modified, (iii) all correspondence between the Company
or its
counsel and the Commission, and (iv) as to the incumbency of the officers
of the
Company. The documents referred to in such certificate shall be attached
to such
certificate.
4.5. No
Material Changes.
Prior
to and on each of the Closing Date and the Option Closing Date, if any, (i)
there shall have been no material adverse change or development involving
a
prospective material adverse change in the condition or prospects or the
business activities, financial or otherwise, of the Company from the latest
dates as of which such condition is set forth in the Registration Statement
and
Prospectus, (ii) no action suit or proceeding, at law or in equity, shall
have
been pending or threatened against the Company or any Initial Stockholder
before
or by any court or federal or state commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects or financial condition
or
income of the Company, except as set forth in the Registration Statement
and
Prospectus, (iii) no stop order shall have been issued under the Act and
no
proceedings therefor shall have been initiated or threatened by the Commission,
and (iv) the Registration Statement and the Prospectus and any amendments
or
supplements thereto shall contain all material statements which are required
to
be stated therein in accordance with the Act and the Regulations and shall
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor
any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6. Delivery
of Agreements.
On the
Effective Date, the Company shall have delivered to the Representative executed
copies of the Escrow Agreement, the Trust Agreement, the Warrant Agreement,
the
Services Agreement and all of the Insider Letters. On the Closing Date, the
Company shall have delivered to the Representative executed copies of the
Representative’s Purchase Option.
4.7. Secondary
Market Trading Survey.
On the
Closing Date, the Representative shall have received the Secondary Market
Trading Survey from Loeb.
5. Indemnification.
5.1. Indemnification
of the Underwriters.
26
5.1.1. General.
Subject
to the conditions set forth below, the Company agrees to indemnify and hold
harmless each of the Underwriters, and each dealer selected by you that
participates in the offer and sale of the Securities (each a “Selected
Dealer”)
and
each of their respective directors, officers and employees and each person,
if
any, who controls any such Underwriter (“controlling
person”)
within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, whether arising out of
any
action between any of the Underwriters and the Company or between any of
the
Underwriters and any third party or otherwise) to which they or any of them
may
become subject under the Act, the Exchange Act or any other statute or at
common
law or otherwise or under the laws of foreign countries, arising out of or
based
upon any untrue statement or alleged untrue statement of a material fact
contained in (i) any Preliminary Prospectus, the Registration Statement or
the
Prospectus (as from time to time each may be amended and supplemented); (ii)
any
materials or information provided to investors by, or with the approval of,
the
Company in connection with the marketing of the offering of the Securities,
including any “road show” or investor presentations made to investors by the
Company (whether in person or electronically); or (iii) any application or
other
document or written communication (in this Section 5, collectively called
“application”) executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Units
under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any securities exchange; or the omission
or
alleged omission therefrom of a material fact required to be stated therein
or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to an Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. Each of the Underwriters and each Selected
Dealer hereby waives any right, interest or claim of any kind that it may
have
in or to any monies held in the trust account for the benefit of the holders
of
the Public Securities and agrees not to seek any payment of any indemnity
of the
Company under this Section 5.1 from any monies held in the trust account
for the
benefit of the holders of the Public Securities. With respect to any untrue
statement or omission or alleged untrue statement or omission made in the
Preliminary Prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of any Underwriter to the extent that any
loss,
liability, claim, damage or expense of such Underwriter results from the
fact
that a copy of the Prospectus was not given or sent to the person asserting
any
such loss, liability, claim or damage at or prior to the written confirmation
of
sale of the Securities to such person as required by the Act and the
Regulations, and if the untrue statement or omission has been corrected in
the
Prospectus, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with its obligations under Section 3.4 hereof.
The
Company agrees promptly to notify the Representative of the commencement
of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or Prospectus.
5.1.2. Procedure.
If any
action is brought against an Underwriter, a Selected Dealer or a controlling
person in respect of which indemnity may be sought against the Company pursuant
to Section 5.1.1, such Underwriter or such 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 such Selected
Dealer,
as the case may be) and payment of actual expenses. Such Underwriter, such
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, such Selected Dealer or controlling
person unless (i) the employment of such counsel at the expense of the Company
shall have been authorized in writing by the Company in connection with the
defense of such action, or (ii) the Company shall not have employed counsel
to
have charge of the defense of such action, or (iii) such indemnified party
or
parties shall have reasonably concluded that there may be defenses available
to
it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in
any of
which events the reasonable fees and expenses of not more than one additional
firm of attorneys selected by the Underwriter, Selected Dealer and/or
controlling person shall be borne by the Company. Notwithstanding anything
to
the contrary contained herein, if any 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.
27
5.2. Indemnification
of the Company.
Each
Underwriter, severally and not jointly, agrees to indemnify and hold harmless
the Company, its directors, officers and employees and agents who control
the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense
described in the foregoing indemnity from the Company to the several
Underwriters, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application, in reliance upon, and in strict
conformity with, written information furnished to the Company with respect
to
such Underwriter by or on behalf of the Underwriter expressly for use in
such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based
on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have
the
rights and duties given to the Company, and the Company and each other person
so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
5.3. Contribution.
5.3.1. Contribution
Rights.
In
order to provide for just and equitable contribution under the Act in any
case
in which (i) any person entitled to indemnification under this Section 5
makes
claim for indemnification pursuant hereto but it is judicially determined
(by
the entry of a final judgment or decree by a court of competent jurisdiction
and
the expiration of time to appeal or the denial of the last right of appeal)
that
such indemnification may not be enforced in such case notwithstanding the
fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required
on the
part of any such person in circumstances for which indemnification is provided
under this Section 5, then, and in each such case, the Company and the
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and the Underwriters, as incurred, in such proportions
that the Underwriters are responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover page of
the
Prospectus bears to the initial offering price appearing thereon and the
Company
is responsible for the balance; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall
be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 5.3.1,
no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any
damages that such Underwriter has otherwise been required to pay in respect
of
such losses, liabilities, claims, damages and expenses. For purposes of this
Section, each director, officer and employee of an Underwriter or the Company,
as applicable, and each person, if any, who controls an Underwriter or the
Company, as applicable, within the meaning of Section 15 of the Act shall
have
the same rights to contribution as such Underwriter or the Company, as
applicable.
28
5.3.2. Contribution
Procedure.
Within
fifteen days after receipt by any party to this Agreement (or its
representative) of notice of the commencement of any action, suit or proceeding,
such party will, if a claim for contribution in respect thereof is to be
made
against another party (“contributing party”), notify the contributing party of
the commencement thereof, but the omission to so notify the contributing
party
will not relieve it from any liability which it may have to any other party
other than for contribution hereunder. In case any such action, suit or
proceeding is brought against any party, and such party notifies a contributing
party or its representative of the commencement thereof within the aforesaid
fifteen days, the contributing party will be entitled to participate therein
with the notifying party and any other contributing party similarly notified.
Any such contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or proceeding
effected by such party seeking contribution on account of any settlement
of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The contribution provisions
contained in this Section are intended to supersede, to the extent permitted
by
law, any right to contribution under the Act, the Exchange Act or otherwise
available. Each Underwriter’s obligations to contribute pursuant to this Section
5.3 are several and not joint.
6. Default
by an Underwriter.
6.1. Default
Not Exceeding 10% of Firm Units or Option Units.
If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the over-allotment option
is
exercised, hereunder, and if the number of the Firm Units or Option Units
with
respect to which such default relates does not exceed in the aggregate 10%
of
the number of Firm Units or Option Units that all Underwriters have agreed
to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion
to
their respective commitments hereunder.
6.2. Default
Exceeding 10% of Firm Units or Option Units.
In the
event that the default addressed in Section 6.1 above relates to more than
10%
of the Firm Units or Option Units, you may in your discretion arrange for
yourself or for another party or parties to purchase such Firm Units or Option
Units to which such default relates on the terms contained herein. If within
one
business day after such default relating to more than 10% of the Firm Units
or
Option Units you do not arrange for the purchase of such Firm Units or Option
Units, then the Company shall be entitled to a further period of one business
day within which to procure another party or parties satisfactory to you
to
purchase said Firm Units or Option Units on such terms. In the event that
neither you nor the Company arrange for the purchase of the Firm Units or
Option
Units to which a default relates as provided in this Section 6, this
Agreement will be terminated without liability on the part of the
Company
(except as provided in Sections 3.13 and 5 hereof) or the several Underwriters
(except as provided in Section 5 hereof); provided, however, that if such
default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein
shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default
hereunder.
6.3. Postponement
of Closing Date.
In the
event that the Firm Units or Option Units to which the default relates are
to be
purchased by the non-defaulting Underwriters, or are to be purchased by another
party or parties as aforesaid, you or the Company shall have the right to
postpone the Closing Date or Option Closing Date for a reasonable period,
but
not in any event exceeding five business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents and arrangements, and the Company agrees
to
file promptly any amendment to the Registration Statement or the Prospectus
that
in the opinion of counsel for the Underwriters may thereby be made necessary.
The term “Underwriter”
as used
in this Agreement shall include any party substituted under this Section
6 with
like effect as if it had originally been a party to this Agreement with respect
to such Securities.
29
7. Right
to Appoint Observer.
Until
the earlier of the consummation of a Business Combination or two years from
the
Effective Date, upon notice from ▇▇▇▇▇▇ to the Company, ▇▇▇▇▇▇ shall have
the
right to send a representative (who need not be the same individual from
meeting
to meeting) to observe each meeting of the Board of Directors of the Company;
provided that such representative shall sign a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to ▇▇▇▇▇▇ and its
counsel in connection with representatives attendance at meetings of the
Board
of Directors; and provided further that upon written notice to ▇▇▇▇▇▇, the
Company may exclude ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ written notice
of
each such meeting and to provide ▇▇▇▇▇▇ with an agenda and minutes of the
meeting no later than it gives such notice and provides such items to the
other
directors and to reimburse ▇▇▇▇▇▇ for its reasonable out-of-pocket expenses
incurred in connection with its attendance at the meeting, including but
not
limited to, food, lodging and transportation.
8. Additional
Covenants.
8.1. Additional
Shares or Options.
The
Company hereby agrees that until the Company consummates a Business Combination,
it shall not issue any shares of Common Stock or any options or other securities
convertible into Common Stock, or any shares of Preferred Stock which
participate in any manner in the Trust Fund or which vote as a class with
the
Common Stock on a Business Combination.
8.2. Trust
Fund Waiver Acknowledgment.
Prior
to the commencement by the Company of its due diligence investigation of
any
operating business which the Company seeks to acquire (“Target
Business”)
or the
obtaining of the services of any vendor, the Company shall seek to have such
Target Business or vendor acknowledges in writing, whether through a letter
of
intent, memorandum of understanding or other similar document (and subsequently
acknowledges the same in any definitive document replacing any of the
foregoing), that (a) it has read the Prospectus and understands that the
Company
has established the Trust Fund, initially in an amount of $28,130,000 (without
giving effect to the exercise of the Over-allotment Option) for the benefit
of
the Public Stockholders and that, except for up
to a
maximum of $600,000 of the interest earned on the amounts held in the
Trust Fund, the Company may disburse monies from the Trust Fund only (i)
to the
Public Stockholders in the event of the conversion of their shares or the
liquidation of the Company or (ii) to the Company and the Underwriters after
it
consummates a Business Combination and (b) for and in consideration of the
Company (1) agreeing to evaluate such Target Business for purposes of
consummating a Business Combination with it or (2) agreeing to engage the
services of the vendor, as the case may be, such Target Business or vendor
agrees that it does not have any right, title, interest or claim of any kind
in
or to any monies in the Trust Fund (“Claim”)
and
waives any Claim it may have in the future as a result of, or arising out
of,
any negotiations, contracts or agreements with the Company and will not seek
recourse against the Trust Fund for any reason whatsoever. The
foregoing letters shall substantially be 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.
8.3. Insider
Letters.
The
Company shall not take any action or omit to take any action which would
cause a
breach of any of the Insider or the Placement Unit Purchase Option and will
not
allow any amendments to, or waivers of, such Insider Letters without the
prior
written consent of the Representative.
8.4. Certificate
of Incorporation and Bylaws.
The
Company shall not take any action or omit to take any action that would cause
the Company to be in breach or violation of its Certificate of Incorporation
or
Bylaws. Prior to the consummation of a Business Combination, the Company
will
not amend its Certificate of Incorporation without the prior written consent
of
the Representative.
30
8.5. Information
Requirements.
The
Company shall provide counsel to The Representative with ten copies of all
proxy
information and all related material filed with the Commission in connection
with a Business Combination concurrently with such filing with the Commission.
In addition, the Company shall furnish any other state in which its initial
public offering was registered, such information as may be requested by such
state.
8.6. Acquisition/Liquidation
Procedure.
The
Company agrees: (i) that, prior to the consummation of any Business Combination,
it will submit such transaction to the Company’s stockholders for their approval
(“Business
Combination Vote”)
even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law; and (ii) that, in the event
that the Company does not effect a Business Combination within 18 months
from
the consummation of this Offering (subject to extension for an additional
six-month period, as described in the Prospectus), the Company will be
liquidated and will distribute to all holders of IPO Shares (defined below)
an
aggregate sum equal to the Company’s “Liquidation Value.” The Company’s
“Liquidation
Value”
shall
mean the Company’s book value (including the Escrowed Fees and interest accrued
thereon, net of taxes payable), as determined by the Company and approved
by
GGK. In no event, however, will the Company’s Liquidation Value be less than the
Trust Fund, inclusive of any net interest income thereon. Only holders of
IPO
Shares shall be entitled to receive liquidating distributions and the Company
shall pay no liquidating distributions with respect to any other shares of
capital stock of the Company. With respect to the Business Combination Vote,
the
Company shall cause all of the Initial Stockholders to vote the shares of
Common
Stock owned by them immediately prior to this Offering and the Private Placement
in accordance with the vote of the holders of a majority of the IPO Shares
present, in person or by proxy, at a meeting of the Company’s stockholders
called for such purpose. At the time the Company seeks approval of any potential
Business Combination, the Company will offer each holder of the Company’s Common
Stock issued in this Offering (“IPO
Shares”)
the
right to convert their IPO Shares at a per share price (“Conversion
Price”)
equal
to the amount in the Trust Fund (exclusive of the Escrowed Fees and accrued
interest thereon, and inclusive of any interest income accruing with respect
to
the net proceeds attributable to the IPO Shares, net of taxes payable)
calculated as of two business days prior to the consummation of the proposed
Business Combination divided by the total number of IPO Shares. If holders
of
less than 20% in interest of the Company’s IPO Shares elect to convert their IPO
Shares, the Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will convert shares,
based
upon the Conversion Price, from those holders of IPO Shares who affirmatively
requested such conversion and who voted against the Business Combination.
If
holders of 20% or more in interest of the IPO Shares, who vote against approval
of any potential Business Combination, elect to convert their IPO Shares,
the
Company will not proceed with such Business Combination and will not convert
such shares.
8.7. Rule
419.
The
Company agrees that it will use its best efforts to prevent the Company from
becoming subject to Rule 419 under the Act prior to the consummation of any
Business Combination, including but not limited to using its best efforts
to
prevent any of the Company’s outstanding securities from being deemed to be a
“▇▇▇▇▇ stock” as defined in Rule 3a-51-1 under the Exchange Act during such
period.
8.8. Affiliated
Transactions.
Except
as set forth on Schedule 8.8, the Company shall cause each of the officers
to
agree that, in order to minimize potential conflicts of interest which may
arise
from multiple affiliations, the officers will present to the Company for
its
consideration, prior to presentation to any other person or company, any
suitable opportunity to acquire an operating business, until the earlier
of the
consummation by the Company of a Business Combination, the liquidation of
the
Company or until such time as the officers cease to be an officer of the
Company, subject to any pre-existing fiduciary obligations the officers might
have.
31
8.9. Target
Net Assets.
The
Company agrees that the initial Target Business that it acquires must
have
a fair market value (exclusive of the Escrowed Fees) 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 (exclusive of the Escrowed Fees) at the time of such acquisition,
the Company will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the NASD with respect to the satisfaction
of
such criteria. The Company is not required to obtain an opinion from an
investment banking firm as to the fair market value if the Company’s Board of
Directors independently determines that the Target Business does have sufficient
fair market value.
8.10 Compliance
with Agreements.
The Company shall comply in all material respects with all of its covenants
and
agreements contained in, and shall perform all of its obligations under,
the
Warrant Agreement, the Placement Unit Purchase Agreement, the Trust Agreement
and the Escrow Agreement.
9. Representations
and Agreements to Survive Delivery.
Except
as the context otherwise requires, all representations, warranties and
agreements contained in this Agreement shall be deemed to be representations,
warranties and agreements as of the Closing Date or the Option Closing Date,
if
any, and such representations, warranties and agreements of the Underwriters
and
the 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 the Underwriters, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the Underwriters until the earlier
of
the expiration of any applicable statute of limitations and the seventh
anniversary of the later of the Closing Date or the Option Closing Date,
if any,
at which time the representations, warranties and agreements shall terminate
and
be of no further force and effect.
10. Effective
Date of This Agreement and Termination Thereof.
10.1. Effective
Date.
This
Agreement shall become effective on the Effective Date at the time the
Registration Statement is declared effective by the Commission.
10.2. Termination.
You
shall have the right to terminate this Agreement at any time prior to the
Closing Date, (i) if any domestic or international event or act or occurrence
has materially disrupted, or in your opinion will in the immediate future
materially disrupt, general securities markets in the United States; or (ii)
if
trading on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq
Stock Market or on the NASD OTC Bulletin Board (or successor trading market)
shall have been suspended, or minimum or maximum prices for trading shall
have
been fixed, or maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities shall have been required on the
NASD
OTC Bulletin Board or by order of the Commission or any other government
authority having jurisdiction, or (iii) if the United States shall have become
involved in a new war or an increase in major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or
(v) if
a moratorium on foreign exchange trading has been declared which materially
and
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, explosion, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act
which,
whether or not such loss shall have been insured, will, in your opinion,
make it
inadvisable to proceed with the delivery of the Units, or (vii) if any of
the
Company’s representations, warranties or covenants hereunder are breached, or
(viii) if the Representative shall have become aware after the date hereof
of
such a material adverse change in the conditions or prospects of the Company,
or
such adverse material change in general market conditions, including without
limitation as a result of terrorist activities after the date hereof, as
in the
Representative’s judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Units or to enforce contracts made
by the
Underwriters for the sale of the Securities.
32
10.3. Expenses.
In the
event that this Agreement shall not be carried out for any reason whatsoever,
within the time specified herein or any extensions thereof pursuant to the
terms
herein, the obligations of the Company to pay the out of pocket expenses
related
to the transactions contemplated herein shall be governed by Section 3.13
hereof.
10.4. Indemnification.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 shall not
be in
any way affected by, such election or termination or failure to carry out
the
terms of this Agreement or any part hereof.
11. Miscellaneous.
11.1. Notices.
All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed, delivered or telecopied and confirmed
and shall be deemed given when so delivered or telecopied and confirmed or
if
mailed, two days after such mailing
If
to the
Representative:
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Copy
to:
Morse,
Zelnick, Rose & Lander, LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If
to the
Company:
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇
▇▇▇▇▇▇, Co-Chief Executive Officer
Copy
to:
Loeb
& Loeb LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
33
11.2. Headings.
The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of
any of
the terms or provisions of this Agreement.
11.3. Amendment.
This
Agreement may only be amended by a written instrument executed by each of
the
parties hereto.
11.4. Entire
Agreement.
This
Agreement (together with the other agreements and documents being delivered
pursuant to or in connection with this Agreement) constitute the entire
agreement of the parties hereto with respect to the subject matter hereof
and
thereof, and supersede all prior agreements and understandings of the parties,
oral and written, with respect to the subject matter hereof.
11.5. Binding
Effect.
This
Agreement shall inure solely to the benefit of and shall be binding upon
the
Representative, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 5 hereof, and their respective
successors, legal representatives and assigns, and no other person shall
have or
be construed to have any legal or equitable right, remedy or claim under
or in
respect of or by virtue of this Agreement or any provisions herein
contained.
11.6. Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of New York, without giving effect to conflict of laws.
The
Company hereby agrees that any action, proceeding or claim against it arising
out of, relating in any way to this Agreement shall be brought and enforced
in
the courts of the State of New York of the United States of America for the
Southern District, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection
to such
exclusive jurisdiction and that such courts represent an inconvenient forum.
Any
such process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
11.1 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The Company
agrees that the prevailing party(ies) in any such action shall be entitled
to
recover from the other party(ies) all of its reasonable attorneys’ fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
11.7 Waiver
of Trial by Jury.
THE
COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW,
ON
BEHALF OF ITS EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT TO A
TRIAL
BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION
WITH
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
REGISTRATION STATEMENT AND THE PROSPECTUS.
11.8. Execution
in Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which shall be deemed to
be an
original, but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
11.9. Waiver,
Etc.
The
failure of any of the parties hereto to at any time enforce any of the
provisions of this Agreement shall not be deemed or construed to be a waiver
of
any such provision, nor to in any way affect the validity of this Agreement
or
any provision hereof or the right of any of the parties hereto to thereafter
enforce each and every provision of this Agreement. No waiver of any breach,
non-compliance or non-fulfillment of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought;
and
no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
34
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,
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By:
|
|
|
|
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Name:
▇▇▇ ▇▇▇▇▇▇
|
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Title:
Co-Chief Executive Officer
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Accepted
on the date first above written.
|
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▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
|
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By:
|
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Name:
▇▇▇▇▇▇ ▇▇▇▇▇
|
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Title:
Chief Financial Officer
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35
SCHEDULE
I
3,625,000 Units
|
Underwriter
|
Number
of Firm Units to be Purchased
|
|
|
|
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▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, LLC
|
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I-Bankers Securities,
Inc.
|
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1
EXHIBIT
A
Form
of Target Business Letter
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇
▇▇▇▇▇▇, Co-Chief Executive Officer
Gentlemen:
Reference
is made to the Final Prospectus of Argyle
Security Acquisition Corporation (the
“Company”),
dated ____________, 2005 (the “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 the Company
has
established the Trust Fund, initially in an amount of $28,130,000 for the
benefit of the Public Stockholders and the underwriters of the Company’s initial
public offering (the “Underwriters”) and that, except for up
to a
maximum of $600,000 of the interest earned on the amounts held in the
Trust Fund, the Company 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 the
Company;
or (ii) to the
Company and the Underwriters after
consummation of a Business Combination.
For
and in consideration of the
Company 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 (the
“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 the
Company and
will not seek recourse against the Trust Fund for any reason
whatsoever.
|
Print
Name of Target Business
|
|
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Authorized
Signature of Target Business
|
2
Form
of Vendor Letter
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇
▇▇▇▇▇▇, Co-Chief Executive Officer
Gentlemen:
Reference
is made to the Final Prospectus of Argyle
Security Acquisition Corporation
(the “Company”),
dated _________________, 2005 (the “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 the Company has established
the
Trust Fund, initially in an amount of $28,130,000 for the benefit of the
Public
Stockholders and the underwriters of the Company’s initial public offering (the
“Underwriters”) and that, except for up to a maximum of $600,000 of the interest
earned on the amounts held in the Trust Fund, the Company 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 the Company; or (ii) to
the
Company and the Underwriters after consummation of a Business
Combination.
For
and in consideration of the Company 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 (the “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 the Company and will not seek recourse
against the Trust Fund for any reason whatsoever.
|
Print
Name of Vendor
|
|
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Authorized
Signature of Vendor
|
3
Form
of Director/Officer Letter
Argyle
Security Acquisition Corporation
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇
▇▇▇▇▇▇, Co-Chief Executive Officer
The
undersigned officer or director of Argyle
Security Acquisition Corporation (the
“Company”)
hereby acknowledges that the Company has established the Trust Fund, initially
in an amount of $28,130,000 for the benefit of the Public Stockholders and
the
underwriters (the “Underwriters”) of the Company’s initial public offering (the
“IPO”)
and that the Company 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 the Company; or (ii) to the Company and the Underwriters after
consummation of 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 (the “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 the Company and will not seek recourse
against the Trust Fund for any reason whatsoever.
Notwithstanding
the foregoing, such waiver shall apply to the shares underlying the units
acquired by the undersigned or any of its affiliates in the IPO, but shall
not
apply to any shares subsequently acquired by the undersigned in the public
market.
|
Print
Name of Officer/Director
|
|
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Authorized
Signature of Officer/Director
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4