EXHIBIT 1.1
CONFLUENCE ACQUISITION PARTNERS I, INC.
UNDERWRITING AGREEMENT
Boca Raton, Florida
_________, 2005
▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇▇ Capital Partners, LLC
As Representatives of the
Several Underwriters
c/o ▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned, Confluence Acquisition Partners I, Inc., a Delaware
corporation ("Company"), hereby confirms its agreement with ▇▇▇▇▇▇ ▇▇▇▇▇
Securities, Inc. ("DJS"), ▇▇▇▇ Capital Partners, LLC ("▇▇▇▇") and each of the
other underwriters named in schedule I attached hereto (collectively, the
"Underwriters" or individually, an "Underwriter", which term shall also include
any underwriter substituted as hereinafter provided in Section 6 hereof), for
whom DJS and ▇▇▇▇ are acting as representatives, (in such capacity, the
"Representatives"), as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Units. On the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell, severally and not jointly, to the
several Underwriters, an aggregate of 8,000,000 units ("Firm Units") of the
Company, at a purchase price (net of discounts and commissions) of $5.64 per
Firm Unit. The Underwriters, severally and not jointly, agree to purchase from
the Company the number of Firm Units set forth opposite their respective names
on Schedule I attached hereto and made a part hereof at a purchase price (net of
discounts and commissions) of $5.64 per Firm Unit. The Firm Units are to be
offered initially to the public ("Offering") at the offering price of $6.00 per
Firm Unit. Each Firm Unit consists of one share of the Company's common stock,
par value $.01 per share ("Common Stock"), and two warrants ("Warrant(s)"). The
shares of Common Stock and the Warrants included in the Firm Units will not be
separately transferable until 90 days after the effective date ("Effective
Date") of the Registration Statement (as defined in Section 2.1.1 hereof) unless
DJS informs the Company of its decision to allow earlier separate trading, but
in no event will DJS allow separate trading until the preparation of an audited
balance sheet of the Company reflecting receipt by the Company of the proceeds
of the Offering and the filing of a Form 8-K by the Company which includes such
balance sheet. Each Warrant entitles its holder to exercise it to purchase one
share of Common Stock for $5.00 during the period commencing on the later of the
consummation by the Company of its "Business Combination" or one year from the
Effective Date and terminating on the five-year anniversary of
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the Effective Date. "Business Combination" shall mean any merger, capital stock
exchange, asset acquisition or other similar business combination consummated by
the Company with an operating business in the healthcare industry (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., Boca Raton time, on the fourth business day
following the effective date of the Registration Statement or at such earlier
time as shall be agreed upon by the Representatives and the Company at the
offices of DJS or at such other place as shall be agreed upon by the
Representatives and the Company. The hour and date of delivery and payment for
the Firm Units are called "Closing Date." Payment for the Firm Units shall be
made on the Closing Date at the Representatives' election by wire transfer in
Federal (same day) funds or by certified or bank cashier's check(s) in New York
Clearing House funds, payable as follows: $__________ of the proceeds received
by the Company for the Firm Units shall be deposited in the trust fund
established by the Company for the benefit of the public stockholders as
described in the Registration Statement ("Trust Fund") pursuant to the terms of
an Investment Management Trust Agreement ("Trust Agreement") and the remaining
proceeds shall be paid (subject to Section 3.13 hereof) to the order of the
Company upon delivery to the Representatives of certificates (in form and
substance satisfactory to the Representatives) representing the Firm Units (or
through the facilities of the Depository Trust Company ("DTC")) for the account
of the Underwriters. In addition, a total of $2,160,000 of the underwriting
discounts and commissions attributable to the Firm Units (and up to an
additional $324,000 attributable to the Option Units (defined below) if the
Over-allotment Option (defined below) is exercised in full) (collectively, the
"Additional Funds") shall be deposited in the Trust Fund. The Additional Funds
shall promptly be released to the representatives for the benefit of the
underwriters upon the consummation by the Company of a Business Combination
within the 18 months from the closing of the sale of the Firm Units (or 24
months if a letter of intent, agreement in principle or definitive agreement
with respect to a proposed Business Combination has been executed by the Company
but not yet been consummated within the 18 month period). If the Company has not
consummated a Business Combination within the foregoing 18 or 24 month period,
as the case may be, the Additional Funds will become part of the Trust Fund that
will be distributed to the Company's stockholders in accordance with the Trust
Agreement and none of such Additional Funds will be payable to the underwriters.
Any interest earned on the Additional Funds from the time the Additional Funds
are deposited in the Trust Fund until such time as the Additional Funds are
either released to the representatives for the benefit of the underwriters or to
the Company's stockholders, may be used by the Company to satisfy its working
capital requirements. The Firm Units shall be registered in such name or names
and in such authorized denominations as the Representatives may request in
writing at least two full business days prior to the Closing Date. The Company
will permit the Representatives to examine and package the Firm Units for
delivery, at least one full business day prior to the Closing Date. The Company
shall not be obligated to sell or deliver the Firm Units except upon tender of
payment for all the Firm Units.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any over-allotments
in connection with the distribution and sale of the Firm Units, the Company
hereby grants to the several Underwriters, severally, and not jointly, an option
to purchase up to an additional 1,200,000 units from the Company
("Over-allotment Option"). Such additional 1,200,000 units are hereinafter
referred to as "Option Units." The Firm Units and the Option Units are
hereinafter collectively referred to as the "Units," and the Units, the shares
of Common Stock and the Warrants included in the Units and the shares of Common
Stock issuable upon exercise of the Warrants are hereinafter referred to
collectively as the "Public Securities." The purchase price to be paid for the
Option Units will be the same price per Option Unit as the price per Firm Unit
set forth in Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted pursuant
to Section 1.2.1 hereof may be exercised 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 notice to the Company by the
Representatives, which , if initially given orally, must be confirmed in writing
by overnight mail or facsimile transmission, setting forth the number of Option
Units to be purchased by the several Underwriters and the date and time for
delivery of and payment for the Option Units (the "Option Closing Date"), which
will not be later than five full business days after the date of the notice or
such other time as shall be agreed upon by the Company and the Representatives,
at the offices of DJS or at such other place as shall be agreed upon by the
Company and the Representatives. Upon exercise of the Over-allotment Option, the
Company will become obligated to convey to the several Underwriters, and,
subject to the terms and conditions set forth herein, each of the Underwriters,
acting severally, and not jointly, will become obligated to purchase the
proportion of the number of Option Units then being purchased as specified in
the notice which the number of Firm Units set forth in Schedule I opposite the
name of such Underwriter bears to the total number of Firm Units, subject in
each case to such adjustments as the Representatives in their discretion shall
make.
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1.2.3 Payment and Delivery. Payment for any Option Units purchased
shall be made on the Option Closing Date at the election of the Representatives
by wire transfer in Federal (same day) funds or by certified or bank cashier's
check(s) in New York Clearing House funds, payable as follows: $____ per Option
Unit shall be deposited in the Trust Fund pursuant to the Trust Agreement and
the remaining proceeds shall be paid (subject to Section 3.13 hereof) to the
order of the Company upon delivery to the Representatives of certificates (in
form and substance satisfactory to the Representatives) representing the Option
Units (or through the facilities of DTC) for the account of the Underwriters.
The certificates representing the Option Units to be delivered will be in such
denominations and registered in such names as the Representatives request not
less than two full business days prior to the Closing Date or the Option Closing
Date, as the case may be, and will be made available to the Representatives for
inspection, checking and packaging at the aforesaid office of the Company's
transfer agent or correspondent not less than one full business day prior to
such Closing Date.
1.3 Representative's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and sell to
the Representatives (and/or their designees) on the Effective Date an option
("Representatives' Purchase Option") for the purchase of an aggregate of 400,000
units ("Representatives' Units") for an aggregate purchase price of $100. Each
of the Representatives' Units is identical to the Firm Units except that the
Warrants included in the Representatives' Units ("Representatives' Warrants")
have an exercise price of $6.25 (125% of the exercise price of the Warrants
included in the Units sold to the public). The Representatives Purchase Option
shall be exercisable, in whole or in part, commencing on the later of the
consummation of a Business Combination and one year from the Effective Date and
expiring on the five-year anniversary of the Effective Date at an initial
exercise price per Representatives Unit of $7.50, which is equal to one hundred
and twenty five percent (125%) of the initial public offering price of a Unit.
The Representatives' Purchase Option, the Representatives' Units, the
Representatives' Warrants and the shares of Common Stock issuable upon exercise
of the Representatives' Warrants are hereinafter referred to collectively as the
"Representatives' Securities." The Public Securities and the Representatives'
Securities are hereinafter referred to collectively as the "Securities." The
Representatives understands and agrees that there are significant restrictions
against transferring the Representatives' Purchase Option during the first year
after the Effective Date, as set forth in Section 3 of the Representatives'
Purchase Option.
1.3.2 Payment and Delivery. Delivery of and payment for the
Representatives' Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Representatives, upon payment therefor, certificates for
the Representatives' Purchase Option in the name or names and in such authorized
denominations as the Representatives may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the Securities
and Exchange Commission ("Commission") a registration statement and an amendment
or amendments thereto, on Form S-1 (File No. 333-126467), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Public Securities under the Securities Act of 1933, as amended ("Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations ("Regulations") of the Commission under the Act. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial
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statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430A of the Regulations), is
hereinafter called the "Registration Statement". If the Company has filed an
abbreviated registration statement to register additional Securities pursuant to
Rule 462(b) under the Rules (the "462(b) Registration Statement"), then any
reference herein to the Registration Statement shall also be deemed to include
such 462(b) Registration Statement. The form of the final prospectus dated the
Effective Date included in the Registration Statement (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration Statement
has been declared effective by the Commission on the date hereof.
2.1.2 Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A (File Number 000-_____) providing for the registration
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 Disclosures in Registration Statement.
2.3.1 10b-5 Representation. At the time the Registration Statement
became effective and at all times subsequent thereto up to the Closing Date and
the Option Closing Date, if any, the Registration Statement and the Prospectus
does and will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, does or will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
for the registration of the Securities or any amendment thereto or pursuant to
Rule 424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this Section
2.3.1 does not apply to statements made or statements omitted in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
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2.3.2 Disclosure of Agreements. The agreements and documents described
in the Registration Statement and the Prospectus conform to the descriptions
thereof contained therein in all material respects and there are no agreements
or other documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i) that
is referred to in the Prospectus, or (ii) is material to the Company's business,
has been duly and validly executed by the Company, is in full force and effect
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the Company have
been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company since the Company's formation, except as disclosed in the Registration
Statement.
2.3.4 Regulations. The disclosures in the Registration Statement
concerning the effects of Federal, State and local regulation on the Company's
business as currently contemplated are correct in all material respects and do
not omit to state a material fact.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or business prospects
of the Company, (ii) there have been no material transactions entered into by
the Company, other than as contemplated pursuant to this Agreement, and (iii) no
member of the Company's management has resigned from any position with the
Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its equity securities.
2.5 Independent Accountants. RubinBrown, LLP ("RubinBrown"), whose report
is filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations. RubinBrown
has not, during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Exchange Act.
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2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus fairly present in all material respects the financial position, the
results of operations and the cash flows of the Company at the dates and for the
periods to which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved; and the supporting schedules included in the
Registration Statement present fairly in all material respects the information
required to be stated therein. The Registration Statement discloses all material
off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unconsolidated
entities or other persons that may have a material current or future effect on
the Company's financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses.
2.7 Authorized Capital; Options; Etc. The Company had at the date or dates
indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding securities of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The authorized Common Stock conforms to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or, based in part on the representations and
warranties of the purchasers of such shares of Common Stock, exempt from such
registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The Securities have
been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. The Securities
conform in all material respects to all statements with respect thereto
contained in the Registration Statement. When issued, the Representatives'
Purchase Option, the Representatives' Warrants and the Warrants will constitute
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment of the respective exercise prices therefor, the number and
type of securities of the Company called for thereby in accordance with the
terms thereof and such Representatives' Purchase Option, the Representatives'
Warrants and the Warrants are enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable
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relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10 Validity and Binding Effect of Agreements. This Agreement, the Warrant
Agreement (as defined in Section 2.21 hereof), the Trust Agreement, the Services
Agreement (as defined in Section 3.7.2 hereof) and the Escrow Agreement (as
defined in Section 2.22.2 hereof) have been duly and validly authorized by the
Company and constitute, and the Representative's Purchase Option, has been duly
and validly authorized by the Company and, when executed and delivered, will
constitute, the valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement, the Representatives' Purchase
Option, the Trust Agreement, the Services Agreement and the Escrow Agreement,
the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and thereof
do not and will not, with or without the giving of notice or the lapse of time
or both (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party except pursuant to the Trust
Agreement referred to in Section 2.24 hereof; (ii) result in any violation of
the provisions of the Certificate of Incorporation or the Bylaws of the Company;
or (iii) violate any existing applicable law, rule, regulation, judgment, order
or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties, businesses or assets.
2.12 No Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or Bylaws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties,
businesses or assets.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies that it needs as of the date hereof to conduct its business
purpose as described in the Prospectus. The disclosures in the Registration
Statement concerning the effects of federal, state and local regulation on this
offering and the Company's business purpose as currently contemplated are
correct in all material respects and do not omit to state a material fact
required to be stated therein or necessary
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in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
2.13.2 Transactions Contemplated Herein. The Company has all corporate
power and authority to enter into this Agreement, the Warrant Agreement, the
Services Agreement, the Representatives' Purchase Option, the Trust Agreement,
and the Escrow Agreement and to carry out the provisions and conditions hereof
and thereof, and all consents, authorizations, approvals and orders required in
connection therewith have been obtained. No consent, authorization or order of,
and no filing with, any court, government agency or other body is required for
the valid issuance, sale and delivery, of the Securities and the consummation of
the transactions and agreements contemplated by this Agreement, the Warrant
Agreement, the Services Agreement, the Representatives' Purchase Option, the
Trust Agreement and the Escrow Agreement and as contemplated by the Prospectus,
except with respect to applicable federal and state securities laws.
2.14 D&O Questionnaires. To the best of the Company's knowledge, all
information contained in the questionnaires ("Questionnaires") completed by each
of the Company's stockholders immediately prior to the Offering ("Initial
Stockholders") and provided to the Underwriters 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 in any material respect.
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 either individually, or in the aggregate, could
result in a material adverse change in the condition, financial or otherwise, or
business prospects of the Company, which has not been disclosed in the
Registration Statement or the Questionnaires.
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the assets,
business or operations of the Company.
2.17 Stop Orders. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or any part
thereof and, to the Company's knowledge, has not threatened to issue any such
order.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Finder's Fees. Except as described in the Prospectus, there are
no claims, payments, arrangements, agreements or understandings relating to the
payment of a finder's, consulting or origination fee by the Company or any
Initial Stockholder with respect to the sale of the Securities hereunder or any
other arrangements, agreements or understandings of the Company or, to the best
of the Company's knowledge, any Initial Stockholder that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
2.18.2 Payments Within Twelve Months. The Company has not made any
direct or indirect payments (in cash, securities or otherwise) (i) to any
person, as a finder's fee, consulting fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
raised or provided capital to the Company, (ii) to any NASD member or (iii) to
any person or entity that has
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any direct or indirect affiliation or association with any NASD member, within
the twelve months prior to the Effective Date, other than payments to DJS.
2.18.3 Use of Proceeds. None of the net proceeds of the Offering will
be paid by the Company to any participating NASD member or its affiliates,
except as specifically authorized herein and except as may be paid in connection
with a Business Combination as contemplated by the Prospectus.
2.18.4 Insiders' NASD Affiliation. Based on questionnaires distributed
to such persons, except as set forth on Schedule 2.18.4, no officer, director or
any beneficial owner of the Company's unregistered securities has any direct or
indirect affiliation or association with any NASD member. The Company will
advise the Representatives and their counsel if it learns that any officer,
director or owner of at least 5% of the Company's outstanding Common Stock is or
becomes an affiliate or associated person of an NASD member participating in the
offering.
2.19 Foreign Corrupt Practices Act. Neither the Company nor any of the
Initial Stockholders or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) that (i) might subject the Company to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a material adverse effect on the
assets, business or operations of the Company as reflected in any of the
financial statements contained in the Prospectus or (iii) if not continued in
the future, might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
2.20. Officers' Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to the Representatives or to their counsel
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
2.21 Warrant Agreement. The Company has entered into a warrant agreement
with respect to the Warrants and the Representatives' Warrants with Continental
Stock Transfer & Trust Company substantially in the form annexed as Exhibit 4.5
to the Registration Statement ("Warrant Agreement").
2.22 Agreements With Initial Stockholders.
2.22.1 Insider Letters. The Company has caused to be duly executed
legally binding and enforceable agreements (except (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or noncompete provision may be limited under the
federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought) a form of which is annexed as Exhibit 10.1
to the Registration Statement ("Insider Letters"), pursuant to which each of the
Initial Stockholders of the Company agrees to certain matters, including but not
limited to, certain matters described as being agreed to by them under the
"Proposed Business" section of the Prospectus.
2.22.2 Escrow Agreement. The Company has caused the Initial
Stockholders to enter into an escrow agreement ("Escrow Agreement") with
Continental Stock Transfer & Trust Company ("Escrow
9
Agent") substantially in the form annexed as Exhibit 10.3 to the Registration
Statement, whereby the Common Stock owned by the Initial Stockholders will be
held in escrow by the Escrow Agent, until the third anniversary of the Effective
Date or earlier in the event of the Company's liquidation or upon consummation
of a business combination all as more specifically provided in the Escrow
Agreement. During such escrow period, the Initial Stockholders shall be
prohibited from selling or otherwise transferring such shares (except to spouses
and children of Initial Stockholders and trusts established for their benefit
and as otherwise set forth in the Escrow Agreement) but will retain the right to
vote such shares. To the Company's knowledge, the Escrow Agreement is
enforceable against each of the Initial Stockholders and will not, with or
without the giving of notice or the lapse of time or both, result in a breach
of, or conflict with any of the terms and provisions of, or constitute a default
under, any agreement or instrument to which any of the Initial Stockholders is a
party. The Escrow Agreement shall not be amended, modified or otherwise changed
without the prior written consent of the Representatives.
2.23 Lock-Up and Stock Sale Agreements. The Company has caused to be duly
executed legally binding and enforceable agreements pursuant to which all of the
Initial Stockholders agree not to sell, transfer or otherwise dispose of any of
their Common Stock or Warrants, including any shares of Common Stock issuable
upon exercise of such Warrants, for a period of three (3) years from the
Effective Date or any longer period required by the NASD, any securities
exchange or association governing any quotation medium where the Common Stock is
listed or quoted or any State (each a "Lock-up Letter"), without the express
written consent of DJS. In addition, the Company has caused each of its
executive officers and directors to enter into an agreement to effect all sales
of the Company's securities exclusively through DJS for a period of twenty-four
(24) months from the Effective Date (each a "Sale Letter").
2.24 Investment Management Trust Agreement. The Company has entered into
the Trust Agreement with respect to certain proceeds of the Offering
substantially in the form annexed as Exhibit 10.2 to the Registration Statement.
2.25 Covenants Not to Compete. No Initial Stockholder, employee, officer or
director of the Company is subject to any noncompetition agreement or
non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be an Initial Stockholder, employee, officer
and/or director of the Company except as described in the Registration Statement
and Prospectus.
2.26 Investments. No more than 45% of the "value" (as defined in Section
2(a) (41) of the Investment Company Act of 1940 ("Investment Company Act")) of
the Company's total assets consist of, and no more than 45% of the Company's net
income after taxes is derived from, securities other than "Government
securities" (as defined in Section 2(a) (16) of the Investment Company Act).
2.27 Subsidiaries. The Company does not own an interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
entity.
2.28 Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any other person required to
be described in the Prospectus that have not been described as required.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to the
Representatives, 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 Representatives
shall reasonably object in writing.
10
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is required to be
delivered under the Act, the Company will use all reasonable efforts to comply
with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representatives 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 Representatives) with the Commission
pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. The Company will use its best efforts
to maintain the registration of the Units, Common Stock and Warrants under the
provisions of the Exchange Act for a period of five years from the Effective
Date, or until the Company is required to be liquidated, if earlier. The Company
will not deregister the Units under the Exchange Act without the prior written
consent of the Representatives.
3.3 Blue Sky Filings. The Company will endeavor in good faith, in
cooperation with the Representatives, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representatives may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representatives agree that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction except that with respect to any jurisdiction
outside of the United States the Company shall not be required to make such
filings unless it so consents, which consent will not be unreasonably withheld.
3.4 Delivery to Underwriters of Prospectuses. The Company will deliver to
each of the several Underwriters, without charge, from time to time during the
period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to each of the Representatives 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 Representatives immediately and confirm the notice
in writing (i) of the effectiveness of the Registration Statement and any
amendment thereto, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding for that purpose, (iii)
of the issuance by any state securities commission of any
11
proceedings for the suspension of the qualification of the Public Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration
Statement or Prospectus, (v) of the receipt of any comments or request for any
additional information from the Commission, and (vi) of the happening of any
event during the period described in Section 3.4 hereof that, in the judgment of
the Company, makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Commission or any state securities commission shall enter a
stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. Until the earlier of five years from
the Effective Date, or until such earlier time upon which the Company is
required to be liquidated, the Company, at its expense, shall cause its
regularly engaged independent registered 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 quarterly report on Form 10-Q 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 Administrative Services. The Company has entered into an
agreement ("Services Agreement") with Confluence Acquisition, LLC ("Affiliate")
substantially in the form annexed as Exhibit 10.5 to the Registration Statement
pursuant to which the Affiliate will make available to the Company general and
administrative services including office space, utilities and secretarial
support for the Company's use for $7,500 per month.
3.7.3 Compensation. Except as set forth above in this Section 3.7, the
Company shall not pay any Initial Stockholder or any of their affiliates any
fees or compensation from the Company, for services rendered to the Company
prior to, or in connection with, the consummation of a Business Combination;
provided that the Initial Stockholders shall be entitled to reimbursement from
the Company for their reasonable out-of-pocket expenses incurred in connection
with seeking and consummating a Business Combination.
3.8 Secondary Market Trading. The Company shall take such other action as
may be reasonably requested by the Representatives to obtain a secondary market
trading exemption in such states as may be reasonably requested by the
Representatives.
3.9 Warrant Solicitation Fees. The Company hereby engages the
Representatives, on a non-exclusive basis, as its agent for the solicitation of
the exercise of the Warrants. The Company will (i) assist the Representatives
with respect to such solicitation, if requested by the Representatives, and (ii)
at the Representatives' request, provide the Representatives, and direct the
Company's transfer and warrant agent to provide to the Representatives, at the
Company's cost, lists of the record and, to the extent known, beneficial owners
of, the Warrants. Commencing one year from the Effective Date, the Company will
pay the Representatives a commission of five percent (5%) of the exercise price
of the Warrants for each Warrant exercised, payable on the date of such
exercise, on the terms provided for in the Warrant Agreement, only if permitted
under the rules and regulations of the NASD and only to the extent that an
investor who exercises his Warrants specifically designates, in writing, that
the Representatives solicited his exercise. The Representatives
12
may engage sub-agents in their solicitation efforts. The Company agrees to
disclose the arrangement to pay such solicitation fees to the Representatives in
any prospectus used by the Company in connection with the registration of the
shares of Common Stock underlying the Warrants.
3.10 Reports to the Representative.
3.10.1 Periodic Reports, Etc. For a period of two years from the
Closing Date or until such earlier time upon which the Company is required to be
liquidated, the Company will furnish to the Representatives (and their 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 Representatives (i) a copy of each
periodic report and other documents the Company files with the Commission, (ii)
a copy of every press release and every news item and article with respect to
the Company or its affairs which was released by the Company, (iii) a copy of
each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company, (iv) five copies of each registration statement filed by the Company
with the Commission under the Securities Act, (v) copies of daily transfer
sheets prepared by the Company's transfer agent, (vi) special security position
reports and tracking reports as prepared by DTC, and (vii) such additional
documents and information with respect to the Company and the affairs of any
future subsidiaries of the Company as the Representative may from time to time
reasonably request.
3.11.2 Secondary Market Trading Survey.
The Company agrees to pay the
cost, not to exceed $________, of counsel to the Underwriters, to deliver to the
Underwriters on the Closing Date, a written report detailing those states in
which the Public Securities may be traded in non-issuer transactions under the
Blue Sky laws of the fifty States ("Secondary Market Trading Survey").
3.12 Payment of Expenses.
3.12.1 General Expenses Related to the Offering. The Company hereby
agrees to pay on each of the Closing Date and the Option Closing Date, if any,
to the extent not paid at Closing Date, all expenses incident to the performance
of the obligations of the Company under this Agreement, including but not
limited to (i) the preparation, printing, filing and mailing (including the
payment of postage with respect to such mailing) of the Registration Statement,
the Preliminary and Final Prospectuses and the printing and mailing of this
Agreement and related documents, including the cost of all copies thereof and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as may be required by the Underwriters, (ii) the printing, engraving,
issuance and delivery of the Units, the shares of Common Stock and the Warrants
included in the Units and the Representatives' Purchase Option, (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
(including the cost of preparing the Secondary Market Trading survey) (not to
exceed $15,000) to DP, (iv) fees and disbursements of the transfer and warrant
agent, (v) the Company's expenses associated with "due diligence" and/or
roadshow meetings arranged by the Representatives to the extent such meetings
were agreed upon between the Company and the Representatives, (vi) the cost
of preparing a videotape or a power point presentation of the Company's
business, (vii) the preparation, binding and delivery of bound transaction
"bibles," containing SEC, NASD and closing documents and (viii) all other costs
and expenses customarily borne by an issuer incident to the performance of
its obligations hereunderwhich are not otherwise specifically
13
provided for in this Section 3.12.1. 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 Representatives and others. If the
Offering contemplated by this Agreement is not consummated for any reason
whatsoever then the Company and the Underwriters shall each be responsible for
their expenses. The Representatives shall retain such part of the nonaccountable
expense allowance previously paid as shall equal its actual out-of-pocket
expenses and refund the balance. If the amount previously paid is insufficient
to cover such actual out-of-pocket expenses, the Company shall remain liable for
and promptly pay any other actual out-of-pocket expenses.
3.12.2 Nonaccountable Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.12.1, on the Closing
Date, it will pay to the Representatives a nonaccountable expense allowance
equal to two percent (2%) of the gross proceeds received by the Company from the
sale of the Firm Units.
3.13 Application of Net Proceeds. The Company will apply the net proceeds
from the Offering received by it in a manner consistent with the application
described under the caption "Use Of Proceeds" in the Prospectus.
3.14 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 registered 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.
3.15 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 the Representatives 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.
3.16 Stabilization. Neither the Company, nor, to its knowledge, any of its
employees, directors or stockholders (without the consent of the
Representatives) has taken or will take, directly or indirectly, any action
designed to or that has constituted or that might reasonably be expected to
cause or result in, under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Units.
3.17 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.
14
3.19 Accountants. Until the earlier of five years from the Effective Date
or until such earlier time upon which the Company is required to be liquidated,
the Company shall retain ▇▇▇▇▇ ▇▇▇▇▇ or another independent registered public
accounting firm reasonably acceptable to the Representatives.
3.20 Form 8-K. The Company shall, on the date hereof, retain its
independent registered public accountants to audit the financial statements of
the Company as of the Closing Date ("Audited Financial Statements") reflecting
the receipt by the Company of the proceeds of the initial public offering. As
soon as the Audited Financial Statements become available, the Company shall
immediately file a Current Report on Form 8-K with the Commission, which Report
shall contain the Company's Audited Financial Statements.
3.21 NASD. The Company shall advise the NASD if it is aware that any 5% or
greater stockholder of the Company becomes an affiliate or associated person of
an NASD member participating in the distribution of the Company's Public
Securities.
3.22 Corporate Proceedings. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction of counsel for the Underwriters.
3.23 Investment Company. The Company shall cause the proceeds of the
Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Prospectus. The Company will otherwise conduct its business in
a manner so that it will not become subject to the Investment Company Act.
Furthermore, once the Company consummates a Business Combination, it will be
engaged in a business other than that of investing, reinvesting, owning, holding
or trading securities.
3.24 Business Combination Announcement. The Company will not issue a press
release or otherwise make an announcement of a Business Combination without
providing advance notice thereof to the Representatives.
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 Limitations on Sales of Securities. From the date hereof until one
hundred twenty (120) days after the Effective Date, the Company shall not,
without the prior written consent of the Representatives, issue, sell, offer to
sell, grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any equity securities or other securities convertible into,
exercisable for, or exchangeable for equity securities of the Company except
with respect to the Offering.
4 Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
15
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York time,
on the date of this Agreement or such later date and time as shall be consented
to in writing by the Representatives, and, at each of the Closing Date and the
Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for the purpose
shall have been instituted or shall be pending or contemplated by the Commission
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of Blank Rome LLP,
counsel to the Underwriters ("Blank Rome").
4.1.2 NASD Clearance. By the Effective Date, the Representatives shall
have received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriters as described in the Registration Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the
Units in any jurisdiction designated by the Representatives pursuant to Section
3.3 hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
4.1.4 Listing of the Public Securities.
On or prior to the Effective Date the Company shall have been
advised that one or more market makers has received authorization to quote the
Public Securities on the Electronic Over-the-Counter Bulletin Board (OTC-BB).
4.2 Company Counsel Matters.
4.2.1 Opinion of Counsel. On each of the Closing Date and the Option
Closing Date, if any, the Representatives shall have received the favorable
opinion of DP, counsel to the Company, dated the Closing Date or Option Closing
Date, as the case may be, addressed to the Representatives and in form and
substance satisfactory to Blank Rome to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the assets, business or operations of the Company.
(ii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of law
or under the Certificate of Incorporation or Bylaws of the Company. The offers
and sales of the outstanding Common Stock were at all relevant times either
registered under the Act or exempt from such registration requirements. The
authorized and, to such counsel's knowledge, outstanding capital stock of the
Company is as set forth in the Prospectus.
(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
16
Incorporation or Bylaws of the Company. When issued, the Representatives'
Purchase Option, the Representatives' Warrants and the Warrants will constitute
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of securities of the Company
called for thereby and such Warrants, the Representatives' Purchase Option, and
the Representatives' Warrants, when issued, in each case, are enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The certificates representing the Securities are in due and
proper form.
(iv) This Agreement, the Warrant Agreement, the Services
Agreement, the Trust Agreement and the Escrow Agreement have each been duly and
validly authorized and, when executed and delivered by the Company, constitute,
and the Representatives' Purchase Option has been duly and validly authorized by
the Company and, when executed and delivered, will constitute, the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification or
contribution provisions may be limited under the federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(v) The execution, delivery and performance of this Agreement,
the Warrant Agreement, the Representatives' Purchase Option, the Escrow
Agreement, the Trust Agreement and the Services Agreement and compliance by the
Company with the terms and provisions thereof and the consummation of the
transactions contemplated thereby, and the issuance and sale of the Securities,
do not and will not, with or without the giving of notice or the lapse of time,
or both, (a) to such counsel's knowledge, conflict with, or result in a breach
of, any of the terms or provisions of, or constitute a default under, or result
in the creation or modification of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to the
terms of, any mortgage, deed of trust, note, indenture, loan, contract,
commitment or other agreement or instrument filed as an exhibit to the
Registration Statement, (b) result in any violation of the provisions of the
Certificate of Incorporation or the Bylaws of the Company, or (c) to such
counsel's knowledge, violate any United States statute or any judgment, order or
decree, rule or regulation applicable to the Company of any court, United States
federal, state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets.
(vi) The Registration Statement, each Preliminary Prospectus and
the Prospectus and any post-effective amendments or supplements thereto (other
than the financial statements included therein, as to which no opinion need be
rendered) each as of their respective dates appeared on their face to comply as
to form in all material respects with the requirements of the Act and
Regulations. The Securities and all other securities issued or issuable by the
Company conform in all material respects to the description thereof contained in
the Registration Statement and the Prospectus. The descriptions in the
Registration Statement and in the Prospectus, insofar as such statements
constitute a summary of United States statutes, legal matters, contracts,
documents or proceedings referred to therein, fairly present in all material
respects the information required to be shown with respect to such United States
statutes, legal matters, contracts, documents and proceedings, and such counsel
does not know of any United States statutes or legal or governmental proceedings
required to be described in the Prospectus that are not described in the
Registration Statement or the Prospectus or included as exhibits to the
Registration Statement that are not described or included as required.
17
(vii) The Registration Statement is effective under the Act. To
such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act or applicable state
securities laws.
(viii) To such counsel's knowledge, there is no action, suit or
proceeding before or by any court of governmental agency or body, domestic or
foreign, now pending, or threatened against the Company that is required to be
described in the Registration Statement.
The opinion of counsel shall further include a statement to the effect that such
counsel has participated in conferences with officers and other representatives
of the Company, the Underwriters and the independent registered public
accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus contained therein and related matters
were discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus contained
therein (except as otherwise set forth in the foregoing opinion), at the time
the Registration Statement or amendment became effective, or as of the date of
such opinion, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or the Prospectus or any amendment or
supplement thereto, at the time they were filed pursuant to Rule 424(b) or at
the date of such counsel's opinion, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
opinion with respect to the financial information and statistical data and
information included in the Registration Statement or the Prospectus).
4.2.2 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
Blank Rome) of other counsel reasonably acceptable to Blank Rome, familiar with
the applicable laws, and (ii) as to matters of fact, to the extent they deem
proper, on certificates or other written statements of officers of the Company
and officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to the
Underwriters' counsel if requested. The opinion of counsel for the Company and
any opinion relied upon by such counsel for the Company shall include a
statement to the effect that it may be relied upon by counsel for the
Underwriters in its opinion delivered to the Underwriters.
4.3 Cold Comfort Letter. At each of the Closing Date and the Option Closing
Date, if any, the Representatives shall have received a letter, addressed to
them 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 the Representatives and to Blank Rome from RubinBrown dated,
respectively, as of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are registered 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;
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(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 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 material decrease in the stockholders' equity of the
Company as compared with amounts shown in the June 30, 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 June
30, 2005 to a specified date not later than five days prior to the 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 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) 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;
(v) Stating that they have not since the inception of the Company
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
(ivi) Statements as to such other matters incident to the transaction
contemplated hereby as the Representatives 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 Representatives shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary or Assistant Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed all covenants and complied with all conditions
required by this Agreement to be performed or complied with by the Company prior
to and as of the Closing Date, or the Option Closing Date, as the case may be,
and that the conditions set forth in Section 4.5 hereof have been satisfied as
of such date and that, as of Closing Date and the Option Closing Date, as the
case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct. In addition, the Representatives will
have received such other and further certificates of officers of the Company as
the Representatives may reasonably request.
19
4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representatives shall have received a
certificate of the Company signed by the 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, (a) there shall have been (i) 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, and (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 (b) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.6 Delivery of Agreements.
4.6.1 Effective Date Deliveries. On the Effective Date, the Company
shall have delivered to the Representatives executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement, the Services Agreement
and all of the Insider Letters and Lock-Up Letters.
4.6.2 Closing Date Deliveries. On the Closing Date, the Company shall
have delivered to the Representatives executed copies of the Representatives'
Purchase Option.
4.7 Opinion of Counsel for the Underwriters. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Representatives and to Blank Rome and the Representatives shall have received
from such counsel a favorable opinion, dated the Closing Date and the Option
Closing Date, if any, with respect to such of these proceedings as the
Representatives may reasonably require. On or prior to the Effective Date, the
Closing Date and the Option Closing Date, as the case may be, counsel for the
Underwriters shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review or
pass upon the matters referred to in this Section 4.7, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.
4.8 Secondary Market Trading Survey. On the Closing Date, the
Representative shall have received the Secondary Market Trading Survey from
Blank Rome .
5 Indemnification.
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5.1 Indemnification of Underwriters.
5.1.1 General. Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless each of the Underwriters, and each dealer
selected by the Representitves that participates in the offer and sale of the
Securities (each a "Selected Dealer") and each of their respective directors,
officers and employees and each person, if any, who controls any such
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, whether arising out of any action between any of the Underwriters
and the Company or between any of the Underwriters and any third party or
otherwise) to which they or any of them may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
each may be amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the
Representative's Purchase Option; or (iii) any application or other document or
written communication (in this Section 5 collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to an Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. With respect to any untrue statement or
omission or alleged untrue statement or omission made in the Preliminary
Prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of any Underwriter to the extent that any loss, liability, claim,
damage or expense of such Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Securities to such person as required by the Act and the Regulations, and if
the untrue statement or omission has been corrected in the Prospectus, unless
such failure to deliver the Prospectus was a result of non-compliance by the
Company with its obligations under Section 3.4 hereof. The Company agrees
promptly to notify the Representative of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Securities or in connection
with the Registration Statement or Prospectus.
5.1.2 Procedure. If any action is brought against an Underwriter, a
Selected Dealer or a controlling person in respect of which indemnity may be
sought against the Company pursuant to Section 5.1.1, such Underwriter or
Selected Dealer shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action,
including the employment and fees of counsel (subject to the reasonable approval
of such Underwriter or Selected Dealer, as the case may be) and payment of
actual expenses. Such Underwriter , Selected Dealer or controlling person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Underwriter,
Selected Dealer or controlling person unless (i) the employment of such counsel
at the expense of the Company shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company shall
not have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the
21
indemnified party or parties), in any of which events the reasonable fees and
expenses of not more than one additional firm of attorneys selected by the
Underwriter, Selected Dealer and/or controlling person shall be borne by the
Company. Notwithstanding anything to the contrary contained herein, if the
Underwriter, Selected Dealer or controlling person shall assume the defense of
such action as provided above, the Company shall have the right to approve the
terms of any settlement of such action which approval shall not be unreasonably
withheld. The Company shall not settle any action without the prior consent of
the Representative, unless such settlement provides for a full release of the
underwriters ad Selected dealers (whether or not named a party to the action),
without admission of nay wrongdoing.
5.2 Indemnification of the Company. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company, its directors,
officers and employees and agents who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to the several Underwriters, as incurred, but only with respect
to untrue statements or omissions, 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 ("indemnified party") makes claim for
indemnification pursuant hereto but indemnification provided for in this Section
5 is unavailable or insufficient to hold harmless an indemnified party under
Sections 5.1 and 5.2 above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then, and in
each such case, the indemnifying parties shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
this Section 5 incurred by the indemnified parties in such proportions as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the Offering. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault in case of an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission of a material fact shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 5.3.1 were
22
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
5.3.1. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 5.3.1 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section
5.3.1, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Public Securities underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
in respect of such losses, liabilities, claims, damages and expenses. For
purposes of this Section, each director, officer and employee of an Underwriter
or the Company, as applicable, and each person, if any, who controls an
Underwriter or the Company, as applicable, within the meaning of Section 15 of
the Act shall have the same rights to contribution as the Underwriters or the
Company, as applicable. Anything in this Section 5.3.1 to the contrary
notwithstanding, no party will be liable for contribution with respect to the
settlement of any claim or action effected without its written consent.
5.3.2 Contribution Procedure. Within fifteen days after receipt by any
party to this Agreement (or its representative) of notice of the commencement of
any action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party ("contributing party"),
notify the contributing party of the commencement thereof, but the omission to
so notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or its representative of the commencement thereof
within the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section are intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the
Exchange Act or otherwise available. The Underwriters' obligations to contribute
pursuant to this Section 5.3 are several and not joint.
6 Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Units . If any Underwriter or
Underwriters shall default in its or their obligations to purchase the Firm
Units and if the number of the Firm Units with respect to which such default
relates does not exceed in the aggregate 10% of the number of Firm Units that
all Underwriters have agreed to purchase hereunder, then such Firm 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. In the event that the default
addressed in Section 6.1 above relates to more than 10% of the Firm Units, the
Representatives may in their discretion arrange for themselves or for another
party or parties to purchase such Firm 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 the Representatives do not arrange
for the purchase of such Firm 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 the Representatives to purchase said Firm Units on such
terms. In the event that neither the Representatives nor the Company arrange for
the purchase of the Firm Units to which a default relates as provided in this
Section 6, this Agreement will be terminated by the Representatives or the
Company without liability on the
23
part of the Company (except as provided in Sections 3.15 and 5 hereof) or the
several Underwriters (except as provided in Section 5 hereof); provided 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 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, the
Representatives or the Company shall have the right to postpone the Closing Date
for a reasonable period, but not in any event exceeding five business days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment to the
Registration Statement or the Prospectus that in the opinion of counsel for the
Underwriters may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any party substituted under this Section 6 with
like effect as if it had originally been a party to this Agreement with respect
to such Securities.
7 Additional Covenants.
7.1 Additional Shares or Options. The Company hereby agrees that until the
consummation of a Business Combination, it shall not issue any shares of Common
Stock or any options or other securities convertible 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 other than
the Firm Units and the Option Units.
7.2 Trust Fund Waiver Acknowledgment. The Company hereby agrees that it
will not commence its due diligence investigation of any operating business
which the Company seeks to acquire ("Target Business") or obtain the services of
any vendor unless and until such Target Business or vendor acknowledges in
writing, whether through a letter of intent, memorandum of understanding or
other similar document (and subsequently acknowledges the same in any definitive
document replacing any of the foregoing), that (a) it has read the Prospectus
and understands that the Company has established the Trust Fund, initially in an
amount of $42,400,000 for the benefit of the public stockholders and that the
Company may disburse monies from the Trust Fund only (i) to the public
stockholders in the event they elect to convert their IPO Shares (as defined
below in Section 8.8) and the liquidation of the Company or (ii) to the Company
after, or concurrently with, the consummation of a Business Combination and (b)
for and in consideration of the Company (1) agreeing to evaluate such Target
Business for purposes of consummating a Business Combination with it or (2)
agreeing to engage the services of the vendor, as the case may be, such Target
Business or vendor agrees that it does not have any right, title, interest or
claim of any kind in or to any monies in the Trust Fund ("Claim") and waives any
Claim it may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with the Company and will not seek
recourse against the Trust Fund for any reason whatsoever.
7.3 Insider Letters and Lock-up Letters. The Company shall not take any
action or omit to take any action which would cause a breach of any of the
Insider Letters or Lock-Up Letters executed between each Initial Stockholder and
the Representatives and will not allow any amendments to, or waivers of, such
Insider Letters or Lock-Up Letters without the prior written consent of the
Representatives.
7.4 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
Representatives.
7.5 Blue Sky Requirements. The Company shall provide counsel to the
Representative with ten copies of all proxy information and all related material
filed with the Commission in connection with a
24
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.
7.6 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, as determined by the
Company and approved by RubinBrown. In no event, however, will the Company's
Liquidation Value be less than the Trust Fund, inclusive of any net interest
income thereon after provision for taxes theron. Only holders of IPO Shares
shall be entitled to receive liquidating distributions and the Company shall pay
no liquidating distributions with respect to any other shares of capital stock
of the Company. With respect to the Business Combination Vote, the Company shall
cause all of the Initial Stockholders to vote the shares of Common Stock owned
by them immediately prior to this Offering in accordance with the vote of the
holders of a majority of the IPO Shares present, in person or by proxy, at a
meeting of the Company's stockholders called for such purpose. At the time the
Company seeks approval of any potential Business Combination, the Company will
offer each holder of Common Stock issued in this Offering ("IPO Shares") the
right to convert their IPO Shares at a per share price ("Conversion Price")
equal to the amount in the Trust Fund (inclusive of any net interest income
therein after provision for taxes thereon) calculated as of the record date for
determination of stockholders entitled to vote upon the proposal to approve such
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.
7.7 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.
7.8 Affiliated Transactions. The Company shall cause each of the officers
and directors to agree that, in order to minimize potential conflicts of
interest which may arise from multiple affiliations, the officers and directors
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
and directors cease to be an officer or director of the Company, subject to any
pre-existing fiduciary and contractual obligations the officers and directors
might have.
7.9 Target Net Assets. The Company agrees that the initial Target Business
that it acquires must have a fair market value equal to at least 80% of the
Company's net assets (all of the Company's assets, including the funds held in
the Trust Fund, less the Company's liabilities) at the time of such acquisition.
The fair market value of such business must be determined by the Board of
Directors of the Company based upon standards generally accepted by the
financial community, such as actual and potential sales, earnings and cash flow
and book value. If the Board of Directors of the Company is not able to
independently determine that the
25
target business has a fair market value of at least 80% of the Company's net
assets at the time of such acquisition, the Company will obtain an opinion from
an unaffiliated, independent investment banking firm which is a member of the
NASD with respect to the satisfaction of such criteria. The Company is not
required to obtain an opinion from an investment banking firm as to the fair
market value if the Company's Board of Directors independently determines that
the Target Business does have sufficient fair market value.
8. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and agreements of the
Underwriters and Company, including the indemnity agreements contained in
Section 5 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the several Underwriters until the
earlier of the expiration of any applicable statute of limitations and the
seventh anniversary of the later of the Closing Date or the Option Closing Date,
if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
9 Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the Effective
Date at the time the Registration Statement is declared effective by the
Commission.
9.2 Termination. The Representatives shall have the right to terminate this
Agreement at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in the
Representatives' 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 or the Boston Stock Exchange
(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 New York Stock Exchange, the American Stock
Exchange or the Boston Stock Exchange or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States shall
have become involved in a new war or an increase in major hostilities, or (iv)
if a banking moratorium has been declared by a New York State or federal
authority, or (v) if a moratorium on foreign exchange trading has been declared
which materially adversely impacts the United States securities market, or (vi)
if the Company shall have sustained a material loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act which,
whether or not such loss shall have been insured, will, in the Representatives'
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 Representatives shall have become aware after the
date hereof of such a material adverse change in the conditions or prospects of
the Company, or such adverse material change in general market conditions,
including without limitation as a result of terrorist activities after the date
hereof, as in the Representatives' judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Units or to enforce
contracts made by the Underwriters for the sale of the Securities.
9.3 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.
26
9.4 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.
10 Miscellaneous.
10.1 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 Representatives:
▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CEO
▇▇▇▇ Capital Partners, LLC
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, Managing Director
Copy to: Blank Rome, LLP
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Company:
Confluence Acquisition Partners I, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman and CEO
Copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
11.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
11.3 Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
11.4 Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitute the entire agreement of the parties
27
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 Representatives, 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 Delaware, without giving
effect to conflicts of law principles that would result in the application of
the substantive laws of another jurisdiction. The Company hereby agrees that any
action, proceeding or claim against it arising out of, or relating in any way to
this Agreement shall be brought and enforced in the courts of the State of
Delaware or the United States of America for the District of Delaware, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum. Any such process or summons to be
served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 10 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the Company
in any action, proceeding or claim. The Company agrees that the prevailing
party(ies) in any such action shall be entitled to recover from the other
party(ies) all of its reasonable attorneys' fees and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
11.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
11.8 Waiver, Etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
28
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CONFLUENCE ACQUISITION PARTNERS I, INC.
By:
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Accepted on the date first above
written.
▇▇▇▇▇▇ ▇▇▇▇▇ SECURITIES, INC.
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: CEO
▇▇▇▇ CAPITAL PARTNERS, LLC
By
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Managing Director
SCHEDULE I
CONFLUENCE ACQUISITION PARTNERS I, INC.
8,000,000 UNITS
Number of Firm Units
Underwriter to be Purchased
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▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇▇ Capital Partners, LLC 8,000,000