AFFINITY MEDIA INTERNATIONAL CORP. UNDERWRITING AGREEMENT
AFFINITY
MEDIA INTERNATIONAL CORP.
____,
2005
Maxim
Group LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
As
Representative of the Underwriters
named
on Schedule
A
hereto
Ladies
and Gentlemen:
The
undersigned, Affinity Media International Corp., a Delaware corporation
(“Company”),
hereby confirms its agreement with Maxim Group LLC (hereinafter referred to
as
“you,”“Maxim”
or the
“Representative”)
and
with the other underwriters named on Schedule A
hereto
for which Maxim is acting as Representative (the Representative and the other
Underwriters being collectively referred to herein as the “Underwriters”
or,
individually, an “Underwriter”)
as
follows:
1. Purchase
and Sale of Securities.
1.1 Firm
Securities.
1.1.1 Purchase
of Firm Units.
On the basis of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell, severally and not jointly, to the several Underwriters, an aggregate
of
2,500,000 units (the “Firm
Units”)
of the
Company at a purchase price (net of discounts and commissions) of $7.52 per
Firm
Unit. The Underwriters, severally and not jointly, agree to purchase
from
the Company the number of Firm Units set forth opposite their respective names
on Schedule A
attached
hereto and made a part hereof at a purchase price (net of discounts and
commissions) of $7.52 per Firm Unit. The Firm Units are to be offered
initially to the public (the “Offering”)
at the
offering price of $8.00 per Firm Unit. Each Firm Unit consists of one
share of the Company’s common stock, par value $.0001 per share (the
“Common
Stock”),
and
one warrant to purchase a share of Common Stock (the “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 (the
“Effective
Date”)
of the
Registration Statement (as defined in Section 2.1.1 hereof) unless Maxim
informs the Company of its decision to allow earlier separate trading (and
thereafter shall trade only separately), but in no event will Maxim allow
separate trading until (i) 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 such audited balance sheet with the Commission (as herein defined)
on a Form 8-K or similar form by the Company which includes such balance sheet
and (ii) the Business Day (defined below) following the earliest to occur of
the
expiration of the Over-allotment Option (defined below) or the exercise of
the
Over-allotment Option in full. Each Warrant entitles its holder to
purchase one share of Common Stock for $6.00 during the period commencing on
the
later of (a) the consummation by the Company of its “Business Combination” or
(b) one year from the Effective Date of the Registration Statement and
terminating on the four-year anniversary of the Effective Date.
“Business
Combination”
shall
mean any acquisition by merger, capital stock exchange, asset or stock
acquisition or other similar business combination consummated by the Company
with a single operating entity, or one or more related or unrelated entities
in
the publishing or related industries (as described more fully in the
Registration Statement). The Company has the right to redeem the Warrants upon
not less than thirty (30) days written notice at a price of $0.01 per Warrant
at
any time after the Warrants become exercisable; so long as the average closing
sales price of the Company’s Common Stock has been at least $11.50 for any
twenty (20) trading days within a thirty (30) trading day period ending on
the
third day prior to the day on which notice is given.
1.1.2 Payment
and Delivery.
Delivery and payment for the Firm Units shall be made at 10:00 A.M., New York
time, on the third Business Day following the Effective Date of the Registration
Statement (or the fourth Business Day following the Effective Date, if the
Registration Statement is declared effective after 4:30 p.m.) or at such earlier
time as shall be agreed upon by the Representative and the Company at the
offices of the Representative or at such other place as shall be agreed upon
by
the Representative and the Company. The hour and date of delivery and
payment for the Firm Units is called the “Closing
Date.”
Payment for the Firm Units shall be made on the Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House funds, payable
as follows: $17,400,000 ($6.96 per Firm Unit) 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 (the “Trust
Fund”)
pursuant to the terms of an Investment Management Trust Agreement (the
“Trust
Agreement”)
and
the remaining proceeds (less commissions, expense allowance and actual expense
payments or other fees) shall be paid to the order of the Company upon delivery
to you of certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units (or through the facilities of the Depository Trust
Company (the “DTC”)
for
the account of the Underwriters. The Firm Units shall be registered
in
such name or names and in such authorized denominations as the Representative
may request in writing at least two Business Days prior to the Closing
Date. The Company will permit the Representative to examine and package
the Firm Units for delivery, at least one full Business Day prior to the Closing
Date. The Company shall not be obligated to sell or deliver the Firm
Units
except upon tender of payment by the Representative for all the Firm Units.
As
used
herein, the term “Business
Day”
shall
mean any day other than a Saturday, Sunday or any day on which national banks
in
New York, New York are not open for business.
1.2 Over-Allotment
Option.
1.2.1 Option
Units.
For the purposes of covering any over-allotments in connection with the
distribution and sale of the Firm Units, the Underwriters are hereby granted,
severally and not jointly, an option to purchase up to an additional 375,000
units from the Company (the “Over-allotment
Option”).
Such additional 375,000 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.
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1.2.2 Exercise
of Option.
The Over-allotment Option granted pursuant to Section 1.2.1 hereof may
be
exercised by the Representative as to all (at any time) or any part (from time
to time) of the Option Units within 45 days after the Effective Date.
The
Underwriters will not be under any obligation to purchase any Option Units
prior
to the exercise of the Over-allotment Option. The Over-allotment Option
granted hereby may be exercised by the giving of oral notice to the Company
from
the Representative, which must be confirmed in writing by overnight mail or
facsimile transmission setting forth the number of Option Units to be purchased
and the date and time for delivery of and payment for the Option Units, which
will not be later than five Business
Days after the date of the notice or such other time as shall be agreed upon
by
the Company and the Representative, at the offices of the Representative or
at
such other place as shall be agreed upon by the Company and the
Representative. If such delivery and payment for the Option Units does
not
occur on the Closing Date, the date and time of the closing for such Option
Units will be as set forth in the notice (hereinafter the “Option
Closing Date”).
Upon exercise of the Over-allotment Option, the Company will become obligated
to
convey to the Underwriters, and, subject to the terms and conditions set forth
herein, the Underwriters will become obligated to purchase, the number of Option
Units specified in such notice.
1.2.3 Payment
and Delivery.
Payment for the Option Units shall be made on the Option Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by
certified or bank cashier’s check(s) in New York Clearing House funds, payable
as follows: $6.96 per Option Unit shall be deposited in the Trust Fund pursuant
to the Trust Agreement and the remaining proceeds (less commissions, expense
allowance and actual expense payments or other fees) shall be paid to the order
of the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Option Units (or through
the
facilities of DTC) for the account of the Underwriters. The
certificates representing the Option Units to be delivered will be in such
denominations and registered in such
names as the Representative requests not less than two Business Days prior
to
the Closing Date or the Option Closing Date, as the case may be, and will be
made available to the Representative for inspection, checking and packaging
at
the aforesaid office of the Company’s transfer agent or correspondent not less
than one full Business Day prior to such Closing Date.
1.3 Representative’s
Purchase Option.
1.3.1 Purchase
Option.
The Company hereby agrees to issue and sell to the Representative (and/or their
designees) on the Effective Date an option (“Representative’s
Purchase Option”)
for
the purchase of an aggregate of 175,000 units (the “Representative’s
Units”)
for an
aggregate purchase price of $100.00. Each of the Representative’s Units is
identical to the Firm Units and the Warrants included in the Representative’s
Units have an exercise price of $6.00. The Representative’s Purchase
Option shall be exercisable, in whole or in part, commencing on the later of
the
consummation of a Business Combination or one year from the Effective Date
and
expiring on the five-year anniversary of the Effective Date at an initial
exercise price per Representative’s Unit of $8.80, which is equal to one hundred
and ten percent (110%) of the initial public offering price of a Unit.
The
Representative’s Purchase Option, the Representative’s Units, the shares of
Common Stock and the Warrants included in the Representative’s Units (the
“Representative’s
Warrants”)
and
the shares of Common Stock issuable upon exercise of the Representative’s
Warrants are hereinafter referred to collectively as the “Representative’s
Securities.”
The Public Securities and the Representative’s Securities are hereinafter
referred to collectively as the “Securities.”
The
Representative understands and agrees that there are significant restrictions
against transferring the Representative’s Purchase Option during the first year
after the Effective Date, as set forth in Section 3 of the Representative’s
Purchase Option.
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1.3.2 Delivery
and Payment.
Delivery and payment for the Representative’s Purchase Option shall be made on
the Closing Date. The Company shall deliver to the Underwriters, upon
payment therefor, certificates for the Representative’s Purchase Option in the
name or names and in such authorized denominations as the Representative may
request.
2. Representations
and Warranties of the Company.
The Company represents and warrants to the Underwriters as follows:
2.1 Filing
of Registration Statement.
2.1.1 Pursuant
to the Act.
The Company has filed with the Securities and Exchange Commission (the
“Commission”)
a
registration statement and an amendment or amendments thereto, on Form S-1
(File No. 333-______), including any related preliminary prospectus (the
“Preliminary
Prospectus”),
for
the registration of the Securities under the Securities Act of 1933, as amended
(the “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 (the “Regulations”)
of the
Commission under the Act. The conditions for use of Form S-1 to register
the Offering under the Act, as set forth in the General Instructions to such
Form, have been satisfied. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time
the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein and all information deemed to be a part thereof as
of
such time pursuant to paragraph (b) of Rule 430A of the Regulations), is
hereinafter called the “Registration
Statement,”
and
the form of the final prospectus dated the Effective Date included in the
Registration Statement (or, if applicable, the form of final prospectus filed
with the Commission pursuant to Rule 424 of the Regulations), is hereinafter
called the “Prospectus.”
If the
Company has filed, or is required pursuant to the terms hereof to file, a
registration statement pursuant to Rule 462(b) under the Securities Act
registering additional shares of Common Stock (a “Rule
462(b) Registration Statement”),
then,
unless otherwise specified, any reference herein to the term “Registration
Statement”
shall
be deemed to include such Rule 462(b) Registration Statement. Other than a
Rule
462(b) Registration Statement, which, if filed, becomes effective upon filing,
no other document with respect to the Registration Statement has heretofore
been
filed with the Commission. All of the Public Securities have been registered
under the Securities Act pursuant to the Registration Statement or, if any
Rule
462(b) Registration Statement is filed, will be duly registered under the
Securities Act with the filing of such Rule 462(b) Registration Statement.
The
Registration Statement has been declared effective by the Commission on the
date
hereof.
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2.1.2 Pursuant
to the Exchange Act.
The Company has filed with the Commission a Form 8-A (File
Number 000- )
providing for the registration under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”),
of
the Units, the Common Stock and the Warrants. The registration of the
Units, Common Stock and Warrants under the Exchange Act has been declared
effective by the Commission on the date hereof.
2.2 No
Stop Orders, Etc.
Neither the Commission nor, to the best of the Company’s knowledge, any state
regulatory authority has issued any order or threatened to issue any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company’s knowledge, threatened to institute any
proceedings with respect to such an order.
2.3 Disclosures
in Registration Statement.
2.3.1 10b-5
Representation.
At the time the Registration Statement became effective and at all times
subsequent thereto up to the Closing Date and the Option Closing Date, if any,
the Registration Statement and the Prospectus will contain all material
statements that are required to be stated therein in accordance with the Act
and
the Regulations, and will in all material respects conform to the requirements
of the Act and the Regulations; neither the Registration Statement nor any
Preliminary Prospectus or the Prospectus, nor any amendment or supplement
thereto, on such dates, did 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 the case of the Prospectus, in
light of the circumstances under which they were made), not misleading.
When any Preliminary Prospectus was first filed with the Commission (whether
filed as part of the Registration Statement for the registration of the
Securities or any amendment thereto or pursuant to Rule 424(a) of the
Regulations) and when any amendment thereof or supplement thereto was first
filed with the Commission, such Preliminary Prospectus and any amendments
thereof and supplements thereto complied or will have been corrected in the
Prospectus to comply in all material respects with the applicable provisions
of
the Act and the Regulations and did not and will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
representation and warranty made in this Section 2.3.1 does not apply
to
statements made or statements omitted in reliance upon and in conformity with
written information furnished to the Company with respect to the Underwriters
by
the Representative expressly for use in the Registration Statement or Prospectus
or any amendment thereof or supplement thereto. It is understood that the
statements set forth in paragraphs __________ in the Prospectus under the
heading “Underwriting - Underwriting Terms” constitute for the purposes of this
Agreement, information furnished by the Representative with respect to the
Underwriters.
5
2.3.2 Disclosure
of Agreements.
The agreements and documents described in the Registration Statement and the
Prospectus conform to the descriptions thereof contained therein and there
are
no agreements or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits
to
the Registration Statement, that have not been so described or filed.
Each
agreement or other instrument (however characterized or described) to which
the
Company is a party or by which its property or business is or may be bound
or
affected and (i) that is referred to in the Prospectus or attached as an exhibit
thereto, or (ii) is material to the Company’s business, has been duly and
validly executed by the Company, is in full force and effect in all material
respects 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 Company’s knowledge, any other
party is in breach or default thereunder and, to 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 Company’s
knowledge, performance by the Company of the material provisions of such
agreements or instruments will not result in a violation of any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company
or
any of its assets or businesses, including, without limitation, those relating
to environmental laws and regulations.
2.3.3 Prior
Securities Transactions.
No securities of the Company have been sold by the Company or by or on behalf
of, or for the benefit of, any person or persons controlling, controlled by,
or
under common control with the Company within the three years prior to the date
hereof, except as disclosed in the Registration Statement.
2.3.4 Regulations.
The disclosures in the Registration Statement concerning the effects of Federal,
State and local regulation on the Company’s business as currently contemplated
are correct in all material respects and do not omit to state a material fact
necessary to make the statements therein, in light of the circumstances in
which
they were made, not misleading.
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,
any Preliminary Prospectus and/or the Prospectus, except as otherwise
specifically stated therein: (i) there has been no material adverse change
in
the condition, financial or otherwise, or business prospects of the Company;
(ii) there have been no material transactions entered into by the Company,
other
than as contemplated pursuant to this Agreement; (iii) no member of the
Company’s board of directors or management has resigned from any position with
the Company and (iv) no event or occurrence has taken place which materially
impairs, or would likely materially impair, with the passage of time, the
ability of the members of the Company’s board of directors or management to act
in their capacities with the Company as described in the Registration Statement
and the Prospectus.
6
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 capital stock.
2.5 Independent
Accountants.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP (“▇▇▇▇▇▇”),
whose
report is filed with the Commission as part of the Registration Statement,
are
independent accountants as required by the Act and the Regulations and the
Public Company Accounting Oversight Board (including
the rules and regulations promulgated by such entity, the “PCAOB”).
▇▇▇▇▇▇ is duly registered and in good standing with the PCAOB. ▇▇▇▇▇▇
has not, during the periods covered by the financial statements included in
the
Prospectus, provided to the Company any non-audit services, as such term is
used
in Section 10A(g) of the Exchange Act.
2.6 Financial
Statements; Statistical Data.
2.6.1 Financial
Statements.
The
financial statements, including the notes thereto and supporting schedules
included in the Registration Statement and Prospectus fairly present the
financial position and the results of operations of the Company at the dates
and
for the periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. No
other
financial statements or supporting schedules are required to be included or
incorporated by reference in the Registration Statement. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons
that
may have a material current or future effect on the Company’s financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses. There
are
no pro forma or as adjusted financial statements which are required to be
included in
the
Registration Statement and
the
Prospectus in accordance with Regulation
S-X which have not been included as so required.
2.6.2 Statistical
Data.
The
statistical, industry-related and market-related data included in the
Registration Statement and the Prospectus are based on or derived from sources
which the Company reasonably and in good faith believes are reliable and
accurate, and such data agree with the sources from which they are derived.
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.
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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
Public Securities conform 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 reserved for issuance and when
issued and paid for, will be validly issued, fully paid and non-assessable;
the
holders thereof are not and will not be subject to personal liability by reason
of being such holders; the Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company; and all corporate action required
to
be taken for the authorization, issuance and sale of the Securities has been
duly and validly taken. The Securities conform in all material respects
to
all statements with respect thereto contained in the Registration
Statement. When issued, the Representative’s Purchase Option, the
Representative’s Warrants and the Warrants will constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
of the respective exercise prices therefor, the number and type of securities
of
the Company called for thereby in accordance with the terms thereof and such
Representative’s Purchase Option, the Representative’s Warrants and the Warrants
are enforceable against the Company in accordance with their respective terms,
except: (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally; (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may
be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The shares of Common Stock
issuable upon exercise of the Warrants and included in the Representative’s
Purchase Option (and the shares of Common Stock issuable upon exercise of the
Representative’s Warrants) have been reserved for issuance upon the exercise of
the Warrants, the Representative’s Purchase Option and the Representative’s
Warrants and when issued in accordance with the terms of such securities, will
be duly and validly authorized, validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders.
8
2.8.3 No
Integration.
Neither
the Company nor any of its affiliates has, prior to the date hereof, made
any
offer or sale of any securities which are required to be “integrated” pursuant
to the Act or the Regulations with the offer and sale of the Public Securities
pursuant to the Registration Statement.
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 2.22 hereof),
the Trust Agreement, the Services Agreement (as defined in Section 3.7.2
hereof) and the Escrow Agreement (as defined in Section 2.23.2 hereof)
have
been duly and validly authorized by the Company and constitute valid and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms, except: (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.11 No
Conflicts, Etc.
The execution, delivery, and performance by the Company of this Agreement,
the
Warrant Agreement, the Representative’s Purchase Option, the Trust Agreement,
the Service 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 al 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, as amended, or the By-Laws of the Company; or (iii) violate
any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over
the
Company or any of its properties or business.
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, as amended, or Bylaws or in violation of any
material franchise, license, permit, applicable law, rule, regulation, judgment
or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or
businesses.
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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 for the purposes described in the
Prospectus. The disclosures in the Registration Statement concerning
the
effects of federal, state and local regulation on this offering and the
Company’s business purpose as currently contemplated are correct in all material
respects and do not omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.13.2 Transactions
Contemplated Herein.
The Company has all corporate power and authority to enter into this Agreement
and to carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have
been
obtained. No consent, authorization or order of, and no filing with,
any
court, government agency or other body is required for the valid issuance,
sale
and delivery, of the Securities and the consummation of the transactions and
agreements contemplated by this Agreement, the Warrant Agreement, the
Representative’s Purchase Option, the Trust Agreement, the Services Agreement
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.
All information contained in the questionnaires (the “Questionnaires”)
completed by each of the Company’s stockholders immediately prior to the
Offering (the “Initial
Stockholders”)
and
provided to the Underwriters as an exhibit to his or her Insider Letter (as
defined in Section 2.23.1) is true and correct and the Company has not
become aware of any information which would cause the information disclosed
in
the questionnaires completed by each Initial Stockholder to become inaccurate
and incorrect.
2.15 Litigation;
Governmental Proceedings.
There is no action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental proceeding pending or, to the best of the Company’s
knowledge, threatened against, or involving the Company or, to the best of
the
Company’s knowledge, any Initial Stockholder which has not been disclosed in the
Registration Statement or the Questionnaires.
2.16 Good
Standing.
The Company has been duly organized and is validly existing as a corporation
and
is in good standing under the laws of its state of incorporation and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership or lease of property or the conduct
of
business requires such qualification, except where the failure to qualify would
not have a material adverse effect on the Company.
10
2.17 No
Contemplation of a Business Combination.
Prior
to the date hereof, neither the Company, its officers and directors nor the
Initial Stockholders had, and as of the Closing, the Company and such officers
and directors and Initial Stockholders will not have had: (a) any specific
Business Combination under consideration or contemplation or (b) any substantive
interactions or discussions with any target business regarding a possible
Business Combination.
2.18 Transactions
Affecting Disclosure to NASD.
2.18.1 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 Company’s knowledge, any Initial
Stockholder that may affect the Underwriters’ compensation, as determined by the
National Association of Securities Dealers, Inc. (the “NASD”).
2.18.2 The
Company has not made any direct or indirect payments (in cash, securities or
otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise,
in consideration of such person raising capital for the Company or introducing
to the Company persons who raised or provided capital to the Company; (ii)
to
any NASD member; or (iii) except with respect to ▇▇▇▇ ▇▇▇▇▇▇, to any
person
or entity that has any direct or indirect affiliation or association with any
NASD member, within the twelve months prior to the Effective Date, other than
payments to Maxim.
2.18.3 Except
with respect to ▇▇▇▇ ▇▇▇▇▇▇, no officer, director, or beneficial owner of any
class of the Company’s securities (whether debt or equity, registered or
unregistered, regardless of the time acquired or the source from which derived)
(any such individual or entity, a “Company
Affiliate”)
is a
member, a person associated, or affiliated with a member of the NASD.
2.18.4 Except
with respect to ▇▇▇▇ ▇▇▇▇▇▇, no Company Affiliate is an owner of stock or other
securities of any member of the NASD (other than securities purchased on the
open market).
2.18.5 No
Company Affiliate has made a subordinated loan to any member of the
NASD.
2.18.6 No
proceeds from the sale of the Public Securities (excluding underwriting
compensation) will be paid to any NASD member, or any persons associated or
affiliated with a member of the NASD.
2.18.7 Except
with respect to Maxim, the Company has not issued any warrants or other
securities, or granted any options, directly or indirectly to anyone who is
a
potential underwriter in the Offering or a related person (as defined by NASD
rules) of such an underwriter within the 180-day period prior to the initial
filing date of the Registration Statement.
11
2.18.8 Except
with respect to ▇▇▇▇ ▇▇▇▇▇▇, no person to whom securities of the Company
have
been privately issued within the 180-day period prior to the initial filing
date
of the Registration Statement has any relationship or affiliation or association
with any member of the NASD.
2.18.9 No
NASD
member intending to participate in the Offering has a conflict of interest
with
the Company. For this purpose, a “conflict of interest” exists when a member of
the NASD and/or its associated persons, parent or affiliates in the aggregate
beneficially own 10% or more of the Company’s outstanding subordinated debt or
common equity, or 10% or more of the Company’s preferred equity. “Members
participating in the Offering” include managing agents, syndicate group members
and all dealers which are members of the NASD.
2.18.10
Except with respect to Maxim, the Company has not entered into any agreement
or
arrangement (including, without limitation, any consulting agreement or any
other type of agreement) during the 180-day period prior to the initial filing
date of the Registration Statement, which arrangement or agreement provides
for
the receipt of any item of value and/or the transfer of any warrants, options,
or other securities from the Company to an NASD member, any person associated
with a member (as defined by NASD rules), any potential underwriters in the
Offering and/or any related persons.
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 Patriot
Act.
Neither
the Company
nor any officer, director or Initial Stockholder has violated: (a) the Bank
Secrecy Act, as amended, (b) the Money Laundering Control Act of 1986, as
amended, or (c) the Uniting and Strengthening of America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT)
Act of 2001, and/or the rules and regulations promulgated under any such law,
or
any successor law.
12
2.21 Officers’
Certificate.
Any certificate signed by any duly authorized officer of the Company and
delivered to you or to your counsel shall be deemed a representation and
warranty by the Company to the Underwriters as to the matters covered
thereby.
2.22 Warrant
Agreement.
The Company has entered into a warrant agreement with respect to the Warrants
and the Representative’s Warrants with American Stock Transfer & Trust
Company substantially in the form filed as an exhibit to the Registration
Statement (the “Warrant
Agreement”),
providing for, among other things, the payment of a warrant solicitation fee
as
contemplated by Section 3.9 hereof.
2.23 Agreements
With Initial Stockholders.
2.23.1 Insider
Letters.
The Company has caused to be duly executed legally binding and enforceable
agreements (except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally, (ii) as enforceability of any indemnification, contribution or
noncompete provision may be limited under the federal and state securities
laws,
and (iii) that the remedy of specific performance and injunctive and other
forms
of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought)
annexed as Exhibits 10.1.1 through 10.1.6, to the Registration Statement
(the “Insider
Letter”),
pursuant to which each of the Initial Stockholders of the Company agree to
certain matters, including but not limited to, certain matters described as
being agreed to by them under the “Proposed Business” Section of the
Prospectus.
2.23.2 Escrow
Agreement.
The Company has caused the Initial Stockholders to enter into an escrow
agreement (the “Escrow
Agreement”)
with
American Stock Transfer & Trust Company (the “Escrow
Agent”)
substantially in the form filed as an exhibit to the Registration Statement
whereby the Common Stock owned by the Initial Stockholders will be held in
escrow by the Escrow Agent, until the third anniversary of the Effective
Date. During such escrow period, the Initial Stockholders shall be
prohibited from selling or otherwise transferring such shares (except
(a) to spouses and children of Initial Stockholders and trusts established
for their benefit, (b) after a Business Combination in a transaction
whereby all the outstanding shares of the Company are exchanged or converted
into cash or another entity’s securities and (c) as otherwise set forth in
the Escrow Agreement) unless approved by the Company’s public stockholders, but
will retain the right to vote such shares. The Escrow Agreement shall
not
be amended, modified or otherwise changed without the prior written consent
of
Maxim.
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 filed as an exhibit to the
Registration Statement.
2.25 Covenants
Not to Compete.
No Initial Stockholder 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.
13
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.
No relationship, direct or indirect, exists between or among any of the Company
or any affiliate of the Company, on the one hand, and any director, officer,
shareholder, customer or supplier of the Company or any affiliate of the
Company, on the other hand, which is required by the Act, the Exchange Act
or
the Regulations to be described in the Registration Statement or the Prospectus
which is not so described and described as required. There are no outstanding
loans, advances (except normal advances for business expenses in the ordinary
course of business) or guarantees of indebtedness by the Company to or for
the
benefit of any of the officers or directors of the Company or any of their
respective family members, except as disclosed in the Registration Statement
and
the Prospectus. The Company has not extended or maintained credit, arranged
for
the extension of credit, or renewed an extension of credit, in the form of
a
personal loan to or for any director or officer of the Company.
2.29 No
Influence.
The
Company has not offered, or caused the Underwriters to offer, the Firm Units
to
any person or entity with the intention of unlawfully influencing: (a) a
customer or supplier of the Company or any affiliate of the Company to alter
the
customer’s or supplier’s level or type of business with the Company or such
affiliate or (b) a journalist or publication to write or publish favorable
information about the Company or any such affiliate.
2.30 Definition
of “Knowledge.” As
used
in herein, the term “knowledge
of the Company”
(or
similar language) shall mean the knowledge of the officers and directors of
the
Company who are named in the Prospectus, with the assumption that such officers
and directors shall have made reasonable and diligent inquiry of the matters
presented.
3. Covenants
of the Company.
The Company covenants and agrees as follows:
3.1 Amendments
to Registration Statement.
The Company will deliver to the Representative, prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Representative shall reasonably object in writing.
3.2 Federal
Securities Laws.
14
3.2.1 Compliance.
During the time when a Prospectus is required to be delivered under the Act,
the
Company will use all reasonable efforts to comply with all requirements imposed
upon it by the Act, the Regulations and the Exchange Act and by the regulations
under the Exchange Act, as from time to time in force, so far as necessary
to
permit the continuance of sales of or dealings in the Public Securities in
accordance with the provisions hereof and the Prospectus. If at any
time
when a Prospectus relating to the Public Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or counsel for the Underwriters, the
Prospectus, as then amended or supplemented, includes an untrue statement of
a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under
which they were made, not misleading, or if it is necessary at any time to
amend
the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission, subject to
Section 3.1 hereof, an appropriate amendment or supplement in accordance
with Section 10 of the Act.
3.2.2 Filing
of Final Prospectus.
The Company will file the Prospectus (in form and substance satisfactory to
the
Representative) with the Commission pursuant to the requirements of Rule 424
of
the Regulations.
3.2.3 Exchange
Act Registration.
For a period of five years from the Effective Date, or until such earlier time
upon which the Company is required to be liquidated, the Company will use its
best efforts to maintain the registration of the Units, Common Stock and
Warrants under the provisions of the Exchange Act. The Company will
not
deregister the Units under the Exchange Act without the prior written consent
of
Maxim.
3.2.4 ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Compliance.
As soon
as it is legally required to do so, the
Company shall take all actions necessary to obtain and thereafter maintain
material compliance with each applicable provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of
2002 and the rules and regulations promulgated thereunder and related or similar
rules and regulations promulgated by any other governmental or self regulatory
entity or agency with jurisdiction over the Company.
3.3 Blue
Sky Filing.
The Company will endeavor in good faith, in cooperation with the Representative,
at or prior to the time the Registration Statement becomes effective, to qualify
the Public Securities for offering and sale under the securities laws of such
jurisdictions as the Representative may reasonably designate, provided that
no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction.
In
each jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may be required by the laws of such
jurisdiction.
3.4 Delivery
to Underwriters of Prospectuses.
The Company will deliver to each of the several Underwriters, without charge,
from time to time during the period when the Prospectus is required to be
delivered under the Act or the Exchange Act such number of copies of each
Preliminary Prospectus and the Prospectus as such Underwriters may reasonably
request and, as soon as the Registration Statement or any amendment or
supplement thereto becomes effective, deliver to you two original executed
Registration Statements, including exhibits, and all post-effective amendments
thereto and copies of all exhibits filed therewith or incorporated therein
by
reference and all original executed consents of certified experts.
15
3.5 Effectiveness
and Events Requiring Notice to the Representative.
The Company will use its best efforts to cause the Registration Statement to
remain effective and will notify the Representative immediately and confirm
the
notice in writing: (i) of the effectiveness of the Registration Statement
and any amendment thereto; (ii) of the issuance by the Commission of any stop
order or of the initiation, or the threatening, of any proceeding for that
purpose; (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Public Securities
for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose; (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration
Statement or Prospectus; (v) of the receipt of any comments or request for
any
additional information from the Commission; and (vi) of the happening of any
event during the period described in Section 3.4 hereof that, in the
judgment of the Company, makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or that requires the making
of
any changes in the Registration Statement or the Prospectus in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Commission or any state securities commission
shall
enter a stop order or suspend such qualification at any time, the Company will
make every reasonable effort to obtain promptly the lifting of such
order.
3.6 Review
of Financial Statements.
Until the earlier of five years from the Effective Date, or until such earlier
upon which the Company is required to be liquidated, the Company, at its
expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company’s financial statements for
each of the first three fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company’s Form 10-Q quarterly report
and the mailing of quarterly financial information to stockholders.
3.7 Affiliated
Transactions.
3.7.1 Business
Combinations.
The Company will not consummate a Business Combination with any entity which
is
affiliated with any Initial Stockholder unless the Company obtains an opinion
from an independent investment banking firm that the Business Combination is
fair to the Company’s stockholders from a financial perspective.
3.7.2 Administrative
Services.
The Company has entered into an agreement (the “Service
Agreement”)
with
Silverback Books, Inc., (the “Affiliate”)
in the
form filed as an exhibit to the Registration Statement pursuant to which the
Affiliate will make available to the Company general and administrative services
including office space, utilities, receptionist and secretarial support for
the
Company’s use for $7,500 per month.
3.7.3 Compensation.
Except as set forth 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 out-of-pocket expenses incurred in connection with seeking and
consummating a Business Combination.
16
3.8 Secondary
Market Trading and Standard & Poor’s.
The Company will apply to be included in Standard and Poor’s Daily News and
Corporation Records Corporate Descriptions for a period of five years from
the
consummation of a Business Combination. Promptly after the consummation
of
the Offering, the Company shall take such steps as may be necessary to obtain
a
secondary market trading exemption for the Company’s securities in the State of
California. The Company shall also take such other action as may be
reasonably requested by the Representative to obtain a secondary market trading
exemption in such other states as may be requested by the
Representative.
3.9 Warrant
Solicitation Fees.
The Company hereby engages Maxim, on a non-exclusive basis, as its agent for
the
solicitation of the exercise of the Warrants. The Company will
(i) assist Maxim with respect to such solicitation, if requested by
Maxim,
and (ii) at Maxim’s request, provide Maxim, and direct the Company’s
transfer and warrant agent to provide to Maxim, 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 Maxim three
percent (3%) of the cash proceeds received upon exercise of the Warrants,
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 Maxim solicited his exercise. Maxim may
engage sub-agents in its solicitation efforts. The Company agrees to
disclose the arrangement to pay such solicitation fees to Maxim in any
prospectus used by the Company in connection with the registration of the shares
of Common Stock underlying the Warrants.
3.10 Financial
Public Relations Firm.
Promptly after the execution of a definitive agreement for a Business
Combination, the Company shall retain a financial public relations firm
reasonably acceptable to the Representative for a term to be agreed upon by
the
Company and the Representative.
3.11 Reports
to the Representative.
3.11.1 Periodic
Reports, Etc.
For a period of five years from the Effective Date or until such earlier time
upon which the Company is required to be liquidated, the Company will furnish
to
the Representative (Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing Director) and its
counsel copies of such financial statements and other periodic and special
reports as the Company from time to time furnishes generally to holders of
any
class of its securities, and promptly furnish to the Representative: (i) a
copy
of each periodic report the Company shall be required to file with the
Commission; (ii) a copy of every press release and every news item and
article with respect to the Company or its affairs which was released
by
the Company; (iii) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1
or
13E-4 received or prepared by the Company; (iv) five copies of each Registration
Statement; (v) a copy of monthly statements, if any, setting forth such
information regarding the Company’s results of operations and financial position
(including balance sheet, profit and loss statements and data regarding
outstanding purchase orders) as is regularly prepared by management of the
Company; and (vi) such additional documents and information with respect
to
the Company and the affairs of any future subsidiaries of the Company as the
Representative may from time to time reasonably request; provided that the
Representative shall sign, if requested by the Company, a Regulation FD
compliant confidentiality agreement which is reasonably acceptable to the
Representative and its counsel in connection with the Representative’s receipt
of such information.
17
3.11.2 Transfer
Sheets.
For a period of five years following the Effective Date or until such earlier
time upon which the Company is required to be liquidated, the Company shall
retain a transfer and warrant agent acceptable to the Representative (the
“Transfer
Agent”)
and
during the two (2) year period following the Closing Date, will furnish to
the
Underwriters at the Company’s sole cost and expense such transfer sheets of the
Company’s securities as the Representative may request, including the daily and
monthly consolidated transfer sheets of the Transfer Agent and DTC.
American Stock Transfer & Trust Company is acceptable to the
Underwriters.
3.11.3 Secondary
Market Trading Survey.
Until such time as the Public Securities are listed or quoted, as the case
may
be, on the New York Stock Exchange, the American Stock Exchange or quoted on
the
Nasdaq National Market, or until such earlier time upon which the Company is
required to be liquidated, the Company shall engage ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC
(“Lowenstein”),
for a
one-time fee of $5,000 payable on the Closing Date, to deliver and update to
the
Underwriters on a timely basis, but in any event on the Effective Date and
at
the beginning of each fiscal quarter, a written report detailing those states
in
which the Public Securities may be traded in non-issuer transaction under the
Blue Sky laws of the fifty States (the “Secondary
Market Trading Survey”).
3.11.4 Trading
Reports.
During such time as the Public Securities are quoted on the NASD OTC Bulletin
Board (or any successor trading market such as the Bulletin Board Exchange)
or
the Pink Sheets, LLC (or similar publisher of quotations) and no other automated
quotation system, the Company shall provide to the Representative, at its
expense, such reports published by the NASD or the Pink Sheets, LLC relating
to
price trading of the Public Securities, as the Representative shall reasonably
request. In addition to the requirements of the preceding sentence, for a period
of two (2) years from the Closing Date, the Company, at its expense, shall
provide the Representative a subscription to the Company’s weekly Depository
Transfer Company Security Position Reports.
3.12 Disqualification
of Form S-1.
For a period equal to seven
years from the date hereof, the Company will not take any action or actions
which may prevent or disqualify the Company’s use of Form S-1 (or other
appropriate form) for the registration of the Warrants and the Representative’s
Warrants under the Act.
18
3.13 Payment
of Expenses.
3.13.1 General
Expenses Related to the Offering.
The Company hereby agrees to pay on each of the Closing Date and the Option
Closing Date, if any, to the extent not paid at Closing Date, all expenses
incident to the performance of the obligations of the Company under this
Agreement, including, but not limited to: (i) the preparation, printing, filing
and mailing (including the payment of postage with respect to such mailing)
of
the Registration Statement, the Preliminary and final Prospectuses and the
printing and mailing of this Agreement and related documents, including the
cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriters in quantities as may be required by the Underwriters; (ii)
the printing, engraving, issuance and delivery of the Units, the shares of
Common Stock and the Warrants included in the Units and the Representative’s
Purchase Option, including any transfer or other taxes payable thereon; (iii)
the qualification of the Public Securities under state or foreign securities
or
Blue Sky laws, including the costs of printing and mailing the “Preliminary Blue
Sky Memorandum,” and all amendments and supplements thereto, fees and
disbursements for the Representative’s counsel retained for such purpose (such
fees shall be capped at $35,000 in the aggregate (of which $15,000 has
previously been paid)), and a one-time fee of $5,000 payable to the
Representative’s counsel for the preparation of the Secondary Market Trading
Survey; (iv) filing fees, costs and expenses incurred in registering
the
Offering with the NASD (including all COBRADesk fees); (v) costs of placing
“tombstone” advertisements in The
Wall Street Journal,
The
New York Times
and a
third publication to be selected by the Representative not to exceed $30,000
in
the aggregate; (vi) fees and disbursements of the transfer and warrant agent;
(vii) the Company’s expenses associated with “due diligence” meetings arranged
by the Representative; (viii) the preparation, binding and delivery of leather
bound volumes in form and style reasonably satisfactory to the Representative
and transaction lucite cubes or similar commemorative items in a style and
quantity as reasonably requested by the Representative; (ix) all costs and
expenses associated with “road show” marketing and “due diligence” trips for the
Company’s management to meet with prospective investors, including without
limitation, all travel, food and lodging expenses associated with such trips;
and (x) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in
this
Section 3.13.1. 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 above to be paid by the Company to the
Representative and others. The Company also agrees that, if requested by the
Representative, it will engage and pay for an investigative search firm of
the
Representative’s choice to conduct an investigation of the principals of the
Company as shall be selected by the Representative. If the Offering is
successfully consummated, any amounts paid by the Company in connection with
such investigative search firm shall be credited against the non-accountable
expenses to be paid to the Representative pursuant to Section 3.13.2
hereof. If the Offering is not consummated for any reason whatsoever, except
as
a result of the Representatives or any Underwriter's breach or default with
respect to any of its obligations described in this Agreement, then the Company
shall reimburse the Representative in full for their out of pocket accountable
expenses actually incurred by the Representative, including, without limitation,
its legal fees (up to a maximum of $50,000, less any amounts previously
paid).
3.13.2 Nonaccountable
Expenses.
The Company further agrees that in addition to the expenses payable pursuant
to
Section 3.13.1, on the Closing Date, it will pay to the Representative
a
nonaccountable expense allowance equal to two percent (2%) of the gross proceeds
received by the Company from the sale of the Firm Units (of which $50,000 has
previously been paid) by deduction from the proceeds of the Offering
contemplated herein.
19
3.13.3 Fee on Business Combination.
Upon consummation of a Business Combination, the Company further agrees that
in
addition to the expenses payable pursuant to Sections 3.13.1 and 3.13.2, it
will
pay to the Representative an additional underwriting commission equal to two
percent (2%) of the gross proceeds received by the Company from the sale of
the
Firm Units and the Option Units, if any.
3.14 Application
of Net Proceeds.
The Company will apply the net proceeds from the Offering received by it in
a
manner consistent with the application described under the caption “Use Of
Proceeds” in the Prospectus.
3.15 Delivery
of Earnings Statements to Security Holders.
The Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Act) covering a
period
of at least twelve consecutive months beginning after the Effective
Date.
3.16 Notice
to NASD.
3.16.1 Business
Combination.
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 Representative prior to the consummation of the
Business Combination: (i) complete details of all services and
copies
of agreements governing such services; and (ii) justification as to
why the
person or entity providing the merger and acquisition services should not be
considered an “underwriter and related person” with respect to the Company’s
initial public offering, as such term is defined in Rule 2710 of the NASD’s
Conduct Rules. The Company also agrees that proper disclosure
of such
arrangement or potential arrangement will be made in the proxy statement which
the Company will file for purposes of soliciting stockholder approval for the
Business Combination.
3.16.2 Broker/Dealer.
In the
event the Company intends to register as a broker/dealer, merge with or acquire
a registered broker/dealer, or otherwise become a member of NASD, it shall
promptly notify the NASD.
3.17 Stabilization. Except
with respect to the agreement among the Company, ▇▇▇▇▇ ▇▇▇▇▇ and the
Representative annexed as Exhibit 10.8 to the Registration Statement, neither
the Company, nor, to its knowledge, any of its employees, directors or
stockholders (without the consent of Maxim) has taken or will take, directly
or
indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Units.
3.18 Internal
Controls.
The Company will maintain a system of internal accounting controls sufficient
to
provide reasonable assurances that: (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary in order to permit preparation of financial statements
in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
20
3.19 Accountants.
For a period of five years from the Effective Date or until such earlier time
upon which the Company is required to be liquidated, the Company shall retain
▇▇▇▇▇▇ or other independent public accountants reasonably acceptable to
Maxim.
3.20 Form
8-K.
The Company shall, on the date hereof, retain its independent public accountants
to audit the financial statements of the Company as of the Closing Date (the
“Audited
Financial Statements”)
reflecting the receipt by the Company of the proceeds of the initial public
offering. As soon as the Audited Financial Statements become available,
the Company shall immediately file a Current Report on Form 8-K with
the
Commission, which Report shall contain the Company’s Audited Financial
Statements.
3.21 NASD.
The Company shall advise the NASD if it is aware that any 5% or greater
stockholder of the Company becomes an affiliate or associated person of an
NASD
member participating in the distribution of the Company’s Public
Securities.
3.22 Corporate
Proceedings.
All
corporate proceedings and other legal matters necessary to carry out the
provisions of this Agreement and the transactions contemplated hereby shall
have
been done to the reasonable satisfaction to counsel for the
Underwriters.
3.23 Investment
Company.
The
Company shall cause the proceeds of the Offering to be held in the Trust Fund
to
be invested only in “government securities” with specific maturity dates as set
forth in the Trust Agreement and disclosed in the Prospectus. The Company will
otherwise conduct its business in a manner so that it will not become subject
to
the Investment Company Act. Furthermore, once the Company consummates a Business
Combination, it will be engaged in a business other than that of investing,
reinvesting, owning, holding or trading securities.
3.24 Business
Combination Announcement.
Within
five (5) Business Days following the consummation by the Company of a Business
Combination, the Company shall
cause an announcement (“Business
Combination
Announcement”)
to be
placed, at its cost, in The Wall Street Journal, The New York Times and a third
publication to be selected by Maxim announcing the consummation of the
Business
Combination
and
indicating that Maxim was the managing underwriter in the Offering. The Company
shall supply Maxim with a draft of the Business
Combination
Announcement and provide Maxim with a reasonable advance opportunity to comment
thereon. The Company will not place the Business
Combination
Announcement without the final approval of Maxim, which approval will not be
unreasonably withheld.
21
3.25 Colorado
Trust Filing.
In the
event the Securities are registered in the State of Colorado, the Company will
cause a Colorado Form ES to be filed with the Commissioner of the State
of
Colorado no less than 10 days prior to the distribution of the Trust Fund in
connection with a Business Combination and will do all things necessary to
comply with Section ▇▇-▇▇-▇▇▇ and Rule 51-3.4 of the Colorado
Securities Act.
3.26 Press
Releases.
The
Company agrees that it will not issue press releases or engage in any other
publicity, without Maxim’s prior written consent (not to be unreasonably
withheld), for a period of forty (40) days after the Closing Date.
3.27 Key-Man
Insurance. Prior
to
the consummation of the Business Combination, the Company will obtain key person
life insurance with an insurer rated at least AA or better in the most recent
addition of “Best’s Life Reports” in the aggregate amount of $2,000,000 on the
lives of Mssrs. ▇▇▇▇▇ and ▇▇▇▇ or other key management to be agreed upon by
the
Company and Maxim prior to the Closing Date. Such insurance shall be maintained
in full force and effect for a period of three years from the consummation
of
the Business Combination. The Company shall be the sole beneficiary of such
policy.
3.28 Electronic
Prospectus. The
Company shall cause to be prepared and delivered to the Representative, at
its
expense, within one (1) Business Day from the effective date of this Agreement,
an Electronic Prospectus
to be used by the Underwriters in connection with the Offering. As used herein,
the term “Electronic
Prospectus”
means a
form of prospectus, and any amendment or supplement thereto, that meets each
of
the following conditions: (i) it shall be encoded in an electronic format,
satisfactory to the Representative, that may be transmitted electronically
by
the other Underwriters to offerees and purchasers of the Units for at least
the
period during which a Prospectus relating to the Units is required to be
delivered under the Securities Act; (ii) it shall disclose the same information
as the paper prospectus and prospectus filed pursuant to ▇▇▇▇▇, except to the
extent that graphic and image material cannot be disseminated electronically,
in
which case such graphic and image material shall be replaced in the electronic
prospectus with a fair and accurate narrative description or tabular
representation of such material, as appropriate; and (iii) it shall be in or
convertible into a paper format or an electronic format, satisfactory to the
Representative, that will allow recipients thereof to store and have
continuously ready access to the prospectus at any future time, without charge
to such recipients (other than any fee charged for subscription to the Internet
as a whole and for on-line time). The Company hereby confirms that it has
included or will include in the Prospectus filed pursuant to ▇▇▇▇▇ or otherwise
with the Commission and in the Registration Statement at the time it was
declared effective an undertaking that, upon receipt
of a request by an investor or his or her representative within the period
when
a prospectus relating to the Units is required to be delivered under the
Securities Act, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus.
3.29 Reservation
of Shares. The
Company will reserve and keep available that maximum number of its authorized
but unissued securities which are issuable upon exercise of the Warrants and
the
Representative’s Purchase Option and Representative’s Warrants outstanding from
time to time.
22
3.30 Board
Advisor. The
Company agrees that it will, upon completion of the proposed public offering
contemplated herein, for a period of no less than two (2) years, engage a
designee of the Representative as an advisor (“Advisor”)
to its
Board of Directors where such Advisor shall attend meetings of the Board,
receive all notices and other correspondence and communications sent by the
Company to members of its Board of Directors provided, that such Advisor shall
not be entitled to any compensation, other than reimbursement for all costs
incurred in attending such meetings including, food, lodging, and
transportation. The Company further agrees that, during said two (2) year
period, it shall schedule no less than four (4) formal and "in person" meetings
of its Board of Directors in each such year at which meetings such Advisor
shall
be permitted to attend as set forth herein; said meetings shall be held
quarterly each year and ten (10) days advance notice of such meetings shall
be
given to the Advisor. Further, during such two (2) year period, the Company
shall give notice to the Representative with respect to any proposed
acquisitions, mergers, reorganizations or other similar transactions. The
Company shall indemnify and hold such Advisor harmless against any and all
claims, actions, damages, costs and expenses, and judgments arising solely
out
of the attendance and participation of such Advisor at any such meeting
described herein, and, if the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it shall, if
possible, include such Advisor as an insured under such policy.
3.31 Right
of First Refusal. For
a
period of eighteen (18) months from the Closing Date, the Company grants the
Representative the right of first refusal to act as lead underwriter or
minimally as a co-manager with at least 50% of the economics; or, in the case
of
a three-handed deal 33% of the economics, for any and all future public and
private equity and debt offerings, excluding ordinary course of business
financings such as bank lines of credit, accounts receivable, factoring and
financing generated by the Company or any successor to or any subsidiary of
the
Company.
4. Conditions
of Underwriters’ Obligations.
The obligations of the several Underwriters to purchase and pay for the Units,
as provided herein, shall be subject to the continuing accuracy of the
representations and warranties of the Company as of the date hereof and as
of
each of the Closing Date and the Option Closing Date, if any, to the accuracy
of
the statements of officers of the Company made pursuant to the provisions hereof
and to the performance by the Company of its obligations hereunder and to the
following conditions:
4.1 Regulatory
Matters.
4.1.1 Effectiveness
of Registration Statement.
The Registration Statement shall have become effective not later than 5:00
P.M.,
New York time, on the date of this Agreement or such later date and time as
shall be consented to in writing by you, and, at each of the Closing Date and
the Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for the purpose
shall have been instituted or shall be pending or contemplated by the Commission
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of
▇▇▇▇▇▇▇▇▇▇.
4.1.2 NASD
Clearance.
By the Effective Date, the Representative shall have received clearance from
the
NASD as to the amount of compensation allowable or payable to the Underwriters
as described in the Registration Statement.
23
4.1.3 No
Commission Stop Order.
As of
either on the Closing Date or the Option Closing Date, the Commission has not
issued any order or threatened to issue any order preventing or suspending
the
use of any Preliminary Prospectus, the Prospectus or any part thereof, and
has
not instituted or threatened to institute any proceedings with respect to such
an order.
4.1.4 No
Blue Sky Stop Orders.
No order suspending the sale of the Units in any jurisdiction designated by
you
pursuant to Section 3.3 hereof shall have been issued on either on the
Closing Date or the Option Closing Date, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
4.2 Company
Counsel Matters.
4.2.1 Effective
Date Opinion of Counsel.
On the Effective Date, the Representative shall have received the favorable
opinion of Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP (“EGS”),
counsel to the Company, dated the Effective Date, addressed to the
Representative and in form and substance satisfactory to the Representative
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, with full power
and authority to own its properties and conduct its business as described in
the
Registration Statement and the Prospectus. The Company is duly qualified
and licensed and in good standing as a foreign corporation in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing, except where the failure
to
qualify would not have a material adverse effect on the Company.
(ii) All
issued and outstanding securities of the Company have been duly authorized
and
validly issued and are fully paid and non-assessable; the holders thereof are
not subject to personal liability by reason of being such holders; and none
of
such securities were issued in violation of the preemptive rights of any
stockholder of the Company arising by operation of law or under the Certificate
of Incorporation, as amended, or Bylaws of the Company. The offers
and
sales of the outstanding Common Stock were at all relevant times either
registered under the Act and the applicable state securities or Blue Sky Laws
or
exempt from such registration requirements. The authorized and outstanding
capital stock of the Company is as set forth in the Prospectus. The Units,
the
Common Stock and the Warrants conform to the descriptions thereof contained
in
the Registration Statement and the Prospectus.
(iii) The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not
and
will not be subject to personal liability by reason of being such holders.
The Securities are not and will not be subject to the preemptive rights of
any
holders of any security of the Company arising by operation of law or under
the
Certificate of Incorporation, as amended, or Bylaws of the Company or, to such
counsel’s knowledge, similar rights that entitle or will entitle any person to
acquire any security from the Company upon issuance or sale thereof.
When
issued, the Representative’s Purchase Option, the Representative’s Warrants and
the Warrants will constitute valid and binding obligations of the Company to
issue and sell, upon exercise thereof and payment therefor, the number and
type
of securities of the Company called for thereby and such Warrants, the
Representative’s Purchase Option, and the Representative’s Warrants, when
issued, in each case, are enforceable against the Company in accordance with
their respective terms, except: (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally; (b) as enforceability of any indemnification or contribution
provision may be limited under the United States and state securities laws;
and
(c) that the remedy of specific performance and injunctive and other forms
of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form. A
sufficient number of shares of Common Stock have been reserved for issuance
upon
exercise of the Warrants and the Representative’s Warrants. The shares of Common
Stock underlying the Warrants and the Representative’s Warrant will, upon
exercise of the Warrants and the Representative’s Warrant and payment of the
exercise price thereof, be duly and validly issued, fully paid and
non-assessable and will not have been issued in violation of or subject to
preemptive or, to such counsel’s knowledge, similar rights that entitle or will
entitle any person to acquire any securities from the Company upon issuance
thereof.
24
(iv) The
Company has full right, power and authority to execute and deliver this
Agreement, the Warrant Agreement, the Services Agreements, the Trust Agreement,
the Escrow Agreement and the Representative’s Purchase Option and to perform its
obligations thereunder, and all corporate action required to be taken for the
due and proper authorization, execution and delivery of this Agreement, the
Warrant Agreement, the Services Agreements, the Trust Agreement, the Escrow
Agreement and the Representative’s Purchase Option and consummation of the
transactions contemplated by the Underwriting Agreement, the Registration
Statement and the Prospectus and as described in the Registration Statement
and
the Prospectus have been duly and validly taken.
(v) This
Agreement, the Warrant Agreement, the Services Agreements, the Trust Agreement
and the Escrow Agreement have each been duly and validly authorized and, when
executed and delivered by the Company, constitute, and the Representative’s
Purchase Option has been duly and validly authorized by the Company and, when
executed and delivered, will constitute, the valid and binding obligations
of
the Company, enforceable against the Company in accordance with their respective
terms, except: (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally; (b) as enforceability of any indemnification or contribution
provisions may be limited under the United States and state securities laws;
and
(c) that the remedy of specific performance and injunctive and other forms
of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(vi) The
execution, delivery and performance of this Agreement, the Warrant Agreement,
the Representative’s Purchase Option, the Escrow Agreement, the Trust Agreement
and the Services Agreements, the issuance and sale of the Securities, the
consummation of the transactions contemplated hereby and thereby, and compliance
by the Company with the terms and provisions hereof and thereof, do not and
will
not, with or without the giving of notice or the lapse of time, or both, (a)
to
such counsel’s knowledge, conflict with, or result in a breach of, any of the
terms or provisions of, or constitute a default under, or result in the creation
or modification of any lien, security interest, charge or encumbrance upon
any
of the properties or assets of the Company pursuant to the terms of, any
mortgage, deed of trust, note, indenture, loan, contract, commitment or other
agreement or instrument filed as an exhibit to the Registration Statement,
(b)
result in any violation of the provisions of the Certificate of Incorporation,
as amended, or the By-Laws of the Company, or (c) to such counsel’s knowledge,
violate any statute or any judgment, order or decree, rule or regulation
applicable to the Company of any court, domestic or foreign, or of any federal,
state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets.
25
(vii) The
Registration Statement, each Preliminary Prospectus and the Prospectus and
any
post-effective amendments or supplements thereto (other than the financial
statements included therein, as to which no opinion need be rendered) each
as of
their respective dates complied as to form in all material respects with the
requirements of the Act and Regulations. The Securities and each agreement
filed as an exhibit to the Registration Statement conform in all material
respects to the description thereof contained in the Registration Statement
and
the Prospectus. No United States or state statute or regulation required
to be described in the Prospectus is not described as required (except as to
the
Blue Sky laws of the various states, as to which such counsel expresses no
opinions), nor are any contracts or documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement not so described or filed as required
(except for the contracts and documents described in the “Underwriting”
section of the Registration Statement, as to which such counsel expresses
no opinions).
(viii) The
Registration Statement is effective under the Act. To such counsel’s
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act or applicable state
securities laws.
(ix) To
such
counsel’s knowledge, there is no action, suit or proceeding before or by any
court of governmental agency or body, domestic or foreign, now pending, or
threatened against the Company that is required to be described in the
Registration Statement.
(x) No
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any judicial, regulatory or other
legal or governmental agency or body is required for the execution, delivery
and
performance of the Underwriting Agreement or consummation of the transactions
contemplated by the Underwriting Agreement, the Registration Statement and
the
Prospectus, except for (1) such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Units
by
the Underwriters (as to which such counsel need express no opinion), (2) such
as
have been made or obtained under the Securities Act and (3) such as are required
by the NASD.
(xi) The
statements under the captions “Description of Securities” and Item 14 of Part II
of the Registration Statement, insofar as such statements constitute a summary
of the legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters, documents
and proceedings.
26
The
opinion of counsel shall further include a statement to the effect that counsel
has participated in conferences with officers and other representatives of
the
Company, representatives of the independent public accountants for the Company
and representatives of the Underwriters at which the contents of the
Registration Statement, the Prospectus and related matters were discussed and
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as otherwise set forth in this
opinion), no facts have come to the attention of such counsel which lead them
to
believe that either the Registration Statement or the Prospectus or any
amendment or supplement thereto, as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
4.2.2 Closing
Date and Option Closing Date Opinion of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the favorable opinion of EGS, dated the
Closing Date or the Option Closing Date, as the case may be set forth above,
addressed to the Representative and in form and substance reasonably
satisfactory to the counsel to the Representative, confirming as of the Closing
Date and, if applicable, the Option Closing Date, the statements made by EGS
in
its opinion delivered on the Effective Date.
4.2.3 Reliance.
In rendering such opinion, such counsel may rely: (i) as to matters involving
the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to the
Representative) of other counsel reasonably acceptable to the Representative,
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 jurisdiction having
custody of documents respecting the corporate existence or good standing of
the
Company, provided that copies of any such statements or certificates shall
be
delivered to the Underwriters’ counsel if requested. The opinion of
counsel for the Company and any opinion relied upon by such counsel for the
Company shall include a statement to the effect that it may be relied upon
by
counsel for the Underwriters in its opinion delivered to the
Underwriters.
4.3 Cold
Comfort Letter.
At the time this Agreement is executed, and at each of the Closing Date and
the
Option Closing Date, if any, you shall have received a letter, addressed to
the
Representative and in form and substance satisfactory in all respects (including
the non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) to you and to ▇▇▇▇▇▇▇▇▇▇ from ▇▇▇▇▇▇ dated, respectively,
as
of the date of this Agreement and as of the Closing Date and the Option Closing
Date, if any:
27
(i) Confirming
that they are independent accountants with respect to the Company within the
meaning of the Act and the applicable Regulations and that they have not, during
the periods covered by the financial statements included in the Prospectus,
provided to the Company any non-audit services, as such term is used in
Section 10A(g) of the Exchange Act;
(ii)
Stating
that in their opinion the financial statements of the Company included in the
Registration Statement and Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the published
Regulations thereunder;
(iii) Stating
that, on the basis of a limited review which included a reading of the latest
available unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the stockholders
and
board of directors and the various committees of the board of directors,
consultations with officers and other employees of the Company responsible
for
financial and accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe that:
(a)
the unaudited financial statements of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not fairly
presented in conformity with generally accepted accounting principles applied
on
a basis substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement; (b) at a date not later
than five days prior to the Effective Date, Closing Date or Option Closing
Date,
as the case may be, there was any change in the capital stock or long-term
debt
of the Company, or any decrease in the stockholders’ equity of the Company as
compared with amounts shown in the
,
2005 balance
sheet included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any decrease,
setting forth the amount of such decrease, and (c) during the period from
,
2005
to a specified date not later than five days prior to the Effective Date,
Closing Date or Option Closing Date, as the case may be, there was any decrease
in revenues, net earnings or net earnings per share of Common Stock, in each
case as compared with the corresponding period in the preceding year and as
compared with the corresponding period in the preceding quarter, other than
as
set forth in or contemplated by the Registration Statement, or, if there was
any
such decrease, setting forth the amount of such decrease;
(iv) Setting
forth, at a date not later than five days prior to the Effective Date, the
amount of liabilities of the Company (including a break-down of commercial
papers and notes payable to banks);
(v) Stating
that they have compared specific dollar amounts, numbers of shares, percentages
of revenues and earnings, statements and other financial information pertaining
to the Company set forth in the Prospectus in each case to the extent that
such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel, with
the
results obtained from the application of specified readings, inquiries and
other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement;
28
(vi) Stating
that they have not during the immediately preceding five year period brought
to
the attention of the Company’s management any reportable condition related to
internal structure, design or operation as defined in the Statement on Auditing
Standards No. 60 “Communication of Internal Control Structure Related Matters
Noted in an Audit,” in the Company’s internal controls; and
(vii) Statements
as to such other matters incident to the transaction contemplated hereby as
you
may reasonably request.
4.4 Officers’
Certificates.
4.4.1 Officers’
Certificate.
At each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received a certificate of the Company signed by the
Chairman of the Board or the President and the Secretary or Assistant Secretary
of the Company, dated the Closing Date or the Option Closing Date, as the case
may be, respectively, to the effect that the Company has performed all covenants
and complied with all conditions required by this Agreement to be performed
or
complied with by the Company prior to and as of the Closing Date, or the Option
Closing Date, as the case may be, and that the conditions set forth in
Section 4.5 hereof have been satisfied as of such date and that, as
of
Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2
hereof
are true and correct. In addition, the Representative will have received
such other and further certificates of officers of the Company as the
Representative may reasonably request.
4.4.2 Secretary’s
Certificate.
At each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received a certificate of the Company signed by the
Secretary or Assistant Secretary of the Company, dated the Closing Date or
the
Option Date, as the case may be, respectively, certifying: (i) that the By-Laws
and Certificate of Incorporation, as amended, of the Company are true and
complete, have not been modified and are in full force and effect; (ii) that
the
resolutions relating to the public offering contemplated by this Agreement
are
in full force and effect and have not been modified; (iii) all correspondence
between the Company or its counsel and the Commission; and (iv) as to the
incumbency of the officers of the Company. The documents referred to
in
such certificate shall be attached to such certificate.
4.5 No
Material Changes.
Prior to and on each of the Closing Date and the Option Closing Date, if any:
(i) there shall have been no material adverse change or development involving
a
prospective material adverse change in the condition or prospects or the
business activities, financial or otherwise, of the Company from the latest
dates as of which such condition is set forth in the Registration Statement
and
Prospectus; (ii) no action suit or proceeding, at law or in equity, shall have
been pending or threatened against the Company or any Initial Stockholder before
or by any court or federal or state commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects or financial condition
or
income of the Company, except as set forth in the Registration Statement and
Prospectus; (iii) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or threatened by the Commission;
and (iv) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all material statements which are required
to
be stated therein in accordance with the Act and the Regulations and shall
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor
any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made), not
misleading.
29
4.6 Delivery
of Agreements.
4.6.1 Effective
Date Deliveries.
On the Effective Date, the Company shall have delivered to the Representative
executed copies of the Escrow Agreement, the Trust Agreement, the Warrant
Agreement, the Services Agreement and all of the Insider Letters.
4.6.2 Closing
Date Deliveries.
On the Closing Date, the Company shall have delivered to the Representative
executed copies of the Representative’s Purchase Option.
4.7 Secondary
Market Trading Survey.
On the Closing Date, the Representative shall have received the Secondary Market
Trading Survey from ▇▇▇▇▇▇▇▇▇▇.
5. Indemnification.
5.1 Indemnification
of Underwriters.
5.1.1 General.
Subject to the conditions set forth below, the Company agrees to indemnify
and
hold harmless each of the Underwriters and each dealer selected by you that
participates in the offer and sale of the Units (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 federal, state
or
local statute, law, rule, regulation or ordinance or at common law or otherwise
or under the laws, rules and regulation 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 Units under the securities
laws thereof or filed with the Commission, any state securities commission
or
agency, the OTC Bulletin Board or 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, which furnished written information, it is
expressly agreed, consists solely of the information described in the last
sentence of Section 2.3.1. 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.
30
5.1.2 Procedure.
If any action is brought against an Underwriter or controlling person in respect
of which indemnity may be sought against the Company pursuant to
Section 5.1.1, such Underwriter 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) and payment of actual
expenses. Such Underwriter 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 or such 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; (ii) the Company shall not have employed counsel to
have
charge of the defense of such action; or (iii) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it
or
them which are different from or additional to those available to the Company
(in which case the Company shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events the reasonable fees and expenses of not more than one additional firm
of
attorneys selected by the Underwriter and/or controlling person shall be borne
by the Company. Notwithstanding anything to the contrary contained
herein,
if the Underwriter 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.
31
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, which furnished
written information, it is expressly agreed, consists solely of the information
described in the last sentence of Section 2.3.1. . In case any
action
shall be brought against the Company or any other person so indemnified based
on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have
the
rights and duties given to the Company, and the Company and each other person
so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution
Rights.
In order to provide for just and equitable contribution under the Act in any
case in which (i) any person entitled to indemnification under this
Section 5 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court
of
competent jurisdiction and the expiration of time to appeal or the denial of
the
last right of appeal) that such indemnification may not be enforced in such
case
notwithstanding the fact that this Section 5 provides for indemnification
in such case, or (ii) contribution under the Act, the Exchange Act or otherwise
may be required on the part of any such person in circumstances for which
indemnification is provided under this Section 5, then, and in each
such
case, the Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company and the Underwriters, as incurred,
in such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial offering price appearing
thereon and the Company is responsible for the balance; provided, that, no
person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person
who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, no Underwriter shall be required
to
contribute any amount in excess of the amount by which the total price at which
the 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.
32
5.3.2 Contribution
Procedure.
Within fifteen days after receipt by any party to this Agreement (or its
representative) of notice of the commencement of any action, suit or proceeding,
such party will, if a claim for contribution in respect thereof is to be made
against another party (“contributing party”), notify the contributing party of
the commencement thereof, but the omission to so notify the contributing party
will not relieve it from any liability which it may have to any other party
other than for contribution hereunder. In case any such action, suit
or
proceeding is brought against any party, and such party notifies a contributing
party or its representative of the commencement thereof within the aforesaid
fifteen days, the contributing party will be entitled to participate therein
with the notifying party and any other contributing party similarly
notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party.
The
contribution provisions contained in this Section are intended to
supersede, to the extent permitted by law, any right to contribution under
the
Act, the Exchange Act or otherwise available. The Underwriters’
obligations to contribute pursuant to this Section 5.3 are several and
not
joint.
6. Default
by an Underwriter.
6.1 Default
Not Exceeding 10% of Firm Units or Option Units.
If any Underwriter or Underwriters shall default in its or their obligations
to
purchase the Firm Units or the Option Units, if the over-allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10%
of
the number of Firm Units or Option Units that all Underwriters have agreed
to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion
to
their respective commitments hereunder.
6.2 Default
Exceeding 10% of Firm Units or Option Units.
In the event that the default addressed in Section 6.1 above relates to more
than 10% of the Firm Units or Option Units, you may in your discretion arrange
for yourself or for another party or parties to purchase such Firm Units or
Option Units to which such default relates on the terms contained herein.
If within one Business Day after such default relating to more than 10% of
the
Firm Units or Option Units you do not arrange for the purchase of such Firm
Units or Option Units, then the Company shall be entitled to a further period
of
one Business Day within which to procure another party or parties satisfactory
to you to purchase said Firm Units or Option Units on such terms. In
the
event that neither you nor the Company arrange for the purchase of the Firm
Units or Option Units to which a default relates as provided in this
Section 6, this Agreement may be terminated by you or the Company without
liability on the part of the Company (except as provided in Sections 3.15 and
5
hereof) or the several Underwriters (except as provided in Section 5
hereof); provided,
however,
that if
such default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided
further
that
nothing herein shall relieve a defaulting Underwriter of its liability, if
any,
to the other several Underwriters and to the Company for damages occasioned
by
its default hereunder.
33
6.3 Postponement
of Closing Date.
In the event that the Firm Units or Option Units to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to be purchased
by another party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Option Closing Date for a reasonable
period, but not in any event exceeding five Business Days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement
or
the Prospectus or in any other documents and arrangements, and the Company
agrees to file promptly any amendment to the Registration Statement or the
Prospectus that in the opinion of counsel for the Underwriters may thereby
be
made necessary. The term “Underwriter” as used in this Agreement shall include
any party substituted under this Section 6 with like effect as if it
had
originally been a party to this Agreement with respect to such
Securities.
7. Additional
Covenants.
7.1 Additional
Shares or Options.
The Company hereby agrees that until the Company consummates a Business
Combination (as such term is defined in the Registration Statement), 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.
7.2 Trust
Fund Waiver Acknowledgments.
The
Company hereby agrees that it will not commence its due diligence investigation
of any operating business or businesses which the Company seeks to acquire
(each, a “Target
Business”)
or
obtain the services of any vendor unless and until such Target Business or
vendor acknowledges in writing, whether through a letter of intent, memorandum
of understanding or other similar document (and subsequently acknowledges the
same in any definitive document replacing any of the foregoing), that (a) it
has
read the Prospectus and understands that the Company has established the Trust
Fund, initially in an amount of $17,400,000 (without giving effect to any
exercise of the Over-allotment Option) 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 of the conversion of their shares
or
the liquidation of the Company or (ii) to the Company after it consummates
a
Business Combination and (b) for and in consideration of the Company (1)
agreeing to evaluate such Target Business for purposes of consummating a
Business Combination with it or (2) agreeing to engage the services of the
vendor, as the case may be, such Target Business or vendor agrees that it does
not have any right, title, interest or claim of any kind in or to any monies
of
the Trust Fund (“Claim”) and waives any Claim it may have in the future as a
result of, or arising out of, any negotiations, contracts or agreements with
the
Company and will not seek recourse against the Trust Fund for any reason
whatsoever. The
foregoing letters shall substantially be in the form attached hereto
as Exhibit
A
and B,
respectively. Furthermore, each officer and director of the Company shall
execute a waiver letter in the form attached hereto as Exhibit
C.
7.3 Insider
Letters.
The Company shall not take any action or omit to take any action which would
cause a breach of any of the Insider Letters executed between each Initial
Stockholder and Maxim and will not allow any amendments to, or waivers of,
such
Insider Letters without the prior written consent of Maxim.
34
7.4 Certificate
of Incorporation and By-Laws.
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, as amended, or By-Laws. Prior to the consummation of
a
Business Combination, the Company will not amend its Certificate of
Incorporation, as amended, without the prior written consent of
Maxim.
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 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 12 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 audited by
▇▇▇▇▇▇. In no event, however, will the Company’s Liquidation Value be less than
the amount contained in the Trust Fund at that time, inclusive of any net
interest income thereon. Only holders of IPO Shares (as defined below) 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. At the time the Company seeks
approval of any potential Business Combination, the Company will offer each
of
the holders of the Company’s Common Stock issued in this Offering (the
“IPO
Shares”)
the
right to convert their IPO Shares at a per share price equal to (A) the amount
in the Trust Fund (inclusive of any interest income therein) on the record
date
(the “Conversion
Price”)
for
determination of stockholders entitled to vote upon the proposal to approve
such
Business Combination (the “Record
Date”)
divided by (B) the total number of IPO Shares. If holders of
less
than 20% in interest of the Company’s IPO Shares vote against such approval of a
Business Combination, the Company may, but will not be required to, proceed
with
such Business Combination. If the Company elects to so proceed, it
will
convert shares, based upon the Conversion Price, from those holders of IPO
Shares who affirmatively requested such conversion and who voted against the
Business Combination. If holders of 20% or more in interest
of the
IPO Shares vote against approval of any potential Business Combination, the
Company will not proceed with such Business Combination and will not convert
such shares.
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.
35
7.8 Presentation
of Potential Target Businesses.
The Company shall cause each of the Initial Stockholders to agree that, in
order
to minimize potential conflicts of interest which may arise from multiple
affiliations, the Initial Stockholders will present to the Company for its
consideration, prior to presentation to any other person or company, any
suitable opportunity to acquire an operating business, until the earlier of
the
consummation by the Company of a Business Combination, the liquidation of the
Company or until such time as the Initial Stockholders cease to be an officer
or
director of the Company, subject to any pre-existing fiduciary obligations
the
Initial Stockholders might have.
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 at the time
of such acquisition. The fair market value of such business must be determined
by the Board of Directors of the Company based upon standards generally accepted
by the financial community, such as actual and potential sales, earnings and
cash flow and book value. If the Board of Directors of the Company
is not
able to independently determine that the target business has a fair market
value
of at least 80% of the Company’s net assets at the time of such acquisition, the
Company will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the NASD with respect to the satisfaction
of
such criteria. The Company is not required to obtain an opinion from
an
investment banking firm as to the fair market value if the Company’s Board of
Directors independently determines that the Target Business does have sufficient
fair market value.
7.10 Purchases
by Maxim.
Within
six (6) months of the Warrants and the Common Stock trading separately, and
subject in all instances to the requirements of applicable laws, rules and
regulations, Maxim hereby agrees that either it or certain of its principals,
affiliates or designees, shall purchase up to $250,000 of Warrants for its
own
account in the open market at a price not to exceed $1.20 per Warrant.
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 Date or the Option Closing Date, if
any, 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.
36
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.
You shall have the right to terminate this Agreement at any time prior to any
Closing Date, (i) if any domestic or international event or act or occurrence
has materially disrupted, or in your opinion will in the immediate future
materially disrupt, general securities markets in the United States; or (ii)
if
trading on the New York Stock Exchange, the American Stock Exchange, the Boston
Stock Exchange or on the NASD OTC Bulletin Board (or successor trading market)
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities shall have been required on the
NASD
OTC Bulletin Board or by order of the Commission or any other government
authority having jurisdiction, or (iii) if the United States shall have become
involved in a war or an increase in major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v)
if
a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether
or
not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Units, or (vii) if any of the
Company’s representations, warranties or covenants hereunder are breached, or
(viii) if the Representative shall have become aware after the date hereof
of
such a material adverse change in the conditions or prospects of the Company,
or
such adverse material change in general market conditions, including, without
limitation, as a result of terrorist activities after the date hereof, as in
the
Representative’s judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Units or to enforce contracts made by
the
Underwriters for the sale of the Units.
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.
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 effected 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 by hand or reputable
overnight courier or delivered by facsimile transmission (with printed
confirmation of receipt) and confirmed and shall be deemed given when so mailed,
delivered or faxed (or if mailed, two days after such mailing):
37
If
to the
Representative:
Maxim
Group LLC
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, Managing Director
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Copy
to:
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ PC
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to the
Company:
Affinity
Media International Corp.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇, President
Fax
No.:
(▇▇▇) ▇▇▇-▇▇▇▇
Copy
to:
Ellenoff
▇▇▇▇▇▇▇▇ & Schole LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
11.2 Headings.
The headings contained herein are for the sole purpose of convenience of
reference, and shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this Agreement.
11.3 Amendment.
This Agreement may only be amended by a written instrument executed by each
of
the parties hereto.
11.4 Entire
Agreement.
This Agreement (together with the other agreements and documents being delivered
pursuant to or in connection with this Agreement) constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof, and supersede all prior agreements and understandings of the parties,
oral and written, with respect to the subject matter hereof.
11.5 Binding
Effect.
This Agreement shall inure solely to the benefit of and shall be binding upon
the Representative, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
38
11.6 Governing
Law, Venue, etc.
11.6.1 This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of New York, without giving effect to the conflict of laws
principles thereof. Each
of
the Representative and the Company (and any individual signatory hereto): (i)
agrees that any legal suit, action or proceeding arising out of or relating
to
this engagement letter and/or the transactions contemplated hereby shall be
instituted exclusively in New York Supreme Court, County of New York, or in
the
United States District Court for the Southern District of New York, (ii) waives
any objection which such party may have or hereafter to the venue of any such
suit, action or proceeding and (iii) irrevocably and exclusively consents to
the
jurisdiction of the New York Supreme Court, County of New York, and the United
States District Court for the Southern District of New York in any such suit,
action or proceeding.
11.6.2 Each
of
the Representative and the Company (and any individual signatory hereto) further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York and agrees that service of process upon the Company or
any
such individual mailed by certified mail to the Company’s address shall be
deemed in every respect effective service of process upon the Company or any
such individual in any such suit, action or proceeding, and service of process
upon the Representative mailed by certified mail to the Representative’s address
shall be deemed in every respect effective service process upon the
Representative, in any such suit, action or proceeding.
11.6.3 THE
COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON
BEHALF OF ITS EQUITY HOLDERS AND CREDITORS) HEREBY WAIVE ANY RIGHT TO A TRIAL
BY
JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
REGISTRATION STATEMENT AND THE PROSPECTUS.
11.6.4 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. Delivery of a signed counterpart of this Agreement by fax or email/pdf
transmission shall constitute valid and sufficient delivery
thereof.
39
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.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
40
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.
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Very
truly yours,
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AFFINITY
MEDIA INTERNATIONAL CORP.
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By:
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Name:
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▇▇▇▇
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Title:
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President
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Accepted
on the date first
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above
written.
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MAXIM
GROUP LLC
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By:
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Name:
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Title:
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41
SCHEDULE A
AFFINITY
MEDIA INTERNATIONAL CORP.
2,500,000
Units
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Underwriter
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Number
of Firm Units
to
be Purchased
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Maxim
Group LLC
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2,500,000
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42
EXHIBIT
A
Form
of Target Business Letter
Affinity
Media International Corp.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇, President
Gentlemen:
Reference
is made to the Final Prospectus of Affinity
Media International Corp,
(“AIC”),
dated, 2005 (the “Prospectus”).
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to them in Prospectus.
We
have
read the Prospectus and understand that AIC
has
established the Trust Fund, initially in an amount of at least $17,400,000
for
the benefit of the Public Stockholders and that AIC
may
disburse monies from the Trust Fund only (i) to the Public Stockholders in
the
event of the redemption of their shares or the liquidation of AIC or (ii) to
AIC
after it
consummates a Business Combination.
For
and
in consideration of AIC
agreeing
to evaluate the undersigned for purposes of consummating a Business Combination
with it, the undersigned hereby agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund (the
“Claim”)
and
hereby waives any Claim it may have in the future as a result of, or arising
out
of, any negotiations, contracts or agreements with AIC
and will
not seek recourse against the Trust Fund for any reason whatsoever.
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Print
Name of Target Business
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Authorized
Signature of Target Business
|
43
Form
of Vendor Letter
Affinity
Media International Corp.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇, President
Gentlemen:
Reference
is made to the Final Prospectus of Affinity
Media International Corp.
(“AIC”),
dated, 2005 (the “Prospectus”).
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to them in Prospectus.
We
have
read the Prospectus and understand that AIC
has
established the Trust Fund, initially in an amount of at least $17,400,000
for
the benefit of the Public Stockholders and that AIC
may
disburse monies from the Trust Fund only (i) to the Public Stockholders in
the
event of the redemption of their shares or the liquidation of AIC or (ii) to
AIC
after it
consummates a Business Combination.
For
and
in consideration of AIC
agreeing
to evaluate the undersigned for purposes of consummating a Business Combination
with it, the undersigned hereby agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund (the
“Claim”)
and
hereby waives any Claim it may have in the future as a result of, or arising
out
of, any negotiations, contracts or agreements with AIC
and will
not seek recourse against the Trust Fund for any reason whatsoever.
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Print
Name of Vendor
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Authorized
Signature of Vendor
|
44
Form
of Director/Officer Letter
Affinity
Media International Corp.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇, President
Gentlemen:
The
undersigned officer or director of Affinity
Media International Corp.
(“AIC”)
hereby
acknowledges that AIC has established the Trust Fund, initially in an amount
of
at least $17,400,000 for the benefit of the Public Stockholders and that AIC
may
disburse monies from the Trust Fund only (i) to the Public Stockholders in
the
event of the redemption of their shares or the liquidation of AIC or (ii) to
AIC
after it consummates a Business Combination.
The
undersigned hereby agrees that it does not have any right, title, interest
or
claim of any kind in or to any monies in the Trust Fund (the “Claim”)
and
hereby waives any Claim it may have in the future as a result of, or arising
out
of, any contracts or agreements with AIC and will not seek recourse against
the
Trust Fund for any reason whatsoever.
Notwithstanding
the foregoing, such waiver shall not apply to any shares acquired by the
undersigned in the public market.
|
Print
Name of Officer/Director
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Authorized
Signature of Officer/Director
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45