Exhibit 1.1
12,000,000 Units
KEY HOSPITALITY ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
New York, New York
, 2005
Maxim Group LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
As Representative of the Underwriters
named on Schedule A hereto
Dear Sirs:
The undersigned, Key Hospitality Acquisition Corporation, a Delaware
corporation ("Company"), along with the individuals whose names appear on the
signature page hereto (but solely with respect to the Sections hereof indicated
thereon), hereby confirms its agreement with Maxim Group LLC ("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 12,000,000 units (the "Units" and such
12,000,000 Units, the "Firm Units") of the Company at a purchase price (net of
discounts and commissions) of $7.60 per 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 $7.60 per
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 Unit consists of one (1)
share of the Company's common stock, par value $.001 per share (the "Common
Stock"), and one (1) warrant to purchase one (1) 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, but in no event will Maxim allow separate trading until the
preparation of an audited balance sheet of the Company reflecting receipt by the
Company of the proceeds of the Offering and the filing of 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. Each Warrant entitles its holder,
upon exercise, to purchase one share of Common Stock for $6.00 during the period
commencing on the later of the consummation by the Company of its "Business
Combination" or one year from the Effective Date of the Registration Statement
and terminating on the four-year anniversary of the Effective Date. As used
herein, the term "Business Combination" (as described more fully in the
Registration Statement) shall mean any merger, capital stock exchange, asset pr
stock acquisition or other similar business combination consummated by the
Company with one or more related or unrelated operating business(es) or asset(s)
in the hospitality industry.
Maxim Group, LLC
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1.1.2. Payment and Delivery. Delivery and payment for the Firm Units
shall be made at 10:00 A.M., New York time, on the third (3rd) Business Day
following the Effective Date of the Registration Statement (or the fourth (4th)
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 and in such a manner as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and payment for
the Firm Units is herein 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: $87,000,000 (or $7.25 per
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 ("Trust Fund")
pursuant to the terms of an Investment Management Trust Agreement (the "Trust
Agreement") and the remaining proceeds (less commissions, expense allowances and
actual expense payments or other fees) shall be paid to the order of the Company
upon delivery to the Representative 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 (2) 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 (1) 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 1,800,000 units from the Company (the
"Over-allotment Option"). Such additional 1,800,000 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 (5) 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: $7.25 per Option Unit
shall be deposited in the Trust Fund pursuant to the Trust Agreement and the
remaining proceeds (less commissions, expense allowances and actual expense
payments or other fees) shall be paid to the order of the Company upon delivery
to the Representative 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 (2) 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 (1) Business Day prior to such Closing Date.
1.3. Representative's Purchase Option.
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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 600,000
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, except that
the Warrants included in the Representative's Units ("Representative's
Warrants") have an exercise price of $7.50 (125% of the exercise price of the
Warrants included in the units sold to the public). The Representative's
Purchase Option shall be exercisable, in whole or in part, commencing on the
later of the consummation of a Business Combination or one (1) 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
the Units. The Representative's Purchase Option, the Representative's Units
(including the shares of Common Stock included therein), 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.
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 Underwriters 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.
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2.1.1. Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-1 (File No. 333-125009), and amendments thereto, and related
preliminary prospectuses for the registration under the Securities Act of 1933,
as amended (the "Act"), for the Securities, which registration statement, as so
amended (including post-effective amendments, if any), has been declared
effective by the Commission and copies of which have heretofore been delivered
to the Underwriters. The conditions for use of Form S-1 to register the Offering
under the Act, as set forth in the General Instructions to such Form, have been
satisfied. The registration statement, as amended at the time it became
effective, including the prospectus, financial statements, schedules, exhibits
and other information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the "Registration Statement." If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Securities Act registering additional Securities of any
type (a "Rule 462(b) Registration Statement"), then, unless otherwise specified,
any reference herein to the term "Registration Statement" shall be deemed to
include such Rule 462(b) Registration Statement. Other than a Rule 462(b)
Registration Statement, which, if filed, becomes effective upon filing, no other
document with respect to the Registration Statement has heretofore been filed
with the Commission. All of the Securities have been registered under the
Securities Act pursuant to the Registration Statement or, if any Rule 462(b)
Registration Statement is filed, will be duly registered under the Act with the
filing of such Rule 462(b) Registration Statement. The Company, if required by
the Securities Act and the rules and regulations of the Commission (the
"Regulations"), proposes to file the Prospectus with the Commission pursuant to
Rule 424(b) under the Securities Act ("Rule 424(b)"). The prospectus, in the
form in which it is to be filed with the Commission pursuant to Rule 424(b), or,
if the prospectus is not to be filed with the Commission pursuant to Rule
424(b), the prospectus in the form included as part of the Registration
Statement at the time the Registration Statement became effective, is
hereinafter referred to as the "Prospectus," except that if any revised
prospectus or prospectus supplement shall be provided to the Underwriters by the
Company for use in connection with the Offering which differs from the
Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b)), the term
"Prospectus" shall also refer to such revised prospectus or prospectus
supplement, as the case may be, from and after the time it is first provided to
the Underwriters for such use. Any preliminary prospectus or prospectus subject
to completion included in the Registration Statement or filed with the
Commission pursuant to Rule 424 under the Act is hereafter called a "Preliminary
Prospectus." Any reference herein to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
exhibits incorporated by reference therein pursuant to the Regulations on or
before the effective date of the Registration Statement, the date of such
Preliminary Prospectus or the date of the Prospectus, as the case may be. Any
reference herein to the terms "amend", "amendment" or "supplement" with respect
to the Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include: (i) the filing of any document under
the Securities Exchange Act of 1934, as amended, and together with the Rules and
Regulations promulgated thereunder (the "Exchange Act") after the effective date
of the Registration Statement, the date of such Preliminary Prospectus or the
date of the Prospectus, as the case may be, which is incorporated therein by
reference, and (ii) any such document so filed. All references in this Agreement
to the Registration Statement, the Rule 462(b) Registration Statement, a
Preliminary Prospectus and the Prospectus, or any amendments or supplements to
any of the foregoing shall be deemed to include any copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("▇▇▇▇▇").
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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 ___________) providing for the registration
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
the Securities. The registration of the Securities 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
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, the Prospectus or any part thereof, or has instituted
or, to 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 of effectiveness of the
Registration Statement (or the time of any post-effective amendment to the
Registration Statement) 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 final
Prospectus contained therein, nor any amendment or supplement thereto, on their
respective 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 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
information furnished in writing to the Company by the Representative or its
representatives with respect to the Underwriters expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto, which information, it is agreed, shall consist solely of the
subsections captioned "State Blue Sky Information," "Pricing of Securities" and
"Regulatory Restrictions on Purchase of Securities" contained in the section of
the Prospectus entitled "Underwriting."
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2.3.2. Disclosure of Agreements. The agreements and documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein 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 (3) 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.
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.
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2.5. Independent Accountants. ▇▇▇▇▇▇▇▇▇, Kass and Company, P.C.
("RK"), whose report is filed with the Commission as part of the Registration
Statement, are independent registered public accountants as required by the Act,
the Regulations and the Public Company Accounting Oversight Board (including the
rules and regulations promulgated by such entity, the "PCAOB"). RK is duly
registered and in good standing with the PCAOB. RK 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. 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. Such financial
statements have been prepared in conformity with generally accepted accounting
principles of the United States, 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 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. 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 Securities conform to the
descriptions thereof contained in the Registration Statement and the Prospectus.
The offers and sales of the outstanding Common Stock were at all relevant times
either registered under the Act and the applicable state securities or Blue Sky
laws or, based in part on the representations and warranties of the purchasers
of such shares of Common Stock, exempt from such registration requirements.
2.8.2. Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable, and 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.
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,
and the holders thereof are not and will not be subject to personal liability by
reason of being such holders.
2.8.3. No Integration. Neither the Company nor any of its affiliates
has, prior to the date hereof, made any offer or sale of any securities which
are required to be "integrated" pursuant to the Act or the Regulations with the
offer and sale of the Public Securities pursuant to the Registration Statement.
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2.9. Registration Rights of Third Parties. Except as set forth in
the Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10. Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.22 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, and the Representative's Purchase Option, has been
duly and validly authorized by the Company and, when executed and delivered,
will constitute, the valid and binding agreements of the Company, enforceable
against the Company in accordance with their respective terms, except: (i) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws; and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.11. No Conflicts, etc. The execution, delivery, and performance by
the Company of this Agreement, the Warrant Agreement, the Representative's
Purchase Option, the Trust Agreement, the Services Agreement and the Escrow
Agreement, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both: (i) result in a breach of, or conflict with any of the terms
and provisions of, or constitute 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 (other than the Trust Agreement );
(ii) result in any violation of the provisions of the Amended and Restated
Certificate of Incorporation (the "Company Certificate") or the Bylaws of the
Company (the "Bylaws"); 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 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 the Company Certificate or the 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
as described in the Prospectus. The disclosures in the Registration Statement
concerning the effects of federal, state and local regulation on this offering
and the Company's business purpose as currently contemplated are correct in all
material respects and do not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.13.2. Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals,
licenses 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 Company's knowledge, threatened
against, or involving the Company or, to 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.
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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, contracts, agreements or understandings relating to the
payment of a brokerage commission or finder's, consulting, origination or
similar fee by the Company or any Initial Stockholder with respect to the sale
of the Securities hereunder or any other arrangements, agreements or
understandings of the Company or any Initial Stockholder that may affect the
Underwriters' compensation, as determined by the 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)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. 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. 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 including 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. 2.18.8. No person to whom
securities of the Company have been privately issued within the 180-day period
prior to the initial filing date of the Registration Statement has any
relationship or affiliation or association with any member of the NASD.
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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.
2.21. Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to the Representative or its
counsel shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
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2.22. Warrant Agreement. The Company has entered into a warrant
agreement with respect to the Warrants and the Representative's Warrants with
Continental Stock Transfer & Trust Company ("CST") 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 Exhibits10.1 through 10.11, to
the Registration Statement (as the same may be amended or supplemented from time
to time, 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 relating to the voting of shares of Common Stock by them and
certain other 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
CST, as escrow agent, in form and substance satisfactory to the Underwriters,
whereby the Common Stock owned by the Initial Stockholders will be held in
escrow by CST until the third anniversary of the Effective Date. During such
escrow period, the Initial Stockholders shall be prohibited from selling or
otherwise transferring such shares (except to spouses and children of Initial
Stockholders and trusts established for their benefit and as otherwise set forth
in the Escrow Agreement), but will retain the right to vote such shares. The
Company warrants that the Escrow Agreement shall not be amended, modified or
otherwise changed without the prior written consent of Maxim.
2.23.3. Investment Management Trust Agreement. The Company has
entered into the Trust Agreement with respect to certain proceeds of the
Offering in substantially the form filed as an exhibit to the Registration
Statement.
2.23.4. 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 and act in the capacity of an Initial Stockholder, employee, officer and/or
director of the Company.
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2.24. 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).
2.25. Subsidiaries. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other entity.
2.26. 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.
2.27. 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.
2.28. 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 and Additional Agreements 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.
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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 (5) 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 the Representative two (2) 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.
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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. For a period of five (5) years
from the Effective Date, or until such earlier time that 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. Transactions.
3.7.1. Affiliate 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. Services. The Company has entered into an agreement (the
"Services Agreement") with _________________, an entity affiliated with ▇▇▇
▇▇▇▇▇▇▇▇, pursuant to which the Company will pay up to $7,500 for general and
administrative services, including office space, utilities and secretarial
support. In no event will such fees be more than $7,500 per month in the
aggregate and all such arrangements will be arm's-length transactions.
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3.7.3. Affiliate 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.
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 (5) 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 a commission of three percent (3%) of the cash proceeds received upon
exercise of the Warrants for each Warrant exercised, payable on the date of such
exercise, on the terms provided for in the Warrant Agreement, only if permitted
under the rules and regulations of the NASD and only to the extent that an
investor who exercises his Warrants specifically designates, in writing, that
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 (Attention:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, 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 (5) 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.
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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 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. CST 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 Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP ("EG&S"),
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 (7)
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.
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3.13. Payment of Expenses.
3.13.1. General Expenses Related to the Offering. The Company hereby
agrees to pay on or prior to 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) Company legal and accounting fees and disbursements;
(ii) 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
and all "▇▇▇▇▇" preparation and filing costs;
(iii) 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;
(iv) 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;
(v) filing fees, costs and expenses (including fees of
Representative's counsel and disbursements for the Representative's
counsel) incurred in registering the Offering with the NASD;
(vi) all Company 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;
(vii) costs of placing "tombstone" advertisements in The Wall Street
Journal, The New York Times and a third publication to be selected by the
Representative;
(viii) fees and disbursements of CST, whether it is acting in the
capacity of transfer or warrant agent or as trustee of the Trust Account
or otherwise;
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(ix) the preparation, binding and delivery of transaction closing
"bibles" and the preparation and delivery of transaction Lucite cubes or
similar commemorative items, in each case in a form, style and quantity as
reasonably requested by the Representative; 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 herein to be paid by the Company to the Representative
and others.
If the Offering contemplated by this Agreement is not consummated
for any reason whatsoever, except to the extent such event is demonstrated by a
court of competent jurisdiction to have occurred directly and primarily as a
result of a material breach or default by the Representative or any Underwriter
of their respective 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 $60,000).
3.13.2. Nonaccountable Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.13.1, on each of the
Closing Date, it will pay to Maxim a nonaccountable expense allowance equal to
two percent (2%) of the gross proceeds received by the Company from the sale of
the Firm Units (less $40,000 previously advanced by the Company) by deduction
from the proceeds of the Offering contemplated herein. In addition, at the
closing of a Business Combination, the Company will pay to Maxim a cash fee
equal to one percent (1%) of the gross proceeds raised in the Offering,
including any proceeds receives as a result of the exercise of the
Over-allotment Option.
3.14. Application of Net Proceeds. The Company will apply the net
proceeds from the Offering received by it in a manner consistent with the
application described under the caption "Use of Proceeds" in the Prospectus.
3.15. Delivery of Earnings Statements to Security Holders. The
Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of
at least twelve consecutive months beginning after the Effective Date.
3.16. Notice to NASD. In the event any person or entity (regardless
of any NASD affiliation or association) is engaged to assist the Company in its
search for a merger candidate or to provide any other merger and acquisition
services, the Company will provide the following to the NASD and 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.
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3.17. Stabilization. Except with respect to the agreements certain
agreements between Maxim and certain Company Affiliates (which agreements have
been filed as exhibits 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.
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 RK 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 Form8-K with the Commission, which Report
shall contain the Company's Audited Financial Statements.
3.21. Press Releases. The Company will not issue press releases or
engage in any other publicity, without Maxim's prior written consent, for a
period ending at 5:00 p.m., New York City time, on the first Business Day
following the fortieth (40th) day following the Closing Date.
3.22. 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.
3.23. 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.
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3.24. 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.
3.25. 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.
3.26. 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.
3.27. Right of First Refusal. For a period of eighteen (18) months
from the closing of a Business Combination, Maxim shall have a thirty (30) day
right of first refusal (beginning on the day the Company provides written notice
of its intention to engage in a financing, which notice shall contain proposed
terms of such financing) to act as lead underwriter or placement agent (or
minimally as a co-manager or placement agent), 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 of the Company
during such eighteen (18) month period, or any successor to or any subsidiary of
the Company. In the event that Maxim elects not to act as an underwriter or
placement agent in connection with such financing (or if Maxim does not respond
to the Company with the 30-day first refusal period), the Company shall
thereafter have the right to engage other investment bankers for such financing;
provided, however, that in the event the Company shall thereafter propose to
engage in a financing with an investment banking firm on terms superior to those
offered Maxim (in terms of total underwriter's or placement agent's
compensation, whether expressed in aggregate dollars or as a percentage of the
transaction), the Company shall first offer such terms exclusively to Maxim for
a period of thirty (30) days in accordance with this Section 3.27.
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3.28. Electronic Prospectus. The Company shall cause to be prepared
and delivered to the Representative, at its expense, within one (1) Business Day
from the effective date of this Agreement, an Electronic Prospectus to be used
by the Underwriters in connection with the Offering. As used herein, the term
"Electronic Prospectus" means a form of Prospectus, and any amendment or
supplement thereto, that meets each of the following conditions: (i) it shall be
encoded in an electronic format, satisfactory to the Representative, that may be
transmitted electronically by the other Underwriters to offerees and purchasers
of the Units for at least the period during which a Prospectus relating to the
Units is required to be delivered under the Securities Act; (ii) it shall
disclose the same information as the paper prospectus and prospectus filed
pursuant to ▇▇▇▇▇, except to the extent that graphic and image material cannot
be disseminated electronically, in which case such graphic and image material
shall be replaced in the electronic prospectus with a fair and accurate
narrative description or tabular representation of such material, as
appropriate; and (iii) it shall be in or convertible into a paper format or an
electronic format, satisfactory to the Representative, that will allow
recipients thereof to store and have continuously ready access to the prospectus
at any future time, without charge to such recipients (other than any fee
charged for subscription to the Internet as a whole and for on-line time). The
Company hereby confirms that it has included or will include in the Prospectus
filed pursuant to ▇▇▇▇▇ or otherwise with the Commission and in the Registration
Statement at the time it was declared effective an undertaking that, upon
receipt of a request by an investor or his or her representative within the
period when a prospectus relating to the Units is required to be delivered under
the Securities Act, the Company shall transmit or cause to be transmitted
promptly, without charge, a paper copy of the Prospectus.
3.29. Reservation of Shares. The Company will reserve and keep
available that maximum number of its authorized but unissued securities which
are issuable upon exercise of any of the Securities outstanding from time to
time.
4. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1. Regulatory Matters.
4.1.1. Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York time,
on the date of this Agreement or such later date and time as shall be consented
to in writing by the Representative, 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 EG&S.
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4.1.2. NASD Clearance. By the Effective Date, the Representative
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3. No Commission Stop Order. As of either on the Closing Date or
the Option Closing Date, the Commission has not issued any order or threatened
to issue any order preventing or suspending the use of any Preliminary
Prospectus, the Prospectus or any part thereof, and has not instituted or
threatened to institute any proceedings with respect to such an order.
4.1.4. No Blue Sky Stop Orders. No order preventing or suspending
the sale of the Units in any jurisdiction designated by the Representative
pursuant to Section 3.3 hereof shall have been issued on either as of the
Closing Date or the Option Closing Date, and no proceedings for that purpose
shall have been instituted or shall have been threatened.
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 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇, P.C. ("▇▇▇▇▇ ▇▇▇▇▇"), 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 Company Certificate or Bylaws. The offers
and sales of the outstanding Common Stock were at all relevant times
either registered under the Act and the applicable state securities or
Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as described in
the Prospectus. The Public Securities and the Representative's Securities
conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
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(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 Company Certificate or
Bylaws or, to such counsel's knowledge, under 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.
(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.
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(v) This Agreement, the Warrant Agreement, the Services Agreement,
the Trust Agreement and the Escrow Agreement have each been duly and
validly authorized and, when executed and delivered by the Company,
constitute, and the Representative's Purchase Option has been duly and
validly authorized by the Company and, when executed and delivered, will
constitute, the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except: (a)
as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (b)
as enforceability of any indemnification or contribution provisions may be
limited under the 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 Company Certificate or By-Laws, 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.
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(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, state or foreign 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.
(viii) 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).
(ix) The Registration Statement is effective under the Act. To such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act or
applicable state securities laws. To such counsel's knowledge, neither the
Company nor any of its affiliates has, prior to the date hereof, made any
offer or sale of any securities which are required to be "integrated"
pursuant to the Act or the Regulations with the offer and sale of the
Public Securities pursuant to the Registration Statement
(x) 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.
4.2.2. Closing Date and Option Closing Date Opinion of Counsel. On
each of the Closing Date and the Option Closing Date, if any, the Representative
shall have received the favorable opinion of ▇▇▇▇▇ ▇▇▇▇▇, dated the Closing Date
or the Option Closing Date, as the case may be set forth above, addressed to the
Representative and in form and substance reasonably satisfactory to the
Representative, confirming as of the Closing Date and, if applicable, the Option
Closing Date, the statements made by ▇▇▇▇▇ ▇▇▇▇▇ in its opinion delivered on the
Effective Date.
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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, the
Representative 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 the Representative and to EG&S from RK dated, respectively, as of the date of
this Agreement and as of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect to
the Company within the meaning of the Act and the applicable Regulations
and that they have not, during the periods covered by the financial
statements included in the Prospectus, provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange
Act;
(ii) Stating that in their opinion the financial statements of the
Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements
of the Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited review which included
a reading of the latest available unaudited interim financial statements
of the Company (with an indication of the date of the latest available
unaudited interim financial statements), a reading of the latest available
minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and
other employees of the Company responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come to
their attention which would lead them to believe that: (a) the unaudited
financial statements of the Company included in the Registration Statement
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration
Statement; (b) at a date not later than five days prior to the Effective
Date, Closing Date or Option Closing Date, as the case may be, there was
any change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity of the Company as compared with
amounts shown in the , 2005 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any decrease, setting forth the amount of such
decrease, and (c) during the period from , 2005 to a specified date not
later than five days prior to the Effective Date, Closing Date or Option
Closing Date, as the case may be, there was any decrease in revenues, net
earnings or net earnings per share of Common Stock, in each case as
compared with the corresponding period in the preceding year and as
compared with the corresponding period in the preceding quarter, other
than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
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(iv) Setting forth, at a date not later than five days prior to the
Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding
any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding
five year period brought to the attention of the Company's management any
reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the
Company's internal controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as the Representative may reasonably
request.
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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 Company Certificate are true
and complete, have not been modified and are in full force and effect; (ii) that
the resolutions relating to the public offering contemplated by this Agreement
are in full force and effect and have not been modified; (iii) all
correspondence between the Company or its counsel and the Commission; and (iv)
as to the incumbency of the officers of the Company. The documents referred to
in such certificate shall be attached to such certificate.
4.5. No Material Changes. Prior to and on each of the Closing Date
and the Option Closing Date, if any: (i) there shall have been no material
adverse change or development involving a prospective material adverse change in
the condition or prospects or the business activities, financial or otherwise,
of the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) no action suit or proceeding, at
law or in equity, shall have been pending or threatened against the Company or
any Initial Stockholder before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; (iii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission; and (iv) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
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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.
4.6.3. Secondary Market Trading Survey. On the Closing Date, the
Representative shall have received the Secondary Market Trading Survey from
EG&S.
5. Indemnification.
5.1. Indemnification of Underwriters.
5.1.1. General. Subject to the conditions set forth below, each of
the Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇ (the "Company Indemnitors"),
jointly and severally, agrees to indemnify and hold harmless each of the
Underwriters and each dealer selected by the Representative that participates in
the offer and sale of the Units (each a "Selected Dealer") and each of their
respective directors, officers, employees, agents and representatives, 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
(collectively, including all controlling persons, the "Indemnitees"), against
any and all loss, liability, claim, charge, 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 Indemnitee
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 regulations of foreign countries or
political subdivisions thereof, 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 NASD or OTC Bulletin Board 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 subsections captioned "State Blue Sky
Information," "Pricing of Securities" and "Regulatory Restrictions on Purchase
of Securities" contained in the section of the Prospectus entitled
"Underwriting." 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
Indemnitee to the extent that any loss, liability, claim, damage or expense of
such Indemnitee results from the fact that a copy of the Prospectus was not
given or sent to the person asserting any such loss, liability, claim or damage
at or prior to the written confirmation of sale of the Securities to such person
as required by the Act and the Regulations, and if the untrue statement or
omission has been corrected in the Prospectus, unless such failure to deliver
the Prospectus was a result of non-compliance by the Company with its
obligations under Section 3.4 hereof. The Company agrees promptly to notify the
Representative of the commencement of any litigation or proceedings against the
Company or any of its officers, directors or controlling persons in connection
with the issue and sale of the Securities or in connection with the Registration
Statement or Prospectus.
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5.1.2. Procedure. If any action is brought against an Indemnitee in
respect of which indemnity may be sought against the Company Indemnitors
pursuant to Section 5.1.1, such Indemnitee shall promptly notify the Company
Indemnitors in writing of the institution of such action and the Company
Indemnitors shall assume the defense of such action, including the employment
and fees of counsel (subject to the reasonable approval of the applicable
Indemnitee) and payment of actual expenses. Such Indemnitee 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 Indemnitee person unless: (i)
the employment of such counsel at the expense of the Company Indemnitors shall
have been authorized in writing by the applicable Company Indemnitor in
connection with the defense of such action; (ii) the Company Indemnitors shall
not have employed counsel to have charge of the defense of such action; or (iii)
such Indemnitee(s) 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 Indemnitors (in which case the Company Indemnitors
shall not have the right to direct the defense of such action on behalf of the
applicable Indemnittees), in any of which events the reasonable fees and
expenses of not more than one additional firm of attorneys selected by the
applicable Indemnitee shall be borne by the Company Indemnitors. Notwithstanding
anything to the contrary contained herein, if the applicable Indemnitee shall
assume the defense of such action as provided above, the Company Indemnitors
shall have the right to approve the terms of any settlement of such action which
approval shall not be unreasonably withheld.
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 subsections
captioned "State Blue Sky Information," "Pricing of Securities" and "Regulatory
Restrictions on Purchase of Securities" contained in the section of the
Prospectus entitled "Underwriting." 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.
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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, each of the Company Indemnitors, on the
one hand, and the Underwriters, on the other hand, shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by the applicable parties, as
incurred, in such proportions that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the initial offering price
appearing thereon and the Company is responsible for the balance; provided,
that, no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 5.3.1, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Public
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
an Underwriter or the Company, as applicable, and each person, if any, who
controls an Underwriter or the Company, as applicable, within the meaning of
Section 15 of the Act shall have the same rights to contribution as the
Underwriters or the Company, as applicable.
5.3.2. Contribution Procedure. Within fifteen (15) 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.
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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, the Representative may, in its discretion,
arrange for the Representative 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 (1) Business Day after such default relating to more than
10% of the Firm Units or Option Units, the Representative does not arrange for
the purchase of such Firm Units or Option Units, then the Company shall be
entitled to a further period of one (1) Business Day within which to procure
another party or parties satisfactory to the Representative to purchase said
Firm Units or Option Units on such terms. In the event that neither the
Representative or the Company can 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 the Representative 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.
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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, the Representative 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 (5) Business Days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus or in
any other documents and arrangements, and the Company agrees to file promptly
any amendment to the Registration Statement or the Prospectus that in the
opinion of counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7. Right to Appoint Observer. For a period of two (2) years from the
Effective Date, upon notice from Maxim to the Company, Maxim shall have the
right to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting of the Board of Directors of the Company;
provided that such representative shall sign a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to Maxim and its
counsel in connection with such representative's attendance at meetings of the
Board of Directors; and provided further that upon written notice to Maxim, the
Company may exclude the representative from meetings where, in the written
opinion of counsel for the Company, the representative's presence would destroy
the attorney-client privilege. The Company agrees to give Maxim written notice
of each such meeting and to provide Maxim with an agenda and minutes of the
meeting no later than it gives such notice and provides such items to the other
directors, and reimburse the representative of Maxim for its reasonable
out-of-pocket expenses incurred in connection with its attendance at the
meeting, including but not limited to, food, lodging and transportation. The
Company further agrees that, during said two (2) year period, it shall schedule
no less than four (4) meetings of its Board of Directors in each such year at
which meetings a representative of Maxim shall be permitted to attend or
otherwise participate as set forth herein. Such meetings shall be held quarterly
each year and ten (10) days advance notice of such meetings shall be given to
Maxim. Further, during such two (2) year period, the Company shall give prompt
written notice to Maxim of any proposed Business Combinations or other
acquisitions, mergers, reorganizations or similar transactions.
8. Additional Covenants and Agreements.
8.1. Additional Shares or Options. The Company hereby agrees that
until the Company consummates a Business Combination, it shall not issue any
shares of Common Stock or any options or other securities convertible into
Common Stock, or any shares of Preferred Stock which participate in any manner
in the Trust Fund or which vote as a class with the Common Stock on a Business
Combination.
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8.2. Trust Fund Waiver Letters. The Company hereby agrees that it
will not commence its due diligence investigation of any operating business
which the Company seeks to effect a Business Combination (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 $87,000,000 (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 in
the Trust Fund ("Claim") and waives any Claim it may have in the future as a
result of, or arising out of, any negotiations, contracts or agreements with the
Company and will not seek recourse against the Trust Fund for any reason
whatsoever. The foregoing letters shall substantially be in the form attached
hereto as Exhibit A and B, respectively. Furthermore, each officer and director
of the Company shall execute a waiver letter in the form attached hereto as
Exhibit C.
8.3. Insider Letters. The Company shall not take any action or omit
to take any action which would cause a breach of any of the Insider 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.
8.4. 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 the Company Certificate or the By-Laws. Prior to the
consummation of a Business Combination, the Company will not amend the Company
Certificate or Bylaws without the prior written consent of Maxim.
8.5. 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.
8.6. Acquisition/Liquidation Procedure. The Company agrees: (i)
that, prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("Business
Combination Vote") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law; and (ii)
that, in the event that the Company does not effect a Business Combination
within 18 months from the consummation of this Offering (subject to extension
for an additional six-month period, as described in the Prospectus), the Company
will be liquidated and will distribute to all holders of IPO Shares (defined
below) an aggregate sum equal to the Company's "Liquidation Value." 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 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 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 the total number of IPO
Shares. The Company's "Liquidation Value" shall mean the Company's book value,
as determined by the Company and audited by RK. In no event, however, will the
Company's Liquidation Value be less than the Trust Fund, inclusive of any net
interest income thereon. If holders of less than 20% in interest of the
Company's IPO Shares vote against such approval of a Business Combination, the
Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will convert shares, based
upon the Conversion Price, from those holders of IPO Shares who affirmatively
requested such conversion and who voted against the Business Combination. Only
holders of IPO Shares shall be entitled to receive liquidating distributions and
the Company shall pay no liquidating distributions with respect to any other
shares of capital stock of the Company. If holders of 20% or more in interest of
the IPO Shares vote against approval of any potential Business Combination, the
Company will not proceed with such Business Combination and will not convert
such shares.
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8.7. Rule 419. The Company agrees that it will use its best efforts
to prevent the Company from becoming subject to Rule 419 under the Act prior to
the consummation of any Business Combination, including, but not limited to,
using its best efforts to prevent any of the Company's outstanding securities
from being deemed to be a "▇▇▇▇▇ stock" as defined in Rule 3a-51-1 under the
Exchange Act during such period.
8.8. Affiliated Transactions. 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.
8.9. 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.
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8.10. Purchases by Maxim. Following the Closing, and subject in all
instances to the requirements of applicable laws, rules and regulations, Maxim
hereby agrees to purchase up to $500,000 of Warrants for its own account in the
open market at a price not to exceed $1.20 per Warrant.
8.11. Redemption of Warrants. In accordance with the terms of the
Warrant Agreement, the Company shall have the right to call the Warrants, with
Maxim's prior written consent, for a redemption price of $.01 per Warrant at any
time if notice of not less than 30 days is given and the last sale price of the
Common Stock has been at least $11.50 for any 20 trading days within a 30
trading day period ending on the third day prior to the day on which notice is
given.
9. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements at the Closing Date or the Option Closing
Date, if any, and such representations, warranties, covenants and agreements of
the Underwriters and Company, including the indemnity agreements contained in
Section 5 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the several Underwriters until the
earlier of the expiration of any applicable statute of limitations and the
seventh anniversary of the later of the Closing Date or the Option Closing Date,
if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
10. Effective Date of This Agreement and Termination Thereof.
10.1. Effective Date. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
10.2. Termination. Maxim shall have the right to terminate this
Agreement at any time prior to any Closing Date if: (i) any domestic or
international event or act or occurrence has materially disrupted, or in the
Representative's sole opinion will, in the immediate future, materially disrupt,
general securities markets in the United States; or (ii) 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) the United States shall have become involved in a new war
or an increase in major hostilities, or (iv) a banking moratorium has been
declared by a New York State or federal authority, or (v) a moratorium on
foreign exchange trading has been declared which materially adversely impacts
the United States securities market, or (vi) the Company shall have sustained a
material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in the Representative's sole opinion, make it inadvisable to
proceed with the delivery of the Units, or (vii) any of the Company's
representations, warranties, covenants or agreements hereunder are breached, or
(viii) any Underwriter 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
Maxim'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.
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10.3. Expenses. In the event that this Agreement shall not be
carried out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the obligations of the Company
to pay the out of pocket expenses related to the transactions contemplated
herein shall be governed by Section 3.13 hereof.
10.4. Indemnification. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 shall not be in any way effected by, such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Miscellaneous.
11.1. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered 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):
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If to the Representative:
Maxim Group LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Key Hospitality Acquisition Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Co-Chairman and Chief Executive Officer
Fax No.: _______________________________
With a copy (which shall not constitute notice) to:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
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.
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11.5. Binding Effect. This Agreement shall inure solely to the
benefit of and shall be binding upon the Representative, the Underwriters, the
Company and the controlling persons, directors and officers referred to in
Section 5 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
11.6. Governing Law, 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 facsimile or e-mail/.pdf transmission shall
constitute valid and sufficient delivery thereof.
42
Maxim Group, LLC
___________, 2005
Page 43 of 44
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.
11.9. Time is of the Essence. Time shall be of the essence of this
Agreement.
[Signature Page Follows]
43
Maxim Group, LLC
___________, 2005
Page 44 of 44
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very Truly Yours,
KEY HOSPITALITY ACQUISITION CORPORATION
By:
--------------------------------------
Name:
Title:
Agreed to and accepted
as of the date first written above:
MAXIM GROUP LLC, as Representative
of the several Underwriters
By:
----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
Solely with respect to Sections 5 and 11.6 hereof:
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇
44
SCHEDULE A
KEY HOSPITALITY ACQUISITION CORPORATION
12,000,000 Units
Number of Firm Units
Underwriter to be Purchased
----------------------------------------------------------------------------
Maxim Group LLC
12,000,000
EXHIBIT A
Form of Target Business Letter
Key Hospitality Acquisition Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Gentlemen:
Reference is made to the Final Prospectus of Key Hospitality Acquisition
Corporation ("Key"), 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 Key has established the
Trust Fund, initially in an amount of $87,000,000 for the benefit of the Public
Stockholders and that Key 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 Key or (ii) to Key after it consummates a Business Combination.
For and in consideration of Key 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 Key and will not seek recourse against the Trust
Fund for any reason whatsoever.
------------------------------------------
Print Name of Target Business
------------------------------------------
Authorized Signature of Target Business
EXHIBIT B
Form of Vendor Letter
Key Hospitality Acquisition Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Gentlemen:
Reference is made to the Final Prospectus of Key Hospitality Acquisition
Corporation ("Key"), 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 Key has established the
Trust Fund, initially in an amount of $87,000,000 for the benefit of the Public
Stockholders and that Key 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 Key; or (ii) to Key after it consummates a Business Combination.
For and in consideration of Key engaging the services of the undersigned,
the undersigned hereby agrees that it does not have any right, title, interest
or claim of any kind in or to any monies in the Trust Fund (the "Claim") and
hereby waives any Claim it may have in the future as a result of, or arising out
of, any contracts or agreements with Key and will not seek recourse against the
Trust Fund for any reason whatsoever.
-----------------------------------------
Print Name of Vendor
-----------------------------------------
Authorized Signature of Vendor
EXHIBIT C
Form of Director/Officer Letter
Key Hospitality Acquisition Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Gentlemen:
The undersigned officer or director of Key Hospitality Acquisition
Corporation ("Key") hereby acknowledges that Key has established the Trust Fund,
initially in an amount of $87,000,000 for the benefit of the Public Stockholders
and that Key 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 Key or (ii) to Key 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 Key and will not seek
recourse against the Trust Fund for any reason whatsoever.
Notwithstanding the foregoing, such waiver shall not apply to any shares
acquired by the undersigned in the public market.
-----------------------------------------
Print Name of Officer/Director
-----------------------------------------
Authorized Signature of Officer/Director