EXHIBIT 1.1
UNDERWRITING AGREEMENT
BETWEEN
ENERGY SERVICES ACQUISITION CORP.
AND
FERRIS, BAKER WATTS, INCORPORATED
DATED: _________________, 2006
ENERGY SERVICES ACQUISITION CORP.
UNDERWRITING AGREEMENT
Baltimore, Maryland
Ferris, Baker Watts, Incorporated
100 Light Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
The undersigned, Energy Services Acquisition Corp., a Delaware
corporation ("COMPANY"), hereby confirms its agreement with Ferris, Baker Watts,
Incorporated (hereinafter referred to as "YOU," "FBW" or the "REPRESENTATIVE")
as representative of the underwriters named on Schedule I hereto (the
Representative and the other Underwriters being collectively called the
"UNDERWRITERS" or, individually, an "UNDERWRITER") as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Units. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters, an aggregate of 10,000,000 units
("FIRM UNITS") of the Company at a purchase price (net of discounts and
commissions but before the non-accountable expense allowance of $0.135 per unit
described in Section 3.26) of Five Dollars and Seventy Cents ($5.70) per Firm
Unit. The Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Units set forth opposite their respective names on
Schedule I attached hereto and made a part hereof at a purchase price (net of
discounts and commissions but before the nonaccountable expense allowance
described in Section 3.26) of $5.70 per Firm Unit. The Firm Units are to be
offered initially to the public (the "OFFERING") at the offering price set forth
on the cover page of the Prospectus (as defined in Section 2.1.1 hereof). Each
Firm Unit consists of one share of the Company's common stock, par value $0.0001
per share (the "COMMON STOCK"), and two warrants ("WARRANT(s)"). The shares of
Common Stock and the Warrants included in the Firm Units will not be separately
transferable until 90 days after the effective date (the "EFFECTIVE DATE") of
the Registration Statement (as defined in Section 2.1.1 hereof) unless FBW
informs the Company of its decision to allow earlier separate trading, but in no
event will FBW 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 a filing of a Form 8-K by the Company that includes such
audited balance sheet. Each Warrant entitles its holder to exercise it to
purchase one share of Common Stock for $5.00 during the period commencing on the
later of the consummation by the Company of its "Business Combination" or one
year from the Effective Date of the Registration Statement and terminating on
the five-year anniversary of the Effective Date unless earlier redeemed as
provided in the Warrant Agreement (as defined in Section 2.21 hereof). "BUSINESS
COMBINATION" shall mean any merger, capital stock exchange, asset acquisition or
other similar business
combination consummated by the Company with an operating company (as described
more fully in the Registration Statement).
1.1.2 Payment and Delivery. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., Baltimore, Maryland time, on the third
business day following the Effective Date of the Registration Statement (or the
fourth business day following the Effective Date, if the Registration Statement
is declared effective after 4:30 p.m.) or at such earlier time as shall be
agreed upon by the Representative and the Company at the offices of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and payment for
the Firm Units is called the "CLOSING DATE." Payment for the Firm Units in the
total amount of $[_________] (representing gross proceeds of the Offering before
payment of Offering expenses of $[_________], and the non-accountable expense
allowance of $[_________] referred to in Section 3.26 hereof) 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, as follows: $[__________] (representing net proceeds of the
Offering after payment of Offering expenses of $[__________] but including
$[__________] non-accountable expense allowance and without giving effect to the
over-allotment option) 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 $[__________] of the proceeds
(representing $[__________] for Offering expenses) shall be paid to the order of
the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Firm Units (or through the
facilities of the Depository Trust Company (the "DTC")) for the account of the
Underwriters. The Firm Units shall be registered in such name or names and in
such authorized denominations as the Representative may request in writing at
least two full business days prior to the Closing Date. The Company will permit
the Representative to examine and package the Firm Units for delivery, at least
one full business day prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Units except upon tender of payment by the
Representative for all the Firm Units.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 1,500,000 units from the Company (the
"OVER-ALLOTMENT OPTION"). Such additional 1,500,000 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 $5.70 per Option Unit (for avoidance of doubt, such amount
does not include any nonaccountable expense allowance).
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 full business days after
the date of the notice or such other time as shall be agreed upon by the Company
and the Representative, at the offices of the Representative or at such other
place as shall be agreed upon by the Company and the Representative. If
2
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 will
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: $5.70 per Option Unit
shall be deposited in the Trust Fund pursuant to the Trust Agreement at the
offices of the Representative or at such other place as shall be agreed upon by
the Representative and the Company, upon delivery to you of certificates
representing such securities (or through the facilities of DTC) for the account
of the Underwriters. The certificates representing the Option Units to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Representative for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to such Closing Date or Option Closing Date, as the
case may be.
1.3 Representative's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Representative (and/or their designees) on the Effective Date an
option ("REPRESENTATIVE'S PURCHASE OPTION") for the purchase of an aggregate of
500,000 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 $6.25, which is equal to
one hundred and twenty-five (125%) percent of the exercise price of warrants
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 year from the Effective Date and expiring on the four-year
anniversary of the Effective Date at an initial exercise price per
Representative's Unit of $7.50, which is equal to one hundred and twenty five
(125%) percent of the initial public offering price of a Unit. The
Representative's Purchase Option, the Representative's Units, the
Representative's Warrants and the shares of Common Stock issuable upon exercise
of the Representative's Warrants are hereinafter referred to collectively as the
"REPRESENTATIVE'S SECURITIES." The Public Securities and the Representative's
Securities are hereinafter referred to collectively as the "SECURITIES." Except
pursuant to one or more of the exceptions set forth in Rule 2710(g)(2) of the
Conduct Rules of the National Association of Securities Dealers, the
Representative's Purchase Option shall not be sold, transferred, assigned,
pledged or hypothecated, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of the Representative's Purchase Option by the holder(s) thereof,
for a period of one hundred eighty (180) days immediately following the date the
Registration Statement (as hereinafter defined) is declared effective by the
Commission (as hereinafter defined).
1.3.2 Delivery and Payment. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for the
Representative's Purchase Option in the name or names and in such authorized
denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as follows:
3
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("COMMISSION") a registration statement or
amendments thereto, on Form S-1 (File No. 333-______), including any related
preliminary prospectus (the "PRELIMINARY PROSPECTUS"), for the registration of
the Public Securities under the Securities Act of 1933, as amended ("ACT"),
which registration statement or amendments have been prepared by the Company in
conformity with the requirements of the Act, and the rules and regulations
("REGULATIONS") of the Commission under the Act. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430A of the Regulations), is hereinafter called the "REGISTRATION STATEMENT,"
and the form of the final prospectus dated the Effective Date included in the
Registration Statement (or, if applicable, the form of final prospectus filed
with the Commission pursuant to Rule 424 of the Regulations), is hereinafter
called the "PROSPECTUS." "STATUTORY PROSPECTUS" as of any time means the
Preliminary Prospectus included in the Registration Statement immediately prior
to the Time of Sale. "TIME OF SALE" means 5:00 pm Eastern time on the date of
this Agreement. In the event the Company and Underwriters agree to increase the
number of Firm Units to be sold pursuant hereto, "Registration Statement" shall
include the registration statement filed pursuant to Rule 462(b) of the Act to
register to such add such additional Unites for sale. The Registration Statement
has been declared effective by the Commission on the date hereof. The Company
has complied with all requests of the Commission for additional or supplemental
information. The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and sale
of the Securities other than any Preliminary Prospectus, Statutory Prospectus or
Prospectus.
The Company has delivered to the Representative a complete manually
signed copy of the Registration Statement and of each consent and certificate of
experts filed as a part thereof and has delivered to the Representative
conformed copies of the Registration Statement (without exhibits) and
Preliminary Prospectuses and the Prospectus, as amended or supplemented, in such
quantities and at such places as the Representative has reasonably requested.
Each Preliminary Prospectus used by the Underwriters pursuant to Rule 430A and
the Prospectus, when filed, complied in all material respects with the
Securities Act and, as filed by electronic transmission pursuant to EDGAR
(except as may be permitted by Regulation S-T under the Securities Act), was
identical to the copy thereof delivered to the Underwriters for use in
connection with the offer and sale of the Public Securities.
2.1.2 Pursuant to the Exchange Act. The Company has filed with
the Commission a Form 8-A (File Number 001-_____) 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 best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
4
2.3 Disclosures in Registration Statement Statutory, Prospectus and
Preliminary Prospectus.
2.3.1 10b-5 Representation. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to the
Closing Date and the Option Closing Date, if any, the Registration Statement and
the Prospectus will contain all material statements that are required to be
stated therein in accordance with the Act and the Regulations, and will in all
material respects conform to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, on such dates, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
for the registration of the Securities or any amendment thereto or pursuant to
Rule 424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Statutory Prospectus does not include and did not
include as of the Time of Sale any untrue statement of a material fact and does
not omit and did not omit as of the Time of Sale to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The representation and warranty made
in this Section 2.3.1 does not apply to statements made or statements omitted in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by the Representative expressly for use
in the Registration Statement, the Statutory Prospectus or Prospectus or any
amendment thereof or supplement thereto.
2.3.2 Disclosure of Agreements. The agreements and documents
described in the Registration Statement, the Statutory Prospectus 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, the Statutory Prospectus 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 Statutory
Prospectus or the Prospectus, or (ii) is material to the Company's business, has
been duly and validly executed by the Company, is in full force and effect and
is enforceable against the Company and, to the Company's knowledge, the other
parties thereto, in accordance with its terms, except (x) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
5
2.3.3 Prior Securities Transactions. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.3.4 Regulations. The disclosures in the Registration
Statement, the Statutory Prospectus and Prospectus concerning the effects of
federal, state and local regulation on this Offering and 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, the Statutory
Prospectus and the Prospectus, except as otherwise specifically stated therein:
(i) there has been no material adverse change in the condition, financial or
otherwise, or business prospects of the Company; (ii) there have been no
material transactions or agreements entered into by the Company other than as
contemplated pursuant to this Agreement; and (iii) no member of the Company's
management has resigned from any position with the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement,
the Statutory Prospectus and the Prospectus, except as otherwise specifically
stated therein or in this Agreement, the Company has not: (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money; or (ii) declared or paid any dividend or made any other
distribution on or in respect to its capital stock.
2.5 Independent Accountants. To the knowledge of the Company, Castaing,
Hussey & Lolan, LLC ("CASTAING"), whose report is filed with the Commission as
part of the Registration Statement, are registered independent accountants as
required by the Act and the Regulations. Castaing has not, during the periods
covered by the financial statements included in the Prospectus, provided to the
Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.
2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules, included in the Registration Statement, the
Statutory Prospectus and Prospectus fairly present the financial position,
results of operations and cash flows of the Company at the dates and for the
periods to which they apply; such financial statements comply with the
applicable accounting requirements of the Act and the Regulations; such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved; and
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein. The Registration Statement
discloses all material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company with
unconsolidated entities or other persons, if any, that may have a material
current or future effect on the Company's financial condition, changes in
financial condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenues or expenses.
2.7 Authorized Capital; Options, Etc. The Company had at the date or
dates indicated in the Registration Statement, the Statutory Prospectus and the
Prospectus duly authorized, issued and outstanding capitalization as set forth
in the Registration Statement, the Statutory Prospectus and the Prospectus.
Based on the assumptions stated in the Registration Statement, the Statutory
Prospectus 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, the Statutory Prospectus
6
and the Prospectus, on the Effective Date and on the Closing Date, there will be
no options, warrants, or other rights to purchase or otherwise acquire any
authorized, but unissued shares of Common Stock of the Company or any security
convertible into shares of Common Stock of the Company, or any contracts or
commitments to issue or sell shares of Common Stock or any such options,
warrants, rights or convertible securities.
2.8 Valid Issuance of Securities, Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The authorized Common Stock conforms
to all statements relating thereto contained in the Registration Statement, the
Statutory Prospectus and the Prospectus. The offers and sales of the outstanding
Common Stock were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky laws or, based in part on the
representations and warranties of the purchasers of such shares of Common Stock,
exempt from such registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement, the Statutory
Prospectus and the Prospectus. 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, Representative's Warrants and
Warrants are enforceable against the Company in accordance with their respective
terms, except: (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.9 Registration Rights of Third Parties. Except as set forth in the
Registration Statement, the Statutory Prospectus and the Prospectus, no holders
of any securities of the Company or any rights exercisable for or convertible or
exchangeable into securities of the Company have the right to require the
Company to register any such securities of the Company under the Act or to
include any such securities in a registration statement to be filed by the
Company.
2.10 Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.21 hereof), the Trust Agreement, the
Services Agreement (as defined in Section 3.7.2 hereof), the Escrow Agreement
(as defined in Section 2.22.2 hereof) and the Warrant Placement Agreement (as
defined in Section 2.22.3 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
7
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws; and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement, the Representative's Purchase
Option, the Trust Agreement, the Service Agreement, the Escrow Agreement and the
Warrant Placement Agreement, and the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms hereof and thereof do not and will not, with or without the
giving of notice or the lapse of time or both: (i) result in a breach of, or
conflict with any of the terms and provisions of, or constitute a default under,
or result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any agreement or instrument to which the Company is a party except
pursuant to the Trust Agreement referred to in Section 2.23 hereof; (ii) result
in any violation of the provisions of the Certificate of Incorporation or the
By-Laws of the Company; or (iii) violate any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business.
2.12 No Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or By-Laws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
businesses.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies that it needs as of the date hereof to conduct
its business purpose as described in the Statutory Prospectus and the
Prospectus.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities and the consummation of the transactions and agreements contemplated
by this Agreement, the Warrant Agreement, the Representative's Purchase Option,
the Trust Agreement, the Services Agreement and the Escrow Agreement and as
contemplated by the Statutory Prospectus and the Prospectus, except with respect
to applicable federal and state securities laws.
2.14 D&O Questionnaires. To the best of the Company's knowledge, all
information contained in the questionnaires (the "QUESTIONNAIRES") completed by
each of the Company's stockholders and directors 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 2.22.1) is true and
correct and
8
the Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by each Initial
Stockholder and director to become inaccurate and incorrect.
2.15 Litigation; Governmental Proceedings. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the best of the Company's knowledge, threatened
against, or involving the Company or, to the best of the Company's knowledge,
any Initial Stockholder, which has not been disclosed in the Registration
Statement, the Statutory Prospectus and the Prospectus or the Questionnaires.
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the Company.
2.17 Stop Orders. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or any part
thereof.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Finder's Fees. Except as described in the Prospectus,
there are no claims, payments, arrangements, agreements or understandings
relating to the payment of a finder's, consulting or origination fee by the
Company or any Initial Stockholder with respect to the sale of the Securities
hereunder or any other arrangements, agreements or understandings of the Company
or, to the best of the Company's knowledge, any Initial Stockholder that may
affect the Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. (the "NASD").
2.18.2 Payments Within Twelve Months. 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 FBW.
2.18.3 Use of Proceeds. None of the net proceeds of the
Offering will be paid by the Company to any participating NASD member or its
affiliates, except as specifically authorized herein and except as may be paid
in connection with a Business Combination as contemplated by the Statutory
Prospectus and the Prospectus.
2.18.4 Initial Stockholders' NASD Affiliation. Based on
Questionnaires distributed to such persons, no officer, director or any
beneficial owner of the Company's unregistered securities has any direct or
indirect affiliation or association with any NASD member. The Company will
advise the Representative and its counsel if it learns that any officer,
director or owner of at least 5% of the Company's outstanding Common Stock is or
becomes and affiliate or associated person of an NASD member participating in
the Offering.
2.19 Foreign Corrupt Practices Act. Neither the Company nor any of the
Initial Stockholders or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any
9
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed transaction)
that (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding; (ii) if not given in the
past, might have had a material adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus; or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
2.20. Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
2.21 Warrant Agreement. The Company has entered into a warrant
agreement with respect to the Warrants and the Representative's Warrants with
Continental Stock Transfer & Trust Company substantially in the form filed as an
exhibit to the Registration Statement (the "WARRANT AGREEMENT").
2.22 Agreements With Initial Stockholders.
2.22.1 Insider Letters. The Company has caused to be duly
executed legally binding and enforceable agreements (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or noncompete provision may be limited under
the federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought) annexed as Exhibits 10.[ ] through 10.[ ] to
the Registration Statement (the "INSIDER LETTER"), pursuant to which each of the
Initial Stockholders of the Company agree to certain matters including, but not
limited to, certain matters described as being agreed to by them under the
"Proposed Business" Section of the Prospectus.
2.22.2 Escrow Agreement. The Company has caused the Initial
Stockholders to enter into an escrow agreement (the "ESCROW AGREEMENT") with
Continental Stock Transfer & Trust Company (the "ESCROW AGENT") substantially in
the form of Exhibit 10.3 to the Registration Statement, whereby the Common Stock
owned by each of the Initial Stockholders, other than shares of Common Stock
included in Units purchased pursuant to the Warrant Placement Agreement, will be
held in escrow by the Escrow Agent, until the date that is six (6) months after
the date a Business Combination is consummated. During such escrow period, the
Initial Stockholders shall be prohibited from selling or otherwise transferring
such shares (except to spouses and children of Initial Stockholders and trusts
established for their benefit and as otherwise set forth in the Escrow
Agreement), but will retain the right to vote such shares. To the Company's
knowledge, the Escrow Agreement is enforceable against each of the Initial
Stockholders and will not, with or without the giving of notice or the lapse of
time or both, result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, any agreement or instrument to
which any of the Initial Stockholders is a party. The Escrow Agreement shall not
be amended, modified or otherwise changed without the prior written consent of
FBW.
2.22.3 Unit Placement Agreement. The Initial Stockholders and
the Company have entered to a Warrant Placement Agreement, substantially in the
form of Exhibit 10.7 to the Registration Statement, pursuant to which the
Initial Stockholders agreed to purchase 3,076,923 Warrants at a price of $0.65
per Warrant ($2,000,000 in the aggregate) (the "Warrant Placement Agreement").
The Warrants issued and sold pursuant to the Warrant Placement Agreement are
identical in all respects to the Warrants
10
offered in the Offering. The issuance and sale of the Warrants pursuant to the
Warrant Placement Agreement are exempt from registration pursuant to Section
4(2) of the Act.
2.23 Investment Management Trust Agreement. The Company has entered
into the Trust Agreement with respect to certain proceeds of the Offering
substantially in the form of Exhibit 10.[ ] to the Registration Statement, which
Trust Agreement shall not be amended, modified or otherwise changed without the
prior written consent of FBW.
2.24 Covenants Not to Compete. No Initial Stockholder, employee,
officer or director of the Company is subject to any non-competition or
non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be an Initial Stockholder, employee, officer
and/or director of the Company.
2.25 Investments. No more than 45% of the "value" (as defined in
Section 2(a)(41) of the Investment Company Act of 1940 ("Investment Company
Act")) of the Company's total assets consist of, and no more than 45% of the
Company's net income after taxes is derived from, securities other than
"Government securities" (as defined in Section 2(a)(16) of the Investment
Company Act).
2.26 Subsidiaries. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.27 Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any other person required to
be described in the Prospectus that have not been described as required.
2.28 Rule 419. Upon delivery and payment for the Firm Units on the
Closing Date, the Company will not be subject to Rule 419 under the Act and none
of the Company's outstanding securities will be deemed to be a "penny stock" as
defined in Rule 3a-51-1 under the Exchange Act.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Public Securities in accordance with the provisions
hereof and the Prospectus. If at any time when a Prospectus relating to the
Public Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
counsel for the 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.
11
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Representative) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years
from the Effective Date, or 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 Securities under the provisions of the Exchange Act. For a
period of five years from the Effective Date, or such earlier time upon which
the Company is required to be liquidated, the Company will not deregister the
Securities under the Exchange Act without the prior written consent of FBW.
3.3 Blue Sky Filing. Where required, the Company will endeavor in good
faith, in cooperation with the Representative, at or prior to the time the
Registration Statement becomes effective, to qualify the Public Securities for
offering and sale under the securities laws of such jurisdictions as the
Representative may reasonably designate, provided that no such qualification
shall be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representative
agrees that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction.
3.4 Delivery to Underwriters of Prospectuses. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
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. The Company shall
not file any amendment of the Registration Statement or supplement to the
Prospectus or any document incorporated by reference in the Registration
Statement unless the Company has furnished the Representative with a copy for
review prior to filing and shall not file any such proposed amendment or
supplement to which the Representative reasonable objects. 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.
12
3.6 Review of Financial Statements. For a period of five years from the
Effective Date, or until such earlier upon which the Company is required to be
liquidated, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the Company's
financial statements for each of the first three fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
Form 10-Q quarterly report and the mailing of quarterly financial information to
stockholders.
3.7 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 Chapman Printing Co. (the "PROVIDER"), pursuant to
which the Provider will make available to the Company certain administrative,
technology and secretarial services, as well as office space, including a
conference room, in Huntington, West Virginia, as the Company may require time
to time, for an amount not to exceed $5,000 per month.
3.7.3 Affiliate Compensation. Except as provided in Section
3.7.2, the Company shall not pay any Initial Stockholder or any of their
affiliates any fees or compensation from the Company, for services rendered to
the Company prior to, or in connection with, the consummation of a Business
Combination; provided that the Initial Stockholders shall be entitled to
reimbursement from the Company for their reasonable out-of-pocket expenses
incurred in connection with seeking and consummating a Business Combination.
3.8 AMEX Listing. The Company applied to have its Units, the underlying
shares of Common Stock, warrants and the shares of Common Stock issuable upon
conversion of the warrants, listed on the American Stock Exchange ("AMEX") and
such Units, shares and warrants have been approved for listing subject to
official notice. The Company will use its best efforts to effect and maintain
the listing of the Units, Common Stock and Warrants on the AMEX.
3.9 Sarbanes-Oxley Act and AMEX. The Company has taken all necessary
actions to ensure, that, upon and at all times after the effectiveness of the
Registration Statement, it will be in compliance with (i) all applicable
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder or implementing the provision thereof ("Sarbanes-Oxley
Act") that are then in effect and is actively taking steps to ensure that it
will be in compliance with other applicable provisions of the Sarbanes-Oxley Act
not currently in effect upon the effectiveness of such provisions and (ii) the
requirements of the American Stock Exchange's AMEX Company Guide.
3.10 Standard & Poor's and 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 (i) will apply to be included in Standard & Poor's Daily News and
Corporation Records Corporate Descriptions for a period of five years from the
consummation of a Business Combination; (ii) 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 (iii) shall provide to the Representative, at the Company's
expense, such reports published by the NASD or the Pink Sheets, LLC relating to
price trading of the Public Securities, as the Representative shall reasonably
request.
13
3.11 Reports to the Representative.
3.11.1 Periodic Reports, Etc. For a period of five years from
the Effective Date or until such earlier time upon which the Company is required
to be liquidated, the Company will furnish to the Representative (Attn: Richard
K. Prins) 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 such registration statements, financial statements
and periodic and special reports as the Company shall be required to file with
the Commission and from time to time furnishes generally to holders of any class
of its securities; and (ii) such additional documents and information with
respect to the Company and the affairs of any future subsidiaries of the Company
as the Representative may from time to time reasonably request.
3.11.2 Intentionally Omitted.
3.11.3 Intentionally Omitted.
3.11.4 Intentionally Omitted.
3.12 Disqualification of Form S-1. For a period equal to five 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 and the
shares issuable upon exercise thereof under the Act.
3.13 Payment of Expenses.
3.13.1 General Expenses Related to the Offering. The Company
hereby agrees to pay on each of the Closing Date and the Option Closing Date, if
any, to the extent not paid at Closing Date, all expenses incident to the
performance of the obligations of the Company under this Agreement including,
but not limited to: (i) the preparation, printing, filing and mailing (including
the payment of postage with respect to such mailing) of the Registration
Statement, the Preliminary and final Prospectuses and the printing and mailing
of this Agreement and related documents, including the cost of all copies
thereof and any amendments thereof or supplements thereto supplied to the
Underwriters in quantities as may be required by the Underwriters; (ii) the
printing, engraving, issuance and delivery of the Units, the shares of Common
Stock and the Warrants included in the Units and the Representative's Purchase
Option, including any transfer or other taxes payable thereon; (iii) the
qualification of the Public Securities under state or foreign securities or Blue
Sky laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," and all amendments and supplements thereto, fees and disbursements
of Venable for such purpose; (iv) filing fees, costs and expenses (including
fees and disbursements for the Representative's counsel); (v) fees and
disbursements of the transfer and warrant agent; (vi) the Company's expenses
associated with "due diligence" meetings arranged by the Representative; and
(vii) all other costs and expenses customarily borne by an issuer incident to
the performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section 3.13.1. The Company also agrees that,
if requested by the Representative, it will engage and pay up to $5,000 for an
investigative search firm of the Representative's choice to conduct an
investigation of the principals of the Company as shall be mutually selected by
the Representative and the Company. 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 is not consummated for
any reason whatsoever, except as a result of the Representative's breach or
default with respect to any of its
14
obligations described in this Agreement, then the Company shall reimburse the
Underwriters in full for their out of pocket expenses actually incurred by the
Underwriters, including, without limitation, its legal fees and disbursements
and "road show" and due diligence expenses and the Representative shall retain
such part of the nonaccountable expense allowance (described below in Section
3.13.2) previously paid, if any, as shall equal its actual out of pocket
accountable expenses and refund the balance. If the amount previously paid is
insufficient to cover such actual out of pocket accountable expenses, the
Company shall remain liable for and promptly pay any other actual out of pocket
accountable expenses.
3.13.2 Intentionally omitted.
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 FBW prior to
the consummation of the Business Combination: (i) complete details of all
services and copies of agreements governing such services; and (ii)
justification as to why the person or entity providing the merger and
acquisition services should not be considered an "underwriter and related
person" with respect to the Company's initial public offering, as such term is
defined in Rule 2710 of the NASD's Conduct Rules. The Company also agrees that
proper disclosure of such arrangement or potential arrangement will be made in
the proxy statement which the Company will file for purposes of soliciting
stockholder approval for the Business Combination.
3.17 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders (without the consent of FBW) 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 Castaing or other registered independent public accountants
reasonably acceptable to FBW.
15
3.20 Form 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date (the "AUDITED FINANCIAL STATEMENTS") reflecting the
receipt by the Company of the proceeds of the initial public offering. As soon
as the Audited Financial Statements become available, the Company shall
immediately file a Current Report on Form 8-K with the Commission, which Report
shall contain the Company's Audited Financial Statements.
3.21 NASD. The Company shall advise the NASD if it is aware that any 5%
or greater stockholder of the Company becomes an affiliate or associated person
of an NASD member participating in the distribution of the Company's Public
Securities.
3.22 Corporate Proceedings. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
3.23 Investment Company. The Company shall cause the proceeds of the
Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Statutory Prospectus and the Prospectus. The Company will
otherwise conduct its business in a manner so that it will not become subject to
the Investment Company Act. Furthermore, once the Company consummates a Business
Combination, it will be engaged in a business other than that of investing,
reinvesting, owning, holding or trading securities.
3.24 Business Combination Announcement. Within five 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 the Representative announcing the consummation of
the Business Combination and indicating that the representative was the managing
underwriter in the Offering. The Company shall supply the Representative with a
draft of the Business Combination Announcement and provide the Representative
with a reasonable opportunity to comment thereon. The Company will not place the
Business Combination Announcement without the final approval of the
representative, which approval will not be unreasonably withheld.
3.25 Intentionally omitted.
3.26 Deferred Non-accountable Expenses. Upon the consummation of the
initial Business Combination, the Company will pay FBW a non-accountable expense
allowance of Two Percent (2%) of the gross offering proceeds other than gross
offering proceeds from any exercise of the Over-allotment Option. This
non-accountable expense allowance shall be paid from the proceeds deposited in
the Trust Fund.
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:
16
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.,
Baltimore, Maryland time, on the date of this Agreement or such later date and
time as shall be consented to in writing by you, and, at each of the Closing
Date and the Option Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for the
purpose shall have been instituted or shall be pending or contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with by the Company to the reasonable
satisfaction of FBW.
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 Blue Sky Stop Orders. No order suspending the sale of
the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing Date or the Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2 Company Counsel Matters.
4.2.1 Opinion of Counsel. On the Closing Date, the
Representative shall have received the favorable opinion of Luse Gorman Pomerenk
& Schick, P.C. ("LUSE"), counsel to the Company, dated as of the Closing 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. The Company is duly qualified 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,
except where the failure to qualify would not have a material adverse effect on
the Company.
(ii) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any stockholder of the Company arising by
operation of law or under the Certificate of Incorporation or Bylaws of the
Company. The authorized and outstanding capital stock of the Company is as set
forth in the Prospectus.
(iii) The Securities have been duly authorized and,
when issued and paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders. The Securities are not and will not be subject to
the preemptive rights of any holders of any security of the Company arising by
operation of law or under the Certificate of Incorporation or Bylaws of the
Company. 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 federal and state securities
laws; and
17
(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 Common Stock comply in all respects with the
requirements of Delaware law.
(iv) This Agreement, the Warrant Agreement, the
Services Agreement, the Trust Agreement, the Escrow Agreement and the Warrant
Placement 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 federal and state securities laws; and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(v) The execution, delivery and performance of this
Agreement, the Warrant Agreement, the Representative's Purchase Option, the
Escrow Agreement, the Trust Agreement, the Services Agreement, the Warrant
Placement Agreement, the issuance and sale of the Securities, the consummation
of the transactions contemplated hereby and thereby, and compliance by the
Company with the terms and provisions hereof and thereof, do not and will not,
with or without the giving of notice or the lapse of time, or both, (a) to such
counsel's knowledge, conflict with, or result in a breach of, any of the terms
or provisions of, or constitute a default under, or result in the creation or
modification of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company pursuant to the terms of, any mortgage,
deed of trust, note, indenture, loan, contract, commitment or other agreement or
instrument filed as an exhibit to the Registration Statement, (b) result in any
violation of the provisions of the Certificate of Incorporation or the By-Laws
of the Company, or (c) to such counsel's knowledge, violate any statute or any
judgment, order or decree, rule or regulation applicable to the Company of any
court, domestic or foreign, or of any federal, state or other regulatory
authority or other governmental body having jurisdiction over the Company, its
properties or assets.
(vi) The Registration Statement, the Statutory
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. The statements set forth in the
Registration Statement and the Prospectus under the captions "Risk Factors,"
"Comparison to offerings of blank check companies," and "Description of
Securities," insofar as they purport to describe the provisions of laws, are
accurate and fairly summarize such provisions. Upon delivery and payment for the
Firm Units on the Closing Date, the Company will not be subject to Rule 419
under the Act and none of the Company's outstanding securities will be deemed to
be a "penny stock" as defined in Rule 3a-51-1 under the Exchange Act.
(vii) The Registration Statement is effective under
the Act. To such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the Act or
applicable state securities laws.
18
(viii) To such counsel's knowledge, there is no
action, suit or proceeding before or by any court of governmental agency or
body, domestic or foreign, now pending, or threatened in writing against the
Company.
4.2.2 The Underwriters shall have received on the Closing Date
a letter from Luse dated as of the Closing Date that does not set forth opinions
of law but rather factual disclosures to the effect that nothing has come to the
attention of such counsel that causes such counsel to believe that (i) the
Registration Statement (except for the financial statements and financial
schedules and other financial data included therein, as to which such counsel
need not express any belief) at the time the Registration Statement became
effective contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Statutory Prospectus (except for the financial
statements and financial schedules and other financial data included therein, as
to which such counsel need not express any belief) as of the Time of Sale
contained any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (iii) the
Prospectus (except for the financial statements and financial schedules and
other financial data included therein, as to which such counsel need not express
any belief) as of its date contained an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
4.2.3 Option Closing Date Opinion of Counsel. On the Option
Closing Date, if any, the Representative shall have received the favorable
opinion of Luse, dated the Option Closing Date, addressed to the Representative
and in form and substance reasonably satisfactory to the Representative,
confirming as of the Option Closing Date, the statements made by Luse in its
opinion delivered on the Closing Date.
4.2.4 Reliance. In rendering such opinion, such counsel may
rely: (i) as to matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to the Representative) of other counsel reasonably acceptable to the
Representative, familiar with the applicable laws; and (ii) as to matters of
fact, to the extent they deem proper, on certificates or other written
statements of officers of the Company and officers of departments of various
jurisdiction having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to the Underwriters' counsel if requested. The
opinion of counsel for the Company and any opinion relied upon by such counsel
for the Company shall include a statement to the effect that it may be relied
upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Representative and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you from Castaing
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 registered independent
accountants with respect to the Company within the meaning of the Act and the
applicable Regulations and that they have not, during the periods covered by the
financial statements included in the Prospectus, provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange Act;
19
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement, the Statutory Prospectus and
the 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, the Statutory Prospectus and
the Prospectus 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 April 4, 2006 balance sheet
included in the Registration Statement, the Statutory Prospectus and the
Prospectus, other than as set forth in or contemplated by the Registration
Statement, the Statutory Prospectus and the Prospectus, or, if there was any
decrease, setting forth the amount of such decrease, and (c) during the period
from April 4, 2006 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, the
Statutory Prospectus and the Prospectus, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Registration
Statement, the Statutory Prospectus and 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; and
(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.
20
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. Such certificate 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.
4.4.2 Secretary's Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary or Assistant Secretary of the
Company, dated the Closing Date or the Option Date, as the case may be,
respectively, certifying: (i) that the By-Laws and Certificate of Incorporation
of the Company are true and complete, have not been modified and are in full
force and effect; (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified; (iii) all correspondence between the Company or its representative and
the Commission; (iv) as to the incumbency of the officers of the Company. The
documents referred to in such certificate shall be attached to such certificate;
(v) no action is pending in contemplation of merger, consolidation or
liquidation, dissolution or reorganization of the Company or for the sale, lease
or other transfer of all or substantially all of its assets (vi) the minute
books and records of the Company made available to Underwriters Counsel are its
original (or true copies thereof) and complete minute books and records; (vii)
attached is a true, correct and complete specimen of a certificate of the Units,
shares of Common Stock and warrants of the Company; (viii) each officer or
director who signed the registration statement was duly elected or appointed;
and (ix) attached are true, correct and complete copies of all written
communications between the Company and its representatives and the AMEX.
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, the Statutory Prospectus and the 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, the Statutory Prospectus and
the 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, the Statutory Prospectus 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.
21
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,
the Warrant Placement Agreement, and all of the Insider Letters.
4.6.2 Closing Date Deliveries. On the Closing Date, the
Company shall have delivered to the Representative executed copies of the
Representative's Purchase Option.
4.7 Opinion of Counsel for the Underwriters. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Venable LLP and you shall have received from such counsel a favorable
opinion, dated the Closing Date and the Option Closing Date, if any, with
respect to such of these proceedings as you may reasonably require. On or prior
to the Closing Date and the Option Closing Date, as the case may be, counsel for
the Underwriters shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 4.7, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
4.8 Listing on the American Stock Exchange. On the Closing Date, the
Public Securities shall have been approved for listing on the AMEX.
4.9 Completion of the Private Placement. On the Closing Date, the
private placement contemplated under Section 2.22.3 shall have been completed
and the proceeds of such placement in the aggregate sum of $2,000,000 shall have
been transferred to the Trust Fund.
5. Indemnification.
5.1 Indemnification of Underwriters.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, and each
dealer selected by you that participates in the offer and sale of the Securities
(each, a "Selected Dealer"), and each of their respective directors, officers
and employees and each person, if any, who controls any such Underwriter
("CONTROLLING PERSON") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
statute or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in (i) any Preliminary Prospectus, the Registration
Statement, the Statutory Prospectus or the Prospectus (as from time to time each
may be amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the
Representative's Purchase Option; or (iii) any application or other document or
written communication (in this Section 5 collectively called "APPLICATION")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance
22
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, the Statutory
Prospectus or the Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. With respect to any untrue statement or
omission or alleged untrue statement or omission made in the Preliminary
Prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of any Underwriter to the extent that any loss, liability, claim,
damage or expense of such Underwriter results from the fact that a copy of the
Statutory Prospectus was not given or sent by the person asserting such loss,
liability, claim or damage prior to the Time of Sale or if 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 Statutory Prospectus and Prospectus,
unless such failure to deliver the Statutory Prospectus and 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, the
Statutory Prospectus or the Prospectus.
5.1.2 Procedure. If any action is brought against an
Underwriter, a Selected Dealer or a controlling person in respect of which
indemnity may be sought against the Company pursuant to Section 5.1.1, such
Underwriter or Selected Dealer, as the case may be, shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the reasonable approval of such Underwriter or Selected Dealer) and
payment of actual expenses. Such Underwriter, Selected Dealer or controlling
person shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Underwriter, Selected Dealer or controlling person unless: (i) the employment of
such counsel at the expense of the Company shall have been authorized in writing
by the Company in connection with the defense of such action; (ii) the Company
shall not have employed counsel to have charge of the defense of such action; or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the reasonable fees and
expenses of not more than one additional firm of attorneys selected by the
Underwriter, Selected Dealer and/or controlling person shall be borne by the
Company. Notwithstanding anything to the contrary contained herein, if the
Underwriter, Selected Dealer or controlling person shall assume the defense of
such action as provided above, the Company shall have the right to approve the
terms of any settlement of such action which approval shall not be unreasonably
withheld.
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, the Statutory
Prospectus 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, the Statutory Prospectus or Prospectus or any amendment
or supplement thereto or in any such application. In case any action shall be
brought against the Company or any other person so indemnified based on any
Preliminary Prospectus, the Registration Statement, the Statutory Prospectus
23
or Prospectus or any amendment or supplement thereto or any application, and in
respect of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the several Underwriters by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, in such proportions as is appropriate to reflect (a) the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party on the other, from the Offering; or (b) if the
allocation provided by the foregoing clause (a) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other, in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefit received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the Offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Underwriters; 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 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
24
contribution under the Act, the Exchange Act or otherwise available. The
Underwriters' obligations to contribute pursuant to this Section 5.3 are several
and not joint.
6. Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Units or Option Units. If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units, if the over-allotment option is
exercised, hereunder, and if the number of the Firm Units or Option Units with
respect to which such default relates does not exceed in the aggregate 10% of
the number of Firm Units or Option Units that all Underwriters have agreed to
purchase hereunder, then such Firm Units or Option Units to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Units or Option Units. In the event
that the default addressed in Section 6.1 above relates to more than 10% of the
Firm Units or Option Units, you may in your discretion arrange for yourself or
for another party or parties to purchase such Firm Units or Option Units to
which such default relates on the terms contained herein. If within one business
day after such default relating to more than 10% of the Firm Units or Option
Units you do not arrange for the purchase of such Firm Units or Option Units,
then the Company shall be entitled to a further period of one business day
within which to procure another party or parties satisfactory to you to purchase
said Firm Units or Option Units on such terms. In the event that neither you nor
the Company arrange for the purchase of the Firm Units or Option Units to which
a default relates as provided in this Section 6, this Agreement will
automatically terminate without liability on the part of the Company (except as
provided in Sections 3.13 and 5 hereof) or the several Underwriters (except as
provided in Section 5 hereof); provided, however, that if such default occurs
with respect to the Option Units, this Agreement will not terminate as to the
Firm Units; and provided further that nothing herein shall relieve a defaulting
Underwriter of its liability, if any, to the other several Underwriters and to
the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm Units or
Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7. Right to Appoint Representative. For a period of two (2) years after the
Effective Date, upon notice from FBW to the Company, FBW 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 FBW 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 FBW, 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 FBW written notice of each
such meeting and to provide FBW 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 FBW for its reasonable out-of-pocket
expenses incurred in
25
connection with its attendance at the meeting, including but not limited to,
food, lodging and transportation.
8. Additional Covenants.
8.1 Intentionally Omitted.
8.2 Additional Shares or Options. The Company hereby agrees that until
the Company consummates a Business Combination, it shall not issue any shares of
Common Stock or any options or other securities convertible into Common Stock,
or any shares of Preferred Stock which participate in any manner in the Trust
Fund or which vote as a class with the Common Stock on a Business Combination.
8.3 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 acquire ("TARGET BUSINESS") or obtain the services of any
vendor unless and until the Target Business or the vendor executes a waiver
letter in the form attached hereto as EXHIBIT A and B, respectively.
Furthermore, each officer and director of the Company shall execute a waiver
letter in the form attached hereto as EXHIBIT C.
8.4 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 FBW and will not allow any
amendments to, or waivers of, such Insider Letters without the prior written
consent of FBW.
8.5 Certificate of Incorporation and By-Laws. The Company shall not
take any action or omit to take any action that would cause the Company to be in
breach or violation of its Certificate of Incorporation or By-Laws. Prior to the
consummation of a Business Combination, the Company will not amend its
Certificate of Incorporation without the prior written consent of FBW.
8.6 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.
8.7 Intentionally Omitted.
8.8 Acquisition/Liquidation Procedure. The Company agrees: (i) that,
prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("BUSINESS
COMBINATION VOTE") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law; and (ii)
that, in the event that the Company does not effect a Business Combination
within 18 months from the consummation of this Offering (subject to extension
for an additional six-month period, as described in the Prospectus), the Company
will be liquidated and will distribute to all holders of IPO Shares (defined
below) an aggregate sum equal to the Company's "Liquidation Value." The
Company's "Liquidation Value" shall mean the Company's book value, as determined
by the Company and audited by Castaing or other certified independent accountant
acceptable to FBW. In no event, however, will the Company's Liquidation Value be
less than the Trust Fund, inclusive of any net interest income thereon. Only
holders of IPO Shares shall be entitled to receive liquidating distributions and
the Company shall pay no liquidating distributions with respect to any other
shares of capital stock of the Company. With respect to the Business Combination
Vote, the Company shall cause all of the Initial Stockholders to vote the shares
26
of Common Stock owned by them immediately prior to this Offering, as well as any
shares of Common Stock acquired in connection with or following this Offering,
in accordance with the vote of the holders of a majority of the IPO Shares
present, in person or by proxy, at a meeting of the Company's stockholders
called for the Business Combination Vote. 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. If holders of less than 20% in interest of the
Company's IPO Shares vote against such approval of a Business Combination, the
Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will convert shares, based
upon the Conversion Price, from those holders of IPO Shares who affirmatively
requested such conversion and who voted against the Business Combination. If
holders of 20% or more in interest of the IPO Shares vote against approval of
any potential Business Combination, the Company will not proceed with such
Business Combination and will not convert such shares.
8.9 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 "penny stock" as defined in Rule 3a-51-1 under the Exchange
Act during such period.
8.10 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, such 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 such Initial Stockholders might have or new
fiduciary obligations related to or affiliated with entities to whom such
Initial Stockholders have pre-existing fiduciary obligations including, but not
limited to, fiduciary obligations to next generation, follow-on or successor
entities to any entities to which such Initial Stockholders have pre-existing
obligations or as otherwise set forth in the Registration Statement.
8.11 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 (excluding the non
accountable expense allowance). The fair market value of such business must be
determined by the Board of Directors of the Company based upon standards
generally accepted by the financial community, such as actual and potential
sales, earnings and cash flow and book value. If the Board of Directors of the
Company is not able to independently determine that the target business has a
fair market value of at least 80% of the Company's fair market value at the time
of such acquisition (excluding the non-accountable expense allowance), 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.
9. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and
27
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. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will in
the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the AMEX,
Nasdaq 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 any
exchange, Nasdaq or the NASD OTC Bulletin Board, or by order of the Commission
or any other government authority having jurisdiction; or (iii) if a banking
moratorium has been declared by a New York State or federal authority; or (iv)
if a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market; or (v) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Units; or (vi) if any of the
Company's representations, warranties or covenants hereunder are breached; or
(vii) if the United States shall have become involved in a new war or an
increase in major hostilities; or (viii) if the Representative shall have become
aware after the date hereof of such a material adverse change in the conditions
or prospects of the Company, or such adverse material change in general market
conditions, including, without limitation, as a result of terrorist activities
after the date hereof, as in the Representative's judgment would make it
impracticable to proceed with the offering, sale and/or delivery of the Units or
to enforce contracts made by the Underwriters for the sale of the Securities.
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 3.13.1 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 or
telecopied and confirmed and shall be deemed given when so delivered or
telecopied and confirmed or if mailed, two days after such mailing
28
If to the Representative:
Ferris, Baker Watts, Incorporated
100 Light Street
Baltimore, Maryland 21202
Facsimile: (410) 659-4632
Attn: Richard K. Prins
Copy to:
Venable LLP
8010 Towers Crescent Drive
Suite 300
Vienna, VA 22182
Facsimile: (703) 821-8949
Attn: Elizabeth R. Hughes, Esq.
If to the Company:
Energy Services Acquisition Corp.
2450 First Avenue
Huntington, West Virginia 25703
Attn: Marshall T. Reynolds
Copy to:
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
Attn: Alan Schick, Esq.
11.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
11.3 Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
11.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon the Representative, the Underwriters, the Company
and the Selected Dealers, controlling persons, directors and officers referred
to in Section 5 hereof, and their respective successors, legal representatives
and assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
11.6 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maryland, without
giving effect to conflict of laws. The
29
Company hereby agrees that any action, proceeding or claim against it arising
out of, relating in any way to this Agreement shall be brought and enforced in
the Maryland Circuit Court, for the City of Baltimore or in the United States
District Court for Baltimore, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
11 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The Company agrees
that the prevailing party(ies) in any such action shall be entitled to recover
from the other party(ies) all of its reasonable attorneys' fees and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
11.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
11.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
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,
ENERGY SERVICES ACQUISITION CORP.
By:
----------------------------------------
Name: Marshall T. Reynolds
Title: Chairman and Chief Executive Officer
Accepted on the date first above written.
Confirmed:
FERRIS, BAKER WATTS, INCORPORATED
Acting on behalf of itself and as a representative
of the several Underwriters
named in Schedule I annexed hereto.
By:
----------------------------------------------
Name:
Title:
31
SCHEDULE I
ENERGY SERVICES ACQUISITION CORP.
10,000,000 UNITS
Number of Firm Units
Underwriter to be Purchased
----------- --------------------
Ferris, Baker Watts, Incorporated 10,000,000
----------------
Total 10,000,000
================
EXHIBIT A
Energy Services Acquisition Corp.
Attn: Marshall T. Reynolds
2450 First Avenue
Huntington, West Virginia 25703
Gentlemen:
Reference is made to the Final Prospectus of Energy Services
Acquisition Corp. ("ESAC"), dated __________, 2006 (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 ESAC has
established the Trust Fund, initially in an amount of $__________ for the
benefit of the Public Stockholders and that ESAC 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 ESAC or (ii) to ESAC and Ferris, Baker Watts,
Incorporated after ESAC consummates a Business Combination.
For and in consideration of ESAC 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 ESAC 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
Energy Services Acquisition Corp.
Attn: Marshall T. Reynolds
2450 First Avenue
Huntington, West Virginia 25703
Gentlemen:
Reference is made to the Final Prospectus of Energy Services
Acquisition Corp. ("ESAC"), dated ___________, 2006 (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 ESAC has
established the Trust Fund, initially in an amount of $__________ for the
benefit of the Public Stockholders and that ESAC 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 ESAC; or (ii) to ESAC and Ferris, Baker
Watts, Incorporated after ESAC consummates a Business Combination.
For and in consideration of ESAC 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 negotiations, contracts or agreements with ESAC and will
not seek recourse against the Trust Fund for any reason whatsoever.
---------------------------------------
Print Name of Lender
---------------------------------------
Authorized Signature of Lender
EXHIBIT C
Energy Services Acquisition Corp.
Attn: Marshall T. Reynolds
2450 First Avenue
Huntington, West Virginia 25703
Gentlemen:
The undersigned officer or director of Energy Services
Acquisition Corp. ("ESAC") hereby acknowledges that ESAC has established the
Trust Fund, initially in an amount of $___________ for the benefit of the Public
Stockholders and that ESAC 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 ESAC or (ii) to ESAC and Ferris, Baker Watts, Incorporated after
ESAC 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 negotiations, contracts or agreements with ESAC 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