Exhibit 10.1

 

UNDERWRITING AGREEMENT

 

between

 

FMG ACQUISITION CORP.

 

and

 

PALI CAPITAL, INC.

 

Dated: October 4, 2007

FMG ACQUISITION CORP.

 

UNDERWRITING AGREEMENT

 

New York, New York

October 4, 2007

Pali Capital, Inc.

650 Fifth Avenue, 6 ^th Floor

New York, New York 10019

 

As Representative of the

Several Underwriters named in Schedule I hereto

 

Re: Public Offering of Securities

 

Ladies and Gentlemen:

The undersigned, FMG Acquisition Corp., a Delaware corporation ("Company"), hereby confirms its agreement with Pali Capital, Inc. ("Pali Capital" and also referred to herein variously as "you," or the "Representative") and with the other Underwriters named on Schedule I hereto for which Pali Capital is acting as Representative (the Representative and the other Underwriters being collectively called the "Underwriters" or, individually, an "Underwriter") as follows:

1.   Purchase and Sale of Securities .

 

1.1   Firm Securities .

 

1.1.1   Purchase of Firm Units . On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell, severally and not jointly, to the several Underwriters, an aggregate of 4,500,000 units ("Firm Units") of the Company, at a purchase price (net of discounts and commissions) of $7.44 per Firm Unit. The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Units set forth opposite their respective names on Schedule I attached hereto and made a part hereof at a purchase price (net of discounts and commissions) of $7.44 per Firm Unit. The Firm Units are to be offered initially to the public ("Offering") at the offering price of $8.00 per Firm Unit. Each Firm Unit consists of one share of the Company's common stock, par value $.0001 per share ("Common Stock"), and one warrant ("Warrant"). The Common Stock and the Warrants included in the Firm Units will not be separately transferable until 90 days after the effective date ("Effective Date") of the Registration Statement (as defined in Section 2.1.1 hereof) unless the Representative informs the Company, in writing, of its decision to allow earlier separate trading based on its assessment of the relative strengths of the securities markets and small capitalization companies in general, and the trading pattern of, and demand for, the Company's securities in particular, but in no event will the Representative allow separate trading until (i) the Company has filed with the Securities and Exchange Commission a Current Report on Form 8-K that includes an audited balance sheet reflecting the Company's receipt of the proceeds of the Offering, including any proceeds the Company receives from the exercise of the Over-allotment Option (as defined in Section 1.2.1), if such option is exercised prior to the filing of the Form 8-K, (ii) the Company has filed with the Commission a Current Report on Form 8-K and issued a press release announcing when such separate trading will begin and (iii) the expiration of the Over-allotment Option or its exercise in full. Each Warrant entitles its holder to exercise it to purchase one share of Common Stock for $6.00 during the period commencing on the later of the consummation by the Company of its "Business Combination" or one year from the Effective Date of the Registration Statement and terminating on the four-year anniversary of the Effective Date. "Business Combination" shall mean any merger, capital stock exchange, asset acquisition, other contractual arrangement resulting in a business combination or other similar business combination consummated by the Company with an operating business (as described more fully in the Registration Statement (as defined in Section 2.1.1 below)).

 

1.1.2   Payment and Delivery . Delivery and payment for the Firm Units shall be made at 10:00 a.m., New York time, on the fourth Business Day (as defined below) following the effective date of the Registration Statement or at such earlier time as shall be agreed upon by the Representative and the Company at the offices of Kramer Levin Naftalis & Frankel LLP ("Kramer Levin") or at such other place as shall be agreed upon by the Representative and the Company. The closing of the public offering is referred to herein as the “Closing” and the hour and date of delivery and payment for the Firm Units are called “Closing Date.” Payment for the Firm Units shall be made on the Closing Date at the Representative's election by wire transfer in federal (same day) funds or by certified or bank cashier's check(s) in New York Clearing House funds, payable as follows: $35,640,000 of the proceeds received by the Company for the Firm Units and the Placement Warrants (as defined in Section 2.22.3 below), including $1,440,000 of the Deferred Fees (as defined in Section 1.1.3 below) shall be deposited (or with respect to the $1,250,000 of proceeds from the sale of the Placement Warrants shall have been deposited on or prior to the Closing Date) in the Trust Account established by the Company for the benefit of the public stockholders as described in the Registration Statement ("Trust Account") pursuant to the terms of an Investment Management Trust Agreement ("Trust Agreement") between the Company and Continental Stock Transfer & Trust Company ("CST") and the remaining proceeds shall be paid (subject to Section 3.12 hereof) 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 ("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. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

 

1.1.3   Deferral of a Portion of Underwriters' Discount . On the Closing Date and, if applicable, on the Option Closing Date (as defined below), Pali Capital agrees to deposit into the Trust Account a portion of the Underwriters' discount equal to $0.32 per Unit in the Offering and, if applicable, a portion of the discount equal to $0.32 per Option Unit (as defined below) (the "Deferred Fees") until the earlier of the completion of a Business Combination or the liquidation of the Trust Account. Upon the consummation of a Business Combination, Pali Capital shall promptly receive the Deferred Fees without interest.   In the event that the Company is unable to consummate a Business Combination and Continental Stock Transfer & Trust Company, the trustee of the Trust Account, commences liquidation of the Trust Account, Pali Capital hereby agrees to the following: (i) to forfeit any rights or claims to the Deferred Fees and any interest accrued thereon; and (ii) that the Deferred Fees shall be distributed on a pro-rata basis among the holders of the Common Stock included in the Units sold in the Offering along with any interest accrued thereon, net of taxes.

 

 

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 675,000 units from the Company ("Over-allotment Option"). Such additional 675,000 units, the net proceeds of which will be deposited in the Trust Account, 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 Common Stock and the Warrants included in the Units and the Common Stock issuable upon exercise of the Warrants are hereinafter referred to collectively as the "Public Securities." The purchase price to be paid for each Option Unit will be the same price per Option Unit as the price per Firm Unit set forth in Section 1.1.1 hereof.

 

1.2.2   Exercise of Option . The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Units within 45 days after the Effective Date. The Underwriters will not be under any obligation to purchase any Option Units prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company by the Representative, which must be confirmed in writing by overnight mail or facsimile transmission setting forth the number of Option Units to be purchased and the date and time for delivery of and payment for the Option Units (the "Option Closing Date"), which will not be later than five full Business Days after the date of the notice or such other time and in such other manner as shall be agreed upon by the Company and the Representative, at the offices of Kramer Levin or at such other place as shall be agreed upon by the Company and the Representative. Upon exercise of the Over-allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Units specified in such notice.

 

1.2.3   Payment and Delivery . Payment for the Option Units shall be made on the Option Closing Date at the Representative's election by wire transfer in federal (same day) funds or by certified or bank cashier's check(s) in New York Clearing House funds, payable as follows: $7.44 per Option Unit, plus $0.32 of Deferred Fees per Option Unit, shall be deposited in the Trust Account pursuant to the Trust Agreement and the remaining proceeds shall be paid (subject to Section 3.12 hereof) to the order of the Company upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Option Units (or through the facilities of DTC) for the account of the Underwriters. The certificates representing the Option Units to be delivered will be in such denominations and registered in such names as the Representative requests not less than two full Business Days prior to the Closing Date or the Option Closing Date, as the case may be, and will be made available to the Representative for inspection, checking and packaging at the aforesaid office of the Company's transfer agent or correspondent not less than one full Business Day prior to such Closing Date.

 

1.3   Representative's Purchase Option .

 

1.3.1   Purchase Option . The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Effective Date an option ("Representative's Purchase Option") for the purchase of an aggregate of 450,000 units ("Representative's Units") for an aggregate purchase price of $100. Each of the Representative's Units is identical to the Firm Units, including the warrants constituting the Units to purchase Common Stock (sometimes referred to as the "Representative's Warrants"). The Representative's Purchase Option shall be exercisable, in whole or in part, commencing on the later of the consummation of a Business Combination and one year from the Effective Date and expiring on the five-year anniversary of the Effective Date at an initial exercise price per Representative's Unit of $10.00 (125% of the initial public offering price of a Unit), and may be exercised on a cashless basis. The Representative's Purchase Option, the Representative's Units, the Common Stock contained within the Representative's Units, the Representative's Warrants and the Common Stock issuable upon exercise of the Representative's Warrants are hereinafter referred to collectively as the "Representative's Securities." The Public Securities and the Representative's Securities are hereinafter referred to collectively as the "Securities." The Representative understands and agrees that there are significant restrictions against transferring the Representative's Securities during the first year after the Effective Date, as set forth in Section 3 of the Representative's Purchase Option.

 

1.3.2   Payment and Delivery . Delivery and payment for the Representative's Purchase Option shall be made on the Closing Date. The Company shall deliver to the Underwriters, upon payment therefor, certificates for the Representative's Purchase Option in the name or names and in such authorized denominations as the Representative may request.

 

2.   Representations and Warranties of the Company . The Company represents and warrants to the Underwriters as follows:

 

2.1   Filing of Registration Statement .

 

2.1.1   Pursuant to the Act . The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement and an amendment or amendments thereto, on Form S-1 (File No. 333-143466), including any related preliminary Prospectus (the "Preliminary Prospectus"), for the registration of the Securities under the Securities Act of 1933, as amended ("Act"), which Registration Statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Act, and the rules and regulations (the "Regulations") of the Commission under the Act. The conditions for use of Form S-1 to register the Offering under the Act, as set forth in the General Instructions to such Form, have been satisfied. Except as the context may otherwise require, such Registration Statement, as amended, on file with the Commission at the time the Registration Statement becomes effective (including any 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 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 by the Company with the Commission pursuant to Rule 424(b) at or after the time of effectiveness as allowed under Rule 430A of the Regulations), is hereinafter called the "Prospectus." For purposes of this Agreement, "Time of Sale", as used in the Act, means 4:30 p.m. New York City time, on the date of this Agreement. Prior to the Time of Sale, the Company prepared a preliminary Prospectus, dated September 27, 2007, for distribution by the Underwriters (the "Sale Preliminary Prospectus"). If the Company has filed, or is required pursuant to the terms hereof to file, a Registration Statement pursuant to Rule 462(b) under the Act registering additional Securities of any type (a "Rule 462(b) Registration Statement"), then, unless otherwise specified, any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration Statement, which, if filed, becomes effective upon filing, no other document with respect to the Registration Statement has heretofore been filed with the Commission. All of the Public Securities have been registered under the Act pursuant to the Registration Statement or, if any Rule 462(b) Registration Statement is filed, will be duly registered for public sale under the Act with the filing of such Rule 462(b) Registration Statement. The Registration Statement has been declared effective by the Commission on the date hereof. If, subsequent to the date of this Agreement, the Company or the Representative has determined that at the Time of Sale the Sale Preliminary Prospectus includes an untrue statement of a material fact or omitted a statement of material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and have agreed to provide an opportunity to purchasers of the Firm Units to terminate their old purchase contracts and enter into new purchase contracts, then the Sale Preliminary Prospectus will be deemed to include any additional information available to purchasers at the time of entry into the first such new purchase contract.

 

2.1.2   Pursuant to the Exchange Act . The Company has filed with the Commission a Form 8-A (File Number 000-52833) providing for the registration under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the Units, the Common Stock and the Warrants. The registration of the Units, Common Stock and Warrants under the Exchange Act has been declared effective by the Commission on the date hereof.

 

2.2   No Stop Orders, Etc . Neither the Commission nor, to the best of the Company's knowledge, any state regulatory authority has issued any order or threatened to issue any order preventing or suspending the use of any Sale Preliminary Prospectus or Prospectus or has instituted or, to the best of the Company's knowledge, threatened to institute any proceedings with respect to such an order.

5

---

 

2.3.2   Disclosure of Agreements . The agreements and documents described in the Registration Statement, the Sale Preliminary 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 Sale Preliminary 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 Sale Preliminary Prospectus or 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 in all material respects and is enforceable against the Company and, to the Company's knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and none of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the best of the Company's knowledge, any other party is in breach or default thereunder and, to the best of the Company's knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a breach or default thereunder. To the best of the Company's knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations.

 

2.3.3   Prior Securities Transactions . No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by, or under common control with the Company since the Company's formation, except as disclosed in the Registration Statement.

 

2.3.4   Regulations . The disclosures in the Registration Statement and Sale Preliminary Prospectus concerning the effects of federal, state and local regulation on the Company's business as currently contemplated fairly summarize 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 Sale Preliminary 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 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 Sale Preliminary Prospectus and the Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its equity securities.

 

2.5   Independent Accountants . Rothstein, Kass & Company, P.C. ("RK&C"), whose report is filed with the Commission as part of the Registration Statement, the Sale Preliminary Prospectus and Prospectus and included in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, are independent registered public accountants as required by the Act and the Regulations. RK&C has not, during the periods covered by the financial statements included in the Registration Statement, the Sale Preliminary Prospectus and 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 Sale Preliminary Prospectus and Prospectus fairly present the financial position, the results of operations and the cash flows of the Company at the dates and for the periods to which they apply; 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, the Sale Preliminary Prospectus and Prospectus present fairly the information required to be stated therein. The Registration Statement, the Sale Preliminary Prospectus and Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company's financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses.

 

 

2.7   Authorized Capital; Options; Etc . The Company had at the date or dates indicated in the Sale Preliminary Prospectus and Prospectus duly authorized, issued and outstanding capitalization as set forth in the Registration Statement, the Sale Preliminary Prospectus, and the Prospectus. Based on the assumptions stated in the Registration Statement, the Sale Preliminary 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 Sale Preliminary Prospectus 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 Common Stock of the Company, or any contracts or commitments to issue or sell 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 (including, without limitation, the Placement Warrants) have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The Public Securities conform in all material respects to the description thereof contained in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus. Subject to the disclosure contained in the Registration Statement, the Preliminary Prospectus and the Prospectus with respect to the Placement Warrants, the offers and sales of the outstanding securities of the Company were at all relevant times either registered under the Act or, based in part on the representations and warranties of the purchasers of such securities, exempt from such registration requirements and the registration requirements of applicable blue sky laws and regulations.

 

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 the descriptions thereof contained in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus. When issued, the Representative's Securities 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' Securities 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.

 

2.8.3   Placement Warrants . The Placement Warrants constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment of the respective exercise prices therefor, the number and type of securities of the Company called for thereby in accordance with the terms thereof, and such Placement Warrants are enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The Common Stock issuable upon exercise of the Placement Warrants have been reserved for issuance upon the exercise of the Placement Warrants and, when issued in accordance with the terms of the Placement Warrants, will be duly and validly authorized, validly issued, fully paid and non-assessable, and the holders thereof are not and will not be subject to personal liability by reason of being such holders.

 

2.8.4   No Integration . Other than with respect to the Placement Warrants, neither the Company nor any of its affiliates has, prior to the date hereof, made any offer or sale of any securities which are required to be or may be "integrated" pursuant to the Act or the Regulations with the offer and sale of the Securities pursuant to the Registration Statement.

 

2.9   Registration Rights of Third Parties . Except as set forth in the Sale Preliminary 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 Subscription 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 validly authorized by the Company and, when executed and delivered, will constitute the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

 

2.11   No Conflicts, Etc . The execution, delivery, and performance by the Company of this Agreement, the Warrant Agreement, the Representative's Purchase Option, the Trust Agreement, the Services Agreement, the Escrow Agreement and the Subscription Agreement, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party except pursuant to the Trust Agreement; (ii) result in any violation of the provisions of the Company’s Bylaws and Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"); 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 the Amended and Restated Certificate of Incorporation 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 as described in the Registration Statement, Sale Preliminary Prospectus and the Prospectus. The disclosures in the Registration Statement, the Sale Preliminary 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 required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

2.13.2   Transactions Contemplated Herein . The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery, of the Securities and the consummation of the transactions and agreements contemplated by this Agreement, the Warrant Agreement, the Representative's Purchase Option, the Trust Agreement, the Escrow Agreement and the Subscription Agreement and as contemplated by the Registration Statement, Sale Preliminary Prospectus and Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations promulgated by the Financial Industry Regulatory Authority ("FINRA").

 

 

2.14   D&O Questionnaires . To the best of the Company's knowledge, all information contained in the questionnaires ("Questionnaires") completed by each of the Company's officers, directors and stockholders prior to the Offering ("Existing Stockholders") and previously provided to the Representative is true and correct and the Company has not become aware of any information which would cause the information disclosed in the questionnaires completed by each Existing Stockholder to become inaccurate or 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 Existing Stockholder which has not been disclosed, that is required to be disclosed, in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus.

 

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 place of incorporation, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a material adverse effect on the assets, business or operations of the Company.

 

2.17   Stop Orders . The Commission has not issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus, the Sale Preliminary Prospectus or Prospectus or any part thereof and has not threatened to issue any such order.

 

2.18   Transactions Affecting Disclosure to FINRA.

 

2.18.1   Finder's Fees . 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 Existing Stockholder with respect to the sale of the Securities hereunder or any other arrangements, agreements or understandings of the Company or any Existing Stockholder that may affect the Underwriters' compensation, as determined by FINRA.

 

2.18.2   Payments Within Six Months . The Company has not made any direct or indirect payments (in cash, securities or otherwise) (i) to any person, as a finder's fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company, (ii) to any FINRA member or (iii) to any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the six months prior to the Effective Date, other than payments to the Representative in connection with this Offering.

 

2.18.3   Use of Proceeds . None of the net proceeds of the Offering and Private Placement will be paid by the Company to any participating FINRA 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 Sale Preliminary Prospectus.

 

2.18.4   Existing Stockholders' FINRA Affiliation . Based on questionnaires distributed to the Existing Stockholders, no officer, director or any beneficial owner of the Company's unregistered securities has any direct or indirect affiliation or association with any FINRA member, as determined in accordance with the rules and regulations of FINRA. The Company will advise the Representative and its counsel if it learns that any officer, director or beneficial owner (direct or indirect) of 5% or more of the Company's outstanding Common Stock is or becomes an affiliate or associated person of a FINRA member participating in the Offering.

 

2.19   Foreign Corrupt Practices Act; Patriot Act.

 

2.19.1   Foreign Corrupt Practices Act . Neither the Company nor any of the Existing Stockholders or any other person acting on behalf of the Company has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a material adverse effect on the assets, business or operations of the Company as reflected in any of the financial statements contained in the Prospectus or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company's internal accounting controls and procedures are sufficient to cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as amended.

 

2.19.2   Patriot Act . Neither the Company nor any Company Affiliate has violated: (i) the Bank Secrecy Act, as amended, (ii) the Money Laundering Control Act of 1986, as amended, or (iii) the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and/or the rules and regulations promulgated under any such law, or any successor law.

 

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 CST substantially in the form annexed as Exhibit 4.5 to the Registration Statement ("Warrant Agreement").

 

2.22   Agreements With Existing 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), the forms of which are annexed as Exhibits 10.4 through 10.10 to the Registration Statement ("Insider Letters"), pursuant to which each of the Existing 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 Sale Preliminary Prospectus and Prospectus.

13

---

 

2.23   Investment Management Trust Agreement . The Company has entered into the Trust Agreement with CST with respect to certain proceeds of the Offering and the Private Placement substantially in the form annexed as Exhibit 10.1 to the Registration Statement.

 

2.24   No Existing Non-Competition Agreements . No Existing Stockholder, employee, officer or director of the Company is subject to any non competition agreement or non-solicitation agreement with any employer or prior employer which could materially affect his ability to be an Existing 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, as amended ("Investment Company Act")) of the Company's total assets (exclusive of "Government Securities" (as defined in Section 2(a)(16) of the Investment Company Act)) consist of, and no more than 45% of the Company's net income after taxes is derived from, securities other than the Government Securities.

 

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 Registration Statement, Sale Preliminary Prospectus and the Prospectus that have not been described as required.

 

2.28   Sarbanes-Oxley Act . Solely to the extent that the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the Commission thereunder (the “Sarbanes-Oxley Act”) has been applicable to the Company, there is and has been no failure on the part of the Company to comply in all material respects with any provision of the Sarbanes-Oxley Act. The Company has taken all necessary actions to ensure that it is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act that are in effect and with which the Company is required to comply.

 

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 the Company shall 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 Sale Preliminary Prospectus or 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 Sale Preliminary Prospectus or 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 Sale Preliminary Prospectus or the Prospectus to comply with the Act, the Company will notify the Representative promptly and prepare and file with the Commission, subject to Section 3.1 hereof, an appropriate amendment or supplement in accordance with Section 10 of the Act.

 

 

3.2.2   Filing of Final Prospectus . The Company will file the Prospectus (in form and substance satisfactory to the Representative) with the Commission following the Effective Date pursuant to the requirements of Rule 424 of the Regulations.

 

3.2.3   Exchange Act Registration . The Company will use its best efforts to maintain the registration of the Public Securities under the provisions of the Exchange Act (except in connection with a going-private transaction) for a period of five years from the Effective Date, or until the Company is required to be liquidated if earlier, or, in the case of the Warrants, until the Warrants expire and are no longer exercisable. The Company will not deregister the Public Securities under the Exchange Act without the prior written consent of the Representative.

 

3.2.4   Ineligible Issuer . At the time of filing the Registration Statement and at the date hereof, the Company was and is an "ineligible issuer," as defined in Rule 405 under the Securities Act. The Company has not made and will not make any offer relating to the Public Securities that would constitute an "issuer free writing Prospectus," as defined in Rule 433, or that would otherwise constitute a "free writing Prospectus," as defined in Rule 405.

 

3.3   Blue Sky Filing . Unless the Securities are listed or quoted, as the case may be, on the New York Stock Exchange, the American Stock Exchange or the NASDAQ Global Market, 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. The Company shall pay all filings fees in connection with the qualification of the securities under the securities laws of such jurisdictions as the Representative may reasonably designate.

 

 

3.4   Delivery to Underwriters of Preliminary Prospectus, Sale Preliminary Prospectus And 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, Sale 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 a copy of 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 suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or preventing or suspending the use of any Preliminary Prospectus or the Prospectus 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 3.2.3 hereof that, in the judgment of the Company or its counsel, makes any statement of a material fact made in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus untrue or that requires the making of any changes in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.

 

3.6   Review of Quarterly Financial Statements . Until the earlier of five years from the Effective Date, or until such earlier time upon which the Company is required to be liquidated, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company's financial statements for each of the first three fiscal quarters prior to the announcement of quarterly financial information, the filing of the Company's Form 10-Q quarterly report and the mailing of quarterly financial information to stockholders.

 

3.7   Affiliated Transactions .

 

3.7.1   Business Combinations . The Company will not consummate a Business Combination with any entity which is affiliated with any Existing Stockholder unless the Company obtains an opinion from an independent investment banking firm that is a member of FINRA that the Business Combination is fair to the Company's stockholders from a financial perspective. No Existing Stockholder or any affiliate of such person shall receive any fees of any type (other than reimbursement of ordinary and customary expenses incurred on behalf of the Company) in connection with any Business Combination

 

 

3.7.2   Administrative Services . The Company has entered into an office services agreement ("Services Agreement") with Fund Management Group LLC ("Affiliate") substantially in the form annexed as Exhibit 10.11 to the Registration Statement pursuant to which the Affiliate will make available to the Company general and administrative services, including office space, utilities, administrative, technology and secretarial services for the Company's use for up to $7,500 per month.

17

---

 

3.9.3   Secondary Market Trading Maintenance . Unless the Securities are listed or quoted, as the case may be, on the New York Stock Exchange, the American Stock Exchange or quoted on the NASDAQ Global Market, until such earlier time upon which the Company is required to be liquidated or upon consummation of a Business Combination, the Company shall take such actions reasonably requested by the Representative, including the filings of any required initial and renewal notices in the various States to permit secondary market trading of the securities under the Blue Sky laws of the fifty States and, at the Company’s cost and expense and at the beginning of each fiscal quarter, shall provide the Representative with a written report of counsel detailing those states in which the Securities may be traded in non-issuer transactions under the Blue Sky laws of the fifty States ("Secondary Market Trading Survey").

 

3.9.4   Trading Reports . During such time as any of the Securities are quoted on the NASD OTC Bulletin Board (or any successor trading market such as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar publisher of quotations) and no other automated quotation system, the Company shall provide to the Representative, at its expense, such reports published by the NASD or the Pink Sheets, LLC relating to price trading of the Securities, as the Representative shall reasonably request.

 

3.10   Disqualification of Form S-1 . Until the earlier of seven years from the date hereof or until the Warrants have expired and are no longer exercisable, the Company will not take any action or actions which may prevent or disqualify the Company's use of Form S-1 (or other appropriate form) for the registration of the Warrants and the Representative's Warrants under the Act (except in connection with a going-private transaction).

 

3.11   Payment of Expenses .

 

3.11.1   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, the Preliminary Sale 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 Common Stock and the Warrants included in the Units and the Representative's Purchase Option, including any transfer or other taxes payable thereon, (iii) filing fees incurred in registering the Offering with FINRA and filing fees, costs and expenses of qualifying the Public Securities under state or foreign securities or Blue Sky laws (such fees shall not exceed $25,000 in the aggregate), (iv) filing fees incurred in listing the Company on the NASD OTC Bulletin Board, (v) fees and disbursements of the transfer, escrow and warrant agent, (vi) the Company's expenses associated with "due diligence" and "road show" meetings arranged by the Representative, and (vii) the preparation, binding and delivery of transaction "bibles," in form and style reasonably satisfactory to the Representative and transaction lucite cubes or similar commemorative items in a style and quantity as reasonably requested by the Representative. The Company also agrees that, if requested by the Representative, it will engage and pay up to $10,000 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 in this Agreement to be paid by the Company to the Representative and others.

 

 

3.11.2   Expenses Related to Business Combination . The Company further agrees that, in the event the Representative, at the request of the Company, assists the Company in trying to obtain stockholder approval of a proposed Business Combination, the Company agrees to reimburse the Representative for all reasonable out-of-pocket expenses, including, but not limited to, "road-show" and due diligence expenses.

 

3.12   Application of Net Proceeds . The Company will apply the net proceeds from the Offering and Private Placement received by it in a manner consistent with the application described under the caption "Use of Proceeds" in the Registration Statement, Sale Preliminary Prospectus and Prospectus.

 

3.13   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.

 

3.14   Notice to FINRA . In the event any person or entity (regardless of any FINRA 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 FINRA and to Pali Capital 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.

 

3.15   Stabilization . Neither the Company, nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative), has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.

 

 

3.16   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.

 

3.17   Accountants . Until the earlier of five years from the Effective Date or until such earlier time upon which the Company is required to be liquidated, the Company shall retain RK&C or another independent registered public accounting firm reasonably acceptable to the Representative.

 

3.18   Form 8-K . The Company shall, on the date hereof, retain its independent registered public accounting firm to audit the financial statements of the Company as of the Closing Date ("Audited Financial Statements") reflecting the receipt by the Company of the proceeds of the Offering and the Private Placement. 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.

 

Upon the earlier to occur of (i) the expiration or termination of the Over-allotment Option and (ii) the exercise in full of the Over-allotment Option, the Company shall, subject to having filed the Current Report(s) on Form 8-K pursuant to the previous paragraph, promptly issue a press release announcing that separate trading of the Warrants and Common Stock will begin on the NASD OTC Bulletin Board.

3.19   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.

 

3.20   Investment Company . The Company shall cause the proceeds of the Offering to be held in the Trust Account to be invested only in "Government Securities" (as defined in the Trust Agreement) and disclosed in the Registration Statement, Sale, Preliminary Prospectus or 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.

20

---

 

3.22   Colorado Trust Filing . In the event the Securities are registered in the State of Colorado, the Company will cause a Colorado form ES to be filed with the Commissioner of the State of Colorado no less than 10 days prior to the distribution of the Trust Account in connection with a Business Combination and will do all things necessary to comply with Section 11-51-302 and Rule 51-3.4 of the Colorado Securities Act.

 

3.23   Amendments to Certificate of Incorporation .

 

(i) The Company covenants and agrees, that prior to its initial Business Combination it will not seek to amend or modify any of provisions (A) - (F) of Article Sixth of its Certificate of Incorporation.

 

(ii) The Company acknowledges that the purchasers of the Public Securities in the Offering shall be deemed to be third party beneficiaries of this Agreement and specifically this Section 3.23.

 

(iii) The Representative specifically advises the Company that it will not waive this Section 3.23 under any circumstances.

 

3.24   Private Placement Proceeds . Prior to the Effective Date, the Company shall deposit $1,250,000 of the proceeds from the Private Placement in the Trust Account and shall provide Pali Capital with evidence of the same.

 

3.25   Sarbanes-Oxley Act . The Company will take all necessary actions to ensure that, upon and at all times after the effectiveness of the Registration Statement, it will be in compliance in all material respects with all provisions of the Sarbanes-Oxley Act that are then in effect and applicable to it and shall take such steps as are necessary to ensure that it will be in compliance in all material respects with other provisions of the Sarbanes-Oxley Act not currently in effect upon the effectiveness of such provisions to the extent they are applicable to the Company.

 

3.26   Forfeiture of Existing Stockholders’ Shares . If the Over-allotment Option is not exercised in full, then promptly following the earlier to occur of the expiration or termination of the Over-allotment Option, the Company will cause the Existing Stockholders to forfeit shares of Common Stock in an aggregate amount (up to 168,750 shares of Common Stock) sufficient to cause the Existing Stockholders to own a number of shares of Common Stock equal to 20% of the outstanding Common Stock after giving effect to the offering of the Units and the exercise, if any, of the Over-allotment Option. For the avoidance of doubt, if the Underwriters exercise the Over-allotment Option in full, the Existing Stockholders shall not be required to forfeit any shares of Common Stock pursuant to this Section 3.26.

 

4.   Conditions of Underwriters' Obligations . The obligations of the several Underwriters to purchase and pay for the Units, as provided herein, shall be subject to the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof and to the performance by the Company of its obligations hereunder and to the following conditions:

 

 

4.1   Regulatory Matters .

 

4.1.1   Effectiveness of Registration Statement . The Registration Statement shall have become effective not later than 4:30 p.m., New York time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date and the Option Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for the purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of Kramer Levin, counsel to the Underwriters.

22

---

 

4.3   Cold Comfort Letter . At the time this Agreement is executed, and at each of the Closing Date and the Option Closing Date, if any, you shall have received a letter, addressed to the Representative and in form and substance satisfactory in all respects (including the non-material nature of the changes or decreases, if any, referred to in clause (iii) below) to you and to Kramer Levin from RK&C dated, respectively, as of the date of this Agreement and as of the Closing Date and the Option Closing Date, if any:

 

(i) Confirming that they are independent accountants with respect to the Company within the meaning of the Act and the applicable Regulations and that they have not, during the periods covered by the financial statements included in the Preliminary Prospectus, Sale Preliminary Prospectus and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act;

 

(ii) Stating that in their opinion the financial statements of the Company included in the Registration Statement, the Sale Preliminary Prospectus and Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act and the published Regulations thereunder;

 

(iii) Stating that, on the basis of their 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 Sale Preliminary Prospectus and 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, the Sale Preliminary Prospectus and Prospectus, or (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 stockholder's equity of the Company as compared with amounts shown in the May 25, 2007 balance sheet included in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, other than as set forth in or contemplated by the Registration Statement, the Sale Preliminary Prospectus and the Prospectus, or, if there was any decrease, setting forth the amount of such decrease and (c) during the period from May 25, 2007 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 Sale Preliminary Prospectus and 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 and the Sale Preliminary Prospectus and Prospectus, in each case to the extent that such amounts, numbers, percentages, statements and information may be derived from the general accounting records, including work sheets, of the Company and excluding any questions requiring an interpretation by legal counsel, with the results obtained from the application of specified readings, inquiries and other appropriate procedures (which procedures do not constitute an examination in accordance with generally accepted auditing standards) set forth in the letter and found them to be in agreement;

 

(vi) Stating that they have not, since the Company's incorporation, provided the Company's management with any written communication in accordance with PCAOB Interim Auditing Standards AU Section 325, “Communications About Control Deficiencies in an Audit of Financial Statements”; and

 

(vii) Statements as to such other matters incident to the transaction contemplated hereby as you may reasonably request.

 

4.4   Officers' Certificates .

 

4.4.1   Officers' Certificate . At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Chairman of the Board or the Chief Executive Officer and the Secretary or Assistant Secretary of the Company (in their capacities as such), 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 (in their capacities as such) as the Representative may reasonably request.

24

---

 

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 Sale Preliminary Prospectus and Prospectus, (ii) no action suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Existing 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 Sale Preliminary Prospectus and Prospectus, (iii) no stop order shall have been issued under the Act and no proceedings therefor shall have been initiated or threatened by the Commission, and (iv) the Registration Statement, the Sale Preliminary 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, the Sale Preliminary Prospectus nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

4.6   Delivery of Agreements .

 

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 Subscription 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 Kramer Levin 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 matters as you and Kramer Levin may reasonably require. On or prior to the Effective Date, the Closing Date and the Option Closing Date, as the case may be, counsel for the Underwriters shall have been furnished such documents, certificates and opinions as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 4.7, or in order to evidence the accuracy, completeness or satisfaction of any of the representations, warranties or conditions herein contained.

 

4.8   Secondary Market Trading and Standard & Poor's . Unless the Securities are listed or quoted, as the case may be, on the New York Stock Exchange, the American Stock Exchange or the NASDAQ Global or Capital Market, the Company (a) shall take such steps as may be necessary to obtain a secondary market trading exemption for the Company's securities in the State of California and (b) 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.

 

 

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, Sale Preliminary Prospectus or the Prospectus (as from time to time each may be amended and supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities, including any "road show" or investor presentations made to investors by the Company (whether in person or electronically); (iii) any application or other document or written communication (in this Section 5, collectively called "application") executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Units under the securities laws thereof or filed with the Commission, any state securities commission or the OTC Bulletin Board; or (iv) any post effective amendments to the Registration Statement or Prospectus or new Registration Statement or Prospectus filed by the Company with the Commission, any state securities commission or agency, the OTC Bulletin Board or any other securities exchange in which is included any of the Representative's Securities, or the omission or alleged omission from any Preliminary Prospectus, the Registration Statement, Sale Preliminary Prospectus or the Prospectus or subsequent filing by the Company under clause (iv) above 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 (x) such statement or omission was made in reliance upon and in conformity with written information furnished to the Company with respect to an Underwriter by or on behalf of such Underwriter expressly for use in any Preliminary Prospectus, the Registration Statement, Sale Preliminary Prospectus or Prospectus, or any amendment or supplement thereof, or in any application, as the case may be, or (y)   the use of the Sale Preliminary Prospectus or Prospectus in violation of any stop order or other notice received by any Underwriter indicating the then-current Prospectus is not to be used in connection with the sale of any Securities . With respect to any untrue statement or omission or alleged untrue statement or omission made in the Preliminary Prospectus, the indemnity agreement contained in this paragraph shall not inure to the benefit of any Underwriter to the extent that any loss, liability, claim, damage or expense of such Underwriter results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Securities to such person as required by the Act and the Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.4 hereof. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or controlling persons in connection with the issue and sale of the Securities or in connection with the Registration Statement, Sale Preliminary Prospectus or Prospectus.

 

 

5.1.2   Procedure . If any action is brought against an Underwriter, a Selected Dealer or a controlling person in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter or Selected Dealer shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter or Selected Dealer, as the case may be) and payment of actual expenses. Such Underwriter, Selected Dealer or controlling person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter, Selected Dealer or controlling person unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the 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, Sale Preliminary 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, Sale Preliminary 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, Sale Preliminary Prospectus or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2.

 

 

5.3   Contribution .

 

5.3.1   Contribution Rights . In order to provide for just and equitable contribution under the Act in any case in which (i) any person entitled to indemnification under this Section 5 makes claim for indemnification pursuant hereto but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5 provides for indemnification in such case, or (ii) contribution under the Act, the Exchange Act or otherwise may be required on the part of any such person in circumstances for which indemnification is provided under this Section 5, then, and in each such case, the Company and the Underwriters shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company and the Underwriters, as incurred, in such proportions that the Underwriters are responsible for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus bears to the initial offering price appearing thereon and the Company is responsible for the balance; provided, that, no person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters shall contribute in such proportion as is appropriate to reflect the relative fault of the Company and the Underwriters in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of the Company and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 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.

28

---

 

6.   Default by an Underwriter .

 

6.1   Default Not Exceeding 10% of Firm Units or Option Units . If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Units or the Option Units, if the Over-Allotment Option is exercised, hereunder, and if the number of the Firm Units or Option Units with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Units or Option Units that all Underwriters have agreed to purchase hereunder, then such Firm Units or Option Units to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.

 

6.2   Default Exceeding 10% of Firm Units or Option Units . In the event that the default addressed in Section 6.1 above relates to more than 10% of the Firm Units or Option Units, you may in your discretion arrange for yourself or for another party or parties to purchase such Firm Units or Option Units to which such default relates on the terms contained herein. If within one Business Day after such default relating to more than 10% of the Firm Units or Option Units you do not arrange for the purchase of such Firm Units or Option Units, then the Company shall be entitled to a further period of one Business Day within which to procure another party or parties satisfactory to you to purchase said Firm Units or Option Units on such terms. In the event that neither you nor the Company arrange for the purchase of the Firm Units or Option Units to which a default relates as provided in this Section 6, this Agreement will be terminated by you or the Company without liability on the part of the Company (except as provided in Sections 3.11.1 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 (5) business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Sale Preliminary Prospectus or Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement or the Prospectus that in the opinion of counsel for the Underwriters may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such securities.

29

---

 

7.   Intentionally Omitted .

 

8.   Additional Covenants .

 

8.1   Additional Shares or Options . The Company hereby agrees that until the consummation of a Business Combination, it shall not issue any Common Stock (except with respect to any exercise of Warrants) or any options or other securities convertible into Common Stock, or any shares of preferred stock or other securities of the Company which participate or may participate in any manner in the Trust Account or which vote as a class with the Common Stock on a Business Combination.

 

8.2   Amendments to Insider Letters, Subscription Agreement and Trust Account . 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 existing stockholder and Pali Capital or the Subscription Agreement executed between FMGI and the Company and will not allow any amendments to, or waivers of, such Insider Letters, Subscription Agreement or the Trust Account without the prior written consent of the Representative.

 

8.3   Prohibition on Amendment of Certificate of Incorporation . 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. Except as set forth in Section 3.23, prior to the consummation of a Business Combination, the Company will not, other than pursuant to the terms of the Amended and Restated Certificate of Incorporation, amend its Amended and Restated Certificate of Incorporation without the prior written consent of the holders holding not less than 95% of the Public Securities.

 

8.4   Acquisition/Liquidation Procedure . The Company agrees: (i) 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 the laws of the state of Delaware; and (ii) in the event that the Company does not effect a Business Combination within twenty-four (24) months from the consummation of the offering (the "Termination Date"), this shall trigger an automatic winding-up of the Company and the trust account will be liquidated to holders of IPO shares in the manner described in the Sale Preliminary Prospectus and the Prospectus as soon as reasonably practicable, and subject to the requirements of the laws of the state of Delaware. For purposes of this Section 8.4, the term "IPO shares" means the Common Stock contained in the public securities.  

30

---

 

8.4.2   With respect to the Business Combination Vote, the Company shall use its commercially reasonable efforts to cause the Existing Stockholders to vote all Common Stock owned by them immediately prior to the Offering in accordance with the vote of holders of a majority of the IPO Shares present, in person or by proxy, at a meeting of the Company's stockholders in connection with the Business Combination Vote.

 

8.4.3   At the time the Company seeks approval of any potential Business Combination (prior to the confirmation of its initial Business Combination), the Company will offer each of the holders of the IPO Shares the right to convert their IPO Shares into a pro rata share of the Trust Account (the "Conversion Price"). If holders of less than 30% in interest of the Common Stock 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 of Common Stock, based upon the Conversion Price, from those holders of Common Stock who affirmatively requested such conversion and who voted against the Business Combination as provided under the laws of the State of Delaware. If holders of 30% or more in interest of the Common Stock vote against approval of any potential Business Combination, the Company will not proceed with such Business Combination and may seek another Business Combination or liquidate.

 

8.5   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.

 

8.6   Affiliated Transactions . Except as disclosed on the Registration Statement, the Company shall cause each of the existing stockholders to agree that, in order to minimize potential conflicts of interest which may arise from multiple affiliations, the existing 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 existing stockholders cease to be an officer or director of the Company, subject to any pre-existing fiduciary or contractual obligations the existing stockholders might have.

 

 

8.7   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 held in trust, net of taxes (all of the Company's assets, including the funds held in the Trust Account, less the Company's liabilities and deferred fees) at the time of such Business Combination. The fair market value of such business must be determined by the board of directors of the Company based upon standards generally accepted by the financial community, such as actual and potential sales, earnings and cash flow and book value. If the board of directors of the Company is not able to independently determine that the target business has a fair market value of at least 80% of the Company's net assets held in trust, net of taxes, at the time of such acquisition, or if the target business is affiliated with any of the existing stockholders, the Company will obtain an opinion from an unaffiliated, independent investment banking firm which is a member of FINRA with respect to the satisfaction of such criteria. The Company is not required to obtain an opinion from an investment banking firm as to the fair market value if the Company's board of directors independently determines that the target business does have sufficient fair market value.

 

8.8   Trust Account Waiver Acknowledgments . The Company hereby agrees it will use best efforts, prior to commencing its due diligence investigation of any operating business or businesses which the Company seeks to acquire (each, a "Target Business") or obtaining the services of any vendor, to obtain from such Target Business or vendor an acknowledgment in writing, whether through a letter of intent, memorandum of understanding or other similar document (and subsequently acknowledges the same in any definitive document replacing any of the foregoing), that (a) it has read the Prospectus and understands that the Company has established the Trust Account, initially in an amount of $35,640,000   (without giving effect to any exercise of the Over-allotment Option) for the benefit of the Public Stockholders and that, except for a portion of the interest earned on the amounts held in the Trust Account, the Company may disburse monies from the Trust Account only: (i) to the Public Stockholders in the event of the conversion of their shares or the dissolution and liquidation of the Trust Account as part of the Company's plan of dissolution and liquidation or (ii) to the Company after it consummates a Business Combination and (b) for and in consideration of the Company (1) agreeing to evaluate such target business for purposes of consummating a Business Combination with it or (2) agreeing to engage the services of the vendor, as the case may be, such target business or vendor agrees that it does not have any right, title, interest or claim of any kind in or to any monies of the Trust Account ("claim") and waives any claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company and will not seek recourse against the Trust Account for any reason whatsoever. The foregoing letters shall substantially be in the form attached hereto as E xhibits A and B , respectively.

 

8.9   Proxy and Other Information . 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.

 

9.   Representations and Agreements to Survive Delivery . Except as the context otherwise requires, all representations, warranties and agreements contained in this Agreement shall be deemed to be representations, warranties and agreements as of the Closing Dates and such representations, warranties and agreements of the Underwriters and the Company, including the indemnity agreements contained in Section 5 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of 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.

32

---

 

10.   Effective Date of This Agreement and Termination Thereof .

 

10.1   Effective Date . This Agreement shall become effective on the Effective Date at the time the Registration Statement is declared effective by the Commission.

 

10.2   Termination . You shall have the right to terminate this Agreement at any time prior to the Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market or on the NASD OTC Bulletin Board (or successor trading market) shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been fixed, or maximum ranges for prices for securities shall have been required on the New York Stock Exchange, the American Stock Exchange, NASDAQ Stock Market or on the NASD OTC Bulletin Board (or successor trading market) or by order of the Commission or any other government authority having jurisdiction, or (iii) if the United States shall have become involved in a new war or an increase in major hostilities, or (iv) if a banking moratorium has been declared by a New York State or federal authority, or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities market, or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of the Public Securities, or (vii) upon the suspension of trading of the Company’s securities by the NASD OTC Bulletin Board, the Commission, or any other governmental authority, or (viii) if any of the Company's representations, warranties or covenants hereunder are breached and are not cured within five (5) Business Days of receipt of written notice of such breach, or (ix) 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 Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities.

 

10.3   Expenses . In the event that this Agreement shall not be carried out for any reason whatsoever, other than as a result of the Representative’s or any Underwriters’ material breach or default with respect to any of its material obligations, 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 3.11 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 by U.S. first class mail or delivered by courier and shall be deemed given five business days after deposited in the mail or when delivered if sent by courier to the following addresses:

 

	If to the Representative:
	Pali Capital, Inc.
	650 Fifth Avenue, 6 th Floor
	New York, New York 10019
	Attn: Michael Powell
	Facsimile: (212) 259-2093
	Copy to:
	Kramer Levin Naftalis & Frankel LLP
	1177 Avenue of the Americas
	New York, New York 10036
	Attn: Christopher Auguste, Esq.
	Facsimile: (212) 715-8000
	If to the Company:
	FMG Acquisition Corp.
	Four Forest Park, Second Floor
	Farmington, Connecticut 06032
	Attn: Gordon G. Pratt, Chairman, President and Chief Executive Officer
	Facsimile: (860) 677-2701
	Copy to:
	Ellenoff Grossman & Schole LLP
	370 Lexington Avenue
	New York, New York 10017
	Attn: Douglas S. Ellenoff, Esq.
	Facsimile: (212) 370-7889

11.2   Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

 

11.3   Amendment . This Agreement may only be amended by a written instrument executed by each of the parties hereto.

 

11.4   Entire Agreement . This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersede all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

11.5   Binding Effect . This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. This agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and said controlling persons and their respective successors, officers, directors, heirs and legal representatives, and it is not for the benefit of any other person. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters. The Company acknowledges and agrees that: (i) the sale and issuance of the securities pursuant to this Agreement is an arm's-length commercial transaction between the Company and the Underwriters; (ii) in connection therewith and with the process leading to the offering, the Underwriters are acting solely as a principal and not the agent or fiduciary of the Company; (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto, including any negotiation related to the pricing of the securities; and (iv) the Company has consulted its own legal and financial advisors to the extent it has deemed appropriate in connection with this Agreement and the offering.

 

11.6   Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 11.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys' fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

 

 

11.7   Execution In Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement via fax or email/.pdf transmission shall constitute valid and sufficient delivery hereof.

 

11.8   Waiver, Etc . The Failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

 

11.9   No Fiduciary Relationship . The Company hereby acknowledges that the Underwriters are acting solely as Underwriters in connection with the offering of the Company's securities. The Company further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm's length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the offering of the Company's securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company's securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

36

---

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,
FMG ACQUISITION CORP.
By:	/s/ Gordon G. Pratt
Name:	Gordon G. Pratt
Title:	President and CEO
Accepted on the date first above written.
PALI CAPITAL, INC.
By:	/s/ Hilary Bergman
Name:	Hilary Bergman
Title:	Chief Administrative Officer
For themselves and the other several
Underwriters named in Schedule I
to the foregoing Agreement

 

 

APPENDIX A

1.

The Company has been duly organized and, based solely on a certificate of good standing from the state of its incorporation, is validly existing as a corporation and is in good standing under the laws of its state of incorporation. The Company is duly qualified and licensed and in good standing in the State of Connecticut.

 

2.

All issued and outstanding securities of the Company (including, without limitation, the Placement Warrants) have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof are not subject to personal liability solely 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 Amended and Restated Certificate of Incorporation ("Certificate") or Bylaws of the Company. The offers and sales of the outstanding Common Stock prior to the Offering were at all relevant times either registered under the Act or exempt from such registration requirements.

 

3.

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 Articles 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 (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The certificates representing the Securities are in due and proper form.

 

4.

The Placement Warrants constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment therefor, the number and type of securities of the Company called for thereby, and such Placement Warrants are enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. A sufficient number of shares of Common Stock have been reserved for issuance upon exercise of the Placement Warrants. The Common Stock underlying the Placement Warrants will, upon exercise of the Warrants and payment of the exercise price thereof, be duly and validly issued, fully paid, and non-assessable and to such counsel's knowledge, will not have been issued in violation of or subject to preemptive rights.

 

 

5.

This Agreement, the Warrant Agreement, the Services Agreement, the Trust Agreement, the Escrow Agreement and the Subscription 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.

 

6.

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 and the Subscription Agreement and compliance by the Company with the terms and provisions thereof and the consummation of the transactions contemplated thereby, and the issuance and sale of the Securities, do not and will not, with or without the giving of notice or the lapse of time, or both, (a) result in any violation of the provisions of the Certificate of Incorporation or the Bylaws of the Company, or (b) to such counsel's knowledge, violate any United States statute, rule or regulation applicable to the Company, or with respect to any United States federal, state or other regulatory authority or other governmental body having jurisdiction over the Company, its properties or assets.

 

7.

The Registration Statement, the Sale Preliminary Prospectus and the Prospectus and any post-effective amendments or supplements thereto (other than the financial statements included therein, as to which no opinion need be rendered) each as of their respective dates appeared on their face to comply as to form in all material respects with the requirements of the Act and Regulations. The Securities and all other securities issued or issuable by the Company conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus. The descriptions in the Registration Statement, the Sale Preliminary Prospectus and in the Prospectus, insofar as such statements constitute a summary of statutes, legal matters, contracts, documents or proceedings referred to therein, fairly present in all material respects the information required to be shown with respect to such statutes, legal matters, contracts, documents and proceedings.

 

 

8.

Based solely on a notice of effectiveness received from the Securities and Exchange Commission, 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.

 

9.

The opinion of counsel shall further include a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, the Underwriters and the independent registered public accounting firm of the Company, at which conferences the contents of the Registration Statement, the Sale Preliminary Prospectus and the Prospectus contained therein and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus contained therein (except as otherwise set forth in the foregoing opinion), solely on the basis of the foregoing without independent check and verification, no facts have come to the attention of such counsel which lead them to believe that the Registration Statement or any amendment thereto, at the time the Registration Statement or amendment 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 or the Prospectus or any amendment or supplement thereto, at the time they were filed pursuant to Rule 424(b) or at the date of such counsel's opinion, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they were made, not misleading (except that such counsel need express no opinion with respect to the financial information and statistical data and information included in the Registration Statement, the Sale Preliminary Prospectus or the Prospectus).

 

EXHIBIT A

 

FORM OF TARGET BUSINESS LETTER

 

FMG Acquisition Corp.

 

Gentlemen:

 

Reference is made to the Final Prospectus of FMG Acquisition Corp. (the "COMPANY"), dated __________, 2007 (the "PROSPECTUS"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in Prospectus.

 

We have read the Prospectus and understand that the Company has established the Trust Account, initially in an amount of at least $____________ for the benefit of the Public Stockholders and the Underwriters of the Company's initial public offering (the “UNDERWRITERS”) and that, except for a portion of the interest earned on the amounts held in the Trust Account, the Company may disburse monies from the Trust Account only: (i) to the Public Stockholders in the event of (A) the conversion of their shares and the consummation of a Business Combination or (B) upon the dissolution and liquidation of the Company or (ii) to the Company and the Underwriters after it consummates a Business Combination.

 

For and in consideration of the Company agreeing to evaluate the undersigned for purposes of consummating a Business Combination with it, the undersigned hereby agrees that it does not have any right, title, interest or claim of any kind in or to any monies in the Trust Account (each, a “CLAIM”) and hereby waives any Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company and will not seek recourse against the Trust Account for any reason whatsoever.

Print Name of Target Business
Authorized Signature of Target Business

EXHIBIT B

 

FORM OF VENDOR LETTER

 

FMG Acquisition Corp.

 

Gentlemen:

 

Reference is made to the Final Prospectus of FMG Acquisition Corp. (the "COMPANY"), dated ___________, 2007 (the "PROSPECTUS"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in Prospectus.

 

We have read the Prospectus and understand that the Company has established the Trust Account, initially in an amount of at least $____________ for the benefit of the Public Stockholders and the Underwriters of the Company's initial public offering (the "UNDERWRITERS") and that, except for a portion of the interest earned on the amounts held in the Trust Account, the Company may disburse monies from the Trust Account only: (i) to the Public Stockholders in the event of (A) the conversion of their shares and the consummation of a Business Combination or (B) upon the dissolution and liquidation of the Company or (ii) to the Company and the Underwriters after it consummates a Business Combination.

 

For and in consideration of the Company agreeing to use 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 Account (each, a "CLAIM") and hereby waives any Claim it may have in the future as a result of, or arising out of, any services provided to the Company and will not seek recourse against the Trust Account for any reason whatsoever.

 

Print Name of Vendor
Authorized Signature of Vendor

Exhibit 10.2

INVESTMENT MANAGEMENT TRUST AGREEMENT

 

This Agreement is made as of October 4, 2007 by and between FMG Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust Company (“Trustee”).

 

WHEREAS, the Company’s Registration Statement on Form S-1, File No. 333-143466 (“Registration Statement”), for its initial public offering of securities (“IPO”) has been declared effective on October 4, 2007 by the Securities and Exchange Commission (“Effective Date”); and

 

WHEREAS, the Company has completed a private placement of 1,250,000 Warrants (the “Private Warrants”) prior to the completion of the IPO for a purchase price of $1,250,000; and

 

WHEREAS, Pali Capital, Inc. (“Pali”) is acting as the representative of the underwriters in the IPO (the “Underwriters”); and

 

WHEREAS, as described in the Company’s Registration Statement, in accordance with the Company’s Amended and Restated Certificate of Incorporation, $35,640,000 of the net proceeds of the IPO and the sale of the Private Warrants ($40,878,000 if the Underwriters’ over-allotment option is exercised in full), will be delivered to the Trustee as of October 11, 2007 to be deposited and held in a trust account for the benefit of the Company, the holders of the common stock, par value $.0001 per share, of the Company (“Common Stock”), included in the units of the Company’s securities issued in the IPO (the “Units”), and Pali and in the event the securities offered in the IPO are registered in Colorado, pursuant to Section 11-51-302 (6) of the Colorado Revised Statutes (“CRS”), a copy of which is attached hereto, and made a part hereof. The amount to be delivered to the Trustee will be referred to herein as the “Property,” the stockholders for whose benefit the Trustee shall hold the Property will be referred to as the “Public Stockholders,” and the Public Stockholders, the Company and Pali and the Underwriters will be referred to together as the “Beneficiaries”;

 

WHEREAS, a portion of the Property consists of $1,440,000 (or $1,656,000 if the Underwriters’ over-allotment is exercised in full) attributable to the Underwriters’ discount (the “Deferred Discount”) which the Underwriters have agreed to deposit in the Trust Account (as defined below); and

WHEREAS, the Company and the Trustee desire to enter into this Agreement to set forth the terms and conditions pursuant to which the Trustee shall hold the Property.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree as follows:

 

1.   Agreements and Covenants of Trustee . The Trustee hereby agrees and covenants to:

 

(a)    Hold the Property in trust for the Beneficiaries in accordance with the terms of this Agreement, including, without limitation, with respect to the Public Stockholders, the terms of Section 11-51-302(6) of the CRS in segregated trust accounts (the “Trust Account”) established by the Trustee with JP Morgan Chase, N.A. and at a brokerage institution selected by the Trustee;

  

(b)    Manage, supervise and administer the Trust Account subject to the terms and conditions set forth herein;

 

(c)    In a timely manner, upon the written instruction of the Company, to invest and reinvest the Property in any “Government Security” or in money market funds selected by the Company meeting the conditions specified in Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, as determined by the Company. As used herein, “Government Security” means any Treasury Bill issued by the United States, having a maturity of one hundred and eighty days or less ;

 

(d)    Collect and receive, when due, all principal and income arising from the Property, which shall become part of the “Property,” as such term is used herein;

 

(e)    Promptly notify the Company and Pali of all communications received by it with respect to any Property requiring action by the Company;

(f)    Supply any necessary information or documents as may be requested by the Company in connection with the Company’s preparation of the tax returns for the Trust Account or the Company;

 

(g)    Participate in any plan or proceeding for protecting or enforcing any right or interest arising from the Property if, as and when instructed by the Company and/or Pali to do so;

 

(h)    Render to the Company and to such other person as the Company may instruct, monthly written statements of the activities of and amounts in the Trust Account reflecting all receipts and disbursements of the Trust Account;

 

(i)    If there is any income or other tax obligation relating to the income from the Property in the Trust Account, then, from time to time, at the written instruction of the Company, the Trustee shall promptly to the extent there is not sufficient cash in the Trust Account to pay such tax obligation, liquidate such assets held in the Trust Account as shall be designated by the Company in writing; and

(j)   Commence liquidation of the Trust Account only after and promptly after receipt of, and only in accordance with, the terms of a letter (“Termination Letter”), in a form substantially similar to that attached hereto as either Exhibit A or Exhibit B hereto, signed on behalf of the Company by its President or Chairman of the Board and Secretary or Assistant Secretary, and complete the liquidation of the Trust Account and distribute the Property in the Trust Account only as directed in the Termination Letter and the other documents referred to therein; provided, however, that in the event that a Termination Letter has not been received by the Trustee by the 24-month anniversary of the effective date of the Registration Statement (“Last Date”), the Trust Account shall be liquidated in accordance with the procedures set forth in the Termination Letter attached as Exhibit B hereto and distributed to the stockholders of record on the Last Date. The provisions of this Section 1(j) may not be modified, amended or deleted under any circumstances.

2.   Limited Distributions of Income on Property .

 

(a)    If there is any income tax obligation relating to the income from the Property in the Trust Account, or if there is any franchise or other tax obligation to which the Company is subject, then, at the written instruction of the Company, the Trustee shall disburse to the Company, out of the Property in the Trust Account, the amount indicated by the Company as required to pay income, franchise or other taxes and disburse to the Company by wire transfer out of the Property in the Trust Account, the amount indicated by the Company as owing in respect of such taxes.

(b)   Upon written request from the Company containing certification that such distribution pursuant to this Section 2(b) shall only be used to fund the working capital requirements of the Company and the costs related to identifying, researching and acquiring a prospective target business, including, without limitation, the expenses incurred in connection with the Company’s dissolution, the Trustee shall distribute to the Company an amount up to $1,200,000 of the interest earned and collected on the Property in the Trust Account, net of taxes payable, through the last day of the month immediately preceding the date of receipt of the Company’s written request.

(c)   Upon receipt of the Termination Letter, the Trustee shall liquidate the Trust Account in accordance with Section 1(j).

(d)   Except as provided in this Section 2, no other distributions from the Trust Account shall be permitted.

 

3.   Agreements and Covenants of the Company . The Company hereby agrees and covenants:

 

(a)    To provide all instructions to the Trustee hereunder in writing, signed by the Company’s Chief Executive Officer and Chief Financial Officer. In addition, except with respect to its duties under paragraphs 1(i) and 1(j), the Trustee shall be entitled to rely on, and shall be protected in relying on, any verbal or telephonic advice or instruction which it in good faith believes to be given by any one of the persons authorized above to give written instructions, provided that the Company and/or Pali shall promptly confirm such instructions in writing;

(b)   To provide Pali with a copy of any Termination Letters and/or any other correspondence it transmits to the Trustee with respect to any proposed withdrawal from the Trust Account promptly after it issues same; 

(c)   Subject to the provisions of Section 5 hereof, to hold the Trustee harmless and indemnify the Trustee from and against any and all expenses, including reasonable counsel fees and disbursements, or loss suffered by the Trustee in connection with any action, suit or other proceeding brought against the Trustee involving any claim, or in connection with any claim or demand which in any way arises out of or relates to this Agreement, the services of the Trustee hereunder, or the Property or any income earned from investment of the Property, except for expenses and losses resulting from the Trustee’s gross negligence or willful misconduct. Promptly after the receipt by the Trustee of notice of demand or claim or the commencement of any action, suit or proceeding, pursuant to which the Trustee intends to seek indemnification under this paragraph, it shall notify the Company in writing of such claim (hereinafter referred to as the “Indemnified Claim”). The Trustee shall have the right to conduct and manage the defense against such Indemnified Claim, provided that the Trustee shall obtain the consent of the Company with respect to the selection of counsel, which consent shall not be unreasonably withheld. The Trustee may not agree to settle any Indemnified Claim without the prior written consent of the Company, which consent shall not be unreasonably withheld. The Company may participate in such action with its own counsel at its own expense;

 

(d)    Pay the Trustee an initial acceptance fee, an annual fee and a transaction processing fee for each disbursement made pursuant to Sections 2(a) and 2(b) as set forth on Schedule A hereto, which fees shall be subject to modification by the parties from time to time. It is expressly understood that the Property shall not be used to pay such fees and further agreed that said transaction processing fees shall be deducted by the Trustee from the disbursements made to the Company pursuant to Section 2(b). The Company shall pay the Trustee the initial acceptance fee and first year’s fee at the consummation of the IPO and thereafter on the anniversary of the Effective Date. The Trustee shall refund to the Company the annual fee (on a pro rata basis) with respect to any period after the liquidation of the Trust Account. The Company shall not be responsible for any other fees or charges of the Trustee except as set forth in this Section 3(c) and as may be provided in Section 3(b) hereof (it being expressly understood that the Property shall not be used to make any payments to the Trustee under such Sections);

 

(e)    That, in the event the Company consummates a Business Combination and the Trust Account is liquidated in accordance with Section 1(j) hereof, an independent party designated by Pali shall act as the inspector of election to certify the results of the stockholder vote. As used in this Agreement, the term “Business Combination” means the acquisition by the Company, through merger, capital stock exchange, asset or stock acquisition of, or similar business combination with, one or more operating businesses, as more fully described in the prospectus forming a part of the Registration Statement;

 

(f)    That the Company’s Chief Executive Officer and Chief Financial Officer shall each certify the following (wherever applicable): (1) prior to the Last Date, the Company has entered into a Business Combination with a target business, the terms of which are consistent with the requirements set forth in the Registration Statement; and (2) the Board of Directors (the “Board”) pursuant to the unanimous written consent of the Board has approved the Business Combination. A copy of such consent and the definitive agreement relating to the Business Combination so approved shall be attached as an exhibit to the Officer’s Certificate;

 

(g) In connection with any vote of the Company’s stockholders regarding a Business Combination, provide to the Trustee an affidavit or certificate of a firm regularly engaged in the business of soliciting proxies and tabulating stockholder votes verifying the vote of the Company’s stockholders regarding such Business Combination;

 

(h) Within five business days after the Underwriters’ over-allotment option (or any unexercised portion thereof) expires or is exercised in full, to provide the Trustee notice in writing (with a copy to the Underwriters) of the total amount of the Deferred Discount, which shall in no event be less than $1,440,000; and

 

4.   Limitations of Liability . The Trustee shall have no responsibility or liability to:

 

(a)    Take any action with respect to the Property, other than as directed in Sections 1 and 2 hereof and the Trustee shall have no liability to any party except for liability arising out of its own gross negligence or willful misconduct;

 

(b)    Institute any proceeding for the collection of any principal and income arising from, or institute, appear in or defend any proceeding of any kind with respect to, any of the Property unless and until it shall have received written instructions from the Company given as provided herein to do so and the Company shall have advanced or guaranteed to it funds sufficient to pay any expenses incident thereto;

 

(c)    Change the investment of any Property, other than in compliance with Section 1(c);

 

(d)    Refund any depreciation in principal of any Property;

 

(e)    Assume that the authority of any person designated by the Company to give instructions hereunder shall not be continuing unless provided otherwise in such designation, or unless the Company shall have delivered a written revocation of such authority to the Trustee;

 

(f)    The other parties hereto or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of its own best judgment, except for its gross negligence or willful misconduct. The Trustee may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Trustee), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Trustee, in good faith, to be genuine and to be signed or presented by the proper person or persons. The Trustee shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement or any of the terms hereof, unless evidenced by a written instrument delivered to the Trustee signed by the proper party or parties and, if the duties or rights of the Trustee are affected, unless it shall give its prior written consent thereto;

   

(g)    Verify the correctness of the information set forth in the Registration Statement or to confirm or assure that any acquisition made by the Company or any other action taken by it is as contemplated by the Registration Statement, unless an officer of the Trustee has actual knowledge thereof, written notice of such event is sent to the Trustee or as otherwise required under Section 1(j) hereof;

 

(h)    Prepare, execute and file tax reports, income or other tax returns, pay any taxes on behalf of the Trust Account and pay any taxes with respect to income and activities relating to the Trust Account, regardless of whether such tax is payable by the Trust Account or the Company (including but not limited to income tax obligations), (it being expressly understood that the Trustee’s sole obligation with respect to taxes shall be to issue the checks with respect thereto provided for by Section 2(a) hereof. If there is any income or other tax obligation relating to the Trust Account or the Property in the Trust Account, as determined from time to time by the Company and regardless of whether such tax is payable by the Company or the Trust, at the written instruction of the Company, the Trustee shall make funds available in cash from the Property in the Trust Account an amount specified by the Company as owing to the applicable taxing authority, which amount shall be paid directly to the Company by electronic funds transfer, account debit or other method of payment, and the Company shall forward such payment to the taxing authority; and

(i)   Verify calculations, qualify or otherwise approve Company requests for distributions pursuant to Section 1(i), 2(a) or 2(b) above.

 

5.   No Right of Set-Off . The Trustee waives any right of set-off or any right, title, interest or claim of any kind that the Trustee may have against the Property held in the Trust Account. In the event the Trustee has a claim against the Company under this Agreement, including, without limitation, under Section 3(b), the Trustee will pursue such claim solely against the Company and not against the Property held in the Trust Account.

6. Termination . This Agreement shall terminate as follows:

 

(a)    If the Trustee gives written notice to the Company that it desires to resign under this Agreement, the Company shall use its reasonable efforts to locate a successor trustee during which time the Trustee shall continue to act in accordance with the terms of this Agreement. At such time the Company notifies the Trustee that a successor trustee has been appointed by the Company and has agreed to become subject to the terms of this Agreement, the Trustee shall transfer the management of the Trust Account to the successor trustee, including, but not limited to, the transfer of copies of the reports and statements relating to the Trust Account, whereupon this Agreement shall terminate; provided, however, that, in the event the Company does not locate a successor trustee within ninety days of receipt of the resignation notice from the Trustee, the Trustee may, but shall not be obligated to, submit an application to have the Property deposited with the United States District Court for the Southern District of New York and upon such deposit, the Trustee shall be immune from any liability whatsoever that arises due to any actions or omissions to act by any party after such deposit; or

   

(b)    At such time that the Trustee has completed the liquidation of the Trust Account in accordance with the provisions of Section 1(j) hereof, and distributed the Property in accordance with the provisions of the Termination Letter, this Agreement shall terminate except with respect to Section 3(b).

7.   Miscellaneous .

 

(a)    The Company and the Trustee each acknowledge that the Trustee will follow the security procedures set forth below with respect to funds transferred from the Trust Account. The Company and the Trustee will each restrict access to confidential information relating to such security procedures to authorized persons. Each party must notify the other party immediately if it has reason to believe unauthorized persons may have obtained access to such information, or of any change in its authorized personnel. In executing funds transfers, the Trustee will rely upon account numbers or other identifying numbers of a beneficiary, beneficiary’s bank or intermediary bank, rather than names. The Trustee shall not be liable for any loss, liability or expense resulting from any error in an account number or other identifying number, provided it has accurately transmitted the numbers provided.

 

(b)    This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles that would result in the application of the substantive laws of another jurisdiction. It may be executed in several counterparts, each one of which shall constitute an original, and together shall constitute but one instrument. Facsimile signatures shall constitute original signatures for all purposes of this Agreement.

 

(c)    This Agreement contains the entire agreement and understanding of the parties hereto with respect to the subject matter hereof. This Agreement or any provision hereof may only be changed, amended or modified by a writing signed by each of the parties hereto; provided, however, that no such change, amendment or modification may be made without the prior written consent of Pali, who, along with each other Underwriter, the parties specifically agree, is and shall be a third party beneficiary for purposes of this Agreement; and provided further, any amendment to Section 1(j) shall require the vote or consent of holders of 95% of the shares of Common Stock sold in the IPO (the “Public Stockholders”), it being the specific intention of the parties hereto that each Public Stockholder is and shall be a third-party beneficiary of this Section 6(c) with the same right and power to enforce this Section 6(c) as either of the parties hereto. For purposes of this Section 6(c), the “consent of 95% of the Public Stockholders” shall mean receipt by the Trustee of a certificate from an entity certifying that (i) such entity regularly engages in the business of serving as inspector of elections for companies whose securities are publicly traded, and (ii) either (a) 95% of the Public Stockholders of record as of the record date established in accordance with Section 213(a) of the Delaware General Corporation Law, as amended (the “DGCL”), have voted in favor of such amendment or modification or (b) 95% of the Public Stockholders of record as of the record date established in accordance with Section 213(b) of the DGCL has delivered to such entity a signed writing approving such amendment or modification. As to any claim, cross-claim or counterclaim in any way relating to this Agreement, each party waives the right to trial by jury.   

(d)    The parties hereto consent to the jurisdiction and venue of any state or federal court located in the State and County of New York for purposes of resolving any disputes hereunder. The parties hereto irrevocably submit to such jurisdiction, which jurisdiction shall be exclusive, and hereby waive any objection to such exclusive jurisdiction and accept such venue, and waive any objection that such courts represent an inconvenient forum.

 

(e)    Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery or by facsimile transmission:

 

if to the Trustee, to:

 

if to the Company, to:

 

FMG Acquisition Corp.

Four Forest Park Drive

Farmington, CT 06032

Attn:  Gordon Pratt, Chief Executive Officer

Fax No.: (860) 674-1163

in either case with a copy to:

 

Pali Capital, Inc.

650 Fifth Avenue, 6 ^th floor

New York, New York 10019

Attn: R. Michael Powell, Managing Director

Fax No.: (212) 259-2092

and

 

Ellenoff, Grossman & Schole LLP

370 Lexington Avenue

New York, New York 10017

Attn: Douglas S. Ellenoff, Esq.

Fax No.: (212) 370-7889

 

and

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, New York 10036

Attn: Christopher S. Auguste, Esq.

Fax No.: (212) 715-8000

(f)    This Agreement may not be assigned by the Trustee without the prior written consent of the Company and Pali.

 

(g)    Each of the Trustee and the Company hereby represents that it has the full right and power and has been duly authorized to enter into this Agreement and to perform its respective obligations as contemplated hereunder. The Trustee acknowledges and agrees that it shall not make any claims or proceed against the Trust Account, including by way of set-off, and shall not be entitled to any funds in the Trust Account under any circumstance. The Trustee hereby consents to the inclusion of Continental Stock Transfer & Trust Company in the Registration Statement and other materials relating to the IPO.

IN WITNESS WHEREOF, the parties have duly executed this Investment Management Trust Agreement as of the date first written above.

 

CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee
By:	/s/ Frank DiPaolo
Name:	Frank DiPaolo
Title:	Chief Financial Officer

 

FMG ACQUISITION CORP.
By:	/s/ Gordon Pratt
Name:	Gordon Pratt
Title:	Chief Executive Officer and President

EXHIBIT A

 

[Letterhead of Company]

 

[Insert date]

 

Continental Stock Transfer

 

Re:   Trust Account No. [  ] Termination Letter

 

Gentlemen:

 

Pursuant to Section 1(j) of the Investment Management Trust Agreement between FMG Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of October 4, 2007 (“Trust Agreement”), this is to advise you that the Company has entered into an agreement (“Business Agreement”) with __________________ (“Target Business”) to consummate a business combination with Target Business (“Business Combination”) on or about [_______]. The Company shall notify you at least 48 hours in advance of the actual date of the consummation of the Business Combination (“Consummation Date”). Capitalized words used herein and not otherwise defined shall have the meanings ascribed to them in the Trust Agreement.

 

In accordance with paragraph 2 of Article 6 of the Amended and Restated Certificate of Incorporation of the Company, the Business Combination has been approved by the stockholders of the Company and by the Public Stockholders holding a majority of the IPO Shares cast at the meeting relating to the Business Combination, and Public Stockholders holding less than 30% of the IPO Shares have voted against the Business Combination and given notice of exercise of their redemption rights described in paragraph 3 of Article 6 of the Amended and Restated Certificate of Incorporation of the Company. Pursuant to Section 3(f) of the Trust Agreement, we are providing you with [an affidavit] [a certificate] of __________, which verifies the vote of the Company’s stockholders in connection with the Business Combination. In accordance with the terms of the Trust Agreement, we hereby authorize you to commence liquidation of the Trust Account to the effect that, on the Consummation Date, all of funds held in the Trust Account will be immediately available for transfer to the account or accounts that the Company shall direct in writing on the Consummation Date.

 

On the Consummation Date (i) counsel for the Company shall deliver to you written notification that (a) the Business Combination has been consummated or will, concurrently with your transfer of funds to the accounts as directed by the Company, be consummated, and (b) the provisions of Section 11-51-302(6) and Rule 51-3.4 of the CRS have been met, to the extent applicable, and (ii) the Company shall deliver to you written instructions with respect to the transfer of the funds held in the Trust Account (“Instruction Letter”). You are hereby directed and authorized to transfer the funds held in the Trust Account immediately upon your receipt of the counsel’s letter and the Instruction Letter in accordance with the terms of the Instruction Letter. In the event that certain deposits held in the Trust Account may not be liquidated by the Consummation Date without penalty, you will notify the Company of the same and the Company shall direct you as to whether such funds should remain in the Trust Account and be distributed after the Consummation Date to the Company or be distributed immediately and the penalty incurred. Upon the distribution of all the funds in the Trust Account pursuant to the terms hereof, the Trust Agreement shall be terminated.

 

In the event that the Business Combination is not consummated on the Consummation Date described in the notice thereof and we have not notified you on or before the original Consummation Date of a new Consummation Date, then upon receipt by the Trustee of written instructions, the funds held in the Trust Account shall be reinvested as provided in the Trust Agreement on the business day immediately following the Consummation Date as set forth in the notice.

 

	Very truly yours,
	FMG ACQUISITION CORP.
	By:
		Gordon Pratt Chief Executive Officer and President

 

cc: Pali Capital, Inc.

 

EXHIBIT B

 

[Letterhead of Company]

 

[Insert date]

 

 

Re:   Trust Account No. [  ] Termination Letter

 

Gentlemen:

 

Pursuant to paragraph 1(j) of the Investment Management Trust Agreement between FMG Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of October 4, 2007 (“Trust Agreement”), this is to advise you that the Company has been unable to effect a Business Combination (as defined in the Trust Agreement) with a target company within the time frame specified in the Amended and Restated Certificate of Incorporation of the Company, as described in the Company’s prospectus relating to its initial public offering.

 

In accordance with the terms of the Trust Agreement, we hereby (a) certify to you that the provisions of Section 11-51-302(6) and Rule 51-3.4 of the CRS have been met, and (b) authorize you to commence liquidation of the Trust Account as promptly as practicable to the stockholders of record on the Last Date (as defined in the Trust Agreement). The Company has appointed [ ] to serve as its Designated Paying Agent; accordingly, you will notify the Company and the “Designated Paying Agent” in writing as to when all of the funds in the Trust Account will be available for immediate transfer (the “Transfer Date”). The Designated Paying Agent shall thereafter notify you as to the account or accounts of the Designated Paying Agent that the funds in the Trust Account should be transferred to [ ] on the Transfer Date so that the Designated Paying Agent may commence distribution of such funds in accordance with the Company’s instructions. You shall have no obligation to oversee the Designated Paying Agent’s distribution of the funds. Upon the payment to the Designated Paying Agent of all the funds in the Trust Account, the Trust Agreement shall terminated in accordance with the terms thereof.

 

	Very truly yours,
	FMG ACQUISITION CORP.
	By:
		Gordon Pratt
		Chief Executive Officer and President

cc: Pali Capital, Inc.

	Agreed:
Dated: October 4, 2007
	FMG Acquisition Corp.
	By:	/s/ Gordon Pratt
		Gordon Pratt
		Chief Executive Officer and President
	Continental Stock Transfer & Trust Co.
	By:	/s/ Frank Di Paolo
		Authorized Officer

 

Exhibit 10.3

 

SECURITIES ESCROW AGREEMENT

 

SECURITIES ESCROW AGREEMENT, dated as of October 4, 2007 (the “Agreement”) by and among FMG Acquisition Corp., a Delaware corporation (the “Company”), the undersigned parties listed as Initial Stockholders on the signature page hereto (collectively, the “Initial Stockholders”) and Continental Stock Transfer & Trust Company, a New York corporation (the “Escrow Agent”).

 

WHEREAS, the Company has entered into an Underwriting Agreement, dated October 4, 2007 (“Underwriting Agreement”) with Pali Capital, Inc. (“Pali”) acting as representative of the several underwriters (collectively, the “Underwriters”), pursuant to which, among other matters, the Underwriters have agreed to purchase 4,500,000 units (not including the underwriters’ over-allotment option) (“Units”) of the Company. Each Unit consists of one share of the Company’s common stock, par value $.0001 per share (the “Common Stock”), and one warrant (“Warrant”), each Warrant to purchase one share of Common Stock, all as more fully described in the Company’s definitive Prospectus, dated October 4, 2007 (“Prospectus”) comprising part of the Company’s Registration Statement on Form S-1 (File No. 333-143466) under the Securities Act of 1933, as amended (the “Registration Statement”), declared effective on October 4, 2007 (the “Effective Date”);

 

WHEREAS, the Initial Stockholders have agreed, as a condition of the Underwriters’ obligation to purchase the Units pursuant to the Underwriting Agreement and to offer them to the public, to deposit all of their shares of Common Stock, as set forth opposite their respective names in Exhibit A attached hereto (collectively the “Escrow Shares”), in escrow as hereinafter provided;

 

WHEREAS, the Company has entered into a Subscription Agreement with one of the Initial Stockholders (the “Initial Warrantholder”, and together with the Initial Stockholders, the “Initial Holders”), dated May 22, 2007 (the “Subscription Agreement”), pursuant to which the Initial Warrantholder has agreed to purchase 1,250,000 warrants (the “Private Warrants”) in a private placement transaction;

 

WHEREAS, the Initial Warrantholder has agreed as a condition of the sale of the Private Warrants to deposit the Private Warrants (together with the Escrow Shares, the “Escrow Securities”), with the Escrow Agent as hereinafter provided; and

 

WHEREAS, the Company and the Initial Holders desire that the Escrow Agent accept the Escrow Securities, in escrow, to be held and disbursed as hereinafter provided.

 

IT IS AGREED:

 

1.   Appointment of Escrow Agent . The Company and the Initial Holders hereby appoint the Escrow Agent to act in accordance with and subject to the terms of this Agreement and the Escrow Agent hereby accepts such appointment and agrees to act in accordance with and subject to such terms.

 

2.   Deposit of Escrow Securities . On or before the Effective Date, each of the Initial Holders shall deliver to the Escrow Agent certificates representing his, her or its respective Escrow Securities, to be held and disbursed subject to the terms and conditions of this Agreement. Each Initial Holder acknowledges and agrees that the certificates representing his or her Escrow Securities will bear a legend to reflect the deposit of such Escrow Securities under this Agreement.

 

3.   Disbursement of the Escrow Securities .

 

3.1   The Escrow Agent shall hold the Escrow Shares and the Private Warrants until the termination of their respective Escrow Period (as defined below). In the case of the Escrow Shares, the “Escrow Period” shall be the period beginning on the date the certificates representing the Shares are deposited with the Escrow Agent and ending on the date that is twelve (12) months following the consummation of the initial Business Combination (as such term is defined in the Registration Statement). In the case of the Private Warrants, the “Escrow Period” shall be the period beginning on the date the certificates representing the Private Warrants are deposited with the Escrow Agent and ending on the 90th day after the date of the consummation of the initial Business Combination. On the termination date of the applicable Escrow Period, the Escrow Agent shall, upon written instructions from the Company or Company counsel, disburse each of the Initial Holders’ Escrow Securities to such Initial Holder; provided, however, that if the Escrow Agent is notified by the Company pursuant to Section 6.7 hereof that the Company is being liquidated at any time during the Escrow Period, then the Escrow Agent shall promptly destroy the certificates representing the Escrow Securities; provided further, that if, after the Company consummates a Business Combination (as such term is defined in the Registration Statement), it (or the surviving entity) subsequently consummates a liquidation, merger, stock exchange or other similar transaction which results in all of its stockholders of such entity having the right to exchange their shares of Common Stock for cash, securities or other property, then the Escrow Agent will, upon receipt of a notice, executed by the Chairman, Chief Executive Officer or Chief Financial Officer of the Company, in form reasonably acceptable to the Escrow Agent, certifying that such transaction is then being consummated, release the Escrow Securities to the Initial Holders so that they can similarly participate. The Escrow Agent shall have no further duties hereunder after the disbursement or destruction of the Escrow Securities in accordance with this Section 3.

 

4.   Rights of Initial Holders in Escrow Securities .

 

4.1   Voting Rights as a Stockholder . Subject to the terms of the Insider Letters described in Section 4.4 hereof and except as herein provided, the Initial Stockholders shall retain all of their rights as stockholders of the Company during the Escrow Period, including, without limitation, the right to vote such shares.

 

4.2   Dividends and Other Distributions in Respect of the Escrow Securities . During the Escrow Period, all dividends payable in cash with respect to the Escrow Securities shall be paid to the Initial Stockholders, but all dividends payable in stock or other non-cash property (“Non-Cash Dividends”) shall be delivered to the Escrow Agent to hold in accordance with the terms hereof. As used herein, the term “Escrow Securities” shall be deemed to include the Non-Cash Dividends distributed thereon, if any.

 

4.3   Restrictions on Transfer . During the Escrow Period, no sale, transfer or other disposition may be made of any or all of the Escrow Securities except (i) by gift to a member of Initial Holders’ immediate family or to a trust or other entity, the beneficiary of which is an Initial Holder or a member of an Initial Holder’s immediate family, (ii) by virtue of the laws of descent and distribution upon death of any Initial Holder, (iii) pursuant to a qualified domestic relations order, (iv) to an entity that is an Initial Holder, (v) to any person or entity controlling, controlled by, or under common control with, an Initial Holder or (vi) with respect to an Initial Holder who is an individual, to an entity controlled by such Initial Holder; provided, however, that such permitted transfers may be implemented only upon the respective transferee’s written agreement to be bound by the terms and conditions of this Agreement and of the Insider Letter signed by the Initial Holder transferring the Escrow Securities. During the Escrow Period, the Initial Holders shall not pledge or grant a security interest in the Escrow Securities or grant a security interest in their rights under this Agreement.

 

4.4   Insider Letters . Each of the Initial Holders has executed a letter agreement with Pali and the Company, dated as of the Effective Date, and which is filed as an exhibit to the Registration Statement (“Insider Letter”), respecting the rights and obligations of such Initial Holder in certain events, including, but not limited to, the liquidation of the Company.

 

5.   Concerning the Escrow Agent .

 

5.1   Good Faith Reliance . The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and in the exercise of its own best judgment, and may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or parties and, if the duties or rights of the Escrow Agent are affected, unless it shall have given its prior written consent thereto.

 

5.2   Indemnification . The Escrow Agent shall be indemnified and held harmless by the Company from and against any expenses, including counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding involving any claim which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, or the Escrow Securities held by it hereunder, other than expenses or losses arising from the gross negligence or willful misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent shall notify the other parties hereto in writing. In the event of the receipt of such notice, the Escrow Agent, in its sole discretion, may commence an action in the nature of interpleader in an appropriate court to determine ownership or disposition of the Escrow Securities or it may deposit the Escrow Securities with the clerk of any appropriate court or it may retain the Escrow Securities pending receipt of a final, non appealable order of a court having jurisdiction over all of the parties hereto directing to whom and under what circumstances the Escrow Securities are to be disbursed and delivered. The provisions of this Section 5.2 shall survive in the event the Escrow Agent resigns or is discharged pursuant to Sections 5.5 or 5.6 below.

 

5.3   Compensation . The Escrow Agent shall be entitled to reasonable compensation from the Company for all services rendered by it hereunder, as set forth on Exhibit B hereto. The Escrow Agent shall also be entitled to reimbursement from the Company for all expenses paid or incurred by it in the administration of its duties hereunder including, but not limited to, all counsel, advisors’ and agents’ fees and disbursements and all taxes or other governmental charges.

 

5.4   Further Assurances . From time to time on and after the date hereof, the Company and the Initial Holders shall deliver or cause to be delivered to the Escrow Agent such further documents and instruments and shall do or cause to be done such further acts as the Escrow Agent shall reasonably request to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself that it is protected in acting hereunder.

 

5.5   Resignation . The Escrow Agent may resign at any time and be discharged from its duties as escrow agent hereunder by its giving the other parties hereto written notice and such resignation shall become effective as hereinafter provided. Such resignation shall become effective at such time that the Escrow Agent shall turn over to a successor escrow agent appointed by the Company and approved by Pali, the Escrow Securities held hereunder. If no new escrow agent is so appointed within the 60 day period following the giving of such notice of resignation, the Escrow Agent may deposit the Escrow Securities with any court it deems appropriate.

 

5.6   Discharge of Escrow Agent . The Escrow Agent shall resign and be discharged from its duties as escrow agent hereunder if so requested in writing at any time by the other parties hereto, jointly, provided, however, that such resignation shall become effective only upon acceptance of appointment by a successor escrow agent as provided in Section 5.5.

 

5.7   Liability . Notwithstanding anything herein to the contrary, the Escrow Agent shall not be relieved from liability hereunder for its own gross negligence or its own willful misconduct.

 

6.   Miscellaneous .

 

6.1   Governing Law . This Agreement shall for all purposes be deemed to be made under and shall be construed in accordance with the laws of the State of New York. Each of the parties hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

 

6.2   Third Party Beneficiaries . Each of the Initial Holders hereby acknowledges that the Underwriters, including, without limitation, Pali, are third party beneficiaries of this Agreement and this Agreement may not be modified or changed without the prior written consent of Pali.

 

6.3   Entire Agreement . This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and, except as expressly provided herein, may not be changed or modified except by an instrument in writing signed by the party to the charged.

 

6.4   Headings . The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation thereof.

 

6.5   Binding Effect . This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives, successors and assigns.

 

6.6   Notices . Any notice or other communication required or which may be given hereunder shall be in writing and either be delivered personally or by private national courier service, or be mailed, certified or registered mail, return receipt requested, postage prepaid, and shall be deemed given when so delivered personally or, if sent by private national courier service, on the next business day after delivery to the courier, or, if mailed, two business days after the date of mailing, as follows:

 

If to the Company, to:

FMG Acquisition Corp.

Four Forest Park

Farmington, CT 06032

Attn: Gordon Pratt, Chief Executive Officer and President

 

If to a Stockholder, to his address set forth in Exhibit A.

 

and if to the Escrow Agent, to:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Frank A. Di Paolo

Fax No.: (212) 616-7620

 

A copy of any notice sent hereunder shall be sent to:

 

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, New York 10036

Attn:  Christopher Auguste, Esq.

 

and:

Pali Capital, Inc.

650 Fifth Avenue, 6 ^th floor

New York, New York 10019

Attn: R. Michael Powell, Managing Director

 

and:

 

Ellenoff, Grossman & Schole LLP

370 Lexington Avenue

New York, New York 10017

Attn: Douglas S. Ellenoff, Esq.

 

The parties may change the persons and addresses to which the notices or other communications are to be sent by giving written notice to any such change in the manner provided herein for giving notice.

 

6.7   Liquidation of Company . The Company shall give the Escrow Agent written notification of the liquidation and dissolution of the Company in the event that the Company fails to consummate a Business Combination within the time period(s) specified in the Prospectus.

 

6.8  Waiver . Notwithstanding anything herein to the contrary, the Escrow Agent hereby waives any and all right, title, interest or claim of any kind (“Claim”) in or to any distribution of the Trust Account, and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever.

 

6.9   Counterparts . This Agreement may be executed in several counterparts each one of which shall constitute an original and may be delivered by facsimile transmission and together shall constitute one instrument.

 

[remainder of page intentionally left blank]

 

WITNESS the execution of this Agreement as of the date first above written.

FMG ACQUISITION CORP.
By:	/s/ Gordon Pratt
	Gordon Pratt, Chief Executive Officer and President
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By:	/s/ Gregory P. Denman
	Name: Gregory P. Denman
	Title: Vice President

 

INITIAL STOCKHOLDERS:
FMG INVESTORS LLC
By:	/s/ Larry G. Swets. Jr.
	Larry G. Swets, Jr.
	Managing Member

 

 

 

   EXHIBIT B

 

  Escrow Agent Fees

 

$1,800 annually for acting agent escrow fee.

 

Initial acceptance fee and first year agent fee to be paid at closing.

 

Exhibit 10.4

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of the 4th day of October, 2007, by and among FMG Acquisition Corp., a Delaware corporation (the “Company”), and the undersigned parties listed under Investors on the signature page hereto (each, an “Investor” and collectively, the “Investors”).

 

WHEREAS, the Investors currently hold all of the issued and outstanding securities of the Company;

 

WHEREAS, the Investors currently hold an aggregate of 1,250,000 warrants (“Warrants”), exercisable into an aggregate of 1,250,000 shares of the Common Stock (as defined below) (“Warrant Shares”), each of the Warrants and the Warrant Shares shall be referred to herein as the “Warrant Securities”;

 

WHEREAS, the Investors and the Company desire to enter into this Agreement to provide the Investors with certain rights relating to the registration of shares of Common Stock and Warrant Securities held by them;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.   DEFINITIONS . The following capitalized terms used herein have the following meanings:

 

“ Agreement ” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.

 

“ Business Combination ” means the acquisition of direct or indirect ownership through a merger, capital stock exchange, asset or stock acquisition or other similar type of transaction, of an operating business or businesses having collectively, a fair market value of at least 80% of the Company’s net assets at the time of such transaction; provided, however, that, any acquisition of multiple operating businesses shall occur contemporaneously with one another.

 

“ Commission ” means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act or the Exchange Act.

 

“ Common Stock ” means the common stock, par value $0.0001 per share, of the Company.

 

“ Company ” is defined in the preamble to this Agreement.

 

“ Demand Registration ” is defined in Section 2.1.1.

 

“ Demanding Holder ” is defined in Section 2.1.1.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

“ Form S-3 ” is defined in Section 2.2.4.

 

“ Indemnified Party ” is defined in Section 4.3.

 

“ Indemnifying Party ” is defined in Section 4.3.

 

“ Investor ” is defined in the preamble to this Agreement.

 

“ Investor Indemnified Party ” is defined in Section 4.1.

 

“ Maximum Number of Shares ” is defined in Section 2.1.4.

 

“ Notices ” is defined in Section 6.3.

 

“ Piggy-Back Registration ” is defined in Section 2.2.1.

 

“ Purchase Option ” means the option to purchase 450,000 units, each unit consisting of one share of Common Stock and one Common Stock purchase warrant, issued to Pali Capital, Inc. or its registered assignees in connection with the Company’s initial public offering or securities (as may be transferred from time to time in accordance with its terms). 

 

“ Purchase Option Securities ” means the securities underlying the Purchase Option that have been granted registration rights by the Company pursuant to the Purchase Option.

 

“ Register ,” “ registered ” and “ registration ” mean a registration with respect to the Registrable Securities effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

“ Registrable Securities ” mean the 1,125,000 shares of Common Stock, 1,250,000 Warrants and 1,250,000 Warrant Shares owned or held by Investors prior to the effective date of the Company’s initial public offering of securities, in each case that are eligible for registration under the Securities Act and the terms of the Securities Escrow Agreement. Registrable Securities include any warrants, shares of capital stock or other securities of the Company issued as a dividend or other distribution with respect to or in exchange for or in replacement of such shares of Common Stock. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding, or (d) the Securities and Exchange Commission makes a definitive determination to the Company that the Registrable Securities are saleable under Rule 144(k).

 

“ Registration Statement ” means a registration statement filed by the Company with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of Common Stock (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).

 

“ Release Date I ” means the date on which shares of Common Stock are disbursed from escrow pursuant to Section 3 of the Securities Escrow Agreement.

 

“ Release Date II ” means the date on which the Warrants are disbursed from escrow pursuant to Section 3 of the Securities Escrow Agreement.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

“ Securities Escrow Agreement ” means that certain Securities Escrow Agreement dated as of October 4, 2007 by and among the parties hereto and Continental Stock Transfer & Trust Company.

 

“ Underwriter ” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

 

2.    REGISTRATION RIGHTS.

 

2.1   Demand Registration .

 

2.1.1.     Request for Registration . At any time and from time to time on or after each of Release Date I as it relates to the 1,125,000 shares of Common Stock and Release Date II as it relates to the Warrant Securities, as applicable, the holders of a majority-in-interest of the 1,125,000 shares of Common Stock or the 1,250,000 Warrant Securities, as the case may be, held by the Investors or the transferees of the Investors, may make a written demand for registration under the Securities Act of all or part of their Registrable Securities (a “ Demand Registration ”). Any demand for a Demand Registration shall specify the number and type of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will notify all holders of Registrable Securities of the demand within ten (10) days from the receipt of the Demand Registration, and each holder of Registrable Securities who wishes to include all or a portion of such holder’s Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “ Demanding Holder ”) shall so notify the Company within fifteen (15) days after the receipt by the holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.1.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to effect more than an aggregate of two (2) Demand Registrations with respect to the 1,125,000 shares of Common Stock and two (2) Demand Registrations with respect to the Warrant Securities under this Section 2.1.1 in respect of Registrable Securities. In no event shall a registration statement that has been filed with respect to the Warrant Securities be declared effective until the Company has completed its initial Business Combination.

 

2.1.2.   Effective Registration . A registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement or otherwise with respect thereto; provided , however , if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders thereafter elect to continue the offering; provided , further , the Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.

 

2.1.3.   Underwritten Offering . If a majority-in-interest of the Demanding Holders so elect and such holders so advise the Company as part of their written demand for a Demand Registration, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. In such event, the right of any holder to include its Registrable Securities in such registration shall be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by a majority-in-interest of the holders initiating the Demand Registration.

 

2.1.4.   Reduction of Offering . Subject to the registration rights set forth in the Purchase Option, which rights in no way shall be limited by the Maximum Number of Shares to be included in the Registration Statement pursuant to this Section 2.1.4, if the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises the Company and the Demanding Holders in writing that the dollar amount or number of shares of Registrable Securities which the Demanding Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other shareholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders ( pro rata in accordance with the number of shares of Registrable Securities which such Demanding Holders have requested be included in such registration, regardless of the number of shares of Registrable Securities held by each Demanding Holder) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i), (ii), and (iii), the shares of Common Stock that other shareholders desire to sell that can be sold without exceeding the Maximum Number of Shares.

 

2.1.5.     Withdrawal . If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to the Company and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Demand Registration. In such event, the Company need not seek effectiveness of such Registration Statement for the benefit of other Investors. If the majority-in-interest of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration, then such registration shall not count as a Demand Registration provided for in Section 2.1.1.

 

2.2   Piggy-Back Registration .

 

2.2.1.   Piggy-Back Rights . If at any time on or after Release Date I as it relates to the 1,125,000 shares of Common Stock and Release Date II as it relates to the Warrant Securities, the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company including, without limitation, pursuant to Section 2.1), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of shares of Registrable Securities as such holders may request in writing within five (5) days following receipt of such notice (a “ Piggy-Back Registration ”). The Company shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.

 

2.2.2.   Reduction of Offering . Subject to the registration rights set forth in the Purchase Option, which rights in no way shall be limited by the Maximum Number of Shares to be included in the Registration Statement pursuant to this Section 2.2.2, if the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders of Registrable Securities in writing that the dollar amount or number of shares of Common Stock which the Company desires to sell, taken together with shares of Common Stock, if any, as to which registration has been demanded pursuant to written contractual arrangements with persons other than the holders of Registrable Securities hereunder, the Registrable Securities as to which registration has been requested under this Section 2.2, and the shares of Common Stock, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other shareholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such registration:

 

(i)   If the registration is undertaken for the Company’s account: (A) first, the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities, if any, including the Registrable Securities, and Purchase Option Securities as to which registration has been requested pursuant to the applicable written contractual piggy-back registration rights of such security holders ( pro rata in accordance with the number of shares of Common Stock which each such person has actually requested to be included in such registration, regardless of the number of shares of Common Stock with respect to which such persons have the right to request such inclusion) that can be sold without exceeding the Maximum Number of Shares; and (C) third, to the extent that the Maximum Number of shares has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual piggy-back registration rights with such persons ( pro rata in accordance with the number of shares of Common Stock which each such person has actually requested to be included in such registration, regardless of the number of shares of Common Stock with respect to which such persons have the right to request such inclusion) that can be sold without exceeding the Maximum Number of Shares; and

 

(ii)   If the registration is a “demand” registration undertaken at the demand of persons other than the holders of Registrable Securities or pursuant to contractual arrangements with such persons, (A) first, the shares of Common Stock for the account of the demanding persons that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (C) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the Registrable Securities and Purchase Option Securities as to which registration has been requested under this Section 2.2 ( pro rata in accordance with the number of shares of Registrable Securities or Purchase Options Securities held by each such holder); and (D) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A), (B) and (C), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register, if any, as to which registration has been requested pursuant to written contractual arrangements with such persons that can be sold without exceeding the Maximum Number of Shares.

 

2.2.3.   Withdrawal . Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may also elect to withdraw a registration statement at any time prior to the effectiveness of the Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 3.3.

 

2.2.4.     Registrations on Form S-3 . The holders of Registrable Securities may at any time and from time to time, request in writing that the Company register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may be available at such time (“ Form S-3 ”); provided , however , that the Company shall not be obligated to effect such request through an underwritten offering. Upon receipt of such written request, the Company will promptly give written notice of the proposed registration to all other holders of Registrable Securities, and, as soon as practicable thereafter, effect the registration of all or such portion of such holder’s or holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other holder or holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided , however , that the Company shall not be obligated to effect any such registration pursuant to this Section 2.2: (i) if Form S-3 is not available for such offering; or (ii) if the holders of the Registrable Securities, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at any aggregate price to the public of less than $500,000. Registrations effected pursuant to this Section 2.2 shall not be counted as Demand Registrations effected pursuant to Section 2.1.

 

2.3   No Net Cash Settlement Value . In connection with the exercise of the Warrants, the Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise; however, the Company may satisfy its obligation by delivering unregistered shares of Common Stock.  In no event will the Company be required to net cash settle an exercise of a Warrant .

 

3.   REGISTRATION PROCEDURES.

 

3.1     Filings; Information . Whenever the Company is required to effect the registration of any Registrable Securities pursuant to Section 2, the Company shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:

 

3.1.1.   Filing Registration Statement . The Company shall, as expeditiously as possible and in any event within sixty (60) days after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its best efforts to cause such Registration Statement to become and remain effective for the period required by Section 3.1.3; provided , however , that the Company shall have the right to defer any Demand Registration for up to thirty (30) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if the Company shall furnish to the holders a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company and its shareholders for such Registration Statement to be effected at such time; provided further, however , that the Company shall not have the right to exercise the right set forth in the immediately preceding proviso more than once in any 365-day period in respect of a Demand Registration hereunder.

 

3.1.2.   Copies . The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the holders of Registrable Securities included in such registration, and such holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the holders of Registrable Securities included in such registration or legal counsel for any such holders may request in order to facilitate the disposition of the Registrable Securities owned by such holders.

 

3.1.3.   Amendments and Supplements . The Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement (which period shall not exceed the sum of one hundred eighty (180) days plus any period during which any such disposition is interfered with by any stop order or injunction of the Commission or any governmental agency or court) or such securities have been withdrawn.

 

3.1.4.   Notification . After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) business days after such filing, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such holders promptly and confirm such advice in writing in all events within two (2) business days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an 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 not misleading, and promptly make available to the holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity to review such documents and comment thereon, and the Company shall not file any Registration Statement or prospectus or amendment or supplement thereto, including documents incorporated by reference, to which such holders or their legal counsel shall object.

 

3.1.5.   State Securities Laws Compliance . The Company shall use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other Governmental Authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided , however , the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.1.5 or subject itself to taxation in any such jurisdiction.

 

3.1.6.   Agreements for Disposition . The Company shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of the Company in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the holders of Registrable Securities included in such registration statement. No holder of Registrable Securities included in such registration statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such holder’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such holder’s material agreements and organizational documents, and with respect to written information relating to such holder that such holder has furnished in writing expressly for inclusion in such Registration Statement. Holders of Registrable Securities shall agree to such covenants and indemnification and contribution obligations for selling stockholders as are customarily contained in agreements of that type. Further, such holders shall cooperate fully in the preparation of the registration statement and other documents relating to any offering in which they include securities pursuant to Section 2 hereof. Each holder shall also furnish to the Company such information regarding itself, the Registrable Securities held by such holder and the intended method of disposition of such securities as shall be reasonably required to effect the registration of the Registrable Securities.

 

3.1.7.   Cooperation . The principal executive officer of the Company, the principal financial officer of the Company, the principal accounting officer of the Company and all other officers and members of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.

 

3.1.8.     Records . The Company shall make available for inspection by the holders of Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any holder of Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.

 

3.1.9.   Opinions and Comfort Letters . The Company shall furnish to each holder of Registrable Securities included in any Registration Statement a signed counterpart, addressed to such holder, of (i) any opinion of counsel to the Company delivered to any Underwriter and (ii) any comfort letter from the Company’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, the Company shall furnish to each holder of Registrable Securities included in such Registration Statement, at any time that such holder elects to use a prospectus, an opinion of counsel to the Company to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.

 

3.1.10.   Earnings Statement . The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and make available to its shareholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

3.1.11.   Listing . The Company shall use its best efforts to cause all Registrable Securities included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to the holders of a majority of the Registrable Securities included in such registration.

 

3.2   Obligation to Suspend Distribution . Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the Company, pursuant to a written insider trading compliance program adopted by the Company’s Board of Directors, of the ability of all “insiders” covered by such program to transact in the Company’s securities because of the existence of material non-public information, each holder of Registrable Securities included in any registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such holder receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in the Company’s securities is removed, as applicable, and, if so directed by the Company, each such holder will deliver to the Company all copies, other than permanent file copies then in such holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.

 

3.3   Registration Expenses . The Company shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective or whether any or all Holders of Registrable Securities withdraw from any Registration Statement, including, without limitation: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) National Association of Securities Dealers, Inc. fees; (vii) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by the Company in connection with such registration and (ix) the fees and expenses of one legal counsel selected by the holders of a majority-in-interest of the Registrable Securities included in such registration. The Company shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the holders thereof, which underwriting discounts or selling commissions shall be borne by such holders. Additionally, in an underwritten offering, all selling shareholders and the Company shall bear the expenses of the underwriter pro rata in proportion to the respective amount of shares each is selling in such offering.

 

3.4   Information . The holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the Company’s obligation to comply with federal and applicable state securities laws.

 

 

4.   INDEMNIFICATION AND CONTRIBUTION.

 

4.1   Indemnification by the Company . The Company agrees to indemnify and hold harmless each Investor and each other holder of Registrable Securities, and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each person, if any, who controls an Investor and each other holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “ Investor Indemnified Party ”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement (or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission (or alleged omission) to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration; and the Company shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided , however , that (a) the Company will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon (i) any untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by such selling holder expressly for use therein or (ii) for the use by any selling holder of a prospectus in violation of any stop order or other suspension of the Registration Statement of which the Company made the selling holder aware; and (b) the foregoing indemnity shall not inure to the benefit of any Investor Indemnified Party if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of the applicable selling holder to the person asserting such expense, loss, claim, damage or liability who purchased the Registrable Securities from such selling holder, if required by law so to have been delivered at or prior to the written confirmation of the sale of the Registrable Securities to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such expense, loss, claim, damage or liability, unless such failure is the result of noncompliance by the Company with Section 3.1.3 hereof. The Company also shall indemnify any Underwriter of the Registrable Securities or Purchase Option Securities, their officers, employees, affiliates, directors, partners, members and agents and each person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.

 

4.2     Indemnification by Holders of Registrable Securities . Each selling holder of Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling holder, indemnify and hold harmless the Company, each of its directors and officers and each Underwriter (if any), and each other person, if any, who controls another selling holder or such Underwriter or the Company within the meaning of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, judgments, damages or liabilities, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by such selling holder expressly for use therein or for the use by any Investor Indemnified Party of a prospectus in violation of any stop order or other suspension of the Registration Statement, and shall reimburse the Company, its directors and officers, and each other selling holder or such controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each selling holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling holder in connection with the sale of the Registrable Securities by such selling holder pursuant to the Registration Statement containing such untrue statement.

 

4.3   Conduct of Indemnification Proceedings . Promptly after receipt by any person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the “ Indemnified Party ”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder, notify such other person (the “ Indemnifying Party ”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

 

4.4   Contribution .

 

4.4.1.     If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

4.4.2.   The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1. The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

5.     UNDERWRITING AND DISTRIBUTION.

 

5.1   Rule 144 . The Company covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or any similar Rule or regulation hereafter adopted by the Commission.

 

6.   MISCELLANEOUS.

 

6.1   Other Registration Rights . The Company represents and warrants that except for the securities issued or issuable upon exercise of the Purchase Option to be issued to Pali Capital, Inc. or its assigns, no person, other than a holder of the Registrable Securities has any right to require the Company to register any shares of the Company’s capital stock for sale or to include shares of the Company’s capital stock in any registration filed by the Company for the sale of shares of capital stock for its own account or for the account of any other person.

 

6.2   Assignment; No Third Party Beneficiaries . This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the holders of Registrable Securities hereunder may be freely assigned or delegated by such holder of Registrable Securities in conjunction with and to the extent of any transfer of Registrable Securities by any such holder in accordance with applicable law. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties, to Pali Capital, Inc. and their respective successors and the permitted assigns of the Investor or holder of Registrable Securities or of any assignee of the Investor or holder of Registrable Securities. This Agreement is not intended to confer any rights or benefits on any persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.2.

 

6.3  Notices . All notices, demands, requests, consents, approvals or other communications (collectively, “ Notices ”) required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile; provided, that if such service or transmission is not on a business day or is after normal business hours, then such notice shall be deemed given on the next business day. Notice otherwise sent as provided herein shall be deemed given on the next business day following timely delivery of such notice to a reputable air courier service with an order for next-day delivery.

 

6.4   Severability . This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

6.5     Counterparts; Facsimile Signatures . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Facsimile signatures shall be deemed to be original signatures for all purposes of this Agreement.

 

6.6     Entire Agreement . This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written.

 

6.7   Modifications and Amendments . No amendment, modification or termination of this Agreement shall be binding upon any party unless executed in writing by such party.

 

6.8   Titles and Headings . Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.

 

6.9   Waivers and Extensions . Any party to this Agreement may waive any right, breach or default which such party has the right to waive, provided that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts.

 

6.10   Remedies Cumulative . In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the Investor or any other holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

 

6.11   Governing Law . This Agreement shall be governed by, interpreted under, and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed within the State of New York, without giving effect to any choice-of-law provisions thereof that would compel the application of the substantive laws of any other jurisdiction. Each of the parties hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York (each, a “New York Court”), and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

 

6.12   Waiver of Trial by Jury . Each party hereby irrevocably and unconditionally waives the right to a trial by jury in any action, suit, counterclaim or other proceeding (whether based on contract, tort or otherwise) arising out of, connected with or relating to this Agreement, the transactions contemplated hereby, or the actions of the Investor in the negotiation, administration, performance or enforcement hereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.

FMG ACQUISITION CORP.
By:	/s/ Gordon Pratt
	Name: Gordon Pratt
	Title: Chief Executive Officer and President

 

 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.

 

INVESTORS:
FMG INVESTORS LLC
By:	/s/ Larry G. Swets, Jr.
	Larry G. Swets, Jr.
	Managing Member
	Address: Four Forest Park
	Farmington, CT 06032
/s/ John Petry
John Petry
/s/ David E. Sturgess
David E. Sturgess
/s/ Thomas D. Sargent
Thomas D. Sargent
/s/ James R. Zuhlke
James R. Zuhlke

 

Exhibit 10.5

SUBORDINATED REVOLVING

LINE OF CREDIT AGREEMENT

 

This Subordinated Revolving Line of Credit Agreement dated as of October 4, 2007 (this “ Agreement ”) is entered into by and between FMG Acquisition Corp., a Delaware corporation (“ Borrower ”), and FMG Investors LLC, a Connecticut limited liability company (“ Lender ”), with reference to the following facts.

 

(a)  Borrower has been organized for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business (a “ Business Combination ”).

 

(b)  Borrower proposes to: (a) make a public offering (the “ Public Offering ”) of its securities pursuant to a registration statement (the “ Registration Statement ”) filed with and to be declared effective by the Securities and Exchange Commission (the “ SEC ”); (b) deposit the proceeds from the Public Offering into a trust account (the “ Trust Account ”) for the benefit of the purchasers of securities in the Public Offering, net of offering costs, underwriting discounts and $1,200,000 of interest earned on such proceeds, together with $100,000 to be held outside of the Trust Account, to be used for general corporate purposes (such $1,300,000, the “Non-Trust Funds”), to be held and disbursed in accordance with the terms of the Investment Management Trust Agreement to be entered into between Borrower and Continental Stock Transfer & Trust Company as trustee (the “ Trust Agreement ”); and (c) utilize the funds in the Trust Account in connection with a Business Combination.

 

(c)   Borrower may need funds (i) to pay costs and expenses prior to consummation of a Business Combination or (ii) to pay costs, expenses and claims in connection with Borrower’s dissolution and the liquidation of Borrower and the Trust Account to its public stockholders.

 

(d)  On the terms and subject to the conditions set forth in this Agreement, Lender is willing to make available to Borrower a revolving line of credit to pay certain costs and expenses that may arise prior to a Business Combination or to pay costs, expenses and claims in connection with Borrower’s dissolution and the liquidation of the Trust Account to its public stockholders (the “ Loan ”).

   

1.   The Loan  

 

1.1  If the Non-Trust Funds are insufficient for the Borrower’s working capital purposes (including the payment of costs, expenses and claims in connection with Borrower’s dissolution and the liquidation of Borrower and the distribution of the Trust Account to its public stockholders), then Lender agrees to make advances to Borrower, and Borrower agrees to repay such advances, from time to time in accordance with the terms and conditions of this Agreement and the form of revolving promissory note attached hereto as Exhibit A (the “ Note ”); provided, however, that notwithstanding anything to the contrary in this Agreement, at no time shall the aggregate of all advances and readvances outstanding under the Loan at any time exceed $250,000.

This Agreement and the Note are each sometimes referred to in this Agreement individually as a “ Loan Document ,” and are sometimes collectively referred to as the “ Loan Documents .”

1.2  Lender’s obligation to make advances shall expire upon the first to occur of the following:

 

1.2.1

Upon a material breach or default of any representation, warranty or agreement of Borrower that is not cured or corrected within 20 days of notice of such breach from Lender;

    

1.2.2

Upon consummation of a Business Combination;

 

1.2.3  If no Business Combination is consummated, after the completion of the liquidation of the Trust Account and Borrower’s completed and fully implemented dissolution and distribution;

 

1.2.4 Thirty days after Borrower provides written notice to Lender of its termination of this Agreement and the Loan facility, and the payment of all amounts due hereunder to Lender.

 

2.   Conditions of Advances .  Upon reasonable advance request from Borrower, Lender shall make advances to or as directed by Borrower, provided that each and all of the following conditions is satisfied:

 

 

3.   Borrower Representations  

 

3.1.1  Borrower has full power and authority to execute and deliver this Agreement and the other Loan Documents to be executed and delivered by it pursuant hereto and to perform its obligations hereunder and thereunder. This Agreement and such Loan Documents constitute the valid and legally binding obligations of the Borrower and are enforceable against Borrower in accordance with their terms.

 

3.1.2  Neither the execution and the delivery of the Loan Documents by Borrower, nor the consummation of the transactions contemplated by the Loan Documents, nor the borrowing by Borrower, will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Borrower is subject or any provision of the Amended and Restated Certificate of Incorporation or Bylaws of Borrower, or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any entity or natural person (each, a “ Person ”) the right to accelerate, terminate, modify, or cancel, any agreement, contract, lease, license, instrument, or other arrangement to which Borrower is a party or by which it is bound or to which any of its assets are subject (or result in the imposition of any security interest upon any of its assets), in each case other than where such violation, conflict, breach, default, acceleration or creation of right would not reasonably be expected to have a material adverse effect on the ability of Borrower to repay amounts due under the Note in accordance with the terms of the Loan Documents. (a “ Material Adverse Effect ”).

 

3.1.3  Borrower does not need to give any notice to, make any filing with, or obtain any authorization, permit, certificate, registration, consent, approval or order of any government or governmental agency in order for the parties to consummate the transactions contemplated by this Agreement, except where the failure would not reasonably be expected to have a Material Adverse Effect.

 

3.1.4  The conditions to the obligation of Lender to make the advance, as set forth in Section 2, shall be satisfied.

 

3.2  Each and every representation and warranty made by Borrower in this Agreement shall be deemed renewed and remade upon the making of each and every advance or readvance under the Note that Lender may make.

 

4.   Borrower Covenants .  For as long as Lender shall have a commitment to make advances or there shall be any outstanding balance on the Loan, without the prior consent of Lender, Borrower shall:

 

4.1  use the proceeds of any advance made hereunder only for (i) ordinary and reasonable operating costs and expenses during the period Borrower seeks to identify, investigate, negotiate and consummate a Business Combination, including Borrower’s reporting obligations with the SEC, the audit and review of Borrower’s financial statements, identifying and investigating potential targets for a Business Combination, deposits, down payments or funding of “no-shop” provisions in connection with a particular Business Combination, negotiating and closing the Business Combination, legal and other professional fees and expenses, fees, salaries and compensation for directors, officers, employees, consultants and advisors, and insurance premiums or (ii) to pay claims of vendors, prospective target businesses or other entities related to 4.1(i) and any costs or expenses incurred in connection with Borrower’s dissolution and the liquidation of Borrower and the distribution of the Trust Account to its public stockholders;

 

  4.2  not declare or pay any dividend or distribution with respect to, or repurchase or redeem any shares of, the capital stock of Borrower, provided that this shall not prohibit payments from the Trust Account to stockholders of Borrower in accordance with the Trust Agreement;

 

4.3  not engage in any business other than identifying, investigating, negotiating and closing a Business Combination;

 

4.4  not make any material capital expenditure or purchase any material property or asset (other than office supplies and equipment); and

 

4.5  upon request of Lender, provide to Lender copies of all filings with the Securities and Exchange Commission.

5.   No Recourse to Trust Account  

 

Lender, on behalf of itself and its successors and assigns, hereby acknowledges and agrees that under no circumstance shall Lender have any right, title or interest in or to any of the funds in the Trust Account, notwithstanding the fact that such funds were received for the purchase and sale of securities of Borrower, or any funds distributed from the Trust Account other than in a Business Combination Distribution (as defined below), and that their sole recourse for repayment of any and all amounts due under the Note shall be against the assets or properties of Borrower never deposited into the Trust Account or distributed to Borrower from the Trust Account in a Business Combination Distribution. Lender hereby irrevocably waives any claim it might have to funds in the Trust Account, and any funds distributed from the Trust Account other than in a Business Combination Distribution, at law or in equity, agree not to make any such claim, and agree to indemnify and hold Borrower harmless from any such claim made by or on behalf of Lender. For purposes of this Section 5, a “ Business Combination Distribution ” means a distribution from the Trust Account in connection with the consummation of a Business Combination pursuant to the Trust Agreement.

 

6.   Events of Default .  The occurrence of any of the following shall constitute an event of default (an “ Event of Default ”) hereunder and under each and every other Loan Document:

 

6.1  The Borrower shall fail to pay any principal or any other amount as and when due and payable under any Loan Document;

 

6.2  Any representation or warranty which is made or deemed made in any Loan Document by the Borrower shall prove to have been incorrect or misleading in any material respect on or as of the date made or deemed made or remade;

 

6.3  The Borrower shall fail to perform or observe any term, provision, covenant, or agreement contained in any Loan Document to be performed or observed by the Borrower (other than any payment obligation) and such failure shall continue more than 20 days after notice thereof from Lender;

 

6.4  The Borrower shall (a) generally not, or be unable to, or admit in writing its inability to, pay its debts as such debts become due, only after the Company has borrowed the entire $250,000 pursuant hereto; or (b) make an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian, receiver, or trustee for it or a substantial part of its assets; or (c) commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) have any such petition or application filed or any such proceeding commenced against it in which an order for relief is entered or adjudication or appointment is made and which remains undismissed for a period of 30 days or more; or (e) by any act or omission to act indicate consent to, approval of, or acquiescence in any such petition, application, or proceeding, or order for relief, or the appointment of a custodian, receiver or trustee for all or any such substantial part of its properties; or (f) suffer any such custodianship, receivership, or trusteeship for all or any substantial part of its properties; or (g) suffer any such custodianship, receivership, or trusteeship to continue undischarged for a period of 30 days or more; provided, however , that the adoption of a plan of dissolution and distribution and its implementation by the Borrower’s Board of Directors due to the failure of Borrower to complete a Business Combination shall not in any instance be deemed an Event of Default hereunder; or

  

6.5  At any time after execution and delivery of this Agreement, and whether or not due to any fault of Lender, any Loan Document shall cease to be in full force and effect and enforceable in accordance with its terms, or shall be declared null and void.

 

7.   Consequences of Default .  If an Event of Default shall occur, Lender:

 

7.2  may declare the Note and all amounts payable under this Agreement and any other Loan Document to be forthwith due and payable, whereupon the Note and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Borrower.

 

8.   Miscellaneous Provisions  

 

8.1   Notices .  All notices, requests, demands and other communications (collectively, “ Notices ”) given pursuant to this Agreement shall be in writing, and shall be delivered by personal service, courier, facsimile transmission or by United States first class, registered or certified mail, addressed to the following addresses:

     

Any Notice, other than a Notice sent by registered or certified mail, shall be effective when received; a Notice sent by registered or certified mail, postage prepaid return receipt requested, shall be effective on the earlier of when received or the third day following deposit in the United States mails (or on the seventh day if sent to or from an address outside the United States). Any party may from time to time change its address for further Notices hereunder by giving notice to the other party in the manner prescribed in this Section.

 

8.2   No Waivers; Remedies Cumulative . No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided herein shall be cumulative and not exclusive of any rights or remedies provided by law.

 

8.3   Amendments and Waivers . Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by Borrower and Lender.

 

8.4   Successors and Assigns . Borrower may not assign its right or duties hereunder without the prior written consent of Lender, which consent Lender may deny, withhold or delay in its sole and absolute discretion.

 

8.5   Governing Law . This Agreement has been made and entered into in the State of Delaware and shall be construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof.

 

8.6   Prior Understandings . This Agreement supersedes all prior understandings and agreements (whether written, oral or otherwise) pertaining to the subject matter hereof, and constitutes the entire agreement between the parties hereto relating to the subject matter hereof and the transactions provided for herein.

  

8.7   Counterparts . This Agreement may be executed in any number of counterparts each of which shall be deemed an original and all of which shall constitute one and the same agreement with the same effect as if all parties had signed the same signature page. The parties shall accept facsimile signatures as the equivalent of original ones.

 

8.8   Severability . If any provision of this Agreement or the application of such provision to any Person or circumstance will be held invalid, the remainder of this Agreement or the application of such provision to Persons or circumstances other than those to which it is held invalid will not be affected thereby.

 

8.9   Additional Documents and Acts . Borrower shall execute and deliver such additional documents and instruments and shall perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of this Agreement and the transactions contemplated by this Agreement.

 

8.10   Survival . All indemnities, rights, remedies, representations and warranties contained herein shall survive the expiration or termination of this Agreement, and no termination or expiration hereof shall relieve either party from liability for any breach of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement to one another as of the date first above written.

 

BORROWER:		FMG ACQUISITION CORP.
	By:	/s/ Gordon Pratt
		Gordon Pratt
		Chief Executive Officer
LENDER:		FMG INVESTORS LLC
	By:	/s/ Larry G. Swets, Jr.
		Larry G. Swets, Jr.
		Managing Member