As filed with the Securities and Exchange Commission on June 2, 2006
File No. 333-
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
RHAPSODY ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
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Delaware
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6770
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20-4743916
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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10 East 53rd Street, 35th Floor
New York, New York 10022
212-319-7676
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Eric S. Rosenfeld, Chairman of the
Board, Chief Executive Officer and President
10 East 53rd Street, 35th Floor
New York, New York 10022
212-319-7676
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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David Alan Miller, Esq.
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 818-8800
(212) 818-8881 -
Facsimile
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Robert J. Mittman, Esq.
Brad L. Shiffman, Esq.
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212)
885-5000
(212) 885-5001 - Facsimile
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box.
x
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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CALCULATION OF REGISTRATION FEE
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Title of each Class of
Security being registered
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Amount being
Registered
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Proposed Maximum
Offering Price
Per
Security(1)
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Proposed Maximum
Aggregate Offering
Price(1)
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Amount of
Registration Fee
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Units, each consisting of one share of Common Stock, $.0001 par value, and one
Warrant(2)
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5,175,000 Units
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$8.00
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$41,400,000
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$4,429.80
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Shares of Common Stock included as part of the Units(2)
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5,175,000 Shares
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—
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—
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— (3)
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Warrants included as part of the Units(2)
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5,175,000 Warrants
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—
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—
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— (3)
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Shares of Common Stock underlying the Warrants included in the Units(4)
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5,175,000 Shares
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$6.00
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$31,050,000
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$3,322.35
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Warrants issued to insiders (“Insider Warrants”)
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1,136,364 Warrants
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$1.10
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$1,250,000.40
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$133.75
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Shares of Common Stock underlying the Insider Warrants to the extent such Insider Warrants are
subsequently transferred prior to exercise(4)
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1,136,364 Shares
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$6.00
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$6,818,184
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$729.55
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Shares of Common Stock underlying the Insider Warrants to the extent such Insider Warrants are
subsequently exercised by the Insiders(4)
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1,136,364 Shares
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—
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— (5)
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Representative’s Unit Purchase Option
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1
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$100
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$100
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— (3)
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Units underlying the Representative’s Unit Purchase Option (“Underwriter’s
Units”)(4)
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450,000 Units
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$8.80
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$3,960,000
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$423.72
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Shares of Common Stock included as part of the Underwriter’s Units(4)
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450,000 Shares
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—
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—
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— (3)
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Warrants included as part of the Representative’s Units(4)
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450,000 Warrants
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—
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—
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— (3)
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Shares of Common Stock underlying the Warrants included in the Representative’s
Units(4)
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450,000 Shares
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$6.00
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$2,700,000
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$288.90
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Total
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$87,178,284.40
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$9,328.07
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(1)
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Estimated solely for the purpose of calculating the registration fee.
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(2)
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Includes 675,000 Units and 675,000 shares of Common Stock and 675,000 Warrants underlying such Units which may be issued on exercise of a 45-day option granted to the Underwriters
to cover over-allotments, if any.
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(3)
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No fee pursuant to Rule 457(g).
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(4)
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Pursuant to Rule 416, there are also being registered such indeterminable additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or
similar transactions as a result of the anti-dilution provisions contained in the Warrants.
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(5)
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The filing fee is included in the $729.55 filing fee for the shares of common stock underlying the Insider Warrants above.
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The registrant hereby amends this
registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
Preliminary
Prospectus
Subject to Completion, June 2, 2006
PROSPECTUS
$36,000,000
RHAPSODY ACQUISITION CORP.
4,500,000 units
Rhapsody Acquisition Corp. is a newly formed blank check company organized for the purpose of effecting a merger, capital stock exchange, asset
acquisition or other similar business combination with an operating business.
Our efforts to identify a prospective target business will not be limited to a particular industry. We do not have any specific business combination under
consideration and we have not (nor has anyone on our behalf) contacted any prospective target business or had any discussions, formal or otherwise, with respect to such a transaction.
This is an initial public offering of our securities. Each unit that we are offering has a price of $8.00 and consists of one share of our common stock
and one warrant. Each warrant entitles the holder to purchase one share of our common stock at a price of $6.00. Each warrant will become exercisable on the later of our completion of a business combination and
, 2007
[one year from the date of this prospectus]
, and will expire on
, 2010
[four years from the date of this prospectus]
, or earlier upon redemption.
We have granted EarlyBirdCapital, Inc., the representative of the underwriters for this offering, a 45-day option to purchase up to 675,000 units (over
and above the 4,500,000 units referred to above) solely to cover over-allotments, if any. The over-allotment will be used only to cover the net syndicate short position resulting from the initial distribution. We have also agreed to sell to
EarlyBirdCapital, for $100, as additional compensation, an option to purchase up to a total of 450,000 units at $8.80 per unit. The units issuable upon exercise of this option are identical to those offered by this prospectus. The purchase option
and its underlying securities have been registered under the registration statement of which this prospectus forms a part.
Eric S.
Rosenfeld, Leonard B. Schlemm, Jon Bauer and Colin D. Watson, four of our directors, and Gotham Capital V LLC, an entity controlled by Joel Greenblatt, our special advisor, have committed to purchase from us 1,136,364 warrants at $1.10 per warrant
(for an aggregate purchase price of $1,250,000). These purchases will take place on a private placement basis simultaneously with the consummation of this offering. All of the proceeds we receive from the purchases will be placed in the trust fund
described below. The “insider warrants” to be purchased will be identical to the warrants underlying the units being offered by this prospectus except that if we call the warrants for redemption, the insider warrants may be exercisable on
a cashless basis so long as they are held by these purchasers or their affiliates. The insider warrants have been registered for resale under the registration statement of which this prospectus forms a part, but the purchasers have agreed that
the insider warrants will not be sold or transferred by them until after we have completed a business combination.
There is presently no
public market for our units, common stock or warrants. The units will be quoted on the OTC Bulletin Board under the symbol on or promptly after the date of this prospectus. Once the securities
comprising the units begin separate trading, the common stock and warrants will be quoted on the OTC Bulletin Board under the symbols and
, respectively. We cannot assure you that our securities will continue to be quoted on the OTC Bulletin Board.
Investing in our securities involves a high degree of risk. See “
Risk Factors
” beginning on page 9 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Public
offering price
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Underwriting discount
and commissions
(1)
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Proceeds, before
expenses, to us
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Per unit
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$8.00
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$0.48
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$7.52
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Total
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$36,000,000
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$2,160,000
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$33,840,000
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(1)
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Includes a non-accountable expense allowance in the amount of 0.5% of the gross proceeds, or $0.04 per unit ($180,000 in total), payable to EarlyBirdCapital. The non-accountable
expense allowance is not payable with respect to the units sold upon exercise of the over-allotment option. Of the underwriting discount and commissions, $360,000 is being deferred by the underwriters and will not be payable by us to the
underwriters unless and until we consummate a business combination.
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$32,900,000 of the net proceeds of this offering
(including $360,000 of underwriting discounts and commissions payable to the underwriters in this offering which is being deferred by them until we consummate a business combination), plus the additional aggregate $1,250,000 we will receive from the
purchase of the insider warrants being made by Messrs. Rosenfeld, Schlemm, Bauer and Watson and Gotham Capital V simultaneously with the consummation of this offering, for an aggregate of $34,150,000 (or approximately $7.59 per unit sold to the
public in this offering), will be deposited into a trust account at Lehman Brothers Inc., maintained by Continental Stock Transfer & Trust Company acting as trustee.
We are offering the units for sale on a firm-commitment basis. EarlyBirdCapital, Inc., acting as representative of the underwriters, expects to deliver
our securities to investors in the offering on or about , 2006.
EarlyBirdCapital, Inc.
, 2006
Table Of Contents
Prospectus Summary
This summary highlights certain information appearing elsewhere in this prospectus. For
a more complete understanding of this offering, you should read the entire prospectus carefully, including the risk factors and the financial statements. Unless otherwise stated in this prospectus:
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references to “we,” “us” or “our company” refer to Rhapsody Acquisition Corp.;
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“initial shares” refers to the 1,125,000 shares of common stock that our initial stockholders originally purchased from us for $25,000 in April 2006;
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“insider warrants” refers to the 1,136,364 warrants we are selling privately to four of our directors and an entity controlled by our special advisor upon
consummation of this offering;
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the term “public stockholders” means the holders of the shares of common stock which are being sold as part of the units in this public offering, including any
of our existing stockholders to the extent that they purchase such shares, whether included in our units or separately; and
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the information in this prospectus assumes that the representative of the underwriters will not exercise its over-allotment option.
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You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. We are not making an
offer of these securities in any jurisdiction where the offer is not permitted.
We are a blank check company organized under the laws
of the State of Delaware on April 24, 2006. We were formed with the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. To date, our efforts have been
limited to organizational activities. Our efforts to identify a prospective target business will not be limited to a particular industry.
We do not have any specific business combination under consideration and we have not (nor has anyone on our behalf) contacted any prospective target business or had any discussions, formal or otherwise, with respect to such a transaction.
We have not (nor have any of our agents or affiliates) been approached by any candidates (or representative of any candidates) with respect to a possible acquisition transaction with our company. Additionally, we have not, nor has anyone on our
behalf, taken any measure, directly or indirectly, to identify or locate any suitable acquisition candidate, nor have we engaged or retained any agent or other representative to identify or locate any such acquisition candidate.
Our initial business combination must be with a target business whose fair market value is at least equal to 80% of our net assets (all of our assets,
including the funds held in the trust account, less our liabilities) at the time of such acquisition, although this may entail simultaneous acquisitions of several operating businesses. If we determine to simultaneously acquire several businesses
and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and
delay our ability, to complete the business combination. With multiple acquisitions, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if
there are multiple sellers) and the additional risks associated with the subsequent integration of the operations and services or products of the acquired companies in a single operating business.
The target business that we acquire may have a fair market value substantially in excess of 80% of our net assets. In order to consummate such an
acquisition, we may issue a significant amount of our debt or equity securities to the sellers of such business and/or seek to raise additional funds through a private offering of debt or equity securities. Since we have no specific business
combination under consideration, we have not entered into any such fund raising arrangement and have no current intention of doing so.
Our
principal executive offices are located at 10 East 53
rd
Street, 35
th
Floor, New York, New York 10022 and our telephone number is (212) 319-7676.
1
The Offering
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Securities offered
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4,500,000 units, at $8.00 per unit, each unit consisting of:
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one share of common stock; and
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The units will begin trading on or promptly after the date of this prospectus. Each of the common stock and warrants may trade separately on the
90
th
day after the date of this prospectus unless EarlyBirdCapital determines that an earlier date is acceptable
(based upon its assessment of the relative strengths of the securities markets and small capitalization companies in general, and the trading pattern of, and demand for, our securities in particular). In no event will EarlyBirdCapital allow separate
trading of the common stock and warrants until we file an audited balance sheet reflecting our receipt of the gross proceeds of this offering. We will file a Current Report on Form 8-K with the Securities and Exchange Commission, including an
audited balance sheet, upon the consummation of this offering, which is anticipated to take place three business days from the date the units commence trading. The audited balance sheet will reflect our receipt of the proceeds from the exercise of
the over-allotment option if the over-allotment option is exercised prior to the filing of the Form 8-K. If the over-allotment option is exercised after our initial filing of a Form 8-K, we will file an amendment to the Form 8-K to provide updated
financial information to reflect the exercise of the over-allotment option. We will also include in this Form 8-K, or amendment thereto, or in a subsequent Form 8-K, information indicating if EarlyBirdCapital has allowed separate trading of the
common stock and warrants prior to the 90
th
day after the date of this prospectus.
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Securities sold privately to insiders simultaneously with consummation of this offering
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1,136,364 insider warrants at $1.10 per warrant (for an aggregate purchase price of $1,250,000) will be sold to Eric S. Rosenfeld, Leonard B.
Schlemm, Jon Bauer and Colin D. Watson, four of our directors, and Gotham Capital V LLC, an entity controlled by Joel Greenblatt, our special advisor. These purchases will take place on a private placement basis simultaneously with the consummation
of this offering. The insider warrants will be identical to the warrants underlying the units being offered by this prospectus except that if we call the warrants for redemption as described below, the insider warrants may be exercisable on a
cashless basis so long as such warrants are held by these purchasers or their affiliates. Additionally, these purchasers have agreed that the insider warrants will not be sold or transferred by them until after we have completed a business
combination.
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Common stock:
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Number outstanding before this offering
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1,125,000 shares
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Number to be outstanding after this offering
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5,625,000 shares
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Warrants:
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Number outstanding before this offering
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0 warrants
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Number to be sold to insiders
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1,136,364 warrants
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Number to be outstanding after this offering and sale to insiders
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5,636,364 warrants
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Exercisability
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Each warrant is exercisable for one share of common stock.
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Exercise period
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The warrants will become exercisable on the later of:
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the completion of a business combination with a target business, and
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[ ]
, 2007
[one year from the date of this
prospectus].
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The warrants will expire at 5:00 p.m., New York City time, on
[ ]
, 2010
[four years from the date of this prospectus]
or earlier upon redemption.
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Redemption
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We may redeem the outstanding warrants (including any of the insider warrants and any outstanding warrants issued upon exercise of the unit
purchase option issued to EarlyBirdCapital):
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in whole and not in part,
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at a price of $.01 per warrant at any time after the warrants become exercisable,
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upon a minimum of 30 days’ prior written notice of redemption, and
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if, and only if, the last sales price of our common stock equals or exceeds $11.50 per share for any 20 trading days within a 30-trading day period ending three business days before
we send the notice of redemption.
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The redemption criteria for our warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the
initial exercise price and provide a sufficient degree of liquidity to cushion the market reaction to our redemption call.
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If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise
warrants to do so on a “cashless basis.” In such event, the holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the
number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market
value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
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If we call the warrants for redemption and our management does not take advantage of this option, Messrs. Rosenfeld, Schlemm, Bauer and Watson and
Gotham Capital V would still be entitled to exercise their insider warrants as described above for cash or on a cashless basis using the same formula that other warrant holders would have been required to use had all warrant holders been required to
exercise their warrants on a cashless basis. As a result, they may have a conflict of interest in determining when to call the warrants for redemption as they would potentially be able to avoid any negative price pressure on the price of the
warrants and common stock due to the redemption through a cashless exercise.
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Proposed OTC Bulletin
Board symbols for our:
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Offering proceeds to be held in trust
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$32,900,000 of the proceeds of this offering plus the $1,250,000 we will receive from the sale of the insider warrants (for an aggregate of
$34,150,000 or approximately $7.59 per unit sold to the public in this offering) will be placed in a trust account at Lehman Brothers, maintained by Continental Stock Transfer & Trust Company, acting as trustee pursuant to an agreement to
be signed on the date of this prospectus. This amount includes $360,000 of underwriting discounts and commissions payable to the underwriters in the offering. The underwriters have agreed that such amount will not be paid unless and until we
consummate a business combination. Except as set forth below, these proceeds will not be released until the earlier of the completion of a business combination and our liquidation. Therefore, unless and until a business combination is consummated,
the proceeds held in the trust account will not be available for our use for any expenses related to this offering or expenses which we may incur related to the investigation and selection of a target business and the negotiation
of an agreement to acquire a target business.
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Notwithstanding the foregoing, if we have not consummated a business combination by
[ ]
, 2007
[one year from the date of this prospectus],
there can be released to us, from time to time, interest
earned on the funds in the trust account of up to an aggregate of $200,000 to fund expenses related to investigating and selecting a target business, income and other taxes and our other working capital requirements. With this exception, expenses
incurred by us may be paid prior to a business combination only from the net proceeds of this offering not held in the trust account (initially, approximately $800,000).
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None of the warrants may be exercised until after the consummation of a business combination and, thus, after the proceeds of the trust account
have been disbursed. Accordingly, the warrant exercise price will be paid directly to us and not placed in the trust account.
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Limited payments to insiders
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There will be no fees or other cash payments paid to our existing stockholders, officers, directors or their affiliates prior to, or for any
services they render in order to effectuate, the consummation of a business combination other than:
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repayment of a $90,000 non-interest bearing loan made by Eric S. Rosenfeld;
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payment of $7,500 per month to Crescendo Advisors II LLC for office space and related services; and
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reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on our behalf, such as identifying and investigating possible business targets and
business combinations.
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Certificate of Incorporation
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As discussed below, there are specific provisions in our amended and restated certificate of incorporation that may not be amended prior to our
consummation of a business combination, including our requirements to seek stockholder approval of such a business combination and to allow our stockholders to seek conversion of their shares if they do not approve of such a business combination. We
view these provisions, which are contained in Article Seventh of our amended and restated certificate of incorporation, as obligations to our stockholders and will not take any action to amend or waive these provisions.
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Our amended and restated certificate of incorporation also provides that we will continue in existence only until
, 2008
[twenty four months from the date of this prospectus]
. If we have not completed a business combination by such
date, our corporate existence will cease except for the purposes of winding up our affairs and liquidating, pursuant to Section 278 of the Delaware General Corporation Law. This has the same effect as if our board of directors and stockholders
had formally voted to approve our dissolution. As a result, no vote would be required from our stockholders to commence such a dissolution and liquidation. In connection with any proposed business combination we submit to our stockholders for
approval, we
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will also submit to stockholders a proposal to amend our amended and restated certificate of incorporation to provide for our perpetual existence, thereby
removing this limitation on our corporate life. We will only consummate a business combination if stockholders vote both in favor of such business combination and our amendment to extend our corporate life. We view this provision terminating our
corporate life by , 2008
[twenty four months from the date of this prospectus]
as an obligation to our stockholders and
will not take any action to amend or waive this provision to allow us to survive for a longer period of time except in connection with the consummation of a business combination.
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Stockholders must approve business combination
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Pursuant to our amended and restated certificate of incorporation, we will seek stockholder approval before we effect any business combination,
even if the nature of the acquisition would not ordinarily require stockholder approval under applicable state law. We view this requirement as an obligation to our stockholders and will not take any action to amend or waive this provision in our
certificate of incorporation. In connection with the vote required for any business combination, all of our existing stockholders, including all of our officers and directors, have agreed to vote the shares of common stock owned by them immediately
before this offering in accordance with the majority of the shares of common stock voted by the public stockholders. We will proceed with a business combination only if (i) a majority of the shares of common stock voted by the public
stockholders are voted in favor of the business combination and (ii) public stockholders owning less than 20% of the shares sold in this offering exercise their conversion rights described below. Accordingly, it is our understanding and
intention in every case to structure and consummate a business combination in which approximately 19.99% of the public stockholders may exercise their conversion rights and the business combination will still go forward.
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Conversion rights for stockholders voting to reject a business combination
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Pursuant to our amended and restated certificate of incorporation, public stockholders voting against a business combination will be entitled to
convert their stock into a pro rata share of the trust account, including any interest earned on their portion of the trust account less any amount distributed to us, if the business combination is approved and completed. We view this requirement as
an obligation to our stockholders and will not take any action to amend or waive this provision in our certificate of incorporation. Our existing stockholders will not have such conversion rights with respect to any shares of common stock owned by
them, directly or indirectly, whether included in their initial shares or purchased by them in this offering or in the aftermarket. Public stockholders who convert their stock into their share of the trust fund will continue to have the right to
exercise any warrants they may hold.
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Investors in this offering who do not sell, or who receive less than $0.41 of net sales proceeds for, the warrant included in the units, and
persons who purchase common stock in the aftermarket at a price in excess of $7.59 per share, may have a disincentive to exercise their conversion rights because the amount they would receive upon conversion could be less than their original or
adjusted purchase price.
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Liquidation if no business combination
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As described above, if we have not consummated a business combination by
, 2008
[twenty four months from the date of this prospectus]
, our corporate existence will cease by operation of law and
we will promptly distribute only to our public stockholders the amount in our trust account (including any accrued interest) plus any remaining net assets. Our existing stockholders have waived their rights to participate in any liquidation
distribution with respect to their initial shares. We will pay the costs of liquidation from our remaining assets outside of the trust account. If such funds are insufficient, we anticipate our initial stockholders will advance us the funds
necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000).
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Escrow of existing stockholders’ shares
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On the date of this prospectus, all of our existing stockholders, including all of our officers and directors, will place their initial shares
into an escrow account maintained by Continental Stock Transfer & Trust Company, acting as escrow agent. Subject to certain limited exceptions, (such as transfers to relatives and trusts for estate planning purposes, while remaining in
escrow), these shares will not be transferable during the escrow period and will not be released from escrow until one year after our consummation of a business combination or earlier if, following a business combination, we engage in a subsequent
transaction resulting in our stockholders having the right to exchange their shares for cash or other securities.
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Risks
In making your decision on whether to invest in our securities, you should take into account not only the backgrounds of our management
team, but also the special risks we face as a blank check company. In addition, this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act of 1933, as amended, and, therefore, you will not be entitled to
protections normally afforded to investors in Rule 419 blank check offerings. Additionally, our initial security holders’ initial equity investment is below that which is required under the guidelines of the North American Securities
Administrators’ Association, Inc. and we do not satisfy such association’s policy regarding unsound financial condition. You should carefully consider these and the other risks set forth in the section entitled “Risk Factors”
beginning on page 9 of this prospectus.
7
Summary Financial Data
The following table summarizes the relevant financial data for our business and should
be read with our financial statements, which are included in this prospectus. We have not had any significant operations to date, so only balance sheet data are presented.
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May 17, 2006
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Actual
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As
Adjusted
(1)
(2)
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Balance Sheet Data:
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Working capital (deficiency)
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$
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(421
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)
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$
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34,974,579
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Total assets
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$
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115,000
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$
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34,974,579
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Total liabilities
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$
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90,421
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—
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Value of common stock which may be converted to cash
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—
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$
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6,826,585
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Stockholders’ equity
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$
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24,579
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$
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28,147,994
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(1)
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Includes the $1,250,000 we will receive from the sale of the insider warrants. Additionally, if a business combination is consummated, public stockholders who voted against the
business combination and exercised their conversion rights would be entitled to receive approximately $7.59 per share, which amount represents $7.51 per share from the proceeds of this offering and the private placement and $0.08 per share of
deferred underwriting discounts and commissions.
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(2)
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Includes $360,000 of deferred underwriting fees which are payable only upon consummation of a business combination, and excludes the $100 purchase price for the purchase option to
be issued to EarlyBirdCapital.
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The “as adjusted” information gives effect to the sale of the units we are offering
by this prospectus and the insider warrants, including the application of the related gross proceeds and the payment of the estimated remaining costs of this public offering and the repayment of the accrued and other liabilities required to be
repaid.
The working capital deficiency excludes $25,000 of costs related to this offering which were paid prior to May 17, 2006.
These deferred offering costs have been recorded as a long-term asset and are reclassified against stockholders’ equity in the “as adjusted” information.
The working capital and total assets amounts include $33,790,000 of the amount to be held in the trust account, which will be available to us only upon the consummation of a business combination within the time period
described in this prospectus. The total amount to be placed in trust includes an additional $360,000 ($0.08 per share) of deferred underwriting discounts and commissions payable to the underwriters in the offering only if we consummate a business
combination. If a business combination is not so consummated, the trust account, and all accrued interest earned thereon less up to $200,000 that may be released to us to fund our working capital requirements following the one year anniversary of
the date of this prospectus, will be distributed solely to our public stockholders.
We will not proceed with a business combination if
public stockholders owning 20% or more of the shares sold in this offering vote against the business combination and exercise their conversion rights. Accordingly, we may effect a business combination if public stockholders owning up to
approximately 19.99% of the shares sold in this offering exercise their conversion rights. If this occurs, we would be required to convert to cash up to approximately 19.99% of the 4,500,000 shares sold in this offering, or 899,550 shares of common
stock, at an initial per-share conversion price of approximately $7.59 (for a total of approximately $6,826,585), without taking into account interest then held in the trust account. The actual per-share conversion price will be equal to:
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•
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the amount in the trust account, including all accrued interest after distribution of interest income on the trust account balance to us as described above, as of two business days
prior to the proposed consummation of the business combination,
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•
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divided by the number of shares of common stock sold in the offering.
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8
Risk Factors
An investment in our securities involves a high degree of risk. You should consider carefully
all of the material risks described below, together with the other information contained in this prospectus, before making a decision to invest in our units.
Risks associated with our business
We are a development stage company with no operating history and,
accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective. Moreover, our financial statements contain a statement indicating that our ability to continue as a going concern is dependent on us raising
funds in this offering.
We are a recently incorporated development stage company with no operating results to date. Therefore, our
ability to commence operations is dependent upon obtaining financing through the public offering of our securities. Since we do not have an operating history, you will have no basis upon which to evaluate our ability to achieve our business
objective, which is to acquire an operating business. We have not conducted any discussions and we have no plans, arrangements or understandings with any prospective acquisition candidates. We will not generate any revenues until, at the earliest,
after the consummation of a business combination. The report of our independent registered public accountants on our financial statements includes an explanatory paragraph stating that our ability to continue as a going concern is dependent on the
consummation of this offering. The financial statements do not include any adjustments that might result from our inability to consummate this offering or our ability to continue as a going concern.
If we are forced to liquidate before a business combination and distribute the trust account, our public stockholders will receive less than $8.00 per share and
our warrants will expire worthless.
If we are unable to complete a business combination within two years from the date of this
prospectus and are forced to liquidate our assets, the per-share liquidation distribution will be less than $8.00 because of the expenses of this offering, our general and administrative expenses and the anticipated costs of seeking a business
combination. Furthermore, there will be no distribution with respect to our outstanding warrants which will expire worthless if we liquidate before the completion of a business combination.
You will not be entitled to protections normally afforded to investors of blank check companies.
Since the net proceeds of this offering are intended to be used to complete a business combination with a target business that has not been identified, we
may be deemed to be a “blank check” company under the United States securities laws. However, since we will have net tangible assets in excess of $5,000,000 upon the successful consummation of this offering and will file a Current Report
on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors of blank check companies such as Rule 419. Accordingly, investors will not be afforded the benefits or
protections of those rules. Because we are not subject to Rule 419, our units will be immediately tradable and we have a longer period of time to complete a business combination than we would if we were subject to such rule.
Because there are numerous companies with a business plan similar to ours seeking to effectuate a business combination, it may be more difficult for us to do so.
Since August 2003, based upon publicly available information, approximately
similarly structured blank check companies have completed initial public offerings in the United States. Of these companies, only
companies have consummated a business combination, while
other companies have announced they have entered into a definitive agreement for a business combination, but have not consummated such
9
business combination. Accordingly, there are approximately blank check companies
with more than $ billion in trust that are seeking to carry out a business plan similar to our business plan. Furthermore, there are a number of additional offerings for blank
check companies that are still in the registration process but have not completed initial public offerings and there are likely to be more blank check companies filing registration statements for initial public offerings after the date of this
prospectus and prior to our completion of a business combination. While some of those companies must complete a business combination in specific industries, a number of them may consummate a business combination in any industry they choose.
Therefore, we may be subject to competition from these and other companies seeking to consummate a business plan similar to ours. Because of this competition, we cannot assure you that we will be able to effectuate a business combination within the
required time periods.
We may depend on interest earned on the trust account to fund our search for a target business or businesses and to complete
our initial business combination.
Of the net proceeds of this offering, only approximately $800,000 will be available to us
initially outside the trust account to fund our working capital requirements. This amount may not be sufficient to fund our working capital requirements for the entire period prior to a business combination. We therefore may depend to a degree on
sufficient interest being earned on the proceeds held in the trust account to provide us with additional working capital we will need to identify one or more target businesses and to complete our initial business combination. While we are entitled
to have released to us for such purposes interest income of up to a maximum of $200,000 following the one year anniversary of the date of this prospectus, a substantial decline in interest rates may result in our having insufficient funds available
with which to structure, negotiate or close an initial business combination. In such event, we would need to borrow funds from our initial stockholders to operate or may be forced to liquidate.
If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share liquidation price received by stockholders will be less
than $7.59 per share.
Our placing of funds in trust may not protect those funds from third party claims against us. Although we
will seek to have all vendors and service providers we engage and prospective target businesses we negotiate with, execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for
the benefit of our public stockholders, there is no guarantee that they will execute such agreements. Nor is there any guarantee that, even if such entities execute such agreements with us, they will not seek recourse against the trust account.
Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of our public stockholders. If we liquidate before the completion of a business combination and distribute the proceeds held in trust to our
public stockholders, Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, has agreed that he will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target
businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. However, we cannot assure you that he will be able to satisfy those obligations.
Since we are
obligated to have all vendors and prospective target businesses execute agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, we believe the likelihood of
Mr. Rosenfeld having any such obligations is minimal. Nevertheless, we cannot assure you that the per-share distribution from the trust fund, if we liquidate, will not be less than $7.59, plus interest then held in the trust fund.
Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds
held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, we cannot assure you we will be able to return to our public stockholders at least $7.59 per share.
Our stockholders may
be held liable for claims by third parties against us to the extent of distributions received by them.
Our amended and restated
certificate of incorporation provides that we will continue in existence only until twenty four months from the date of this prospectus. If we have not completed a business combination by such
10
date and amended this provision in connection thereto, pursuant to the Delaware General Corporation Law, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating. Under Sections 280 through 282 of the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by
them in a dissolution. If the corporation complies with certain procedures intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against
the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the
dissolution. However, it is our intention to make liquidating distributions to our stockholders as soon as reasonably possible after the expiration of the twenty four month period and, therefore, we do not intend to comply with those procedures. As
such, our stockholders could potentially be liable for any claims to the extent of distributions received by them and any liability of our stockholders may extend beyond the third anniversary of such date. Accordingly, we cannot assure you that
third parties will not seek to recover from our stockholders amounts owed to them by us.
Since we have not yet selected a particular industry or
target business with which to complete a business combination, we are unable to currently ascertain the merits or risks of the industry or business in which we may ultimately operate.
We may consummate a business combination with a company in any industry we choose and are not limited to any particular industry or type of business.
Accordingly, there is no current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire. To the extent we complete a business
combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of those entities. If we complete a business combination with an entity in an industry
characterized by a high level of risk, we may be affected by the currently unascertainable risks of that industry. Although our management will endeavor to evaluate the risks inherent in a particular industry or target business, we cannot assure you
that we will properly ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors in this offering than a direct investment, if an
opportunity were available, in a target business.
We may issue shares of our capital stock or debt securities to complete a business combination,
which would reduce the equity interest of our stockholders and likely cause a change in control of our ownership.
Our certificate
of incorporation authorizes the issuance of up to 15,000,000 shares of common stock, par value $.0001 per share, and 1,000,000 shares of preferred stock, par value $.0001 per share. Immediately after this offering and the purchase of the insider
warrants (assuming no exercise of the over-allotment option), there will be 2,838,636 authorized but unissued shares of our common stock available for issuance (after appropriate reservation for the issuance of the shares upon full exercise of our
outstanding warrants and the unit purchase option granted to the underwriter) and all of the 1,000,000 shares of preferred stock available for issuance. Although we have no commitment as of the date of this offering, we are likely to issue a
substantial number of additional shares of our common or preferred stock, or a combination of common and preferred stock, to complete a business combination. The issuance of additional shares of our common stock or any number of shares of our
preferred stock:
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•
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may significantly reduce the equity interest of investors in this offering;
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•
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may subordinate the rights of holders of common stock if we issue preferred stock with rights senior to those afforded to our common stock;
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•
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will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating
loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
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11
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•
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may adversely affect prevailing market prices for our common stock.
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Similarly, if we issue debt securities, it could result in:
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•
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default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt obligations;
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•
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of
certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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•
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is
outstanding.
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Our ability to successfully effect a business combination and to be successful thereafter will be totally dependent upon
the efforts of our key personnel, some of whom may join us following a business combination.
Our ability to successfully effect a
business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel such as Eric S. Rosenfeld, David Sgro, our
chief financial officer, and Arnaud Ajdler, our secretary and a member of our board of directors, may remain with the target business in senior management or advisory positions following a business combination, it is likely that some or all of the
management of the target business will remain in place. Moreover, our key personnel will be able to remain with the company after the consummation of a business combination only if they are able to negotiate employment or consulting agreements in
connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our
securities for services they would render to the company after the consummation of the business combination. While the personal and financial interests of such individuals may influence their motivation in identifying and selecting a target
business, the ability of such individuals to remain with the company after the consummation of a business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination.
While we intend to closely scrutinize any individuals we engage after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of
operating a public company which could cause us to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely
affect our operations.
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their
determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to consummate a business combination.
Our officers and directors are not required to commit their full time to our affairs, which could create a conflict of interest when allocating their time
between our operations and their other commitments. We do not intend to have any full time employees prior to the consummation of a business combination. All of our executive officers are engaged in several other business endeavors and are not
obligated to devote any specific number of hours to our affairs. If our officers’ and directors’ other business affairs require them to devote more substantial amounts of time to such affairs, it could limit their ability to devote time to
our affairs and could have a negative impact on our ability to consummate a business combination. We cannot assure you that these conflicts will be resolved in our favor.
12
Our officers and directors may in the future become affiliated with entities engaged in business activities similar
to those intended to be conducted by us and accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Our officers and directors may in the future become affiliated with entities, including other “blank check” companies, engaged in business
activities similar to those intended to be conducted by us. Additionally, our officers and directors may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe fiduciary
duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. We cannot assure you that these conflicts will be resolved in our favor.
All of our officers and directors own shares of our common stock issued prior to this offering and several of our directors and an entity controlled by our special
advisor will own warrants after this offering. These securities will not participate in liquidation distributions. Therefore, our officers and directors may have a conflict of interest in determining whether a particular target business is
appropriate for a business combination.
All of our officers and directors own shares of our common stock that were issued prior to
this offering and Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, Messrs. Leonard B. Schlemm, Jon Bauer and Colin D. Watson, each a member of our board of directors, and Gotham Capital V, an entity
controlled by Joel Greenblatt, our special advisor, are purchasing insider warrants upon consummation of this offering. Such individuals have waived their right to receive distributions with respect to their initial shares upon our liquidation if we
are unable to consummate a business combination. The shares acquired prior to this offering, as well as the insider warrants, and any warrants purchased by our officers or directors in this offering or in the aftermarket will be worthless if we do
not consummate a business combination. The personal and financial interests of our directors and officers may influence their motivation in timely identifying and selecting a target business and completing a business combination. Consequently, our
directors’ and officers’ discretion in identifying and selecting a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of a particular business combination are appropriate
and in our stockholders’ best interest.
If our common stock becomes subject to the SEC’s penny stock rules, broker-dealers may experience
difficulty in completing customer transactions and trading activity in our securities may be adversely affected.
If at any time we
have net tangible assets of $5,000,000 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock may be subject to the “penny stock” rules promulgated under the Securities Exchange Act
of 1934. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:
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make a special written suitability determination for the purchaser;
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receive the purchaser’s written agreement to the transaction prior to sale;
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provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these
“penny stocks” as well as a purchaser’s legal remedies; and
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obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a
“penny stock” can be completed.
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If our common stock becomes subject to these rules, broker-dealers may find it
difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. As a result, the market price of our securities may be depressed, and you may find it more difficult to sell our securities.
13
After our business combination, we will be solely dependent on a single business and a limited number of products
or services.
Our business combination must be with a business with a fair market value of at least 80% of our net assets at the
time of such acquisition, although this may entail the simultaneous acquisitions of several operating businesses at the same time. By consummating a business combination with only a single entity, our lack of diversification may subject us to
numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to
complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, or
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dependent upon the development or market acceptance of a single or limited number of products, processes or services.
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Alternatively, if our business combination entails the simultaneous acquisitions of several operating businesses at the same time from different sellers, we would face
additional risks, including difficulties and expenses incurred in connection with the subsequent integration of the operations and services or products of the acquired companies into a single operating business. If we are unable to adequately
address these risks, it could negatively impact our profitability and results of operations.
The ability of our stockholders to exercise their
conversion rights may not allow us to effectuate the most desirable business combination or optimize our capital structure.
When we
seek stockholder approval of any business combination, we will offer each public stockholder (but not our existing stockholders) the right to have his, her or its shares of common stock converted to cash if the stockholder votes against the business
combination and the business combination is approved and completed. Such holder must both vote against such business combination and then exercise his, her or its conversion rights to receive a pro rata portion of the trust account. Accordingly, if
our business combination requires us to use substantially all of our cash to pay the purchase price, because we will not know how many stockholders may exercise such conversion rights, we may either need to reserve part of the trust account for
possible payment upon such conversion, or we may need to arrange third party financing to help fund our business combination in case a larger percentage of stockholders exercise their conversion rights than we expect. Since we have no specific
business combination under consideration, we have not taken any steps to secure third party financing. Therefore, we may not be able to consummate a business combination that requires us to use all of the funds held in the trust account as part of
the purchase price, or we may end up having a leverage ratio that is not optimal for our business combination. This may limit our ability to effectuate the most attractive business combination available to us.
Because of our limited resources and structure, we may not be able to consummate an attractive business combination.
We expect to encounter intense competition from entities other than blank check companies having a business objective similar to ours, including venture
capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there are numerous
potential target businesses that we could acquire with the net proceeds of this offering, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, the obligation we have to seek stockholder approval of a business combination may delay the consummation of a transaction. Additionally, our
outstanding warrants, and the future dilution they potentially
14
represent, may not be viewed favorably by certain target businesses. Any of these obligations may place us at a competitive disadvantage in successfully
negotiating a business combination. Because only of the blank check companies that have gone public in
the United States since August 2003 have either consummated a business combination or entered into a definitive agreement for a business combination, it may indicate that there are fewer attractive target businesses available to such entities like
our company or that many privately held target businesses are not inclined to enter into these types of transactions with publicly held blank check companies like ours. If we are unable to consummate a business combination with a target business
within the prescribed time periods, we will be forced to liquidate.
We may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target business, which could compel us to restructure or abandon a particular business combination.
Although we believe that the net proceeds of this offering will be sufficient to allow us to consummate a business combination, because we have not yet
identified any prospective target business, we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of this offering prove to be insufficient, either because of the size of the business combination, the
depletion of the available net proceeds in search of a target business, or the obligation to convert into cash a significant number of shares from dissenting stockholders, we will be required to seek additional financing. We cannot assure you that
such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to consummate a particular business combination, we would be compelled to either restructure the
transaction or abandon that particular business combination and seek an alternative target business candidate. In addition, if we consummate a business combination, we may require additional financing to fund the operations or growth of the target
business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in
connection with or after a business combination.
Our existing stockholders, including our officers and directors, control a substantial interest in
us and thus may influence certain actions requiring a stockholder vote.
Upon consummation of our offering, our existing
stockholders (including all of our officers and directors) will collectively own 20% of our issued and outstanding shares of common stock (assuming they do not purchase any units in this offering). Our board of directors is divided into three
classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. It is unlikely that there will be an annual meeting of stockholders to elect new directors prior to the consummation
of a business combination, in which case all of the current directors will continue in office until at least the consummation of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of
directors, only a minority of the board of directors will be considered for election and our existing stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our existing stockholders
will continue to exert control at least until the consummation of a business combination.
Our existing stockholders paid an aggregate of $25,000, or
approximately $0.0222 per share, for their initial shares and, accordingly, you will experience immediate and substantial dilution from the purchase of our common stock.
The difference between the public offering price per share and the pro forma net tangible book value per share of our common stock after this offering
constitutes the dilution to the investors in this offering. Our existing stockholders acquired their initial shares of common stock at a nominal price, significantly contributing to this dilution. Assuming the offering is completed, you and the
other new investors will incur an immediate and substantial dilution of approximately 25.5% or $2.04 per share (the difference between the pro forma net tangible book value per share of $5.96, and the initial offering price of $8.00 per unit).
15
Our outstanding warrants and option may have an adverse effect on the market price of our common stock and make it
more difficult to effect a business combination.
We will be issuing warrants to purchase 4,500,000 shares of common stock as part
of the units offered by this prospectus and the insider warrants to purchase 1,136,364 shares of common stock. We will also issue an option to purchase 450,000 units to the representative of the underwriters which, if exercised, will result in the
issuance of an additional 450,000 warrants. To the extent we issue shares of common stock to effect a business combination, the potential for the issuance of a substantial number of additional shares upon exercise of these warrants and option could
make us a less attractive acquisition vehicle in the eyes of a target business. Such securities, when exercised, will increase the number of issued and outstanding shares of our common stock and reduce the value of the shares issued to complete the
business combination. Accordingly, our warrants and option may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business. Additionally, the sale, or even the possibility of sale, of the shares
underlying the warrants and option could have an adverse effect on the market price for our securities or on our ability to obtain future financing. If and to the extent these warrants and option are exercised, you may experience dilution to your
holdings.
Our management’s ability to require holders of our warrants to exercise such warrants on a cashless basis will cause holders to
receive fewer shares of common stock upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our warrants for redemption after the redemption criteria described elsewhere in this prospectus have been satisfied, our management will have the option to require any holder that wishes to exercise his
warrant to do so on a “cashless basis.” If our management chooses to require holders to exercise their warrants on a cashless basis, the number of shares of common stock received by a holder upon exercise will be fewer than it would have
been had such holder exercised his warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s investment in our company.
If our existing stockholders or the purchasers of the insider warrants exercise their registration rights with respect to their initial shares or insider warrants and underlying securities, it may have an
adverse effect on the market price of our common stock and the existence of these rights may make it more difficult to effect a business combination.
Our existing stockholders are entitled to demand that we register the resale of their initial shares at any time commencing three months prior to the date on which their shares are released from escrow. Additionally,
the purchasers of the insider warrants are entitled to demand that we register the resale of their insider warrants and underlying shares of common stock at any time after we consummate a business combination. If such individuals exercise their
registration rights with respect to all of their securities, then there could be an additional 2,261,364 shares of common stock and 1,136,364 warrants eligible for trading in the public market. The presence of these additional securities trading in
the public market may have an adverse effect on the market price of our common stock. In addition, the existence of these rights may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business,
as the stockholders of the target business may be discouraged from entering into a business combination with us or will request a higher price for their securities because of the potential effect the exercise of such rights may have on the trading
market for our common stock.
Investors in this offering may engage in resale transactions only in those states that we have registered this offering
and a limited number of other jurisdictions where an applicable exemption from registration exists.
We have applied to register our
securities, or have obtained or will seek to obtain an exemption from registration, in Colorado, Delaware, the District of Columbia, Florida, Hawaii, Illinois, Indiana, New York and Rhode Island. If you are not an “institutional investor,”
you must be a resident of these jurisdictions to purchase our securities in the offering. Institutional investors in every state except Idaho may purchase units in this offering pursuant to exemptions provided to such entities under the Blue Sky
laws of various states. The
16
definition of an “institutional investor” varies from state to state but generally includes financial institutions, broker-dealers, banks,
insurance companies and other qualified entities. Under the National Securities Markets Improvement Act of 1996, the resale of the units and, once they become separately transferable, the common stock and warrants comprising the units are exempt
from state registration requirements. However, each state retains jurisdiction to investigate and bring enforcement actions with respect to fraud or deceit, or unlawful conduct by a broker or dealer, in connection with the sale of securities.
Although we are not aware of a state having used these powers to prohibit or restrict resales of securities issued by blank check companies generally, certain state securities commissioners view blank check companies unfavorably and might use these
powers, or threaten to use these powers, to hinder the resale of securities of blank check companies in their state.
If we are deemed to be an
investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete a business combination.
If we are deemed to be an investment company under the Investment Company Act of 1940, we may be subject to certain restrictions that may make it more
difficult for us to complete a business combination, including:
|
|
•
|
|
restrictions on the nature of our investments; and
|
|
|
•
|
|
restrictions on the issuance of securities.
|
In addition,
we may have imposed upon us certain burdensome requirements, including:
|
|
•
|
|
registration as an investment company;
|
|
|
•
|
|
adoption of a specific form of corporate structure; and
|
|
|
•
|
|
reporting, record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations.
|
We do not believe that our anticipated principal activities will subject us to the Investment Company Act of 1940. To this end, the proceeds held in trust may be
invested by the trust agent only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements for the exemption provided in Rule 3a-1 promulgated under the
Investment Company Act of 1940. If we were deemed to be subject to that act, compliance with these additional regulatory burdens would require additional expense for which we have not allotted.
Our directors may not be considered “independent” under the policies of the North American Securities Administrators Association, Inc.
No salary or other compensation will be paid to our directors for services rendered by them on our behalf prior to or in connection
with a business combination. Accordingly, we believe our non-executive directors would be considered “independent” as that term is commonly used. However, under the policies of the North American Securities Administrators Association,
Inc., an international organization devoted to investor protection, because each of our directors own shares of our securities and may receive reimbursement for out-of-pocket expenses incurred by them in connection with activities on our behalf
(such as identifying potential target businesses and performing due diligence on suitable business combinations), state securities administrators could argue that all of such individuals are not “independent.” If this were the case, they
would take the position that we would not have the benefit of any independent directors examining the propriety of expenses incurred on our behalf and subject to reimbursement. Additionally, there is no limit on the amount of out-of-pocket expenses
that could be incurred and there will be no review of the reasonableness of the expenses by anyone other than our
17
board of directors, which would include persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.
Although we believe that all actions taken by our directors on our behalf will be in our best interests, whether or not they are deemed to be “independent,” we cannot assure you that this will actually be the case. If actions are taken, or
expenses are incurred that are actually not in our best interests, it could have a material adverse effect on our business and operations, and a material adverse effect on the prices of our securities held by public stockholders.
Because our initial stockholders’ initial equity investment for their initial shares was only $25,000, our offering may be disallowed by state administrators
that follow the North American Securities Administrators Association, Inc. Statement of Policy on development stage companies.
Pursuant to the Statement of Policy Regarding Promoter’s Equity Investment promulgated by The North American Securities Administrators Association, Inc., any state administrator may disallow an offering of a development stage company
if the initial equity investment by a company’s promoters does not equal a certain percentage of the aggregate public offering price. Our promoters’ initial investment of $25,000 for their initial shares is less than the required
$1,010,000 minimum amount pursuant to this policy. Accordingly, a state administrator would have the discretion to disallow our offering if it wanted to. We cannot assure you that our offering would not be disallowed pursuant to this policy. If the
offering were disallowed, it would further restrict your ability to engage in resale transactions with respect to our securities. Additionally, if we are unable to complete a business combination, our promoters’ loss will be limited to their
initial investment. Conversely, if we are able to complete a business combination, the shares of common stock acquired prior to this offering will be worth significantly more than $25,000.
18
Use of Proceeds
We estimate that the net proceeds of this offering, in addition to the funds we will receive
from the sale of the insider warrants (all of which will be deposited into the trust fund), will be as set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Over-
Allotment Option
|
|
|
Over-Allotment
Option Exercised
|
|
|
Gross proceeds
|
|
|
|
|
|
|
|
|
|
From offering
|
|
$
|
36,000,000.00
|
|
|
$
|
41,400,000.00
|
|
|
From private placement of insider warrants
|
|
$
|
1,250,000.00
|
|
|
$
|
1,250,000.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross proceeds
|
|
$
|
37,250,000.00
|
|
|
$
|
42,650,000.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering expenses
(1)
|
|
|
|
|
|
|
|
|
|
Underwriting discount (5.5% of gross proceeds, 4.5% of which is payable at closing and 1.0% of which is payable upon consummation of a
business combination)
|
|
|
1,620,000.00
|
(2)
|
|
|
1,863,000.00
|
(2)
|
|
Underwriting non-accountable expense allowance (0.5% of gross proceeds)
|
|
|
180,000.00
|
|
|
|
180,000.00
|
|
|
Legal fees and expenses (including blue sky services and expenses)
|
|
|
350,000.00
|
|
|
|
350,000.00
|
|
|
Miscellaneous expenses
|
|
|
23,954.10
|
|
|
|
23,954.10
|
|
|
Printing and engraving expenses
|
|
|
65,000.00
|
|
|
|
65,000.00
|
|
|
Accounting fees and expenses
|
|
|
42,500.00
|
|
|
|
42,500.00
|
|
|
SEC registration fee
|
|
|
9,328.07
|
|
|
|
9,328.07
|
|
|
NASD filing fee
|
|
|
9,217.83
|
|
|
|
9,217.83
|
|
|
|
|
|
|
Net proceeds before payment of deferred underwriting fees
|
|
|
|
|
|
|
|
|
|
Held in trust
|
|
|
34,150,000.00
|
|
|
|
39,278,250.00
|
|
|
Not held in trust
|
|
|
800,000.00
|
|
|
|
828,750.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net proceeds
|
|
$
|
34,950,000.00
|
|
|
$
|
40,107,000.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of net proceeds not held in trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of administrative fee to Crescendo Advisors II ($7,500 per month for 24 months)
|
|
$
|
180,000
|
|
(22.50
|
)%
|
|
$
|
180,000
|
|
(21.72
|
)%
|
|
Legal, accounting and other expenses attendant to the due diligence investigation, structuring and negotiation of a business
combination
|
|
|
150,000
|
|
(18.75
|
)%
|
|
|
150,000
|
|
(18.10
|
)%
|
|
Due diligence of prospective target businesses
|
|
|
150,000
|
|
(18.75
|
)%
|
|
|
150,000
|
|
(18.10
|
)%
|
|
Legal and accounting fees relating to SEC reporting obligations
|
|
|
100,000
|
|
(12.50
|
)%
|
|
|
100,000
|
|
(12.07
|
)%
|
|
Working capital to cover miscellaneous expenses, D&O insurance, taxes and reserves
|
|
|
220,000
|
|
(27.50
|
)%
|
|
|
248,750
|
|
(30.01
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
800,000
|
|
(100.0
|
)%
|
|
$
|
828,750
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As of the date hereof, approximately $70,000 of the offering expenses, including the SEC registration fee, the NASD filing fee and a portion of the non-accountable expense allowance
and legal and audit fees, have been paid from the funds we received from Mr. Rosenfeld described below. These funds will be repaid out of the proceeds of this offering not being placed in trust upon consummation of this offering.
|
|
(2)
|
For purposes of presentation, the underwriting discounts are reflected as the amount payable to the underwriters upon consummation of the offering. An additional $360,000, or
$414,000 if the over-allotment option is exercised in full, all of which will be deposited in trust following the consummation of the offering, is payable to the underwriters only if and when we consummate a business combination.
|
19
In addition to the offering of units by this prospectus, Eric S. Rosenfeld, our chairman of the board,
chief executive officer and president, Messrs. Leonard B. Schlemm, Jon Bauer and Colin D. Watson, each a member of our board of directors, and Gotham Capital V, an entity controlled by Joel Greenblatt, our special advisor, have committed to purchase
the insider warrants (for an aggregate purchase price of $1,250,000) from us. These purchases will take place on a private placement basis simultaneously with the consummation of this offering. We will not pay any discounts or commissions with
respect to the purchase of the insider warrants. All of the proceeds we receive from these purchases will be placed in the trust fund described below.
$32,900,000, or $38,028,250 if the over-allotment option is exercised in full, of net proceeds of this offering, plus the $1,250,000 we will receive from the sale of the insider warrants, will be placed in a trust
account at Lehman Brothers, maintained by Continental Stock Transfer & Trust Company, New York, New York, as trustee. This amount includes a portion of the underwriting discounts and commissions payable to the underwriters in this offering.
The underwriters have agreed that such amount will not be paid unless and until we consummate a business combination and have waived their right to receive such payment upon our liquidation if we are unable to complete a business combination. The
funds held in trust will be invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, so that we are not deemed to be an investment company under the Investment Company Act. Except with respect to $200,000 of interest income that may be released
to us following the one year anniversary of the date of this prospectus, the proceeds held in trust will not be released from the trust account until the earlier of the completion of a business combination or our liquidation. The proceeds held in
the trust account may be used as consideration to pay the sellers of a target business with which we complete a business combination.
The
payment to Crescendo Advisors II, an affiliate of Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, of a monthly fee of $7,500 is for general and administrative services including office space, utilities and
secretarial support. This arrangement is being agreed to by Crescendo Advisors II for our benefit and is not intended to provide Mr. Rosenfeld compensation in lieu of a salary. We believe, based on rents and fees for similar services in the New
York metropolitan area, that the fee charged by Crescendo Advisors II is at least as favorable as we could have obtained from an unaffiliated person. This arrangement will terminate upon completion of a business combination or the distribution of
the trust account to our public stockholders. Other than the $7,500 per month administrative fee, no compensation of any kind (including finder’s, consulting or other similar fees) will be paid to any of our existing officers, directors,
stockholders, or any of their affiliates, prior to, or for any services they render in order to effectuate, the consummation of the business combination. However, such individuals will receive reimbursement for any out-of-pocket expenses incurred by
them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or
similar locations of prospective target businesses to examine their operations. Reimbursement for such expenses will be paid by us out of the funds not held in trust and currently allocated to “Legal, accounting and other expenses attendant to
the due diligence investigations, structuring and negotiation of a business combination,” “Due diligence of prospective target businesses” and “Working capital to cover miscellaneous expenses, D&O insurance, taxes and
reserves.” Since the role of present management after a business combination is uncertain, we have no ability to determine what remuneration, if any, will be paid to those persons after a business combination.
We intend to use the excess working capital (approximately $220,000, or $248,750 if the over-allotment is exercised in full) for director and officer
liability insurance premiums (approximately $80,000), with the balance of $140,000 (or $168,750 if the over-allotment option is exercised in full) being held in reserve for tax payments and in the event due diligence, taxes, legal, accounting and
other expenses of structuring and negotiating business combinations exceed our estimates, as well as for reimbursement of any out-of-pocket expenses incurred by our existing stockholders in connection with activities on our behalf as described
above. In addition to the foregoing, interest earned on the funds in the trust account of up to $200,000 may be released to us to fund our working
20
capital requirements if we have not consummated a business combination by the one year anniversary of the date of this prospectus. Such amount would be added
to our excess working capital. We believe that the excess working capital will be sufficient to cover the foregoing expenses and reimbursement costs. We could use a portion of the funds available to us to pay to consultants to assist us with our
search for a target business. We could also use a portion of the funds available to us as a down payment or to fund a “no-shop” provision (a provision in letters of intent designed to keep target businesses from “shopping” around
for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent where
we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the
amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, conducting due diligence with respect to, or
completing a business combination with, a potential target business.
The net proceeds of this offering not held in the trust account and
not immediately required for the purposes set forth above will be held as cash or cash equivalents or will be invested only in United States “government securities” so that we are not deemed to be an investment company under the Investment
Company Act. The income derived from investment of these net proceeds during this period will be used to defray our general and administrative expenses, as well as costs relating to compliance with securities laws and regulations, including
associated professional fees, until a business combination is completed.
To the extent that our capital stock is used in whole or in part
as consideration to effect a business combination, the proceeds held in the trust account which are not used to consummate a business combination will be disbursed to the combined company and will, along with any other net proceeds not expended, be
used as working capital to finance the operations of the target business.
Eric S. Rosenfeld has advanced to us a total of $90,000 which
was used to pay a portion of the expenses of this offering referenced in the line items above for SEC registration fee, NASD filing fee and legal and audit fees and expenses. The loan will be payable without interest on the earlier of May 15,
2007 or the consummation of this offering. The loan will be repaid out of the proceeds of this offering available to us.
We believe that,
upon consummation of this offering, we will have sufficient available funds (which includes amounts we can receive from the trust account) to operate for at least the next 24 months, assuming that a business combination is not consummated during
that time.
A public stockholder will be entitled to receive funds from the trust account (including interest earned on his, her or its
portion of the trust account) only in the event of our liquidation or if that public stockholder converts such shares into cash in connection with a business combination which the public stockholder voted against and which we consummate. In no other
circumstances will a public stockholder have any right or interest of any kind to or in the trust account.
21
Dilution
The difference between the public offering price per share of common stock, assuming no value is
attributed to the warrants included in the units we are offering by this prospectus or the insider warrants, and the pro forma net tangible book value per share of our common stock after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities (including the value of common stock which may be converted into cash), by the number of
outstanding shares of our common stock.
At May 17, 2006, our net tangible book value was a deficiency of $421, or approximately $0.00
per share of common stock. After giving effect to the sale of 4,500,000 shares of common stock included in the units we are offering by this prospectus, and the deduction of underwriting discounts and estimated expenses of this offering, and the
sale of the insider warrants, our pro forma net tangible book value at May 17, 2006 would have been $28,147,994 or $5.96 per share, representing an immediate increase in net tangible book value of $5.96 per share to the existing stockholders
and an immediate dilution of $2.04 per share or 25.5% to new investors not exercising their conversion rights. For purposes of presentation, our pro forma net tangible book value after this offering is approximately $6,826,585 less than it otherwise
would have been because if we effect a business combination, the conversion rights to the public stockholders (but not our existing stockholders) may result in the conversion into cash of up to approximately 19.99% of the aggregate number of the
shares sold in this offering at a per-share conversion price equal to the amount in the trust account (which includes $360,000 in deferred underwriting discounts and commissions) as of two business days prior to the consummation of the proposed
business combination, inclusive of any interest, divided by the number of shares sold in this offering.
The following table illustrates
the dilution to the new investors on a per-share basis, assuming no value is attributed to the warrants included in the units and the insider warrants:
|
|
|
|
|
|
|
|
|
Public offering price
|
|
|
|
|
$
|
8.00
|
|
Net tangible book value before this offering
|
|
(0.00
|
)
|
|
|
|
|
Increase attributable to new investors
|
|
5.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value after this offering
|
|
|
|
|
|
5.96
|
|
|
|
|
|
|
|
|
|
Dilution to new investors
|
|
|
|
|
$
|
2.04
|
|
|
|
|
|
|
|
|
The following table sets forth information with respect to our existing stockholders and the new
investors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average
Price
Per Share
|
|
|
|
Number
|
|
Percentage
|
|
|
Amount
|
|
Percentage
|
|
|
|
Existing stockholders
|
|
1,125,000
|
|
20.00
|
%
|
|
$
|
25,000
|
|
0.07
|
%
|
|
$
|
0.02
|
|
New investors
|
|
4,500,000
|
|
80.00
|
%
|
|
$
|
36,000,000
|
|
99.93
|
%
|
|
$
|
8.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,625,000
|
|
100.00
|
%
|
|
$
|
36,025,000
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
The pro forma net tangible book value after the offering is calculated as follows:
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Net tangible book value before this offering
|
|
$
|
(421
|
)
|
|
Proceeds from this offering and sale of insider warrants and assuming payment of deferred underwriting expenses
|
|
|
34,950,000
|
(1)
|
|
Offering costs paid in advance and excluded from net tangible book value before this offering
|
|
|
25,000
|
|
|
Less: Proceeds held in trust subject to conversion to cash ($34,150,000 x 19.99%)
|
|
|
(6,826,585
|
)
|
|
|
|
|
|
|
|
|
|
$
|
28,147,994
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Shares of common stock outstanding prior to this offering
|
|
|
1,125,000
|
|
|
Shares of common stock included in the units offered
|
|
|
4,500,000
|
|
|
Less: Shares subject to conversion (4,500,000 x 19.99%)
|
|
|
(899,550
|
)
|
|
|
|
|
|
|
|
|
|
|
4,725,450
|
|
|
|
|
|
|
|
|
(1)
|
Does not include the deferred underwriting discounts and commissions ($0.08 per share) which may be distributed to public stockholders if they seek conversion of their shares upon
consummation of a business combination.
|
23
Capitalization
The following table sets forth our capitalization at May 17, 2006 and as adjusted to give
effect to the sale of our units and insider warrants and the application of the estimated net proceeds derived from the sale of such securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
May 17, 2006
|
|
|
|
|
Actual
|
|
|
As
Adjusted
(1)
|
|
|
Note payable to stockholder
|
|
$
|
90,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
90,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.0001 par value, -0- and 899,550 shares which are subject to possible conversion, shares at conversion value
|
|
|
—
|
|
|
$
|
6,826,585
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.0001 par value, 1,000,000 shares authorized; none issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $.0001 par value, 15,000,000 shares authorized; 1,125,000 shares issued and outstanding, actual; 4,725,450 shares issued and
outstanding (excluding 899,550 shares subject to possible conversion), as adjusted
|
|
|
113
|
|
|
|
563
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
24,887
|
|
|
|
28,147,852
|
|
|
|
|
|
|
Deficit accumulated during the development stage
|
|
|
(421
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
$
|
24,579
|
|
|
$
|
28,147,994
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
114,579
|
|
|
$
|
34,974,579
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the $1,250,000 we will receive from the sale of the insider warrants.
|
|
(2)
|
Does not include the deferred underwriting discounts and commissions ($0.08 per share) which may be distributed to public stockholders if they seek conversion of their shares upon
consummation of a business combination.
|
If we consummate a business combination, the conversion rights afforded to our
public stockholders (but not our existing stockholders) may result in the conversion into cash of up to approximately 19.99% of the aggregate number of shares sold in this offering at a per-share conversion price equal to the amount in the trust
account (which includes $360,000 in deferred underwriting discounts and commissions), inclusive of any interest thereon not previously released to us for working capital requirements, as of two business days prior to the proposed consummation of a
business combination divided by the number of shares sold in this offering.
24
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
We were formed on April 24, 2006 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business
combination with an operating business. We intend to utilize cash derived from the proceeds of this offering, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination. The issuance of additional
shares of our capital stock:
|
|
•
|
|
may significantly reduce the equity interest of our stockholders;
|
|
|
•
|
|
may subordinate the rights of holders of common stock if we issue preferred stock with rights senior to those afforded to our common stock;
|
|
|
•
|
|
will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating
loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and
|
|
|
•
|
|
may adversely affect prevailing market prices for our common stock.
|
Similarly, if we issue debt securities, it could result in:
|
|
•
|
|
default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations;
|
|
|
•
|
|
acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the
maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant;
|
|
|
•
|
|
our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
|
|
|
•
|
|
our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is
outstanding.
|
We have neither engaged in any operations nor generated any revenues to date. Our entire activity since
inception has been to prepare for our proposed fundraising through an offering of our equity securities.
We estimate that the net proceeds
from the sale of the units, after deducting offering expenses of approximately $680,000, including $180,000 which represents the non-accountable expense allowance of 0.5% of the gross proceeds, and underwriting discounts of approximately $1,980,000,
or $2,277,000 if the over-allotment option is exercised in full, will be approximately $33,340,000, or $38,443,000 if the over-allotment option is exercised in full. However, the underwriters have agreed that 1.0% of the underwriting discounts and
commissions due will not be payable unless and until we consummate a business combination. Accordingly, $32,900,000, or $38,028,250 if the over-allotment option is exercised in full, of the net proceeds of this offering will be held in trust and the
remaining $800,000, or $828,750 if the over-allotment option is exercised in full, will not be held in trust. An additional $1,250,000 will also be deposited into trust upon consummation of this offering from the sale of the insider warrants
described below. If we have not consummated a business combination by the one year anniversary of the date of this prospectus, there can be released to us from the trust account interest earned on the funds in the trust account of up to $200,000 to
fund expenses related to investigating and selecting a target business, income and other taxes and our working capital requirements. We intend to use substantially all of the net proceeds of this offering, including the funds held in the trust
account (excluding the deferred underwriting discounts and commissions), to acquire a target business. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the remaining proceeds held in
the trust account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business.
25
We believe that, upon consummation of this offering, the funds available to us outside of the trust
account, together with the up to $200,000 of interest income that may be released to us from the trust account if we have not consummated a business combination by the one year anniversary of the date of this prospectus, will be sufficient to allow
us to operate for at least the next 24 months, assuming that a business combination is not consummated during that time. Over this time period, we will be using these funds for identifying and evaluating prospective acquisition candidates,
performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination. We anticipate that we will incur approximately $180,000 for the administrative fee payable to Crescendo Advisors II ($7,500
per month for two years), $150,000 of expenses for legal, accounting and other expenses attendant to the due diligence investigations, structuring and negotiating of a business combination, $150,000 of expenses for the due diligence and
investigation of a target business, $100,000 of expenses in legal and accounting fees relating to our SEC reporting obligations, and $220,000 (or $248,750 if the over-allotment option is exercised in full) for general working capital that will be
used for miscellaneous expenses, taxes and reserves, including approximately $80,000 for director and officer liability insurance premiums. The additional $200,000 we may receive from the trust account would be added to our general working capital.
We do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private offering of debt or equity
securities if such funds are required to consummate a business combination that is presented to us, although we have not entered into any such arrangement and have no current intention of doing so.
We are obligated, commencing on the date of this prospectus, to pay to Crescendo Advisors II, an affiliate of Eric S. Rosenfeld, our chairman of the
board, chief executive officer and president, a monthly fee of $7,500 for general and administrative services.
On May 15, 2006, Eric
S. Rosenfeld advanced an aggregate of $90,000 to us for payment of offering expenses on our behalf. The loan will be payable without interest on the earlier of May 15, 2007 or the consummation of this offering. The loan will be repaid out of
the proceeds of this offering not being placed in trust.
Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson and Gotham
Capital V have also committed to purchase 1,136,364 warrants at $1.10 per warrant (for an aggregate purchase price of $1,250,000) from us. These purchases will take place on a private placement basis simultaneously with the consummation of this
offering.
We have agreed to issue to the representative of the underwriters, for $100, an option to purchase up to a total of 450,000
units. We estimate that the fair value of this option is approximately $1,557,000 ($3.46 per Unit underlying such option) using a Black-Scholes option-pricing model. The fair value of the option granted to the representative is estimated as of the
date of grant using the following assumptions: (1) expected volatility of 45.12%, (2) risk-free interest rate of 4.96% and (3) expected life of 5 years.
26
Proposed Business
Introduction
We are a recently organized Delaware blank check company incorporated on April 24, 2006 in order to serve as a vehicle for the acquisition of an operating business. Our efforts to identify a prospective target
business will not be limited to a particular industry.
Effecting a business combination
General
We are not presently engaged
in, and we will not engage in, any substantive commercial business for an indefinite period of time following this offering. We intend to utilize cash derived from the proceeds of this offering, our capital stock, debt or a combination of these in
effecting a business combination. Although substantially all of the net proceeds of this offering are intended to be applied generally toward effecting a business combination as described in this prospectus, the proceeds are not otherwise being
designated for any more specific purposes. Accordingly, investors in this offering are investing without first having an opportunity to evaluate the specific merits or risks of any one or more business combinations. A business combination may
involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking
a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various Federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that
may be financially unstable or in its early stages of development or growth. While we may seek to effect business combinations with more than one target business, we will probably have the ability, as a result of our limited resources, to effect
only a single business combination.
We have not identified a target business or target industry
To date, we have not selected any target business or target industry on which to concentrate our search for a business combination. None of our officers,
directors, promoters and other affiliates has engaged in discussions on our behalf with representatives of other companies regarding the possibility of a potential merger, capital stock exchange, asset acquisition or other similar business
combination with us, nor have we, nor any of our agents or affiliates, been approached by any candidates (or representatives of any candidates) with respect to a possible acquisition transaction with us. Additionally, we have not, nor has anyone on
our behalf, taken any measure, directly or indirectly, to identify or locate any suitable acquisition candidate, nor have we engaged or retained any agent or other representative to identify or locate such an acquisition candidate. We have also not
conducted any research with respect to identifying the number and characteristics of the potential acquisition candidates. As a result, we cannot assure you that we will be able to locate a target business or that we will be able to engage in a
business combination with a target business on favorable terms.
Subject to the limitations that a target business has a fair market value
of at least 80% of our net assets at the time of the acquisition, as described below in more detail, we will have virtually unrestricted flexibility in identifying and selecting a prospective acquisition candidate. We have not established any other
specific attributes or criteria (financial or otherwise) for prospective target businesses. Accordingly, there is no basis for investors in this offering to evaluate the possible merits or risks of the target business with which we may ultimately
complete a business combination. To the extent we effect a business combination with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we may
be affected by numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. Although our management will endeavor to evaluate the risks inherent in a particular target
business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
27
Sources of target businesses
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers, venture
capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us
through calls or mailings. These sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these sources will have read this prospectus and know what types of businesses we are
targeting. Our officers and directors, as well as their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they
may have, as well as attending trade shows or conventions. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms
or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. In no event, however, will any of our
existing officers, directors or stockholders, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation of a
business combination.
Selection of a target business and structuring of a business combination
Our management will have virtually unrestricted flexibility in identifying and selecting a prospective target business. We have not established any other
specific attributes or criteria (financial or otherwise) for prospective target businesses. In evaluating a prospective target business, our management will consider, among other factors, the following:
|
|
•
|
|
financial condition and results of operation;
|
|
|
•
|
|
experience and skill of management and availability of additional personnel;
|
|
|
•
|
|
stage of development of the products, processes or services;
|
|
|
•
|
|
degree of current or potential market acceptance of the products, processes or services;
|
|
|
•
|
|
proprietary features and degree of intellectual property or other protection of the products, processes or services;
|
|
|
•
|
|
regulatory environment of the industry; and
|
|
|
•
|
|
costs associated with effecting the business combination.
|
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our
management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent
management and inspection of facilities, as well as review of financial and other information which is made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage,
although we have no current intention to engage any such third parties. We will also seek to have all prospective target businesses execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the
trust account. If any prospective target business refused to execute such agreement, it is unlikely we would continue negotiations with such target business.
28
The time and costs required to select and evaluate a target business and to structure and complete the
business combination cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed
will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.
We have engaged
EarlyBirdCapital, the representative of the underwriters, on a non-exclusive basis, to act as our investment banker to assist us in structuring a business combination and negotiating its terms (but not for purposes of locating potential target
candidates for our business combination). We will pay the representative a cash fee at the closing of our business combination of 1.0% of the total consideration paid in connection with the business combination, with a maximum fee to be paid of
$360,000.
Fair market value of target business
The target business that we acquire must have a fair market value equal to at least 80% of our net assets at the time of such acquisition, although we may acquire a target business whose fair market value
significantly exceeds 80% of our net assets. In order to consummate such an acquisition, we may issue a significant amount of our debt or equity securities to the sellers of such businesses and/or seek to raise additional funds through a private
offering of debt or equity securities. Since we have no specific business combination under consideration, we have not entered into any such fund raising arrangement and have no current intention of doing so. The fair market value of the target will
be determined by our board of directors based upon standards generally accepted by the financial community, such as actual and potential sales, earnings and cash flow and book value. If our board is not able to independently determine that the
target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm with respect to the satisfaction of such criteria. Since any opinion, if obtained, would merely state that fair
market value meets the 80% of net assets threshold, it is not anticipated that copies of such opinion would be distributed to our stockholders, although copies will be provided to stockholders who request it. We will not be required to obtain an
opinion from an investment banking firm as to the fair market value if our board of directors independently determines that the target business complies with the 80% threshold.
Lack of business diversification
Our
business combination must be with a target business or businesses which satisfies the minimum valuation standard at the time of such acquisition, as discussed above, although this process may entail the simultaneous acquisitions of several operating
businesses at the same time. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance of a single business. Unlike other entities which may have the resources to complete several business
combinations of entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses.
By consummating a business combination with only a single entity, our lack of diversification may:
|
|
•
|
|
subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may
operate subsequent to a business combination, and
|
|
|
•
|
|
result in our dependency upon the development or market acceptance of a single or limited number of products, processes or services.
|
If we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our
purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple acquisitions, we could also face
additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are
29
multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies
in a single operating business.
Limited ability to evaluate the target business’ management
Although we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business combination, we
cannot assure you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure you that the future management will have the necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and directors, if any, in the target business following a business combination cannot presently be stated with any certainty. While it is possible that Eric S. Rosenfeld, David Sgro or Arnaud
Ajdler will remain in a senior management or advisory position with us following a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a business combination. Moreover, they would only be
able to remain with the company after the consummation of a business combination if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with
the negotiation of the business combination and could provide for them to receive compensation in the form of cash payments and/or our securities for services they would render to the company after the consummation of the business combination. While
the personal and financial interests of Messrs. Rosenfeld, Sgro and Ajdler may influence their motivation in identifying and selecting a target business, their ability to remain with the company after the consummation of a business combination will
not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. Additionally, we cannot assure you that our officers and directors will have significant experience or knowledge relating to
the operations of the particular target business.
Following a business combination, we may seek to recruit additional managers to
supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Opportunity for stockholder approval of business combination
Prior to the completion of a business combination, we will submit the transaction to our stockholders for approval, even if the nature of the acquisition
is such as would not ordinarily require stockholder approval under applicable state law. In connection with any such transaction, we will also submit to our stockholders for approval a proposal to amend our amended and restated certificate of
incorporation to provide for our corporate life to continue perpetually following the consummation of such business combination. We will only consummate a business combination if stockholders vote both in favor of such business combination and our
amendment to extend our corporate life.
In connection with seeking stockholder approval of a business combination, we will furnish our
stockholders with proxy solicitation materials prepared in accordance with the Securities Exchange Act of 1934, as amended, which, among other matters, will include a description of the operations of the target business and audited historical
financial statements of the business.
In connection with the vote required for any business combination, all of our existing stockholders,
including all of our officers and directors, have agreed to vote their respective initial shares in accordance with the majority of the shares of common stock voted by the public stockholders. This voting arrangement shall not apply to shares
included in units purchased in this offering or purchased following this offering in the aftermarket by any of our existing stockholders, officers and directors. Accordingly, they may vote these shares on a proposed business combination any way they
choose. We will proceed with the business combination only if a majority of the shares of common stock voted by the public stockholders are voted in favor of the business combination and public stockholders owning less than 20% of the shares sold in
this offering both exercise their conversion rights and vote against the business combination.
30
Conversion rights
At the time we seek stockholder approval of any business combination, we will offer each public stockholder the right to have such stockholder’s shares of common stock converted to cash if the stockholder votes
against the business combination and the business combination is approved and completed. Our existing stockholders will not have such conversion rights with respect to any shares of common stock owned by them, directly or indirectly, whether
included in their initial shares or purchased by them in this offering or in the aftermarket. The actual per-share conversion price will be equal to the amount in the trust account, inclusive of any interest (calculated as of two business days prior
to the consummation of the proposed business combination), divided by the number of shares sold in this offering. Without taking into any account interest then held in the trust account, the initial per-share conversion price would be $7.59, or
$0.41 less than the per-unit offering price of $8.00. An eligible stockholder may request conversion at any time after the mailing to our stockholders of the proxy statement and prior to the vote taken with respect to a proposed business combination
at a meeting held for that purpose, but the request will not be granted unless the stockholder votes against the business combination and the business combination is approved and completed. Any request for conversion, once made, may be withdrawn at
any time up to the date of the meeting. It is anticipated that the funds to be distributed to stockholders entitled to convert their shares who elect conversion will be distributed promptly after completion of a business combination. Public
stockholders who convert their stock into their share of the trust account still have the right to exercise any warrants they still hold.
We will not complete any business combination if public stockholders, owning 20% or more of the shares sold in this offering, both exercise their conversion rights and vote against the business combination. Accordingly, it is our
understanding and intention in every case to structure and consummate a business combination in which approximately 19.99% of the public stockholders may exercise their conversion rights and the business combination will still go forward.
Investors in this offering who do not sell, or who receive less than $0.41 of net sales proceeds for, the warrant included in the units,
or persons who purchase common stock in the aftermarket at a price in excess of $7.59 per share, may have a disincentive to exercise their conversion rights because the amount they would receive upon conversion could be less than their original or
adjusted purchase price.
Liquidation if no business combination
Our amended and restated certificate of incorporation provides that we will continue in existence only until
, 2008
[twenty four months from the date of this prospectus]
. This provision may not be amended except in connection with
the consummation of a business combination. If we have not completed a business combination by such date, our corporate existence will cease except for the purposes of winding up our affairs and liquidating, pursuant to Section 278 of the
Delaware General Corporation Law. This has the same effect as if our board of directors and stockholders had formally voted to approve our dissolution. As a result, no vote would be required from our stockholders to commence such a dissolution and
liquidation. We view this provision terminating our corporate life by , 2008
[twenty four months from the date of this
prospectus]
as an obligation to our stockholders and will not take any action to amend or waive this provision to allow us to survive for a longer period of time except in connection with the consummation of a business combination.
If we are unable to complete a business combination by
, 2008
[twenty four months from the date of this prospectus]
, we will distribute to all of our public stockholders, in
proportion to their respective equity interests, an aggregate sum equal to the amount in the trust account, inclusive of any interest, plus any remaining net assets. We anticipate notifying the trustee of the trust account to begin liquidating such
assets promptly after such date. Our initial stockholders have waived their rights to participate in any liquidation distribution with respect to their initial shares. There will be no distribution from the trust account with respect to our warrants
which will expire worthless. We will pay the costs of liquidation from our remaining assets outside of the trust fund. If such funds are insufficient, we anticipate our initial stockholders will advance us the funds necessary to complete such
liquidation (currently anticipated to be no more than approximately $15,000).
31
If we were to expend all of the net proceeds of this offering, other than the proceeds deposited in the
trust account, and without taking into account interest, if any, earned on the trust account, the initial per-share liquidation price would be $7.59, or $0.41 less than the per-unit offering price of $8.00. The proceeds deposited in the trust
account could, however, become subject to the claims of our creditors which could have higher priority than the claims of our public stockholders. Eric S. Rosenfeld has personally agreed, pursuant to an agreement with us and EarlyBirdCapital that,
if we liquidate prior to the consummation of a business combination, he will be personally liable to pay debts and obligations to target businesses or vendors or other entities that are owed money by us for services rendered or contracted for or
products sold to us in excess of the net proceeds of this offering not held in the trust account. We cannot assure you, however, that he would be able to satisfy those obligations. Accordingly, the actual per-share liquidation price could be less
than $7.59, plus interest, due to claims of creditors.
Our public stockholders will be entitled to receive funds from the trust account
only in the event of the expiration of our existence and our liquidation or if they seek to convert their respective shares into cash upon a business combination which the stockholder voted against and which is completed by us. In no other
circumstances will a stockholder have any right or interest of any kind to or in the trust account.
Under the Delaware General Corporation
Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. If the corporation complies with certain procedures set forth in Section 280 of the
Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during
which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the
lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, as stated above, it is our
intention to make liquidating distributions to our stockholders as soon as reasonably possible after , 2008
[twenty four
months from the date of this prospectus]
and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them and any liability of
our stockholders may extend beyond the third anniversary of such date. Because we will not be complying with Section 280, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan that will provide for our payment,
based on facts known to us at such time, of (i) all existing claims, (ii) all pending claims and (iii) all claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check
company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors and service providers (such as accountants, lawyers,
investment bankers, etc.) and potential target businesses. As described above, we are obligated to have all vendors, service providers and prospective target businesses execute agreements with us waiving any right, title, interest or claim of any
kind they may have in or to any monies held in the trust account. As a result, the claims that could be made against us will be significantly limited and the likelihood that any claim would result in any liability extending to the trust is remote.
If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held
in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, we cannot assure you we will be able to return to our public stockholders at least $7.59 per share.
Competition
In identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business
objective similar to ours. There are approximately blank check companies that
32
have completed initial public offerings in the United States with more than $ billion
in trust that are seeking to carry out a business plan similar to our business plan. Furthermore, there are a number of additional offerings for blank check companies that are still in the registration process but have not completed initial public
offerings and there are likely to be more blank check companies filing registration statements for initial public offerings after the date of this prospectus and prior to our completion of a business combination. Additionally, we may be subject to
competition from entities other than blank check companies having a business objective similar to ours, including venture capital firms, leverage buyout firms and operating businesses looking to expand their operations through the acquisition of a
target business. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources
than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses that we could acquire with the net proceeds of this offering,
our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business. Further, the
following may not be viewed favorably by certain target businesses:
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•
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our obligation to seek stockholder approval of a business combination may delay the completion of a transaction;
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•
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our obligation to convert into cash shares of common stock held by our public stockholders to such holders that both vote against the business combination and exercise their
conversion rights may reduce the resources available to us for a business combination; and
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•
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our outstanding warrants and option, and the potential future dilution they represent.
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Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity and potential access to the
United States public equity markets may give us a competitive advantage over privately-held entities having a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target business. We
cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete effectively.
Facilities
We maintain our principal executive offices at 10 East 53
rd
Street, 35
th
Floor, New York, New York. The cost for this space is
included in the $7,500 per-month fee Crescendo Advisors II will charge us for general and administrative services commencing on the effective date of this prospectus pursuant to a letter agreement between us and Crescendo Advisors II. We believe,
based on rents and fees for similar services in the New York metropolitan area, that the fee charged by Crescendo Advisors II is at least as favorable as we could have obtained from an unaffiliated person. We consider our current office space,
combined with the other office space otherwise available to our executive officers, adequate for our current operations.
Employees
We have three executive officers. These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as
much time as he deems necessary to our affairs. The amount of time they will devote in any time period will vary based on whether a target business has been selected for the business combination and the stage of the business combination process the
company is in. Accordingly, once management locates a suitable target business to acquire, they will spend more time investigating such target business and negotiating and processing the business combination (and consequently spend more time to our
affairs) than they would prior to locating a suitable target business. We presently expect Messrs. Rosenfeld, Sgro
33
and Ajdler to devote an average of approximately 10 hours per week to our business. We do not intend to have any full time employees prior to the
consummation of a business combination.
Periodic Reporting and Audited Financial Statements
We have registered our units, common stock and warrants under the Securities Exchange Act of 1934, as amended, and have reporting obligations, including
the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Securities Exchange Act of 1934, our annual reports will contain financial statements audited and reported on by our
independent registered public accountants.
We will not acquire a target business if audited financial statements based on United States
generally accepted accounting principles cannot be obtained for the target business. Additionally, we will provide stockholders with audited financial statements of the prospective target business as part of the proxy solicitation materials sent to
stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with United States generally accepted accounting principles. We cannot assure you that any particular
target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with United States generally accepted accounting principles or that the potential target business will be able to prepare its
financial statements in accordance with United States generally accepted accounting principles. To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential
acquisition candidates, we do not believe that this limitation will be material.
Comparison to offerings of blank check companies
The following table compares and contrasts the terms of our offering and the terms of an offering of blank check companies under Rule 419 promulgated by
the SEC assuming that the gross proceeds, underwriting discounts and underwriting expenses for the Rule 419 offering are the same as this offering and that the underwriters will not exercise their over-allotment option. None of the terms of a Rule
419 offering will apply to this offering.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Escrow of offering proceeds
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$32,900,000 of the net offering proceeds plus the $1,250,000 we will receive from the sale of the insider warrants will be deposited into a trust account at Lehman Brothers, maintained by
Continental Stock Transfer & Trust Company, acting as trustee.
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$30,456,000 of the offering proceeds would be required to be deposited into either an escrow account with an insured depositary institution or in a separate bank account established by a
broker-dealer in which the broker-dealer acts as trustee for persons having the beneficial interests in the account.
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Investment of net proceeds
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The $32,900,000 of net offering proceeds plus the $1,250,000 we will receive from the sale of the insider warrants held in trust will only be invested in United States “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of
1940.
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Proceeds could be invested only in specified securities such as a money market fund meeting conditions of the Investment Company Act of 1940 or in securities that are direct obligations of, or
obligations guaranteed as to principal or interest by, the United States.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Limitation on Fair Value or Net Assets of Target Business
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The initial target business that we acquire must have a fair market value equal
to at least 80% of our net assets at the time of such acquisition.
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We would be restricted from acquiring a target business unless the fair value
of such business or net assets to be acquired represented at least 80% of the maximum offering proceeds.
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Trading of securities issued
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The units may commence trading on or promptly after the date of this prospectus. The common stock and warrants comprising the units will begin to trade separately on the 90th day after the date
of this prospectus unless EarlyBirdCapital informs us of its decision to allow earlier separate trading (based upon its assessment of the relative strengths of the securities markets and small capitalization companies in general, and the trading
pattern of, and demand for, our securities in particular), provided we have filed with the SEC a Current Report on Form 8-K, which includes an audited balance sheet reflecting our receipt of the proceeds of this offering, including any proceeds we
receive from the exercise of the over-allotment option, if such option is exercised prior to the filing of the Form 8-K. We will also include in this Form 8-K, or amendment thereto, or in a subsequent Form 8-K, information indicating if
EarlyBirdCapital has allowed separate trading of the common stock and warrants prior to the 90
th
day after the date
of this prospectus.
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No trading of the units or the underlying common stock and warrants would be permitted until the completion of a business combination. During this period, the securities would be held in the
escrow or trust account.
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Exercise of the warrants
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The warrants cannot be exercised until the later of the completion of a business combination and one year from the date of this prospectus and, accordingly, will be exercised only after the
trust fund has been terminated and distributed.
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The warrants could be exercised prior to the completion of a business combination, but securities received and cash paid in connection with the exercise would be deposited in the escrow or trust
account.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Election to remain an investor
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We will give our stockholders the opportunity to vote on the business combination. In connection with seeking stockholder approval, we will send each stockholder a proxy statement containing
information required by the SEC. A stockholder following the procedures described in this prospectus is given the right to convert his or her shares into his or her pro rata share of the trust account. However, a stockholder who does not follow
these procedures or a stockholder who does not take any action would not be entitled to the return of any funds.
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A prospectus containing information required by the SEC would be sent to each investor. Each investor would be given the opportunity to notify the company, in writing, within a period of no less
than 20 business days and no more than 45 business days from the effective date of the post-effective amendment, to decide whether he or she elects to remain a stockholder of the company or require the return of his or her investment. If the company
has not received the notification by the end of the 45
th
business day, funds and interest or dividends, if any, held
in the trust or escrow account would automatically be returned to the stockholder. Unless a sufficient number of investors elect to remain investors, all of the deposited funds in the escrow account must be returned to all investors and none of the
securities will be issued.
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Business combination deadline
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Pursuant to our amended and restated certificate of incorporation, our corporate existence will cease 24 months from the date of this prospectus except for the purposes of winding up our affairs
and liquidating. However, if we complete a business combination within this time period, we will amend this provision to allow for our perpetual existence following such business combination.
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If an acquisition has not been consummated within 18 months after the effective date of the initial registration statement, funds held in the trust or escrow account would be returned to
investors.
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Release of funds
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Except with respect to interest earned on the funds in the trust account, up to $200,000, that may be released to us, the proceeds held in the trust account will not be released until the
earlier of the completion of a business combination and our liquidation upon failure to effect a business combination within the allotted time.
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The proceeds held in the escrow account would not be released until the earlier of the completion of a business combination or the failure to effect a business combination within the allotted
time.
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36
Management
Directors and Executive Officers
Our current directors and executive officers are as follows:
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Name
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Age
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Position
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Eric S. Rosenfeld
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48
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Chairman of the Board of Directors, Chief Executive Officer and President
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David Sgro
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29
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Chief Financial Officer
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Arnaud Ajdler
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30
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Secretary and Director
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Leonard B. Schlemm
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53
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Director
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Jon Bauer
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49
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Director
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Colin D. Watson
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64
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Director
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Eric S. Rosenfeld
has been our chairman of the board, chief executive officer and president
since our inception. Mr. Rosenfeld has been the chairman of the board, chief executive officer and president of Arpeggio Acquisition Corporation, an OTC Bulletin Board-listed blank check company formed to effect a merger, capital stock
exchange, asset acquisition or other similar business combination with an operating business, since its inception in April 2004. Mr. Rosenfeld has been the President and Chief Executive Officer of Crescendo Partners, L.P., a New York-based
investment firm, since its formation in November 1998. He has also been the Senior Managing Member of Crescendo Advisors II LLC, the entity providing us with general and administrative services, since its formation in August 2000. Prior to forming
Crescendo Partners, Mr. Rosenfeld had been Managing Director at CIBC Oppenheimer and its predecessor company Oppenheimer & Co., Inc. since 1985. He was also Chairman of the Board of Spar Aerospace Limited, a company that provides
repair and overhaul services for aircraft and helicopters used by governments and commercial airlines, from May 1999 through November 2001, until its sale to L-3 Communications. He served as a director of Hip Interactive, a Toronto Stock
Exchange-listed company that distributes and develops electronic entertainment products, from November 2004 until July 2005. Mr. Rosenfeld also served as a director of AD OPT Technologies Inc., which was a Toronto Stock Exchange-listed company
from April 2003 to November 2004, when it was acquired by Kronos Inc. Mr. Rosenfeld also served as a director and head of the special committee of Pivotal Corporation, a Canadian based customer relations management software company that was
sold to chinadotcom in February 2004. Mr. Rosenfeld is currently Chairman of the Board of CPI Aerostructures, Inc., an American Stock Exchange-listed company engaged in the contract production of structural aircraft parts principally for the
United States Air Force and other branches of the U.S. armed forces. He became Chairman in January 2005 and a director in April 2003. He has been the Chairman of the Board of Computer Horizons Corp., a Nasdaq listed company, providing IT
professional services with a concentration in sourcing and managed services since October 2005. He has been a director of Sierra Systems Group, Inc., a Toronto Stock Exchange-listed information technology, management consulting and systems
integration firm based in Canada since October 2003, a director of Emergis Inc., a Toronto Stock Exchange-listed company that enables the electronic processing of transactions in the finance and healthcare industries, since July 2004, and was a
director of Geac Computer Corporation Limited, a Toronto Stock Exchange and Nasdaq listed software company that was recently acquired by another company, from October 2005 through March 2006. Mr. Rosenfeld is a regular guest lecturer at
Columbia Business School and has served on numerous panels at Queen’s University Business Law School Symposia, McGill Law School, the World Presidents’ Organization and the Value Investing Congress. He is a faculty member at the
Director’s College. He has also been a regular guest host on CNBC. Mr. Rosenfeld received an A.B. in economics from Brown University and an M.B.A. from the Harvard Business School.
David D. Sgro, CFA
has been our chief financial officer since our inception. Mr. Sgro has been a Vice President of Crescendo Partners,
L.P., a Delaware limited partnership, since December 2005 and an investment analyst from May 2005 to December 2005. From June 1998 to May 2003, he worked as an analyst and then senior analyst at Management Planning, Inc., a firm engaged in the
valuation of privately held companies. Simultaneously, Mr. Sgro worked as an associate with MPI Securities, Management Planning, Inc.’s
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boutique investment banking affiliate. From June 2004 to August 2004, Mr. Sgro worked as an analyst at Brandes Investment
Partners. Mr. Sgro received a B.S. in Finance from The College of New Jersey and an M.B.A. from Columbia Business School. In 2001, he became a Chartered Financial Analyst (CFA) Charterholder.
Arnaud Ajdler
has been our secretary and a member of our board of directors since our inception. He has also served as the chief financial officer
and secretary and a member of the board of directors of Arpeggio Acquisition Corporation since its inception in April 2004. Since October 2005, Mr. Ajdler is also assistant to the chairman of the board and a board observer to Computer Horizon
Corp., a NASDAQ listed company. Mr. Ajdler has been a Managing Director of Crescendo Partners, L.P., a Delaware limited partnership, since December 2005, a Senior Vice President from December 2004 to December 2005 and an investment analyst from
September 2003 to December 2004. From January 2000 to July 2001, he worked as a management consultant at Mercer Management Consulting, an international strategy consulting firm, before completing his M.B.A. at Harvard Business School in June 2003.
He also worked as an investment analyst at Tilson Capital, a New York-based hedge fund, from July to September 2003, as an investment banker at Deutsche Bank, an international financial service provider, from June to August 2002, and as a management
consultant at the Boston Consulting Group from June to August 1999. Mr. Ajdler received a B.S. in engineering from the Free University of Brussels, Belgium, an S.M. in Aeronautics from the Massachusetts Institute of Technology and an M.B.A from
the Harvard Business School.
Leonard B. Schlemm
has been a member of our board of directors since our inception. He has been
chairman of Sila Holdings, a Cyprus holding company which owns one of the largest chains of fitness centers in Russia, since March 1997 and the president of The Atwater Club, a private racquet club in Montreal, since February 2002. He also served as
chairman of the board of AD OPT Technologies from November 2002 until April 2004. From November 1999 until its merger with Netpulse Communications and E-Zone Networks in November 2000, he served as chairman of the board of Xystos Media Networks, an
interactive media company with three million users under long-term contract. Mr. Schlemm was a co-founder of 24 Hour Fitness, one of the world’s largest privately owned and operated fitness center chains and was its chairman from September
1986 until July 1997. From June 1996 to January 1999, Mr. Schlemm served as a member of the board of directors of Forza Limited, a European fitness equipment distribution company. Mr. Schlemm has been a member of the board of directors of
Arpeggio Acquisition Corporation since its inception in April 2004. Mr. Schlemm received a Bachelor of Commerce degree from McGill University (great distinction) and an M.B.A. from Harvard University (with distinction). He also received his
Chartered Accountant designation in Canada in 1975.
Jon Bauer
has been a member of our board of directors since our inception.
Since May 1995, Mr. Bauer has been the managing member and chief investment officer of Contrarian Capital Management, a multi-strategy distressed securities money management firm. From July 1986 to May 1995, he was managing director at
Oppenheimer & Co., Inc. where he founded the High Yield Department. Mr. Bauer has been a member of the board of directors of Arpeggio Acquisition Corporation since its inception in April 2004. Mr. Bauer received a B.A. (with
honors) from Rutgers College and an MBA from Harvard Business School.
Colin D. Watson
has been a member of our board of directors
since our inception. From November 2003 through December 2004, Mr. Watson had been president and chief executive officer of Vector Aerospace Corporation, a company engaged in the aviation repair and overhaul industry. He is also a director of
Louisiana-Pacific Corporation, Rogers Communications, Great Lakes Carbon, B Split 11 Corporation, Cygnal Technologies Corporation, Northstar Aeropsace and Vector Aerospace. From April 1996 until January 2002, Mr. Watson served in various
positions with Spar Aerospace. In December 2001, he retired from the office of vice-chairman of Spar Aerospace, a position he had held since January 2001. From January 2000 to December 2000, he was vice-chairman and chief executive officer of Spar
Aerospace and from April 1996 until December 1999, he was its president and chief executive officer. From April 1974 to April 1996, Mr. Watson was president and chief executive officer of Rogers Cable TV, one of Canada’s largest cable
providers, and a director of Rogers Communications Inc. as well as director, president and chief executive officer of Rogers Cable TV. Mr. Watson is a member of the Chairman’s Advisory Council of Harbourfront Centre and Sunnybrook
Foundation,
38
respectively, and is a past Chairman of the Toronto Film Festival. Mr. Watson has been a member of the board of directors of Arpeggio Acquisition
Corporation since its inception in April 2004. Mr. Watson received a Ba.Sc. (Mechanical Engineering) from UBC and an MBA from the Richard Ivey School of Business at the University of Western Ontario.
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year
term. The term of office of the first class of directors, consisting of Colin D. Watson, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Leonard B. Schlemm and Jon Bauer,
will expire at the second annual meeting. The term of the third class of directors, consisting of Eric Rosenfeld and Arnaud Ajdler, will expire at the third annual meeting.
Special Advisor
Joel Greenblatt
is our special advisor who will advise us concerning our
acquisition of a target business. Mr. Greenblatt is the managing partner of Gotham Capital III, L.P., an investment partnership he founded in April 1985, and a managing member of Gotham Capital V LLC. He is also a special advisor to Arpeggio
Acquisition Corporation. He is the former chairman of the board and a former board member of Alliant Techsystems, a New York Stock Exchange-listed aerospace and defense contractor. Since 1996, he has been on the adjunct faculty of Columbia Business
School where he teaches “Security Analysis.” Mr. Greenblatt is the author of “You Can Be A Stock Market Genius” (Simon & Schuster, 1997) and “The Little Book That Beats the Market” (John Wiley &
Sons, 2005). He received a B.S. (summa cum laude) and an MBA from the Wharton School of the University of Pennsylvania.
These individuals
will play a key role in identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating its acquisition. We believe that the skills and expertise of these individuals, their
collective access to acquisition opportunities and ideas, their contacts, and their transactional expertise should enable them to successfully identify and effect an acquisition.
Prior Involvement of Principals in Blank Check Companies
Except for David Sgro, each of our officers
and directors has been a principal of Arpeggio Acquisition Corporation, a blank check company that completed an offering similar to this offering and executed a business plan similar to our business plan.
Arpeggio Acquisition Corporation, a blank check company with an objective to acquire an operating business, completed its initial public offering on
June 30, 2004 and raised gross proceeds of $40.8 million at an offering price of $6.00 per unit. Since its inception, Mr. Rosenfeld has been the chairman, chief executive officer and president of Arpeggio Acquisition Corporation and Arnaud
Ajdler has been the chief financial officer, secretary and a member of the board of directors of Arpeggio Acquisition Corporation. Since its inception, each of Messrs. Schlemm, Bauer and Watson has been a member of the board of directors of Arpeggio
Acquisition Corporation. As of the date of this prospectus, Arpeggio Acquisition Corporation has not consummated a business combination with a target business. However, it has entered into an Agreement and Plan of Merger with Hill International,
Inc. and all of its stockholders pursuant to which Hill International will become a wholly owned subsidiary of Arpeggio Acquisition Corporation. The Agreement and Plan of Merger with Hill International currently contemplates that each of
Mr. Rosenfeld and Mr. Ajdler will continue to serve as a member of the board of directors of Arpeggio Acquisition Corporation following completion of the merger. As such, in the future, they will receive any cash fees and stock awards that
Arpeggio’s board of directors determines to pay to its non-executive directors.
No salary has been paid to any of these individuals for their services to Arpeggio Acquisition Corporation. However, Crescendo Advisors II, an affiliate of
Mr. Rosenfeld’s and Mr. Ajdler’s that will provide similar services to us, receives a $7,500 per month fee from Arpeggio Acquisition Corporation for use of office space and administrative services from the effective date of
Arpeggio Acquisition Corporation’s initial public offering through the date of the merger with Hill International.
39
Prior to Arpeggio Acquisition Corporation’s initial public offering, these individuals purchased the
following shares for an aggregate purchase price of $25,000.
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Name
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Number of Shares
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Eric S. Rosenfeld
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1,080,000
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Rosenfeld 1991 Children’s Trust
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120,000
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Leonard B. Schlemm
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60,000
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Colin D. Watson
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60,000
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Jon Bauer
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60,000
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Arnaud Ajdler
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60,000
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Subsequent to Arpeggio Acquisition Corporation’s initial public offering, Messrs. Rosenfeld, Schlemm and
Gotham Capital V, an affiliate of Joel Greenblatt, our special advisor and a special advisor to Arpeggio Acquisition Corporation, purchased 750,000 warrants, 40,800 warrants and 212,500 warrants, respectively, at $0.65 per warrant for a total
purchase price of $487,500, $26,520 and $138,125, respectively.
Executive Compensation
No executive officer has received any cash compensation for services rendered to us. Commencing on the date of this prospectus through the acquisition of
a target business, we will pay Crescendo Advisors II, an affiliate of Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, a fee of $7,500 per month for providing us with office space and certain office and
secretarial services. However, this arrangement is solely for our benefit and is not intended to provide Mr. Rosenfeld compensation in lieu of a salary. Other than the $7,500 per month administrative fee, no compensation of any kind, including
finders, consulting or other similar fees, will be paid to any of our existing stockholders, including our directors, or any of their respective affiliates, prior to, or for any services they render in order to effectuate, the consummation of a
business combination. However, such individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business
combinations. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of the expenses by anyone other than our board of directors, which includes persons who may seek reimbursement, or a
court of competent jurisdiction if such reimbursement is challenged. Because of the foregoing, we will generally not have the benefit of independent directors examining the propriety of expenses incurred on our behalf and subject to reimbursement.
Conflicts of Interest
Potential
investors should be aware of the following potential conflicts of interest:
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None of our officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various
business activities.
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•
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In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to
our company as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
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•
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Our officers and directors may in the future become affiliated with entities, including other blank check companies, engaged in business activities similar to those intended to be
conducted by our company.
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•
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The initial shares owned by our officers and directors will be released from escrow only if a business combination is successfully completed, and the insider
warrants purchased by our officers and directors and any warrants which they may purchase in this offering or in the aftermarket will expire worthless if a business combination is not consummated. Additionally, our directors will not receive
liquidation distributions with respect to any of their initial shares. Furthermore, while the insider warrants have been registered for resale under the registration statement of which this prospectus forms a part, the purchasers have agreed that
such securities will not be sold or transferred by them until after we have
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completed a business combination. For the foregoing reasons, our board may have a conflict of interest in determining whether a particular target business is
appropriate to effect a business combination with.
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•
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The ability of Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson and Gotham Capital V to exercise their insider warrants on a cashless basis may cause them to have a
conflict of interest in determining when to call the warrants for redemption as they would potentially be able to avoid any negative price pressure on the price of the warrants and common stock due to the redemption through a cashless exercise.
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•
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Our officers and directors may enter into consulting or employment agreements with the company as part of a business combination pursuant to which they may be entitled to
compensation for their services to be rendered to the company after the consummation of a business combination. The personal and financial interests of our directors and officers may influence their motivation in identifying and selecting a target
business, timely completing a business combination and securing the release of their stock from escrow.
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Our directors and officers may purchase shares of common stock as part of this offering or in the aftermarket and would be entitled to vote such shares as they choose on a proposal
to approve a business combination.
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In general, officers and directors of a corporation incorporated under the laws of the
State of Delaware are required to present business opportunities to a corporation if:
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the corporation could financially undertake the opportunity;
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the opportunity is within the corporation’s line of business; and
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it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
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Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business
opportunities meeting the above-listed criteria to multiple entities. In addition, conflicts of interest may arise when our board evaluates a particular business opportunity with respect to the above-listed criteria. We cannot assure you that any of
the above mentioned conflicts will be resolved in our favor.
In order to minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of our officers has agreed, until the earliest of a business combination, our liquidation or such time as he or she ceases to be an officer, to present to our company for our consideration, prior to presentation
to any other entity, any business opportunity which may reasonably be required to be presented to us under Delaware law, subject to any pre-existing fiduciary or contractual obligations he might have.
In connection with the vote required for any business combination, all of our existing stockholders, including all of our officers and directors, have
agreed to vote their respective shares of common stock which were owned prior to this offering in accordance with the vote of the public stockholders owning a majority of the shares of our common stock sold in this offering. In addition, they have
agreed to waive their respective rights to participate in any liquidation distribution with respect to their initial shares. Any common stock acquired by existing stockholders in the offering or aftermarket will be considered part of the holdings of
the public stockholders. Except with respect to the conversion rights afforded to public stockholders, these existing stockholders will have the same rights as other public stockholders with respect to such shares, including voting rights in
connection with a potential business combination. Accordingly, they may vote such shares on a proposed business combination any way they choose.
To further minimize potential conflicts of interest, we have agreed not to consummate a business combination with an entity which is affiliated with any of our existing stockholders unless we obtain an opinion from an independent investment
banking firm that the business combination is fair to our unaffiliated stockholders from a financial point of view.
41
Principal Stockholders
The following table sets forth information regarding the beneficial ownership of our
common stock as of June 2, 2006 and as adjusted to reflect the sale of our common stock included in the units offered by this prospectus (assuming no purchases of units offered by this prospectus), by:
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•
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each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
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•
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each of our officers and directors; and
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•
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all our officers and directors as a group.
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Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
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Prior to Offering and
Insider Purchases
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After Offering and
Insider Purchases
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Name and Address of Beneficial Owner
(1)
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Amount and
Nature of
Beneficial
Ownership
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Approximate
Percentage
of Outstanding
Common Stock
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Amount and
Nature of
Beneficial
Ownership
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Approximate
Percentage
of Outstanding
Common Stock
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Eric S. Rosenfeld
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871,840
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(2)
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77.5
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%
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871,840
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(3)
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15.5
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%
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Arnaud Ajdler
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50,632
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4.5
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%
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50,632
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*
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Leonard B. Schlemm
(4)
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40,632
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3.6
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%
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40,632
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(5)
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*
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Jon Bauer
(6)
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40,632
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3.6
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%
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40,632
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(5)
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*
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Colin D. Watson
(7)
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40,632
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3.6
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%
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40,632
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(5)
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*
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David Sgro
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20,000
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1.8
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%
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20,000
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*
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All directors and executive officers as a group (six individuals)
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1,064,368
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94.6
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%
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1,064,368
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(8)
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18.9
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%
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(1)
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Unless otherwise indicated, the business address of each of the individuals is 10 East 53rd Street, 35th Floor, New York, New York 10022.
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(2)
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Includes 106,840 shares of common stock held by the Rosenfeld 1991 Children’s Trust, of which Mr. Rosenfeld’s wife is the sole trustee.
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(3)
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Does not include 863,636 shares of common stock issuable upon exercise of warrants held by Mr. Rosenfeld that are not exercisable and will not become exercisable within 60
days.
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(4)
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The business address of Mr. Schlemm is c/o The Atwater Club, 3505 Avenue Atwater, Montreal, Quebec H3W 1Y2.
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(5)
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Does not include 68,182 shares of common stock issuable upon exercise of warrants held by such individual that are not exercisable and will not become exercisable within 60 days.
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(6)
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The business address of Mr. Bauer is 411 W. Putnam Ave., Ste 225, Greenwich, Connecticut 06830.
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(7)
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The business address of Mr. Watson is 72 Chestnut Park Rd., Toronto, Ontario, M4W1W8.
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(8)
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Does not include 1,136,364 shares of common stock issuable upon exercise of warrants held by such individuals that are not exercisable and will not become exercisable within 60
days.
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Immediately after this offering, our existing stockholders, which include all of our officers and directors,
collectively, will beneficially own 20% of the then issued and outstanding shares of our common stock (assuming none of them purchase any units offered by this prospectus). None of our existing stockholders, officers and directors has indicated to
us that he intends to purchase our securities in the offering. Because of the ownership block held by our existing stockholders, such individuals may be able to effectively exercise control over all matters requiring approval by our stockholders,
including the election of directors and approval of significant corporate transactions other than approval of a business combination.
All
of the initial shares outstanding prior to the date of this prospectus will be placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until one year after the consummation of a
42
business combination. The initial shares may be released from escrow earlier than this date if, within the first year after we consummate a business
combination, we consummate a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
During the escrow period, the holders of these shares will not be able to sell or transfer their securities except to their spouses and children or trusts established for their benefit, but will retain all other rights as our stockholders,
including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we
are unable to effect a business combination and liquidate, none of our existing stockholders will receive any portion of the liquidation proceeds with respect to their initial shares.
Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, Messrs. Leonard B. Schlemm, Jon Bauer and Colin D. Watson, each
a member of our board of directors, and Gotham Capital V, an entity controlled by Joel Greenblatt, our special advisor, have committed to purchase an aggregate of 1,136,364 insider warrants (for an aggregate purchase price of $1,250,000) from us.
These purchases will take place on a private placement basis simultaneously with the consummation of this offering. The insider warrants will be identical to the warrants underlying the units being offered by this prospectus except that if we call
the warrants for redemption, the insider warrants may be exercisable on a cashless basis at the holder’s option (except in the case of a forced cashless exercise upon our redemption of the warrants, as described below) so long as such warrants
are held by these purchasers or their affiliates. Additionally, they have agreed that the insider warrants will not be sold or transferred by them until after we have completed a business combination.
Eric S. Rosenfeld is our “promoter” as that term is defined under the Federal securities laws.
43
Certain Transactions
In April 2006, we issued 1,125,000 shares of our common stock to the individuals set
forth below for $25,000 in cash, at a purchase price of approximately $0.02 per share, as follows:
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Name
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Number of Shares
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Relationship to Us
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Eric S. Rosenfeld
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765,000
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Chairman of the Board, Chief Executive Officer and President
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Rosenfeld 1991 Children’s Trust
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106,840
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Trustee is wife of Chairman of the Board, Chief Executive Officer and President
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Arnaud Ajdler
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50,632
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Secretary and Director
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Leonard B. Schlemm
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40,632
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Director
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Jon Bauer
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40,632
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Director
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Colin D. Watson
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40,632
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Director
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Joel Greenblatt
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40,632
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Special Advisor
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David Sgro
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20,000
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Chief Financial Officer
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Greg Monahan
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20,000
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Stockholder
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If the underwriter determines the size of the offering should be increased or decreased, a stock
dividend or a contribution back to capital, as applicable, would be effectuated in order to maintain our existing stockholders’ ownership at a percentage of the number of shares to be sold in this offering.
The holders of the majority of these shares will be entitled to demand that we register these shares pursuant to an agreement to be signed prior to or on
the date of this prospectus. The holders of the majority of these shares may elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are released from escrow. In
addition, these stockholders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in connection with the
filing of any such registration statements.
Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, Messrs.
Leonard B. Schlemm, Jon Bauer and Colin D. Watson, each a member of our board of directors, and Gotham Capital V, an entity controlled by Joel Greenblatt, our special advisor, have committed to purchase the insider warrants (for an aggregate
purchase price of $1,250,000, or $1.10 per warrant) from us. These purchases will take place on a private placement basis simultaneously with the consummation of this offering. The insider warrants will be identical to the warrants underlying the
units being offered by this prospectus except that if we call the warrants for redemption, the insider warrants may be exercisable on a cashless basis at the holder’s option (except in the case of a forced cashless exercise upon our redemption
of the warrants) so long as such warrants are held by these purchasers or their affiliates. Additionally, the purchasers have agreed that the insider warrants will not be sold or transferred by them until after we have completed a business
combination. The holders of the majority of these insider warrants (or underlying shares) will be entitled to demand that we register these securities pursuant to an agreement to be signed prior to or on the date of this prospectus. The holders of
the majority of these securities may elect to exercise these registration rights with respect to such securities at any time after we consummate a business combination. In addition, these holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to such date. We will bear the expenses incurred in connection with the filing of any such registration statements.
Crescendo Advisors II, an affiliate of Eric S. Rosenfeld, our chairman of the board, chief executive officer and president, has agreed that, commencing
on the effective date of this prospectus through the acquisition of a target business, it will make available to us a small amount of office space and certain office and secretarial services, as we may require from time to time. We have agreed to
pay Crescendo Advisors II $7,500 per month for these services. Mr. Rosenfeld is the senior managing member and 100% owner of Crescendo Advisors II,
44
and, as a result, he will benefit from the transaction to the extent of his interest in Crescendo Advisors II. However, this arrangement is solely for our
benefit and is not intended to provide Mr. Rosenfeld compensation in lieu of a salary. We believe, based on rents and fees for similar services in the New York metropolitan area, that the fee charged by Crescendo Advisors II is at least as
favorable as we could have obtained from an unaffiliated person. However, as our directors may not be deemed “independent,” we did not have the benefit of disinterested directors approving this transaction.
As of the date of this prospectus, Eric S. Rosenfeld has advanced to us an aggregate of $90,000 to cover expenses related to this offering. The loan will
be payable without interest on the earlier of May 15, 2007 or the consummation of this offering. We intend to repay this loan from the proceeds of this offering not being placed in trust.
We will reimburse our officers and directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on
our behalf such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by us, which will be reviewed only by our board or a court of competent
jurisdiction if such reimbursement is challenged.
Other than the $7,500 per-month administrative fee and reimbursable out-of-pocket
expenses payable to our officers and directors, no compensation or fees of any kind, including finder’s fees, consulting fees or other similar compensation, will be paid to any of our existing stockholders, officers or directors who owned our
common stock prior to this offering, or to any of their respective affiliates, prior to or with respect to the business combination.
All
ongoing and future transactions between us and any of our officers and directors or their respective affiliates, including loans by our officers and directors, will be on terms believed by us to be no less favorable to us than are available from
unaffiliated third parties. Such transactions or loans, including any forgiveness of loans, will require prior approval by a majority of our uninterested “independent” directors (to the extent we have any) or the members of our board who
do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent” directors (or, if
there are no “independent” directors, our disinterested directors) determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third
parties.
45
Description of Securities
General
We are authorized to issue 15,000,000 shares of common stock, par value $.0001, and 1,000,000 shares of preferred stock, par value $.0001. As of the date of this prospectus, 1,125,000 shares of common stock are
outstanding, held by eight stockholders of record. No shares of preferred stock are currently outstanding.
Units
Each unit consists of one share of common stock and one warrant. Each warrant entitles the holder to purchase one share of common stock. The common stock
and warrants will begin to trade separately on the 90
th
day after the date of this prospectus unless
EarlyBirdCapital informs us of its decision to allow earlier separate trading (based upon its assessment of the relative strengths of the securities markets and small capitalization companies in general and the trading pattern of, and demand for,
our securities in particular), provided that in no event may the common stock and warrants be traded separately until we have filed with the SEC a Current Report on Form 8-K which includes an audited balance sheet reflecting our receipt of the gross
proceeds of this offering. We will file a Current Report on Form 8-K which includes this audited balance sheet upon the consummation of this offering. The audited balance sheet will reflect proceeds we receive from the exercise of the over-allotment
option, if the over-allotment option is exercised prior to the filing of the Form 8-K. If the over-allotment option is exercised after our initial filing of a Form 8-K, we will file an amendment to the Form 8-K to provide updated financial
information to reflect the exercise of the over-allotment option. We will also include in this Form 8-K, or amendment thereto, or in a subsequent Form 8-K information indicating if EarlyBirdCapital has allowed separate trading of the common stock
and warrants prior to the 90
th
day after the date of this prospectus.
Common stock
Our stockholders of record are entitled
to one vote for each share held on all matters to be voted on by stockholders. In connection with the vote required for any business combination, all of our existing stockholders, including all of our officers and directors, have agreed to vote
their respective shares of common stock owned by them immediately prior to this offering in accordance with the majority of the shares of our common stock voted by our public stockholders. This voting arrangement shall not apply to shares included
in units purchased in this offering or purchased following this offering in the aftermarket by any of our existing stockholders, officers and directors. Additionally, our existing stockholders, officers and directors will vote all of their shares in
any manner they determine, in their sole discretion, with respect to any other items that come before a vote of our stockholders.
We will
proceed with the business combination only if a majority of the shares of common stock voted by the public stockholders are voted in favor of the business combination and public stockholders owning less than 20% of the shares sold in this offering
both exercise their conversion rights discussed below and vote against the business combination.
Our board of directors is divided into
three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of
more than 50% of the shares eligible to vote for the election of directors can elect all of the directors.
Pursuant to our amended and
restated certificate of incorporation, if we do not consummate a business combination by
, 2008
[twenty four months from the date of this prospectus]
, our
corporate existence will cease except for the purposes of winding up our affairs and liquidating. If we are forced to liquidate prior to a business combination, our public stockholders are entitled to share ratably in the trust fund, including any
interest, and any net assets remaining available for distribution to them after payment of liabilities. Our existing stockholders have waived their rights to participate in any liquidation distribution with respect to their initial shares.
Our stockholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions
applicable to the common stock, except that public stockholders have the right to have
46
their shares of common stock converted to cash equal to their pro rata share of the trust account if they vote against the business combination and the
business combination is approved and completed. Public stockholders who convert their stock into their share of the trust account still have the right to exercise the warrants that they received as part of the units.
Preferred stock
Our certificate of incorporation
authorizes the issuance of 1,000,000 shares of blank check preferred stock with such designation, rights and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are being issued or registered in
this offering. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of
the holders of common stock. However, the underwriting agreement prohibits us, prior to a business combination, from issuing preferred stock which participates in any manner in the proceeds of the trust account, or which votes as a class with the
common stock on a business combination. We may issue some or all of the preferred stock to effect a business combination. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of
us. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Warrants
No warrants are currently outstanding. Each warrant entitles the registered holder to purchase one share of our common stock at a price
of $6.00 per share, subject to adjustment as discussed below, at any time commencing on the later of:
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•
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the completion of a business combination; and
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•
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one year from the date of this prospectus.
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The warrants will expire four years from the date of this prospectus at 5:00 p.m., New York City time.
We may call the warrants
for redemption (including the insider warrants and any warrants issued upon exercise of the unit purchase option issued to EarlyBirdCapital),
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•
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in whole and not in part,
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•
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at a price of $.01 per warrant at any time after the warrants become exercisable,
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•
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upon not less than 30 days’ prior written notice of redemption to each warrant holder, and
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•
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if, and only if, the reported last sale price of the common stock equals or exceeds $11.50 per share, for any 20 trading days within a 30-trading day period ending on the third
business day prior to the notice of redemption to warrant holders.
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The redemption criteria for our warrants have been
established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient degree of liquidity to cushion the market reaction to our redemption call.
If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise his, her or
its warrant (including the insider warrants) to do so on a “cashless basis.” If our management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering his, her or its warrants for that number of
shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market
value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the
47
10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If our management
takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the warrants, including the “fair market value” in such case.
Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the
exercise of the warrants after a business combination. If we call our warrants for redemption and our management does not take advantage of this option, Messrs. Rosenfeld, Schlemm, Bauer and Watson and Gotham Capital V would still be entitled to
exercise their insider warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis.
The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by Messrs. Rosenfeld, Schlemm, Bauer and Watson and Gotham Capital V or their affiliates is because it is not known at this time
whether they will be affiliated with us following a business combination. If they remain insiders, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from
selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he is in possession of material non-public
information. Accordingly, unlike public stockholders who could exercise their warrants and sell the shares of common stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be
significantly restricted from selling such securities. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate.
The warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. You should review a copy of the warrant agreement, which
has been filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants.
The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the
event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of common stock at a price below their respective exercise prices.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the
exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. The
warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants,
each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No warrants will be
exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the warrants
until the expiration of the warrants. However, we cannot assure you that we will be able to do so. The warrants may be deprived of any value and the market for the warrants may be limited if the prospectus relating to the common stock issuable upon
the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional
interest in a share, we will, upon exercise, round up to the nearest whole number the number of shares of common stock to be issued to the warrant holder.
48
Purchase Option
We have agreed to sell to the underwriter an option to purchase up to a total of 450,000 units at $8.80 per unit. The units issuable upon exercise of this option are identical to those offered by this prospectus.
Dividends
We have not paid any cash
dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital
requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present
intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
Our Transfer Agent and Warrant Agent
The transfer
agent for our securities and warrant agent for our warrants is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004.
Shares Eligible for Future Sale
Immediately after this offering, we will have 5,625,000 shares of common stock outstanding,
or 6,300,000 shares if the over-allotment option is exercised in full. Of these shares, the 4,500,000 shares sold in this offering, or 5,175,000 shares if the over-allotment option is exercised, will be freely tradable without restriction or further
registration under the Securities Act, except for any shares purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. All of the remaining shares are restricted securities under Rule 144, in that they were issued
in private transactions not involving a public offering. None of those shares will be eligible for sale under Rule 144 prior to April 24, 2007. Notwithstanding this restriction, all of the 1,125,000 initial shares have been placed in escrow and
will not be transferable until one year after our consummation of a business combination and will be released prior to that date only upon a subsequent transaction resulting in our stockholders having the right to exchange their shares for cash or
other securities. The insider warrants have been registered for resale under the registration statement of which this prospectus forms a part. However, Messrs. Rosenfeld, Schlemm, Bauer and Watson and Gotham Capital V have agreed that the insider
warrants will not be sold or transferred by them until after we have completed a business combination.
Rule 144
In general, under Rule 144 as currently in effect, a person who has beneficially owned restricted shares of our common stock for at least one year would
be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:
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•
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1% of the number of shares of common stock then outstanding, which will equal 56,250 shares immediately after this offering (or 63,000 if the over-allotment option is exercised in
full); and
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|
•
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if the common stock is listed on a national securities exchange or on The Nasdaq Stock Market, the average weekly trading volume of the common stock during the four calendar weeks
preceding the filing of a notice on Form 144 with respect to the sale.
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Sales under Rule 144 are also limited by manner of
sale provisions and notice requirements and to the availability of current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our affiliates at the time of or at any time during the three months preceding a sale,
and who has beneficially owned the restricted shares proposed to
49
be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell their shares without complying
with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
SEC Position on Rule 144 Sales
The Securities and Exchange Commission has taken the position that promoters or affiliates of a blank check company and their
transferees, both before and after a business combination act as “underwriters” under the Securities Act when reselling the securities of a blank check company acquired prior to the consummation of its initial public offering. Accordingly,
the Securities and Exchange Commission believes that those securities can be resold only through a registered offering and that Rule 144 would not be available for those resale transactions despite technical compliance with the requirements of Rule
144. However, this position would not be applicable to the insider warrants (and the underlying shares of common stock) being purchased simultaneously with the consummation of this offering. Accordingly, Rule 144 would be available to Messrs.
Rosenfeld, Schlemm, Bauer and Watson and Gotham Capital V with respect to the resale of the insider warrants (and the underlying shares of common stock) following a business combination.
Registration Rights
The holders of
our initial shares issued and outstanding on the date of this prospectus, as well as the holders of the insider warrants (and underlying securities), will be entitled to registration rights pursuant to an agreement to be signed prior to or on the
effective date of this offering. The holders of the majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the initial shares can elect to exercise these registration
rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the insider warrants (or underlying securities) can elect to exercise these registration
rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination.
We will bear the expenses incurred in connection with the filing of any such registration statements.
50
Underwriting
In accordance with the terms and conditions contained in the underwriting agreement, we have
agreed to sell to each of the underwriters named below, and each of the underwriters, for which EarlyBirdCapital, Inc is acting as representative, has individually agreed to purchase on a firm commitment basis the number of units set forth opposite
their respective name below:
|
|
|
|
|
Underwriters
|
|
Number of Units
|
|
EarlyBirdCapital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
A copy of the underwriting agreement has been filed as an exhibit to the registration statement of
which this prospectus forms a part.
State Blue Sky Information
We will offer and sell the units to retail customers only in Colorado, Delaware, the District of Columbia, Florida, Hawaii, Illinois, Indiana, New York and Rhode Island. In New York and Hawaii, we have relied on
exemptions from the state registration requirements. In the other states, we have applied to have the units registered for sale and will not sell the units to retail customers in these states unless and until such registration is effective
(including in Colorado, pursuant to 11-51-302(6) of the Colorado Revised Statutes).
If you are not an institutional investor, you may
purchase our securities in this offering only in the jurisdictions described directly above. Institutional investors in every state except in Idaho may purchase the units in this offering pursuant to exemptions under the Blue Sky laws of various
states. The definition of an “institutional investor” varies from state to state but generally includes financial institutions, broker-dealers, banks, insurance companies and other qualified entities.
We will file periodic and annual reports under the Securities Exchange Act of 1934. Therefore, under the National Securities Markets Improvement Act of
1996, the resale of the units, from and after the effective date, and the common stock and warrants comprising the units, once they become separately transferable, are exempt from state registration requirements. However, states are permitted to
require notice filings and collect fees with regard to these transactions, and a state may suspend the offer and sale of securities within such state if any such required filing is not made or fee is not paid. As of the date of this prospectus, the
following states either do not presently require any notice filings or fee payments or have not yet issued rules or regulations indicating whether notice filings or fee payments will be required:
|
|
•
|
|
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts,
Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, the Virgin Islands, Virginia, Washington, West Virginia, Wisconsin
and Wyoming.
|
Additionally, the following states currently permit the resale of the units, and the common stock and warrants comprising the
units, once they become separately transferable, if the proper notice filings have been submitted and the required fees have been paid:
|
|
•
|
|
The District of Columbia, Illinois, Maryland, Michigan, Montana, New Hampshire, North Dakota, Oregon, Puerto Rico, Tennessee, Texas and Vermont.
|
As of the date of this prospectus, we have not determined in which, if any, of these states we will submit the required filings or pay the required fee. Additionally, if
any of these states that has not yet adopted a statute
51
relating to the National Securities Markets Improvement Act adopts such a statute in the future requiring a filing or fee or if any state amends its existing
statutes with respect to its requirements, we would need to comply with those new requirements in order for the securities to continue to be eligible for resale in those jurisdictions.
Under the National Securities Markets Improvement Act, the states retain the jurisdiction to investigate and bring enforcement actions with respect to
fraud or deceit, or unlawful conduct by a broker or dealer, in connection with the sale of securities. Although we are not aware of a state having used these powers to prohibit or restrict resales of securities issued by blank check companies
generally, certain state securities commissioners view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the resale of securities of blank check companies in their states.
Aside from the exemption from registration provided by the National Securities Markets Improvement Act, we believe that the units, from and after the
effective date, and the common stock and warrants comprising the units, once they become separately transferable, may be eligible for sale on a secondary market basis in various states based on the availability of another applicable exemption from
state registration requirements, in certain instances subject to waiting periods, notice filings or fee payments.
Pricing of Securities
We have been advised by the representative that the underwriters propose to offer the units to the public at the offering price set forth on the cover
page of this prospectus. They may allow some dealers concessions not in excess of $ per unit and the dealers may reallow a concession not in excess of
$ per unit to other dealers.
Prior to this offering there has been
no public market for any of our securities. The public offering price of the units and the terms of the warrants were negotiated between us and the representative. Factors considered in determining the prices and terms of the units, including the
common stock and warrants underlying the units, include:
|
|
•
|
|
the history and prospects of companies whose principal business is the acquisition of other companies;
|
|
|
•
|
|
prior offerings of those companies;
|
|
|
•
|
|
our prospects for acquiring an operating business at attractive values;
|
|
|
•
|
|
an assessment of our management and their experience in identifying operating companies;
|
|
|
•
|
|
general conditions of the securities markets at the time of the offering; and
|
|
|
•
|
|
other factors as were deemed relevant.
|
However, although these factors
were considered, the determination of our offering price is more arbitrary than the pricing of securities for an operating company in a particular industry since we have no operating results and are not limited to operate in any specific industry.
Over-Allotment Option
We have granted
to the representative of the underwriters an option, exercisable during the 45-day period commencing on the date of this prospectus, to purchase from us at the offering price, less underwriting discounts, up to an aggregate of 675,000 additional
units for the sole purpose of covering over-allotments, if any. The over-allotment option will only be used to cover the net syndicate short position resulting from the initial distribution. The representative of the underwriters may exercise the
over-allotment option if it sells more units than the total number set forth above.
52
Commissions and Discounts
The following table shows the public offering price, underwriting discount to be paid by us to the underwriters and the proceeds, before expenses, to us. This information assumes either no exercise or full exercise by
the representative of the underwriters of its over-allotment option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit
|
|
Without option
|
|
With option
|
|
Public offering price
|
|
$
|
8.00
|
|
$
|
36,000,000
|
|
$
|
41,400,000
|
|
Discount
(1)
|
|
$
|
0.44
|
|
$
|
1,980,000
|
|
$
|
2,277,000
|
|
Non-accountable Expense Allowance
(2)
|
|
$
|
0.04
|
|
$
|
180,000
|
|
$
|
180,000
|
|
Proceeds before expenses
(3)
|
|
$
|
7.52
|
|
$
|
33,840,000
|
|
$
|
38,943,000
|
|
(1)
|
1.0% of the underwriting discounts will not be payable unless and until we complete a business combination. The underwriters have waived their right to receive such payment upon our
liquidation if we are unable to complete a business combination.
|
|
(2)
|
The non-accountable expense allowance is not payable with respect to the units sold upon exercise of the over-allotment option.
|
|
(3)
|
The offering expenses are estimated at $500,000.
|
No discounts or
commissions will be paid on the sale of the insider warrants.
Purchase Option
We have agreed to sell to the representative, for $100, an option to purchase up to a total of 450,000 units. The units issuable upon exercise of this
option are identical to those offered by this prospectus. This option is exercisable at $8.80 per unit, and may be exercised on a cashless basis, commencing on the later of the consummation of a business combination and one year from the date of
this prospectus and expiring five years from the date of this prospectus. The option and the 450,000 units, the 450,000 shares of common stock and the 450,000 warrants underlying such units, and the 450,000 shares of common stock underlying such
warrants, have been deemed compensation by the NASD and are therefore subject to a 180-day lock-up pursuant to Rule 2710(g)(1) of the NASD Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a
one-year period (including the foregoing 180-day period) following the date of this prospectus except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners. Although the purchase option and its
underlying securities have been registered under the registration statement of which this prospectus forms a part, the option grants to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the date
of this prospectus with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. We will bear all fees and expenses attendant to registering the securities, other than
underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or our
recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of common stock at a price below its exercise price.
Regulatory Restrictions on Purchase of Securities
Rules of the SEC may limit the ability of the
underwriter to bid for or purchase our units before the distribution of the units is completed. However, the underwriters may engage in the following activities in accordance with the rules:
|
|
•
|
|
Stabilizing Transactions
. The underwriters may make bids or purchases for the purpose of preventing or retarding a decline in the price of our units, as long as stabilizing
bids do not exceed the offering price of $8.00.
|
53
|
|
•
|
|
Over-Allotments and Syndicate Coverage Transactions
. The underwriters may create a short position in our units by selling more of our units than are set forth on the cover
page of this prospectus. If the underwriters create a short position during the offering, the underwriters may engage in syndicate covering transactions by purchasing our units in the open market. The representative may also elect to reduce any
short position by exercising all or part of the over-allotment option.
|
|
|
•
|
|
Penalty Bids
. The representative may reclaim a selling concession from a selected dealer when the units originally sold by the selected dealer is purchased in a stabilizing
or syndicate covering transaction to cover short positions.
|
Stabilization and covering transactions may cause the price of
our securities to be higher than they would be in the absence of these transactions. The imposition of a penalty bid might also have an effect on the prices of our securities if it discourages resales of our securities.
Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our
securities. These transactions may occur on the OTC Bulletin Board, in the over-the-counter market or on any trading market. If any of these transactions are commenced, they may be discontinued without notice at any time.
Other Terms
We have engaged the representative of
the underwriters to act as our non-exclusive investment banker in connection with our business combination. We will pay the representative a cash fee at the closing of our business combination for assisting us in structuring and negotiating the
terms of the transaction of 1% of the total consideration paid in connection with the business combination, up to a maximum of $360,000. Except as set forth above, we are not under any contractual obligation to engage any of the underwriters to
provide any services for us after this offering, and have no present intent to do so. However, any of the underwriters may, among other things, introduce us to potential target businesses or assist us in raising additional capital, as needs may
arise in the future. If any of the underwriters provide services to us after this offering, we may pay such underwriter fair and reasonable fees that would be determined at that time in an arm’s length negotiation; provided that no agreement
will be entered into with any of the underwriters and no fees for such services will be paid to any of the underwriters prior to the date which is 90 days after the date of this prospectus, unless the National Association of Securities Dealers
determines that such payment would not be deemed underwriter’s compensation in connection with this offering.
Indemnification
We have agreed to indemnify the underwriters against some liabilities, including civil liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in this respect.
54
Legal Matters
The validity of the securities offered in this prospectus is being passed upon for us by
Graubard Miller, New York, New York. We have paid Graubard Miller a retainer of $25,000 for such services. Graubard Miller has agreed that the balance of the legal fees that we will owe to it for these services will be paid by us only upon the
successful consummation of this offering.
Blank Rome LLP, is acting as counsel for the underwriter in this offering.
Experts
The financial statements included in this prospectus and in the registration statement have been
audited by BDO Seidman, LLP, independent registered public accounting firm, to the extent and for the period set forth in their report (which contains an explanatory paragraph regarding our ability to continue as a going concern) appearing elsewhere
in this prospectus and in the registration statement. The financial statements and the report of BDO Seidman, LLP are included in reliance upon their report given upon the authority of BDO Seidman, LLP as experts in auditing and accounting.
Where You Can Find Additional Information
We have filed with the SEC a registration statement on Form S-1,
which includes exhibits, schedules and amendments, under the Securities Act, with respect to this offering of our securities. Although this prospectus, which forms a part of the registration statement, contains all material information included in
the registration statement, parts of the registration statement have been omitted as permitted by rules and regulations of the SEC. We refer you to the registration statement and its exhibits for further information about us, our securities and this
offering. The registration statement and its exhibits, as well as our other reports filed with the SEC, can be inspected and copied at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site at http://www.sec.gov which contains the Form S-1 and other reports, proxy and information statements and
information regarding issuers that file electronically with the SEC.
55
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Index to Financial Statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Rhapsody Acquisition Corp.
We have audited the accompanying balance sheet of Rhapsody Acquisition Corp. (a corporation in the development stage) as of May 17, 2006, and the related statements of operations, stockholders’ equity and
cash flows for the period from April 24, 2006 (inception) to May 17, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rhapsody
Acquisition Corp. as of May 17, 2006, and the results of its operations and its cash flows for the period from April 24, 2006 (inception) to May 17, 2006 in conformity with accounting principles generally accepted in the United
States.
The accompanying financial statements have been prepared assuming Rhapsody Acquisition Corp. will continue as a going concern. The
Company has no operations and as discussed in Note 2, is in the process of raising capital through a Proposed Offering. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
May 30, 2006
F-2
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Balance Sheet
|
|
|
|
|
|
|
|
|
May 17, 2006
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets—Cash
|
|
$
|
90,000
|
|
|
Deferred offering costs
(Note 3)
|
|
|
25,000
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
115,000
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accrued expenses
|
|
$
|
421
|
|
|
Note payable to stockholder (Note 4)
|
|
|
90,000
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
90,421
|
|
|
|
|
|
|
|
|
Commitments
(Note 5)
|
|
|
|
|
|
|
|
|
Stockholders’ equity
(Notes 5 & 6)
|
|
|
|
|
|
Preferred stock, $.0001 par value
|
|
|
|
|
|
Authorized 1,000,000 shares; none issued
|
|
|
—
|
|
|
Common stock, $.0001 par value
|
|
|
|
|
|
Authorized 15,000,000 shares
|
|
|
|
|
|
Issued and outstanding 1,125,000 shares
|
|
|
113
|
|
|
Additional paid-in capital
|
|
|
24,887
|
|
|
Deficit accumulated during the development stage
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
24,579
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
115,000
|
|
|
|
|
|
|
|
See notes to Financial
Statements.
F-3
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Statement of Operations
For the period
April 24, 2006 (inception) to May 17, 2006
|
|
|
|
|
|
|
Formation costs
|
|
$
|
421
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(421
|
)
|
|
|
|
|
Net loss
|
|
$
|
(421
|
)
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
1,125,000
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
See notes to Financial Statements.
F-4
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Statement of Stockholders’ Equity
For the
period April 24, 2006 (inception) to May 17, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Addition paid-in
capital
|
|
Deficit
Accumulated
During
the
Development Stage
|
|
|
Stockholders’ Equity
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Common shares issued to initial stockholders
|
|
1,125,000
|
|
$
|
113
|
|
$
|
24,887
|
|
|
—
|
|
|
$
|
25,000
|
|
|
Net Loss
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
(421
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 17, 2006
|
|
1,125,000
|
|
$
|
113
|
|
$
|
24,887
|
|
$
|
421
|
)
|
|
$
|
24,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to Financial Statements
F-5
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Statement of Cash Flows
For the period
April 24, 2006 (inception) to May 17, 2006
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
|
|
|
|
Net loss
|
|
$
|
(421
|
)
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
Increase in accrued expenses
|
|
|
421
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
Proceeds from sale of shares of common stock to founding stockholders
|
|
|
25,000
|
|
|
Proceeds from note payable, stockholder
|
|
|
90,000
|
|
|
Deferred offering costs
|
|
|
(25,000
|
)
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
90,000
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
90,000
|
|
|
Cash at beginning of period
|
|
|
—
|
|
|
Cash at end of period
|
|
$
|
90,000
|
|
|
|
|
|
|
|
See notes to Financial
Statements
F-6
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Summary of Significant Accounting Policies
Income
taxes
The Company follows Statement of Financial Accounting Standards No. 109 (“SFAS No. 109”), “Accounting
for Income Taxes” which is an asset and liability approach that have been recognized in the Company’s financial statements. The Company has a net operating loss carryforward of approximately $420 available to reduce any future income
taxes. The tax benefit of this loss, approximately $140, has been fully offset by a valuation allowance due to the uncertainty of its realization.
Net
loss per share
Net loss per share is computed on the basis of the weighted average number of common shares outstanding during the
period.
Use of estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the report amounts of assets and liabilities at the
date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Recently issued accounting standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
F-7
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Notes to Financial Statements
1. Organization and
Business Operations
Rhapsody Acquisition Corp. (the “Company”) was incorporated in Delaware on April 24, 2006 as a blank
check company whose objective is to acquire an operating business.
At May 17, 2006, the Company had not yet commenced any operations.
All activity through May 17, 2006 relates to the Company’s formation and the proposed public offering described below. The Company has selected March 31 as its fiscal year-end.
The Company’s ability to commence operations is contingent upon obtaining adequate financial resources through a proposed public offering of up to
4,500,000 units (“Units”) which is discussed in Note 2 (“Proposed Offering”). The Company’s management has broad discretion with respect to the specific application of the net proceeds of this Proposed Offering,
although substantially all of the net proceeds of this Proposed Offering are intended to be generally applied toward consummating a business combination with an operating business (“Business Combination”). Furthermore, there is no
assurance that the Company will be able to successfully effect a Business Combination. Upon the closing of the Proposed Offering, management has agreed that at least $7.59 per Unit sold in the Proposed Offering will be held in a trust account
(“Trust Account”) and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 until the earlier of (i) the consummation of its first Business Combination and (ii) liquidation of the Company. The placing of funds in the Trust Account may not
protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, prospective target businesses or other entities it engages, execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to any monies held in the Trust Account, there is no guarantee that they will execute such agreements. The Company’s Chairman of the Board, Chief Executive Officer and President has agreed that he will be personally
liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered contracted for or products
sold to the Company. However, there can be no assurance that he will be able to satisfy those obligations. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative expenses. Additionally, if the Company is unable to consummate a Business Combination by the one year anniversary of the effective date of the Proposed Offering, up to an aggregate of $200,000
of interest earned on the Trust Account balance may be released to the Company to fund working capital requirements. The Company, after signing a definitive agreement for the acquisition of a target business, is required to submit such transaction
for stockholder approval. In the event that stockholders owning 20% or more of the shares sold in the Proposed Offering vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be
consummated. All of the Company’s stockholders prior to the Proposed Offering, including all of the officers and directors of the Company (“Initial Stockholders”), have agreed to vote their 1,125,000 founding shares of common stock in
accordance with the vote of the majority in interest of all other stockholders of the Company (“Public Stockholders”) with respect to any Business Combination. After consummation of a Business Combination, these voting safeguards will no
longer be applicable.
With respect to a Business Combination which is approved and consummated, any Public Stockholder who voted against
the Business Combination may demand that the Company convert his or her shares. The per share conversion price will equal the amount in the Trust Account, calculated as of two business days prior to the consummation of the proposed Business
Combination, divided by the number of shares of common stock held by Public Stockholders at the consummation of the Proposed Offering. Accordingly, Public Stockholders holding
F-8
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Notes to Financial
Statements—(Continued)
19.99% of the aggregate number of shares owned by all Public Stockholders may seek conversion of their shares in the event of a Business Combination. Such
Public Stockholders are entitled to receive their per share interest in the Trust Account computed without regard to the shares held by Initial Stockholders.
The Company’s Amended and Restated Certificate of Incorporation will be amended prior to the Proposed Offering to provide that the Company will continue in existence only until 24 months from the Effective Date
of the Proposed Offering. If the Company has not completed a Business Combination by such date, its corporate existence will cease except for the purposes of winding up its affairs and it will liquidate. In the event of liquidation, it is likely
that the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will be less than the initial public offering price per share in the Proposed Offering (assuming no value is attributed to the
Warrants contained in the Units to be offered in the Proposed Offering discussed in Note 2).
As indicated in the accompanying
financial statements, at May 17, 2006, the Company has no operations. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. Management’s plans to address
this uncertainty are discussed in Note 2. There is no assurance that the Company’s plans to raise capital or to consummate a Business Combination will be successful or successful within the target business acquisition period. These factors,
among others, indicate that the Company may be unable to continue operations as a going concern.
2. Proposed Public Offering
The Proposed Offering calls for the Company to offer for public sale up to 4,500,000 Units at a proposed offering price of $8.00 per Unit (plus up to an
additional 675,000 units solely to cover over-allotments, if any). Each Unit consists of one share of the Company’s common stock and one Redeemable Common Stock Purchase Warrant (“Warrants”). Each Warrant will entitle the holder to
purchase from the Company one share of common stock at an exercise price of $6.00 commencing the later of the completion of a Business Combination and one year from the effective date of the Proposed Offering and expiring four years from the
effective date of the Proposed Offering. The Company may redeem the Warrants, at a price of $.01 per Warrant upon 30 days’ notice after the Warrants become exercisable, only in the event that the last sale price of the common stock is at least
$11.50 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which notice of redemption is given. If the Company redeems the Warrants as described above, management will have the option to
require any holder that wishes to exercise his Warrant to do so on a “cashless basis.” In such event, the holder would pay the exercise price by surrendering his Warrants for that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the fair
market value. The “fair market value” shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to holders of
Warrants.
The Company will pay the underwriters in the Proposed Offering an underwriting discount of 5.5% of the gross proceeds of the
Proposed Offering and a non-accountable expense allowance of 0.5% of the gross proceeds of the Proposed Offering. However, the underwriters have agreed that 1.0% of the underwriting discounts will not be payable unless and until the Company
completes a Business Combination and have waived their right to receive such payment upon the Company’s liquidation if it is unable to complete a Business Combination. The Company will also issue a unit purchase option, for $100, to
EarlyBirdCapital, Inc., the representative of the underwriters in the Proposed Offering (“EBC”), to purchase 450,000 Units at an exercise price of $8.80 per Unit. The Units issuable upon exercise of this option are identical to the Units
being offered in the Proposed Offering. The Company intends to account for the fair value of the unit purchase option, inclusive of
F-9
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Notes to Financial
Statements—(Continued)
the receipt of the $100 cash payment, as an expense of the Proposed Offering resulting in a charge directly to stockholders’ equity. The Company
estimates that the fair value of this unit purchase option is approximately $1,557,000 ($3.46 per Unit) using a Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriter is estimated as of the date of
grant using the following assumptions: (1) expected volatility of 45.12%, (2) risk-free interest rate of 4.96% and (3) expected life of 5 years. The unit purchase option may be exercised for cash or on a “cashless” basis, at the
holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described above), such that the holder may use the appreciated value of the unit purchase option (the difference between
the exercise prices of the unit purchase option and the underlying Warrants and the market price of the Units and underlying securities) to exercise the unit purchase option without the payment of any cash.
3. Deferred Offering Costs
Deferred offering costs
consist principally of legal and underwriting fees incurred through the balance sheet date that are directly related to the Proposed Offering and that will be charged to stockholders’ equity upon the receipt of the capital raised. Should the
Proposed Offering prove to be unsuccessful, these deferred costs as well as additional expenses to be incurred will be charged to operations.
4. Note
Payable, Stockholder
The Company issued a $90,000 principal amount unsecured promissory note to the Company’s Chairman of the
Board, Chief Executive Officer and President on May 15, 2006. The note is non-interest bearing and is payable on the earlier of May 15, 2007 or the consummation of the Proposed Offering. Due to the short-term nature of the note, the fair value of
the note approximates its carrying amount.
5. Commitments
The Company presently occupies office space provided by an affiliate of the Company’s Chairman of the Board, Chief Executive Officer and President. Such affiliate has agreed that, until the Company consummates a
Business Combination, it will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time. The Company has agreed to pay such affiliate $7,500 per month
for such services commencing on the effective date of the Proposed Offering.
Pursuant to letter agreements dated May 30, 2006 with
the Company and the underwriter, the Initial Stockholders have waived their right to receive distributions with respect to their founding shares upon the Company’s liquidation.
Four of the Initial Stockholders and one affiliate of an Initial Stockholder have committed to purchase 1,136,364 Warrants (“Insider Warrants”)
at $1.10 per Warrant (for an aggregate purchase price of $1,250,000) privately from the Company. These purchases will take place simultaneously with the consummation of the Proposed Offering. All of the proceeds received from these purchases will be
placed in the Trust Account. The Insider Warrants to be purchased by such purchasers will be identical to the Warrants underlying the Units being offered in the Proposed Offering except that if the Company calls the Warrants for redemption, the
Insider Warrants may be exercisable on a “cashless basis,” at the holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described above), so long as such securities
are held by such purchasers or their affiliates. Furthermore, the purchasers have agreed that the Insider Warrants will not be sold or transferred by them until after the Company has completed a Business Combination.
F-10
Rhapsody Acquisition Corp.
(a corporation in the development stage)
Notes to Financial
Statements—(Continued)
The Initial Stockholders and holders of the Insider Warrants (or underlying securities) will be
entitled to registration rights with respect to their founding shares or Insider Warrants (or underlying securities), as the case may be, pursuant to an agreement to be signed prior to or on the effective date of the Proposed Offering. The holders
of the majority of the founding shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Insider
Warrants (or underlying securities) are entitled to demand that the Company register such securities at any time after the Company consummates a Business Combination. In addition, the Initial Stockholders and holders of the Insider Warrants (or
underlying securities) have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination.
EBC will be engaged by the Company to act as the Company’s non exclusive investment banker in connection with a proposed Business Combination. For
assisting the Company in structuring and negotiating the terms of a Business Combination, the Company will pay EBC a cash transaction fee equal to 1% of the total consideration paid in connection with the Business Combination, with a maximum fee to
be paid of $360,000. Additionally, the Company has agreed to pay the fees and issue the securities to the underwriters in the Proposed Offering as described in Note 2 above.
6. Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.
The agreement with
the underwriters prohibits the Company, prior to a Business Combination, from issuing preferred stock which participates in the proceeds of the Trust Account or which votes as a class with the Common Stock on a Business Combination.
F-11
Until
, 2006, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
No dealer, salesperson or any other person is authorized to give any information or make any representations in connection with this offering other than
those contained in this prospectus and, if given or made, the information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any
security other than the securities offered by this prospectus, or an offer to sell or a solicitation of an offer to buy any securities by anyone in any jurisdiction in which the offer or solicitation is not authorized or is unlawful.
$36,000,000
Rhapsody Acquisition
Corp.
4,500,000 Units
PROSPECTUS
EarlyBirdCapital, Inc.
, 2006
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The estimated expenses payable by us in connection with the offering described in this registration statement (other than the
underwriting discount and commissions and the underwriter’s non-accountable expense allowance) will be as follows:
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Initial Trustees’ fee
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|
$
|
1,000.00
|
(1)
|
|
SEC registration Fee
|
|
|
9,328.07
|
|
|
NASD filing fee
|
|
|
9,217.83
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|
Accounting fees and expenses
|
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42,500.00
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Printing and engraving expenses
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65,000.00
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Directors & officers liability insurance premiums
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80,000.00
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(2)
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Legal fees and expenses
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300,000.00
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Blue sky services and expenses
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50,000.00
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Miscellaneous
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22,954.10
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(3)
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Total
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$
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580,000.00
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(1)
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In addition to the initial acceptance fee that is charged by Continental Stock Transfer & Trust Company, as trustee, the registrant will be required to pay to Continental
Stock Transfer & Trust Company annual fees of $3,000 for acting as trustee, $4,800 for acting as transfer agent of the registrant’s common stock, $2,400 for acting as warrant agent for the registrant’s warrants and $1,800 for
acting as escrow agent.
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(2)
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This amount represents the approximate amount of director and officer liability insurance premiums the registrant anticipates paying following the consummation of its initial public
offering and until it consummates a business combination.
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(3)
|
This amount represents additional expenses that may be incurred by the Company in connection with the offering over and above those specifically listed above, including distribution
and mailing costs.
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Item 14. Indemnification of Directors and Officers.
Our certificate of incorporation provides that all directors, officers, employees and agents of the registrant shall be entitled to be indemnified by us
to the fullest extent permitted by Section 145 of the Delaware General Corporation Law.
Section 145 of the Delaware General
Corporation Law concerning indemnification of officers, directors, employees and agents is set forth below.
“Section 145.
Indemnification of officers, directors, employees and agents; insurance.
(a) A corporation shall have power to indemnify
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe
the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
II-1
its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
(d) Any
indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director,
officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is
a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it
shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and
agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification
and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
II-2
(h) For purposes of this section, references to “the corporation” shall
include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this section,
references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the
request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner “not opposed to the best interests of the corporation” as referred to in this section.
(j) The
indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby
vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).”
Insofar as
indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director,
officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Paragraph B of Article Eighth of our certificate of incorporation provides:
“The Corporation, to the full extent permitted by Section 145 of the GCL, as amended from time to time, shall indemnify all persons whom it may
indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled
to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.”
Pursuant to the
Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, we have agreed to indemnify the Underwriters and the Underwriters have agreed to indemnify us against certain civil liabilities that may be incurred in connection with this
offering, including certain liabilities under the Securities Act.
II-3
Item 15. Recent Sales of Unregistered Securities.
(a) During the past three years, we sold the following shares of common stock without registration under the Securities Act:
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Stockholders
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Number of Shares
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Eric S. Rosenfeld
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765,000
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Rosenfeld 1991 Children’s Trust
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106,840
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Arnaud Ajdler
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50,632
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Leonard B. Schlemm
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40,632
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Jon Bauer
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|
40,632
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Colin D. Watson
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40,632
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Joel Greenblatt
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40,632
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David Sgro
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20,000
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|
Greg Monahan
|
|
20,000
|
Such shares were issued on April 24, 2006 in connection with our organization pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act as they were sold to sophisticated, accredited, wealthy individuals and entities. The shares issued to the individuals and entities above were sold for an aggregate
offering price of $25,000 at an average purchase price of approximately $0.0222 per share. No underwriting discounts or commissions were paid with respect to such sales.
Item 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as
part of this Registration Statement:
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Exhibit No.
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Description
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1.1
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Form of Underwriting Agreement.
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1.2
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Form of Selected Dealers Agreement.
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3.1
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Form of Amended and Restated Certificate of Incorporation.
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3.2
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By-laws.
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4.1
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Specimen Unit Certificate.
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4.2
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Specimen Common Stock Certificate.
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4.3
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Specimen Warrant Certificate.
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4.4
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Form of Unit Purchase Option to be granted to Representative.
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4.5
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Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant.
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5.1
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Opinion of Graubard Miller.
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10.1
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Eric S. Rosenfeld.
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10.2
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Arnaud Ajdler.
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10.3
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Leonard B. Schlemm.
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10.4
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Jon Bauer.
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10.5
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Colin D. Watson.
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10.6
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and David Sgro.
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10.7
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Greg Monahan.
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II-4
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Exhibit No.
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Description
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10.8
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Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Joel Greenblatt.
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10.9
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Form of Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Registrant.
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10.10
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Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders.
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10.11
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Form of Letter Agreement between Crescendo Advisors II LLC and Registrant regarding administrative support.
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10.12
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Promissory Note, dated as of May 15, 2006, issued to Eric S. Rosenfeld.
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10.13
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Form of Registration Rights Agreement among the Registrant and the Initial Stockholders.
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10.14
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Form of Subscription Agreement among the Registrant, Graubard Miller and each of Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson and Gotham Capital V.
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23.1
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Consent of BDO Seidman, LLP.
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23.2
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Consent of Graubard Miller (included in Exhibit 5.1).
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24
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Power of Attorney (included on signature page of this Registration Statement).
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Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration statement:
i. To include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in the effective registration statement.
iii. To include any
material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned hereby undertakes to provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
II-5
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial
bona fide
offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 2
nd
day of June, 2006.
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RHAPSODY ACQUISITION CORP.
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By:
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/s/ E
RIC
S.
R
OSENFELD
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Eric S. Rosenfeld
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eric S. Rosenfeld, David Sgro and Arnaud Ajdler
his true and lawful attorney-in-fact, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration
statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting
alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
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Name
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Position
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Date
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/s/ E
RIC
S.
R
OSENFELD
Eric S. Rosenfeld
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Chairman of the Board, Chief Executive Officer and Director (Principal executive officer)
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June 2, 2006
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/s/ D
AVID
S
GRO
David Sgro
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Chief Financial Officer (Principal financial and accounting officer)
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June 2, 2006
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/s/ A
RNAUD
A
JDLER
Arnaud Ajdler
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Secretary and Director
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June 2, 2006
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S
/ L
EONARD
B.
S
CHLEMM
Leonard B. Schlemm
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Director
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June 2, 2006
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/s/ J
ON
B
AUER
Jon Bauer
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Director
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June 2, 2006
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/s/ C
OLIN
D.
W
ATSON
Colin D. Watson
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Director
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June 2, 2006
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II-7
Exhibit 1.1
UNDERWRITING AGREEMENT
between
RHAPSODY ACQUISITION CORP.
and
EARLYBIRDCAPITAL, INC.
Dated:
, 2006
RHAPSODY ACQUISITION CORP.
UNDERWRITING AGREEMENT
New York, New York
, 2006
EarlyBirdCapital, Inc.
275 Madison Avenue, Suite 1203
New York, New York 10016
Dear Sirs:
The
undersigned, Rhapsody Acquisition Corp., a Delaware corporation (“Company”), hereby confirms its agreement with EarlyBirdCapital, Inc. (being referred to herein variously as “you,” “EBC” or the
“Representative”) and with the other underwriters named on Schedule I hereto for which EBC 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 $7.56 per Firm Unit (including discounts and commissions of $0.08 that will be paid to the Underwriters
only upon consummation of a Business Combination (as defined below) by the Company). The Underwriters, severally and not jointly, agree that they will not seek payment of the discounts and commissions of $0.08 referred to in the preceding sentence
unless and until a Business Combination has been consummated by the Company, and the Company agrees that it shall pay such discounts and commissions only upon consummation of such Business Combination. 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 $7.56 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(s)”). The shares of Common Stock and the Warrants included in the Firm Units will not be separately transferable until 90 days after the effective date (“Effective Date”) of the Registration Statement (as
defined in Section 2.1.1 hereof) unless EBC informs the Company of its decision to allow earlier separate trading, but in no event will EBC allow separate trading until the preparation of an audited balance sheet of the Company reflecting
receipt by the Company of the proceeds of the Offering and the filing of a Form 8-K by the Company which includes such balance sheet. Each Warrant entitles its holder to exercise it to purchase one share of Common Stock for $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 and terminating on the four-year anniversary of the Effective Date. “Business Combination” shall mean
any merger, capital stock exchange, asset acquisition or other similar business combination consummated by the Company with an operating business (as described more fully in the Registration Statement).
1.1.2
Payment and Delivery
. Delivery and payment for the Firm Units shall be made at 10:00 A.M.,
New York time, on the third business day following commencement of trading of the Firm Units or at such earlier time as shall be agreed upon by the Representative and the Company at the offices of the Representative or at such other place as shall
be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Units 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: $32,900,000 of the proceeds received by the Company for the Firm Units shall be deposited in
the trust fund established by the Company for the benefit of the public stockholders as described in the Registration Statement (“Trust Fund”) pursuant to the terms of an Investment Management Trust Agreement (“Trust Agreement”)
and the remaining proceeds shall be paid (subject to Section 3.13 hereof) to the order of the Company upon delivery to 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.
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 are hereinafter referred to as “Option
Units.” The Firm Units and the Option Units are hereinafter collectively referred to as the “Units,” and the Units, the shares of Common Stock and the Warrants included in the Units and the shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to collectively as the “Public Securities.” The purchase price to be paid for the Option Units will be the same price per Option Unit as the price per Firm Unit set forth in
Section 1.1.1 hereof.
1.2.2
Exercise of Option
. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be
exercised 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 as shall be agreed upon by the Company and the Representative, at the offices of the Representative or at such other place as shall be agreed upon by the Company and the Representative. 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: approximately $7.59740 per Option Unit shall be deposited in the Trust Fund (including discounts and
commissions of $0.08 that will be paid to the Underwriters only upon consummation of a Business Combination by the Company) pursuant to the Trust Agreement and the remaining proceeds shall be paid (subject to Section 3.13 hereof) to the order
of the Company upon delivery to 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
units
(“Representative’s Units”) for an aggregate purchase price of $100. Each of the Representative’s Units is identical to the Firm Units. 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
$
(
% of the initial public offering price of a Unit). The Representative’s Purchase
Option, the Representative’s Units, the Warrants included in the Representative’s Units (“Representative’s Warrants”) and the shares of Common Stock issuable upon exercise of the Representative’s Warrants are
hereinafter referred to collectively as the “Representative’s Securities.” The Public Securities and the Representative’s Securities are hereinafter referred to collectively as the “Securities.” The Representative
understands and agrees that there are significant restrictions against transferring the Representative’s Purchase Option during the first year after the Effective Date, as set forth in Section 3 of the Representative’s Purchase
Option.
1.3.2
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 Representative, 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 (“Commission”) a registration statement and an amendment or amendments thereto, on Form S-1 (File
No. 333-
), including any related preliminary prospectus (“Preliminary Prospectus”), for the registration of
the Public Securities under the Securities Act of 1933, as amended (“Act”), which registration statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Act, and the rules and
regulations (“Regulations”) of the Commission under the Act. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule 430A
of the Regulations), is hereinafter called the “Registration Statement,” and the form of the final prospectus dated the Effective Date included in the Registration Statement (or, if applicable, the form of final prospectus filed with the
Commission pursuant to Rule 424 of the Regulations), is hereinafter called the “Prospectus.” The Registration Statement has been declared effective by the Commission on the date hereof.
2.1.2
Pursuant to the Exchange Act
. The Company has filed with the Commission a Form 8-A (File
Number 000-
) providing for the registration under the Securities Exchange Act of 1934, as amended (“Exchange
Act”), of the Units, the Common Stock and the Warrants. The registration of the Units, Common Stock and Warrants under the Exchange Act has been declared effective by the Commission on the date hereof.
2.2
No Stop Orders, Etc.
Neither the Commission nor, to the best of the Company’s knowledge,
any state regulatory authority has issued any order or threatened to issue any order preventing or suspending the use of any Preliminary Prospectus or has instituted or, to the best of the Company’s knowledge, threatened to institute any
proceedings with respect to such an order.
2.3
Disclosures in Registration Statement
.
2.3.1
10b-5 Representation
. At the time the Registration Statement became effective and at all times subsequent thereto up to the Closing Date and
the Option Closing Date, if any, the Registration Statement and the Prospectus does and will contain all material statements that are required to be stated therein in accordance with the Act and the Regulations, and will in all material respects
conform to the requirements of the Act and the Regulations; neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, on such dates, does or will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. When any Preliminary Prospectus was first filed with the Commission (whether filed
as part of the Registration Statement for the registration of the Securities or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such
Preliminary Prospectus and any amendments thereof and supplements thereto complied or will comply in all material respects with the applicable provisions of the Act and the Regulations and did not and will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The representation and warranty made in
this Section 2.3.1 does not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement thereto.
2.3.2
Disclosure of Agreements
. The agreements
and documents described in the Registration Statement and the Prospectus conform to the descriptions thereof contained therein and there are no agreements or other documents required to be described in the Registration Statement or the Prospectus or
to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which its property or
business is or may be bound or affected and (i) that is referred to in the Prospectus, or (ii) is material to the Company’s business, has been duly and validly executed by the Company, is in full force and effect and is enforceable
against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and none of such agreements or instruments has been assigned by the Company, and neither the
Company nor, to the best of the Company’s knowledge, any other party is in breach or default thereunder and, to the best of the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would
constitute a breach or default thereunder. To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and
regulations.
2.3.3
Prior Securities Transactions
. No securities of the Company have been sold by the Company or by or on behalf of,
or for the benefit of, any person or persons controlling, controlled by, or under common control with the Company since the Company’s formation, except as disclosed in the Registration Statement.
2.3.4
Regulations
. The disclosures in the Registration Statement concerning the effects of
Federal, State and local regulation on the Company’s business as currently contemplated are correct in all material respects and do not omit to state a material fact.
2.4
Changes After Dates in Registration Statement
.
2.4.1
No Material Adverse Change
. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise specifically stated therein, (i) there
has been no material adverse change in the condition, financial or otherwise, or business prospects of the Company, (ii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this
Agreement, and (iii) no member of the Company’s management has resigned from any position with the Company.
2.4.2
Recent
Securities Transactions, Etc.
Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its equity securities.
2.5
Independent Accountants
. BDO Seidman, LLP (“BDO”), whose report is filed with the Commission as part of the Registration Statement,
are independent accountants as required by the Act and the Regulations. BDO has not, during the periods covered by the financial statements included in the Prospectus, provided to the Company any non-audit services, as such term is used in
Section 10A(g) of the Exchange Act.
2.6
Financial Statements
. The financial statements, including the notes thereto and
supporting schedules included in the Registration Statement 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; and such financial
statements have been prepared in conformity with generally accepted accounting principles, consistently applied throughout the periods involved; and the supporting schedules included in the Registration Statement present fairly the information
required to be stated therein. The summary financial data included in the Registration Statement and the Prospectus present fairly the information shown thereon and have been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be included in the Registration Statement or the Prospectus. The Registration Statement discloses all material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition,
results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses.
2.7
Authorized Capital; Options; Etc.
The Company had at the date or dates indicated in the Prospectus duly authorized, issued and outstanding capitalization as set forth in the Registration Statement and the Prospectus. Based on the assumptions
stated in the Registration Statement and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement and the Prospectus, on the
Effective Date and on the Closing Date, there will be no options, warrants, or other rights to purchase or otherwise acquire any authorized but unissued shares of Common Stock of the Company or any security convertible into shares of Common Stock of
the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.
2.8
Valid Issuance of Securities; Etc.
2.8.1
Outstanding Securities
. All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company or similar contractual rights granted by the Company. The authorized Common Stock conforms to all statements relating thereto contained in the Registration Statement and the Prospectus. The offers and sales
of the outstanding Common Stock were at all relevant times either registered under the Act and the applicable state securities or Blue Sky laws or, based in part on the representations and warranties of the purchasers of such shares of Common Stock,
exempt from such registration requirements.
2.8.2
Securities Sold Pursuant to this Agreement
. The Securities have been duly
authorized and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Securities are not and will not be
subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Securities has been
duly and validly taken. The Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement. When issued, the Representative’s Purchase Option, the Representative’s Warrants and
the Warrants will constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment of the respective exercise prices therefor, the number and type of securities of the Company called for thereby in
accordance with the terms thereof and such Representative’s Purchase Option, the Representative’s Warrants and the Warrants are enforceable against the Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and
state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be
brought.
2.8.3
Insider Warrants
. Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson and Gotham Capital V (the
“Insider Purchasers”), four of the Company’s stockholders immediately prior to the Offering (all of which stockholders are referred to as the “Initial Stockholders”) and an affiliate of one of the Initial Stockholders, have
committed to purchase an aggregate of 1,136,364 Warrants (“Insider Warrants” and together with the shares of Common Stock underlying the Insider Warrants, collectively referred to as the “Insider Securities”) at $1.10 per Warrant
(for an aggregate purchase price of $1,250,000.40) from the Company upon consummation of the Offering. The Insider Securities have been duly authorized and, when issued and paid for in accordance with the subscription agreements (“Subscription
Agreements”) and the Insider Warrants, 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 Insider 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 Insider Securities
has been duly and validly taken.
2.9
Registration Rights of Third Parties
. Except as set forth in the Prospectus, no holders of any
securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Act or to include any such
securities in a registration statement to be filed by the Company.
2.10
Validity and Binding Effect of Agreements
. This Agreement,
the Warrant Agreement (as defined in Section 2.21 hereof), the Trust Agreement, the Services Agreement (as defined in Section 3.7.2 hereof), the Subscription Agreements and the Escrow Agreement (as defined in Section 2.22.2 hereof)
have been duly and validly authorized by the Company and constitute, and the Representative’s Purchase Option, has been duly and validly authorized by the Company and, when executed and delivered, will constitute, the
valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.11
No Conflicts, Etc.
The execution, delivery, and performance by the Company of this
Agreement, the Warrant Agreement, the Representative’s Purchase Option, the Trust Agreement, the Services Agreement, the Subscription Agreement and the Escrow Agreement, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both (i) result in a breach of, or conflict with any of the terms and provisions
of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the
Company is a party except pursuant to the Trust Agreement referred to in Section 2.24 hereof; (ii) result in any violation of the provisions of the Certificate of Incorporation or the Bylaws of the Company; or (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its properties or business.
2.12
No Defaults; Violations
. No material default exists in the due performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not in violation of any term or provision of its Certificate of Incorporation or Bylaws or in violation of any material
franchise, license, permit, applicable law, rule, regulation, judgment or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its properties, businesses or assets.
2.13
Corporate Power; Licenses; Consents.
2.13.1
Conduct of Business
. The Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials
and bodies that it needs as of the date hereof to conduct its business purpose as described in the Prospectus. The disclosures in the Registration Statement concerning the effects of federal, state and local regulation on this offering and the
Company’s business purpose as currently contemplated are correct in all material respects and do not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.13.2
Transactions Contemplated Herein
. The Company has all corporate power and
authority to enter into this Agreement, the Warrant Agreement, the Services Agreement, the Representative’s Purchase Option, the Trust Agreement and the Escrow Agreement and to carry out the provisions and conditions hereof and thereof, and all
consents, authorizations, approvals, licenses, certifications, permits 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 and the Escrow
Agreement and as contemplated by the Prospectus, except with respect to applicable federal and state securities laws.
2.14
D&O
Questionnaires
. To the best of the Company’s knowledge, all information contained in the questionnaires (“Questionnaires”) completed by each of the Initial Stockholders and provided to the
Underwriters as an exhibit to his, her or its Insider Letter (as defined in Section 2.22.1) is true and correct and
the Company has not become aware of any information which would cause the information disclosed in the questionnaires completed by each Initial Stockholder to become inaccurate and incorrect.
2.15
Litigation; Governmental Proceedings
. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the best of the Company’s knowledge, threatened against, or involving the Company or, to the best of the Company’s knowledge, any Initial Stockholder, which has not been disclosed in the Registration Statement or
the Questionnaires.
2.16
Good Standing
. The Company has been duly organized and is validly existing as a corporation and is in good
standing under the laws of its state of incorporation, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of business requires such
qualification, except where the failure to qualify would not have a material adverse effect on the assets, business or operations of the Company.
2.17
Stop Orders
. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus or Prospectus or any part thereof and has not threatened to issue any such order.
2.18
Transactions Affecting Disclosure to NASD
.
2.18.1
Finder’s Fees
. Except as described in the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination
fee by the Company or any Initial Stockholder with respect to the sale of the Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the best of the Company’s knowledge, any Initial Stockholder that
may affect the Underwriters’ compensation, as determined by the National Association of Securities Dealers, Inc. (“NASD”).
2.18.2
Payments Within Twelve Months
. Other than payments to EBC, the Company has not within the twelve months prior to the Effective Date made any direct or indirect payments (in cash, securities or otherwise) (i) to any
person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company, (ii) to any NASD member or
(iii) to any person or entity that has any direct or indirect affiliation or association with any NASD member.
2.18.3
Use of
Proceeds
. None of the net proceeds of the Offering will be paid by the Company to any participating NASD member or its affiliates, except as specifically authorized herein and except as may be paid in connection with a Business Combination as
contemplated by the Prospectus.
2.18.4
Insiders’ NASD Affiliation
. Based on questionnaires distributed to such persons, except
as set forth on Schedule 2.18.4, no officer, director or any beneficial owner of the Company’s unregistered securities has any direct or indirect affiliation or association with any NASD member. The Company will advise the Representative
and its counsel if it learns that any officer, director or owner of at least 5% of the Company’s outstanding Common Stock is or becomes an affiliate or associated person of an NASD member participating in the offering.
2.19
Foreign Corrupt Practices Act
. Neither the Company nor any of the Initial Stockholders or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or any political party or candidate for office (domestic or foreign) or
other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have
had a material adverse effect on the assets, business or operations of the Company as reflected in any of the financial statements contained in the Prospectus or (iii) if not continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company’s internal accounting controls and procedures are sufficient to cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as amended.
2.20.
Officers’ Certificate
. Any certificate signed by any duly authorized officer of the Company and delivered to 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, the Insider Warrants and the Representative’s Warrants with Continental Stock Transfer & Trust Company substantially in the form annexed as
Exhibit 4.5 to the Registration Statement (“Warrant Agreement”).
2.22
Agreements With Initial Stockholders
.
2.22.1
Insider Letters
. The Company has caused to be duly executed legally binding and enforceable agreements (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability of any indemnification, contribution or noncompete provision may be limited under the
federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding
therefor may be brought) annexed as Exhibits 10.1 through 10.8 to the Registration Statement (“Insider Letters”), pursuant to which each of the Initial Stockholders of the Company agrees to certain matters, including but not limited
to, certain matters described as being agreed to by them under the “Proposed Business” section of the Prospectus.
2.22.2
Escrow Agreement
. The Company has caused the Initial Stockholders to enter into an escrow agreement (“Escrow Agreement”) with Continental Stock Transfer & Trust Company (“Escrow Agent”) substantially in the form
annexed as Exhibit 10.10 to the Registration Statement, whereby the Common Stock owned by the Initial Stockholders will be held in escrow by the Escrow Agent, until the first anniversary of the consummation of a Business Combination. During such
escrow period, the Initial Stockholders shall be prohibited from selling or otherwise transferring such shares (except to spouses and children of Initial Stockholders and trusts established for their benefit and as otherwise set forth in the Escrow
Agreement) but will retain the right to vote such shares. To the Company’s knowledge, the Escrow Agreement is enforceable against each of the Initial Stockholders and will not, with or without the giving of notice or the lapse of time or both,
result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, any agreement or instrument to which any of the Initial Stockholders is a party. The Escrow Agreement shall not be amended, modified or
otherwise changed without the prior written consent of EBC.
2.22.3
Subscription Agreements
. The Company has entered into the
Subscription Agreements substantially in the form annexed as Exhibit 10.14 to the Registration Statement with the Insider Purchasers to purchase the Insider Securities. Pursuant to the Subscription Agreement, the Insider Purchasers have placed the
purchase price for the Insider Securities in escrow prior to the date hereof. Simultaneously with the consummation of the Offering, such purchase price shall be deposited into the Trust Fund pursuant to the Trust Agreement.
2.23
Intentionally Omitted
.
2.24
Investment Management Trust Agreement
. The Company has entered into the Trust Agreement with
respect to certain proceeds of the Offering substantially in the form annexed as Exhibit 10.9 to the Registration Statement. The Trust Agreement will provide that if the Company has not consummated a business combination by the first anniversary of
the Effective Date, there may be released to the Company up to $200,000 of interest earned on the funds held pursuant to the Trust Agreement to fund expenses related to investigating and selecting a target business, income and other taxes and the
Company’s other working capital requirements.
2.25
Covenants Not to Compete
. No Initial Stockholder, employee, officer or
director of the Company is subject to any noncompetition agreement or non-solicitation agreement with any employer or prior employer which could materially affect his ability to be an Initial Stockholder, employee, officer and/or director of the
Company.
2.26
Investment Company Act; Investments
. The Company has been advised concerning the Investment Company Act of 1940, as
amended (the “Investment Company Act”), and the rules and regulations thereunder and has in the past conducted, and intends in the future to conduct, its affairs in such a manner as to ensure that it will not become an “investment
company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act and such rules and regulations. The Company is not, nor will the Company become upon the sale of the Units and
the application of the proceeds therefore as described in the Prospectus under the caption “Use of Proceeds”, an “investment company” or a person controlled by an “investment company” within the meaning of the
Investment Company Act. No more than 45% of the “value” (as defined in Section 2(a)(41) of the Investment Company Act) of the Company’s total assets (exclusive of cash items and “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.
2.27
Subsidiaries
. The Company does not own an interest in any corporation, partnership, limited liability company, joint venture, trust or other
business entity.
2.28
Related Party Transactions
. There are no business relationships or related party transactions involving the
Company or any other person required to be described in the Prospectus that have not been described as required. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or directors or Initial Stockholders of the Company or any of the members of the families of any of them, except as disclosed in the Registration Statement and the
Prospectus.
2.29
No Distribution of Offering Material.
The Company has not distributed and will not distribute prior to the Closing
Date any offering material in connection with the offering and sale of the Units other than any Preliminary Prospectuses, the Prospectus, the Registration Statement and other materials, if any, permitted by the Act.
2.30
Title to Assets.
Except as set forth in the Registration Statement and Prospectus, the Company has good and marketable title to all
properties and assets described in the Registration Statement and Prospectus as owned by it, free and clear of any pledge, lien, security interest, encumbrances, claim or equitable interest, other than such as would not have a material adverse
effect on the financial condition, earnings, operations, business or business prospects of the Company.
2.31
Taxes.
The Company has
timely filed all necessary federal, state and foreign income and franchise tax returns and has paid all taxes shown thereon as due, and there is no tax deficiency that has been or, to the best of the Company’s knowledge, might be asserted
against the Company that might have a material adverse effect on the financial condition, earnings, operations, business or business prospects of the Company, and all material tax liabilities are adequately provided for on the books of the Company.
3.
Covenants of the Company
. The Company covenants and agrees as follows:
3.1
Amendments to Registration Statement
. The Company will deliver to the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
3.2
Federal Securities Laws
.
3.2.1
Compliance
. During the time when a Prospectus is required to be delivered under the Act, the Company will use its best efforts to comply with all requirements imposed upon it by the Act, the Regulations and the Exchange Act and by the
regulations under the Exchange Act, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Public Securities in accordance with the provisions hereof and the Prospectus. If at any time when a
Prospectus relating to the Public Securities is required to be delivered under the Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel for the Underwriters, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will notify the Representative promptly and prepare and file with the Commission, subject to Section 3.1 hereof, an appropriate amendment or supplement
in accordance with Section 10 of the Act.
3.2.2
Filing of Final Prospectus
. The Company will file the Prospectus (in form and
substance satisfactory to the Representative) with the Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3
Exchange Act Registration
. The Company will use its best efforts to maintain the registration of the Units, Common Stock and Warrants under the provisions of the Exchange Act for a period of five years from the Effective Date, or until the
Company is required to be liquidated, if earlier or, in the case of the Warrants, until the Warrants expire and are no longer exercisable. The Company will not deregister the Units under the Exchange Act without the prior written consent of EBC.
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 Filings
.
The Company will use its best efforts, 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 its best
efforts to file and make such statements or reports at such times as are or may be required by the laws of such jurisdiction.
3.4
Delivery to Underwriters of Prospectuses
. The Company will deliver to each of the several Underwriters, without charge, from time to time during the period when the Prospectus is required to be delivered under the Act or the Exchange Act,
such number of copies of each Preliminary Prospectus and the Prospectus as such Underwriters may reasonably request and, as soon as the Registration Statement or any
amendment or supplement thereto becomes effective, deliver to you two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all exhibits filed therewith or incorporated therein by reference and all original executed consents of certified experts.
3.5
Effectiveness and Events Requiring Notice to the Representative
. The Company will use its best efforts to cause the Registration Statement to
remain effective and will notify the Representative immediately and confirm the notice in writing (i) of the effectiveness of the Registration Statement and any amendment thereto, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding for that purpose, (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose, (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus, (v) of the
receipt of any comments or request for any additional information from the Commission, and (vi) of the happening of any event during the period described in Section 3.4 hereof that, in the judgment of the Company, makes any statement of a
material fact made in the Registration Statement or the Prospectus untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will use commercially reasonable effort to obtain promptly the lifting of such
order.
3.6
Review of Financial Statements
. Until the earlier of five years from the Effective Date, or until such earlier time upon
which the Company is required to be liquidated, the Company, at its expense, shall cause its regularly engaged independent certified public accountants to review (but not audit) the Company’s financial statements for each of the first three
fiscal quarters prior to the announcement of quarterly financial information, the filing of the Company’s Form 10-Q quarterly report and the mailing of quarterly financial information to stockholders.
3.7
Affiliated Transactions
.
3.7.1
Business Combinations
. The Company will not consummate a Business Combination with any entity which is affiliated with any Initial Stockholder unless the Company obtains an opinion from an independent investment banking firm that the Business
Combination is fair to the Company’s stockholders from a financial perspective.
3.7.2
Administrative Services
. The Company has
entered into an agreement (“Services Agreement”) with Crescendo Advisors II 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 and secretarial support for the Company’s use for $7,500 per month.
3.7.3
Compensation
. Except as set forth above in this Section 3.7, the Company shall not pay any Initial Stockholder or any of their affiliates any fees or compensation from the Company, for services
rendered to the Company prior to, or in connection with, the consummation of a Business Combination; provided that the Initial Stockholders shall be entitled to reimbursement from the Company for their reasonable out-of-pocket expenses incurred in
connection with seeking and consummating a Business Combination.
3.8
Secondary Market Trading and Standard & Poor’s
. The Company will apply to be
included in Standard & Poor’s Daily News and Corporation Records Corporate Descriptions for a period of five years from the consummation of a Business Combination. Promptly after the consummation of the Offering, the Company shall take
such steps as may be necessary to obtain a secondary market trading exemption for the Company’s securities in the State of California. The Company shall also take such other action as may be reasonably requested by the Representative to obtain
a secondary market trading exemption in such other states as may be requested by the Representative.
3.9
Intentionally Omitted.
3.10
Financial Public Relations Firm
. Promptly after the execution of a definitive agreement for a Business Combination, the
Company shall retain a financial public relations firm.
3.11
Reports to the Representative
.
3.11.1
Periodic Reports, Etc.
For a period of five years from the Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company will furnish to the Representative (Attn: Steven Levine, President and Managing Director of Investment Banking) and its counsel copies of such financial statements and other periodic and special reports as the Company from
time to time furnishes generally to holders of any class of its securities, and promptly furnish to the Representative (i) a copy of each periodic report the Company shall be required to file with the Commission, (ii) a copy of every press
release and every news item and article with respect to the Company or its affairs which was released by the Company, (iii) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, (iv) five copies
of each registration statement filed by the Company with the Commission under the Securities Act, (v) a copy of monthly statements, if any, setting forth such information regarding the Company’s results of operations and financial position
(including balance sheet, profit and loss statements and data regarding outstanding purchase orders) as is regularly prepared by management of the Company and (vi) such additional documents and information with respect to the Company and the
affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request.
3.11.2
Intentionally
Omitted.
3.11.3
Secondary Market Trading Survey
. Until such time as the Public Securities are listed or quoted, as the case may
be, on the New York Stock Exchange, the American Stock Exchange or quoted on the Nasdaq National Market, or until such earlier time upon which the Company is required to be liquidated, the Company shall engage Graubard Miller (“GM”), for a
one-time fee of $5,000 payable on the Closing Date , to deliver and update to the Representative on a timely basis, but in any event on the Effective Date and at the beginning of each fiscal quarter, a written report detailing those states in which
the Public Securities may be traded in non-issuer transactions under the Blue Sky laws of the fifty States (“Secondary Market Trading Survey”).
3.11.4
Intentionally Omitted.
3.12
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.
3.13
Payment of Expenses
.
3.13.1
General Expenses Related to the Offering
. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any,
to the extent not paid at Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including but
not limited to (i) the preparation, printing, filing and mailing (including the payment of postage with respect to
such mailing) of the Registration Statement, the Preliminary and Final Prospectuses and the printing and mailing of this Agreement and related documents, including the cost of all copies thereof and any amendments thereof or supplements thereto
supplied to the Underwriters in quantities as may be required by the Underwriters, (ii) the printing, engraving, issuance and delivery of the Units, the shares of Common Stock and the Warrants included in the Units and the Representative’s
Purchase Option, including any transfer or other taxes payable thereon, (iii) the qualification of the Public Securities under state or foreign securities or Blue Sky laws, including the costs of printing and mailing the “Preliminary Blue
Sky Memorandum,” and all amendments and supplements thereto, fees and disbursements of GM (such fees shall be $35,000 in the aggregate (of which $15,000 has previously been paid)), and a one-time fee of $5,000 payable to GM for the preparation
of the Secondary Market Trading Survey, (iv) filing fees, costs and expenses (including disbursements for the Representative’s counsel) incurred in registering the Offering with the NASD, (v) fees and disbursements of the transfer and
warrant agent, (vi) the Company’s expenses associated with “due diligence” meetings arranged by the Representative, (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 and (viii) all other costs and expenses customarily borne by an issuer incident
to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 3.13.1. The Company also agrees that, if requested by the Representative, it will engage and pay 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. If the Offering is successfully consummated, any such amounts paid by the Company
pursuant to the immediately preceding sentence shall be credited against the Representative’s nonaccountable expense allowance (described below in Section 3.13.2). 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. If the Offering contemplated by this Agreement is not consummated for any
reason whatsoever then the Company shall reimburse the Underwriters in full for their out of pocket expenses, including, without limitation, its legal fees (up to a maximum of $50,000) and disbursements and “road show” and due diligence
expenses. The Representative shall retain such part of the nonaccountable expense allowance previously paid as shall equal its actual out-of-pocket expenses and refund the balance. If the amount previously paid is insufficient to cover such actual
out-of-pocket expenses, the Company shall remain liable for and promptly pay any other actual out-of-pocket expenses.
3.13.2
Nonaccountable Expenses
. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.13.1, on the Closing Date, it will pay to the Representative a nonaccountable expense allowance equal to one half of one
percent (0.5%) of the gross proceeds received by the Company from the sale of the Firm Units (of which $25,000 has previously been paid), by deduction from the proceeds of the Offering contemplated herein.
3.13.3
Deferred Compensation
. Upon the consummation of a Business Combination, the Company shall pay the Underwriters discounts and commissions of
$0.08 per Unit sold in the Offering. This payment shall be made by wire transfer to an account designated by the Representative on the closing date of the Business Combination.
3.14
Application of Net Proceeds
. The Company will apply the net proceeds from the Offering received by it in a manner consistent with the
application described under the caption “Use Of Proceeds” in the Prospectus.
3.15
Delivery of Earnings Statements to Security Holders
. The Company will make generally
available to its security holders as soon as practicable, but not later than the first day of the fifteenth full calendar month following the Effective Date, an earnings statement (which need not be certified by independent public or independent
certified public accountants unless required by the Act or the Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of at least twelve consecutive months beginning after the
Effective Date.
3.16
Notice to NASD
. For a period of ninety days following the Effective Date, in the event any person or entity
(regardless of any NASD affiliation or association) is engaged to assist the Company in its search for a merger candidate or to provide any other merger and acquisition services, the Company will provide the following to the NASD and EBC prior to
the consummation of the Business Combination: (i) complete details of all services and copies of agreements governing such services (which details or agreements may be appropriately redacted to account for privilege or confidentiality
concerns); and (ii) justification as to why the person or entity providing the merger and acquisition services should not be considered an “underwriter and related person” with respect to the Company’s initial public offering, as
such term is defined in Rule 2710 of the NASD’s Conduct Rules. The Company also agrees that proper disclosure of such arrangement or potential arrangement will be made in the proxy statement which the Company will file for purposes of
soliciting stockholder approval for the Business Combination.
3.17
Stabilization
. Neither the Company, nor, to its knowledge, any
of its employees, directors or stockholders (without the consent of EBC) has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange
Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Units.
3.18
Internal Controls
. The Company will maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific
authorization, (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets
is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to
any differences.
3.19
Accountants
. 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 BDO or another independent registered public accountant.
3.20
Form
8-K
. The Company shall, on the date hereof, retain its independent public accountants to audit the financial statements of the Company as of the Closing Date (“Audited Financial Statements”) reflecting the receipt by the Company of the
proceeds of the initial public offering. As soon as the Audited Financial Statements become available, the Company shall immediately file a Current Report on Form 8-K with the Commission, which Report shall contain the Company’s Audited
Financial Statements.
3.21
NASD
. The Company shall advise the NASD if it is aware that any 5% or greater stockholder of the Company
becomes an affiliate or associated person of an NASD member participating in the distribution of the Company’s Public Securities.
3.22
Corporate Proceedings
. All corporate proceedings and other legal matters necessary to carry out the provisions of this Agreement and the transactions contemplated hereby shall have been done to the reasonable satisfaction to
counsel for the Underwriters.
3.23
Investment Company
. The Company shall cause a portion of the proceeds of the Offering to be held
in the Trust Fund to be invested only as set forth in the Trust Agreement and as more fully described
in the Prospectus. The Company will otherwise conduct its business in a manner so that it will not become subject to the
Investment Company Act. Furthermore, once the Company consummates a Business Combination, it will be engaged in a business other than that of investing, reinvesting, owning, holding or trading securities.
3.24
Business Combination Announcement
. Within five business days following the consummation by the Company of a Business Combination, the Company
shall cause an announcement (“Business Combination Announcement”) to be placed, at its cost, in
The Wall Street Journal
,
The New York Times
and a third publication to be selected by the Representative announcing the
consummation of the Business Combination and indicating that EBC was the managing underwriter in the Offering. The Company shall supply the Representative with a draft of the Business Combination Announcement and provide the Representative with a
reasonable opportunity to comment thereon. The Company will not place the Business Combination Announcement without the final approval of the Representative, which such approval will not be unreasonably withheld.
3.25
Colorado Trust Filing
. In the event the Securities are registered in the State of Colorado, the Company will cause a Colorado Form ES to be
filed with the Commissioner of the State of Colorado no less than 10 days prior to the distribution of the Trust Fund in connection with a Business Combination and will do all things necessary to comply with Section 11-51-302 and Rule 51-3.4 of
the Colorado Securities Act.
3.26
Insider Warrants
.
3.26.1
Insider Warrant Purchase Price
. Simultaneously with the consummation of the Offering, the Company shall cause the purchase price to be paid for the Insider Warrants by the Insider Purchasers to be
deposited in the Trust Fund
3.26.2
Insider Warrant Exercises
. The Company hereby acknowledges and agrees that, if the Warrants are
called for redemption, so long as the Insider Warrants are held by the Insider Purchasers or their affiliates, such Warrants shall be exercisable by the holder by surrendering such Warrants for that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value” (defined below) by (y) the Fair
Market Value. The “Fair Market Value” shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third business day prior to the date on which the notice of redemption is sent to holders of
Warrants.
3.27
Investment Banking Engagement
. The Company hereby engages EBC as its non-exclusive investment banker in connection
with the Company’s Business Combination to provide the Company with assistance in structuring the Business Combination and negotiating its terms.
3.27.1
Compensation
. As compensation for the foregoing services, the Company will pay EBC a cash fee, based on the “Total Consideration” paid by the Company in the Business Combination, equal to 1% of
the Total Consideration; provided, however, that the maximum fee to be paid to EBC shall be $360,000. The phrase “Total Consideration” for the purpose of this Agreement, shall mean the total value of the securities (valued as determined in
the applicable agreement governing the terms of the Business Combination or, if not so valued, at market on the day of closing, or if there is no public market, valued as set forth herein for other property), cash and assets and property or other
benefits exchanged by the Company or received by the Company or its securityholders as consideration as a result of or arising out of the Business Combination, irrespective of the period of payment or terms (all valued at fair market present value
as agreed or, if not, by an independent appraiser selected by EBC in good faith).
3.27.2
Payment
. All fees payable under
Section 3.27.1 are due and payable to EBC, by certified check or wire transfer, at the closing of the Business Combination. If a proposed Business
Combination is not consummated for any reason, no amounts shall be payable to EBC under 3.27.1. The fee payable under
Section 3.27.1 shall be paid to EBC directly from the proceeds of the Trust Fund. The Company shall instruct the trustee under the Trust Agreement to deliver the fee to EBC simultaneously with the release of the remaining funds from the Trust
Fund.
3.27.3
Expenses
. In addition to the compensation described in Section 3.27.1 above, the Company shall bear all
reasonable out of pocket costs and expenses incurred by EBC in connection with the performance of its services under this Section 3.27, promptly after submission of appropriate evidence of having incurred such costs and expenses.
4
Conditions of Underwriters’ Obligations
. The obligations of the several Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its obligations hereunder and to the following conditions:
4.1
Regulatory Matters
.
4.1.1
Effectiveness of Registration Statement
. The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date and the Option Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for the purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Blank Rome L.L.P., counsel to the Underwriters (“BR”).
4.1.2
NASD
Clearance
. By the Effective Date, the Representative shall have received clearance from the NASD as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3
No Blue Sky Stop Orders
. No order suspending the sale of the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing Date or the Option Closing Date, and no proceedings for that purpose shall have been instituted or shall be contemplated.
4.2
Company Counsel Matters
.
4.2.1
Effective Date Opinion of Counsel
. On the Effective Date,
the Representative shall have received the favorable opinion of GM, counsel to the Company, dated the Effective Date, addressed to the Representative and in form and substance satisfactory to BR to the effect that:
(i) The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of its state of incorporation.
The Company is duly qualified and licensed and in good standing as a foreign corporation in each jurisdiction in which its ownership or leasing of any properties or the character of its operations requires such qualification or licensing, except
where the failure to qualify would not have a material adverse effect on the assets, business or operations of the Company. To such counsel’s knowledge, the Company is not in violation of any term or provision of its Certificate of
Incorporation or Bylaws.
(ii) All issued and outstanding securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof are not subject to
personal liability by reason of being such holders; and none of such securities were issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of law or under the Certificate of Incorporation or Bylaws of the Company. The offers and sales of the outstanding Common Stock were at all relevant times either registered
under the Act or exempt from such registration requirements. The authorized and, to such counsel’s knowledge, outstanding capital stock of the Company is as set forth in the Prospectus.
(iii) The Securities and Insider 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 and Insider Securities are not and will not be subject to the preemptive rights of any holders of any security
of the Company arising by operation of law or under the Certificate of Incorporation or Bylaws of the Company. When issued, the Representative’s Purchase Option, the Representative’s Warrants, the Insider 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 Insider 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.
(iv) This Agreement, the Warrant Agreement, the Services Agreement, the Trust
Agreement, the Subscription Agreements and the Escrow Agreement have each been duly and validly authorized and, when executed and delivered by the Company, constitute, and the Representative’s Purchase Option has been duly and validly
authorized by the Company and, when executed and delivered, will constitute, the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (b) as enforceability of any indemnification or contribution provisions may be limited under the federal and state securities laws,
and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(v) The execution, delivery and performance of this Agreement, the Warrant Agreement, the Representative’s Purchase Option, the Escrow Agreement,
the Trust Agreement, the Subscription Agreements and the Services Agreement and compliance by the Company with the terms and provisions thereof and the consummation of the transactions contemplated thereby, and the issuance and sale of the
Securities, do not and will not, with or without the giving of notice or the lapse of time, or both, (a) to such counsel’s knowledge, conflict with, or result in a breach of, any of the terms or provisions of, or constitute a default
under, or result in the creation or modification of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company pursuant to the terms of, any mortgage, deed of trust, note, indenture, loan, contract,
commitment or other agreement or instrument filed as an exhibit to the Registration Statement, (b) result in any violation of the provisions of the Certificate of Incorporation or the Bylaws of the Company, or (c) to such counsel’s
knowledge, violate any United States statute or any judgment, order or decree, rule or regulation applicable to the Company of any court, United States federal, state or other regulatory authority or other governmental body having jurisdiction over
the Company, its properties or assets.
(vi) The Registration Statement, the Preliminary Prospectus and the Prospectus and any
post-effective amendments or supplements thereto (other than the financial statements included therein, as to which no opinion need be rendered) each as of their respective dates appeared on their face to comply as to form in all material respects
with the requirements of the Act and Regulations. The Securities
and all other securities issued or issuable by the Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus. The descriptions in the Registration Statement and in the Prospectus, insofar as such statements constitute a summary of 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, and such counsel does not know of any statutes or legal or
governmental proceedings required to be described in the Prospectus that are not described in the Registration Statement or the Prospectus or included as exhibits to the Registration Statement that are not described or included as required.
(vii) The Registration Statement is effective under the Act. To such counsel’s knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or threatened under the Act or applicable state securities laws.
(viii) To such counsel’s knowledge, there is no action, suit or proceeding before or by any court of governmental agency or body, domestic or
foreign, now pending, or threatened against the Company that is required to be described in the Registration Statement.
The opinion of counsel shall
further include a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, the Underwriters and the independent public accountants of the Company, at which conferences the
contents of the Registration Statement and the Prospectus contained therein and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus contained therein (except as otherwise set forth in the foregoing opinion), 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 statements and related notes and schedules thereto and other financial and statistical data and information included in the Registration Statement or the
Prospectus).
4.2.2
Closing Date and Option Closing Date Opinion of Counsel
. On each of the Closing Date and the Option Closing
Date, if any, the Representative shall have received the favorable opinion of GM, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Representative and in form and substance reasonably satisfactory to BR,
confirming as of the Closing Date and, if applicable, the Option Closing Date, the statements made by GM in its opinion delivered on the Effective Date.
4.2.3
Reliance
. In rendering such opinion, such counsel may rely (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted,
to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to BR) of other counsel reasonably acceptable to BR, familiar with the
applicable laws, and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting
the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to the Underwriters’ counsel if requested. The opinion of counsel for the Company and any opinion relied
upon by such counsel for the Company shall include a statement to the effect that it may be relied upon by counsel for the Underwriters in its opinion delivered to the Underwriters.
4.3
Cold Comfort Letter
. At 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 BR from BDO 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 registered public accounting firm with respect to the Company within the meaning of the Act and the applicable Regulations and that they have not, during the periods covered by
the financial statements included in the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating that in their opinion the financial statements of the Company included in the Registration Statement and Prospectus comply as to form in all material respects with the applicable accounting requirements
of the Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a 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, they have been advised by the Company officials that
(a) the unaudited financial statements of the Company included in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the Regulations or are 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 and (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 no change in the capital stock or long-term debt of the Company, or any decrease in the stockholders’ equity of the Company as compared with amounts
shown in the May 17, 2006 balance sheet included in the Registration Statement, other than as set forth in or contemplated by the Registration Statement, or, if there was any decrease, setting forth the amount of such decrease;
(iv) Stating that they have compared specific dollar amounts, numbers of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case to the extent that such amounts, numbers, percentages, statements and information may be derived from the general accounting records, including work sheets, of the
Company and excluding any questions requiring an interpretation by legal counsel, with the results obtained from the application of specified readings, inquiries and other appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter and found them to be in agreement;
(v) Stating that they
have not provided the Company’s management with any written communication in accordance with Statement on Auditing Standards No. 60 “Communication of Internal Control Structure Related Matters Noted in an Audit;” and
(vi) Statements as to such other matters incident to the transaction contemplated hereby as you may reasonably request.
4.4
Officers’ Certificates
.
4.4.1
Officers’ Certificate
. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President and the Secretary or Assistant Secretary of the Company, dated the Closing Date or the Option Closing Date, as the case may be, respectively, to the effect that the
Company has performed all covenants and complied with all conditions required by this Agreement to be performed or complied with by the Company prior to and as of the Closing Date, or the Option Closing Date, as the case may be, and that the
conditions set forth in Section 4.5 hereof have been satisfied as of such date and that, as of Closing Date and the Option Closing Date, as the case may be, the representations and warranties of the Company set forth in Section 2 hereof
are true and correct. In addition, the Representative will have received such other and further certificates of officers of the Company as the Representative may reasonably request.
4.4.2
Secretary’s Certificate
. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary or Assistant Secretary of the Company, dated the Closing Date or the Option Date, as the case may be, respectively, certifying (i) that the Bylaws and Certificate of Incorporation of the
Company are true and complete, have not been modified and are in full force and effect, (ii) that the resolutions relating to the public offering contemplated by this Agreement are in full force and effect and have not been modified,
(iii) all correspondence between the Company or its counsel and the Commission, and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
4.5
No Material Changes
. Prior to and on each of the Closing Date and the Option Closing Date, if any, (i) there shall have been no
material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus, (ii) no action suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Initial Stockholder before or by any court or federal or state commission, board
or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement
and Prospectus, (iii) no stop order shall have been issued under the Act and no proceedings therefor shall have been initiated or threatened by the Commission, and (iv) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Act and the Regulations and shall conform in all material respects to the requirements of the Act and the Regulations, and
neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
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, all of the Subscription Agreements 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 BR and you shall have received from such counsel a favorable opinion, dated the Closing Date and the Option Closing Date, if any, with respect to such of these
proceedings as you
may reasonably require. On or prior to the Effective Date, the Closing Date and the Option Closing Date, as the case may
be, counsel for the Underwriters shall have been furnished such documents, certificates and opinions as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 4.7, or in order
to evidence the accuracy, completeness or satisfaction of any of the representations, warranties or conditions herein contained.
4.8
Secondary Market Trading Survey
. On the Closing Date, the Representative shall have received the Secondary Market Trading Survey from GM.
4.9
Insider Warrants
. On the Closing Date, the Insider Purchasers shall have purchased the Insider Warrants and the purchase price for such Insider Warrants shall be deposited into the Trust Fund.
5
Indemnification
.
5.1
Indemnification of
Underwriters
.
5.1.1
General
. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each
of the Underwriters, and each dealer selected by you that participates in the offer and sale of the Securities (each a “Selected Dealer”) and each of their respective directors, officers and employees and each person, if any, who controls
any such Underwriter (“controlling person”) within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to
any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriters and the
Company or between any of the Underwriters and any third party or otherwise) to which they or any of them may become subject under the Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) any Preliminary Prospectus, the Registration Statement or the Prospectus (as from time to time each may be amended and
supplemented); (ii) in any post-effective amendment or amendments or any new registration statement and prospectus in which is included securities of the Company issued or issuable upon exercise of the Representative’s Purchase Option; or
(iii) any application or other document or written communication (in this Section 5 collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, Nasdaq or any securities exchange; or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to an Underwriter by or on behalf of such Underwriter expressly for use in any Preliminary Prospectus, the Registration Statement or Prospectus, or any amendment or supplement thereof, or in any application, as
the case may be. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Preliminary Prospectus, the indemnity agreement contained in this paragraph shall not inure to the benefit of any Underwriter to
the extent that any loss, liability, claim, damage or expense of such Underwriter results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written
confirmation of sale of the Securities to such person as required by the Act and the Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with its obligations under Section 3.4 hereof. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or
controlling persons in connection with the issue and sale of the Securities or in connection with the Registration Statement or Prospectus.
5.1.2
Procedure
. If any action is brought against an Underwriter, a Selected Dealer or a controlling person in respect of which indemnity may be sought against the Company pursuant to
Section 5.1.1, such Underwriter or Selected Dealer shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter or Selected Dealer, as the case may be) and payment of actual expenses. Such
Underwriter, Selected Dealer or controlling person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter, Selected Dealer or controlling person
unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel reasonably
acceptable to the Underwriter or Selected Dealer, as the case may be, 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 (in addition to a local firm of attorneys in any applicable jurisdiction) 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. This Indemnification provided for in this Section 5.1 shall not be available to any party who shall fail to give notice as provided in this Section 5.1.2 if the Company was
unaware of the proceeding to which such notice would have related and was actually prejudiced by the failure to give such notice;
provided, however
, that indemnification shall only be limited to the extent of such prejudice;
provided,
further,
that, the omission so to notify the Company will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 5.1. The Company shall not without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter of such proceedings.
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 made in any
Preliminary Prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, written information furnished to the Company with respect to such
Underwriter by or on behalf of the Underwriter expressly for use in such Preliminary Prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or in any such application. In case any action shall be brought against
the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2.
5.3
Contribution
.
5.3.1
Contribution Rights
. In order to provide for just and equitable contribution under the Act in any case in which (i) any person entitled to indemnification under this Section 5 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 and the Company are responsible for;
provided, that, no person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 5.3.1, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Public Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise been required to pay in respect of such losses, liabilities, claims, damages and expenses. For purposes of this Section, each director, officer and employee of an
Underwriter or the Company, as applicable, and each person, if any, who controls an Underwriter or the Company, as applicable, within the meaning of Section 15 of the Act shall have the same rights to contribution as the Underwriters or the
Company, as applicable.
5.3.2
Contribution Procedure
. Within fifteen days after receipt by any party to this Agreement (or its
representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of
the commencement thereof, but the omission to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid fifteen days, the contributing party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding effected by such party seeking contribution on account of
any settlement of any claim, action or proceeding effected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section are intended to supersede, to the extent
permitted by law, any right to contribution under the Act, the Exchange Act or otherwise available. The Underwriters’ obligations to contribute pursuant to this Section 5.3 are several and not joint.
6
Default by an Underwriter
.
6.1
Default Not
Exceeding 10% of Firm Units or Option Units
. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Units or the Option Units, if the over-allotment option is exercised, hereunder, and if the number of
the Firm Units or Option Units with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Units or Option Units that all Underwriters have agreed to purchase hereunder, then such Firm Units or Option Units
to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
6.2
Default Exceeding 10% of Firm Units or Option Units
. In the event that the default addressed in Section 6.1 above relates to more than 10% of the Firm Units or Option Units, you may in your discretion arrange for yourself or
for another party or parties to purchase such Firm Units or Option Units to which such default relates on the terms contained herein. If within one business day after such default relating to more than 10% of the Firm Units or Option Units you do
not arrange for the purchase of such Firm Units or Option Units, then the Company shall be entitled to a further period of one business day within which to procure another party or parties satisfactory to you to purchase said Firm Units or Option
Units on such terms. In the event that neither you nor the Company arrange for the purchase of the Firm Units or Option Units to which a default relates as provided in this Section 6, this Agreement will be terminated by you or the Company
without liability on the part of the Company (except as provided in Sections 3.13 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option
Units, this Agreement will not terminate as to the Firm Units; and provided further that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other several Underwriters and to the Company for damages occasioned by
its default hereunder.
6.3
Postponement of Closing Date
. In the event that the Firm Units or Option Units to which the
default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable
period, but not in any event exceeding five business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file
promptly any amendment to the Registration Statement or the Prospectus that in the opinion of counsel for the Underwriters may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such Securities.
7
Intentionally
Omitted.
8
Additional Covenants
.
8.1
Intentionally Omitted
.
8.2
Additional Shares or Options
. The Company hereby agrees that until the consummation
of a Business Combination, it shall not issue any shares of Common Stock or any options or other securities convertible or exercisable or exchangeable into Common Stock, or any shares of Preferred Stock which participate in any manner in the Trust
Fund or which vote as a class with the Common Stock on a Business Combination.
8.3
Trust Fund Waiver Acknowledgment
.
(a)
Underwriters/Representative
. Except with respect to (i) the underwriting discounts and commissions due to the Underwriters and
(ii) the investment banking fee due to the Representative pursuant to Section 3.27 only upon successful consummation of a Business Combination, each of the Underwriters and the Representative hereby agree that it does not have any right,
title, interest or claim of any kind in or to any monies in the Trust Fund (“Claim”) and waive any Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company and will not
seek recourse against the Trust Fund for any reason whatsoever.
(b)
Target Businesses and Vendors
. The Company hereby agrees that
it will not commence its due diligence investigation of any operating business which the Company seeks to acquire (“Target Business”) or obtain the services of any vendor unless and until such Target Business or vendor acknowledges in
writing, whether through a letter of intent, memorandum of understanding or other similar document (and subsequently acknowledges the same in any definitive document replacing any of the foregoing), that (a) it has read the Prospectus and
understands that the Company has established the Trust Fund for the benefit of the public stockholders and that the Company may disburse monies from the Trust Fund only (i) to the public stockholders in the event they elect to convert their IPO
Shares (as defined below in Section 8.8), (ii) to the public stockholders upon the liquidation of the Company if the Company fails to consummate a Business Combination or (iii) to the Company after, or concurrently with, the
consummation of a Business Combination and (b) for and in consideration of the Company (1) agreeing to evaluate such Target Business for purposes of consummating a Business Combination with it or (2) agreeing to engage the services of
the vendor, as the case may be, such Target Business or vendor agrees that it does not have Claim in or to any monies in the Trust Fund and waives any Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or
agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever.
8.4
Insider Letters
. The Company shall not take any action or omit to take any action which would
cause a breach of any of the Insider Letters executed between each Initial Stockholder and EBC and will not allow any amendments to, or waivers of, such Insider Letters without the prior written consent of EBC.
8.5
Certificate of Incorporation and Bylaws
. The Company shall not take any action or omit to take any action that would cause the Company to be
in breach or violation of its Certificate of Incorporation or Bylaws. Prior to the consummation of a Business Combination, the Company will not amend its Certificate of Incorporation without the prior written consent of EBC.
8.6
Blue Sky Requirements
. The Company shall provide counsel to the Representative with ten copies of all proxy information and all related
material filed with the Commission in connection with a Business Combination concurrently with such filing with the Commission. In addition, the Company shall furnish any other state in which its initial public offering was registered, such
information as may be requested by such state.
8.7
Intentionally Omitted.
8.8
Acquisition/Liquidation Procedure
. The Company agrees: (i) that, prior to the consummation of any Business Combination, it will submit
such transaction to the Company’s stockholders for their approval (“Business Combination Vote”) even if the nature of the acquisition is such as would not ordinarily require stockholder approval under applicable state law; and
(ii) that, in the event that the Company does not effect a Business Combination within 24 months from the Effective Date, the Company will be liquidated and will distribute to all holders of IPO Shares (defined below) an aggregate sum equal to
the Company’s “Liquidation Value.” The Company’s “Liquidation Value” shall mean the Company’s book value, as determined by the Company and approved by BDO. In no event, however, will the Company’s Liquidation
Value be less than the Trust Fund, inclusive of any net interest income thereon after any permitted distributions to the Company as set forth in Section 2.24 hereof. Only holders of IPO Shares shall be entitled to receive liquidating
distributions and the Company shall pay no liquidating distributions with respect to any other shares of capital stock of the Company. With respect to the Business Combination Vote, the Company shall cause all of the Initial Stockholders to vote the
shares of Common Stock owned by them immediately prior to this Offering in accordance with the vote of the holders of a majority of the IPO Shares present, in person or by proxy, at a meeting of the Company’s stockholders called for such
purpose. At the time the Company seeks approval of any potential Business Combination, the Company will offer each holder of Common Stock issued in this Offering (“IPO Shares”) the right to convert their IPO Shares at a per share price
(“Conversion Price”) equal to the amount in the Trust Fund (inclusive of any interest income therein after any permitted distributions to the Company as set forth in Section 2.24 hereof) calculated as of two business days prior to the
consummation of the proposed Business Combination divided by the total number of IPO Shares. If a majority of the holders of IPO Shares present and entitled to vote on the Business Combination vote in favor of such Business Combination and holders
of less than 20% in interest of the Company’s IPO Shares elect to convert their IPO Shares, the Company may, but will not be required to, proceed with such Business Combination. If the Company elects to so proceed, it will convert shares, based
upon the Conversion Price, from those holders of IPO Shares who affirmatively requested such conversion and who voted against the Business Combination. If holders of 20% or more in interest of the IPO Shares, who vote against approval of any
potential Business Combination, elect to convert their IPO Shares, the Company will not proceed with such Business Combination and will not convert such shares. The provisions of this Section 8.8 may not be modified, amended or deleted under
any circumstances.
8.9
Rule 419
. The Company agrees that it will use its best efforts to prevent the Company from becoming subject
to Rule 419 under the Act prior to the consummation of any Business Combination, including but not limited to using its best efforts to prevent any of the Company’s outstanding securities from being deemed to be a “penny stock” as
defined in Rule 3a-51-1 under the Exchange Act during such period.
8.10
Affiliated Transactions
. The Company shall cause each of the Initial Stockholders to agree
that, in order to minimize potential conflicts of interest which may arise from multiple affiliations, the Initial Stockholders will present to the Company for its consideration, prior to presentation to any other person or company, any suitable
opportunity to acquire an operating business, until the earlier of the consummation by the Company of a Business Combination, the liquidation of the Company or until such time as the Initial Stockholders cease to be an officer or director of the
Company, subject to any pre-existing fiduciary or contractual obligations the Initial Stockholders might have.
8.11
Target Net
Assets
. The Company agrees that the initial Target Business that it acquires must have a fair market value equal to at least 80% of the Company’s net assets (all of the Company’s assets, including the funds held in the Trust Fund, less
the Company’s liabilities) at the time of such acquisition. The fair market value of such business must be determined by the Board of Directors of the Company based upon standards generally accepted by the financial community, such as actual
and potential sales, earnings and cash flow and book value. If the Board of Directors of the Company is not able to independently determine that the target business has a fair market value of at least 80% of the Company’s net assets at the time
of such acquisition, the Company will obtain an opinion from an unaffiliated, independent investment banking firm which is a member of the NASD with respect to the satisfaction of such criteria. The Company is not required to obtain an opinion from
an investment banking firm as to the fair market value if the Company’s Board of Directors independently determines that the Target Business does have sufficient fair market value.
9
Representations and Agreements to Survive Delivery
. Except as the context otherwise requires, all representations, warranties and agreements contained in this Agreement shall be deemed to be representations,
warranties and agreements at the Closing Date or Option Closing Date and such representations, warranties and agreements of the Underwriters and Company, including the indemnity agreements contained in Section 5 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on behalf of any Underwriter, the Company or any controlling person, and shall survive termination of this Agreement or the issuance and delivery of the Securities to the
several Underwriters until the earlier of the expiration of any applicable statute of limitations and the seventh anniversary of the later of the Closing Date or the Option Closing Date, if any, at which time the representations, warranties and
agreements shall terminate and be of no further force and effect.
10
Effective Date of This Agreement and Termination Thereof
.
10.1
Effective Date
. This Agreement shall become effective on the Effective Date at the time the Registration Statement is declared effective by
the Commission.
10.2
Termination
. You shall have the right to terminate this Agreement at any time prior to any Closing Date,
(i) if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New
York Stock Exchange, the American Stock Exchange, the Boston Stock Exchange or on the NASD OTC Bulletin Board (or successor trading market) shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been fixed, or maximum ranges for prices for securities shall have been required on the NASD OTC Bulletin Board or by order of the Commission or any other government authority having jurisdiction, or
(iii) if the United States shall have become involved in a 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 Units, or (vii) if any of the Company’s representations, warranties or
covenants hereunder are breached, or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market
conditions, including without limitation
as a result of terrorist activities after the date hereof, as in the Representative’s judgment would make it
impracticable to proceed with the offering, sale and/or delivery of the Units or to enforce contracts made by the Underwriters for the sale of the Securities.
10.3
Expenses
. In the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the obligations of
the Company to pay the out of pocket expenses related to the transactions contemplated herein shall be governed by Section 3.13 hereof.
10.4
Indemnification
. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way effected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
11
Miscellaneous
.
11.1
Notices
. All communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed, delivered or telecopied and confirmed and shall be deemed given when so delivered or telecopied and confirmed or if mailed, two days after such mailing
If to the Representative:
EarlyBirdCapital, Inc.
275 Madison Avenue, Suite 1203
New York, New York 10016
Attn: David M.
Nussbaum, Chairman
Copy to:
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, New York
10174
Attn: Robert J. Mittman, Esq.
If to the Company:
Rhapsody Acquisition Corp.
10 East 53
rd
Street,
35
th
Floor
New York, New York 10022
Attn: Eric S. Rosenfeld
Copy to:
Graubard Miller
The Chrysler Building
405
Lexington Avenue
New York, New York 10174
Attn: David Alan Miller, Esq.
11.2
Headings
. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
11.3
Amendment
. Except for Section 8.8 (which may not be amended under any circumstances),
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.
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 of the United States of America 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 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. Facsimile signatures will be binding and effective as originals.
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.
If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please
so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
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Very truly yours,
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RHAPSODY ACQUISITION CORP.
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By:
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Name:
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Title:
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Accepted on the date first
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above written.
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EARLYBIRDCAPITAL, INC.
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By:
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Name:
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Steven Levine
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Title:
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Managing Director
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SCHEDULE I
RHAPSODY ACQUISITION CORP.
4,500,000 Units
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Underwriter
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Number of Firm Units
to be Purchased
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EarlyBirdCapital, Inc.
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4,500,000
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Exhibit 1.2
EARLYBIRDCAPITAL, INC.
275 MADISON AVENUE
SUITE 1203
NEW YORK, NEW YORK 10016
SELECTED
DEALERS AGREEMENT
Dear Sirs:
1. Registration under the Securities Act of 1933, as amended (“Act”), of the 4,500,000
Units
* of Rhapsody Acquisition Corp. (“Company”), as more fully described in the Preliminary Prospectus,
dated
, 2006, and in the final prospectus (“Prospectus”) which will be forwarded to you, will become effective
in the near future. We, as the Underwriters, are offering certain of the Units for purchase by a selected group of dealers (“Selected Dealers”) on the terms and conditions stated herein.
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Authorized Public Offering Price:
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$8.00 per Unit.
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Dealers’ Selling Concession:
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Not to exceed $0.
per Unit payable upon termination of this Agreement, except as provided below. We reserve the right not to pay such concession on any of the
Units purchased by any of the Selected Dealers from us and repurchased by us at or below the price stated above prior to such termination.
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Reallowance:
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You may reallow not in excess of $0.
per Unit as a selling concession to dealers who are members in good standing of the National Association of Securities
Dealers, Inc. (“NASD”) or to foreign dealers who are not eligible for membership in the NASD and who have agreed (i) not to sell the Units within the United States of America, its territories or possessions or to persons who are citizens
thereof or residents therein, and (ii) to abide by the applicable Conduct Rules of the NASD.
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*
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Plus the over-allotment option available to the Underwriters to purchase up to an additional 675,000 Units.
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Delivery and Payment:
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Delivery of the Units shall be made on or about
, 2006 or such
later date as we may advise on not less than one day’s notice to you, at the office of EarlyBirdCapital, Inc., 275 Madison Avenue, Suite 1203, New York, New York 10016 or at such other place as we shall specify on not less than one day’s
notice to you. Payment for the Units is to be made, against delivery, at the authorized public offering price stated above, or, if we shall so advise you, at the authorized public offering price less the dealers’ selling concession stated
above, by wire transfer in Federal (same day) funds or by certified or official bank check in New York Clearing House Funds payable to the order of EarlyBirdCapital, Inc.
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Termination:
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This Agreement shall terminate at the close of business on the 45th day following the effective date of the Registration Statement (of which the enclosed Prospectus forms a part), unless
extended at our discretion for a period or periods not to exceed in the aggregate 30 additional days. We may terminate this Agreement, whether or not extended, at any time without notice.
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2. Any of the Units purchased by you hereunder are to be offered by you to the public at the
public offering price, except as herein otherwise provided and except that a reallowance from such public offering price not in excess of the amount set forth on the first page of this Agreement may be allowed as consideration for services rendered
in distribution to dealers that (a) are actually engaged in the investment banking or securities business; (b) execute the written agreement prescribed by Rule 2740 of the NASD Conduct Rules; and (c) are either members in good
standing of the NASD or foreign banks, dealers or institutions not eligible for membership in the NASD that represent to you that they will promptly reoffer such Units at the public offering price and will abide by the conditions with respect to
foreign banks, dealers and institutions set forth in paragraph 9 below.
3. You, by becoming a member of the Selected Dealers, agree
(a) upon effectiveness of the Registration Statement and your receipt of the Prospectus, to take up and pay for the number of Units allotted and confirmed to you, (b) not to use any of the Units to reduce or cover any short position you
may have and (c) to make available a copy of the Prospectus to all persons who on your behalf will solicit orders for the Units prior to the making of such solicitations by such persons. You are not authorized to give any information or to make
any representations other than those contained in the Prospectus or any supplements or amendments thereto.
4. We may be authorized to
over-allot in arranging sales to Selected Dealers, to purchase and sell Units, and to stabilize or maintain the market price of the Units. You agree to advise us at any time and from time to time upon our request, prior to the termination of this
Agreement, of the number of Units purchased by you remaining unsold by you, and you will, upon our request at any such time, sell to us, for our account or the account of one or more of the Underwriters, such amount of such unsold Units as we may
designate, at the public offering price thereof less an amount to be determined by us not in excess of the concession to dealers. In the event that prior to the later of (i) the termination of this Agreement or (ii) the covering by us of
any short position created by us in connection with the offering of the Units, for our account or the account of one or more Underwriters, we purchase or contract to purchase for our account or the account of any of the Underwriters, in the open
market or otherwise, any Units theretofore delivered to you, we reserve the right to withhold the above-mentioned concession to dealers on such Units if sold to you at the public offering price, or if such concession has been allowed
to you through your purchase at a net price, you agree to repay such concession upon our demand, plus, in each case, any
taxes on redelivery, commissions, original issue discount, accrued interest and dividends paid in connection with such purchase or contract to purchase.
5. As contemplated by Rule 15c2-8 under the Securities Exchange Act of 1934, as amended, we agree to mail a copy of the Prospectus to any person making a written request therefor during the period referred to in the
rules and regulations adopted under such Act, the mailing to be made to the address given in the request. You confirm that you have delivered all preliminary prospectuses and revised preliminary prospectuses, if any, required to be delivered under
the provisions of Rule 15c2-8 and agree to deliver all copies of the Prospectus required to be delivered thereunder. We have heretofore delivered to you such preliminary prospectuses as have been required by you, receipt of which is hereby
acknowledged, and will deliver such further prospectuses as may be requested by you. You agree to keep an accurate record of your distribution (including dates, number of copies and persons to whom sent) of copies of the Prospectus or any
preliminary prospectus (or any amendment or supplement to any thereof), and promptly upon request by us to bring all subsequent changes to the attention of anyone to whom such material shall have been furnished. You agree to furnish to persons who
receive a confirmation of sale a copy of the Prospectus filed pursuant to Rule 424(b) or Rule 424(c) under the Securities Act.
6. You
agree that until termination of this Agreement you will not make purchases or sales of the Units except (a) pursuant to this Agreement, (b) pursuant to authorization received from us, or (c) in the ordinary course of business as
broker or agent for a customer pursuant to any unsolicited order.
7. Additional copies of the Prospectus and any supplements or amendments
thereto shall be supplied in reasonable quantity upon request.
8. The Units are offered by us for delivery when, as and if sold to, and
accepted by, us and subject to the terms herein and in the Prospectus or any supplements or amendments thereto, to our right to vary the concessions and terms of offering after their release for public sale, to approval of counsel as to legal
matters and to withdrawal, cancellation or modification of the offer without notice.
9. Upon written application to us, you shall be
informed as to the jurisdictions under the securities or blue sky laws of which we believe the Units are eligible for sale, but we assume no responsibility as to such eligibility or the right of any member of the Selected Dealers to sell any of the
Units in any jurisdiction. We acknowledge that you have advised us that sales of the Company’s securities cannot be made from the state of New Jersey or Connecticut. You represent to us that all sales by you of the Company’s securities
will be made by your offices outside the state of New Jersey or Connecticut. We have caused to be filed a Further State Notice relating to such of the Units to be offered to the public in New York in the form required by, and pursuant to, the
provisions of Article 23A of the General Business Law of the State of New York. Upon the completion of the public offering contemplated herein, each member of the Selected Dealers agrees to promptly furnish to us, upon our request, territorial
distribution reports setting forth each jurisdiction in which sales of the Units were made by such member, the number of Units sold in such jurisdiction, and any further information as we may request, in order to permit us to file on a timely basis
any report that we as the Underwriters of the offering or manager of the Selected Dealers may be required to file pursuant to the securities or blue sky laws of any jurisdiction.
10. You, by becoming a member of the Selected Dealers, represent that you are actually engaged in the investment banking or securities business and that
you are (a) a member in good standing of the NASD and will comply with all applicable rules of the NASD, including but not limited to NASD Conduct Rule 2740, or (b) a foreign dealer or institution that is not eligible for membership in the
NASD and that has agreed (i) not to sell Units within the United States of America, its territories or
possessions or to persons who are citizens thereof or residents therein; (ii) that any and all sales shall be in
compliance with Rule 2790 of the NASD’s Conduct Rules; (iii) to comply, as though it were a member of the NASD, with Rules 2730, 2740 and 2750 of the NASD’s Conduct Rules, and to comply with Rule 2420 thereof as that Rule applies to a
non-member broker or dealer in a foreign country. You represent that neither you nor any of your directors, officers, partners, or persons associated with you (as defined in the By-Laws of the NASD) nor, to your knowledge, any “related
person” (as defined by the NASD in its Interpretation Relating to Review of Corporate Financing, which term includes counsel, financial consultants and advisors, finders, members of the selling or distribution groups, and any other persons
associated with or related to any of the foregoing) or any other broker-dealer has had, within the last twelve months, any dealings with the Company or any controlling shareholders thereof (other than relating to this Agreement) as to which
documents or information are required to be filed with the NASD pursuant to its Interpretation Relating to Review of Corporate Financing.
11. You are not authorized to act as agent for any Underwriter or the Company in offering the Units to the public otherwise. Neither we not any Underwriter shall be under any obligation to you except as specifically set forth herein.
Nothing herein shall constitute any members of the Selected Dealers partners with us or with each other, but you agree, notwithstanding any prior settlement of accounts or termination of this Agreement, to bear your proper proportion of any tax or
other liability based upon the claim that the Selected Dealers constitute a partnership, association, unincorporated business or other separate entity and a like share of any expenses of resisting any such claim.
12. EarlyBirdCapital, Inc. shall be the Managing Underwriter of the offering and manager of the Selected Dealers and shall have full authority to take
such action as we may deem advisable in respect of all matters pertaining to the offering or the Selected Dealers or any members of them. Except as expressly stated herein, or as may arise under the Act, we shall be under no liability to any member
of the Selected Dealers as such for, or in respect of (i) the validity or value of the Units (ii) the form of, or the statements contained in, the Prospectus, the Registration Statement of which the Prospectus forms a part, any supplements
or amendments to the Prospectus or such Registration Statement, any preliminary prospectus, any instruments executed by, or obtained or any supplemental sales data or other letters from, the Company, or others, (iii) the form or validity of the
Underwriting Agreement or this Agreement, (iv) the eligibility of any of the Units for sale under the laws of any jurisdiction, (v) the delivery of the Units, (vi) the performance by the Company, or others of any agreement on its or
their part, or (vii) any matter in connection with any of the foregoing, except our own want of good faith.
13. If for federal income
tax purposes the Selected Dealers, among themselves or with the Underwriters, should be deemed to constitute a partnership, then we elect to be excluded from the application of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code of
1986, as amended, and we agree not to take any position inconsistent with such selection. We authorize you, in your discretion, to execute and file on our behalf such evidence of such election as may be required by the Internal Revenue Service.
14. All communications from you shall be addressed to EarlyBirdCapital, Inc. at 275 Madison Avenue, Suite 1203, New York, New York 10016,
Attention: Steven Levine, Managing Director. Any notice from us to you shall be deemed to have been fully authorized by the Underwriters and to have been duly given if mailed, telegraphed or sent by confirmed facsimile transmittal to you at the
address to which this letter is mailed. This Agreement shall be construed in accordance with the laws of the State of New York without giving effect to conflict of laws. Time is of the essence in this Agreement.
If you desire to become a member of the Selected Dealers, please advise us to that effect immediately by facsimile transmission and sign and return to us
the enclosed counterpart of this letter.
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Very truly yours,
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EARLYBIRDCAPITAL, INC.
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As representative of the Underwriters
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By:
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Steven Levine
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Managing Director
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We accept membership in the Selected Dealers on the terms specified above.
Dated:
, 2006
(Selected Dealer)
_____________________________________________
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RHAPSODY ACQUISITION CORP.
Pursuant to
Section 245 of the
Delaware General Corporation Law
RHAPSODY ACQUISITION CORP.,
a corporation existing under the laws of the State of Delaware (the “Corporation”), by its Chief Executive Officer, hereby certifies as follows:
1. The name of the Corporation is “Rhapsody Acquisition Corp.”
2. The Corporation’s
Certificate of Incorporation was filed in the office of the Secretary of State of the State of Delaware on April 24, 2006.
3. This
Amended Restated Certificate of Incorporation restates, integrates and amends the Certificate of Incorporation of the Corporation.
4. This
Amended and Restated Certificate of Incorporation was duly adopted by joint written consent of the directors and stockholders of the Corporation in accordance with the applicable provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware (“GCL”).
5. The text of the Certificate of Incorporation of the Corporation is hereby amended and restated
to read in full as follows:
FIRST: The name of the corporation is Rhapsody Acquisition Corp. (hereinafter sometimes referred to as the
“Corporation”).
SECOND: The registered office of the Corporation is to be located at 615 S. DuPont Hwy., Kent County, Dover,
Delaware. The name of its registered agent at that address is National Corporate Research, Ltd.
THIRD: The purpose of the Corporation
shall be to engage in any lawful act or activity for which corporations may be organized under the GCL.
FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have
authority to issue is 16,000,000 of which 15,000,000 shares shall be Common Stock of the par value of $.0001 per share and 1,000,000 shares shall be Preferred Stock of the par value of $.0001 per share.
A.
Preferred Stock
. The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or more series, and to
fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “Preferred Stock Designation”) and as may be permitted by the GCL. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred
Stock Designation.
B.
Common Stock
. Except as otherwise required by law or as otherwise provided in any Preferred Stock
Designation, the holders of the Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote.
FIFTH: The name and mailing address of the sole incorporator of the Corporation are as follows:
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Name
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Address
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Jeffrey M. Gallant
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Graubard Miller
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The Chrysler Building
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405 Lexington Avenue
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New York, New York 10174
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SIXTH: The Corporation’s existence shall terminate on
, 2008 (the “Termination Date”). This provision may only be amended in connection with, and become effective
upon, the consummation of a Business Combination (defined below).
SEVENTH: The following provisions (A) through (E) shall apply
during the period commencing upon the filing of this Certificate of Incorporation and terminating upon the consummation of any “Business Combination,” and may not be amended during the “Target Business Acquisition Period.” A
“Business Combination” shall mean the acquisition by the Corporation, whether by merger, capital stock exchange, asset or stock acquisition or other
similar type of transaction, of an operating business (“Target Business”). The “Target Business
Acquisition Period” shall mean the period from the effectiveness of the registration statement filed in connection with the Corporation’s initial public offering (“IPO”) up to and including the first to occur of (a) a
Business Combination or (b) the Termination Date.
A. Prior to the consummation of any Business Combination, the Corporation shall
submit such Business Combination to its stockholders for approval regardless of whether the Business Combination is of a type which normally would require such stockholder approval under the GCL. In the event that a majority of the IPO Shares
(defined below) present and entitled to vote at the meeting to approve the Business Combination are voted for the approval of such Business Combination, the Corporation shall be authorized to consummate the Business Combination; provided that the
Corporation shall not consummate any Business Combination if the holders of 20% or more of the IPO Shares exercise their conversion rights described in paragraph B below.
B. In the event that a Business Combination is approved in accordance with the above paragraph (A) and is consummated by the Corporation, any stockholder of the Corporation holding shares of Common Stock issued
in the IPO (“IPO Shares”) who voted against the Business Combination may, contemporaneously with such vote, demand that the Corporation convert his IPO Shares into cash. If so demanded, the Corporation shall, promptly after consummation of
the Business Combination, convert such shares into cash at a per share conversion price equal to the quotient determined by dividing (i) the amount in the Trust Fund (as defined below), inclusive of any interest thereon, calculated as of two
business days prior to the consummation of the Business Combination, by (ii) the total number of IPO Shares. “Trust Fund” shall mean the trust account established by the Corporation at the consummation of its IPO and into which a
certain amount of the net proceeds of the IPO is deposited.
C. In the event that the Corporation does not consummate a Business
Combination by the Termination Date, only the holders of IPO Shares shall be entitled to receive liquidating distributions and the Corporation shall pay no liquidating distributions with respect to any other shares of capital stock of the
Corporation.
D. A holder of IPO Shares shall be entitled to receive distributions from the Trust Fund only in the event of a liquidation
of the Corporation or in the event he demands conversion of his shares in accordance with paragraph B, above. In no other circumstances shall a holder of IPO Shares have any right or interest of any kind in or to the Trust Fund.
E. The Board of Directors shall be divided into three classes: Class A, Class B and Class C. The number of directors in each class shall be as
nearly equal as possible. At the first election of directors by the incorporator, the incorporator shall elect a Class C director for a term expiring at the Corporation’s third Annual Meeting of Stockholders. The Class C director shall then
appoint additional Class A, Class B and Class C directors, as necessary. The directors in
Class A shall be elected for a term expiring at the first Annual Meeting of Stockholders, the directors in Class B
shall be elected for a term expiring at the second Annual Meeting of Stockholders and the directors in Class C shall be elected for a term expiring at the third Annual Meeting of Stockholders. Commencing at the first Annual Meeting of Stockholders,
and at each annual meeting thereafter, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Except as the GCL may
otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of directors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause, may be filled by the vote of a majority of the remaining directors then in office, although less than
a quorum (as defined in the Corporation’s Bylaws), or by the sole remaining director. All directors shall hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified. A
director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy and until his
successor shall have been elected and qualified.
EIGHTH: The following provisions are inserted for the management of the business and for
the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
A. Election of directors need not be by ballot unless the by-laws of the Corporation so provide.
B. The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the
by-laws of the Corporation as provided in the by-laws of the Corporation.
C. The directors in their discretion may submit any contract or
act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the
vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy)
shall be as valid and binding upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal attack because
of directors’ interests, or for any other reason.
D. In addition to the powers and authorities hereinbefore or by statute expressly
conferred upon them, the directors are hereby empowered to exercise all such powers and do all
such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this Certificate of Incorporation, and to any by-laws from time to time made by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such
by-law had not been made.
NINTH: A. A director of the Corporation shall not be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the GCL, as so amended. Any repeal or modification of
this paragraph A by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.
B. The Corporation, to the full extent permitted by Section 145 of the GCL, as amended from time to time, shall indemnify all persons whom it may
indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled
to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.
TENTH: Whenever a compromise
or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to
be signed by Eric S. Rosenfeld, its Chief Executive Officer, as of the
day of
, 2006.
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Eric S. Rosenfeld, Chief Executive Officer
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Exhibit 3.2
Adopted as of April 24, 2006
BY LAWS
OF
RHAPSODY ACQUISITION CORP.
ARTICLE I
OFFICES
1.1
Registered Office
. The registered office of Rhapsody Acquisition Corp. (the
“Corporation”) in the State of Delaware shall be established and maintained at 615 S. DuPont Highway, Kent County, Dover, Delaware and National Corporate Research, Ltd. shall be the registered agent of the corporation in charge thereof.
1.2
Other Offices
. The Corporation may also have offices at such other places both within and without the State of Delaware as the
board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1
Place of Meetings
. All meetings of the stockholders shall be held at such time and place, either within or without the State of Delaware, as
shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.
2.2
Annual Meetings
. The annual meeting of stockholders shall be held on such date and at such time as may be fixed by the Board of Directors and stated in the notice of the meeting, for the purpose of electing
directors and for the transaction of only such other business as is properly brought before the meeting in accordance with these Bylaws (the “Bylaws”).
Written notice of an annual meeting stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the annual meeting.
To be properly brought before the annual meeting, business must be either (i) specified in the
notice of annual meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the annual meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the annual meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety
(90) days prior to the meeting; provided, however, that in the event that less than
seventy (70) days notice or prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was
made, whichever first occurs. A stockholder’s notice to the Secretary shall set forth (a) as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the annual meeting, and (ii) any material interest of the stockholder in such business, and (b) as to the stockholder giving the notice (i) the name and record
address of the stockholder and (ii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the procedures set forth in this Article II, Section 2. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the annual
meeting that business was not properly brought before the annual meeting in accordance with the provisions of this Article II, Section 2, and if such officer should so determine, such officer shall so declare to the annual meeting and any such
business not properly brought before the meeting shall not be transacted.
2.3
Special Meetings
. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), may only be called by a majority of the entire Board of
Directors, or the Chief Executive Officer or the Chairman, and shall be called by the Secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled
to vote. Such request shall state the purpose or purposes of the proposed meeting.
Unless otherwise provided by law, written notice of a
special meeting of stockholders, stating the time, place and purpose or purposes thereof, shall be given to each stockholder entitled to vote at such meeting, not less than ten (10) or more than sixty (60) days before the date fixed for
the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
2.4
Quorum
. The holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the holders of a majority of the votes entitled to be cast by
the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.
2.5
Organization
. The Chairman of the Board of Directors shall act as chairman of meetings of the
stockholders. The Board of Directors may designate any other officer or director of the Corporation to act as chairman of any meeting in the absence of the Chairman of the Board of Directors, and the Board of Directors may further provide for
determining who shall act as chairman of any stockholders meeting in the absence of the Chairman of the Board of Directors and such designee.
The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting.
2.6
Voting
. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question (other than the election of
directors) brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. At all meetings of stockholders for the election of directors, a plurality of the
votes cast shall be sufficient to elect. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder, unless otherwise provided by
the Certificate of Incorporation. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize any person or persons to act for him by proxy. All
proxies shall be executed in writing and shall be filed with the Secretary of the Corporation not later than the day on which exercised. No proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a
longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot.
2.7
Action of Shareholders Without Meeting
. Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and
voted, and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not consented in writing.
2.8
Voting List
. The officer who
has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing
the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the election, either at a place within the city, town or village where the election is to be held, which place shall be specified in the
notice of the meeting, or, if not specified, at the place where said meeting is to be held. The list shall be produced
and kept at the time and place of election during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present.
2.9
Stock Ledger
. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 8 of this Article II or
the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
2.10
Adjournment
. Any meeting of the
stockholders, including one at which directors are to be elected, may be adjourned for such periods as the presiding officer of the meeting or the stockholders present in person or by proxy and entitled to vote shall direct.
2.11
Ratification
. Any transaction questioned in any stockholders’ derivative suit, or any other suit to enforce alleged rights of the
Corporation or any of its stockholders, on the ground of lack of authority, defective or irregular execution, adverse interest of any director, officer or stockholder, nondisclosure, miscomputation or the application of improper principles or
practices of accounting may be approved, ratified and confirmed before or after judgment by the Board of Directors or by the holders of Common Stock and, if so approved, ratified or confirmed, shall have the same force and effect as if the
questioned transaction had been originally duly authorized, and said approval, ratification or confirmation shall be binding upon the Corporation and all of its stockholders and shall constitute a bar to any claim or execution of any judgment in
respect of such questioned transaction.
2.12
Judges
. All votes by ballot at any meeting of stockholders shall be conducted by two
judges appointed for the purpose either by the directors or by the meeting. The judges shall decide upon the qualifications of voters, count the votes and declare the result.
ARTICLE III
DIRECTORS
3.1
Powers; Number; Qualifications
. The business and affairs of the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the Certificate of Incorporation. The number of directors which shall constitute the Board of Directors shall be not less than one (1) nor more than nine (9). The exact number of
directors shall be fixed from time to time, within the limits specified in this Article III Section 1 or in the Certificate of Incorporation, by the Board of Directors. Directors need not be stockholders of the Corporation. The Board may be
divided into Classes as more fully described in the Certificate of Incorporation.
3.2
Election; Term of Office; Resignation; Removal;
Vacancies
. Each director shall hold office until the next annual meeting of stockholders at which his Class stands for election or until such director’s earlier resignation, removal from office, death or incapacity. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors or from any other cause may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director
and each director so chosen shall hold office until the next annual meeting and until such director’s successor
shall be duly elected and shall qualify, or until such director’s earlier resignation, removal from office, death or incapacity.
3.3
Nominations
. Nominations of persons for election to the Board of Directors of the Corporation at a meeting of stockholders of the Corporation may be made at such meeting by or at the direction of the Board of Directors, by any committee or
persons appointed by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Article III, Section 3. Such
nominations by any stockholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided however, that in the event that less than seventy (70) days notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder’s notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (a) the name, age,
business address and residence address of the person, (b) the principal occupation or employment of the person, (c) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person, and
(d) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section 14 of
the Securities Exchange Act of 1934, as amended, and (ii) as to the stockholder giving the notice (a) the name and record address of the stockholder and (b) the class and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director
of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The officer of the Corporation presiding at an annual meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
3.4
Meetings
. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly elected Board of Directors shall be held immediately after and at the same place as the meeting of the stockholders at which it is elected and no notice of such meeting shall be necessary to the newly
elected directors in order to legally constitute the meeting, provided a quorum shall be present. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of
Directors. Special meetings of the Board of Directors may be called by the Chief Executive Officer or a majority of the entire Board of Directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either
by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, facsimile, telegram or e-mail on twenty-four (24) hours notice, or on such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
3.5
Quorum
. Except as may be otherwise specifically provided by law, the Certificate of
Incorporation or these Bylaws, at all meetings of the Board of Directors or any committee thereof, a majority of the entire Board of Directors or such committee, as the case may be, shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors or of any committee thereof, a majority of the
directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
3.6
Organization of Meetings
. The Board of Directors shall elect one of its members to be Chairman of the Board of Directors. The Chairman of the Board of Directors shall lead the Board of Directors in
fulfilling its responsibilities as set forth in these By-Laws, including its responsibility to oversee the performance of the Corporation, and shall determine the agenda and perform all other duties and exercise all other powers which are or from
time to time may be delegated to him or her by the Board of Directors.
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board of Directors, or in his or her absence, by the Chief Executive Officer, or in the absence of the Chairman of the Board of Directors and the Chief Executive Officer by such other person as the Board of Directors may designate or
the members present may select.
3.7
Actions of Board of Directors Without Meeting
. Unless otherwise restricted by the Certificate
of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or of such committee, as the
case may be, consent thereto in writing, and the writing or writings are filled with the minutes of proceedings of the Board of Directors or committee.
3.8
Removal of Directors by Stockholders
. The entire Board of Directors or any individual Director may be removed from office with or without cause by a majority vote of the holders of the outstanding shares
then entitled to vote at an election of directors. In case the Board of Directors or any one or more Directors be so removed, new Directors may be elected at the same time for the unexpired portion of the full term of the Director or Directors so
removed.
3.9
Resignations
. Any Director may resign at any time by submitting his written resignation to the Board of Directors or
Secretary of the Corporation. Such resignation shall take effect at the time of its receipt by the Corporation unless another time be fixed in the resignation, in which case it shall become effective at the time so fixed. The acceptance of a
resignation shall not be required to make it effective.
3.10
Committees
. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the Corporation. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided by law and in the
resolution of the Board of Directors establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution
or amending the Bylaws of the Corporation; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and
merger. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
3.11
Compensation
. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed amount (in cash or other form of consideration) for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation
for attending committee meetings.
3.12
Interested Directors
. No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
3.13
Meetings by Means of Conference Telephone
. Members of the Board of Directors or any committee designed by the Board of Directors may participate in a meeting of the Board of Directors or of a committee of the Board of Directors
by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this subsection shall constitute presence in person at
such meeting.
ARTICLE IV
OFFICERS
4.1
General
. The officers of the Corporation shall be elected by the Board
of Directors and may consist of: a Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, President, Secretary and Treasurer. The Board of Directors, in its discretion, may also elect one or more Vice Presidents (including
Executive Vice Presidents and Senior Vice Presidents), Assistant Secretaries, Assistant Treasurers, a Controller and such other officers as in the judgment of the Board of Directors may be necessary or desirable. Any number of offices may be held by
the same person and more than one person may hold the same office, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation, nor need such
officers be directors of the Corporation.
4.2
Election
. The Board of Directors at its first meeting held after each annual meeting
of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of
the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Except as otherwise provided in this Article IV, any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers who are directors of the Corporation shall be fixed
by the Board of Directors.
4.3
Voting Securities Owned by the Corporation
. Powers of attorney, proxies, waivers of notice of
meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chief Executive Officer or any Vice President, and any such officer may, in the name and
on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall
possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
4.4
Chairman of the Board and Vice Chairman of the Board
. The Chairman
of the Board shall preside at meetings of the Stockholders and of the Board of Directors and shall perform such other duties and exercise such other powers as from time to time may be delegated to him or her by the Board of Directors, subject to the
oversight of the Board of Directors. If the Board of Directors appoints a Vice Chairman of the Board, he shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and
shall perform such other duties and possess such other powers as may from time to time be vested in him or her by the Board of Directors. Notwithstanding anything else contained herein, the Chairman of the Board and the Vice Chairman of the Board
shall not be deemed officers of the Corporation unless the Board of Directors specifically designates either or both of them as officers.
4.5
Chief Executive Officer
. Subject to the provisions of these Bylaws and to the direction of the
Board of Directors, the Chief Executive Officer shall have ultimate authority for decisions relating to the general management and control of the affairs and business of the Corporation and shall perform such other duties and exercise such other
powers which are or from time to time may be delegated to him or her by the Board of Directors or these Bylaws, all in accordance with basic policies as established by and subject to the oversight of the Board of Directors.
4.6
President
. At the request of the Chief Executive Officer, or in the absence of the Chief Executive Officer, or in the event of his or her
inability or refusal to act, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon such office. The President shall perform such other
duties and have such other powers as the Board of Directors from time to time may prescribe.
4.7
Vice Presidents
. At the request of
the Chief Executive Officer or in the absence of the Chief Executive Officer, or in the event of his or her inability or refusal to act, the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon such office. Each Vice President shall perform such other duties and have such other
powers as the Board of Directors from time to time may prescribe. If there be no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the Chief Executive Officer or in the event of the
inability or refusal of such officer to act, shall perform the duties of such office, and when so acting, shall have all the powers of and be subject to all the restrictions upon such office.
4.8
Secretary
. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse
to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, then any Assistant Secretary shall perform such actions. If there be no Assistant Secretary, then the Board of Directors or the Chief
Executive Officer may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may
be.
4.9
Chief Financial Officer or Treasurer
. The Chief Financial Officer or Treasurer shall have general supervision, direction
and control of the financial affairs of the Corporation and shall perform such other duties and exercise such other powers which are or from time to time may be delegated to him or her by the Board of Directors or these Bylaws, all in accordance
with basic policies as established by and subject to the oversight of
the Board of Directors. The Chief Financial Officer or Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. The Chief Financial Officer or Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the
Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Chief Financial Officer or Treasurer and of the financial condition of the Corporation. If
required by the Board of Directors, the Chief Financial Officer or Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties
of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
4.10
Assistant Secretaries
. Except as may be otherwise provided in these Bylaws, Assistant
Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, any Vice President, if there be one, or the Secretary, and in the
absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.
4.11
Assistant Treasurers
. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
4.12
Controller
. The Controller shall establish and maintain the accounting records of the Corporation in accordance with generally accepted accounting principles applied on a consistent basis, maintain proper internal control of the assets of the
Corporation and shall perform such other duties as the Board of Directors, the Chief Executive Officer or any Vice President of the Corporation may prescribe.
4.13
Other Officers
. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.
4.14
Vacancies
. The Board of Directors shall have the power to fill any vacancies in any office occurring from whatever reason.
4.15
Resignations
. Any officer may resign at any time by submitting his written resignation to the
Corporation. Such resignation shall take effect at the time of its receipt by the Corporation, unless another time be fixed in the resignation, in which case it shall become effective at the time so fixed. The acceptance of a resignation shall not
be required to make it effective.
4.16
Removal
. Subject to the provisions of any employment agreement approved by the Board of
Directors, any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1
Form of Certificates
. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chief Executive Officer or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation.
5.2
Signatures
. Any or all of the signatures on the certificate may be a facsimile, including, but not limited to, signatures of officers of the Corporation and countersignatures of a transfer agent or
registrar. In case an officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
5.3
Lost
Certificates
. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
5.4
Transfers
. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in
the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transactions upon its books, unless the Corporation has a duty to inquire as to adverse claims with respect to such transfer which has not been discharged. The Corporation shall have no duty to inquire into adverse
claims with respect to such transfer unless (a) the Corporation has received a written notification of an adverse claim at a time and in a manner
which affords the Corporation a reasonable opportunity to act on it prior to the issuance of a new, reissued or
re-registered share certificate and the notification identifies the claimant, the registered owner and the issue of which the share or shares is a part and provides an address for communications directed to the claimant; or (b) the Corporation
has required and obtained, with respect to a fiduciary, a copy of a will, trust, indenture, articles of co-partnership, Bylaws or other controlling instruments, for a purpose other than to obtain appropriate evidence of the appointment or incumbency
of the fiduciary, and such documents indicate, upon reasonable inspection, the existence of an adverse claim. The Corporation may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or
certified mail at the address furnished by him or, if there be no such address, at his residence or regular place of business that the security has been presented for registration of transfer by a named person, and that the transfer will be
registered unless within thirty days from the date of mailing the notification, either (a) an appropriate restraining order, injunction or other process issues from a court of competent jurisdiction; or (b) an indemnity bond, sufficient in
the Corporation’s judgment to protect the Corporation and any transfer agent, registrar or other agent of the Corporation involved from any loss which it or they may suffer by complying with the adverse claim, is filed with the Corporation.
5.5
Fixing Record Date
. In order that the Corporation may determine the stockholders entitled to notice or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record is
adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than ten (10) days after the date upon which the resolution fixing the
record date of action with a meeting is adopted by the Board of Directors, nor more than sixty (60) days prior to any other action. If no record date is fixed:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(b) The record date for
determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the first date on which a signed written consent is delivered to the
Corporation.
(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
5.6
Registered Stockholders
. Prior to due presentment for transfer of any share or shares, the
Corporation shall treat the registered owner thereof as the person exclusively entitled to vote, to receive notifications and to all other benefits of ownership with respect to such share or shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State Delaware.
ARTICLE VI
NOTICES
6.1
Form of Notice
. Notices to directors and stockholders other than notices to directors of special meetings of the board
of Directors which may be given by any means stated in Article III, Section 4, shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram.
6.2
Waiver of
Notice
. Whenever any notice is required to be given under the provisions of law or the Certificate of Incorporation or by these Bylaws of the Corporation, a written waiver, signed by the person or persons entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular, or special meeting of the stockholders, Directors, or
members of a committee of Directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
7.1 The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
7.2 The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem
proper.
7.3 To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 or 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred
by him or her in connection therewith.
7.4 Any indemnification under sections 1 or 2 of this Article (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in
such section. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or
(b) If such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written opinion, or
(c) By the stockholders.
7.5 Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses (including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
7.6 The indemnification and advancement of expenses provided by, or granted pursuant to the
other sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
7.7 The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article.
7.8 For purposes of this Article, references to “the Corporation” shall include, in addition to the resulting Corporation, any
constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article with respect to the resulting or surviving Corporation as he would have with respect to such constituent Corporation of its separate existence
had continued.
7.9 For purposes of this Article, references to “other enterprises” shall include employee benefit plans;
references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and
in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in
this Article.
7.10 The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless
otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
7.11 No director or officer of the Corporation shall be personally liable to the Corporation or to any stockholder of the Corporation for monetary
damages for breach of fiduciary duty as a director or officer, provided that this provision shall not limit the liability of a director or officer (i) for any breach of the director’s or the officer’s duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for
any transaction from which the director or officer derived an improper personal benefit.
ARTICLE VIII
GENERAL PROVISIONS
8.1
Reliance on Books and Records
. Each Director, each member of
any committee designated by the Board of Directors, and each officer of the Corporation, shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation, including
reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care.
8.2
Dividends
. Subject to the provisions of the Certificate of Incorporation, if any, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created.
8.3
Annual Statement
. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and condition of the Corporation.
8.4
Checks
. All checks or
demands for money and notes of the Corporation shall be signed by such officer or officers or such other persons as the Board of Directors may from time to time designate.
8.5
Fiscal Year
. The fiscal year of the Corporation shall be as determined by the Board of Directors. If the Board of Directors shall fail to do
so, the Chief Executive Officer shall fix the fiscal year.
8.6
Seal
. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
8.7
Amendments
. The original or other Bylaws may be adopted, amended or repealed by the stockholders entitled to vote thereon at any regular or
special meeting or, if the Certificate of Incorporation so provides, by the Board of Directors. The fact that such power has been so conferred upon the Board of Directors shall not divest the stockholders of the power nor limit their power to adopt,
amend or repeal Bylaws.
8.8
Interpretation of Bylaws
. All words, terms and provisions of these Bylaws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of Delaware, as amended, and as amended from time to time hereafter.
Exhibit 4.1
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SEE REVERSE FOR
CERTAIN DEFINITIONS
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RHAPSODY ACQUISITION CORP.
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CUSIP
UNITS CONSISTING OF ONE SHARE OF COMMON STOCK AND TWO WARRANTS EACH TO PURCHASE
ONE SHARE OF COMMON STOCK
THIS CERTIFIES THAT
is the owner of
Units.
Each Unit (“Unit”) consists of one (1) share of common stock, par value
$.0001 per share (“Common Stock”), of Rhapsody Acquisition Corp., a Delaware corporation (the “Company”), and one warrants (the “Warrant(s)”). Each Warrant entitles the holder to purchase one (1) share of Common
Stock for $6.00 per share (subject to adjustment). Each Warrant will become exercisable on the later of (i) the Company’s completion of a merger, capital stock exchange, asset acquisition or other similar business combination and
(ii)
, 2007, and will expire unless exercised before 5:00 p.m., New York City Time, on
, 2010, or earlier upon redemption (the “Expiration Date”). The Common Stock and Warrants comprising the Units
represented by this certificate are not transferable separately prior to
, 2006, subject to earlier separation in the
discretion of EarlyBirdCapital, Inc. The terms of the Warrants are governed by a Warrant Agreement, dated as of
, 2006,
between the Company and Continental Stock Transfer & Trust Company, as Warrant Agent, and are subject to the terms and provisions contained therein, all of which terms and provisions the holder of this certificate consents to by acceptance
hereof. Copies of the Warrant Agreement are on file at the office of the Warrant Agent at 17 Battery Place, New York, New York 10004, and are available to any Warrant holder on written request and without cost.
This certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Company.
Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.
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By
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Chairman of the
Board
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Secretary
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Rhapsody Acquisition Corp.
The Company will furnish without charge to each stockholder who so requests, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series thereof of the Company and the qualifications, limitations, or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
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TEN COM –
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as tenants in common
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UNIF GIFT MIN ACT -
Custodian
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TEN ENT –
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as tenants by the entireties
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(Cust)
(Minor)
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JT TEN –
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as joint tenants with right of survivorship
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under Uniform Gifts to Minors
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and not as tenants in common
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Act
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(State)
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Additional Abbreviations may also be used though not in the above list.
For value received,
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE
NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Units
represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney to transfer the said Units on the books of the within named Company will full power of substitution in the premises.
Dated
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Notice:
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The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change
whatever.
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Signature(s) Guaranteed:
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
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Exhibit 4.2
RHAPSODY ACQUISITION CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
SEE REVERSE FOR
CERTAIN DEFINITIONS
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This Certifies that
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CUSIP
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is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.0001
EACH OF THE
COMMON STOCK OF
RHAPSODY ACQUISITION CORP.
transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of
this certificate properly endorsed.
The Corporation will be forced to liquidate if it is unable to complete a business
combination within 24 months from the consummation of its initial public offering, all as more fully described in the Corporation’s final prospectus dated
, 2006
This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.
Witness the
facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
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CHAIRMAN
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SECRETARY
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The following abbreviations, when used in the inscription on the face of this certificate, shall be
construed as though they were written out in full according to applicable laws or regulations:
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TEN COM –
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as tenants in common
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UNIF GIFT MIN ACT -
Custodian
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TEN ENT –
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as tenants by the entireties
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(Cust)
(Minor)
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JT TEN –
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as joint tenants with right of survivorship
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under Uniform Gifts to Minors
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and not as tenants in common
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Act
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(State)
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Additional Abbreviations may also be used though not in the above list.
Rhapsody Acquisition Corp.
The
Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof of the Corporation and the
qualifications, limitations, or restrictions of such preferences and/or rights. This certificate and the shares represented thereby are issued and shall be held subject to all the provisions of the Certificate of Incorporation and all amendments
thereto and resolutions of the Board of Directors providing for the issue of shares of Preferred Stock (copies of which may be obtained from the secretary of the Corporation), to all of which the holder of this certificate by acceptance hereof
assents.
For value received,
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE
NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
shares
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within named Corporation will full power of substitution in the premises.
Dated
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Notice:
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The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change
whatever.
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Signature(s) Guaranteed:
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
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The holder of this certificate shall be entitled to receive funds from the trust fund only in the event of the
Company’s liquidation upon failure to consummate a business combination or if the holder seeks to convert his respective shares into cash upon a business combination which he voted against and which is actually completed by the Company. In no
other circumstances shall the holder have any right or interest of any kind in or to the trust fund.
Exhibit 4.3
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NUMBER
-
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(SEE REVERSE SIDE FOR LEGEND)
THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO
5:00 P.M. NEW YORK CITY TIME,
, 2010
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WARRANTS
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RHAPSODY ACQUISITION CORP.
CUSIP
WARRANT
THIS CERTIFIES THAT, for value received
is the registered holder of a Warrant or Warrants expiring
, 2010 (the “Warrant”) to purchase one fully paid and non-assessable share of Common Stock, par value $.0001 per
share (“Shares”), of Rhapsody Acquisition Corp., a Delaware corporation (the “Company”), for each Warrant evidenced by this Warrant Certificate. The Warrant entitles the holder thereof to purchase from the Company, commencing on
the later of (i) the Company’s completion of a merger, capital stock exchange, asset acquisition or other similar business combination and
(ii)
, 2007, such number of Shares of the Company at the price of $6.00 per share, upon surrender of this Warrant
Certificate and payment of the Warrant Price at the office or agency of the Warrant Agent, Continental Stock Transfer & Trust Company, but only subject to the conditions set forth herein and in the Warrant Agreement between the Company and
Continental Stock Transfer & Trust Company. The Warrant Agreement provides that upon the occurrence of certain events the Warrant Price and the number of Warrant Shares purchasable hereunder, set forth on the face hereof, may, subject to
certain conditions, be adjusted. The term Warrant Price as used in this Warrant Certificate refers to the price per Share at which Shares may be purchased at the time the Warrant is exercised.
No fraction of a Share will be issued upon any exercise of a Warrant. If the holder of a Warrant would be entitled to receive a fraction of a Share upon
any exercise of a Warrant, the Company shall, upon such exercise, round up to the nearest whole number the number of Shares to be issued to such holder.
Upon any exercise of the Warrant for less than the total number of full Shares provided for herein, there shall be issued to the registered holder hereof or the registered holder’s assignee a new Warrant
Certificate covering the number of Shares for which the Warrant has not been exercised.
Warrant Certificates, when surrendered at the
office or agency of the Warrant Agent by the registered holder hereof in person or by attorney duly authorized in writing, may be exchanged in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of the Warrant Certificate at the office or agency of the Warrant Agent, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any applicable tax or other governmental charge.
The Company and the Warrant Agent may deem and treat the registered holder as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the registered holder, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
This Warrant does not entitle the registered holder to any of the rights of a stockholder of the Company.
The Company reserves the right to call the Warrant at any time prior to its exercise, with a notice of call in writing to the holder of
record of the Warrant, giving 30 days’ notice of such call at any time after the Warrant becomes exercisable if the last sale price of the Shares has been at least $11.50 per share on each of 20 trading days within any 30 trading day period
ending on the third business day prior to the date on which notice of such call is given. The call price of the Warrants is to be $.01 per Warrant. In connection with any call of the Warrants, the Company may require the holder of the Warrant to
exercise the Warrant on a “cashless basis” in accordance with the Warrant Agreement. Any Warrant either not exercised or tendered back to the Company by the end of the date specified in the notice of call shall be canceled on the books of
the Company and have no further value except for the $.01 call price.
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By
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Secretary
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Chairman of the Board
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SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder irrevocably elects
to exercise
Warrants represented by this Warrant Certificate, and to purchase the shares of Common Stock issuable upon
the exercise of such Warrants, and requests that Certificates for such shares shall be issued in the name of
(PLEASE TYPE OR PRINT NAME
AND ADDRESS)
(SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER)
and be delivered
to
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
and, if such number of Warrants shall not
be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below:
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Dated:
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(SIGNATURE)
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(ADDRESS)
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(TAX IDENTIFICATION NUMBER)
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ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
For Value Received,
hereby sell, assign, and transfer unto
(PLEASE TYPE OR PRINT NAME
AND ADDRESS)
(SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER)
and be delivered
to
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
of the Warrants represented by this
Warrant Certificate, and hereby irrevocably constitute and appoint
Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises.
T
HE
SIGNATURE
TO
THE
ASSIGNMENT
OF
THE
S
UBSCRIPTION
F
ORM
MUST
CORRESPOND
TO
THE
NAME
WRITTEN
UPON
THE
FACE
OF
THIS
W
ARRANT
C
ERTIFICATE
IN
EVERY
PARTICULAR
,
WITHOUT
ALTERATION
OR
ENLARGEMENT
OR
ANY
CHANGE
WHATSOEVER
,
AND
MUST
BE
GUARANTEED
BY
A
COMMERCIAL
BANK
OR
TRUST
COMPANY
OR
A
MEMBER
FIRM
OF
THE
A
MERICAN
S
TOCK
E
XCHANGE
, N
EW
Y
ORK
S
TOCK
E
XCHANGE
, P
ACIFIC
S
TOCK
E
XCHANGE
OR
C
HICAGO
S
TOCK
E
XCHANGE
.
Exhibit 4.4
THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE OPTION AGREES THAT IT WILL
NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE OPTION FOR A PERIOD OF ONE YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) EARLYBIRDCAPITAL, INC. (“
EBC
”) OR AN UNDERWRITER OR
SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF EBC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS
PURCHASE OPTION IS NOT EXERCISABLE PRIOR TO THE LATER OF THE CONSUMMATION BY RHAPSODY ACQUISITION CORP. (“
COMPANY
”) OF A MERGER, CAPITAL STOCK EXCHANGE, ASSET ACQUISITION OR OTHER SIMILAR BUSINESS COMBINATION
(“
BUSINESS COMBINATION
”)(AS DESCRIBED MORE FULLY IN THE COMPANY’S REGISTRATION STATEMENT (DEFINED HEREIN)) OR
, 2007.
VOID AFTER 5:00 P.M. NEW YORK CITY LOCAL TIME,
, 2011.
UNIT PURCHASE OPTION
FOR THE PURCHASE OF
UNITS
OF
RHAPSODY ACQUISITION CORP.
1. Purchase Option.
THIS CERTIFIES THAT, in
consideration of $100.00 duly paid by or on behalf of
(“
Holder
”), as registered owner of this Purchase Option, to
Rhapsody Acquisition Corp. (“
Company
”), Holder is entitled, at any time or from time to time upon the later of the consummation of a Business Combination or
, 2007 (“
Commencement Date
”), and at or before 5:00 p.m., New York City local time,
, 2011 (“
Expiration Date
”), but not thereafter, to subscribe for, purchase and receive, in
whole or in part, up to
(
) units (“
Units
”) of the Company, each
Unit consisting of one share of common stock of the Company, par value $0.0001 per share (“
Common Stock
”), and one warrant (“
Warrant(s)
”) expiring four years from the effective date
(“
Effective Date
”) of the registration statement (“
Registration Statement
”) pursuant to which Units are offered for sale to the public (“
Offering
”). Each Warrant is the same as
the warrants included in the Units being registered for sale to the public by way of the Registration Statement (“
Public Warrants
”). If the Expiration Date is a day on which banking institutions are authorized by law to
close, then this Purchase Option may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate
the Purchase Option. This Purchase Option is initially exercisable at $
per Unit so purchased; provided, however, that
upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Option,
including the exercise price per Unit and the number of Units (and shares of Common Stock and Warrants) to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise
price or the adjusted exercise price, depending on the context.
2.
Exercise.
2.1
Exercise Form
. In order to exercise this Purchase Option, the exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise Price for the Units being purchased payable in cash or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at
or before 5:00 p.m., New York City local time, on the Expiration Date this Purchase Option shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
2.2
Legend
. Each certificate for the securities purchased under this Purchase Option shall bear a legend as follows unless such securities have
been registered under the Securities Act of 1933, as amended (“
Act
”):
“The securities represented by this
certificate have not been registered under the Securities Act of 1933, as amended (“Act”) or applicable state law. The securities may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law.”
2.3
Cashless
Exercise
.
2.3.1
Determination of Amount
. In lieu of the payment of the Exercise Price multiplied by the number of Units for
which this Purchase Option is exercisable (and in lieu of being entitled to receive Common Stock and Warrants) in the manner required by Section 2.1, the Holder shall have the right (but not the obligation) to convert any exercisable but
unexercised portion of this Purchase Option into Units (“
Cashless Exercise Right
”) as follows: upon exercise of the Cashless Exercise Right, the Company shall deliver to the Holder (without payment by the Holder of any of the
Exercise Price in cash) that number of Units (or that number of shares of Common Stock and Warrants comprising that number of Units) equal to the quotient obtained by dividing (x) the “Value” (as defined below) of the portion of the
Purchase Option being converted by (y) the Current Market Value (as defined below). The “Value” of the portion of the Purchase Option being converted shall equal the remainder derived from subtracting (a) (i) the Exercise
Price multiplied by (ii) the number of Units underlying the portion of this Purchase Option being converted from (b) the Current Market Value of a Unit multiplied by the number of Units underlying the portion of the Purchase Option being
converted. As used herein, the term “Current Market Value” per Unit at any date means: (A) in the event that neither the Units nor Public Warrants are still trading, the remainder derived from subtracting (x) the exercise price
of the Warrants multiplied by the number of shares of Common Stock issuable upon exercise of the Warrants underlying one Unit from (y) (i) the Current Market Price of the Common Stock multiplied by (ii) the number of shares of Common
Stock underlying one Unit, which shall
include the shares of Common Stock underlying the Warrants included in such Unit; (B) in the event that the Units,
Common Stock and Public Warrants are still trading, (i) if the Units are listed on a national securities exchange or quoted on the Nasdaq National Market, Nasdaq SmallCap Market or NASD OTC Bulletin Board (or successor exchange), the last sale
price of the Units in the principal trading market for the Units as reported by the exchange, Nasdaq or the NASD, as the case may be, on the last trading day preceding the date in question; or (ii) if the Units are not listed on a national
securities exchange or quoted on the Nasdaq National Market, Nasdaq SmallCap Market or the NASD OTC Bulletin Board (or successor exchange), but is traded in the residual over-the-counter market, the closing bid price for Units on the last trading
day preceding the date in question for which such quotations are reported by the Pink Sheets, LLC or similar publisher of such quotations; and (C) in the event that the Units are not still trading but the Common Stock and Public Warrants
underlying the Units are still trading, the Current Market Price of the Common Stock plus the product of (x) the Current Market Price of the Public Warrants and (y) the number of shares of Common Stock underlying the Warrants included in
one Unit. The “Current Market Price” shall mean (i) if the Common Stock (or Public Warrants, as the case may be) is listed on a national securities exchange or quoted on the Nasdaq National Market, Nasdaq SmallCap Market or NASD OTC
Bulletin Board (or successor exchange), the last sale price of the Common Stock (or Public Warrants) in the principal trading market for the Common Stock as reported by the exchange, Nasdaq or the NASD, as the case may be, on the last trading day
preceding the date in question; (ii) if the Common Stock (or Public Warrants, as the case may be) is not listed on a national securities exchange or quoted on the Nasdaq National Market, Nasdaq SmallCap Market or the NASD OTC Bulletin Board (or
successor exchange), but is traded in the residual over-the-counter market, the closing bid price for the Common Stock (or Public Warrants) on the last trading day preceding the date in question for which such quotations are reported by the Pink
Sheets, LLC or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Board of Directors of the Company shall
determine, in good faith. In the event the Public Warrants have expired and are no longer exercisable, no “Value” shall be attributed to the Warrants underlying this Purchase Option. Additionally, in the event that this Purchase Option is
exercised pursuant to this Section 2.3 and the Public Warrants are still trading, the “Value” shall be reduced by the difference between the Warrant Exercise Price and the exercise price of the Public Warrants multiplied by the number
of Warrants underlying the Units included in the portion of this Purchase Option being converted.
2.3.1
Mechanics of Cashless
Exercise
. The Cashless Exercise Right may be exercised by the Holder on any business day on or after the Commencement Date and not later than the Expiration Date by delivering the Purchase Option with the duly executed exercise form attached
hereto with the cashless exercise section completed to the Company, exercising the Cashless Exercise Right and specifying the total number of Units the Holder will purchase pursuant to such Cashless Exercise Right.
3.
Transfer
.
3.1
General Restrictions
. The
registered Holder of this Purchase Option, by its acceptance hereof, agrees that it will not sell, transfer, assign, pledge or hypothecate this Purchase Option for a period of one year following the Effective Date to anyone other than (i) EBC
or an underwriter or selected dealer in connection with the Offering, or (ii) a bona fide
officer or partner of EBC or of any such underwriter or selected dealer. On and after the first anniversary of the
Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly
executed and completed, together with the Purchase Option and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five business days transfer this Purchase Option on the books of the Company and shall
execute and deliver a new Purchase Option or Purchase Options of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Units purchasable hereunder or such portion of such number as shall be
contemplated by any such assignment.
3.2
Restrictions Imposed by the Act
. The securities evidenced by this Purchase Option shall
not be transferred unless and until (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Act and applicable state securities laws, the
availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Graubard Miller shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a
registration statement or a post-effective amendment to the Registration Statement relating to such securities has been filed by the Company and declared effective by the Securities and Exchange Commission (the “
Commission
”)
and compliance with applicable state securities law has been established.
4.
New Purchase Options to be Issued
.
4.1
Partial Exercise or Transfer
. Subject to the restrictions in Section 3 hereof, this Purchase Option may be exercised or assigned in whole
or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Option for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or
transfer tax, the Company shall cause to be delivered to the Holder without charge a new Purchase Option of like tenor to this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the number of Units purchasable
hereunder as to which this Purchase Option has not been exercised or assigned.
4.2
Lost Certificate
. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Option of like tenor and
date. Any such new Purchase Option executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
5.
Registration Rights
.
5.1
Demand
Registration
.
5.1.1
Grant of Right
. The Company, upon written demand (
“
Initial Demand Notice
”) of
the Holder(s) of at least 51% of the Purchase Options and/or the underlying Units and/or the underlying securities (
“
Majority Holders
”
), agrees to register (the
“
Demand
Registration
”) under the Act on one occasion, all or any portion of the Purchase Options requested by
the Majority Holders in the Initial Demand Notice and all of the securities underlying such Purchase Options, including the Units, Common Stock, the Warrants and the Common Stock underlying the Warrants (collectively, the “
Registrable
Securities
”). On such occasion, the Company will file a registration statement or a post-effective amendment to the Registration Statement covering the Registrable Securities within sixty days after receipt of the Initial Demand Notice
and use its best efforts to have such registration statement or post-effective amendment declared effective as soon as possible thereafter. The demand for registration may be made at any time during a period of five years beginning on the Effective
Date. The Initial Demand Notice shall specify the number of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will notify all holders of the Purchase Options and/or Registrable
Securities of the demand within ten days from the date of the receipt of any such Initial Demand Notice. 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 5.1.4.
5.1.2
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 with respect thereto; provided, however, that 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.
5.1.3
Underwritten Offering
. If the Majority Holders so elect and such holders so advise the
Company as part of the Initial Demand Notice, 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 the Majority Holders.
5.1.4
Reduction of Offering
. 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 stockholders 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 that each such Person has requested be included in such registration, regardless of the number of shares held by each such Person (such proportion is referred to herein as “
Pro
Rata
”)) 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 or other securities registrable pursuant to the terms of the Registration Rights Agreement between the Company and the initial investors in the Company, dated as of
, 2006 (the “
Registration Rights Agreement
” and such registrable securities, the
“
Investor Securities
”) as to which “piggy-back” registration has been requested by the holders thereof, Pro Rata, 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 or other securities 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.
5.1.5
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. If the majority-in-interest of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration, then the Company does not have to continue its obligations under Section 5.1 with respect to such
proposed offering.
5.1.6
Terms.
The Company shall bear all fees and expenses attendant to registering the Registrable Securities,
including the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities, but the Holders shall pay any and all underwriting commissions. The Company agrees to use its reasonable
best efforts to qualify or register the Registrable Securities in such states as are reasonably requested by the Majority Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a state
in which such registration would cause (i) the Company to be obligated to qualify to do business in such state, or would subject the Company to taxation as a foreign corporation doing business in such jurisdiction or (ii) the principal
stockholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement or post-effective amendment filed pursuant to the demand rights granted under Section 5.1.1
to remain effective for a period of nine consecutive months from the effective date of such registration statement or post-effective amendment.
5.2
Piggy-Back Registration
.
5.2.1
Piggy-Back Rights
. If at any time during the seven year period commencing on the Effective Date the Company proposes to file a registration
statement under the 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 stockholders of the
Company for their account (or by the Company and by stockholders of the Company including, without limitation, pursuant to Section 5.1), 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 stockholders, (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 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.
5.2.2
Reduction of Offering
. 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 5.2, 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 stockholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such registration:
(a) 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, comprised of Registrable Securities and Investor Securities, as to which
registration has been requested pursuant to the applicable written contractual piggy-back registration rights of such security holders, Pro Rata, 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 and that can be sold without exceeding the Maximum Number of Shares;
(b) If the
registration is a “demand” registration undertaken at the demand of holders of Investor Securities, (A) first, the shares of Common Stock or other securities for the account of the demanding persons, Pro Rata, 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 shares of Registrable Securities, Pro Rata, as to
which registration has been requested pursuant to the terms hereof, that can be sold without exceeding the Maximum Number of Shares; 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 pursuant to written contractual arrangements with such persons, that can be sold without
exceeding the Maximum Number of Shares; and
(c) If the registration is a “demand” registration undertaken at the demand of
persons other than either the holders of Registrable Securities or of Investor Securities, (A) first, the shares of Common Stock or other securities 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), collectively the shares of Common Stock or other securities comprised of Registrable
Securities and Investor Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof and of the Registration Rights Agreement, as applicable, that can be sold without exceeding the Maximum Number of Shares; 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 pursuant to written contractual arrangements with such persons, that can be sold without exceeding the Maximum Number of Shares.
5.2.3
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 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 5.2.4.
5.2.4
Terms
. The Company shall bear
all fees and expenses attendant to registering the Registrable Securities, including the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities but the Holders shall pay any
and all underwriting commissions related to the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than fifteen days written notice
prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each applicable registration statement filed (during the period in which the Purchase Option is exercisable) by the
Company until such time as all of the Registrable Securities have been registered and sold. The Holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice, within ten days of
the receipt of the Company’s notice of its intention to file a registration statement. The Company shall cause any registration statement filed pursuant to the above “piggyback” rights to remain effective for at least nine months from
the date that the Holders of the Registrable Securities are first given the opportunity to sell all of such securities.
5.3
Damages
. Should the registration or the effectiveness thereof required by Sections 5.1 and 5.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Company shall, in addition to any other
equitable or other relief available to the Holder(s), be liable for any and all incidental, special and consequential damages sustained by the Holder(s), including, but not limited to, the loss of any profits that might have been received by the
holder upon the sale of shares of Common Stock or Warrants (and shares of Common Stock underlying the Warrants) underlying this Purchase Option.
5.4
General Terms
.
5.4.1
Indemnification
. The Company shall indemnify the Holder(s) of the Registrable Securities to
be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
(“
Exchange Act
”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against litigation,
commenced or threatened, or any claim whatsoever whether arising out of any action between the underwriter and the Company or between the underwriter and any third party or otherwise) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the underwriters contained in Section 5 of the
Underwriting Agreement between the Company, EBC and the other underwriters named therein dated the Effective Date. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage, expense or liability (including all reasonable attorneys’ fees and
other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they
may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent
and with the same effect as the provisions contained in Section 5 of the Underwriting Agreement pursuant to which the underwriters have agreed to indemnify the Company.
5.4.2
Exercise of Purchase Options
. Nothing contained in this Purchase Option shall be construed as requiring the Holder(s) to exercise their
Purchase Options or Warrants underlying such Purchase Options prior to or after the initial filing of any registration statement or the effectiveness thereof.
5.4.3
Documents Delivered to Holders
. The Company shall furnish EBC, as representative of the Holders participating in any of the foregoing offerings, a signed counterpart, addressed to the participating
Holders, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting
agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s
counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to EBC, as representative of the Holders participating in the offering, the correspondence and
memoranda described below and copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and
permit EBC, as representative of the Holders, to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable
securities laws or rules of the National Association of Securities Dealers, Inc. (“
NASD
”). Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with
its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as EBC, as representative of the Holders, shall reasonably request. The Company shall not be required to disclose any confidential
information or other records to EBC, as representative of the Holders, or to any other person, until and unless such persons shall have entered into reasonable confidentiality agreements (in form and substance reasonably satisfactory to the
Company), with the Company with respect thereto.
5.4.4
Underwriting Agreement
. The Company shall enter into an underwriting
agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 5, which managing underwriter shall be reasonably acceptable to the Company. Such agreement
shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain
such representations, warranties and covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate to such Holders and their intended methods of distribution. Such Holders, however, shall agree to such covenants and indemnification and contribution obligations for selling
stockholders as are customarily contained in agreements of that type used by the managing underwriter. Further, such Holders shall execute appropriate custody agreements and otherwise cooperate fully in the preparation of the registration statement
and other documents relating to any offering in which they include securities pursuant to this Section 5. Each Holder shall also furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended
method of disposition of such securities as shall be reasonably required to effect the registration of the Registrable Securities.
5.4.5
Rule 144 Sale
. Notwithstanding anything contained in this Section 5 to the contrary, the Company shall have no obligation pursuant to Sections 5.1 or 5.2 for the registration of Registrable Securities held by any Holder (i) where
such Holder would then be entitled to sell under Rule 144 within any three-month period (or such other period prescribed under Rule 144 as may be provided by amendment thereof) all of the Registrable Securities then held by such Holder, and
(ii) where the number of Registrable Securities held by such Holder is within the volume limitations under paragraph (e) of Rule 144 (calculated as if such Holder were an affiliate within the meaning of Rule 144).
5.4.6
Supplemental Prospectus
. Each Holder agrees, that upon receipt of any notice from the Company of the happening of any event as a result of
which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, such Holder will immediately discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder’s receipt of
the copies of a supplemental or amended prospectus, and, if so desired by the Company, such Holder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of such destruction) all copies,
other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.
5.4.7
Rule 144
. The Company covenants that it shall file any reports required to be filed by it under the 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 Act within the limitations of the
exemptions provided by Rule 144, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.
6.
Adjustments.
6.1
Adjustments to Exercise Price and Number of Securities
. The Exercise Price and the number of Units underlying the Purchase Option shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1
Stock Dividends - Split-Ups
. If after the date hereof, and subject to the provisions of Section 6.4 below, the number of
outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or by a split-up of shares of Common Stock or other similar event, then, on the effective date thereof, the number of shares of Common Stock
underlying each of the Units purchasable hereunder shall be increased in proportion to such increase in outstanding shares. In such case, the number of shares of Common Stock, and the exercise price applicable thereto, underlying the Warrants
underlying each of the Units purchasable hereunder shall be adjusted in accordance with the terms of the Warrants. For example, if the Company declares a two-for-one stock dividend and at the time of such dividend this Purchase Option is for the
purchase of one Unit at $8.00 per whole Unit (each Warrant underlying the Units is exercisable for $6.00 per share), upon effectiveness of the dividend, this Purchase Option will be adjusted to allow for the purchase of one Unit at $8.00 per Unit,
each Unit entitling the holder to receive two shares of Common Stock and two Warrants (each Warrant exercisable for $3.00 per share).
6.1.2
Aggregation of Shares
. If after the date hereof, and subject to the provisions of Section 6.4, the number of outstanding shares of Common Stock is decreased by a consolidation, combination or reclassification of shares of
Common Stock or other similar event, then, on the effective date thereof, the number of shares of Common Stock underlying each of the Units purchasable hereunder shall be decreased in proportion to such decrease in outstanding shares. In such case,
the number of shares of Common Stock, and the exercise price applicable thereto, underlying the Warrants underlying each of the Units purchasable hereunder shall be adjusted in accordance with the terms of the Warrants.
6.1.3
Replacement of Securities upon Reorganization, etc
. In case of any reclassification or reorganization of the outstanding shares of Common
Stock other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such shares of Common Stock, or in the case of any merger or consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation
or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Option shall have the right thereafter (until the expiration of the right of
exercise of this Purchase Option) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash)
receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of shares of Common Stock of the Company obtainable upon exercise of this Purchase
Option and the underlying Warrants immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 6.1.1 or 6.1.2, then such
adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this
Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.
6.1.4
Changes in Form of Purchase Option
. This form of Purchase Option need not be changed because of any change pursuant to this Section, and Purchase Options issued after such change may state the same Exercise Price and the same
number of Units as are stated in the Purchase Options initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Options reflecting a required or permissive change shall not be deemed to waive any
rights to an adjustment occurring after the Commencement Date or the computation thereof.
6.2 [Intentionally Omitted]
6.3
Substitute Purchase Option
. In case of any consolidation of the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result in any reclassification or change of the outstanding Common Stock), the corporation formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental Purchase Option providing that the holder of each Purchase Option then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Option) to receive, upon exercise of such Purchase
Option, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or merger, by a holder of the number of shares of Common Stock of the Company for which such Purchase Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer. Such supplemental Purchase Option shall provide for adjustments which shall be identical to the adjustments provided in Section 6. The above provision of this Section
shall similarly apply to successive consolidations or mergers.
6.4
Elimination of Fractional Interests
. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock or Warrants upon the exercise of the Purchase Option, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of Warrants, shares of Common Stock or other securities, properties or rights.
7.
Reservation and Listing.
The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of
issuance upon exercise of the Purchase Options or the Warrants underlying the Purchase Option, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Purchase Options and payment of the Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not
subject to preemptive rights of any stockholder. The Company further covenants and agrees that upon exercise of the Warrants underlying the Purchase Options and payment of the respective Warrant exercise price therefor, all shares of Common Stock
and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Options shall be outstanding, the
Company shall use its best efforts to cause all (i) Units and shares of Common Stock issuable upon exercise of the
Purchase Options, (ii) Warrants issuable upon exercise of the Purchase Options and (iii) shares of Common Stock issuable upon exercise of the Warrants included in the Units issuable upon exercise of the Purchase Option to be listed
(subject to official notice of issuance) on all securities exchanges (or, if applicable on the Nasdaq National Market, SmallCap Market, OTC Bulletin Board or any successor trading market) on which the Units, the Common Stock or the Public Warrants
issued to the public in connection herewith may then be listed and/or quoted.
8.
Certain Notice Requirements
.
8.1
Holder’s Right to Receive Notice
. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent as a
stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Purchase Options and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such
record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in
the same manner that such notice is given to the stockholders.
8.2
Events Requiring Notice
. The Company shall be required to give
the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or
(iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business shall be proposed.
8.3
Notice of Change in Exercise Price
. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to
Section 6 hereof, send notice to the Holders of such event and change (“
Price Notice
”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true
and accurate by the Company’s President and Chief Financial Officer.
8.4
Transmittal of Notices
. All notices, requests,
consents and other communications under this Purchase Option shall be in writing and shall be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered Holder of the
Purchase Option, to the address of such Holder as shown on the books of the
Company, or (ii) if to the Company, to the following address or to such other address as the Company may designate
by notice to the Holders:
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Attn: Chairman
9.
Miscellaneous.
9.1
Amendments
. The Company and EBC may from time to time supplement or amend this Purchase Option without the
approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder that the Company and EBC may deem necessary or desirable and that the Company and EBC deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of
and be signed by the party against whom enforcement of the modification or amendment is sought.
9.2
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 Purchase Option.
9.3
Entire Agreement
. This Purchase Option (together with the other agreements and documents being delivered pursuant to or in connection with
this Purchase Option) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter
hereof.
9.4
Binding Effect
. This Purchase Option shall inure solely to the benefit of and shall be binding upon, the Holder and the
Company and their permitted assignees, respective successors, legal representative 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 Purchase
Option or any provisions herein contained.
9.5
Governing Law; Submission to Jurisdiction
. This Purchase Option 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. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this
Purchase Option shall be brought and enforced in the courts of the State of New York or of the United States of America 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 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 8 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 and the Holder agree 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.
9.6
Waiver, Etc
. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Option shall not be deemed
or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Option or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase
Option. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Option 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 or non-compliance.
9.7
Execution in Counterparts
. This Purchase Option 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.
9.8
Exchange Agreement
. As a condition of the Holder’s receipt and acceptance
of this Purchase Option, Holder agrees that, at any time prior to the complete exercise of this Purchase Option by Holder, if the Company and EBC enter into an agreement (“
Exchange Agreement
”) pursuant to which they agree
that all outstanding Purchase Options will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.
9.9
Intentionally Omitted
.
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly authorized
officer as of the
day of
, 2006.
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RHAPSODY ACQUISITION CORP.
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By:
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Name:
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Title:
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Form to be used to exercise Purchase Option:
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Date:
,
200
The undersigned hereby elects irrevocably to exercise all or a portion of the within Purchase Option
and to purchase
Units of Rhapsody Acquisition Corp. and hereby makes payment of $
(at the rate of
$
per Unit) in payment of the Exercise Price pursuant thereto. Please issue the Common Stock and Warrants as to which this Purchase Option is exercised in accordance with
the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right to purchase
Units purchasable under the within Purchase Option by surrender of the unexercised
portion of the attached Purchase Option (with a “Value” based of $
based on a “Market Price” of
$
). Please issue the securities comprising the Units as to which this Purchase Option is exercised in accordance with the instructions given below.
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NOTICE: The signature to this assignment must correspond with the name as written upon the face of the purchase option in every particular, without alteration or enlargement or any change
whatever.
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Signature(s) Guaranteed:
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
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INSTRUCTIONS FOR REGISTRATION OF SECURITIES
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Name
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(Print in Block Letters)
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Address
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Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the
registered Holder to effect a transfer of the within Purchase Option):
FOR VALUE RECEIVED,
does hereby sell, assign and transfer unto
the right to purchase
Units of Rhapsody Acquisition Corp. (“
Company
”) evidenced by the within Purchase Option and does
hereby authorize the Company to transfer such right on the books of the Company.
Dated:
, 200
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Signature
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NOTICE: The signature to this assignment must correspond with the name as written upon the face of the purchase option in every particular, without alteration or enlargement or any change
whatever.
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Signature(s) Guaranteed:
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
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Exhibit 4.5
WARRANT AGREEMENT
Agreement made as of
, 2006 between Rhapsody Acquisition Corp., a Delaware corporation, with offices at 10 East 53
rd
Street, 35
th
Floor, New
York, New York 10022 (“Company”), and Continental Stock Transfer & Trust Company, a New York corporation, with offices at 17 Battery Place, New York, New York 10004 (“Warrant Agent”).
WHEREAS, the Company has received binding commitments from Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson and Gotham Capital V
(collectively, the “Insiders”) to purchase an aggregate of 1,136,364 warrants (“Insider Warrants”); and
WHEREAS, the
Company is engaged in a public offering (“Public Offering”) of units (“Units”) and, in connection therewith, has determined to issue and deliver up to (i) 5,175,000 Warrants (“Public Warrants”) to the public
investors, and (ii) 450,000 Warrants to EarlyBirdCapital, Inc. (“EBC”) or its designees (“Representative’s Warrants” and, together with the Public Warrants and Insider Warrants, the “Warrants”), each of such
Warrants evidencing the right of the holder thereof to purchase one share of the Company’s common stock, par value $.0001 per share (“Common Stock”), for $6.00, subject to adjustment as described herein; and
WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement on Form S-1,
No. 333-
(“Registration Statement”), for the registration, under the Securities Act of 1933, as amended (“Act”) of, among other securities, the
Warrants and the Common Stock issuable upon exercise of the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf
of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and
WHEREAS,
all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of
the Company, and to authorize the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as
follows:
1.
Appointment of Warrant Agent
. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the
Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.
2.
Warrants
.
2.1.
Form of Warrant
. Each Warrant shall be issued in registered form only, shall be in substantially the form of
Exhibit A hereto, the provisions of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Board or President and Treasurer, Secretary or Assistant Secretary of the Company and shall bear a
facsimile of the Company’s seal. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be
issued with the same effect as if he or she had not ceased to be such at the date of issuance.
2.2.
Effect of Countersignature
.
Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.
2.3.
Registration
.
2.3.1.
Warrant
Register
. The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue
and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.
2.3.2.
Registered Holder
. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and
treat the person in whose name such Warrant shall be registered upon the Warrant Register (“registered holder”), as the absolute owner of such Warrant
and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant
Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
2.4.
Detachability of Warrants
. The securities comprising the Units will not be separately transferable until 90 days after the date hereof
unless EBC informs the Company of its decision to allow earlier separate trading, but in no event will EBC allow separate trading of the securities comprising the Units until the Company files a Current Report on Form 8-K which includes an audited
balance sheet reflecting the receipt by the Company of the gross proceeds of the Public Offering including the proceeds received by the Company from the exercise of the Underwriter’s over-allotment option, if the over-allotment option is
exercised prior to the filing of the Form 8-K.
2.5
Warrant Attributes
. The Insider Warrants and Representative’s Warrants
shall have the same terms and be in the same form as the Public Warrants.
3.
Terms and Exercise of Warrants
3.1.
Warrant Price
. Each Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions
of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $6.00 per whole share, subject to the adjustments provided in Section 4 hereof and in the last
sentence of this Section 3.1. The term “Warrant Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole discretion may
lower the Warrant Price at any time prior to the Expiration Date.
3.2.
Duration of Warrants
. A Warrant may be exercised only during
the period (“Exercise Period”) commencing on the later of (i) the consummation by the Company of a merger, capital stock exchange, asset acquisition or other similar business combination (“Business Combination”) (as
described more fully in the Company’s Registration Statement) and (ii)
, 2007, and terminating at 5:00 p.m., New York City time on the earlier to occur of
(i)
, 2010 or (ii) the date fixed for redemption of the Warrants as provided in Section 6 of this Agreement (“Expiration Date”). Except with
respect to the right to receive the Redemption Price (as set forth in Section 6 hereunder), each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this
Agreement shall cease at the close of business on the Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by delaying the Expiration Date.
3.3.
Exercise of Warrants
.
3.3.1.
Payment
. Subject to the provisions of the Warrant and this Warrant Agreement, a Warrant, when countersigned by the Warrant Agent, may be
exercised by the registered holder thereof by surrendering it, at the office of the Warrant Agent, or at the office of its successor as Warrant Agent, in the Borough of Manhattan, City and State of New York, with the subscription form, as set forth
in the Warrant, duly executed, and by paying in full the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, as follows:
(a) in cash, good certified check or good bank draft payable to the order of the Company (or as otherwise agreed to by the
Company);
(b) in the event of redemption pursuant to Section 6 hereof in which the Company’s management has
elected to force all holders of Warrants to exercise such Warrants on a “cashless basis,” by surrendering the Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number
of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value” (defined below) by (y) the Fair Market Value. Solely for purposes of this Section 3.3.1, the
“Fair Market Value” shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to holders of Warrant pursuant to
Section 6 hereof; or
(c) with respect to any Insider Warrants, in the event of redemption pursuant to Section 6
hereof other than as set forth in the above Section 3.3.1(b) and so long as such Insider Warrants are held by the Insiders or their affiliates, by surrendering such Insider Warrants for that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “Fair Market Value” by (y) the Fair
Market Value.
3.3.2.
Issuance of Certificates
. As soon as practicable after the exercise of any Warrant and the
clearance of the funds in payment of the Warrant Price, the Company shall issue to the registered holder of such Warrant a certificate or certificates for the number of full shares of Common Stock to which he is entitled, registered in such name or
names as may be directed by him, her or it, and if such Warrant shall not have been exercised in full, a new countersigned Warrant for the number of shares as to which such Warrant shall not have been exercised. Notwithstanding the foregoing, the
Company shall not be obligated to deliver any securities pursuant to the exercise of a Warrant unless a registration statement under the Act with respect to the Common Stock is effective. Warrants may not be exercised by, or securities issued to,
any registered holder in any state in which such exercise would be unlawful.
3.3.3.
Valid Issuance
. All shares of Common Stock
issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and nonassessable.
3.3.4.
Date of Issuance
. Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.
3.3.5.
Intentionally Omitted.
4.
Adjustments
.
4.1.
Stock Dividends - Split-Ups
. If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding
shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number
of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.
4.2.
Aggregation of Shares
. If after the date hereof, and subject to the provisions of Section 4.6, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse
stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such
consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
4.3
Adjustments in Exercise Price
. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is
adjusted, as provided in Section 4.1 and 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the
number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.
4.4.
Replacement of Securities upon Reorganization, etc.
In case of any reclassification or reorganization of the outstanding
shares of Common Stock (other than a change covered by Section 4.1 or 4.2 hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to
another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Warrant holders shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the
kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the Warrant holder
would have received if such Warrant holder had exercised his, her or its Warrant(s) immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 4.1 or 4.2, then such
adjustment shall be made pursuant to Sections 4.1, 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
4.5.
Notices of Changes in Warrant
. Upon every adjustment of the Warrant Price or the number of shares issuable upon
exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, then, in any such event, the Company shall give written notice to each
Warrant holder, at the last address set forth for such holder in the warrant register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such
event.
4.6.
No Fractional Shares
. Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company
shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a
share, the Company shall, upon such exercise, round up or down to the nearest whole number the number of the shares of Common Stock to be issued to the Warrant holder.
4.7.
Form of Warrant
. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same
number of shares as is stated in the Warrants initially issued pursuant to this Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not
affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.
5.
Transfer and Exchange of Warrants.
5.1.
Registration of Transfer
. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly
guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants
so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.
5.2.
Procedure for Surrender of
Warrants
. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder
of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that in the event that a
Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue
new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.
5.3.
Fractional Warrants
. The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the
issuance of a warrant certificate for a fraction of a warrant.
5.4.
Service Charges
. No service charge shall be made for any
exchange or registration of transfer of Warrants.
5.5.
Warrant Execution and Countersignature
. The Warrant Agent is hereby
authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the
Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.
6.
Redemption
.
6.1.
Redemption
. Subject to Section 6.4 hereof, not less than all of the outstanding Warrants may be redeemed, at the option of the Company,
at any time after they become exercisable and prior to their expiration, at the office of the Warrant Agent, upon the notice referred to in Section 6.2, at the price of $.01 per Warrant (“Redemption Price”), provided that the last
sales price of the Common Stock has been at least $11.50 per share (subject to adjustment in accordance with Section 4 hereof), on each of twenty (20) trading days within any thirty (30) trading day period ending on the third business
day prior to the date on which notice of redemption is given.
6.2.
Date Fixed for, and Notice of, Redemption
. In the event the
Company shall elect to redeem all of the Warrants, the Company shall fix a date for the redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to the date fixed for
redemption to the registered holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given
whether or not the registered holder received such notice.
6.3.
Exercise After Notice of Redemption
. The Warrants may be exercised,
for cash (or on a
“cashless basis” in accordance with Section 3.3.1 of this Agreement) at any time after notice of
redemption shall have been given by the Company pursuant to Section 6.2 hereof and prior to the time and date fixed for redemption. In the event the Company determines to require all holders of Warrants to exercise their Warrants on a
“cashless basis” pursuant to Section 3.3.1(b), the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the Warrants, including the “Fair
Market Value” in such case. On and after the redemption date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.
6.4
Outstanding Warrants Only
. The Company understands that the redemption rights provided for by this Section 6 apply only to outstanding
Warrants. To the extent a person holds rights to purchase Warrants, such purchase rights shall not be extinguished by redemption. However, once such purchase rights are exercised, the Company may redeem the Warrants issued upon such exercise
provided that the criteria for redemption is met. The provisions of this Section 6.4 may not be modified, amended or deleted without the prior written consent of EBC.
7.
Other Provisions Relating to Rights of Holders of Warrants
.
7.1.
No Rights as Stockholder
.
A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to
consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.
7.2.
Lost, Stolen, Mutilated, or Destroyed Warrants
. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity or otherwise as they may in
their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall
constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.
7.3.
Reservation of Common Stock
. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.
7.4.
Registration of Common Stock
. The Company agrees that prior to the commencement of the
Exercise Period, it shall file with the Securities and Exchange Commission a post-effective amendment to the Registration Statement, or a new registration statement, for the registration, under the Act, of, and it shall take such action as is
necessary to qualify for sale, in those states in which the Warrants were initially offered by the Company, the Common Stock issuable upon exercise of the Warrants. In either case, the Company will use its best efforts to cause the same to become
effective and to maintain the effectiveness of such registration statement until the expiration of the Warrants in accordance with the provisions of this Agreement. The provisions of this Section 7.4 may not be modified, amended or deleted
without the prior written consent of EBC.
8.
Concerning the Warrant Agent and Other Matters
.
8.1.
Payment of Taxes
. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.
8.2.
Resignation, Consolidation, or Merger of Warrant Agent
.
8.2.1.
Appointment of Successor Warrant Agent
. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after
giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the
Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice,
submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any
successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and
State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority,
powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate,
the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to
such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in
writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.
8.2.2.
Notice of Successor Warrant Agent
. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common
Stock not later than the effective date of any such appointment.
8.2.3.
Merger or Consolidation of Warrant Agent
. Any corporation
into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement
without any further act.
8.3.
Fees and Expenses of Warrant Agent
.
8.3.1.
Remuneration
. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will
reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.
8.3.2.
Further Assurances
. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.
8.4.
Liability of Warrant Agent
.
8.4.1.
Reliance on Company Statement
. Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed
to be conclusively proved and established by a statement signed by the President or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good
faith by it pursuant to the provisions of this Agreement.
8.4.2.
Indemnity
. The Warrant Agent shall be liable hereunder only for
its own negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the
Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent’s negligence, willful misconduct, or bad faith.
8.4.3.
Exclusions
. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the
manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.
8.5.
Acceptance of Agency
. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms
and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of
shares of Common Stock through the exercise of Warrants.
9.
Miscellaneous Provisions
.
9.1.
Successors
. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.
9.2.
Notices
. Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by
the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid,
addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:
Rhapsody
Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Attn: Chief Executive Officer
Any notice, statement or demand authorized by this Agreement to be
given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after
deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:
Continental Stock Transfer & Trust Company
17 Battery Place
New York, New York 10004
Attn: Compliance Department
with a copy in each case to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: David Alan Miller, Esq.
and
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: Robert J. Mittman, Esq.
and
EarlyBirdCapital, Inc.
275 Madison Avenue, Suite 1203
New York, New York 10016
Attn: David M. Nussbaum, Chairman
9.3.
Applicable law
. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by 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 or the United States District Court 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 inconvenience 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 9.2 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.
9.4.
Persons Having Rights under this Agreement
. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants and, for the purposes of Sections 6.4, 7.4 and 9.2 hereof, EBC, any right,
remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. EBC shall be deemed to be a third-party beneficiary of this Agreement with respect to Sections 6.4, 7.4 and 9.2
hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and EBC with respect to the Sections 6.4, 7.4 and 9.2 hereof) and their
successors and assigns and of the registered holders of the Warrants.
9.5.
Examination of the Warrant Agreement
. A copy of this Agreement shall be available at all
reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection
by it.
9.6.
Counterparts
. This Agreement may be executed in any number of original or facsimile counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
9.7.
Effect of Headings
. The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year
first above written.
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RHAPSODY ACQUISITION CORP.
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By:
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Name:
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Title:
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY
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By:
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Name:
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Title:
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Exhibit 5.1
GRAUBARD MILLER
THE CHRYSLER BUILDING
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
June 2, 2006
Rhapsody Acquisition
Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Dear Sirs:
Reference is made to the Registration Statement on Form S-1 (“Registration Statement”)
filed by Rhapsody Acquisition Corp. (“Company”), a Delaware corporation, under the Securities Act of 1933, as amended (“Act”), covering (i) 4,500,000 Units, with each Unit consisting of one share of the Company’s common
stock (4,500,000 shares), par value $.0001 per share (the “Common Stock”), and warrants (4,500,000 warrants) (“Warrants”) to purchase one share of the Company’s Common Stock (4,500,000 Shares) to EarlyBirdCapital, Inc., the
underwriter (the “Underwriter”), (ii) up to 675,000 Units (the “Over-Allotment Units”) representing 675,000 shares of Common Stock and 675,000 Warrants (to purchase 675,000 shares of Common Stock), which the Underwriter will
have a right to purchase from the Company to cover over-allotments, if any, (iii) up to 450,000 Units (the “Purchase Option Units”) representing 450,000 shares of Common Stock and 450,000 Warrants (to purchase 450,000 shares of Common
Stock), which the Underwriter will have the right to purchase (“Purchase Option”) for its own account or that of its designees, (iv) all shares of Common Stock and all Warrants issued as part of the Units, Over-Allotment Units and the
Purchase Option Units and (v) all shares of Common Stock issuable upon exercise of the Warrants included in the Units, Over-Allotment Units and Purchase Option Units. In addition, the Registration Statement relates to the re-sale by certain
individuals (the “Insiders”) of an aggregate of (A) 1,136,334 Warrants (to purchase 1,136,334 shares of Common Stock) (“Insider Warrants”) and (B) all shares of Common Stock issuable upon exercise of the Insider
Warrants.
We have examined such documents and considered such legal matters as we have deemed necessary and relevant as the basis for the
opinion set forth below. With respect to such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as
reproduced or certified copies, and the authenticity of the originals of those latter documents. As to questions of fact material to this opinion, we have, to the extent deemed appropriate, relied upon certain representations of certain officers and
employees of the Company.
Based upon the foregoing, we are of the opinion that:
1. The Units, the Over-Allotment Units, the Purchase Option Units, the Warrants and the Common Stock to be sold to the Underwriter, when issued and sold
in accordance with and in the manner described in the Registration Statement, will be duly authorized, validly issued, fully paid and non assessable.
2. The shares of Common Stock issuable upon exercise of the Insider Warrants to be sold to the Insiders, when issued and sold in accordance with and in the manner described in the Subscription Agreements between the
Company and such purchasers, and the Insider Warrants, will be duly authorized, validly issued, fully paid and non-assessable.
3. Each of the Purchase Option, the Insider Warrants and Warrants constitutes legal, valid and binding
obligations of the Company, enforceable against it in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent indemnification provisions contained such documents, if
any, may be limited by applicable federal or state law and consideration of public policy.
We are opining solely on all applicable
statutory provisions of Delaware corporate law, including the rules and regulations underlying those provisions, all applicable provisions of the Delaware Constitution and all applicable judicial and regulatory determinations. We hereby consent to
the use of this opinion as an exhibit to the Registration Statement, to the use of our name as your counsel and to all references made to us in the Registration Statement and in the Prospectus forming a part thereof. In giving this consent, we do
not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations promulgated thereunder.
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Very truly yours,
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/s/ Graubard Miller
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Exhibit 10.1
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
The undersigned
stockholder, officer and director of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public
offering of the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 14 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance
with the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, the undersigned will (i) cause the Trust Fund (as defined in the Letter of Intent) to be liquidated and
distributed to the holders of IPO Shares and (ii) take all reasonable actions within his power to cause the Company to liquidate as soon as reasonably practicable. The undersigned hereby waives any and all right, title, interest or claim of any
kind in or to any distribution of the Trust Fund and any remaining net assets of the Company as a result of such liquidation with respect to his Insider Shares (“Claim”) and hereby waives any Claim the undersigned may have in the future as
a result of, or arising out of, any contracts or agreements with the Company
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
and will not seek recourse against the Trust Fund for any reason whatsoever. In the event of the
liquidation of the Trust Fund, the undersigned agrees to indemnify and hold harmless the Company against any and all loss, liability, claims, 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, whether pending or threatened, or any claim whatsoever) which the Company may become subject as a result of any claim by any vendor or other person who is owed
money by the Company for services rendered or products sold or contracted for, or by any target business, but only to the extent necessary to ensure that such loss, liability, claim, damage or expense does not reduce the amount in the Trust Fund.
3. In order to minimize potential conflicts of interest which may arise from multiple affiliations, the undersigned agrees to present to
the Company for its consideration, prior to presentation to any other person or entity, 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 undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary and contractual obligations the undersigned might have.
4. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is affiliated
with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
5. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will
be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the consummation of the Business Combination; provided that commencing on the Effective Date, Crescendo Advisors II LLC
(“Related Party”), shall be allowed to charge the Company $7,500 per month, representing an allocable share of Related Party’s overhead, to compensate it for the Company’s use of Related Party’s offices, utilities and
personnel. Related Party and the undersigned shall also be entitled to reimbursement from the Company for their out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
6. Neither the undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a
finder’s fee or any other compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
7. The undersigned will escrow all of his Insider Shares acquired prior to the IPO until
the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent acceptable to the Company.
8. The undersigned agrees to be the Chairman of the Board, Chief Executive Officer and President of the Company until the earlier of the consummation by
the Company of a Business Combination or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and EBC and attached hereto as Exhibit A is true and accurate in all respects, does not omit any
material information with respect to the undersigned’s background and contains all of the information required to be disclosed pursuant to Item 401 of Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s
Questionnaire furnished to the Company and EBC and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities
in any jurisdiction;
(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating
to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities
license or registration denied, suspended or revoked.
9. The undersigned has full right and power, without violating any agreement by
which he is bound, to enter into this letter agreement and to serve as Chairman of the Board, Chief Executive Officer and President of the Company.
10. The undersigned hereby waives his right to exercise conversion rights with respect to any shares of the Company’s common stock owned or to be owned by the undersigned, directly or indirectly, and agrees that he will not seek
conversion with respect to such shares in connection with any vote to approve a Business Combination.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
11. The undersigned hereby agrees to not propose, or vote in favor of, an amendment to
the Company’s Certificate of Incorporation to extend the period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by the
undersigned, the undersigned hereby agrees to vote against such proposal. This paragraph may not be modified or amended under any circumstances.
12. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to EBC and its legal representatives or agents (including any investigative search firm retained by EBC) any information they
may have about the undersigned’s background and finances (“Information”). Neither EBC nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information and the
undersigned hereby releases them from liability for any damage whatsoever in that connection.
13. This letter 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 undersigned hereby
(i) agrees that any action, proceeding or claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of New York of the United States of
America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum
and (iii) irrevocably agrees to appoint Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for any reason such agent is unable
to act as such, the undersigned will promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either party to serve process in any
other manner permitted by law.
14. As used herein, (i) a “Business Combination” shall mean an acquisition by merger,
capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to the IPO;
(iii) “Insider Shares” shall mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the Company’s IPO.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
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Eric S. Rosenfeld
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Print Name of Insider
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/s/ Eric S. Rosenfeld
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Signature
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Exhibit A
Eric S. Rosenfeld
has been our chairman of the board, chief executive officer and president since our inception. Mr. Rosenfeld has been the chairman of the board, chief executive officer and president of Arpeggio Acquisition
Corporation, an OTC Bulletin Board-listed blank check company formed to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business, since its inception in April 2004.
Mr. Rosenfeld has been the President and Chief Executive Officer of Crescendo Partners, L.P., a New York-based investment firm, since its formation in November 1998. He has also been the Senior Managing Member of Crescendo Advisors II LLC, the
entity providing us with general and administrative services, since its formation in August 2000. Prior to forming Crescendo Partners, Mr. Rosenfeld had been Managing Director at CIBC Oppenheimer and its predecessor company
Oppenheimer & Co., Inc. since 1985. He was also Chairman of the Board of Spar Aerospace Limited, a company that provides repair and overhaul services for aircraft and helicopters used by governments and commercial airlines, from May 1999
through November 2001, until its sale to L-3 Communications. He served as a director of Hip Interactive, a Toronto Stock Exchange-listed company that distributes and develops electronic entertainment products, from November 2004 until July 2005.
Mr. Rosenfeld also served as a director of AD OPT Technologies Inc., which was a Toronto Stock Exchange-listed company from April 2003 to November 2004, when it was acquired by Kronos Inc. Mr. Rosenfeld also served as a director and head
of the special committee of Pivotal Corporation, a Canadian based customer relations management software company that was sold to chinadotcom in February 2004. Mr. Rosenfeld is currently Chairman of the Board of CPI Aerostructures, Inc., an
American Stock Exchange-listed company engaged in the contract production of structural aircraft parts principally for the United States Air Force and other branches of the U.S. armed forces. He became Chairman in January 2005 and a director in
April 2003. He has been the Chairman of the Board of Computer Horizons Corp., a Nasdaq listed company, providing IT professional services with a concentration in sourcing and managed services since October 2005. He has been a director of Sierra
Systems Group, Inc., a Toronto Stock Exchange-listed information technology, management consulting and systems integration firm based in Canada since October 2003, a director of Emergis Inc., a Toronto Stock Exchange-listed company that enables the
electronic processing of transactions in the finance and healthcare industries, since July 2004, and was a director of Geac Computer Corporation Limited, a Toronto Stock Exchange and Nasdaq listed software company that was recently acquired by
another company, from October 2005 through March 2006. Mr. Rosenfeld is a regular guest lecturer at Columbia Business School and has served on numerous panels at Queen’s University Business Law School Symposia, McGill Law School, the World
Presidents’ Organization and the Value Investing Congress. He is a faculty member at the Director’s College. He has also been a regular guest host on CNBC. Mr. Rosenfeld received an A.B. in economics from Brown University and an
M.B.A. from the Harvard Business School.
Exhibit 10.2
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
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Re:
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Initial Public Offering
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Gentlemen:
The undersigned stockholder, officer and director of Rhapsody Acquisition Corp. (“Company”), in consideration
of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public offering of the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees
as follows (certain capitalized terms used herein are defined in paragraph 14 hereof):
1. If the Company solicits approval of its
stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance with the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business Combination within 24 months from the effective date (“Effective Date”) of the
registration statement relating to the IPO, the undersigned will (i) cause the Trust Fund (as defined in the Letter of Intent) to be liquidated and distributed to the holders of IPO Shares and (ii) take all reasonable actions within his
power to cause the Company to liquidate as soon as reasonably practicable. The undersigned hereby waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Fund and any remaining net assets of the Company
as a result of such liquidation with respect to his Insider Shares (“Claim”) and hereby waives any Claim the undersigned may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not
seek recourse against the Trust Fund for any reason whatsoever.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
3. In order to minimize potential conflicts of interest which may arise from multiple
affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, 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 undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary and contractual obligations the undersigned might have.
4. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is
affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
5. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will
be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the consummation of the Business Combination; provided that the undersigned shall be entitled to reimbursement from the
Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
6. Neither the
undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the
undersigned or any Affiliate of the undersigned originates a Business Combination.
7. The undersigned will escrow all of his Insider
Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent
acceptable to the Company.
8. The undersigned agrees to be the Secretary and a Director of the Company until the earlier of the
consummation by the Company of a Business Combination or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and EBC and attached hereto as Exhibit A is true and accurate in all respects, does not
omit any material information with respect to the
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
undersigned’s background and contains all of the information required to be disclosed pursuant to
Item 401 of Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire furnished to the Company and EBC and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned
represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or
order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction;
(b) he has
never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not
currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities
or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked.
9. The
undersigned has full right and power, without violating any agreement by which he is bound, to enter into this letter agreement and to serve as Secretary and a Director of the Company.
10. The undersigned hereby waives his right to exercise conversion rights with respect to any shares of the Company’s common stock owned or to be
owned by the undersigned, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection with any vote to approve a Business Combination.
11. The undersigned hereby agrees to not propose, or vote in favor of, an amendment to the Company’s Certificate of Incorporation to extend the
period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by the undersigned, the undersigned hereby agrees to vote against such
proposal. This paragraph may not be modified or amended under any circumstances.
12. The undersigned authorizes any employer, financial
institution, or consumer credit reporting agency to release to EBC and its legal representatives or agents (including any investigative search firm retained by EBC) any information they may have about the undersigned’s background and finances
(“Information”). Neither EBC nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information and the undersigned hereby releases them from liability for any damage
whatsoever in that connection.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
13. This letter 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 undersigned hereby (i) agrees that any action, proceeding or
claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of New York of the United States of America for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum and (iii) irrevocably agrees to appoint
Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for any reason such agent is unable to act as such, the undersigned will
promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either party to serve process in any other manner permitted by law.
14. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or
stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; (iii) “Insider Shares” shall
mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the Company’s IPO.
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Arnaud Ajdler
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Print Name of Insider
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/s/ Arnaud Ajdler
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Signature
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Exhibit A
Arnaud Ajdler
has been our secretary and a member of our board of directors since our inception. He has also served as the chief financial officer and secretary and a member of the board of directors of Arpeggio Acquisition
Corporation since its inception in April 2004. Since October 2005, Mr. Ajdler is also assistant to the chairman of the board and a board observer to Computer Horizon Corp., a NASDAQ listed company. Mr. Ajdler has been a Managing Director
of Crescendo Partners, L.P., a Delaware limited partnership, since December 2005, a Senior Vice President from December 2004 to December 2005 and an investment analyst from September 2003 to December 2004. From January 2000 to July 2001, he worked
as a management consultant at Mercer Management Consulting, an international strategy consulting firm, before completing his M.B.A. at Harvard Business School in June 2003. He also worked as an investment analyst at Tilson Capital, a New York-based
hedge fund, from July to September 2003, as an investment banker at Deutsche Bank, an international financial service provider, from June to August 2002, and as a management consultant at the Boston Consulting Group from June to August 1999.
Mr. Ajdler received a B.S. in engineering from the Free University of Brussels, Belgium, an S.M. in Aeronautics from the Massachusetts Institute of Technology and an M.B.A from the Harvard Business School.
Exhibit 10.3
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
The undersigned
stockholder and director of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public offering of
the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 14 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance
with the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, the undersigned will (i) cause the Trust Fund (as defined in the Letter of Intent) to be liquidated and
distributed to the holders of IPO Shares and (ii) take all reasonable actions within his power to cause the Company to liquidate as soon as reasonably practicable. The undersigned hereby waives any and all right, title, interest or claim of any
kind in or to any distribution of the Trust Fund and any remaining net assets of the Company as a result of such liquidation with respect to his Insider Shares (“Claim”) and hereby waives any Claim the undersigned may have in the future as
a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
3. In order to minimize potential conflicts of interest which may arise from multiple
affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, 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 undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary and contractual obligations the undersigned might have.
4. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is
affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
5. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will
be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the consummation of the Business Combination; provided that the undersigned shall be entitled to reimbursement from the
Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
6. Neither the
undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the
undersigned or any Affiliate of the undersigned originates a Business Combination.
7. The undersigned will escrow all of his Insider
Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent
acceptable to the Company.
8. The undersigned agrees to be a Director of the Company until the earlier of the consummation by the Company
of a Business Combination or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and EBC and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material
information with respect to the undersigned’s background and contains all of the information required to be disclosed pursuant to Item 401 of
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire
furnished to the Company and EBC and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities
in any jurisdiction;
(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating
to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities
license or registration denied, suspended or revoked.
9. The undersigned has full right and power, without violating any agreement by
which he is bound, to enter into this letter agreement and to serve as a director of the Company.
10. The undersigned hereby waives his
right to exercise conversion rights with respect to any shares of the Company’s common stock owned or to be owned by the undersigned, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection
with any vote to approve a Business Combination.
11. The undersigned hereby agrees to not propose, or vote in favor of, an amendment to
the Company’s Certificate of Incorporation to extend the period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by the
undersigned, the undersigned hereby agrees to vote against such proposal. This paragraph may not be modified or amended under any circumstances.
12. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to EBC and its legal representatives or agents (including any investigative search firm retained by EBC) any information they
may have about the undersigned’s background and finances (“Information”). Neither EBC nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information and the
undersigned hereby releases them from liability for any damage whatsoever in that connection.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
13. This letter 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 undersigned hereby (i) agrees that any action, proceeding or
claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of New York of the United States of America for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum and (iii) irrevocably agrees to appoint
Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for any reason such agent is unable to act as such, the undersigned will
promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either party to serve process in any other manner permitted by law.
14. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or
stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; (iii) “Insider Shares” shall
mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the Company’s IPO.
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Leonard B. Schlemm
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|
Print Name of Insider
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/s/ Leonard B. Schlemm
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Signature
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Exhibit A
Leonard B. Schlemm
has been a member of our board of directors since our inception. He has been chairman of Sila Holdings, a Cyprus holding company which owns one of the largest chains of fitness centers in Russia, since March 1997
and the president of The Atwater Club, a private racquet club in Montreal, since February 2002. He also served as chairman of the board of AD OPT Technologies from November 2002 until April 2004. From November 1999 until its merger with Netpulse
Communications and E-Zone Networks in November 2000, he served as chairman of the board of Xystos Media Networks, an interactive media company with three million users under long-term contract. Mr. Schlemm was a co-founder of 24 Hour Fitness,
one of the world’s largest privately owned and operated fitness center chains and was its chairman from September 1986 until July 1997. From June 1996 to January 1999, Mr. Schlemm served as a member of the board of directors of Forza
Limited, a European fitness equipment distribution company. Mr. Schlemm has been a member of the board of directors of Arpeggio Acquisition Corporation since its inception in April 2004. Mr. Schlemm received a Bachelor of Commerce degree
from McGill University (great distinction) and an M.B.A. from Harvard University (with distinction). He also received his Chartered Accountant designation in Canada in 1975.
Exhibit 10.4
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
The undersigned
stockholder and director of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public offering of
the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 14 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance
with the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, the undersigned will (i) cause the Trust Fund (as defined in the Letter of Intent) to be liquidated and
distributed to the holders of IPO Shares and (ii) take all reasonable actions within his power to cause the Company to liquidate as soon as reasonably practicable. The undersigned hereby waives any and all right, title, interest or claim of any
kind in or to any distribution of the Trust Fund and any remaining net assets of the Company as a result of such liquidation with respect to his Insider Shares (“Claim”) and hereby waives any Claim the undersigned may have in the future as
a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
3. In order to minimize potential conflicts of interest which may arise from multiple
affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, 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 undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary and contractual obligations the undersigned might have.
4. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is
affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
5. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will
be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the consummation of the Business Combination; provided that the undersigned shall be entitled to reimbursement from the
Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
6. Neither the
undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the
undersigned or any Affiliate of the undersigned originates a Business Combination.
7. The undersigned will escrow all of his Insider
Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent
acceptable to the Company.
8. The undersigned agrees to be a Director of the Company until the earlier of the consummation by the Company
of a Business Combination or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and EBC and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material
information with respect to the undersigned’s background and contains all of the information required to be disclosed pursuant to Item 401 of
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire
furnished to the Company and EBC and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities
in any jurisdiction;
(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating
to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities
license or registration denied, suspended or revoked.
9. The undersigned has full right and power, without violating any agreement by
which he is bound, to enter into this letter agreement and to serve as a director of the Company.
10. The undersigned hereby waives his
right to exercise conversion rights with respect to any shares of the Company’s common stock owned or to be owned by the undersigned, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection
with any vote to approve a Business Combination.
11. The undersigned hereby agrees to not propose, or vote in favor of, an amendment to
the Company’s Certificate of Incorporation to extend the period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by the
undersigned, the undersigned hereby agrees to vote against such proposal. This paragraph may not be modified or amended under any circumstances.
12. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to EBC and its legal representatives or agents (including any investigative search firm retained by EBC) any information they
may have about the undersigned’s background and finances (“Information”). Neither EBC nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information and the
undersigned hereby releases them from liability for any damage whatsoever in that connection.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
13. This letter 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 undersigned hereby (i) agrees that any action, proceeding or
claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of New York of the United States of America for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum and (iii) irrevocably agrees to appoint
Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for any reason such agent is unable to act as such, the undersigned will
promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either party to serve process in any other manner permitted by law.
14. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or
stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; (iii) “Insider Shares” shall
mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the Company’s IPO.
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Jon Bauer
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|
Print Name of Insider
|
|
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/s/ Jon Bauer
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Signature
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Exhibit A
Jon Bauer
has been a member of our board of directors since our inception. Since May 1995, Mr. Bauer has been the managing member and chief investment officer of Contrarian Capital Management, a multi-strategy distressed
securities money management firm. From July 1986 to May 1995, he was managing director at Oppenheimer & Co., Inc. where he founded the High Yield Department. Mr. Bauer has been a member of the board of directors of Arpeggio Acquisition
Corporation since its inception in April 2004. Mr. Bauer received a B.A. (with honors) from Rutgers College and an MBA from Harvard Business School.
Exhibit 10.5
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
The undersigned
stockholder and director of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public offering of
the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 14 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance
with the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, the undersigned will (i) cause the Trust Fund (as defined in the Letter of Intent) to be liquidated and
distributed to the holders of IPO Shares and (ii) take all reasonable actions within his power to cause the Company to liquidate as soon as reasonably practicable. The undersigned hereby waives any and all right, title, interest or claim of any
kind in or to any distribution of the Trust Fund and any remaining net assets of the Company as a result of such liquidation with respect to his Insider Shares (“Claim”) and hereby waives any Claim the undersigned may have in the future as
a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
3. In order to minimize potential conflicts of interest which may arise from multiple
affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, 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 undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary and contractual obligations the undersigned might have.
4. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is
affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
5. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will
be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the consummation of the Business Combination; provided that the undersigned shall be entitled to reimbursement from the
Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
6. Neither the
undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the
undersigned or any Affiliate of the undersigned originates a Business Combination.
7. The undersigned will escrow all of his Insider
Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent
acceptable to the Company.
8. The undersigned agrees to be a Director of the Company until the earlier of the consummation by the Company
of a Business Combination or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and EBC and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material
information with respect to the undersigned’s background and contains all of the information required to be disclosed pursuant to Item 401 of
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire
furnished to the Company and EBC and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities
in any jurisdiction;
(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating
to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities
license or registration denied, suspended or revoked.
9. The undersigned has full right and power, without violating any agreement by
which he is bound, to enter into this letter agreement and to serve as a director of the Company.
10. The undersigned hereby waives his
right to exercise conversion rights with respect to any shares of the Company’s common stock owned or to be owned by the undersigned, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection
with any vote to approve a Business Combination.
11. The undersigned hereby agrees to not propose, or vote in favor of, an amendment to
the Company’s Certificate of Incorporation to extend the period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by the
undersigned, the undersigned hereby agrees to vote against such proposal. This paragraph may not be modified or amended under any circumstances.
12. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to EBC and its legal representatives or agents (including any investigative search firm retained by EBC) any information they
may have about the undersigned’s background and finances (“Information”). Neither EBC nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information and the
undersigned hereby releases them from liability for any damage whatsoever in that connection.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
13. This letter 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 undersigned hereby (i) agrees that any action, proceeding or
claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of New York of the United States of America for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum and (iii) irrevocably agrees to appoint
Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for any reason such agent is unable to act as such, the undersigned will
promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either party to serve process in any other manner permitted by law.
14. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or
stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; (iii) “Insider Shares” shall
mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the Company’s IPO.
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Colin D. Watson
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|
Print Name of Insider
|
|
|
|
/s/ Colin D. Watson
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Signature
|
Exhibit A
Colin D. Watson
has been a member of our board of directors since our inception. From November 2003 through December 2004, Mr. Watson had been president and chief executive officer of Vector Aerospace Corporation, a company
engaged in the aviation repair and overhaul industry. He is also a director of Louisiana-Pacific Corporation, Rogers Communications, Great Lakes Carbon, B Split 11 Corporation, Cygnal Technologies Corporation, Northstar Aeropsace and Vector
Aerospace. From April 1996 until January 2002, Mr. Watson served in various positions with Spar Aerospace. In December 2001, he retired from the office of vice-chairman of Spar Aerospace, a position he had held since January 2001. From January
2000 to December 2000, he was vice-chairman and chief executive officer of Spar Aerospace and from April 1996 until December 1999, he was its president and chief executive officer. From April 1974 to April 1996, Mr. Watson was president and
chief executive officer of Rogers Cable TV, one of Canada’s largest cable providers, and a director of Rogers Communications Inc. as well as director, president and chief executive officer of Rogers Cable TV. Mr. Watson is a member of the
Chairman’s Advisory Council of Harbourfront Centre and Sunnybrook Foundation, respectively, and is a past Chairman of the Toronto Film Festival. Mr. Watson has been a member of the board of directors of Arpeggio Acquisition Corporation
since its inception in April 2004. Mr. Watson received a Ba.Sc. (Mechanical Engineering) from UBC and an MBA from the Richard Ivey School of Business at the University of Western Ontario.
Exhibit 10.6
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
The undersigned
stockholder and officer of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public offering of the
securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 14 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance
with the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, the undersigned will (i) cause the Trust Fund (as defined in the Letter of Intent) to be liquidated and
distributed to the holders of IPO Shares and (ii) take all reasonable actions within his power to cause the Company to liquidate as soon as reasonably practicable. The undersigned hereby waives any and all right, title, interest or claim of any
kind in or to any distribution of the Trust Fund and any remaining net assets of the Company as a result of such liquidation with respect to his Insider Shares (“Claim”) and hereby waives any Claim the undersigned may have in the future as
a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
3. In order to minimize potential conflicts of interest which may arise from multiple affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, 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 undersigned ceases to be an officer of the Company, subject to any
pre-existing fiduciary and contractual obligations the undersigned might have.
4. The undersigned acknowledges and agrees that the Company
will not consummate any Business Combination which involves a company which is affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to EBC that the business
combination is fair to the Company’s stockholders from a financial perspective.
5. Neither the undersigned, any member of the family
of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the consummation of the Business
Combination; provided that the undersigned shall be entitled to reimbursement from the Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
6. Neither the undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a
finder’s fee or any other compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.
7. The undersigned will escrow all of his Insider Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a
Business Combination subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent acceptable to the Company.
8. The undersigned agrees to be the Chief Financial Officer of the Company until the earlier of the consummation by the Company of a Business Combination
or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and EBC and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material information with respect to the
undersigned’s background and contains all of the information required to be disclosed
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
pursuant to
Item 401 of Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire furnished to the Company and EBC and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned
represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or
order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction;
(b) he has
never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not
currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities
or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked.
9. The
undersigned has full right and power, without violating any agreement by which he is bound, to enter into this letter agreement and to serve as Chief Financial Officer of the Company.
10. The undersigned hereby waives his right to exercise conversion rights with respect to any shares of the Company’s common stock owned or to be
owned by the undersigned, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection with any vote to approve a Business Combination.
11. The undersigned hereby agrees to not propose, or vote in favor of, an amendment to the Company’s Certificate of Incorporation to extend the
period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by the undersigned, the undersigned hereby agrees to vote against such
proposal. This paragraph may not be modified or amended under any circumstances.
12. The undersigned authorizes any employer, financial
institution, or consumer credit reporting agency to release to EBC and its legal representatives or agents (including any investigative search firm retained by EBC) any information they may have about the undersigned’s background and finances
(“Information”). Neither EBC nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information and the undersigned hereby releases them from liability for any damage
whatsoever in that connection.
Rhapsody Acquisition Corp.
EarlyBirdCapital, Inc.
May 30, 2006
13. This letter 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 undersigned hereby (i) agrees that any action, proceeding or claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the
courts of the State of New York of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction
and that such courts represent an inconvenient forum and (iii) irrevocably agrees to appoint Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in
any Proceeding. If for any reason such agent is unable to act as such, the undersigned will promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will
affect the right of either party to serve process in any other manner permitted by law.
14. As used herein, (i) a “Business
Combination” shall mean an acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of
the Company immediately prior to the IPO; (iii) “Insider Shares” shall mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common
Stock issued in the Company’s IPO.
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David Sgro
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Print Name of Insider
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/s/ David Sgro
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Signature
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Exhibit A
David D. Sgro, CFA
has been our chief financial officer since our inception. Mr. Sgro has been a Vice President of Crescendo Partners, L.P., a Delaware limited partnership, since December 2005 and an investment analyst from
May 2005 to December 2005. From June 1998 to May 2003, he worked as an analyst and then senior analyst at Management Planning, Inc., a firm engaged in the valuation of privately held companies. Simultaneously, Mr. Sgro worked as an
associate with MPI Securities, Management Planning, Inc.’s boutique investment banking affiliate. From June 2004 to August 2004, Mr. Sgro worked as an analyst at Brandes Investment Partners. Mr. Sgro received a B.S. in
Finance from The College of New Jersey and an M.B.A. from Columbia Business School. In 2001, he became a Chartered Financial Analyst (CFA) Charterholder.
Exhibit 10.7
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
Greg Monahan
(“Stockholder”), a stockholder of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial
public offering of the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 12 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, Stockholder will vote all Insider Shares owned by it in accordance with
the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, Stockholder will vote all Insider Shares owned by him in favor of the Company’s decision to liquidate.
Stockholder hereby waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Fund (as defined in the Letter of Intent) and any remaining net assets of the Company as a result of such liquidation with
respect to his Insider Shares (“Claim”) and hereby waives any Claim he may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason
whatsoever.
3. Stockholder acknowledges and agrees that the Company will not consummate any Business Combination which involves a company
which is affiliated
with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably
acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
4. Neither
Stockholder, any member of the family of Stockholder, nor any affiliate of Stockholder (“Affiliate”) will be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the
consummation of the Business Combination; provided that Stockholder shall be entitled to reimbursement from the Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
5. Neither Stockholder, any member of the family of Stockholder, nor any Affiliate will be entitled to receive or accept a finder’s fee or any other
compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.
6. Stockholder will escrow all of his Insider Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement
which the Company will enter into with the undersigned and an escrow agent acceptable to the Company.
7. Stockholder’s Questionnaire
furnished to the Company and EBC and annexed as Exhibit A hereto is true and accurate in all respects. Stockholder represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities
in any jurisdiction;
(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating
to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities
license or registration denied, suspended or revoked.
8. Stockholder has full right and power, without violating any agreement by which he
is bound, to enter into this letter agreement.
9. Stockholder hereby waives his right to exercise conversion rights with respect to any
shares of the Company’s common stock owned by him, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection with any vote to approve a Business Combination.
10. Stockholder hereby agrees to not propose, or vote in favor of, an amendment to the Company’s
Certificate of Incorporation to extend the period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by Stockholder, Stockholder
hereby agrees to vote against such proposal. This paragraph may not be modified or amended under any circumstances.
11. This letter
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. Stockholder hereby (i) agrees that any action, proceeding or claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of
New York of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum and (iii) irrevocably agrees to appoint Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for
any reason such agent is unable to act as such, Stockholder will promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either
party to serve process in any other manner permitted by law.
12. As used herein, (i) a “Business Combination” shall mean an
acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to
the IPO; (iii) “Insider Shares” shall mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the
Company’s IPO.
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Greg Monahan
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Print Name of Insider
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/s/ Greg Monahan
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Signature
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Exhibit 10.8
May 30, 2006
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
EarlyBirdCapital, Inc.
275 Madison Avenue
Suite 1203
New York, New York 10016
Re:
Initial Public Offering
Gentlemen:
Joel Greenblatt
(“Stockholder”), a stockholder of Rhapsody Acquisition Corp. (“Company”), in consideration of EarlyBirdCapital, Inc. (“EBC”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial
public offering of the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 12 hereof):
1. If the Company solicits approval of its stockholders of a Business Combination, Stockholder will vote all Insider Shares owned by it in accordance with
the majority of the votes cast by the holders of the IPO Shares.
2. In the event that the Company fails to consummate a Business
Combination within 24 months from the effective date (“Effective Date”) of the registration statement relating to the IPO, Stockholder will vote all Insider Shares owned by him in favor of the Company’s decision to liquidate.
Stockholder hereby waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Fund (as defined in the Letter of Intent) and any remaining net assets of the Company as a result of such liquidation with
respect to his Insider Shares (“Claim”) and hereby waives any Claim he may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason
whatsoever.
3. Stockholder acknowledges and agrees that the Company will not consummate any Business Combination which involves a company
which is affiliated
with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably
acceptable to EBC that the business combination is fair to the Company’s stockholders from a financial perspective.
4. Neither
Stockholder, any member of the family of Stockholder, nor any affiliate of Stockholder (“Affiliate”) will be entitled to receive and will not accept any compensation for services rendered to the Company prior to or in connection with the
consummation of the Business Combination; provided that Stockholder shall be entitled to reimbursement from the Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.
5. Neither Stockholder, any member of the family of Stockholder, nor any Affiliate will be entitled to receive or accept a finder’s fee or any other
compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.
6. Stockholder will escrow all of his Insider Shares acquired prior to the IPO until the first anniversary of the Company’s consummation of a Business Combination subject to the terms of a Stock Escrow Agreement
which the Company will enter into with the undersigned and an escrow agent acceptable to the Company.
7. Stockholder’s Questionnaire
furnished to the Company and EBC and annexed as Exhibit A hereto is true and accurate in all respects. Stockholder represents and warrants that:
(a) he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities
in any jurisdiction;
(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating
to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and
(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities
license or registration denied, suspended or revoked.
8. Stockholder has full right and power, without violating any agreement by which he
is bound, to enter into this letter agreement.
9. Stockholder hereby waives his right to exercise conversion rights with respect to any
shares of the Company’s common stock owned by him, directly or indirectly, and agrees that he will not seek conversion with respect to such shares in connection with any vote to approve a Business Combination.
10. Stockholder hereby agrees to not propose, or vote in favor of, an amendment to the Company’s
Certificate of Incorporation to extend the period of time in which the Company must consummate a Business Combination prior to its liquidation. Should such a proposal be put before stockholders other than through actions by Stockholder, Stockholder
hereby agrees to vote against such proposal. This paragraph may not be modified or amended under any circumstances.
11. This letter
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. Stockholder hereby (i) agrees that any action, proceeding or claim against him arising out of or relating in any way to this letter agreement (a “Proceeding”) shall be brought and enforced in the courts of the State of
New York of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive, (ii) waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum and (iii) irrevocably agrees to appoint Graubard Miller as agent for the service of process in the State of New York to receive, for the undersigned and on his behalf, service of process in any Proceeding. If for
any reason such agent is unable to act as such, Stockholder will promptly notify the Company and EBC and appoint a substitute agent acceptable to each of the Company and EBC within 30 days and nothing in this letter will affect the right of either
party to serve process in any other manner permitted by law.
12. As used herein, (i) a “Business Combination” shall mean an
acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to
the IPO; (iii) “Insider Shares” shall mean all of the shares of Common Stock of the Company acquired by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the
Company’s IPO.
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Joel Greenblatt
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Print Name of Insider
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/s/ Joel Greenblatt
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Signature
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Exhibit 10.9
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Agreement is made as of
, 2006 by and between Rhapsody Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust
Company (“Trustee”).
WHEREAS, the Company’s registration statement on Form S-1,
No. 333-
(“Registration Statement”), for its initial public offering of securities (“IPO”) has
been declared effective as of the date hereof (“Effective Date”) by the Securities and Exchange Commission (capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Registration Statement); and
WHEREAS, EarlyBirdCapital, Inc. (“EBC”) is acting as the representative of the underwriters in the IPO; and
WHEREAS, as described in the Registration Statement, and in accordance with the Company’s Certificate of Incorporation, $34,150,000.40 of the gross
proceeds of the IPO and sale of the Insider Units (as defined in the Registration Statement) ($39,278,250.40 if the underwriters over-allotment option is exercised in full) will be delivered to the Trustee to be deposited and held in a trust account
for the benefit of the Company and the holders of the Company’s common stock, par value $.0001 per share, issued in the IPO as hereinafter provided and in the event the Units are registered in Colorado, pursuant to Section 11-51-302(6) of
the Colorado Revised Statutes. A copy of the Colorado Statute 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 and the Company will be referred to together as the “Beneficiaries”); 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;
IT IS AGREED:
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 the terms of Section 11-51-302(6) of the Colorado Statute, in a segregated trust account (“Trust Account”) established 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 instruction of the Company, to invest and reinvest the Property in United States “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, and/or in any open ended investment company registered under the Investment Company Act of 1940 that holds itself out as a money
market fund selected by the Company meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4) of Rule 2a-7 promulgated under the Investment Company Act of 1940, as determined by the Company;
(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) Notify the Company 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 its returns;
(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 to do so;
(h) Render to the Company and to EBC, 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; and
(i) 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 affirmed by counsel for the Company, 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 record date established by the Company for such purpose. The Company shall set the record date to be
within ten days of the Last Date, or as soon thereafter as reasonably practicable and legally permissible. In all cases, the Trustee shall provide EBC with a copy of any Termination Letters and/or any other correspondence that it receives with
respect to any proposed withdrawal from the Trust Account promptly after it receives same. The provisions of this Section 1(i) may not be modified, amended or deleted under any circumstances.
(j) Upon written request from the Company, which may be given from time to time at any time after
, 2007 in a form substantially similar to that attached hereto as Exhibit C, the Trustee shall distribute to the Company
the amount requested by the Company to cover expenses related to investigating and selecting a target business, income and other taxes and other working capital requirements; provided, however, that (i) such distribution shall be only from
income collected on the Property and (ii) the aggregate amount of all such distributions shall not exceed $200,000.
2
2.
Agreements and Covenants of the Company
. The Company hereby agrees and covenants to:
(a) Give all instructions to the Trustee hereunder in writing, signed by the Company’s Chairman of the Board or President. In addition, except with
respect to its duties under paragraphs 1(i) and 1(j) above, 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 shall promptly confirm such instructions in writing;
(b)
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 unless such settlement includes a full release of the Company with respect to such Indemnified Claim. The Company may participate in such action with its own counsel;
(c) Pay the Trustee an initial acceptance fee of $1,000 and an annual fee of $3,000 (it being expressly understood that the Property shall not be used to
pay such fee). 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 fee (on a pro
rata basis) with respect to any period after the liquidation of the Trust Fund. The Company shall not be responsible for any other fees or charges of the Trustee except as may be provided in paragraph 2(b) hereof (it being expressly understood
that the Property shall not be used to make any payments to the Trustee under such paragraph);
(d) Provide to the Trustee any letter of
intent, agreement in principle or definitive agreement for a Business Combination that is executed on or prior to the First Date; and
(e)
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/or tabulating stockholder votes
(which firm may be the Trustee) verifying the vote of the Company’s stockholders regarding such Business Combination.
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3.
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 paragraph 1 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 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 paragraph 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; and
(h) Pay any taxes on behalf of the Trust Account.
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4.
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. At such time that 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 that the
Company does not locate a successor trustee within ninety days of receipt of the resignation notice from the Trustee, the Trustee may submit an application to have the Property deposited with any court in the State of New York or 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; or
(b) At such time that the Trustee has completed the liquidation of the Trust Account in accordance with the provisions of paragraph 1(i) hereof, and distributed the Property in accordance with the provisions of the Termination Letter, this
Agreement shall terminate except with respect to Paragraph 2(b).
5.
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. Upon receipt of written instructions, the Trustee will confirm such instructions with an Authorized Individual at an Authorized Telephone Number listed on the attached Exhibit D. 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
conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. It may be executed in several original or facsimile counterparts, each one of which shall constitute an original, and together shall
constitute but one instrument.
(c) This Agreement contains the entire agreement and understanding of the parties hereto with respect to
the subject matter hereof. Except for Section 1(i) (which may not be amended under any circumstances), 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 EBC.
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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 City of New York, Borough of Manhattan, for
purposes of resolving any disputes hereunder.
(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:
Continental Stock
Transfer
& Trust Company
17 Battery Place
New York, New York 10004
Attn: Steven G. Nelson
Fax No.: (212) 509-5150
if to the Company, to:
Rhapsody Acquisition
Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Attn: Eric S. Rosenfeld
Fax No.: (
)
-
in either case with a copy to:
EarlyBirdCapital, Inc.
275 Madison Avenue, Suite 1203
New York, New
York 10016
Attn: David M. Nussbaum
Fax No.: (212) 269-3796
(f) This Agreement may not be assigned by the Trustee without the prior consent of the Company.
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(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.
(h) Each of the Company and the Trustee
hereby acknowledge that EBC is a third party beneficiary of this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Investment Management Trust Agreement as of the
date first written above.
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee
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By:
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Name:
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Title:
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RHAPSODY ACQUISITION CORP.
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By:
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Name:
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Title:
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8
EXHIBIT A
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[Letterhead of Company]
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[Insert date]
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Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New
York 10004
Attn: Steven Nelson
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Re:
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Trust Account No. 530-061538 Termination Letter
|
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between Rhapsody Acquisition Corp. (“Company”) and
Continental Stock Transfer & Trust Company (“Trustee”), dated as of
, 2006 (“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
[insert date]
. The Company shall notify you at least 48 hours in advance of the actual date of the consummation of the Business Combination
(“Consummation Date”).
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 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 and (b) the provisions of Section 11-51-302(6) and Rule 51-3.4 of the Colorado Statute have been met, and (ii) the Company shall deliver to you (a) [an affidavit] [a certificate] of
, which verifies the vote
of the Company’s stockholders in connection with the Business Combination and (b) 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 distributed after the Consummation
Date to the Company. 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 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.
9
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Very truly yours,
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RHAPSODY ACQUISITION CORP.
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By:
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Eric S. Rosenfeld, Chairman of the Board
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By:
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Arnaud Ajdler, Secretary
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cc: EarlyBirdCapital, Inc.
10
EXHIBIT B
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[Letterhead of Company]
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[Insert date]
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Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New
York 10004
Attn:
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Re:
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Trust Account No. 530-061538 Termination Letter
|
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between Rhapsody Acquisition Corp. (“Company”) and
Continental Stock Transfer & Trust Company (“Trustee”), dated as of
, 2006 (“Trust
Agreement”), this is to advise you that the Company has been unable to effect a Business Combination with a Target Company within the time frame specified in the Company’s Certificate of Incorporation, as described in the Company’s
prospectus relating to its IPO.
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 Colorado Statute have been met and (b) authorize you, to commence liquidation of the Trust Account. The Company will establish a record date for the purposes of determining the stockholders
entitled to receive their share of liquidation proceeds. The record date shall be within ten (10) days of the date of this letter or as soon thereafter as is reasonably practicable and legally permissible. You will notify the Company in writing
as to when all of the funds in the Trust Account will be available for immediate transfer (“Transfer Date”) in accordance with the terms of the Trust Agreement and the Certificate of Incorporation of the Company. You shall commence
distribution of such funds in accordance with the terms of the Trust Agreement and the Certificate of Incorporation of the Company and you shall oversee the distribution of the funds. Upon the distribution of all the funds in the Trust Account, your
obligations under the Trust Agreement shall be terminated.
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Very truly yours,
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RHAPSODY ACQUISITION CORP.
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By:
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Eric S. Rosenfeld, Chairman of the Board
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By:
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Arnaud Ajdler, Secretary
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cc: EarlyBirdCapital, Inc.
11
EXHIBIT C
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[Letterhead of Company]
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[Insert date]
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Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New
York 10004
Attn:
|
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Re:
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Trust Account No. 530- Termination Letter
|
Gentlemen:
Pursuant to paragraph 1(j) of the Investment Management Trust Agreement between Rhapsody Acquisition Corp. (“Company”) and
Continental Stock Transfer & Trust Company (“Trustee”), dated as of
, 2006 (“Trust
Agreement”), this is to advise you that the Company hereby requests that you deliver to the Company $
of the income earned on the Property as of the date hereof. The
Company needs such funds to cover its expenses relating to investigating and selecting a target business and other working capital requirements. In accordance with the terms of the Trust Agreement, you are hereby directed and authorized to transfer
(via wire transfer) such funds promptly upon your receipt of this letter to the Company’s operating account at:
[WIRE INSTRUCTION INFORMATION]
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Very truly yours,
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RHAPSODY ACQUISITION CORP.
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By:
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Eric S. Rosenfeld, Chairman of the Board
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By:
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Arnaud Ajdler, Secretary
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cc: EarlyBirdCapital, Inc.
12
EXHIBIT D
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AUTHORIZED INDIVIDUAL(S)
FOR TELEPHONE CALL BACK
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AUTHORIZED
TELEPHONE NUMBER(S)
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Company:
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Rhapsody Acquisition Corp.
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10 East 53
rd
Street, 35
th
Floor
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New York, New York 10022
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Attn: Eric S. Rosenfeld
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(212) 319-7676
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Trustee:
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Continental Stock Transfer
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& Trust Company
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17 Battery Place
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New York, New York 10004
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Attn: Steven G. Nelson, Chairman
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(212) 845-3200
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13
Exhibit 10.10
STOCK ESCROW AGREEMENT
STOCK ESCROW AGREEMENT, dated as of
, 2006 (“Agreement”), by and among RHAPSODY ACQUISITION CORP., a Delaware corporation (“Company”), ERIC S. ROSENFLED, ROSENFELD 1991 CHILDREN’S
TRUST, ARNAUD AJDLER, LEONARD B. SCHLEMM, JON BAUER, COLIN D. WATSON, JOEL GREENBLATT, DAVID SGRO and GREG MONAHAN (collectively “Initial Stockholders”) and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a New York corporation
(“Escrow Agent”).
WHEREAS, the Company has entered into an Underwriting Agreement, dated
, 2006 (“Underwriting Agreement”), with EarlyBirdCapital, Inc. (“EBC”) 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 (“Units”) of the Company. Each Unit consists of one share of the Company’s common stock, par value $.0001 per
share (“Common Stock”), and one Warrant, each Warrant to purchase one share of Common Stock, all as more fully described in the Company’s final Prospectus, dated
, 2006 (“Prospectus”) comprising part of the Company’s Registration Statement on Form S-1
(File No. 333-
) under the Securities Act of 1933, as amended (“Registration Statement”), declared effective on
, 2006 (“Effective Date”).
WHEREAS, the Initial
Stockholders have agreed as a condition of the sale of the Units to deposit their shares of Common Stock of the Company, as set forth opposite their respective names in Exhibit A attached hereto (collectively “Escrow Shares”), in escrow as
hereinafter provided.
WHEREAS, the Company and the Initial Stockholders desire that the Escrow Agent accept the Escrow Shares, in escrow,
to be held and disbursed as hereinafter provided.
IT IS AGREED:
1.
Appointment of Escrow Agent
. The Company and the Initial Stockholders 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 Shares
. On or before the Effective Date, each of the Initial Stockholders shall deliver to the Escrow Agent certificates representing his respective Escrow Shares, to be held and disbursed subject to the terms
and conditions of this Agreement. Each Initial Stockholder acknowledges that the certificate representing his Escrow Shares is legended to reflect the deposit of such Escrow Shares under this Agreement.
3.
Disbursement of the Escrow Shares
. The Escrow Agent shall hold the Escrow Shares until the first anniversary of the Company’s consummation
of a business combination (“Escrow Period”), on which date it shall, upon written instructions from each Initial Stockholder, disburse each of the Initial Stockholder’s Escrow Shares (and any applicable stock power) to such Initial
Stockholder; 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 Shares; provided further, however, 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 the 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 certificate, executed by the Chief Executive Officer of the Company, in form reasonably acceptable to the Escrow Agent, that such transaction is then being consummated, release the Escrow Shares to the Initial
Stockholders upon consummation of the transaction so that they can similarly participate. The Escrow Agent shall have no further duties hereunder after the disbursement or destruction of the Escrow Shares in accordance with this Section 3.
4.
Rights of Initial Stockholders in Escrow Shares
.
4.1
Voting Rights as a Stockholder
. Subject to the terms of the Insider Letter 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 Shares
. During the Escrow Period, all dividends payable in cash with respect to the Escrow Shares 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 Shares” 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 Shares except (i) by gift to a member of Initial Stockholder’s immediate family or to a trust, the beneficiary of which is an Initial Stockholder or a member of an Initial Stockholder’s immediate family, (ii) by virtue
of the laws of descent and distribution upon death of any Initial Stockholder, or (iii) pursuant to a qualified domestic relations order;
provided
,
however
, that such permissive 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 Stockholder transferring the Escrow Shares. During the Escrow Period, the Initial Stockholders
shall not pledge or grant a security interest in the Escrow Shares or grant a security interest in their rights under this Agreement.
4.4
Insider Letters
. Each of the Initial Stockholders has executed a letter agreement with EBC and the Company, dated as indicated on Exhibit A hereto, and which is filed as an exhibit to the Registration Statement (“Insider
Letter”), respecting the rights and obligations of such Initial Stockholder 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 Shares 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 Shares or it may deposit the Escrow Shares with the clerk of any appropriate court or it may retain the Escrow Shares 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 Shares 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. 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 Stockholders 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, the Escrow Shares 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 Shares with any court it
reasonably 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, without giving effect to conflicts of law
principles that would result in the application of the substantive laws of another jurisdiction.
6.2
Third Party Beneficiaries
.
Each of the Initial Stockholders hereby acknowledges that the Underwriters are third party beneficiaries of this Agreement and this Agreement may not be modified or changed without the prior written consent of EBC.
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
be mailed, certified or registered mail, or by private national courier service, return receipt requested, postage prepaid, and shall be deemed given when so delivered personally or, if mailed, two days after the date of mailing, as follows:
If to the Company, to:
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Attn: Chairman
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: Chairman
A copy of
any notice sent hereunder shall be sent to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: David Alan
Miller, Esq.
and:
EarlyBirdCapital, Inc.
275 Madison Avenue, Suite 1203
New York, New York 10016
Attn: David M.
Nussbaum, Chairman
and:
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: Robert J. Mittman, 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 the 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.
WITNESS the execution of this Agreement as of the date first above written.
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RHAPSODY ACQUISITION CORP.
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By:
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Name:
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Title:
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|
|
|
INITIAL STOCKHOLDERS:
|
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|
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Eric S. Rosenfeld
|
|
|
|
ROSEFNELD 1991 CHILDREN’S TRUST
|
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By:
|
|
|
|
Name:
|
|
|
|
Title:
|
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|
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|
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|
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Arnaud Ajdler
|
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|
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|
|
Leonard B. Schlemm
|
|
|
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|
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Jon Bauer
|
|
|
|
|
|
Colin D. Watson
|
|
|
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|
|
Joel Greenblatt
|
|
|
|
|
|
David Sgro
|
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|
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|
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Greg Monahan
|
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|
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY
|
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By:
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Name:
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Title:
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EXHIBIT A
|
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Name and Address of Initial Stockholder
|
|
Number
of Shares
|
|
Stock
Certificate Number
|
|
Date of
Insider Letter
|
|
Eric S. Rosenfeld
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York
10022
|
|
765,000
|
|
1
|
|
May 30, 2006
|
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|
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|
|
|
Rosenfeld 1991 Children’s Trust
c/o Eric S. Rosenfeld
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
|
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106,840
|
|
2
|
|
May 30, 2006
|
|
|
|
|
|
|
Arnaud Ajdler
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York
10022
|
|
50,632
|
|
3
|
|
May 30, 2006
|
|
|
|
|
|
|
Leonard B. Schlemm
The Atwater Club
3505 Avenue Atwater
Montreal, Quebec H3W 1Y2
|
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40,632
|
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4
|
|
May 30, 2006
|
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Jon Bauer
411 W. Putnam Ave., Ste 225
Greenwich, Connecticut 06830
|
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40,632
|
|
5
|
|
May 30, 2006
|
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Colin D. Watson
72 Chestnut Park Rd.
Toronto, Ontario, M4W1W8
|
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40,632
|
|
6
|
|
May 30, 2006
|
|
|
|
|
|
|
Joel Greenblatt
Gotham Capital V LLC
520 Madison Avenue, 32
nd
Floor
New York, New York 10022
|
|
40,632
|
|
7
|
|
May 30, 2006
|
|
|
|
|
|
|
David Sgro
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York
10022
|
|
20,000
|
|
8
|
|
May 30, 2006
|
|
|
|
|
|
|
Greg Monahan
c/o Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
|
|
20,000
|
|
9
|
|
May 30, 2006
|
Exhibit 10.11
RHAPSODY ACQUISITION CORP.
, 2006
Crescendo Advisors II LLC
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Gentlemen:
This letter will confirm our agreement that, commencing on the effective date (“Effective
Date”) of the registration statement for the initial public offering (“IPO”) of the securities of Rhapsody Acquisition Corp. (“RAC”) and continuing until the earlier of the consummation by RAC of a “Business
Combination” (as described in RAC’s IPO prospectus) or RAC’s liquidation (the “Termination Date”), Crescendo Advisors II LLC shall make available to RAC certain office and secretarial services as may be required by RAC from
time to time, situated at 10 East 53
rd
Street, 35
th
Floor, New York, New York 10022. In exchange therefore, RAC shall pay Crescendo Advisors II LLC the sum of $7,500 per month on the Effective Date and
continuing monthly thereafter until the Termination Date.
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Very truly yours,
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RHAPSODY ACQUISITION CORP.
|
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By:
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Name:
|
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Title:
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AGREED TO AND ACCEPTED BY:
|
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CRESCENDO ADVISORS II LLC
|
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By:
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Name:
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Title:
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Exhibit 10.12
PROMISSORY NOTE
|
|
|
|
|
$90,000
|
|
As of May 15, 2006
|
|
|
|
New York, New York
|
Rhapsody Acquisition Corp. (“Maker”) promises to pay to the order of Eric S. Rosenfeld
(“Payee”) the principal sum of Ninety Thousand Dollars and No Cents ($90,000) in lawful money of the United States of America, on the terms and conditions described below.
1.
Principal
. The principal balance of this Note shall be repayable on the earlier of (i) May 15, 2007 or (ii) the date on which
Maker consummates an initial public offering of its securities.
2.
Interest
. No interest shall accrue on the unpaid principal
balance of this Note.
3.
Application of Payments
. All payments shall be applied first to payment in full of any costs incurred in
the collection of any sum due under this Note, including (without limitation) reasonable attorneys’ fees, then to the payment in full of any late charges and finally to the reduction of the unpaid principal balance of this Note.
4.
Events of Default
. The following shall constitute Events of Default:
(a)
Failure to Make Required Payments
. Failure by Maker to pay the principal of this Note within five (5) business days following the date
when due.
(b)
Voluntary Bankruptcy, Etc.
The commencement by Maker of a voluntary case under the Federal Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency, reorganization, rehabilitation or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of Maker or for any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the failure of Maker generally to pay its debts as
such debts become due, or the taking of corporate action by Maker in furtherance of any of the foregoing.
(c)
Involuntary Bankruptcy,
Etc.
The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of maker in an involuntary case under the Federal Bankruptcy Code, as now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Maker or for any substantial part of its property, or ordering the winding-up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days.
5.
Remedies
.
(a) Upon the occurrence of an Event of Default specified in Section 4(a), Payee may, by written notice to Maker,
declare this Note to be due and payable, whereupon the principal amount of this Note, and all other amounts payable thereunder, shall become
immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.
(b) Upon the
occurrence of an Event of Default specified in Sections 4(b) and 4(c), the unpaid principal balance of, and all other sums payable with regard to, this Note shall automatically and immediately become due and payable, in all cases without any action
on the part of Payee.
6.
Waivers
. Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for
payment, demand, notice of dishonor, protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the terms of this Note, and all benefits that might accrue to Maker by
virtue of any present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption
from civil process, or extension of time for payment; and Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution issued hereon, may be sold upon any such writ in whole or
in part in any order desired by Payee.
7.
Unconditional Liability
. Maker hereby waives all notices in connection with the delivery,
acceptance, performance, default, or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Payee with respect to the payment or other provisions of
this Note, and agree that additional makers, endorsers, guarantors, or sureties may become parties hereto without notice to them or affecting their liability hereunder.
8.
Notices
. Any notice called for hereunder shall be deemed properly given if (i) sent by certified mail, return receipt requested, (ii) personally delivered, (iii) dispatched by any form of
private or governmental express mail or delivery service providing receipted delivery, (iv) sent by telefacsimile or (v) sent by e-mail, to the following addresses or to such other address as either party may designate by notice in
accordance with this Section:
If to Maker:
Rhapsody Acquisition Corp.
10 East 53
rd
Street
New York, New York 10022
Attn.: Chief Executive Officer
If to Payee:
Eric S. Rosenfeld
10 East
53
rd
Street
New York, New York 10022
Notice shall be deemed given on the earlier of (i) actual receipt by the receiving party, (ii) the date shown
on a telefacsimile transmission confirmation, (iii) the date on which an e-mail transmission was received by the receiving party’s on-line access provider (iv) the date reflected on a signed delivery receipt, or (vi) two
(2) Business Days following tender of delivery or dispatch by express mail or delivery service.
9.
Construction
. This Note
shall be construed and enforced in accordance with the domestic, internal law, but not the law of conflict of laws, of the State of New York.
10.
Severability
. Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed by its Chief Financial Officer the day and year
first above written.
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RHAPSODY ACQUISITION CORP.
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By:
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/s/ David Sgro
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Name:
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David Sgro
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Title:
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Chief Financial Officer
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Exhibit 10.13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this
“
Agreement
”) is entered into as of the
day of
, 2006, by and among
Rhapsody Acquisition Corp., a Delaware corporation (the “
Company
”) and the undersigned parties listed under Investor 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 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 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.
“
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 2.3.
“
Indemnified Party
” is defined in Section 4.3.
“
Indemnifying Party
” is defined in Section 4.3.
“
Insider Warrants
” means the Warrants being purchased privately by certain of the Investors simultaneously with the consummation
of the Company’s initial public offering.
“
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.
“
Register
,” “
Registered”
and “
Registration
” mean a registration 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 (i) all of the shares of Common Stock owned or held by Investors prior to the consummation of the Company’s initial public offering or (ii) all of
the Insider Warrants (and underlying shares of Common Stock) owned or held by Investors upon consummation of the Company’s initial public offering. 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
” means the date on which shares of Common Stock are disbursed from escrow pursuant to Section 3 of that certain Stock Escrow Agreement dated as of
, 2006 by and among the parties hereto and Continental Stock Transfer & Trust Company.
“
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.
“
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 the date that is (i) after the Company consummates a business combination with respect to the Insider Warrants (or underlying shares of Common Stock) or (ii) three months
prior to the Release Date with respect to all Registrable Securities (to the extent not previously registered by the Company pursuant to the preceding subclause (i)), the holders of a majority-in-interest of such Insider Warrants (or underlying
shares of Common Stock) or other Registrable 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 Insider Warrants (or
underlying shares of Common Stock) or other Registrable Securities, as the case may be (a “
Demand Registration
”). Any demand for a Demand Registration shall specify the number of shares 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, 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 under this Section 2.1.1 in respect of all Registrable Securities.
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 with respect thereto; provided, however, that 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, that 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
. 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 stockholders 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 that each such Person has requested
be included in such registration, regardless of the number of shares held by each such Person (such proportion is referred to herein as “
Pro Rata
”)) 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 or other securities registrable pursuant to the terms of the Unit
Purchase Option issued to EarlyBirdCapital, Inc. or its designees in connection with the Company’s initial public offering (the “
Unit Purchase Option
” and such registrable securities, the “
Option
Securities
”) as to which “piggy-back” registration has been requested by the holders thereof, Pro Rata, 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 or other securities 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.
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.
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.
2.2
Piggy-Back Registration
.
2.2.1.
Piggy-Back Rights
. If at any time on or after the date the Company consummates a business combination 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 stockholders of the Company for their account (or by the Company and by stockholders 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 stockholders, (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 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
. 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 stockholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any
such registration:
a) 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, comprised of Registrable Securities and 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, 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 and that can be sold without exceeding the Maximum Number of
Shares;
b) If the registration is a “demand” registration undertaken at the demand of holders of Option
Securities, (A) first, the shares of Common Stock or other securities for the account of the demanding persons, Pro Rata, 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 shares of Registrable Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof, that can be sold without exceeding the Maximum Number of
Shares; 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 pursuant to written contractual arrangements with such persons, that can be sold without exceeding the Maximum Number of Shares; and
c) If the registration is a “demand” registration undertaken at the demand of persons other than either the holders of
Registrable Securities or of Option Securities, (A) first, the shares of Common Stock or other securities 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), collectively the shares of Common Stock or other securities comprised of Registrable Securities and Option Securities, Pro Rata, as to
which registration has been requested pursuant to the terms hereof and of the Unit Purchase Option, as applicable, that can be sold without exceeding the Maximum Number of Shares; 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 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 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.
2.3
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 or other securities of the Company, if any, 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 2.3: (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 2.3 shall not be counted as Demand Registrations effected pursuant to Section 2.1.
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 or Vice Chairman 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 stockholders 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, that 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 paragraph 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.
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 stockholders, 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, 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 stockholders 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 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 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. The Company also shall indemnify any Underwriter of the Registrable Securities, their
officers, 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 selling holder and each other person, if any, who controls another selling holder or such underwriter within the meaning of the Securities 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, and shall reimburse the Company, its directors and officers, and each other selling holder or
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.
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
4.4.3. 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
. Except with respect to those securities issued or issuable upon exercise of that certain Unit Purchase Option to be issued to EarlyBirdCapital, Inc. or its designees in connection
with the Company’s initial public offering in
2006, the Company represents and warrants that 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. This Agreement and the provisions
hereof shall be binding upon and shall inure to the benefit of each of the parties, to EarlyBirdCapital, Inc. and its 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.
To the Company:
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Attn: Chief Executive Officer
with a copy to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York NY 10174
Attn: David Alan Miller, Esq.
To an Investor, to:
Eric S. Rosenfeld
Rosenfeld 1991
Children’s Trust
c/o Eric S. Rosenfeld
Rhapsody
Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Arnaud Ajdler
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Leonard B.
Schlemm
The Atwater Club
3505 Avenue Atwater
Montreal, Quebec H3W 1Y2
Jon Bauer
411 W. Putnam Ave., Ste 225
Greenwich, Connecticut 06830
Colin D. Watson
72 Chestnut Park Rd.
Toronto, Ontario, M4W1W8
Joel Greenblatt
Gotham Capital V LLC
520 Madison Avenue, 32
nd
Floor
New York, New York 10022
David Sgro
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
Greg Monahan
Rhapsody Acquisition Corp.
10 East 53
rd
Street, 35
th
Floor
New York, New York 10022
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 that is valid and enforceable.
6.5
Counterparts
. 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.
6.6
Entire Agreement
. This Agreement (including all agreements entered into
pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute 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. Notwithstanding the foregoing, any and all parties must obtain the written consent of
EarlyBirdCapital, Inc. to amend or modify this Agreement.
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.
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.
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RHAPSODY ACQUISITION CORP.
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By:
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INITIAL STOCKHOLDERS:
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Eric S. Rosenfeld
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Rosenfeld 1991 Children’s Trust
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By:
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Name:
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Title:
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Arnaud Ajdler
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Leonard B. Schlemm
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Jon Bauer
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Colin D. Watson
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Joel Greenblatt
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Gotham Capital V LLC
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By:
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Name:
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Title:
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Exhibit 10.14
Subscription Agreement
As of May 30, 2006
To the Board of Directors of
Rhapsody Acquisition Corp.:
Gentlemen:
The undersigned hereby subscribes for and agrees to purchase
Warrants
(“Insider Warrants”) at $1.10 per Insider Warrant, of Rhapsody Acquisition Corp. (the “Corporation”) for an aggregate purchase price of
$
(“Purchase Price”). The purchase and issuance of the Insider Warrants shall occur simultaneously with the consummation of the
Corporation’s initial public offering of securities (“IPO”) which is being underwritten by EarlyBirdCapital, Inc. (“EBC”). The Insider Warrants will be sold to the undersigned on a private placement basis and not part of the
IPO.
At least 24 hours prior to the effective date of the registration statement filed in connection with the IPO (“Registration
Statement”), the undersigned shall deliver the Purchase Price to Graubard Miller to hold in a non-interest bearing account until the Corporation consummates the IPO. Simultaneously with the consummation of the IPO, Graubard Miller shall deposit
the Purchase Price, without interest or deduction, into the trust fund (“Trust Fund”) established by the Corporation for the benefit of the Corporation’s public stockholders as described in the Corporation’s Registration
Statement, pursuant to the terms of an Investment Management Trust Agreement to be entered into between the Corporation and Continental Stock Transfer & Trust Company. In the event that the IPO is not consummated within 14 days of the
Purchase Price being delivered to Graubard Miller, Graubard Miller shall return the Purchase Price to the undersigned, without interest or deduction.
The undersigned represents and warrants that he has been advised that the Insider Warrants have not been registered under the Securities Act; that he is acquiring the Insider Warrants for his account for investment
purposes only; that he has no present intention of selling or otherwise disposing of the Insider Warrants in violation of the securities laws of the United States; that he is an “accredited investor” as defined by Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the “Securities Act”); and that he is familiar with the proposed business, management, financial condition and affairs of the Corporation.
Moreover, the undersigned agrees that he shall not sell or transfer the Insider Warrants until after the Corporation consummates a merger, capital stock
exchange, asset acquisition or other similar business combination with an operating business (“Business Combination”) and acknowledges that the certificates for such Insider Warrants shall contain a legend indicating such restriction on
transferability.
The Company hereby acknowledges and agrees that, in the event the Company calls its public Warrants for redemption
pursuant to that certain Warrant Agreement to be entered into by the Company and Continental Stock Transfer & Trust Company in connection with the Company’s IPO, the Company shall allow the undersigned to exercise any Insider Warrants
by surrendering such Insider Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Insider Warrants, multiplied by the difference
between the Warrant exercise price and the “Fair Market Value” (defined below) by (y) the Fair Market Value. The “Fair Market Value” shall mean the average reported last sale price of the Common Stock for the 10 trading days
ending on the third trading day prior to the date on which the notice of redemption is sent to holders of Warrants.
The terms of this agreement and the restriction on transfers with respect to the Insider Warrants may not
be amended without the prior written consent of EBC.
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Agreed to:
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Rhapsody Acquisition Corp.
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By:
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/s/ Eric S. Rosenfeld
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Name:
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Eric S. Rosenfeld
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Title:
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Chief Executive Officer
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Graubard Miller
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By:
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/s/ David Alan Miller
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Name:
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David Alan Miller
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Title:
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Managing Partner
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EarlyBirdCapital, Inc.
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By:
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/s/ Steven Levine
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Name:
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Steven Levine
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Title:
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Managing Director
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Rhapsody Acquisition Corp.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of
our report dated May 30, 2006 relating to the financial statements of Rhapsody Acquisition Corp. which is contained in that Prospectus. Our report contains an explanatory paragraph regarding uncertainties as to the ability of the Company to
continue as a going concern.
We also consent to the reference to us under the caption “Experts” in the
Prospectus.
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/s/ BDO Seidman, LLP
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BDO Seidman, LLP
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New York, New York
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June 2, 2006
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