AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 2005
FILE NO. 333-124712
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HEALTHCARE ACQUISITION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6770 20-2726770
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
2116 FINANCIAL CENTER
666 WALNUT STREET
DES MOINES, IOWA 50309
(515) 244-5746
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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MATTHEW P. KINLEY
2116 FINANCIAL CENTER
666 WALNUT STREET
DES MOINES, IOWA 50309
(515) 244-5746
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
STUART NEUHAUSER, ESQ. ALAN WOVSANIKER, ESQ.
ELLENOFF GROSSMAN & SCHOLE LLP STEVEN SKOLNICK, ESQ.
370 LEXINGTON AVENUE, 19TH FLOOR LOWENSTEIN SANDLER PC
NEW YORK, NEW YORK 10017 65 LIVINGSTON AVENUE
(212) 370-1300 ROSELAND, NEW JERSEY 07068
(973) 597-2500
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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. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |X|
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.
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CALCULATION OF REGISTRATION FEE
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITY TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE
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Units, each consisting of one share of Common Stock,
$.0001 par value, and one Warrant (2) ..................... 9,200,000 $ 8.00 $ 73,600,000 $ 8,663
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Shares of Common Stock included as part of the Units (2) .. 9,200,000 -- -- --(3)
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Warrants included as part of the Units (2) ................ 9,200,000 -- -- --(3)
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Shares of Common Stock underlying the Warrants included in
the Units (4) ............................................. 9,200,000 $ 6.00 $ 55,200,000 $ 6,497
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Representative's Unit Purchase Option ..................... 1 $ 100 $ 100 $ 0
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Units underlying the Representative's Unit Purchase Option
("Representative's Units")(4) ............................. 400,000 $10.00 $ 4,000,000 $ 471
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Shares of Common Stock included as part of the
Representative's Units(4) ................................. 400,000 -- -- --(3)
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Warrants included as part of the Representative's Units(4) 400,000 -- -- --(3)
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Shares of Common Stock underlying the Warrants included in
the Representative's Units(4) ............................. 400,000 $ 7.50 $ 3,000,000 $ 353
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Total ..................................................... $135,800,100 $15,984(5)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 1,200,000 Units and 1,200,000 shares of Common Stock and 1,200,000
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.
(3) No fee pursuant to Rule 457(g).
(4) Pursuant to Rule 416, there are also being registered such indeterminable
additional securities as may be issued as a result of the anti-dilution
provisions contained in the Warrants.
(5) $11,988 previously paid; $3,996 paid herewith.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, JULY 12, 2005
$64,000,000
HEALTHCARE ACQUISITION CORP.
8,000,000 UNITS
Healthcare Acquisition Corp. is a blank check company recently formed for
the purpose of acquiring, through a merger, capital stock exchange, asset
acquisition or other similar business combination, one or more domestic or
international assets or an operating business in the healthcare industry. We
do not have any specific merger, capital stock exchange, asset acquisition or
other business combination under consideration or contemplation and we have
not, nor has anyone on our behalf, contacted any potential 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 consists of:
o one share of our common stock; and
o 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 or ______________, 2006 [ONE YEAR FROM
THE DATE OF THIS PROSPECTUS], and will expire on ______________, 2009 [FOUR
YEARS FROM THE DATE OF THIS PROSPECTUS], or earlier upon redemption.
We have granted the underwriters a 45-day option to purchase up to 1,200,000
additional units solely to cover over-allotments, if any (over and above the
8,000,000 units referred to above). 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 Maxim Group LLC, the
representative of the underwriters, for $100, as additional compensation, an
option to purchase up to a total of 400,000 units at $10.00 per unit, with the
warrants issued as part of such units exercisable at $7.50 per share.
Otherwise, 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.
There is presently no public market for our units, common stock or warrants.
We have applied to have our units listed on the American Stock Exchange under
the symbol "HAQ.U", subject to official notice of listing. Once the
securities comprising the units begin separate trading, the common stock and
warrants will also be listed on the American Stock Exchange under the symbols
"HAQ" and "HAQ.WS", respectively. We cannot assure you, however, that
any of such securities will be or continue to be listed on the American Stock
Exchange. In the event that the securities are not listed on the American
Stock Exchange, we anticipate that the units will be quoted on the OTC
Bulletin Board but we cannot assure you that our securities will be so quoted
or, if quoted, will continue to be quoted.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 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 UNDERWRITING DISCOUNT PROCEEDS, BEFORE
OFFERING PRICE AND COMMISSIONS (1) EXPENSES, TO US
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Per unit $ 8.00 $ 0.64 $ 7.36
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Total $64,000,000 $5,120,000 $58,880,000
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(1) Includes a non-accountable expense allowance in the amount of 1% of the
gross proceeds, or $0.08 per unit ($640,000 in total) payable to Maxim
Group LLC, and also includes an additional underwriting discount in the
amount of 1% of the gross proceeds, or $0.08 per unit ($640,000 in total),
payable to Maxim Group LLC (including any units sold to cover
overallotments), payable upon consummation of a business combination.
Of the net proceeds we receive from this offering, $57,600,000 ($7.20 per
unit) will be deposited into a trust account at JP Morgan Chase NY Bank
maintained by Continental Stock Transfer & Trust Company, acting as trustee.
We are offering the units for sale on a firm-commitment basis. Maxim Group
LLC, acting as representative of the underwriters, expects to deliver our
securities to investors in the offering on or about ______________, 2005.
MAXIM GROUP LLC
__________________, 2005
THE INFORMATION IN THIS 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 IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary ...................................................... 1
Summary Financial Data .................................................. 7
Risk Factors ............................................................ 8
Use of Proceeds ......................................................... 21
Dilution ................................................................ 24
Capitalization .......................................................... 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 26
Proposed Business ....................................................... 28
Management .............................................................. 38
Principal Stockholders .................................................. 43
Certain Relationships and Related Transactions .......................... 45
Description of Securities ............................................... 47
Underwriting ............................................................ 51
Legal Matters ........................................................... 54
Experts ................................................................. 54
Where You Can Find Additional Information ............................... 55
Index to Financial Statements ........................................... F-1
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE 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.
i
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, references
to "we," "us" or "our company" refer to Healthcare Acquisition Corp. The term
"public stockholders" means the holders of common stock sold as part of the
units in this offering or in the open market, including any existing
stockholders to the extent that they purchase or acquire such shares. Unless
we tell you otherwise, the information in this prospectus assumes that the
underwriters will not exercise their over-allotment option. Additionally,
unless we tell you otherwise, the information in this prospectus has been
adjusted to give retroactive effect to a stock dividend of approximately
..333333 shares of common stock for each outstanding share of common stock on
July 8, 2005.
THE COMPANY
We are a blank check company organized under the laws of the State of
Delaware on April 25, 2005. We were formed to acquire, through a merger,
capital stock exchange, asset acquisition or other similar business
combination, one or more domestic or international assets or an operating
business in the healthcare industry. To date, our efforts have been limited to
organizational activities and we have not acquired any business operations.
The healthcare industry constitutes one of the largest segments of the
United States economy. According to the Centers for Medicare and Medicaid
Services, or CMS, healthcare expenditures have increased from $245.8 billion
in 1980 to a forecasted $1.9 trillion in 2005, representing a Compound Annual
Growth Rate, or CAGR, of 9%. Further, in 2003, approximately 64% of total
healthcare expenditures were spent on the following categories: hospital care
(31%), physician and clinical services (23%) and prescription drugs (10%). In
2003, healthcare expenditures totaled $1.7 trillion (or $5,800 per American)
and accounted for 15.3% of Gross Domestic Product, or GDP, which outpaced
overall economic growth by 3%. In the future, national health expenditures are
projected to reach $3.6 trillion by 2014, representing a CAGR of 7.4% over the
next ten years. Health spending is projected to reach 18.7% of GDP by 2014. We
anticipate the substantial growth in healthcare witnessed over the past 25
years should continue going forward. Therefore, we believe there will be
numerous acquisition targets within the healthcare sector.
While we may seek to effect business combinations with more than one target
business in the healthcare industry, our initial business combination must be
for assets or with a target business whose fair market value is at least equal
to 80% of our net assets at the time of such acquisition. Consequently, it is
likely that we will have the ability to effect only a single business
combination. As used in this prospectus, a "target business" shall include
assets or an operating business in the healthcare industry and a "business
combination" shall mean the acquisition by us of such assets or target
business. We do not have any specific merger, capital stock exchange, asset
acquisition or other business combination under consideration or contemplation
and we have not, nor has anyone on our behalf, contacted any potential target
business or had any discussions, formal or otherwise, with respect to such a
transaction. Moreover, we have not engaged or retained any agent or other
representative to identify or locate any suitable acquisition candidate for
us. Other than reviewing several industry reports, including those published
by CMS, in order to define the healthcare industry, neither we nor any of our
agents or affiliates has yet taken any measure, directly or indirectly, to
locate a target business. We will not enter into any business combination with
any affiliates of our initial stockholders, officers or directors.
Our officers and directors will not receive any compensation in this
offering other than reimbursement for out-of-pocket expenses incurred by them
on our behalf, which includes an aggregate of $175,000 in loans which they
made to us in April 2005. After the consummation of a business combination, if
any, to the extent they remain as officers of the resulting business, we
anticipate that they may enter into employment agreements, the terms of which
shall be negotiated and which we expect to be comparable to employment
agreements with other similarly-situated companies in the healthcare industry.
Further, after the consummation of a business combination, if any, to the
extent such persons remain as directors of the
1
resulting business, we anticipate that they will receive compensation
comparable to directors at other similarly-situated companies in the
healthcare industry.
In addition, we have agreed to pay Equity Dynamics, Inc., an affiliated
third party of which Mr. Pappajohn (our Chairman and Secretary) is the
President and principal stockholder, and Mr. Kinley (our President and
Treasurer) is a Senior Vice President, approximately $6,000 per month for
office space and certain additional general and administrative services. We
have also agreed to pay another affiliated third party, The Lan Group, of
which Dr. Schaffer (our Chief Executive Officer) is the sole owner,
approximately $1,500 per month for office space and certain additional general
and administrative services.
Our executive offices are located at 2116 Financial Center, 666 Walnut
Street, Des Moines, Iowa 50309, and our telephone number at that location is
(515) 244-5746.
THE OFFERING
SECURITIES OFFERED: 8,000,000 units, at $8.00 per unit, each
unit consisting of:
o one share of common stock; and
o one warrant
The units will begin trading on or
promptly after the date of this
prospectus. Each of the common stock and
warrants shall trade separately on the
90th day after the date of this
prospectus unless Maxim Group LLC
determines that an earlier date is
acceptable. Upon such separation, the
units will no longer trade. In no event
will Maxim Group LLC 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, including
an audited balance sheet, upon the
consummation of this offering, which is
anticipated to take place three business
days from the date of this prospectus.
The audited balance sheet will include
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.
COMMON STOCK:
Number outstanding before this
offering . . . . . . . . . . . . . 2,000,000 shares
Number to be outstanding after this
offering. . . . . . . . . . . . . . 10,000,000 shares
WARRANTS:
Number outstanding before this
offering . . . . . . . . . . . . . 0
Number to be outstanding after this
offering. . . . . . . . . . . . . . 8,000,000 warrants
Exercisability. . . . . . . . . . . . Each warrant is exercisable for one
share of common stock.
Exercise price. . . . . . . . . . . . $6.00 per share
2
Exercise period . . . . . . . . . . . The warrants will become exercisable on
the later of:
o the completion of a business
combination with a target
business, or
o _________________, 2006 [ONE YEAR
FROM THE DATE OF THIS PROSPECTUS]
The warrants will expire at 5:00 p.m.,
New York City time, on ________________,
2009 [FOUR YEARS FROM THE DATE OF THIS
PROSPECTUS] or earlier upon redemption.
Redemption. . . . . . . . . . . . . . We may redeem the outstanding warrants:
o in whole and not in part,
o at a price of $.01 per warrant
at any time after the warrants
become exercisable,
o upon a minimum of 30 days' prior
written notice of redemption, and
o 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.
We have established this last criterion
to provide warrant holders with a
premium to the initial warrant exercise
price as well as a degree of liquidity
to cushion the market reaction, if any,
to our redemption call. If the foregoing
conditions are satisfied and we call the
warrants for redemption, each warrant
holder shall then be entitled to
exercise his or her warrant prior to the
date scheduled for redemption, however,
there can be no assurance that the price
of the common stock will exceed the call
trigger price or the warrant exercise
price after the redemption call is made.
Management Warrant Purchase . . . . . John Pappajohn, our chairman and
secretary, or his designees, has agreed
to purchase up to $1,000,000 of our
warrants in the open market, at a price
per warrant not to exceed $1.20, within
three months of such warrants being
separately tradeable. These warrants
will not be sold by Mr. Pappajohn or his
designees until the consummation of a
business combination. Maxim Group LLC
has also agreed to purchase up to
$500,000 of our warrants in the open
market on similar terms; however, Maxim
Group LLC may sell their warrants prior
to the consummation of a business
combination.
PROPOSED AMERICAN STOCK EXCHANGE
SYMBOLS FOR OUR:
Units . . . . . . . . . . . . . . . . "HAQ.U"
Common Stock. . . . . . . . . . . . . "HAQ"
Warrants. . . . . . . . . . . . . . . "HAQ.WS"
3
Offering proceeds to be held
in trust . . . . . . . . . . . . . . $57,600,000 of the proceeds of this
offering ($7.20 per unit) will be placed
in a trust account at JP Morgan Chase NY
Bank maintained by Continental Stock
Transfer & Trust Company, pursuant to an
agreement to be signed on the date of
this prospectus. These proceeds will not
be released until the earlier of the
completion of a business combination or
our liquidation. Therefore, unless and
until a business combination is
consummated, the proceeds held in the
trust fund 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. These expenses may be
paid prior to a business combination
only from the net proceeds of this
offering not held in the trust fund
(initially, approximately $1,520,000
after the payment of the expenses
relating to this offering). It is
possible that we could use a portion of
the funds not in the trust account to
make a deposit, down payment or fund a
"no-shop" provision with respect to a
particular proposed business
combination. In the event we were
ultimately required to forfeit such
funds (whether as a result of our breach
of the agreement relating to such
payment or otherwise), we may not have a
sufficient amount of working capital
available outside of the trust account
to pay expenses related to finding a
suitable business combination without
securing additional financing. If we
were unable to secure additional
financing, we would most likely fail to
consummate a business combination in the
allotted time and would be forced to
liquidate.
None of the warrants may be exercised
until after the consummation of a
business combination and, thus, after
the proceeds of the trust fund have been
disbursed, the warrant exercise price
will be paid directly to us.
Stockholders must approve business
combination . . . . . . . . . . . . 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. 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 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 exercise their
conversion rights described below.
Voting against the business combination
alone will not result in conversion of a
stockholder's shares
4
into a pro rata share of the trust fund.
Such stockholder must have also
exercised its conversion rights
described below.
We will not enter into any business
combination with any affiliates of our
initial stockholders, officers or
directors.
Conversion rights for stockholders
voting to reject a business
combination . . . . . . . . . . . . Public stockholders voting against a
business combination will be entitled to
convert their stock into a pro rata
share of the trust fund, including any
interest earned on their portion of the
trust fund, if the business combination
is approved and completed. Public
stockholders that convert their stock
into their pro rata share of the trust
fund will continue to have the right to
exercise any warrants they may hold.
Because the initial per share conversion
price is $7.20 per share (plus any
interest), which is lower than the $8.00
per unit price paid in the offering and,
which may be lower than the market price
of the common stock on the date of the
conversion, there may be a disincentive
on the part of public stockholders to
exercise their conversion rights. The
term public stockholders means the
holders of common stock sold as part of
the units in this offering or in the
open market, including any existing
stockholders to the extent that they
purchase or acquire such shares.
Liquidation if no business
combination. . . . . . . . . . . . . We will dissolve and promptly distribute
only to our public stockholders the
amount in our trust fund plus any
remaining net assets if we do not effect
a business combination within 18 months
after consummation of this offering (or
within 24 months from the consummation
of this offering if a letter of intent,
agreement in principle or definitive
agreement has been executed within 18
months after consummation of this
offering and the business combination
has not yet been consummated within such
18 month period). Our existing
stockholders have agreed to waive their
respective rights to participate in any
liquidation distribution occurring upon
our failure to consummate a business
combination, but only with respect to
those shares of common stock acquired by
them prior to this offering.
Escrow of existing stockholders'
shares . . . . . . . . . . . . . . . On the date of this prospectus, all of
our existing stockholders, including all
of our officers and directors, will
place the shares they owned before this
offering into an escrow account
maintained by Continental Stock Transfer
& Trust Company, acting as escrow agent.
Subject to certain limited exceptions,
such as transfers to family members and
trusts for estate planning purposes and
upon death while remaining subject to
the escrow agreement, these shares will
not be transferable during the escrow
period and will not be released from
escrow until ______________, 2008 [THREE
YEARS FROM THE DATE OF THIS PROSPECTUS],
unless we were to consummate a
5
transaction after the consummation of
the initial business combination which
results in all of the stockholders of
the combined entity having the right to
exchange their shares of common stock
for cash, securities or other property.
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, as well as the fact that
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 promoter's initial equity investment is below
that which is required under the guidelines of the North American Securities
Administrators Association, Inc. You should carefully consider these and the
other risks set forth in the section entitled "Risk Factors" beginning on page
8 of this prospectus.
6
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 is presented.
APRIL 30, 2005
----------------------
ACTUAL AS ADJUSTED
-------- -----------
BALANCE SHEET DATA:
Working capital/(deficiency) ........................ $(90,753) $59,142,500
Total assets ........................................ 253,253 59,142,500
Total liabilities ................................... 230,753 --
Value of common stock which may be converted to cash
($7.20 per share).................................. -- 11,514,240
Stockholders' equity ................................ 22,500 47,628,260
The "as adjusted" information gives effect to the sale of the units we are
offering including the application of the related gross proceeds and the
payment of the estimated remaining costs from such sale.
The working capital and total assets amounts include the $57,600,000 to be
held in the trust fund, which will be available to us only upon the
consummation of a business combination within the time period described in
this prospectus. If a business combination is not so consummated, we will be
dissolved and the proceeds held in the trust fund will be distributed solely
to our public stockholders. The term public stockholders means the holders of
common stock sold as part of the units in this offering or in the open market,
including any existing stockholders to the extent that they purchase or
acquire such shares.
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 occurred, we would be required to convert to cash
up to approximately 19.99% of the 8,000,000 shares sold in this offering, or
1,599,200 shares of common stock, at an initial per-share conversion price of
$7.20, without taking into account interest earned on the trust fund. The
actual per-share conversion price will be equal to:
o the amount in the trust fund, including all accrued interest, as of two
business days prior to the proposed consummation of the business
combination,
o divided by the number of shares of common stock sold in the offering.
7
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 POTENTIAL BUSINESS
WE ARE A NEWLY FORMED COMPANY WITH NO OPERATING HISTORY AND, ACCORDINGLY, YOU
WILL NOT HAVE ANY BASIS ON WHICH TO EVALUATE OUR ABILITY TO ACHIEVE OUR
BUSINESS OBJECTIVE.
We are a recently formed company with no operating results to date.
Therefore, our ability to begin operations is dependent upon obtaining
financing through the public offering of our securities. Since we do not have
any operations or an operating history, you will have no basis upon which to
evaluate our ability to achieve our business objective, which is to acquire
one or more domestic or international assets or an operating business in the
healthcare industry. We do not have any specific merger, capital stock
exchange, asset acquisition or other business combination under consideration
or contemplation and we have not, nor has anyone on our behalf, contacted any
potential target business or had any discussions, formal or otherwise, with
respect to such a transaction. Moreover, we have not engaged or retained any
agent or other representative to identify or locate any suitable acquisition
candidate for us. Other than reviewing several industry reports, including
those published by CMS, in order to define the healthcare industry, neither we
nor any of our agents or affiliates has yet taken any measure, directly or
indirectly, to locate a target business. We will not generate any revenues or
income (other than interest income on the proceeds of this offering) until, at
the earliest, after the consummation of a business combination.
IF WE ARE FORCED TO LIQUIDATE BEFORE A BUSINESS COMBINATION, OUR PUBLIC
STOCKHOLDERS WILL RECEIVE LESS THAN $8.00 PER SHARE UPON DISTRIBUTION OF THE
TRUST FUND AND OUR WARRANTS WILL EXPIRE WORTHLESS.
If we are unable to complete a business combination and are forced to
liquidate our assets, the per-share liquidation 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 after
this offering. Furthermore, there will be no distribution with respect to our
outstanding warrants and, accordingly, the warrants will expire worthless if
we liquidate before the completion of a business combination. For a more
complete discussion of the effects on our stockholders if we are unable to
complete a business combination, see the section below entitled "Effecting a
business combination--Liquidation if no 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 consummation of this offering and will file a Current Report on
Form 8-K with the SEC upon consummation of this offering, 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. For a more detailed comparison of our offering to
offerings under Rule 419, see the section entitled "Comparison to offerings of
blank check companies" below.
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 COMPLETE A BUSINESS COMBINATION.
Based upon publicly available information, approximately 22 similarly
structured blank check companies have completed initial public offerings since
August 2003 and numerous others have filed registration statements. Of these
companies, only one company has consummated a business combination, while
three
8
other companies have announced they have entered into a definitive agreement
for a business combination, but have not consummated such business
combination. Accordingly, there are approximately 21 blank check companies
with more than $923 million in trust, and may be at least 28 additional blank
check companies with more than $2.1 billion in trust that are seeking to carry
out a business plan similar to our business plan. While some of those
companies have specific industries that they must complete a business
combination in, a number of them may consummate a business combination in any
industry they choose. We may therefore be subject to competition from these
and other companies seeking to consummate a business plan similar to ours
which will, as a result, increase demand for privately-held companies to
combine with companies structured similarly to ours. Further, the fact that
only one of such companies has completed a business combination and three of
such companies have entered into a definitive agreement for a business
combination may be an indication that there are only a limited number of
attractive target businesses available to such entities or that many
privately-held target businesses may not be inclined to enter into business
combinations with publicly held blank check companies like us. We cannot
assure you that we will be able to successfully compete for an attractive
business combination. Additionally, because of this competition, we cannot
assure you that we will be able to effectuate a business combination within
the required time periods. If we are unable to find a suitable target business
within such time periods, we will 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 $7.20 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, prospective
target businesses or other entities we engage 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 such entities will agree to waive any claims they may have in
the future as a result of, or arising out of, any negotiations, contracts or
agreements with us and will not seek recourse against the trust account for
any reason. Accordingly, the proceeds held in trust could be subject to claims
which could take priority over the claims of our public stockholders and the
per-share liquidation price could be less than $7.20 per share held in the
trust account, plus interest, due to claims of such creditors. If we are
unable to complete a business combination and are forced to liquidate, our
chairman and executive officers will be personally liable under certain
circumstances (for example, if a vendor does not waive any rights or claims to
the trust account) to ensure that the proceeds in the trust fund are not
reduced by the claims of various vendors or other entities that are owed money
by us for services rendered or products sold to us, to the extent necessary to
ensure that such claims do not reduce the amount in the trust fund. However,
we cannot assure you that our executive officers will be able to satisfy those
obligations.
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
100,000,000 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 (assuming no exercise of the underwriters' over-allotment option),
there will be 82,000,000 authorized but unissued shares of our common stock
available for issuance (after appropriate reservation for the issuance of
shares upon full exercise of our outstanding warrants) and all of the
1,000,000 shares of preferred stock available for issuance. Although we have
no commitments as of the date of this offering to issue our securities, we may
issue a substantial number of additional shares of our common stock 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:
o may significantly reduce the equity interest of investors in this
offering;
o 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 also result in the resignation or removal of our present
officers and directors; and
9
o may adversely affect prevailing market prices for our common stock.
Additionally, the healthcare industry is capital intensive, traditionally
using substantial amounts of indebtedness to finance acquisitions, capital
expenditures and working capital needs. If we finance the purchase of assets
or operations through the issuance of debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues after a
business combination were insufficient to pay our debt obligations;
o acceleration of our obligations to repay the indebtedness even if we have
made all principal and interest payments when due if the debt security
contained covenants that required the maintenance of certain financial
ratios or reserves and any such covenant were breached without a waiver
or renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any, if
the debt security was payable on demand; and
o our inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to obtain additional
financing while such security was outstanding.
For a more complete discussion of the possible structure of a business
combination, see the section below entitled "Effecting a business
combination--Selection of a target business and structuring of a business
combination."
OUR ABILITY TO EFFECT A BUSINESS COMBINATION AND TO EXECUTE ANY POTENTIAL
BUSINESS PLAN AFTERWARDS WILL BE TOTALLY DEPENDENT UPON THE EFFORTS OF OUR KEY
PERSONNEL, SOME OF WHOM MAY JOIN US FOLLOWING A BUSINESS COMBINATION AND WHOM
WE WOULD HAVE ONLY A LIMITED ABILITY TO EVALUATE.
Our ability to effect a business combination will be totally dependent upon
the efforts of our key personnel. The future role of our key personnel
following a business combination, however, cannot presently be fully
ascertained. Although we expect most of our management and other key
personnel, particularly our chairman of the board, vice chairman and president
to each remain associated with us following a business combination, we may
employ other personnel following the business combination. While we intend to
closely scrutinize any additional individuals we engage after a business
combination, we cannot assure you that our assessment of these individuals
will prove to be correct. Moreover, our current management will only be able
to remain with the combined company after the consummation of a business
combination if they are able to negotiate the same as part of any such
combination. If we acquired a target business in an all-cash transaction, it
would be more likely that current members of management would remain with us
if they chose to do so. If a business combination were structured as a merger
whereby the stockholders of the target company were to control the combined
company following a business combination, it may be less likely that
management would remain with the combined company unless it was negotiated as
part of the transaction via the acquisition agreement, an employment agreement
or other arrangement. In making the determination as to whether current
management should remain with us following the business combination,
management will analyze the experience and skill set of the target business'
management and negotiate as part of the business combination that certain
members of current management remain if it is believed that it is in the best
interests of the combined company post-business combination. If management
negotiates to be retained post-business combination as a condition to any
potential business combination, such negotiations may result in a conflict of
interest.
OUR OFFICERS AND DIRECTORS MAY 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 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 may result in a conflict of interest in allocating their time
between our operations and other businesses. We do not intend to have any full
time employees prior to the consummation of a business combination. Each of
our officers are engaged in several other business endeavors and are not
obligated to contribute any specific number of hours per week to our affairs.
If our officers' other business affairs require them to devote more
substantial amounts
10
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. For a discussion of potential conflicts of interest that
you should be aware of, see the section below entitled "Management--Conflicts
of Interest." We cannot assure you that these conflicts will be resolved in
our favor.
OUR OFFICERS AND DIRECTORS ARE CURRENTLY 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 WHICH ENTITY A
PARTICULAR BUSINESS OPPORTUNITY SHOULD BE PRESENTED TO.
Our officers and directors may in the future become affiliated with other
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 as well as the other entities with which
they are or may be affiliated. Further, certain of our officers and directors
are currently involved in other businesses that are similar to the business
activities that we intend to conduct following a business combination. Due to
these existing affiliations, they have prior fiduciary obligations to present
potential business opportunities to those entities prior to presenting them to
us which could cause additional conflicts of interest. Accordingly, they have
conflicts of interest in determining to which entity a particular business
opportunity should be presented. For a complete discussion of our management's
business affiliations and the potential conflicts of interest that you should
be aware of, see the sections below entitled "Management--Directors and
Executive Officers" and "Management--Conflicts of Interest." We cannot assure
you that these conflicts will be resolved in our favor.
ALL OF OUR DIRECTORS OWN SHARES OF OUR SECURITIES WHICH WILL NOT PARTICIPATE
IN LIQUIDATION DISTRIBUTIONS AND THEREFORE THEY MAY HAVE A CONFLICT OF
INTEREST IN DETERMINING WHETHER A PARTICULAR TARGET BUSINESS IS APPROPRIATE
FOR A BUSINESS COMBINATION.
All of our directors own shares of common stock in our company which were
issued prior to this offering, but have waived their right to receive
distributions with respect to those shares upon our liquidation if we are
unable to complete a business combination. Additionally, our chairman, or his
designees, has agreed to purchase up to an aggregate of $1,000,000 of warrants
on the open market for a price not to exceed $1.20 per warrant, once such
warrants begin to trade separately. These warrants will not be sold until the
consummation of a business combination. The shares and warrants owned by these
directors will be worthless if we do not consummate a business combination.
The personal and financial interests of these directors may influence their
motivation in identifying and selecting a target business and completing a
business combination in a timely manner. Consequently, these directors'
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.
OUR EXISTING STOCKHOLDERS WILL NOT RECEIVE REIMBURSEMENT FOR ANY OUT-OF-POCKET
EXPENSES INCURRED BY THEM TO THE EXTENT THAT SUCH EXPENSES EXCEED THE AMOUNT
IN THE TRUST FUND UNLESS THE BUSINESS COMBINATION IS CONSUMMATED AND THEREFORE
THEY MAY HAVE A CONFLICT OF INTEREST.
Our existing stockholders, will not receive reimbursement for any out-of-
pocket expenses incurred by them to the extent that such expenses exceed the
amount in the trust fund unless the business combination is consummated and
there are sufficient funds available for reimbursement after such
consummation. The financial interest of such persons could influence their
motivation in selecting a target business and thus, there may be a conflict of
interest when determining whether a particular business combination is in the
stockholders' best interest.
IT IS PROBABLE THAT WE WILL ONLY BE ABLE TO COMPLETE ONE BUSINESS COMBINATION,
WHICH WILL CAUSE US TO BE SOLELY DEPENDENT ON A SINGLE BUSINESS.
The net proceeds from this offering will provide us with approximately
$57,600,000 which we may use to complete a business combination. Our initial
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. Consequently, it
is probable that we will have the ability to complete only a single business
combination, although this may entail the
11
simultaneous acquisitions of several assets or closely related operating
businesses at the same time. Accordingly, the prospects for our ability to
effect our business strategy may be:
o solely dependent upon the performance of a single business; or
o dependent upon the development or market acceptance of a single or
limited number of products, processes or services.
In this case, we will 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.
Furthermore, since our business combination may entail the simultaneous
acquisitions of several assets or operating businesses at the same time and
may be with different sellers, we will need to convince such sellers to agree
that the purchase of their assets or businesses is contingent upon the
simultaneous closings of the other acquisitions.
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 THE TRANSACTION 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, in as much as 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 or the depletion of the available net proceeds in search
of a target business, or because we become obligated 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 would
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 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
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 units in
this offering). Additionally, our chairman, or his designees, has agreed to
purchase up to an aggregate of $1,000,000 of warrants on the open market for a
price not to exceed $1.20 per warrant, once such warrants begin to trade
separately. These warrants cannot be sold until after consummation of a
business combination. None of our other existing stockholders, officers and
directors has indicated to us that they intend to purchase units in the
offering or warrants on the open market.
Our board of directors is divided into two classes, each of which will
generally serve for a term of two 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 at least until the consummation of the business combination. If there
is an annual meeting, as a consequence of our "staggered" board of directors,
initially 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. In addition, our existing stockholders
and their affiliates and relatives are not prohibited from purchasing units in
this offering or in the open market. If they do, we cannot assure you that our
existing stockholders will not have considerable influence upon the vote in
connection with a business combination.
12
OUR EXISTING STOCKHOLDERS PAID AN AGGREGATE OF $25,000, OR APPROXIMATELY
$0.0125 PER SHARE, FOR THEIR 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 of our common
stock and the pro forma net tangible book value per share of our common stock
after this offering constitutes the dilution to you and the other investors in
this offering. The fact that our existing stockholders acquired their shares
of common stock at a nominal price has significantly contributed to this
dilution. Assuming the offering is completed, you and the other new investors
will incur an immediate and substantial dilution of approximately 29% or $2.33
per share (the difference between the pro forma net tangible book value per
share of $5.67 and the initial offering price of $8.00 per unit).
OUR OUTSTANDING WARRANTS MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF
COMMON STOCK AND MAKE IT MORE DIFFICULT TO EFFECT A BUSINESS COMBINATION.
In connection with this offering, as part of the units (but not including
any overallotments issued to the underwriters), we will be issuing warrants to
purchase 8,000,000 shares of common stock. To the extent we issue shares of
common stock to effect a business combination, the potential for the issuance
of substantial numbers of additional shares upon exercise of these warrants
could make us a less attractive acquisition vehicle in the eyes of a target
business as 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
may make it more difficult to effectuate a business combination or increase
the cost of the target business. Additionally, the sale, or even the
possibility of sale, of the shares underlying the warrants could have an
adverse effect on the market price for our securities or on our ability to
obtain future public financing. If and to the extent these warrants are
exercised, you may experience dilution to your holdings.
IF OUR EXISTING STOCKHOLDERS EXERCISE THEIR REGISTRATION RIGHTS, IT MAY HAVE
AN ADVERSE EFFECT ON THE MARKET PRICE 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 require us to register the resale
of their shares of common stock at any time after the date on which their
shares are released from escrow, which, except in limited circumstances, will
not be before three years from the date of this prospectus. If our existing
stockholders exercise their registration rights with respect to all of their
shares of common stock, then there will be an additional 2,000,000 shares of
common stock eligible for trading in the public market. The presence of this
additional number of shares of common stock eligible for 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 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 as a result of these registration rights and the potential future
effect their exercise may have on the trading market for our common stock.
THE AMERICAN STOCK EXCHANGE MAY DELIST OUR SECURITIES FROM TRADING ON ITS
EXCHANGE WHICH COULD LIMIT INVESTORS' ABILITY TO MAKE TRANSACTIONS IN OUR
SECURITIES AND SUBJECT US TO ADDITIONAL TRADING RESTRICTIONS.
We have applied to have our securities listed on the American Stock
Exchange, a national securities exchange, in connection with this offering. We
cannot assure you that our securities will, or will continue to be, listed on
the American Stock Exchange in the future prior to a business combination.
Additionally, in connection with our business combination, it is likely that
the American Stock Exchange may require us to file a new initial listing
application and meet its initial listing requirements as opposed to its more
lenient continued listing requirements. We cannot assure you that we will be
able to meet those initial listing requirements at that time.
If the American Stock Exchange delists our securities from trading on its
exchange and we are not able to list our securities on another exchange or to
have them quoted on Nasdaq, our securities could be quoted
13
on the OTC Bulletin Board, or "pink sheets". As a result, we could face
significant material adverse consequences including:
o a limited availability of market quotations for our securities;
o a determination that our common stock is a "penny stock" which will
require brokers trading in our common stock to adhere to more stringent
rules and possibly resulting in a reduced level of trading activity in
the secondary trading market for our securities;
o a limited amount of news and analyst coverage for our company; and
o a decreased ability to issue additional securities or obtain additional
financing in the future.
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 our securities are no longer listed on the American Stock
Exchange or another exchange or quoted on Nasdaq and 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:
o make a special written suitability determination for the purchaser;
o receive the purchaser's written agreement to a transaction prior to sale;
o 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
o 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.
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.
THE REPRESENTATIVE OF THE UNDERWRITERS IN THE OFFERING HAS ONLY LIMITED
EXPERIENCE ACTING IN SUCH ROLE.
Although certain principals of Maxim Group LLC have extensive experience in
the securities industry, Maxim Group LLC itself was formed in October 2002 and
has acted as the lead manager in only three firm commitment public offerings,
co-manager in three firm commitment public offerings and as a member of the
underwriting syndicate in fifty three underwritten public offerings. Since
Maxim Group LLC has limited experience in underwriting firm commitment public
offerings, their lack of experience may adversely affect the public offering
price of our units, common stock and warrants and the subsequent development,
if any, of a trading market for our units, common stock and warrants.
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, OUR ACTIVITIES MAY BE RESTRICTED WHICH, AMONG OTHER PROBLEMS, MAY
MAKE IT DIFFICULT FOR US TO COMPLETE A BUSINESS COMBINATION. SUCH RESTRICTIONS
INCLUDE:
o restrictions on the nature of our investments; and
o restrictions on the issuance of securities.
14
In addition, we may have imposed upon us burdensome requirements, including:
o registration as an investment company;
o adoption of a specific form of corporate structure; and
o reporting, record keeping, voting, proxy 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 only be invested by the trust agent in "government securities" with
specific maturity dates. 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 the act, compliance with these additional
regulatory burdens would require additional expense that we have not allotted
for.
OUR DIRECTORS MAY NOT BE CONSIDERED "INDEPENDENT" UNDER THE POLICIES OF THE
NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC.
All of our officers or directors own shares of our common stock, and no
salary or other compensation will be paid to our officers or directors for
services rendered by them on our behalf prior to or in connection with a
business combination. We believe that two members of our board of directors
are "independent" as that term is commonly used. However, under the policies
of the North American Securities Administrators Association, Inc., because our
directors 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 take the position that
such individuals are not "independent." If this were the case, they would take
the position that we would not have the benefit of 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 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 two of them 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 the price of
our stock held by the public stockholders.
BECAUSE OUR INITIAL STOCKHOLDERS' INITIAL EQUITY INVESTMENT 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
PROMOTIONAL OR DEVELOPMENT STAGE COMPANIES.
Pursuant to the Statement of Policy Regarding Promoter's Equity Investment
promulgated by The North American Securities Administrators Association, Inc.,
an international organization devoted to investor protection, any state
administrator may disallow an offering of a promotional or 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 is less than the required $3,505,003
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.
SINCE WE HAVE NOT CURRENTLY SELECTED A PROSPECTIVE TARGET BUSINESS WITH WHICH
TO COMPLETE A BUSINESS COMBINATION, INVESTORS IN THIS OFFERING ARE UNABLE TO
CURRENTLY ASCERTAIN THE MERITS OR RISKS OF THE TARGET BUSINESS' OPERATIONS.
Since we have not yet identified a prospective target, investors in this
offering have no current basis to evaluate the possible merits or risks of the
target business' operations. To the extent we complete a business combination
with a financially unstable company, an entity in its development stage and/or
an entity subject to unknown or unmanageable liabilities, we may be affected
by numerous risks inherent in the business
15
operations of those entities. 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 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. For
a more complete discussion of our selection of a target business, see the
section below entitled "Effecting a business combination--We have not
identified a target business."
WE MAY ACQUIRE A DOMESTIC BUSINESS WITH OPERATIONS OUTSIDE OF THE UNITED
STATES, AND MAY FACE CERTAIN ECONOMIC AND REGULATORY CHALLENGES THAT WE MAY BE
UNABLE TO MEET.
While we expect to acquire a business or assets in the United States, we may
acquire a business or assets with operations outside the United States. There
are certain risks inherent in doing business in international markets,
particularly in the healthcare industry, which is heavily regulated and
controlled in many jurisdictions outside the United States. These risks
include:
o less developed healthcare infrastructures and generally higher costs;
o difficulty in obtaining the necessary healthcare regulatory approvals for
any potential expansion, and the possibility that any approvals that may
be obtained would impose restrictions on the operation of the our
business;
o the inability to manage and coordinate the healthcare regulatory
requirements of multiple jurisdictions that are constantly evolving and
subject to unexpected change;
o difficulties in staffing and managing foreign operations;
o fluctuations in exchange rates;
o reduced or no protection for intellectual property rights; and
o potentially adverse tax consequences.
Our inability to manage these risks effectively could adversely affect our
proposed business and limit our ability to expand our operations, which would
have a material adverse effect on the our business, financial condition and
results of operations.
RISKS ASSOCIATED WITH THE HEALTHCARE INDUSTRY
Even if we acquire domestic or international assets or operations, of which
no assurances can be given, our proposed business will be subject to numerous
risks, including the following:
CHANGES IN THE HEALTHCARE INDUSTRY ARE SUBJECT TO VARIOUS INFLUENCES, EACH OF
WHICH MAY AFFECT OUR PROSPECTIVE BUSINESS.
The healthcare industry is subject to changing political, economic, and
regulatory influences. These factors affect the purchasing practices and
operations of healthcare organizations. Any changes in current healthcare
financing and reimbursement systems could cause us to make unplanned
enhancements of our prospective products or services, or result in delays or
cancellations of orders, or in the revocation of endorsement of our
prospective products or services by clients. Federal and state legislatures
have periodically considered programs to reform or amend the U.S. healthcare
system at both the federal and state level. Such programs may increase
governmental regulation or involvement in healthcare, lower reimbursement
rates, or otherwise change the environment in which healthcare industry
participants operate. Healthcare industry participants may respond by reducing
their investments or postponing investment decisions, including investments in
our prospective products or services.
Many healthcare industry participants are consolidating to create integrated
healthcare systems with greater market power. As the healthcare industry
consolidates, competition to provide products and services to industry
participants will become even more intense, as will the importance of
establishing a relationship with each industry participant. These industry
participants may try to use their market power to negotiate price
16
reductions for our prospective products and services. If we were forced to
reduce our prices, our operating results could suffer if we could not achieve
corresponding reductions in our expenses.
ANY BUSINESS WE ACQUIRE WILL BE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION.
ANY CHANGES TO THE LAWS AND REGULATIONS GOVERNING OUR PROSPECTIVE BUSINESS, OR
THE INTERPRETATION AND ENFORCEMENT OF THOSE LAWS OR REGULATIONS, COULD CAUSE
US TO MODIFY OUR OPERATIONS AND COULD NEGATIVELY IMPACT OUR OPERATING RESULTS.
We believe that our prospective business will be extensively regulated by
the federal government and any states in which we decide to operate. The laws
and regulations governing our operations, if any, are generally intended to
benefit and protect persons other than our stockholders. The government
agencies administering these laws and regulations have broad latitude to
enforce them. These laws and regulations along with the terms of any
government contracts we may enter into would regulate how we do business, what
products and services we could offer, and how we would interact with the
public. These laws and regulations, and their interpretations, are subject to
frequent change. Changes in existing laws or regulations, or their
interpretations, or the enactment of new laws or regulations could reduce our
revenue, if any, by:
o imposing additional capital requirements;
o increasing our liability;
o increasing our administrative and other costs;
o increasing or decreasing mandated benefits;
o forcing us to restructure our relationships with providers; or
o requiring us to implement additional or different programs and systems.
For example, Congress enacted the Health Insurance Portability and
Accountability Act of 1996 which mandates that health plans enhance privacy
protections for member protected health information. This requires health
plans to add, at significant cost, new administrative, information and
security systems to prevent inappropriate release of protected member health
information. Compliance with this law is uncertain and has affected the
revenue streams of entities subject to it. Similarly, individual states
periodically consider adding operational requirements applicable to health
plans, often without identifying funding for these requirements. California
recently required all health plans to make available to members independent
medical review of their claims. Any analogous requirements applied to our
prospective products or services would be costly to implement and could affect
our prospective revenues.
We believe that our business, if any, will be subject to various routine and
non-routine governmental reviews, audits and investigation. Violation of the
laws governing our prospective operations, or changes in interpretations of
those laws, could result in the imposition of civil or criminal penalties, the
cancellation of any contracts to provide products or services, the suspension
or revocation of any licenses, and exclusion from participation in government
sponsored health programs, such as Medicaid and the State Children's Health
Insurance Program. If we become subject to material fines or if other
sanctions or other corrective actions were imposed upon us, we might suffer a
substantial reduction in revenue, and might also lose one or more of our
government contracts and as a result lose significant numbers of members and
amounts of revenue.
The current administration's issuance of new regulations, its review of the
existing Health Insurance Portability and Accountability Act of 1996 rules and
other newly published regulations, the states' ability to promulgate stricter
rules, and uncertainty regarding many aspects of the regulations may make
compliance with any new regulatory landscape difficult. In order to comply
with any new regulatory requirements, any prospective business we acquire may
be required to employ additional or different programs and systems, the costs
of which are unknown to us at this time. Further, compliance with any such new
regulations may lead to additional costs that we have not yet identified. We
do not know whether, or the extent to which, we would be able to recover our
costs of complying with any new regulations. Any new regulations and the
related compliance costs could have a material adverse effect on our business.
17
IF WE ARE UNABLE TO ATTRACT QUALIFIED HEALTHCARE PROFESSIONALS AT REASONABLE
COSTS, IT COULD LIMIT OUR ABILITY TO GROW, INCREASE OUR OPERATING COSTS AND
NEGATIVELY IMPACT OUR BUSINESS.
We may rely significantly on our ability to attract and retain qualified
healthcare professionals who possess the skills, experience and licenses
necessary to meet the certification requirements and the requirements of the
hospitals, nursing homes and other healthcare facilities with which we may
work, as well as the requirements of applicable state and federal governing
bodies. We will compete for qualified healthcare professionals with hospitals,
nursing homes and other healthcare organizations. Currently, for example,
there is a shortage of qualified nurses in most areas of the United States.
Therefore, competition for nursing personnel is increasing, and nurses'
salaries and benefits have risen. This may also occur with respect to other
healthcare professionals on whom our business may become dependent.
Our ability to attract and retain such qualified healthcare professionals
will depend on several factors, including our ability to provide attractive
assignments and competitive benefits and wages. We cannot assure you that we
will be successful in any of these areas. Because we may operate in a fixed
reimbursement environment, increases in the wages and benefits that we must
provide to attract and retain qualified healthcare professionals or increases
in our reliance on contract or temporary healthcare professionals could
negatively affect our revenue. We may be unable to continue to increase the
number of qualified healthcare professionals that we recruit, decreasing the
potential for growth of our business. Moreover, if we are unable to attract
and retain qualified healthcare professionals, we may have to limit the number
of clients for whom we can provide any of our prospective products or
services.
WE MAY FACE SUBSTANTIAL RISKS OF LITIGATION AS A RESULT OF OPERATING IN THE
HEALTHCARE INDUSTRY. IF WE BECOME SUBJECT TO MALPRACTICE AND RELATED LEGAL
CLAIMS, WE COULD BE REQUIRED TO PAY SIGNIFICANT DAMAGES, WHICH MAY NOT BE
COVERED BY INSURANCE.
Litigation is a risk that each business contends with, and businesses
operating in the healthcare industry do so more than most. In recent years,
medical product companies have issued recalls of medical products, and
physicians, hospitals and other health care providers have become subject to
an increasing number of legal actions alleging malpractice, product liability
or related legal theories. Many of these actions involve large monetary claims
and significant defense costs. We intend to maintain liability insurance in
amounts that we believe will be appropriate for our prospective operations. We
also intend to maintain business interruption insurance and property damage
insurance, as well as an additional umbrella liability insurance policy.
However, this insurance coverage may not cover all claims against us.
Insurance coverage may not continue to be available at a cost allowing us to
maintain adequate levels of insurance. If one or more successful claims
against us were not covered by or exceeded the coverage of our insurance, our
financial condition could be adversely affected.
WE MAY BE DEPENDENT ON PAYMENTS FROM MEDICARE AND MEDICAID. CHANGES IN THE
RATES OR METHODS GOVERNING THESE PAYMENTS FOR OUR PROSPECTIVE PRODUCTS OR
SERVICES, OR DELAYS IN SUCH PAYMENTS, COULD ADVERSELY AFFECT OUR PROSPECTIVE
REVENUE.
A large portion of our revenue may consist of payments from Medicare and
Medicaid programs. Because these are generally fixed payments, we would be at
risk for the cost of any products or services provided to our clients. We
cannot assure you that Medicare and Medicaid will continue to pay in the same
manner or in the same amount that they currently do. Any reductions in amounts
paid by government programs for our prospective products or services or
changes in methods or regulations governing payments would adversely affect
our potential revenue. Additionally, delays in any such payments, whether as a
result of disputes or for any other reason, would also adversely affect our
potential revenue.
IF OUR COSTS WERE TO INCREASE MORE RAPIDLY THAN FIXED PAYMENT ADJUSTMENTS WE
RECEIVE FROM MEDICARE, MEDICAID OR OTHER THIRD-PARTY PAYORS FOR ANY OF OUR
POTENTIAL PRODUCTS OR SERVICES, OUR REVENUE COULD BE NEGATIVELY IMPACTED.
We may receive fixed payments for our prospective products or services based
on the level of service or care that we provide. Accordingly, our revenue may
be largely dependent on our ability to manage costs of
18
providing any products or services and to maintain a client base. We may
become susceptible to situations where our clients may require more extensive
and therefore more expensive products or services than we may be able to
profitably deliver. Although Medicare, Medicaid and certain third-party payors
currently provide for an annual adjustment of various payment rates based on
the increase or decrease of the medical care expenditure category of the
Consumer Price Index, these increases have historically been less than actual
inflation. If these annual adjustments were eliminated or reduced, or if our
costs of providing our products or services increased more than the annual
adjustment, any revenue stream we may generate would be negatively impacted.
WE MAY DEPEND ON PAYMENTS FROM THIRD-PARTY PAYORS, INCLUDING MANAGED CARE
ORGANIZATIONS. IF THESE PAYMENTS ARE REDUCED, ELIMINATED OR DELAYED, OUR
PROSPECTIVE REVENUES COULD BE ADVERSELY AFFECTED.
We may be dependent upon private sources of payment for any of our potential
products or services. Any amounts that we may receive in payment for such
products and services may be adversely affected by market and cost factors as
well as other factors over which we have no control, including regulations and
cost containment and utilization decisions and reduced reimbursement schedules
of third-party payors. Any reductions in such payments, to the extent that we
could not recoup them elsewhere, would have a material adverse effect on our
prospective business and results of operations. Additionally, delays in any
such payments, whether as a result of disputes or for any other reason, would
have a material adverse effect on our prospective business and results of
operations.
MEDICAL REVIEWS AND AUDITS BY GOVERNMENTAL AND PRIVATE PAYORS COULD RESULT IN
MATERIAL PAYMENT RECOUPMENTS AND PAYMENT DENIALS, WHICH COULD NEGATIVELY
IMPACT OUR BUSINESS.
Medicare fiscal intermediaries and other payors may periodically conduct
pre-payment or post-payment medical reviews or other audits of our prospective
products or services. In order to conduct these reviews, the payor would
request documentation from us and then review that documentation to determine
compliance with applicable rules and regulations, including the documentation
of any products or services that we might provide. We cannot predict whether
medical reviews or similar audits by federal or state agencies or commercial
payors of such products or services will result in material recoupments or
denials, which could have a material adverse effect on our financial condition
and results of operations.
IF THE FDA OR OTHER STATE OR FOREIGN AGENCIES IMPOSE REGULATIONS THAT AFFECT
OUR POTENTIAL PRODUCTS, OUR COSTS WILL INCREASE.
The development, testing, production and marketing of any of our potential
products that we may manufacture, market or sell following a business
combination may be subject to regulation by the FDA as "devices" under the
1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act.
Before a new medical device, or a new use of, or claim for, an existing
product can be marketed in the United States, it must first receive either
510(k) clearance or pre-market approval from the FDA, unless an exemption
applies. Either process can be expensive and lengthy. The FDA's 510(k)
clearance process usually takes from three to twelve months, but it can take
longer and is unpredictable. The process of obtaining pre-market approval is
much more costly and uncertain than the 510(k) clearance process and it
generally takes from one to three years, or even longer, from the time the
application is filed with the FDA.
In the United States, medical devices must be:
o manufactured in registered and quality approved establishments by the
FDA; and
o produced in accordance with the FDA Quality System Regulation ("QSR") for
medical devices.
As a result, we may be required to comply with QSR requirements and if we
fail to comply with these requirements, we may need to find another company to
manufacture any such devices which could delay the shipment of our potential
product to our customers.
The FDA requires producers of medical devices to obtain FDA licensing prior
to commercialization in the United States. Testing, preparation of necessary
applications and the processing of those applications by the FDA is expensive
and time consuming. We do not know if the FDA would act favorably or quickly
in
19
making such reviews, and significant difficulties or costs may potentially be
encountered by us in any efforts to obtain FDA licenses. The FDA may also
place conditions on licenses that could restrict commercial applications of
such products. Product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following initial
marketing. Delays imposed by the FDA licensing process may materially reduce
the period during which we have the exclusive right to commercialize any
potential patented products. We may make modifications to any potential
devices and may make additional modifications in the future that we may
believe do not or will not require additional clearances or approvals. If the
FDA should disagree, and require new clearances or approvals for the potential
modifications, we may be required to recall and to stop marketing the
potential modified devices. We also may be subject to Medical Device Reporting
regulations, which would require us to report to the FDA if our products were
to cause or contribute to a death or serious injury, or malfunction in a way
that would likely cause or contribute to a death or serious injury. We cannot
assure you that such problems will not occur in the future.
Additionally, our potential products may be subject to regulation by similar
agencies in other states and foreign countries. Compliance with such laws or
regulations, including any new laws or regulations in connection any potential
products developed by us, might impose additional costs on us or marketing
impediments on such products which could adversely affect our revenues and
increase our expenses. The FDA and state authorities have broad enforcement
powers. Our failure to comply with applicable regulatory requirements could
result in enforcement action by the FDA or state agencies, which may include
any of the following sanctions:
o warning letters, fines, injunctions, consent decrees and civil penalties;
o repair, replacement, refunds, recall or seizure of our products;
o operating restrictions or partial suspension or total shutdown of
production;
o refusal of requests for 510(k) clearance or premarket approval of new
products, new intended uses, or modifications to existing products;
o withdrawal of 510(k) clearance or premarket approvals previously granted;
and
o criminal prosecution.
If any of these events were to occur, it could harm our business.
THE FDA CAN IMPOSE CIVIL AND CRIMINAL ENFORCEMENT ACTIONS AND OTHER PENALTIES
ON US IF WE WERE TO FAIL TO COMPLY WITH STRINGENT FDA REGULATIONS.
Medical device manufacturing facilities must maintain records, which are
available for FDA inspectors documenting that the appropriate manufacturing
procedures were followed. Should we acquire such a facility as a result of a
business combination, the FDA would have authority to conduct inspections of
such a facility. Labeling and promotional activities are also subject to
scrutiny by the FDA and, in certain instances, by the Federal Trade
Commission. Any failure by us to take satisfactory corrective action in
response to an adverse inspection or to comply with applicable FDA regulations
could result in enforcement action against us, including a public warning
letter, a shutdown of manufacturing operations, a recall of our products,
civil or criminal penalties or other sanctions. From time to time, the FDA may
modify such requirements, imposing additional or different requirements which
could require us to alter our business methods which could potentially result
in increased expenses.
20
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be as set forth in
the following table:
WITHOUT OVER- OVER-ALLOTMENT
ALLOTMENT OPTION OPTION EXERCISED
---------------- ----------------
Gross proceeds .......................... $64,000,000 $73,600,000
Offering expenses
Underwriting discount (1)(2) ........... $ 3,840,000 $ 4,416,000
Underwriting non-accountable expense
allowance (3).......................... $ 640,000 $ 640,000
Legal fees and expenses (including blue
sky services and expenses)............. $ 200,000 $ 200,000
Miscellaneous expenses ................. $ 23,936 $ 23,936
Printing and engraving expenses ........ $ 50,000 $ 50,000
Accounting fees and expenses ........... $ 25,000 $ 25,000
SEC registration fee ................... $ 15,984 $ 15,984
NASD registration fee .................. $ 14,080 $ 14,080
Initial trustee's fee .................. $ 1,000 $ 1,000
D&O Insurance .......................... $ 70,000 $ 70,000
Net proceeds
Held in trust (2) ...................... $57,600,000 $66,414,000
Not held in trust ...................... $ 1,520,000 $ 1,730,000
Total net proceeds.................... $59,120,000 $68,144,000
Use of net proceeds not held in trust
Legal, accounting and other expenses
attendant to the due diligence
investigations, structuring and
negotiation of a business combination.. $ 200,000 $ 200,000
Payment for administrative services and
support ($7,500 per month for 24
months)................................ $ 180,000 $ 180,000
Due diligence of prospective target
businesses............................. $ 600,000 $ 600,000
Legal and accounting fees relating to
SEC reporting obligations.............. $ 40,000 $ 50,000
Working capital and reserves ............ $ 500,000 $ 700,000
Total................................. $ 1,520,000 $ 1,730,000
- ---------------
(1) Consists of an underwriting discount of 6% of the gross proceeds of this
Offering (including any units sold to cover overallotments).
(2) Upon consummation of a business combination, Maxim Group LLC will be paid
an additional underwriting discount in the amount of 1% of the gross
proceeds of this Offering (including any units sold to cover
overallotments) out of the funds held in trust.
(3) The 1% non-accountable expense allowance is not payable with respect to the
units sold upon exercise of the underwriters' over-allotment option.
$57,600,000, or $66,414,000 if the underwriters' over-allotment option is
exercised in full, of the net proceeds will be placed in a trust account at JP
Morgan Chase NY Bank maintained by Continental Stock Transfer & Trust Company,
New York, New York, as trustee. The proceeds will not be released from the
trust fund until the earlier of the completion of a business combination or
our liquidation. The proceeds held in the trust fund may be used as
consideration to pay the sellers of a target business with which we ultimately
complete a business combination. Any amounts not paid as consideration to the
sellers of the target business may be used to finance operations of the target
business or to effect other acquisitions, as determined by our board of
directors at that time.
We have agreed to pay Equity Dynamics, Inc., an affiliated third party of
which Mr. Pappajohn is the President and principal stockholder, and Mr. Kinley
a Senior Vice President, approximately $6,000 per month for office space and
certain additional general and administrative services. We have also agreed to
pay
21
another affiliated third party, The Lan Group, of which Dr. Schaffer is the
sole owner, approximately $1,500 per month for office space and certain
additional general and administrative services.
John Pappajohn, our chairman and secretary, or his designees, has agreed to
purchase up to $1,000,000 of our warrants in the open market, at a price per
warrant not to exceed $1.20, within three months of such warrants being
separately tradeable. These warrants will not be sold by Mr. Pappajohn or his
designees until the consummation of a business combination. Maxim Group LLC
has also agreed to purchase up to $500,000 of our warrants in the open market
on similar terms; however, Maxim Group LLC may sell their warrants prior to
the consummation of a business combination.
Prior to the closing of a business combination, we have agreed to obtain
keyman life insurance in the amount of $3,000,000 in the aggregate on the
lives of certain members of our management for a three year period. Based on
current estimates, the premium for such life insurance policies, of which we
will be the sole beneficiary, is expected to be approximately $5,000 per year.
We intend to use the excess working capital (approximately $500,000) being
held in reserve in the event due diligence, 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 below. We expect that due diligence of prospective target businesses
will be performed by some or all of our officers and directors and may include
engaging market research firms and/or third party consultants. Our officers
and directors will not receive any compensation for their due diligence of
prospective target businesses, but would be reimbursed for any out-of-pocket
expenses (such as travel expenses) incurred in connection with such due
diligence activities. We believe that the excess working capital will be
sufficient to cover the foregoing expenses and reimbursement costs.
It is also possible that we could use a portion of such excess working
capital to make a deposit, down payment or fund a "no-shop" provision with
respect to a particular proposed business combination, although we do not have
any current intention to do so. In the event that we were ultimately required
to forfeit such funds (whether as a result of our breach of the agreement
relating to such payment or otherwise), we may not have a sufficient amount of
working capital available outside of the trust account to conduct due
diligence and pay other expenses related to finding another suitable business
combination without securing additional financing. Thus, if we were unable to
secure additional financing, we would most likely fail to consummate a
business combination in the allotted time and would be forced to liquidate.
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
fund as well as any other net proceeds not expended will be used to finance
the operations of the target business.
As of the date of this prospectus,Mr. Pappajohn, Dr. Schaffer and Mr. Kinley
have loaned us a total of $175,000 which was used to pay a portion of the
expenses of this offering, such as SEC registration fees, NASD registration
fees and legal and accounting fees and expenses. These loans will be payable
without interest on the earlier of April 28, 2006 or the consummation of this
offering. The loans will be repaid out of the net proceeds of this offering
not being placed in trust.
The net proceeds of this offering not held in the trust fund and not
immediately required for the purposes set forth above will be invested only in
United States "government securities," defined as any Treasury Bill issued by
the United States having a maturity of one hundred and eighty days or less so
that we are not deemed to be an investment company under the Investment
Company Act. The interest 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. We believe that, upon consummation of this offering,
we will have sufficient available funds to operate for at least the next 24
months, assuming that a business combination is not consummated during that
time.
Other than the $7,500 aggregate per month general and administrative service
fees described above, no compensation of any kind (including finder's and
consulting fees) will be paid to any of our existing stockholders, or any of
their affiliates, for services rendered to us prior to or in connection with
the
22
consummation of the business combination. However, our existing stockholders
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 and performing due diligence on suitable business combinations.
After the consummation of a business combination, if any, to the extent our
management remains as officers of the resulting business, we anticipate that
they may enter into employment agreements, the terms of which shall be
negotiated and which we expect to be comparable to employment agreements with
other similarly-situated companies in the healthcare industry. Further, after
the consummation of a business combination, if any, to the extent our
directors remain as directors of the resulting business, we anticipate that
they will receive compensation comparable to directors at other similarly-
situated companies in the healthcare industry.
A public stockholder will be entitled to receive funds from the trust fund
(including interest earned on his, her or its portion of the trust fund) only
in the event of our liquidation upon our failure to complete a business
combination or if that public stockholder were to seek to convert such shares
into cash in connection with a business combination which the public
stockholder voted against and which we actually consummate. In no other
circumstances will a public stockholder have any right or interest of any kind
to or in the trust fund. The term public stockholders means the holders of
common stock sold as part of the units in this offering or in the open market,
including any existing stockholders to the extent that they purchase or
acquire such shares.
23
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, 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 if voted against the business
combination), by the number of outstanding shares of our common stock.
At April 30, 2005, our net tangible book value was a deficiency of
$(90,753), or approximately $(0.05) per share of common stock. After giving
effect to the sale of 8,000,000 shares of common stock included in the units,
and the deduction of underwriting discounts and estimated expenses of this
offering, our pro forma net tangible book value (as decreased by the value of
1,599,200 shares of common stock which may be converted into cash) at April 30,
2005 would have been $47,628,260 or $5.67 per share, representing an immediate
increase in net tangible book value of $5.72 per share to the existing
stockholders and an immediate dilution of $2.33 per share or 29% to new
investors not exercising their conversion rights.
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:
Public offering price $ 8.00
Net tangible book value before this offering $(0.05)
Increase attributable to new investors $ 5.72
Pro forma net tangible book value after this offering $ 5.67
Dilution to new investors $ 2.33
Our pro forma net tangible book value after this offering has been reduced
by approximately $11,514,240 because if we effect a business combination, the
conversion rights to the public 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 fund calculated 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 sets forth information with respect to our existing
stockholders and the new investors:
SHARES PURCHASED TOTAL CONSIDERATION
---------------- ------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
Existing stockholders................... 2,000,000 20.0% $ 25,000 0.001% $0.0125
New investors (1)....................... 8,000,000 80.0% $64,000,000 99.999% $ 8.00
---------- ---------- ----------- ----------
10,000,000 100.0% $64,025,000 100%
- ---------------
(1) Assumes the sale of 8,000,000 units in this offering, but not the exercise
of 8,000,000 warrants to
purchase shares of our common stock sold as part of such units.
24
CAPITALIZATION
The following table sets forth our capitalization at April 30, 2005 and as
adjusted to give effect to the sale of our units and the application of the
estimated net proceeds derived from the sale of our units:
APRIL 30, 2005
--------------
AS
ACTUAL ADJUSTED
-------- -----------
Notes payable, existing stockholders (1) ............. $175,000 --
Common stock, $.0001 par value, -0- and 1,599,200
shares which are subject to possible conversion,
shares at conversion value (2)...................... $ -- $11,514,240
Stockholders' equity:
Preferred stock, $.0001 par value, 1,000,000 shares
authorized; none issued or outstanding.............. $ -- --
Common stock, $.0001 par value, 100,000,000 shares
authorized; 2,000,000 shares issued and outstanding;
8,400,800 shares issued and outstanding (excluding
1,599,200 shares subject to possible conversion), as
adjusted (3)........................................ $ 150 $ 840
Additional paid-in capital $ 24,850 $47,629,970
Deficit accumulated during the development stage (3) $ (2,500) $ (2,550)
Total stockholders' equity......................... $ 22,500 $47,628,260
Total capitalization............................... $197,500 $59,142,500
- ---------------
(1) Notes payable, existing stockholders, are payable on the earlier of
April 28, 2006 or the consummation of this offering.
(2) If we consummate a business combination, the conversion rights afforded to
our public stockholders may result in the conversion into cash
(approximately $11,514,240) of up to approximately 19.99% of the aggregate
number of shares (approximately 1,599,200 shares) sold in this offering at
a per-share conversion price equal to the amount in the trust fund ($7.20
per share), inclusive of any interest thereon, as of two business days
prior to the proposed consummation of a business combination divided by the
number of shares sold in this offering.
(3) As adjusted to include the effect of a .333333 to 1 stock dividend paid on
July 8, 2005.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We were formed on April 25, 2005, to serve as a vehicle to acquire one or
more domestic or international assets or an operating business in the
healthcare industry, through a merger, capital stock exchange, asset
acquisition or other similar business combination. 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:
o may significantly reduce the equity interest of our stockholders;
o 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 may
also result in the resignation or removal of one or more of our present
officers and directors; and
o may adversely affect prevailing market prices for our common stock.
Similarly, if we issued debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues after a
business combination were insufficient to pay our debt obligations;
o acceleration of our obligations to repay the indebtedness even if we have
made all principal and interest payments when due if the debt security
contained covenants that required the maintenance of certain financial
ratios or reserves and any such covenant were breached without a waiver
or renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any, if
the debt security was payable on demand; and
o our inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to obtain additional
financing while such security was 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 $1,040,000, including $640,000
evidencing the underwriters' non-accountable expense allowance of 1% of the
gross proceeds, and underwriting discounts of approximately $3,840,000 (or
$4,416,000 if the underwriters' over-allotment option is exercised in full),
will be approximately $59,120,000 (or $68,144,000 if the underwriters' over-
allotment option is exercised in full). Of this amount, $57,600,000, or
$66,414,000 if the underwriters' over-allotment option is exercised in full,
will be held in trust and the remaining $1,520,000 (or $1,730,000 if the
underwriters' over-allotment option is exercised in full) will not be held in
trust. We will use substantially all of the net proceeds of this offering to
acquire a target business, including identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating the business combination. 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 fund as well as any other
net proceeds not expended will be used to finance the operations of the target
business. We believe that, upon consummation of this offering, the funds
available to us outside of the trust fund 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 anticipate
approximately $200,000 of expenses for legal, accounting and other expenses
attendant to the due diligence investigations, structuring and negotiating of
a business combination, $180,000 for administrative services and support
payable to affiliated third parties (up to $7500 per month for 24 months),
$600,000 of expenses for the due diligence and investigation of a target
business, $40,000 of expenses in legal and accounting fees relating to our SEC
reporting obligations and $500,000 for general working capital that will be
used for miscellaneous expenses and reserves. 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
26
through a private offering of debt or equity securities if such funds are
required to consummate a business combination that is presented to us. We
would only consummate such a fund raising simultaneously with the consummation
of a business combination.
As of the date of this prospectus,Mr. Pappajohn, Dr. Schaffer and Mr. Kinley
have loaned us a total of $175,000 which was used to pay a portion of the
expenses of this offering, such as SEC registration fees, NASD registration
fees and legal and accounting fees and expenses. These loans will be payable
without interest on the earlier of April 28, 2006 or the consummation of this
offering. The loans will be repaid out of the net proceeds of this offering
not being placed in trust.
27
PROPOSED BUSINESS
INTRODUCTION
We are a blank check company organized under the laws of the State of
Delaware on April 25, 2005 and formed to serve as a vehicle for the
acquisition of one or more domestic or international assets or an operating
business in the healthcare industry. We do not have any specific merger,
capital stock exchange, asset acquisition or other business combination under
consideration or contemplation and we have not, nor has anyone on our behalf,
contacted any potential target business or had any discussions, formal or
otherwise, with respect to such a transaction.
OVERVIEW
The healthcare industry constitutes one of the largest segments of the
United States economy. According to the Centers for Medicare and Medicaid
Services, or CMS, healthcare expenditures have increased from $245.8 billion
in 1980 to a forecasted $1.9 trillion in 2005, representing a Compound Annual
Growth Rate, or CAGR, of 9%. Further, in 2003, approximately 64% of total
healthcare expenditures were spent on the following categories: hospital care
(31%), physician and clinical services (23%) and prescription drugs (10%). In
2003, healthcare expenditures totaled $1.7 trillion (or $5,800 per American)
and accounted for 15.3% of Gross Domestic Product, or GDP, which outpaced
overall economic growth by 3%. In the future, national health expenditures are
projected to reach $3.6 trillion by 2014, representing a CAGR of 7.4% over the
next ten years. Health spending is projected to reach 18.7% of GDP by 2014.
Funding for healthcare comes from public and private sources. Medicaid and
Medicare programs were created in the mid 1960's. Medicare focuses on elderly
coverage (over 65 years old) and the disabled of any age. Medicaid provides
coverage for the poor and indigent population and is jointly funded by the
Federal and State governments. In 2002, according to CMS, roughly 34% of
healthcare payments came from Medicaid and Medicare. Private health insurance
supports roughly 35% of total costs. As healthcare costs rise, the private
sector is responding by shifting more of the cost of healthcare to employees
by paying a smaller percent of healthcare premiums. The employee, usually in
the form of a payroll deduction, must pay the amount of the premium not funded
by the employer. However, according to the U.S. Census Bureau, approximately
40 million Americans were uninsured in 2003.
Our management believes that, as a result of continued growth, there will be
numerous acquisition targets within the healthcare sector. Our management
believes that this growth will be driven by the following factors:
o EXPANDING AND AGING POPULATION. According to U.S. Census Bureau
estimates, in 2005 the American population is approximately 296 million
and growing. Simultaneously, we are witnessing the "graying of America",
whereby the elderly population is increasing more rapidly than the rest
of the population and represents the largest users of healthcare
services. According to the U.S. Census Bureau, approximately 12% of the
U.S. population was over-65 in 2003 and was forecasted to account for
roughly 20% of the population by 2030. By 2010, the number of people in
the United States between the ages of 40 and 60 is expected to grow from
roughly 58 million to more than 64 million.
o EVOLVING MEDICAL TREATMENTS. Advances in technology have favorably
impacted the development of new medical devices and treatments/therapies.
The products are generally more effective and easier-to-use. Some of
these breakthroughs have reduced hospital stays, costs and recovery
periods. The continued advancement of technological breakthroughs should
continue to boost services administered by healthcare providers.
o INCREASED CONSUMER AWARENESS. In recent years, the publicity associated
with new technological advances and new medical therapies has increased
the number of patients visiting healthcare professionals to seek
treatment for new and innovative therapies. Simultaneously, consumers
have become more vocal due to rising costs and reduced access to
physicians. Lastly, the rise in cosmetic procedures has emerged as one of
the fastest growing healthcare segments. Since many cosmetic procedures
require out-of-pocket expenditures, this rise may reflect a growing
willingness by
28
consumers to pay for certain procedures out of their discretionary funds.
We believe that more active and aware consumers will continue to
stimulate a wide variety of healthcare segments.
o ACCESS TO CAPITAL. The venture capital community has traditionally
embraced healthcare companies. Capital investments have allowed entities
to grow and expand via consolidation or organic growth. Therefore, we
believe there are many mature companies that may potentially serve as
platforms for future acquisitions and growth. According to Dow Jones
VentureSource, 2,142 healthcare companies raised venture capital
financing rounds from 2001-2004. In that time period, 66 venture-backed
healthcare companies completed initial public offerings and 194 venture-
backed healthcare companies were acquired via merger and acquisition.
Although we may consider a target business in any segment of the healthcare
industry, we intend to concentrate our search for an acquisition candidate in
the following segments:
o healthcare services;
o healthcare information technology;
o healthcare facilities; and
o medical devices and products.
OUR MANAGEMENT TEAM
Mr. Pappajohn, our chairman and secretary, has been an active private equity
investor in healthcare companies for more than 30 years and has served as a
director of more than 40 public companies. Mr. Pappajohn has been a founder in
several public healthcare companies such as Caremark Rx, Inc., Quantum Health
Resources and Radiologix, Inc. Mr. Pappajohn and Dr. Schaffer, our vice
chairman and chief executive officer, have worked together for more than
fifteen years on a variety of healthcare companies and have co-founded Allion
Healthcare, Inc, Patient Infosystems, Inc. and Radiologix all of which are
public companies. In addition, Mr. Pappajohn and Dr. Schaffer have worked
together on many private healthcare companies, such as Logisticare, Inc. and
Source Medical Corporation.
Dr. Schaffer serves as a director of Allion Healthcare and Patient
InfoSystems. He has served as chairman of several healthcare companies,
including Radiologix when it was private. He has been an active co-investor
and co-founder of companies with Mr. Pappajohn for more than fifteen years.
Dr. Schaffer has also served as a director on many healthcare boards,
including several health systems and more than ten healthcare services and
technology companies. Dr. Schaffer is also currently a Clinical Professor of
Radiology at Weill Cornell Medical College.
Mr. Kinley, our president and treasurer, has been involved in the financing
and development of more than twenty companies with Mr. Pappajohn in the past
ten years. Mr. Kinley has worked with Dr. Schaffer for more than ten years on
healthcare services and technology companies. Mr. Kinley has also held various
positions at KPMG Peat Marwick, working on tax, audit and merger and
acquisition issues.
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 generally applied toward effecting a business combination
as described in this prospectus, the proceeds are not otherwise being
designated for any more specific purposes. Accordingly, prospective investors
will invest in us without 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,
29
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
To date, we have not selected any target business on which to concentrate
our search for a business combination. None of our officers, directors,
promoters or other affiliates have had any preliminary contact or discussions
on our behalf with representatives of any prospective target business
regarding the possibility of a potential merger, capital stock exchange, asset
acquisition or other similar business combination with us. Other than
reviewing several industry reports, including those published by CMS, in order
to define the healthcare industry, neither we nor any of our agents or
affiliates has yet taken any measure, directly or indirectly, to locate a
target business. Finally, we note that there has been no diligence,
discussions, negotiations and/or other similar activities undertaken, directly
or indirectly, by us, our affiliates or representatives, or by any third
party, with respect to a business combination transaction with us.
Subject to the limitation that a target business have 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. 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.
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, who may
present solicited or unsolicited proposals. Our officers and directors as well
as their affiliates may also bring to our attention target business
candidates. While we do not presently anticipate engaging the services of
professional firms that specialize in business acquisitions on any formal
basis, we may engage these firms in the future, in which event we may pay a
finder's fee or other compensation. In no event, however, will we pay any of
our existing officers, directors or stockholders or any entity with which they
are affiliated any finder's fee or other compensation for services rendered to
us prior to or in connection with the consummation of a business combination.
We will not enter into any business combinations with any affiliates of our
initial stockholders, officers or directors.
Selection of a target business and structuring of a business combination
Subject to the requirement that our initial business combination must be
with a target business with a fair market value that is at least 80% of our
net assets at the time of such acquisition, our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target
business. In evaluating a prospective target business, (including any such
target business that may have international operations or assets) our
management will consider, among other factors, the following:
o financial condition and results of operation;
o growth potential;
o experience and skill of management and availability of additional
personnel;
o capital requirements;
30
o competitive position;
o barriers to entry into other industries;
o stage of development of the products, processes or services;
o degree of current or potential market acceptance of the products,
processes or services;
o proprietary features and degree of intellectual property or other
protection of the products, processes or services;
o regulatory environment of the industry; and
o 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, where applicable, and inspection
of facilities, as well as review of financial and other information which will
be made available to us.
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. While we may pay fees or compensation to third parties for their
efforts in introducing us to a potential target business, in no event,
however, will we pay any of our existing officers, directors or stockholders
or any entity with which they are affiliated any finder's fee or other
compensation for services rendered to us prior to or in connection with the
consummation of a business combination, other than the $7,500 payable monthly
in the aggregate to Equity Dynamics, Inc. and The Lan Group for office space
and certain general and administrative services. In addition, none of our
officers, directors, special advisors or existing stockholders will receive
any finder's fee, consulting fees or any similar fees from any person or
entity in connection with any business combination involving us other than any
compensation or fees that may be received for any services provided following
such business combination.
Fair Market Value of Target Business
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. The
fair market value of such business 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 which is a member of the
National Association of Securities Dealers, Inc. 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 has sufficient fair market value.
Probable lack of business diversification
While we may seek to effect business combinations with more than one target
business, our initial business combination must be with a target business
which satisfies the minimum valuation standard at the time of such
acquisition, as discussed above. Consequently, it is probable that we will
have the ability to effect only a single business combination. Accordingly,
the prospects for our ability to execute any potential business plan 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
31
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:
o 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
o result in our dependency upon the development or market acceptance of a
single or limited number of products, processes or services.
Additionally, since our business combination may entail the simultaneous
acquisitions of several assets or operating businesses at the same time and
may be with different sellers, we will need to convince such sellers to agree
that the purchase of their assets or closely related businesses is contingent
upon the simultaneous closings of the other acquisitions.
Limited ability to evaluate the target business' management
Although we expect most of our management and other key personnel,
particularly our chairman of the board, chief executive officer and president,
to remain associated with us following a business combination, they may be
involved in different capacities than at present, and we may employ other
personnel following the business combination. Although we intend to closely
scrutinize such individuals, we cannot assure you that our assessment will
prove to be correct. In addition, we cannot assure you that new members that
join our management following a business combination will have the necessary
skills, qualifications or abilities to help manage a public company.
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 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,
which, among other matters, will include a description of the operations of
the target business and certain required financial information regarding 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 shares of common stock owned by them
immediately prior to this offering 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, if any, or purchased following this offering in the open market by
any of our existing stockholders, officers and directors, and with respect to
shares so acquired by existing stockholders, the existing stockholders may
vote against a proposed business combination and exercise their conversion
rights in the event that the business combination transaction is approved.. 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 exercise their conversion rights. Voting against
the business combination alone will not result in conversion of a
stockholder's shares into a pro rata share of the trust fund. Such stockholder
must have also exercised its conversion rights described below.
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.
The actual per-share conversion price will be equal to the amount in the trust
fund, 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
earned on the trust fund, the
32
initial per-share conversion price would be $7.20 or $0.80 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 fund still have the right to exercise the warrants that
they received as part of the units. We will not complete any business
combination if public stockholders, owning 20% or more of the shares sold in
this offering, exercise their conversion rights.
Because the initial per share conversion price is $7.20 per share (plus any
interest), which is lower than the $8.00 per unit price paid in the offering
and, which may be lower than the market price of the common stock on the date
of the conversion, there may be a disincentive on the part of public
stockholders to exercise their conversion rights. The term public stockholders
means the holders of common stock sold as part of the units in this offering
or in the open market, including any existing stockholders to the extent that
they purchase or acquire such shares.
Liquidation if no business combination
If we do not complete a business combination within 18 months after the
consummation of this offering, or within 24 months if the extension criteria
described below have been satisfied, we will be dissolved and 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 fund, inclusive
of any interest, plus any remaining net assets. Our existing stockholders have
waived their rights to participate in any liquidation distribution with
respect to shares of common stock owned by them immediately prior to this
offering. There will be no distribution from the trust fund with respect to
our warrants, which will expire worthless.
If we were to expend all of the net proceeds of this offering, other than
the proceeds deposited in the trust fund, and without taking into account
interest, if any, earned on the trust fund, the initial per-share liquidation
price would be $7.20 or $0.80 less than the per-unit offering price of $8.00.
The proceeds deposited in the trust fund could, however, become subject to the
claims of our creditors which could be prior to the claims of our public
stockholders. We cannot assure you that the actual per-share liquidation price
will not be less than $7.20, plus interest, due to claims of creditors. Our
chairman and all of our executive officers have agreed pursuant to agreements
with us and Maxim Group LLC that, if we distribute the proceeds held in trust
to our public stockholders, they will be personally liable under certain
circumstances (for example, if a vendor does not waive any rights or claims to
the trust fund) to pay debts and obligations to vendors or other entities that
are owed money by us for services rendered or products sold to us in excess of
the net proceeds of this offering not held in the trust account, to the extent
necessary to ensure that such claims do not reduce the amount in the trust
account. We cannot assure you, however, that they would be able to satisfy
those obligations.
If we enter into either a letter of intent, an agreement in principle or a
definitive agreement to complete a business combination prior to the
expiration of 18 months after the consummation of this offering, but are
unable to complete the business combination within the 18-month period, then
we will have an additional six months in which to complete the business
combination contemplated by the letter of intent, agreement in principle or
definitive agreement. If we are unable to do so by the expiration of the 24-
month period from the consummation of this offering, we will then liquidate.
Upon notice from us, the trustee of the trust fund will commence liquidating
the investments constituting the trust fund and will turn over the proceeds to
our transfer agent for distribution to our public stockholders. We anticipate
that our instruction to the trustee would be given promptly after the
expiration of the applicable 18-month or 24-month period.
Our public stockholders shall be entitled to receive funds from the trust
fund only in the event of our liquidation or if the stockholders seek to
convert their respective shares into cash upon a business combination which
the stockholder voted against and which is actually completed by us. In no
other
33
circumstances shall a stockholder have any right or interest of any kind to or
in the trust fund. Voting against the business combination alone will not
result in conversion of a stockholder's shares into a pro rata share of the
trust fund. Such stockholder must have also exercised its conversion rights
described above.
COMPETITION FOR TARGET BUSINESSES
In identifying, evaluating and selecting a target business, we may encounter
intense competition from other entities having a business objective similar to
ours. 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 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 a target business. Further:
o our obligation to seek stockholder approval of a business combination or
obtain the necessary financial information to be included in the proxy
statement to be sent to stockholders in connection with such business
combination may delay or prevent the completion of a transaction;
o our obligation to convert into cash shares of common stock held by our
public stockholders in certain instances may reduce the resources
available to us for a business combination;
o our outstanding warrants and options, and the future dilution they
potentially represent, may not be viewed favorably by certain target
businesses; and
o the requirement to acquire assets or an operating business that has a
fair market value equal to at least 80% of our net assets at the time of
the acquisition could require us to acquire several assets or closely
related operating businesses at the same time, all of which sales would
be contingent on the closings of the other sales, which could make it
more difficult to consummate the business combination.
Additionally, we face competition from other blank-check companies which
have formed recently, a number of which may consummate a business combination
in any industry they choose. We may therefore be subject to competition from
these companies, which are seeking to consummate a business plan similar to
ours and which will, as a result, increase demand for privately-held companies
to combine with companies structured similarly to ours. Further, the fact that
only one of such companies has completed a business combination and three of
such companies have entered into a definitive agreement for a business
combination may be an indication that there are only a limited number of
attractive target businesses available to such entities or that many
privately-held target businesses may not be inclined to enter into business
combinations with publicly held blank check companies like us.
Any of these factors may place us at a competitive disadvantage in
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 us in acquiring a target
business with significant growth potential on favorable terms.
If we effect 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 executive offices at 2116 Financial Center, 666 Walnut
Street, Des Moines, Iowa 50309. We have agreed to pay Equity Dynamics, Inc.,
an affiliated third party of which Mr. Pappajohn is the President and
principal stockholder, and Mr. Kinley a Senior Vice President, approximately
$6,000 per month for office space (located at our executive offices) and
certain additional general and administrative services, such as an allocable
share of receptionist, secretarial and general office services. These offices
consist of
34
approximately 2,570 square feet of office space. We have also agreed to pay
another affiliated third party, The Lan Group, of which Dr. Schaffer is the
sole owner, approximately $1,500 per month for office space (located in
Rochester, New York) and certain additional general and administrative
services, such as an allocable share of receptionist, secretarial and general
office services.
We consider our current office space adequate for our current operations.
EMPLOYEES
We have three officers, all of whom are also members of our board of
directors. These individuals are not obligated to contribute any specific
number of hours per week and intend to devote only as much time as they deem
necessary to our affairs. The amount of time they will devote in any time
period will vary based on the availability of suitable target businesses to
investigate, although we expect such individuals to devote an average of
approximately ten 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 FINANCIAL INFORMATION
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 and quarterly 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 accountants.
We will not acquire an operating business in the healthcare industry if
audited financial statements based on United States generally accepted
accounting principles cannot be obtained for such target business.
Alternatively, we will not acquire assets if the financial information called
for by applicable law cannot be obtained for such assets. Additionally, our
management will provide stockholders with the foregoing financial information
as part of the proxy solicitation materials sent to stockholders to assist
them in assessing each specific target business or assets we seek to acquire.
Our management believes that the requirement of having available financial
information for the target business or assets may limit the pool of potential
target businesses or assets available for acquisition.
LEGAL PROCEEDINGS
To the knowledge of our management, there is no litigation currently pending
or contemplated against us or any of our officers or directors in their
capacity as such.
35
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.
TERMS OF OUR OFFERING TERMS UNDER A RULE 419 OFFERING
--------------------- -------------------------------
ESCROW OF OFFERING $57,600,000 of the net offering proceeds will $53,219,348 would be required to be deposited
PROCEEDS be deposited into a trust account at JP Morgan into either an escrow account with an insured
Chase NY Bank maintained by Continental Stock depositary institution or in a separate bank
Transfer & Trust Company. account established by a broker-dealer in
which the broker-dealer acts as trustee for
persons having the beneficial interests in the
account.
INVESTMENT OF NET The $57,600,000 of net offering proceeds held Proceeds could be invested only in specified
PROCEEDS in trust will only be invested in U.S. securities such as a money market fund meeting
"government securities," defined as any conditions of the Investment Company Act of
Treasury Bill issued by the United States 1940 or in securities that are direct
having a maturity of one hundred and eighty obligations of, or obligations guaranteed as
days or less. to principal or interest by, the United
States.
LIMITATION ON FAIR VALUE The initial target business that we acquire We would be restricted from acquiring a target
OR NET ASSETS OF TARGET must have a fair market value equal to at business unless the fair value of such
BUSINESS least 80% of our net assets at the time of business or net assets to be acquired
such acquisition. represent at least 80% of the maximum offering
proceeds.
TRADING OF SECURITIES The units shall commence trading on or No trading of the units or the underlying
ISSUED promptly after the date of this prospectus. common stock and warrants would be permitted
The common stock and warrants comprising the until the completion of a business
units shall begin to trade separately on the combination. During this period, the
90th day after the date of this prospectus securities would be held in the escrow or
unless Maxim Group LLC informs us of its trust account.
decision to allow earlier separate trading,
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.
Thereafter the units will no longer trade.
36
TERMS OF OUR OFFERING TERMS UNDER A RULE 419 OFFERING
--------------------- -------------------------------
EXERCISE OF THE WARRANTS The warrants cannot be exercised until the The warrants could be exercised prior to the
later of the completion of a business completion of a business combination, but
combination or one year from the date of this securities received and cash paid in
prospectus and, accordingly, will only be connection with the exercise would be
exercised after the trust fund has been deposited in the escrow or trust account.
terminated and distributed.
ELECTION TO REMAIN AN We will give our stockholders the opportunity A prospectus containing information required
INVESTOR to vote on the business combination. In by the SEC would be sent to each investor.
connection with seeking stockholder approval, Each investor would be given the opportunity
we will send each stockholder a proxy to notify the company, in writing, within a
statement containing information required by period of no less than 20 business days and no
the SEC. A stockholder following the more than 45 business days from the effective
procedures described in this prospectus is date of the post-effective amendment, to
given the right to convert his or her shares decide whether he or she elects to remain a
into his or her pro rata share of the trust stockholder of the company or require the
fund. However, a stockholder who does not return of his or her investment. If the
follow these procedures or a stockholder who company has not received the notification by
does not take any action would not be entitled the end of the 45th business day, funds and
to the return of any funds. 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.
BUSINESS COMBINATION A business combination must occur within 18 If an acquisition has not been consummated
DEADLINE months after the consummation of this offering within 18 months after the effective date of
or within 24 months after the consummation of the initial registration statement, funds held
this offering if a letter of intent or in the trust or escrow account would be
definitive agreement relating to a prospective returned to investors.
business combination was entered into prior to
the end of the 18-month period.
RELEASE OF FUNDS The proceeds held in the trust account will The proceeds held in the escrow account would
not be released until the earlier of the not be released until the earlier of the
completion of a business combination or our completion of a business combination or the
liquidation upon our failure to effect a failure to effect a business combination
business combination within the allotted time. within the allotted time.
37
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our current directors and executive officers are as follows:
NAME AGE POSITION
---- --- --------
John Pappajohn ..................................... 76 Chairman and Secretary
Derace L. Schaffer, M.D. ........................... 57 Vice-Chairman and Chief Executive Officer
Matthew P. Kinley .................................. 37 President, Treasurer and Director
Edward B. Berger ................................... 76 Director
Wayne A. Schellhammer .............................. 52 Director
JOHN PAPPAJOHN has served as our chairman and secretary since April 2005.
Since 1969, Mr. Pappajohn has been the President and principal stockholder of
Equity Dynamics, Inc., a financial consulting firm, and the sole owner of
Pappajohn Capital Resources, a venture capital firm. He also serves as a
director of the following public companies: Allion Healthcare, Inc., MC
Informatics, Inc., PACE Health Management Systems, Inc. and Patient
InfoSystems, Inc. Mr. Pappajohn has been an active private equity investor in
healthcare companies for more than 30 years and has served as a director of
more than 40 public companies. Mr. Pappajohn has been a founder in several
public healthcare companies such as Caremark Rx, Inc., Quantum Health
Resources, and Radiologix, Inc. Mr. Pappajohn and Dr. Schaffer have worked
together for more than fifteen years on a variety of healthcare companies, and
they have co-founded Allion Healthcare, Inc., Patient Infosystems, Inc., and
Radiologix, Inc., all of which are public companies. In addition, Mr. Pappajohn
and Dr. Schaffer have worked together on many private healthcare companies,
such as Logisticare, Inc. and Source Medical Corporation. Mr. Pappajohn
received his B.S.C. from the University of Iowa.
DERACE L. SCHAFFER, M.D. has served as our vice chairman and chief executive
officer since April 2005. Dr. Schaffer is the founder and CEO of The Lan
Group, a venture capital firm specializing in healthcare and high technology
investments. He serves as a director of Allion Healthcare, Inc. and Patient
InfoSystems, Inc., both public companies. He has served as chairman of several
healthcare companies including, Radiologix, Inc when it was private. He has
been an active co-investor with Mr. Pappajohn for more than fifteen years on a
variety of healthcare companies, and they have co-founded Allion Healthcare,
Patient Infosystems and Radiologix, all of which are public companies. In
addition, Mr. Pappajohn and Dr. Schaffer have worked together on many private
healthcare companies, such as Logisticare, Inc. and Source Medical
Corporation. Dr. Schaffer served as chief executive officer and chairman of
the board of Ide Imaging Group, P.C. from 1980 to 2001. Dr. Schaffer has
served as a director on many healthcare boards of directors including several
health systems and more than ten healthcare services and technology companies.
Dr. Schaffer received his postgraduate radiology training at Harvard Medical
School and Massachusetts General Hospital, where he served as Chief Resident.
Dr. Schaffer is currently also a Clinical Professor of Radiology at Weill
Cornell Medical College.
MATTHEW P. KINLEY has served as our president, treasurer and a director
since April 2005. Since 1995, he has served as Senior Vice President of Equity
Dynamics, Inc., a financial consulting firm, and Pappajohn Capital Resources,
a venture capital firm, both owned by John Pappajohn. Mr. Kinley has been
involved in the financing and development of more than 20 companies with
Mr. Pappajohn in the past ten years. Mr. Kinley has worked with Dr. Schaffer
for more than ten years on healthcare services and technology companies. From
1990 through 1995, Mr. Kinley was manager and held various positions at KPMG
Peat Marwick, working on tax, audit and merger and acquisition issues.
Mr. Kinley received his B.A. in Business, with highest honors, from the
University of Northern Iowa in May 1990.
EDWARD B. BERGER has served as a director since April 2005. Mr. Berger is
currently a member of the Board, on the Audit Committee and Finance Committee
of Patient InfoSystems, Inc., a public company. He is Chairman and Chief
Executive Officer of Equity Acquisitions Incorporated, a position he has held
since January 2004, Chairman of the Board of Directors of Southwest Business
Systems, Chairman and CEO of Berger Equities Inc., director and Chairman of
the Audit Committee of CardSystems Solutions and a director
38
of Compass Bank of Tucson, AZ., a public company. Mr. Berger has extensive
healthcare experience: past President and CEO of Palo Verde Hospital; past
President and member of the Board of Trustees of Kino Community Hospital; past
member of the Long Range Planning Committee of Tucson Medical Center, all in
Tucson, AZ. Mr. Berger is currently an Adjunct Professor in Political Science
at Pima Community College and is the Chairman of the MBA Advisory Council,
Eller Graduate School of Management at the University of Arizona. He has been
admitted to practice law before the U.S. Supreme Court, U.S. Court of Appeals
for the 9th Circuit and the U.S. District Court-Arizona. He is admitted to the
New York Bar, the Arizona Bar and the District of Columbia Bar. Mr. Berger
received his Juris Doctor degree from New York Law School. Mr. Berger is a
member of both our Audit Committee and our Nominating Committee.
WAYNE A. SCHELLHAMMER has served as a director since June 2005.
Mr. Schellhammer is Chairman and Chief Executive Officer of American Care
Source Holdings, Inc., a private company, a position he has held since October
of 2004. He served as President and CEO of Iowa Health Physicians, an
affiliate of the Iowa Health System, for five years, as President and CEO of
InTrust for five years and as Vice President of Physician Services and Payer
Contracting for the Iowa Health System, a hospital and physician integrated
health system, for five years. Mr. Schellhammer has also held senior executive
positions with KPMG Consulting (now BearingPoint) for two years, Wellcare of
New York, a subsidiary of a public company, Wellcare HealthPlans, Inc., for
five years, as well as a national cardiac consulting firm. He has spent a
total of 30 years in the healthcare industry and is a graduate of the
University of Minnesota. Mr. Schellhammer is a member of both our Audit
Committee and our Nominating Committee.
Our board of directors is divided into two classes with only one class of
directors being elected in each year and each class serving a two-year term.
The term of office of the first class of directors, consisting of Mr. Berger
and Mr. Schellhammer, will expire at our first annual meeting of stockholders.
The term of office of the second class of directors, consisting of
Mr. Pappajohn, Dr. Schaffer and Mr. Kinley, will expire at the second annual
meeting.
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. None of these
individuals has been a principal of or affiliated with a public company or
blank check company that executed a business plan similar to our business plan
and none of these individuals is currently affiliated with such an entity.
However, we believe that the skills and expertise of these individuals, their
collective access to acquisition opportunities and ideas, their contacts, and
their transaction expertise should enable them to identify and effect an
acquisition although we cannot assure you that they will, in fact, be able to
do so.
DIRECTOR INDEPENDENCE
Our board of directors has determined that Mr. Berger and Mr. Schellhammer
are "independent directors" as defined in the American Stock Exchange listing
standards and Rule 10A-3 of the Exchange Act. We intend to locate and appoint
at least two additional independent directors to serve on the board of
directors and one additional independent director to serve on each of our
audit committee and nominating committee within one year of the completion of
this offering.
BOARD COMMITTEES
Our board of directors has established an audit committee and a nominating
committee. Our board of directors has adopted charters for these committees,
as well as a code of conduct and ethics that governs the conduct of our
directors, officers and employees.
Audit Committee
Our audit committee currently consists of Mr. Berger and Mr. Schellhammer.
The independent directors we appoint to our audit committee will each be an
independent member of our board of directors, as defined by the rules of the
American Stock Exchange and the SEC. Each member of our audit committee will
be financially literate under the current listing standards of the American
Stock Exchange, and our board of directors has determined that Mr. Berger
qualifies as an "audit committee financial expert," as such term is
39
defined by SEC rules. We intend to locate and appoint at least one additional
independent director on our audit committee within one year of the completion
of this offering.
The audit committee will review the professional services and independence
of our independent registered public accounting firm and our accounts,
procedures and internal controls. The audit committee will also recommend the
firm selected to be our independent registered public accounting firm, review
and approve the scope of the annual audit, review and evaluate with the
independent public accounting firm our annual audit and annual consolidated
financial statements, review with management the status of internal accounting
controls, evaluate problem areas having a potential financial impact on us
that may be brought to the committee's attention by management, the
independent registered public accounting firm or the board of directors, and
evaluate all of our public financial reporting documents.
Nominating Committee
We have established a nominating committee of the board of directors, which
consists of Mr. Berger and Mr. Schellhammer, each of whom is an independent
director as defined by the rules of the American Stock Exchange and the SEC.
The nominating committee is responsible for overseeing the selection of
persons to be nominated to serve on our board of directors. The nominating
committee considers persons identified by its members, management,
stockholders, investment bankers and others. We intend to locate and appoint
at least one additional independent director on our nominating committee
within one year of the completion of this offering.
The guidelines for selecting nominees, which are specified in the nominating
committee charter, generally provide that persons to be nominated should be
actively engaged in business endeavors, have an understanding of financial
statements, corporate budgeting and capital structure, be familiar with the
requirements of a publicly traded company, be familiar with industries
relevant to our business endeavors, be willing to devote significant time to
the oversight duties of the board of directors of a public company, and be
able to promote a diversity of views based on the person's education,
experience and professional employment. The nominating committee evaluates
each individual in the context of the board as a whole, with the objective of
recommending a group of persons that can best implement our business plan,
perpetuate our business and represent shareholder interests. The nominating
committee may require certain skills or attributes, such as financial or
accounting experience, to meet specific board needs that arise from time to
time. The nominating committee does not distinguish among nominees recommended
by stockholders and other persons.
CODE OF CONDUCT AND ETHICS
We have adopted a code of conduct and ethics applicable to our directors,
officers and employees in accordance with applicable federal securities laws
and the rules of the American Stock Exchange.
EXECUTIVE COMPENSATION
No executive officer has received any cash compensation for services
rendered. No compensation of any kind, including finder's and consulting fees,
will be paid to any of our existing stockholders, including our officers and
directors, or any of their respective affiliates, for services rendered prior
to or in connection with a business combination. However, these 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. If all of our
directors are not deemed "independent," we will not have the benefit of
independent directors examining the propriety of expenses incurred on our
behalf and subject to reimbursement.
We have agreed to pay Equity Dynamics, Inc., an affiliated third party of
which Mr. Pappajohn is the President and principal stockholder, and Mr. Kinley
a Senior Vice President, approximately $6,000 per month for office space and
certain additional general and administrative services. We have also agreed to
pay
40
another affiliated third party, The Lan Group, of which Dr. Schaffer is the
sole owner, approximately $1,500 per month for office space and certain
additional general and administrative services.
CONFLICTS OF INTEREST
Potential investors should be aware of the following potential conflicts of
interest:
o None of our officers or directors is required to commit their full time
to our affairs and, accordingly, they may have conflicts of interest in
allocating management time among various business activities.
o 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 us as well as the other entities
with which they are affiliated. They may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented. For a complete description of our management's other
affiliations, see the previous section entitled "Directors and Executive
Officers."
o 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.
o Since our directors own shares of our common stock which will be released
from escrow only in certain limited situations, our board may have a
conflict of interest in determining whether a particular target business
is appropriate to effect a business combination. The personal and
financial interests of our directors and officers may influence their
motivation in identifying and selecting a target business and completing
a business combination timely.
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:
o the corporation could financially undertake the opportunity;
o the opportunity is within the corporation's line of business; and
o it would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the corporation.
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 and directors has agreed
in principle, until the earlier of a business combination, our liquidation or
such time as he ceases to be an officer or director, to present to us 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 obligations they might
have.
Each of our directors has, or may come to have, to a certain degree, other
fiduciary obligations. In addition all of our officers and directors have
fiduciary obligations to those companies on whose board of directors they sit.
To the extent that they identify business opportunities that may be suitable
for the entities to which they owe a fiduciary obligation, our officers and
directors will honor those fiduciary obligations. Accordingly, they may not
present opportunities to us that otherwise may be attractive to us unless the
entities to which they owe a fiduciary obligation and any successors to such
entities have declined to accept such opportunities. Additionally, certain of
our directors and officers are directors of companies, both public and
private, which may perform business activities in the healthcare industry
similar to those which we may perform after consummating a business
combination. Mr. Pappajohn is a director of the following such public
companies: Patient InfoSystems, Inc. and Allion Healthcare, Inc., as well as
the following such private companies: American CareSource Holdings, Inc. and
Partners Imaging LLC. Dr. Schaffer is a director of the following such public
companies: Patient InfoSystems, Inc. and Allion Healthcare, Inc., as well as
the following such private companies: American CareSource Holdings, Inc.,
Partners Imaging LLC and CareCore
41
National, Inc. Mr. Berger is a director of the following such public company:
Patient InfoSystems, Inc. Mr. Schellhammer is a director of the following
private company: American CareSource Holdings, Inc.
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. Any shares
of common stock acquired by existing stockholders in the open market will be
considered as part of the holdings of public stockholders and will have the
same rights as other public stockholders, including voting and conversion
rights with respect to a potential business combination, and the existing
stockholders may thus vote against a proposed business combination with
respect to such shares. Accordingly, they may vote on a proposed business
combination with respect to shares acquired in the open market any way they so
choose. In addition, they have agreed to waive their respective rights to
participate in any liquidation distribution occurring upon our failure to
consummate a business combination but only with respect to those shares of
common stock acquired by them prior to this offering and not with respect to
any shares acquired in the open market.
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
stockholders from a financial point of view. We expect that any such opinion
will be included in our proxy solicitation materials, furnished to
stockholders in connection with their vote on such a business combination.
42
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of April 30, 2005, and as adjusted to reflect
the sale of our common stock included in the units offered by this prospectus
(assuming no purchase of units in this offering), as well as a stock dividend
of approximately .333333 per share for each share outstanding on July 8, 2005,
by:
o each person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock;
o each of our officers and directors; and
o all our officers and directors as a group.
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.
APPROXIMATE PERCENTAGE
OF OUTSTANDING COMMON
STOCK
------------------------
AMOUNT AND
NATURE OF
BENEFICIAL BEFORE THE AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP OFFERING OFFERING(2)
- --------------------------------------- ---------- ---------- -----------
John Pappajohn.................................................................. 784,000 39.20% 7.84%
Derace L. Schaffer, M.D......................................................... 784,000 39.20% 7.84%
Matthew P. Kinley............................................................... 392,000 19.60% 3.92%
Edward B. Berger................................................................ 20,000 1.00% .20%
Wayne A. Schellhammer........................................................... 20,000 1.00% .20%
All directors and executive officers as a group (four individuals).............. 2,000,000 100% 20%
- ---------------
(1) Unless otherwise indicated, the business address of each of the individuals
is 2116 Financial Center, 666 Walnut Street, Des Moines, Iowa 50309.
(2) Assumes only the sale of 8,000,000 units in this offering, but not the
exercise of the 8,000,000 warrants to purchase our common stock included in
such units.
John Pappajohn, our chairman and secretary, or his designees, has agreed to
purchase up to $1,000,000 of our warrants on the open market, at a price per
warrant not to exceed $1.20, within three months of such warrants being
separately tradeable. These warrants will not be sold until the consummation
of a business combination. None of our other existing stockholders, officers
and directors has indicated to us that they intend to purchase units in the
offering or warrants on the open market. 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. Because of this ownership block, these
stockholders may be able to effectively influence the outcome of 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 shares of our common stock outstanding prior to the date of this
prospectus will be placed in escrow with Continental Stock Transfer & Trust
Company, as escrow agent, until the earliest of:
o three years following the date of this prospectus; or
o the consummation of a 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 subsequent to our consummating a business combination with
a target business.
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
43
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 common stock owned by them prior to the date of this
prospectus.
Dr. Schaffer, Mr. Pappajohn and Mr. Kinley may be deemed to be our "parents"
and are deemed our "promoters," as these terms are defined under the Federal
securities laws.
44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 2005, we issued 1,500,000 shares of our common stock to the
individuals set forth below for an aggregate amount of $25,000 in cash, at an
average purchase price of approximately $0.0167 per share, as follows:
NAME NUMBER OF
- ---- SHARES RELATIONSHIP TO US
--------- ---------------------------------
John Pappajohn ................ 600,000 Chairman and Secretary
Derace L. Schaffer, M.D. ...... 600,000 Vice-Chairman and CEO
Matthew P. Kinley ............. 300,000 President, Treasurer and director
Further, in June 2005, Mr. Pappajohn, Dr. Schaffer and Mr. Kinley
transferred, for an aggregate consideration per share which they paid us and
pro rata to their ownership of our common stock, an aggregate of 30,000 shares
of our common stock equally to Mr. Berger and Mr. Schellhammer, such that our
current share ownership is as reflected in the section entitled "Principal
Stockholders".
On July 8, 2005, our board of directors authorized a stock dividend of
approximately .333333 shares of common stock for each outstanding share of
common stock, effectively lowering the purchase price to approximately $.0125
per share.
The holders of the majority of these shares will be entitled to require us,
on up to two occasions, to 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 after the date on which these shares of common stock are released
from escrow, which, except in limited circumstances, is not before three years
from the date of this prospectus. In addition, these stockholders have certain
"piggy-back" registration rights on registration statements filed subsequent
to the date on which these shares of common stock are released from escrow. We
will bear the expenses incurred in connection with the filing of any such
registration statements.
As of the date of this prospectus,Mr. Pappajohn, Dr. Schaffer and Mr. Kinley
have loaned us a total of $175,000 which was used to pay a portion of the
expenses of this offering, such as SEC registration fees, NASD registration
fees and legal and accounting fees and expenses. These loans will be payable
without interest on the earlier of April 28, 2006 or the consummation of this
offering. The loans will be repaid out of the net proceeds of this offering
not being placed in trust.
John Pappajohn, our chairman and secretary, or his designees, has agreed to
purchase up to $1,000,000 of our warrants on the open market, at a price per
warrant not to exceed $1.20, within three months of such warrants being
separately tradeable. These warrants will not be sold until the consummation
of a business combination. Maxim Group LLC has also agreed to purchase up to
$500,000 of our warrants on the open market on similar terms.
We have agreed to pay Equity Dynamics, Inc., an affiliated third party of
which Mr. Pappajohn is the President and principal stockholder, and Mr. Kinley
a Senior Vice President, approximately $6,000 per month for office space and
certain additional general and administrative services. We have also agreed to
pay another affiliated third party, The Lan Group, of which Dr. Schaffer is
the sole owner, approximately $1,500 per month for office space and certain
additional general and administrative services.
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
accountable 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.
Our existing stockholders, will not receive reimbursement for any out-of-
pocket expenses incurred by them to the extent that such expenses exceed the
amount in the trust fund unless the business combination is consummated and
there are sufficient funds available for reimbursement after such
consummation. The financial interest of such persons could influence their
motivation in selecting a target business and thus, there
45
may be a conflict of interest when determining whether a particular business
combination is in the stockholders' best interest.
Other than the reimbursable out-of-pocket expenses payable to our officers
and directors, no compensation or fees of any kind, including finders and
consulting fees, 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 for services rendered to us prior to or with
respect to the business combination.
After the consummation of a business combination, if any, to the extent our
management remains as officers of the resulting business, we anticipate that
our officers and directors may enter into employment agreements, the terms of
which shall be negotiated and which we expect to be comparable to employment
agreements with other similarly-situated companies in the healthcare industry.
Further, after the consummation of a business combination, if any, to the
extent our directors remain as directors of the resulting business, we
anticipate that they will receive compensation comparable to directors at
other similarly-situated companies in the healthcare industry.
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 than are
available from unaffiliated third parties and such transactions or loans,
including any forgiveness of loans, will require prior approval in each
instance 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.
46
DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue 100,000,000 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, 2,000,000 shares of common stock are outstanding,
held by five record holders. 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 shall begin to trade separately on the 90th day after the
date of this prospectus unless Maxim Group LLC informs us of its decision to
allow earlier separate trading, 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. Thereafter the units will no
longer trade as units. 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.
COMMON STOCK
Our stockholders are entitled to one vote for each share held of record 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 public stockholders. This voting arrangement
shall not apply to shares included in units purchased in this offering, if
any, or purchased following this offering in the open market 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 exercise their conversion rights discussed below.
Voting against the business combination alone will not result in conversion of
a stockholder's shares into a pro rata share of the trust fund. Such
stockholder must have also exercised its conversion rights described below.
Our board of directors is divided into two classes, each of which will
generally serve for a term of two 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 voted for the election of directors can elect all of the directors.
If we are forced to liquidate prior to a business combination, our public
stockholders are entitled to share ratably in the trust fund, inclusive of any
interest, and any net assets remaining available for distribution to them
after payment of liabilities. The term public stockholders means the holders
of common stock sold as part of the units in this offering or in the open
market, including any existing stockholders to the extent that they purchase
or acquire such shares. Our existing stockholders have agreed to waive their
respective rights to participate in any liquidation distribution occurring
upon our failure to consummate a business combination, but only with respect
to those shares of common stock acquired by them prior to this offering.
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 their
shares of common stock converted to cash equal to their pro rata share of the
trust fund 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 fund still have the right to exercise the
warrants that they received as part of the units.
47
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, although 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 fund, 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 included in the units
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:
o the completion of a business combination; or
o one year from the date of this prospectus.
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:
o in whole and not in part;
o at a price of $.01 per warrant at any time after the warrants become
exercisable;
o upon not less than 30 days' prior written notice of redemption to each
warrant holder; and
o if, and only if, the last sales 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.
We have established this last criterion to provide warrant holders with a
premium to the initial warrant exercise price as well as a degree of liquidity
to cushion the market reaction, if any, to our redemption call. If the
foregoing conditions are satisfied and we call the warrants for redemption,
each warrant holder shall then be entitled to exercise his or her warrant
prior to the date scheduled for redemption, however, there can be no assurance
that the price of the common stock will exceed the call trigger price or the
warrant exercise price after the redemption call is made.
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 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
48
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.
John Pappajohn, our chairman and secretary, or his designees, has agreed to
purchase up to $1,000,000 of our warrants on the open market, at a price per
warrant not to exceed $1.20, within three months of such warrants being
separately tradeable. These warrants will not be sold until the consummation
of a business combination. Maxim Group LLC has also agreed to purchase up to
$500,000 of our warrants in the open market on similar terms; however, Maxim
Group LLC may sell their warrants prior to the consummation of a business
combination.
PURCHASE OPTION
We have agreed to sell to the representative of the underwriters an option
to purchase up to a total of 400,000 units at $10.00 per unit. The warrants
issued in conjunction with these units will be exercisable at $7.50 per share.
Otherwise, the units issuable upon exercise of this option are identical to
those offered by this prospectus. For a more complete description of the
purchase option, see the section below entitled "Underwriting--Purchase
Option."
DIVIDENDS
We have not paid any dividends on our common stock to date and do not intend
to pay dividends prior to the completion of a business combination. The
payment of dividends in the future will be contingent 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 10,000,000 shares of common
stock outstanding, or 11,200,000 shares if the underwriters' over-allotment
option is exercised in full. Of these shares, the 8,000,000 shares sold in
this offering, or 9,200,000 shares if the over-allotment option is exercised
in full, 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 2,000,000 shares are restricted securities under Rule 144, in that
they were issued in private transactions not involving a public offering. None
of those will be eligible for sale under Rule 144 prior to April 25, 2006.
Notwithstanding this, all of those shares have been placed in escrow and will
not be transferable for a period of three years from the date of this
prospectus and will only be released prior to that
49
date subject to certain limited exceptions, such as our liquidation prior to a
business combination (in which case the certificate representing such shares
will be destroyed), and the consummation of a 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 subsequent to our consummating a business combination with a
target business.
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:
o 1% of the number of shares of common stock then outstanding, which will
equal 100,000 shares immediately after this offering (or 112,000 if the
underwriters' exercise their over-allotment option); and
o 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.
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 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, would act as an "underwriter" under the
Securities Act when reselling the securities of a blank check company.
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.
Registration Rights
The holders of our 2,000,000 issued and outstanding shares of common stock
on the date of this prospectus 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 shares are entitled to
require us, on up to two occasions, to register these shares. The holders of
the majority of these shares can elect to exercise these registration rights
at any time after the date on which these shares of common stock are released
from escrow. In addition, these stockholders have certain "piggy-back"
registration rights on registration statements filed subsequent to the date on
which these shares of common stock are released from escrow. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
50
UNDERWRITING
Maxim Group LLC is lead managing underwriter of the offering and is acting
as representative of the underwriters named below. Subject to the terms and
conditions in the underwriting agreement, each underwriter named below has
agreed to purchase from us, on a firm commitment basis, the respective number
of units shown opposite its name below, at the public offering price, less the
underwriting discount set forth on the cover page of this prospectus:
UNDERWRITER
----------- NUMBER OF UNITS
---------------
Maxim Group LLC ..............................................
---------
Total ........................................................ 8,000,000
The underwriting agreement provides that the underwriters are committed to
purchase all of the units offered by this prospectus if they purchase any of
the units. This commitment does not apply to the units subject to an over-
allotment option granted by us to the underwriters to purchase additional
units in this offering. The underwriting agreement also provides that the
obligations of the underwriters to pay for and accept delivery of the units
are subject to the passing upon of certain legal matters by counsel and
certain other conditions.
UNDERWRITING TERMS
Pursuant to the underwriting agreement, we have granted to the underwriters
an option, exercisable for 45 days after the date of this prospectus, to
purchase up to an additional 1,200,000 units from us on the same terms and at
the same per unit price as the other units being purchased by the underwriters
from us. The underwriters may exercise the option solely to cover over-
allotments, if any, in the units that the underwriters have agreed to purchase
from us. If the over-allotment option is exercised in full, the total public
offering price, underwriting discounts and commissions and proceeds to us
before expenses will be $[___], $[___] and $[___], respectively.
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
underwriters of their over-allotment option.
PER UNIT WITHOUT OPTION WITH OPTION
-------- -------------- -----------
Public offering price........................... $8.00 $64,000,000 $73,600,000
Discount (1).................................... $0.48 $ 3,840,000 $ 4,416,000
Non-accountable expense allowance(2)............ $0.08 $ 640,000 $ 640,000
Proceeds before expenses(3)..................... $7.44 $59,520,000 $68,448,000
- ---------------
(1) Consists of an underwriting discount of 6% of the gross proceeds of this
offering (including any units sold to cover overallotments). Does not
include an additional underwriting discount in the amount of 1% of the
gross proceeds of this offering (including any units sold to cover
overallotments), payable out of the funds held in trust upon consummation
of a business combination.
(2) The 1% non-accountable expense allowance is not payable with respect to the
units sold upon exercise of the underwriters' over-allotment option.
(3) The offering expenses are estimated at $400,000.
We have agreed to sell the units to the underwriters at the initial public
offering price less the underwriting discount set forth on the cover page of
this prospectus. The underwriting agreement also provides that the
representative of the underwriters will be paid a non-accountable expense
allowance equal to 1% of the gross proceeds from the sale of the units offered
by this prospectus ($50,000 of which has been previously advanced to Maxim),
exclusive of any units purchased on exercise of the over-allotment option. In
the event the offering is terminated, Maxim Group LLC will return to us the
amount previously advanced by us less Maxim Group LLC's actual out-of-pocket
expenses incurred in connection with the offering.
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We estimate that the total expenses of the offering payable by us, not
including underwriting discounts, commissions, the non-accountable expense
allowance and not taking into consideration the underwriters' over-allotment
option, will be approximately $400,000. These expenses include, but are not
limited to, SEC registration fees, NASD filing fees, accounting fees and
expenses, legal fees and expenses, printing and engraving expenses, transfer
agent fees and blue sky fees and expenses.
The underwriters will initially offer the units to be sold in this offering
directly to the public at the initial public offering price set forth on the
cover of this prospectus and to selected dealers at the initial public
offering price less a selling concession not in excess of $___ per unit. The
underwriters may allow, and the selected dealers may reallow, a concession not
in excess of $___ per unit on sales to brokers and dealers. After the
offering, the underwriters may change the offering price and other selling
terms. No change in those terms will change the amount of proceeds to be
received by us as set forth on the cover of this prospectus.
We have agreed to sell to the representative, for $100, an option to
purchase up to a total of 400,000 units, exercisable at $10.00 per unit. The
warrants issued in conjunction with these units will be exercisable at $7.50
per share. Otherwise, the units issuable upon exercise of this option are
identical to those offered by this prospectus. This option commences 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 400,000 units, the 400,000 shares of common stock and the
400,000 warrants underlying such units, and the 400,000 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. However, the
option may be transferred to any underwriter and selected dealer participating
in the offering and their bona fide officers or partners. Thereafter, the
representative's units will be transferable provided such transfer is in
accordance with the provisions of the Securities Act. Although the purchase
option and its underlying securities have been registered under the
registration statement of which this prospectus forms a part of, 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. We will set aside and at all times have available a sufficient
number of shares of common stock to be issued upon exercise of the
representative's units.
We have engaged Maxim Group LLC, the representative of the underwriters, on
a non-exclusive basis, as our agent for the solicitation of the exercise of
the warrants. To the extent not inconsistent with the guidelines of the NASD
and the rules and regulations of the SEC, we have agreed to pay the
representative for bona fide services rendered a commission equal to 4% of the
exercise price for each warrant exercised more than one year after the date of
this prospectus if the exercise was solicited by the underwriters. In addition
to soliciting, either orally or in writing, the exercise of the warrants, the
representative's services may also include disseminating information, either
orally or in writing, to warrant holders about us or the market for our
securities, and assisting in the processing of the exercise of the warrants.
No compensation will be paid to the representative upon the exercise of the
warrants if:
o the market price of the underlying shares of common stock is lower than
the exercise price;
o the holder of the warrants has not confirmed in writing that the
underwriters solicited the exercise;
o the warrants are held in a discretionary account;
o the warrants are exercised in an unsolicited transaction; or
o the arrangement to pay the commission is not disclosed in the prospectus
provided to warrant holders at the time of exercise.
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Subject to any regulatory restrictions, Maxim Group LLC, the representative
of the underwriters, or certain of its principals, affiliates or designees,
has agreed to purchase up to $500,000 of our warrants on the open market, at
prices per warrant not to exceed $1.20, within three months of such warrants
being separately tradeable.
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:
o the history and prospects of companies whose principal business is the
acquisition of other companies;
o prior offerings of those companies;
o our prospects for acquiring an operating business at attractive values;
o our capital structure;
o an assessment of our management and their experience in identifying
operating companies;
o general conditions of the securities markets at the time of the offering;
and
o 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 the underwriters are unable
to compare our financial results and prospects with those of public companies
operating in the same industry.
Although they are not obligated to do so, any of the underwriters may
introduce us to potential target businesses or assist us in raising additional
capital, as needs may arise in the future, but there are no preliminary
agreements or understandings between any of the underwriters and any potential
targets. We are not under any contractual obligation to engage any of the
underwriters to provide any services for us after this offering, but if we do,
we may pay the underwriters a finder's fee that would be determined at that
time in an arm's length negotiation where the terms would be fair and
reasonable to each of the interested parties; provided that no agreement will
be entered into and no fee will be paid prior to the one year anniversary of
the date of this prospectus.
In connection with this offering, the underwriters may distribute
prospectuses electronically. No forms of prospectus other than printed
prospectuses and electronically distributed prospectuses that are printable in
Adobe PDF format will be used in connection with this offering.
The underwriters have informed us that they do not expect to confirm sales
of units offered by this prospectus to accounts over which they exercise
discretionary authority without obtaining the specific approval of the account
holder.
In connection with this offering, our underwriters may engage in stabilizing
transactions, over-allotment transactions, covering transactions and penalty
bids in accordance with Regulation M under the Securities Exchange Act of
1934, as amended.
o Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
o Over-allotment involves sales by the underwriters of units in excess of
the number of units the underwriters are obligated to purchase, which
creates a short position. The short position may be either a covered
short position or a naked short position. In a covered short position,
the number of units over-allotted by the underwriters is not greater than
the number of units that it may purchase in the over-allotment option. In
a naked short position, the number of units involved is greater than the
number of units in the over-allotment option. The underwriters may close
out any covered short position by either exercising their over-allotment
option or purchasing units in the open market.
53
o Covering transactions involve the purchase of units in the open market
after the distribution has been completed in order to cover short
positions. In determining the source of units to close out the short
position, the underwriters will consider, among other things, the price
of units available for purchase in the open market as compared to the
price at which it may purchase units through the over-allotment option.
If the underwriters sell more units than could be covered by the over-
allotment option, a naked short position, the position can only be closed
out by buying units in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there could
be downward pressure on the price of the units in the open market after
pricing that could adversely affect investors who purchase in this
offering.
o Penalty bids permit the underwriters to reclaim a selling concession from
a selected dealer when the units originally sold by the selected dealer
is purchased in a stabilizing covering transaction to cover short
positions.
These stabilizing transactions, covering transactions and penalty bids may
have the effect of raising or maintaining the market price of our units or
preventing or retarding a decline in the market price of our units. As a
result, the price of our units may be higher than the price that might
otherwise exist in the open market. However, neither we nor the underwriters
make any representation or prediction as to the effect the transactions
described above may have on the price of our securities. These transactions
may occur on the American Stock Exchange, 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.
Although certain principals of Maxim Group LLC have extensive experience in
the securities industry, Maxim Group LLC itself was formed in October 2002 and
has acted as an underwriter in only three firm commitment public offerings,
co-manager in three firm commitment public offerings and as a member of the
underwriting syndicate in fifty three underwritten public offerings. Since
Maxim Group LLC has limited experience in underwriting firm commitment public
offerings, their lack of experience may adversely affect the public offering
price of our securities and the subsequent development, if any, of a trading
market for our securities. Maxim Group LLC is a member of the National
Association of Securities Dealers, Inc. and the Securities Investor Protection
Corporation.
The underwriting agreement provides for indemnification between us and the
underwriters against specified liabilities, including liabilities under the
Securities Act, and for contribution by us and the underwriters to payments
that may be required to be made with respect to those liabilities. We have
been advised that, in the opinion of the Securities and Exchange Commission,
indemnification liabilities under the Securities Act is against public policy
as expressed in the Securities Act, and is therefore, unenforceable.
LEGAL MATTERS
The validity of the securities offered in this prospectus is being passed
upon for us by Ellenoff Grossman & Schole LLP, New York, New York. Such firm
has previously represented Maxim Group LLC and expects to do so again in the
future. Lowenstein Sandler PC is acting as counsel for the underwriters in
this offering.
EXPERTS
The financial statements included in this prospectus and in the registration
statement have been audited by LWBJ, LLP, an independent registered public
accounting firm, to the extent and for the period set forth in their report
appearing elsewhere in this prospectus and in the registration statement. The
financial statements and the report of LWBJ, LLP are included in reliance upon
their report given upon the authority of LWBJ, LLP as experts in auditing and
accounting.
54
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 450 Fifth Street, N.W.,
Washington, D.C. 20549-1004. 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
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
APRIL 30, 2005
CONTENTS
Report of Independent Auditors..............................................F-2
Audited Financial Statements
Balance Sheet...............................................................F-3
Statement of Operations.....................................................F-4
Statement of Stockholders' Equity...........................................F-5
Statement of Cash Flows.....................................................F-6
Notes to Financial Statements........................................F-7 to F-11
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Healthcare Acquisition Corp.
We have audited the accompanying balance sheet of Healthcare Acquisition Corp.
(a corporation in the development stage) as of April 30, 2005, and the related
statements of operations, stockholders' equity, and cash flows for the period
from April 25, 2005 (inception) to April 30, 2005. 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 auditing 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 Healthcare Acquisition Corp.
(a corporation in the development stage) as of April 30, 2005, and the results
of its operations and its cash flows for the period from April 25, 2005
(inception) to April 30, 2005, in conformity with accounting principles
generally accepted in the United States of America.
/s/ LWBJ, LLP
----------------------------------------
West Des Moines, Iowa
May 6, 2005, except for Note 7 as to which the date is July 8, 2005
F-2
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
APRIL 30, 2005
ASSETS
Current assets:
Cash............................................................... $140,000
Other assets:
Deferred offering costs............................................ 113,253
--------
Total assets ........................................................ $253,253
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses.................................................... $ 55,753
Notes payable, stockholders ........................................ 175,000
--------
Total current liabilities ........................................... 230,753
--------
Stockholders' equity:
Preferred stock, $.0001 par value, 1,000,000 shares authorized;
none issued
Common stock, $.0001 par value, 100,000,000 shares authorized;
2,000,000 issued and outstanding ................................. 150
Additional paid-in capital ......................................... 24,850
Deficit accumulated during the development stage ................... (2,500)
--------
Total stockholders' equity .......................................... 22,500
--------
Total liabilities and stockholders' equity .......................... $253,253
========
See accompanying notes.
F-3
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 25, 2005 (INCEPTION) TO APRIL 30, 2005
Formation and operating costs ..................................... $ 2,500
----------
Net loss .......................................................... $ 2,500
==========
Weighted average shares outstanding ............................... 2,000,000
==========
Net loss per share ................................................ $ --
==========
See accompanying notes.
F-4
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 25, 2005 (INCEPTION) TO APRIL 30, 2005
DEFICIT
COMMON STOCK PAID-IN ACCUMULATED
------------------ CAPITAL IN DURING THE STOCKHOLDERS'
SHARES AMOUNT EXCESS OF PAR DEVELOPMENT STAGE EQUITY
--------- ------ ------------- ----------------- -------------
Common shares issued................................... 2,000,000 $150 $24,850 $ -- $25,000
Net loss............................................... -- -- -- (2,500) (2,500)
--------- ---- ------- ------- -------
Balance at April 30, 2005.............................. 2,000,000 $150 $24,850 $(2,500) $22,500
========= ==== ======= ======= =======
See accompanying notes.
F-5
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 25, 2005 (INCEPTION) TO APRIL 30, 2005
OPERATING ACTIVITIES
Net loss ........................................................... $ (2,500)
--------
Net cash used in operating activities ............................... (2,500)
FINANCING ACTIVITIES
Proceeds from note payable, stockholders ........................... 175,000
Proceeds from sale of common stock ................................. 25,000
Payments made for deferred offering costs .......................... (57,500)
--------
Net cash provided by financing activities ........................... 142,500
--------
Net increase in cash ................................................ 140,000
Cash at beginning of period ......................................... --
--------
Cash at end of period ............................................... $140,000
========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Accrual of deferred offering costs................................. $ 55,573
See accompanying notes.
F-6
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Healthcare Acquisition Corp. (the "Company") was incorporated in Delaware on
April 25, 2005, as a blank check company whose objective is to acquire,
through a merger, capital stock exchange, asset acquisition or other similar
business combination, a currently unidentified operating business.
At April 30, 2005, the Company had not yet commenced any operations. All
activity through April 30, 2005 relates to the Company's formation and the
proposed public offering described below. The Company has selected December 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 ("Proposed Offering"), which is discussed in Note 2. 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 the Proposed Offering are intended to
be generally applied toward consummating a business combination with an
operating domestic or international company in the healthcare industry, a
"target business".
In evaluating a prospective target business, the Company will consider,
among other factors, the financial condition and results of operation; growth
potential; experience and skill of management; availability of additional
personnel; capital requirements; competitive position; barriers to entry into
other industries; 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 the Company in effecting a business combination consistent with
its business objective.
Upon the closing of the Proposed Offering, $57,600,000 or 90.0% of the
proceeds of this offering ($7.20 per unit) will be placed in a trust account
at JP Morgan Chase NY Bank maintained by Continental Stock Transfer & Trust
Company ("Trust Fund") and invested in United States Treasury Bills having a
maturity of one hundred eighty (180) days or less, until the earlier of (i)
the consummation of the Company's first business combination or (ii) the
liquidation of the Company. The remaining proceeds, not held in trust, may be
used to pay for business, legal and accounting expenses related to this
offering or expenses which may be incurred related to the investigation and
selection of a target business, and the negotiation of an agreement to acquire
a target business.
The Company's first business combination must be with a business with a fair
market value of at least 80% of the Company's net asset value at the time of
acquisition. The Company, after signing a definitive agreement for the
acquisition of a target business, will submit such transaction for stockholder
approval. In the event that stockholders owning 20% or more of the outstanding
stock excluding, for this purpose, those persons who were stockholders prior
to the Proposed Offering, vote against the business combination or request
their consummation right as 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 2,000,000 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 the Company's first business
combination, all of these voting safeguards will no longer be applicable.
With respect to the first business combination which is approved and
consummated, any Public Stockholder who voted against the business combination
may demand that the Company redeem his or her shares. The per share redemption
price will equal the amount in the Trust Fund as of the record date for
F-7
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
determination of stockholders entitled to vote on the 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 19.99% of the aggregate number of shares owned by all Public
Stockholders may seek redemption of their shares in the event of a business
combination. Such Public Stockholders are entitled to receive their per share
interest in the Trust Fund computed, without regard to the shares held by
Initial Stockholders.
The Company's Restated Certificate of Incorporation provides for mandatory
liquidation of the Company, without stockholder approval, in the event that
the Company does not consummate a business combination within eighteen (18)
months from the date of the consummation of the Proposed Offering, or twenty-
four (24) months from the consummation of the Proposed Offering if certain
extension criteria have been satisfied. 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.)
The Company's common stock and Warrants will not be traded separately until
it files an audited balance sheet on Form 8-K with the Securities and Exchange
Commission, which reflects receipt of the gross proceeds from the Proposed
Offering. Upon completion of the Proposed Offering, shares owned by the
Initial Stockholders will be held in an escrow account maintained by the
trustee, acting as escrow agent, for up to three (3) years.
LOSS PER COMMON SHARE
Loss per share is computed by dividing net loss by the weighted-average
number of shares of common stock outstanding during the period.
DERIVATIVE FINANCIAL INSTRUMENTS
As described in Note 2, the Company has granted a Purchase Option to a
representative of its underwriters. Based on Emerging Issues Task Force 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settle in, a Company's Own Stock, the Company, the Purchase Option will
initially be measured at fair value and reported in permanent equity and
subsequent changes in fair value will not be recognized as long as the
Purchase Option continues to be classified as an equity instrument. At
April 30, 2005, this Purchase Option was deemed to have no value.
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 reported 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.
INCOME TAXES
Deferred income taxes are provided for the differences between the basis of
assets and liabilities for financial reporting and income tax purposes. A
valuation allowance is established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
The Company recorded a deferred income tax asset for the tax effect of net
operating loss carryforwards and temporary differences aggregating to
approximately $1,000. In recognition of the uncertainty regarding
F-8
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
the ultimate amount of income tax benefits to be derived, the Company has
recorded a full valuation allowance at April 30, 2005.
The effective tax rate differs from the statutory rate of 34% due to the
increase in the valuation allowance.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company 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.
2. PROPOSED PUBLIC OFFERING
The Proposed Offering calls for the Company to offer for public sale up to
8,000,000 units ("Units") at a maximum price of $8.00 per unit. Each Unit
consists of one share of the Company's common stock, $.0001 par value and one
Redeemable Common Stock Purchase Warrant ("Warrant"). 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 with a target business or one (1) year from the effective
date of the Proposed Offering and expiring four (4) years from the date of the
prospectus. An additional 1,200,000 Units may be issued on exercise of a 45-
day option granted to the underwriters to cover any over-allotments. The
Warrants will be redeemable by the Company, upon prior written consent of the
underwriters, at a price of $.01 per Warrant, upon thirty (30) days notice
after the Warrants become exercisable, only in the event that the last sales
price of the common stock is at least $11.50 per share for any twenty (20)
trading days within a thirty (30) trading-day period ending on the third day
prior to date on which notice of redemption is given.
3. DEFERRED OFFERING COSTS
Deferred offering costs consist principally of underwriting fees, legal
fees, accounting fees, and other fees incurred through the balance sheet date
that are related to the Proposed Offering and that will be charged to capital
upon the receipt of the capital raised.
4. NOTES PAYABLE, STOCKHOLDERS
The Company issued an aggregate of $175,000 unsecured promissory notes to
three Initial Stockholders, who are also officers, on April 28, 2005. The
notes are non-interest bearing and are payable on the earlier of April 28,
2006 or the consummation of the Proposed Offering. Due to the short-term
nature of the notes, the fair value of the notes approximates their carrying
amount.
5. COMMITMENTS AND CONTINGENCIES
The Company has agreed to pay up to $7,500 per month, beginning at the
effective date of the Proposed Offering, for office space and general and
administrative expense to two (2) related entities owned by two (2) of the
Initial Stockholders located in Des Moines, Iowa and Rochester, New York. The
remaining Initial Stockholder is an officer of one of the related entities.
Upon completion of a business combination or liquidation, the Company will no
longer be required to pay these monthly fees.
An Initial Stockholder has agreed that after this offering is completed and
within the first days after separate trading of the Warrants has commenced, he
or certain designees will collectively purchase up to $1,000,000 of the
Company's Warrants in the public marketplace at prices not to exceed $1.20 per
Warrant. He has further agreed that any Warrants purchased by him or his
affiliates or designees, will not be sold or
F-9
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
5. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
transferred until the completion of a business combination. In addition,
subject to any regulatory restrictions and subsequent to the completion of the
purchase of the $1,000,000 of Warrants described above and within the first
ninety (90) days after separate trading of the Warrants has commenced, the
representative of the underwriters, or certain of its principals, affiliates
or designees has agreed to purchase up to $500,000 of the Company's Warrants
in the public marketplace at prices not to exceed $1.20 per Warrant.
The Company has agreed to sell to the representative of the underwriters for
$100, an option to purchase up to a total of 400,000 units, exercisable at $10
per unit ("Purchase Option"). In lieu of payment of the exercise price in
cash, the holder of the Purchase Option has the right (but not the obligation)
to convert any exercisable portion of the Purchase Option into units using a
cashless exercise based on the difference between current market value of the
units and its exercise price. The warrants issued in conjunction with these
units are identical to those offered by the prospectus, except that they have
an exercise price of $7.50 (125% of the exercise price of the warrants
included in the Units sold in the offering). This option commences on the
later of the consummation of a business combination and one (1) year from the
date of the prospectus and expiring five (5) years from the date of the
prospectus. The option and the 400,000 units, the 400,000 shares of common
stock and the warrants underlying such units, and the shares of common stock
underlying such Warrants, may be deemed compensation by the National
Association of Securities Dealers ("NASD") and may be 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 the prospectus. However, the option may be transferred
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 the prospectus forms a part of, the option grants to holders demand and
"piggy back" rights for periods of five (5) and seven (7) years, respectively,
from the date of the prospectus with respect to the registration under the
Securities Act of the securities directly and indirectly issuable upon
exercise of the option. The Company 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.
The Company has engaged a third party to act as the representative of the
underwriters, on a non-exclusive basis, as its agent for the solicitation of
the exercise of the Warrants. To the extent not inconsistent with the
guidelines of the NASD and the rules and regulations of the Securities and
Exchange Commission, the Company has agreed to pay the representative for bona
fide services rendered, a commission equal to 4% of the exercise price for
each Warrant exercised more than one (1) year after the date of this
prospectus if the exercise was solicited by the underwriters. In addition to
soliciting, either orally or in writing, the exercise of the Warrants, the
representative's services may also include disseminating information, either
orally or in writing, to Warrant holders about the Company or the market for
its securities, and assisting in the processing of the exercise of the
Warrants. No compensation will be paid to the representative upon the exercise
of the Warrants if:
o the market price of the underlying shares of common stock is lower than
the exercise price;
o the holder of the Warrants has not confirmed in writing that the
underwriters solicited the exercise;
o the Warrants are held in a discretionary account;
o the Warrants are exercised in an unsolicited transaction; or
F-10
HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
5. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
o the arrangement to pay the commission is not disclosed in the prospectus
provided to Warrant holders at the time of exercise.
Upon consummation of a business combination, the Company is obligated to pay
the underwriters an additional underwriting discount of $640,000.
The Initial Stockholders who are holders of 2,000,000 issued and outstanding
shares of common stock will be entitled to registration rights pursuant to an
agreement to be signed prior to or on the effective date of this Proposed
Offering. The holders of the majority of these shares are entitled to request
the Company, on up to two (2) occasions, to register these shares. The holders
of the majority of these shares can elect to exercise these registration
rights at any time after the date on which these shares of common stock are
released from escrow. In addition, these stockholders have certain "piggy-
back" registration rights on registration statements filed subsequent to the
date on which these shares of common stock are released from escrow. The
Company will bear the expenses incurred in connection with the filing of any
such registration statements.
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.
7. SUBSEQUENT EVENT
On July 8, 2005, the Company's Board of Directors authorized a .333333 to 1
stock dividend. All references in the accompanying financial statements to the
number of shares of stock have been retroactively restated to reflect this
transaction.
F-11
===============================================================================
UNTIL , 2005, 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.
===============================================================================
===============================================================================
$64,000,000
HEALTHCARE ACQUISITION CORP.
8,000,000
UNITS
________________
PROSPECTUS
________________
MAXIM GROUP LLC
________, 2005
===============================================================================
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 representative's non-accountable expense allowance)
will be as follows:
Initial Trustees' fee............................................ $ 1,000.00(1)
SEC Registration Fee............................................. 15,984.00
NASD filing fee.................................................. 14,080.00
Accounting fees and expenses..................................... 25,000.00
Printing and engraving expenses.................................. 50,000.00
Directors & Officers liability insurance premiums................ 70,000.00(2)
Legal fees and expenses.......................................... 150,000.00
Blue sky services and expenses................................... 50,000.00
Miscellaneous.................................................... 23,936.00(3)
-----------
Total......................................................... $400,000.00
- ---------------
(1) In addition to the initial acceptance fee that is charged by Continental
Stock Transfer & Trust Company, as trustee following the offering, the
registrant will be required to pay to Continental Stock Transfer & Trust
Company annual fees of approximately $3,000 for acting as trustee,
approximately $4,800 for acting as transfer agent of the registrant's
common stock, approximately $2,400 for acting as warrant agent for the
registrant's warrants and approximately $1,800 for acting as escrow agent.
(2) This amount represents the approximate amount of Director and Officer
liability insurance premiums that we anticipate paying following the
consummation of our initial public offering and until we consummate a
business combination.
(3) This amount represents additional expenses that may be incurred by us in
connection with the offering over and above those specifically listed
above, including distribution and mailing costs.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation provides that all of our directors,
officers, employees and agents 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 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.
II-1
(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.
(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
II-2
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.
During the past three years, we sold the following shares of common stock
without registration under the Securities Act:
STOCKHOLDERS NUMBER OF SHARES
------------ ----------------
John Pappajohn.............................................. 600,000
Derace L. Schaffer, M.D..................................... 600,000
Matthew P. Kinley........................................... 300,000
Such shares were issued on April 25, 2005 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, wealthy
individuals. 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 $0.0167 per share. No underwriting discounts or commissions were
paid with respect to such sales. In June 2005, Mr. Pappajohn, Dr. Schaffer and
Mr. Kinley transferred, for an aggregate consideration per share which they
paid us and pro rata to their ownership of our common stock, an aggregate of
30,000 shares of our common stock equally to Mr. Berger and Mr. Schellhammer,
two of our directors. On July 8, 2005, our Board of Directors authorized a
stock dividend of approximately .333333 shares of common stock for each
outstanding share of common stock, effectively lowering the purchase price to
approximately $.0125 per share.
II-4
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement:
EXHIBIT
NO. DESCRIPTION
- --- -----------
1.1 Form of Underwriting Agreement.
1.2 Form of Selected Dealers Agreement.
3.1 Amended and Restated Certificate of Incorporation.**
3.2 By-laws.**
4.1 Specimen Unit Certificate.**
4.2 Specimen Common Stock Certificate.**
4.3 Specimen Warrant Certificate.**
4.4 Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant.
5.1 Opinion of Ellenoff Grossman & Schole LLP.
10.1.1 Letter Agreement among the Registrant, Maxim Group LLC and John Pappajohn.**
10.1.2 Letter Agreement among the Registrant, Maxim Group LLC and Derace L. Schaffer, M.D.**
10.1.3 Letter Agreement among the Registrant, Maxim Group LLC and Matthew P. Kinley.**
10.1.4 Restated Letter Agreement among the Registrant, Maxim Group LLC and Edward B. Berger.
10.1.5 Letter Agreement among the Registrant, Maxim Group LLC and Wayne A. Schellhammer.
10.2 Form of Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Registrant.
10.3 Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial
Stockholders.
10.4 Form of Registration Rights Agreement among the Registrant and the Initial Stockholders.**
10.5.1 Office Services Agreement by and between the Registrant and Equity Dynamics, Inc.**
10.5.2 Office Services Agreement by and between the Registrant and The Lan Group.**
10.6.1 Promissory Note, dated April 28, 2005, issued to John Pappajohn, in the amount of $70,000.**
10.6.2 Promissory Note, dated April 28, 2005, issued to Derace L. Schaffer, M.D., in the amount of $70,000.**
10.6.3 Promissory Note, dated April 28, 2005, issued to Matthew P. Kinley, in the amount of $35,000.**
10.7 Form of Unit Option Purchase Agreement between the Registrant and Maxim Group LLC.
10.8 Form of Warrant Purchase Agreement by and between the Registrant, John Pappajohn and Maxim Group LLC.**
14 Code of Ethics
23.1 Consent of LWBJ, LLP.
23.2 Consent of Ellenoff Grossman & Schole LLP (included in Exhibit 5.1).
24 Power of Attorney.**
99.1 Audit Committee Charter
99.2 Nominating Committee Charter
- ---------------
** previously filed
II-5
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.
(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
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Des Moines, State of Iowa, on the 12th day of July, 2005.
HEALTHCARE ACQUISITION CORP.
By: /s/ Derace L. Schaffer, M.D.
Name: Derace L. Schaffer, M.D.
Title: Vice-Chairman and CEO (Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated.
NAME POSITION DATE
---- -------- ----
/s/ John Pappajohn
- ---------------------------- Chairman and Secretary July 12, 2005
John Pappajohn
/s/ Derace L. Schaffer, M.D.
- ---------------------------- Vice-Chairman and CEO (Principal
Derace L. Schaffer, M.D. executive officer) July 12, 2005
/s/ Matthew P. Kinley President, Treasurer and Director
- ---------------------------- (Principal July 12, 2005
Matthew P. Kinley financial and accounting officer)
/s/ Edward B. Berger
- ---------------------------- Director July 12, 2005
Edward B. Berger
/s/ Wayne A. Schellhammer
- ----------------------------
Wayne A. Schellhammer Director July 12, 2005
II-7
Exhibit 1.1
HEALTHCARE ACQUISITION CORP.
UNDERWRITING AGREEMENT
New York, New York
____, 2005
Maxim Group LLC
405 Lexington Avenue
New York, NY 10174
As Representative of the Underwriters
named on Schedule A hereto
Ladies and Gentlemen:
The undersigned, Healthcare Acquisition Corp., a Delaware
corporation ("COMPANY"), hereby confirms its agreement with Maxim Group LLC
(hereinafter referred to as "YOU," "MAXIM" or the "REPRESENTATIVE") and with the
other underwriters named on Schedule A hereto for which Maxim is acting as
Representative (the Representative and the other Underwriters being collectively
referred to herein as the "UNDERWRITERS" or, individually, an "UNDERWRITER") as
follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Units. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters, an aggregate of 8,000,000 units (the
"FIRM UNITS") of the Company at a purchase price (net of discounts and
commissions) of $7.52 per Firm Unit. The Underwriters, severally and not
jointly, agree to purchase from the Company the number of Firm Units set forth
opposite their respective names on Schedule A attached hereto and made a part
hereof at a purchase price (net of discounts and commissions) of $7.52 per Firm
Unit. The Firm Units are to be offered initially to the public (the "OFFERING")
at the offering price of $8.00 per Firm Unit. Each Firm Unit consists of one
share of the Company's common stock, par value $.0001 per share (the "COMMON
STOCK"), and one warrant to purchase a share of Common Stock (the "WARRANT(S)").
The shares of Common Stock and the Warrants included in the Firm Units will not
be separately transferable until 90 days after the effective date (the
"EFFECTIVE DATE") of the Registration Statement (as defined in Section 2.1.1
hereof) unless Maxim informs the Company of its decision to allow earlier
separate trading (and thereafter shall trade only separately), but in no event
will Maxim allow separate trading until the preparation of an audited balance
sheet of the Company reflecting receipt by the Company of the proceeds of the
Offering and the filing of such audited balance sheet with the Commission (as
herein defined) on a Form 8-K or similar form by the Company which includes such
balance sheet. Each Warrant entitles its holder to purchase one share of Common
Stock for $6.00 during the period commencing on the later of (a) the
consummation by the Company of its "Business Combination" or (b) one year from
the Effective Date of the Registration Statement and terminating on the
four-year anniversary of the Effective Date. "BUSINESS COMBINATION" shall mean
any acquisition by merger, capital stock exchange, asset or stock acquisition or
other similar business combination consummated by the Company with a single
operating entity, or one or more related or unrelated entities in the healthcare
industry (as described more fully in the Registration Statement). The Company
has the right to redeem the Warrants upon not less than thirty (30) days written
notice at a price of $0.01 per Warrant at any time after the Warrants become
exercisable; so long as the last sales price of the Company's Common Stock has
been at least $11.50 for any twenty (20) trading days within a thirty (30)
trading day period ending on the third day prior to the day on which notice is
given.
1.1.2 Payment and Delivery. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on the third business day
following the Effective Date of the Registration Statement (or the fourth
business day following the Effective Date, if the Registration Statement is
declared effective after 4:30 p.m.) or at such earlier time as shall be agreed
upon by the Representative and the Company at the offices of the Representative
or at such other place as shall be agreed upon by the Representative and the
Company. The hour and date of delivery and payment for the Firm Units is called
the "CLOSING DATE." Payment for the Firm Units shall be made on the Closing Date
at the Representative's election by wire transfer in Federal (same day) funds or
by certified or bank cashier's check(s) in New York Clearing House funds,
payable as follows: $57,600,000 ($7.20 per Firm Unit) of the proceeds received
by the Company for the Firm Units shall be deposited in the trust fund
established by the Company for the benefit of the public stockholders as
described in the Registration Statement (the "TRUST FUND") pursuant to the terms
of an Investment Management Trust Agreement (the "TRUST AGREEMENT") and the
remaining proceeds (less commissions, expense allowance and actual expense
payments or other fees) shall be paid to the order of the Company upon delivery
to you of certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units (or through the facilities of the Depository Trust
Company (the "DTC") for the account of the Underwriters. The Firm Units shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two Business Days prior to the
Closing Date. The Company will permit the Representative to examine and package
the Firm Units for delivery, at least one full business day prior to the Closing
Date. The Company shall not be obligated to sell or deliver the Firm Units
except upon tender of payment by the Representative for all the Firm Units. As
used herein, the term "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or any day on which national banks in New York, New York are not open for
business.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriters are hereby granted, severally and not jointly, an option to
purchase up to an additional 1,200,000 units from the Company (the
"OVER-ALLOTMENT OPTION"). Such additional 1,200,000 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.
-2-
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative as to
all (at any time) or any part (from time to time) of the Option Units within 45
days after the Effective Date. The Underwriters will not be under any obligation
to purchase any Option Units prior to the exercise of the Over-allotment Option.
The Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company from the Representative, which must be confirmed in
writing by overnight mail or facsimile transmission setting forth the number of
Option Units to be purchased and the date and time for delivery of and payment
for the Option Units, which will not be later than five Business Days after the
date of the notice or such other time as shall be agreed upon by the Company and
the Representative, at the offices of the Representative or at such other place
as shall be agreed upon by the Company and the Representative. If such delivery
and payment for the Option Units does not occur on the Closing Date, the date
and time of the closing for such Option Units will be as set forth in the notice
(hereinafter the "OPTION CLOSING DATE"). Upon exercise of the Over-allotment
Option, the Company will become obligated to convey to the Underwriters, and,
subject to the terms and conditions set forth herein, the Underwriters will
become obligated to purchase, the number of Option Units specified in such
notice.
1.2.3 Payment and Delivery. Payment for the Option Units shall
be made on the Option Closing Date at the Representative's election by wire
transfer in Federal (same day) funds or by certified or bank cashier's check(s)
in New York Clearing House funds, payable as follows: $7.20 per Option Unit
shall be deposited in the Trust Fund pursuant to the Trust Agreement and the
remaining proceeds (less commissions, expense allowance and actual expense
payments or other fees) shall be paid to the order of the Company upon delivery
to you of certificates (in form and substance satisfactory to the Underwriters)
representing the Option Units (or through the facilities of DTC) for the account
of the Underwriters. The certificates representing the Option Units to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two Business Days prior to the Closing
Date or the Option Closing Date, as the case may be, and will be made available
to the Representative for inspection, checking and packaging at the aforesaid
office of the Company's transfer agent or correspondent not less than one full
business day prior to such Closing Date.
1.3 Representative's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Representative (and/or their designees) on the Effective Date an
option ("REPRESENTATIVE'S PURCHASE OPTION") for the purchase of an aggregate of
400,000 units (the "REPRESENTATIVE'S UNITS") for an aggregate purchase price of
$100.00. Each of the Representative's Units is identical to the Firm Units,
except that the Warrants included in the Representative's Units have an exercise
price of $7.50. The Representative's Purchase Option shall be exercisable, in
whole or in part, commencing on the later of the consummation of a Business
Combination or one year from the Effective Date and expiring on the five-year
anniversary of the Effective Date at an initial exercise price per
Representative's Unit of $10.00, which is equal to one hundred and ten percent
(110%) of the initial public offering price of a Unit. The Representative's
Purchase Option, the Representative's Units, the shares of Common Stock and the
Warrants included in the Representative's Units (the "REPRESENTATIVE'S
WARRANTS") and the shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter referred to collectively as the
"REPRESENTATIVE'S SECURITIES." The Public Securities and the Representative's
Securities are hereinafter referred to collectively as the "SECURITIES." The
Representative understands and agrees that there are significant restrictions
against transferring the Representative's Purchase Option during the first year
after the Effective Date, as set forth in Section 3 of the Representative's
Purchase Option.
-3-
1.3.2 Delivery and Payment. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for the
Representative's Purchase Option in the name or names and in such authorized
denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission (the "COMMISSION") a registration statement
and an amendment or amendments thereto, on Form S-1 (File No. 333-124712),
including any related preliminary prospectus (the "PRELIMINARY PROSPECTUS"), for
the registration of the Securities under the Securities Act of 1933, as amended
(the "ACT"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations (the "REGULATIONS") of the Commission under the Act. The
conditions for use of Form S-1 to register the Offering under the Act, as set
forth in the General Instructions to such Form, have been satisfied. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "REGISTRATION
STATEMENT," and the form of the final prospectus dated the Effective Date
included in the Registration Statement (or, if applicable, the form of final
prospectus filed with the Commission pursuant to Rule 424 of the Regulations),
is hereinafter called the "PROSPECTUS." If the Company has filed, or is required
pursuant to the terms hereof to file, a registration statement pursuant to Rule
462(b) under the Securities Act registering additional shares of Common Stock (a
"RULE 462(B) REGISTRATION STATEMENT"), then, unless otherwise specified, any
reference herein to the term "REGISTRATION STATEMENT" shall be deemed to include
such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration
Statement, which, if filed, becomes effective upon filing, no other document
with respect to the Registration Statement has heretofore been filed with the
Commission. All of the Public Securities have been registered under the
Securities Act pursuant to the Registration Statement or, if any Rule 462(b)
Registration Statement is filed, will be duly registered under the Securities
Act with the filing of such Rule 462(b) Registration Statement. The Registration
Statement has been declared effective by the Commission on the date hereof.
-4-
2.1.2 Pursuant to the Exchange Act. The Company has filed with
the Commission a Form 8-A (File Number 000- ) providing for the registration
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), of
the Units, the Common Stock and the Warrants. The registration of the Units,
Common Stock and Warrants under the Exchange Act has been declared effective by
the Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 Disclosures in Registration Statement.
2.3.1 10b-5 Representation. At the time the Registration
Statement became effective and at all times subsequent thereto up to the Closing
Date and the Option Closing Date, if any, the Registration Statement and the
Prospectus will contain all material statements that are required to be stated
therein in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations; neither the
Registration Statement nor any Preliminary Prospectus or the Prospectus, nor any
amendment or supplement thereto, on such dates, did or will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made), not
misleading. When any Preliminary Prospectus was first filed with the Commission
(whether filed as part of the Registration Statement for the registration of the
Securities or any amendment thereto or pursuant to Rule 424(a) of the
Regulations) and when any amendment thereof or supplement thereto was first
filed with the Commission, such Preliminary Prospectus and any amendments
thereof and supplements thereto complied or will have been corrected in the
Prospectus to comply in all material respects with the applicable provisions of
the Act and the Regulations and did not and will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The representation and
warranty made in this Section 2.3.1 does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by the Representative
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto. It is understood that the statements set forth in
the fifth, twelfth, thirteenth, fourteenth and sixteenth paragraphs in the
Prospectus under the heading "Underwriting - Underwriting Terms" constitute for
the purposes of this Agreement, information furnished by the Representative with
respect to the Underwriters.
-5-
2.3.2 Disclosure of Agreements. The agreements and documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i) that
is referred to in the Prospectus or attached as an exhibit thereto, or (ii) is
material to the Company's business, has been duly and validly executed by the
Company, is in full force and effect in all material respects and is enforceable
against the Company and, to the Company's knowledge, the other parties thereto,
in accordance with its terms, except (x) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (y) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (z)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought, and none of
such agreements or instruments has been assigned by the Company, and neither the
Company nor, to the Company's knowledge, any other party is in breach or default
thereunder and, to the Company's knowledge, no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a breach or
default thereunder. To the Company's knowledge, performance by the Company of
the material provisions of such agreements or instruments will not result in a
violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.3.4 Regulations. The disclosures in the Registration
Statement concerning the effects of Federal, State and local regulation on the
Company's business as currently contemplated are correct in all material
respects and do not omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates as
of which information is given in the Registration Statement, any Preliminary
Prospectus and/or the Prospectus, except as otherwise specifically stated
therein: (i) there has been no material adverse change in the condition,
financial or otherwise, or business prospects of the Company; (ii) there have
been no material transactions entered into by the Company, other than as
contemplated pursuant to this Agreement; (iii) no member of the Company's board
of directors or management has resigned from any position with the Company and
(iv) no event or occurrence has taken place which materially impairs, or would
likely materially impair, with the passage of time, the ability of the members
of the Company's board of directors or management to act in their capacities
with the Company as described in the Registration Statement and the Prospectus.
-6-
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not: (i) issued any securities or incurred
any liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
2.5 Independent Accountants. LWBJ, LLP ("LWBJ"), whose report is filed
with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations and the Public Company
Accounting Oversight Board (including the rules and regulations promulgated by
such entity, the "PCAOB"). LWBJ is duly registered and in good standing with the
PCAOB. LWBJ has not, during the periods covered by the financial statements
included in the Prospectus, provided to the Company any non-audit services, as
such term is used in Section 10A(g) of the Exchange Act.
2.6 Financial Statements; Statistical Data.
2.6.1 Financial Statements. The financial statements, including
the notes thereto and supporting schedules included in the Registration
Statement and Prospectus fairly present the financial position and the results
of operations of the Company at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. No other
financial statements or supporting schedules are required to be included or
incorporated by reference in the Registration Statement. The Registration
Statement discloses all material off-balance sheet transactions, arrangements,
obligations (including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have a material
current or future effect on the Company's financial condition, changes in
financial condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenues or expenses. There are
no pro forma or as adjusted financial statements which are required to be
included in the Registration Statement and the Prospectus in accordance with
Regulation S-X which have not been included as so required.
2.6.2 Statistical Data. The statistical, industry-related and
market-related data included in the Registration Statement and the Prospectus
are based on or derived from sources which the Company reasonably and in good
faith believes are reliable and accurate, and such data agree with the sources
from which they are derived.
-7-
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 Public Securities conform to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or, based in part on the representations and
warranties of the purchasers of such shares of Common Stock, exempt from such
registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The
Securities have been duly authorized and reserved for issuance and when issued
and paid for, will be validly issued, fully paid and non-assessable; the holders
thereof are not and will not be subject to personal liability by reason of being
such holders; the Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement. When issued, the
Representative's Purchase Option, the Representative's Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment of the respective exercise prices therefor,
the number and type of securities of the Company called for thereby in
accordance with the terms thereof and such Representative's Purchase Option, the
Representative's Warrants and the Warrants are enforceable against the Company
in accordance with their respective terms, except: (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (ii) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws; and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The shares of Common Stock issuable upon exercise of the
Warrants and included in the Representative's Purchase Option (and the shares of
Common Stock issuable upon exercise of the Representative's Warrants) have been
reserved for issuance upon the exercise of the Warrants, the Representative's
Purchase Option and the Representative's Warrants and when issued in accordance
with the terms of such securities, will be duly and validly authorized, validly
issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability by reason of being such holders.
-8-
2.8.3 No Integration. Neither the Company nor any of its
affiliates has, prior to the date hereof, made any offer or sale of any
securities which are required to be "integrated" pursuant to the Act or the
Regulations with the offer and sale of the Public Securities pursuant to the
Registration Statement.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10 Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.22 hereof), the Trust Agreement, the
Services Agreement (as defined in Section 3.7.2 hereof) and the Escrow Agreement
(as defined in Section 2.23.2 hereof) have been duly and validly authorized by
the Company and constitute valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except: (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement, the Representative's Purchase
Option, the Trust Agreement, the Service Agreements and the Escrow Agreement,
the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and thereof
do not and will not, with or without the giving of notice or the lapse of time
or both: (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute al default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party except pursuant to the Trust
Agreement referred to in Section 2.23 hereof; (ii) result in any violation of
the provisions of the Amended and Restated Certificate of Incorporation or the
By-Laws of the Company; or (iii) violate any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business.
2.12 No Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Amended and Restated 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 or businesses.
-9-
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies that it needs as of the date hereof to conduct
its business for the purposes described in the Prospectus. The disclosures in
the Registration Statement concerning the effects of federal, state and local
regulation on this offering and the Company's business purpose as currently
contemplated are correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities and the consummation of the transactions and agreements contemplated
by this Agreement, the Warrant Agreement, the Representative's Purchase Option,
the Trust Agreement, the Services Agreement and the Escrow Agreement and as
contemplated by the Prospectus, except with respect to applicable federal and
state securities laws.
2.14 D&O Questionnaires. All information contained in the
questionnaires (the "QUESTIONNAIRES") completed by each of the Company's
stockholders immediately prior to the Offering (the "INITIAL STOCKHOLDERS") and
provided to the Underwriters as an exhibit to his or her Insider Letter (as
defined in Section 2.23.1) is true and correct and the Company has not become
aware of any information which would cause the information disclosed in the
questionnaires completed by each Initial Stockholder to become inaccurate and
incorrect.
2.15 Litigation; Governmental Proceedings. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the best of the Company's knowledge, threatened
against, or involving the Company or, to the best of the Company's knowledge,
any Initial Stockholder which has not been disclosed in the Registration
Statement or the Questionnaires.
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the Company.
-10-
2.17 No Contemplation of a Business Combination. Prior to the date
hereof, neither the Company, its officers and directors nor the Initial
Stockholders had, and as of the Closing, the Company and such officers and
directors and Initial Stockholders will not have had: (a) any specific Business
Combination under consideration or contemplation or (b) any substantive
interactions or discussions with any target business regarding a possible
Business Combination.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Except as described in the Prospectus, there are no
claims, payments, arrangements, agreements or understandings relating to the
payment of a finder's, consulting or origination fee by the Company or any
Initial Stockholder with respect to the sale of the Securities hereunder or any
other arrangements, agreements or understandings of the Company or, to the
Company's knowledge, any Initial Stockholder that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. (the "NASD").
2.18.2 The Company has not made any direct or indirect payments
(in cash, securities or otherwise) to: (i) any person, as a finder's fee,
consulting fee or otherwise, in consideration of such person raising capital for
the Company or introducing to the Company persons who raised or provided capital
to the Company; (ii) to any NASD member; or (iii) to any person or entity that
has any direct or indirect affiliation or association with any NASD member,
within the twelve months prior to the Effective Date, other than payments to
Maxim.
2.18.3 No officer, director, or beneficial owner of any class of
the Company's securities (whether debt or equity, registered or unregistered,
regardless of the time acquired or the source from which derived) (any such
individual or entity, a "COMPANY AFFILIATE") is a member, a person associated,
or affiliated with a member of the NASD.
2.18.4 No Company Affiliate is an owner of stock or other
securities of any member of the NASD (other than securities purchased on the
open market).
2.18.5 No Company Affiliate has made a subordinated loan to any
member of the NASD.
2.18.6 No proceeds from the sale of the Public Securities
(excluding underwriting compensation) will be paid to any NASD member, or any
persons associated or affiliated with a member of the NASD.
2.18.7 Except with respect to Maxim, the Company has not issued
any warrants or other securities, or granted any options, directly or indirectly
to anyone who is a potential underwriter in the Offering or a related person (as
defined by NASD rules) of such an underwriter within the 180-day period prior to
the initial filing date of the Registration Statement.
2.18.8 No person to whom securities of the Company have been
privately issued within the 180-day period prior to the initial filing date of
the Registration Statement has any relationship or affiliation or association
with any member of the NASD.
-11-
2.18.9 No NASD member intending to participate in the Offering
has a conflict of interest with the Company. For this purpose, a "conflict of
interest" exists when a member of the NASD and/or its associated persons, parent
or affiliates in the aggregate beneficially own 10% or more of the Company's
outstanding subordinated debt or common equity, or 10% or more of the Company's
preferred equity. "Members participating in the Offering" include managing
agents, syndicate group members and all dealers which are members of the NASD.
2.18.10 Except with respect to Maxim, the Company has not entered
into any agreement or arrangement (including, without limitation, any consulting
agreement or any other type of agreement) during the 180-day period prior to the
initial filing date of the Registration Statement, which arrangement or
agreement provides for the receipt of any item of value and/or the transfer of
any warrants, options, or other securities from the Company to an NASD member,
any person associated with a member (as defined by NASD rules), any potential
underwriters in the Offering and/or any related persons.
2.19 Foreign Corrupt Practices Act. Neither the Company nor any of the
Initial Stockholders or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) that (i) might subject the Company to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a material adverse effect on the
assets, business or operations of the Company as reflected in any of the
financial statements contained in the Prospectus or (iii) if not continued in
the future, might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
2.20 Patriot Act. Neither the Company nor any officer, director or
Initial Stockholder has violated: (a) the Bank Secrecy Act, as amended, (b) the
Money Laundering Control Act of 1986, as amended, or (c) the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and/or the rules and
regulations promulgated under any such law, or any successor law.
2.21. Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
2.22 Warrant Agreement. The Company has entered into a warrant
agreement with respect to the Warrants and the Representative's Warrants with
Continental Stock Transfer & Trust Company substantially in the form filed as an
exhibit to the Registration Statement (the "WARRANT AGREEMENT"), providing for,
among other things, the payment of a warrant solicitation fee as contemplated by
Section 3.9 hereof.
-12-
2.23 Agreements With Initial Stockholders.
2.23.1 Insider Letters. The Company has caused to be duly
executed legally binding and enforceable agreements (except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or noncompete provision may be limited under
the federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought) annexed as Exhibits 10.1.1 through 10.1.5,
to the Registration Statement (the "INSIDER LETTER"), pursuant to which each of
the Initial Stockholders of the Company agree to certain matters, including but
not limited to, certain matters described as being agreed to by them under the
"Proposed Business" Section of the Prospectus.
2.23.2 Escrow Agreement. The Company has caused the Initial
Stockholders to enter into an escrow agreement (the "ESCROW AGREEMENT") with
Continental Stock Transfer & Trust Company (the "ESCROW AGENT") substantially in
the form filed as an exhibit to the Registration Statement whereby the Common
Stock owned by the Initial Stockholders will be held in escrow by the Escrow
Agent, until the third anniversary of the Effective Date. During such escrow
period, the Initial Stockholders shall be prohibited from selling or otherwise
transferring such shares (except (a) to spouses and children of Initial
Stockholders and trusts established for their benefit, (b) after a Business
Combination in a transaction whereby all the outstanding shares of the Company
are exchanged or converted into cash or another entity's securities and (c) as
otherwise set forth in the Escrow Agreement) unless approved by the Company's
public stockholders, but will retain the right to vote such shares. The Escrow
Agreement shall not be amended, modified or otherwise changed without the prior
written consent of Maxim.
2.24 Investment Management Trust Agreement. The Company has entered
into the Trust Agreement with respect to certain proceeds of the Offering
substantially in the form filed as an exhibit to the Registration Statement.
2.25 Covenants Not to Compete. No Initial Stockholder of the Company is
subject to any noncompetition agreement or non-solicitation agreement with any
employer or prior employer which could materially affect his ability to be an
Initial Stockholder, employee, officer and/or director of the Company.
2.26 Investments. No more than 45% of the "value" (as defined in
Section 2(a)(41) of the Investment Company Act of 1940 ("Investment Company
Act")) of the Company's total assets consist of, and no more than 45% of the
Company's net income after taxes is derived from, securities other than
"Government Securities" (as defined in Section 2(a)(16) of the Investment
Company Act).
-13-
2.27 Subsidiaries. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.28 Related Party Transactions. No relationship, direct or indirect,
exists between or among any of the Company or any affiliate of the Company, on
the one hand, and any director, officer, shareholder, customer or supplier of
the Company or any affiliate of the Company, on the other hand, which is
required by the Act, the Exchange Act or the Regulations to be described in the
Registration Statement or the Prospectus which is not so described and described
as required. There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Registration Statement and the Prospectus. The Company has not
extended or maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any director or
officer of the Company.
2.29 No Influence. The Company has not offered, or caused the
Underwriters to offer, the Firm Units to any person or entity with the intention
of unlawfully influencing: (a) a customer or supplier of the Company or any
affiliate of the Company to alter the customer's or supplier's level or type of
business with the Company or such affiliate or (b) a journalist or publication
to write or publish favorable information about the Company or any such
affiliate.
2.30 AMEX Rules. As of the effective date of the Registration
Statement, the Company's Board of Directors shall have validly appointed an
audit committee, nominating committee and compensation committee whose
composition satisfies the requirements of the rules and regulations of the
American Stock Exchange ("AMEX") and the Board of Directors and/or audit
committee and the nominating committee has each adopted a charter that satisfies
the requirements of AMEX. Neither the Board of Directors nor the audit committee
has been informed, nor is any director of the Company aware, of: (i) any
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report
financial information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal control over financial reporting.
2.31 Sarbanes-Oxley The Company is in material compliance with the
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder and related or similar rules and regulations promulgated
by AMEX or any other governmental or self regulatory entity or agency, except
for such violations which, singly or in the aggregate, would not have a material
adverse effect. Without limiting the generality of the foregoing, as of the
effective date of the Registration Statement: (i) all members of the Company's
Board of Directors who are required to be "independent" (as that term is defined
under applicable laws, rules and regulations), including, without limitation,
all members of the audit committee of the Company's Board of Directors, meet the
qualifications of independence as set forth under applicable laws, rules and
regulations and (ii) the audit committee of the Company's Board of Directors has
at least one member who is an "audit committee financial expert" (as that term
is defined under applicable laws, rules and regulations).
-14-
2.32 Listing of the Public Securities on AMEX. The Public Securities
have been authorized for listing on the AMEX.
2.33 Definition of "Knowledge." As used in herein, the term "KNOWLEDGE
OF THE COMPANY" (or similar language) shall mean the knowledge of the officers
and directors of the Company who are named in the Prospectus, with the
assumption that such officers and directors shall have made reasonable and
diligent inquiry of the matters presented.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is required
to be delivered under the Act, the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Representative) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years from
the Effective Date, or until such earlier time upon which the Company is
required to be liquidated, the Company will use its best efforts to maintain the
registration of the Units, Common Stock and Warrants under the provisions of the
Exchange Act. The Company will not deregister the Units under the Exchange Act
without the prior written consent of Maxim.
-15-
3.2.4 Sarbanes-Oxley Compliance. The Company shall take all
actions necessary to obtain and maintain material compliance with each
applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated thereunder and related or similar rules and regulations
promulgated by any other governmental or self regulatory entity or agency with
jurisdiction over the Company.
3.3 Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 Delivery to Underwriters of Prospectuses. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriters may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 Effectiveness and Events Requiring Notice to the Representative.
The Company will use its best efforts to cause the Registration Statement to
remain effective and will notify the Representative immediately and confirm the
notice in writing: (i) of the effectiveness of the Registration Statement and
any amendment thereto; (ii) of the issuance by the Commission of any stop order
or of the initiation, or the threatening, of any proceeding for that purpose;
(iii) of the issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Securities for offering or
sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose; (iv) of the mailing and delivery to the Commission
for filing of any amendment or supplement to the Registration Statement or
Prospectus; (v) of the receipt of any comments or request for any additional
information from the Commission; and (vi) of the happening of any event during
the period described in Section 3.4 hereof that, in the judgment of the Company,
makes any statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the Commission
or any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
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3.6 Review of Financial Statements. Until the earlier of five years
from the Effective Date, or until such earlier upon which the Company is
required to be liquidated, the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to review (but not
audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's Form 10-Q quarterly report and the mailing of quarterly
financial information to stockholders.
3.7 Affiliated Transactions.
3.7.1 Business Combinations. The Company will not consummate a
Business Combination with any entity which is affiliated with any Initial
Stockholder unless the Company obtains an opinion from an independent investment
banking firm that the Business Combination is fair to the Company's stockholders
from a financial perspective.
3.7.2 Administrative Services. The Company has entered into
agreements (the "SERVICE AGREEMENTS") with each of Equity Dynamics, Inc. and The
Lan Group, (the "AFFILIATES") in the forms filed as exhibits to the Registration
Statement pursuant to which the Affiliates will make available to the Company
general and administrative services including office space, utilities and
secretarial support for the Company's use for $6,000 and $1,500, respectively,
per month.
3.7.3 Compensation. Except as set forth in this Section 3.7, the
Company shall not pay any Initial Stockholder or any of their affiliates any
fees or compensation from the Company, for services rendered to the Company
prior to, or in connection with, the consummation of a Business Combination;
provided that the Initial Stockholders shall be entitled to reimbursement from
the Company for their out-of-pocket expenses incurred in connection with seeking
and consummating a Business Combination.
3.8 Secondary Market Trading and Standard & Poor's. In the event the
Public Securities are not listed on the New York Stock Exchange or AMEX or
quoted on the Nasdaq National Market, (a) the Company will apply to be included
in Standard and Poor's Daily News and Corporation Records Corporate Descriptions
for a period of five years from the consummation of a Business Combination, (b)
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
and (c) the Company shall also take such other action as may be reasonably
requested by the Representative to obtain a secondary market trading exemption
in such other states as may be requested by the Representative.
3.9 Warrant Solicitation Fees. The Company hereby engages Maxim, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Company will (i) assist Maxim with respect to such solicitation,
if requested by Maxim, and (ii) at Maxim's request, provide Maxim, and direct
the Company's transfer and warrant agent to provide to Maxim, at the Company's
cost, lists of the record and, to the extent known, beneficial owners of, the
Warrants. Commencing one year from the Effective Date, the Company will pay
Maxim four percent (4%) of the cash proceeds received upon exercise of the
Warrants, payable on the date of such exercise, on the terms provided for in the
Warrant Agreement, only if permitted under the rules and regulations of the NASD
and only to the extent that an investor who exercises his Warrants specifically
designates, in writing, that Maxim solicited his exercise. Maxim may engage
sub-agents in its solicitation efforts. The Company agrees to disclose the
arrangement to pay such solicitation fees to Maxim in any prospectus used by the
Company in connection with the registration of the shares of Common Stock
underlying the Warrants.
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3.10 Financial Public Relations Firm. Promptly after the execution of a
definitive agreement for a Business Combination, the Company shall retain a
financial public relations firm reasonably acceptable to the Representative for
a term to be agreed upon by the Company and the Representative.
3.11 Reports to the Representative.
3.11.1 Periodic Reports, Etc. For a period of five years from the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company will furnish to the Representative (Attn: Clifford
Teller, Managing Director) and its counsel copies of such financial statements
and other periodic and special reports as the Company from time to time
furnishes generally to holders of any class of its securities, and promptly
furnish to the Representative: (i) a copy of each periodic report the Company
shall be required to file with the Commission; (ii) a copy of every press
release and every news item and article with respect to the Company or its
affairs which was released by the Company; (iii) a copy of each Form 8-K or
Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the Company; (iv)
five copies of each Registration Statement; (v) a copy of monthly statements, if
any, setting forth such information regarding the Company's results of
operations and financial position (including balance sheet, profit and loss
statements and data regarding outstanding purchase orders) as is regularly
prepared by management of the Company; and (vi) such additional documents and
information with respect to the Company and the affairs of any future
subsidiaries of the Company as the Representative may from time to time
reasonably request; provided that the Representative shall sign, if requested by
the Company, a Regulation FD compliant confidentiality agreement which is
reasonably acceptable to the Representative and its counsel in connection with
the Representative's receipt of such information.
3.11.2 Transfer Sheets. For a period of five years following the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company shall retain a transfer and warrant agent acceptable
to the Representative (the "TRANSFER AGENT") and will furnish to the
Underwriters at the Company's sole cost and expense such transfer sheets of the
Company's securities as the Representative may request, including the daily and
monthly consolidated transfer sheets of the Transfer Agent and DTC. Continental
Stock Transfer & Trust Company is acceptable to the Underwriters.
3.11.3 Secondary Market Trading Survey. In the event the Public
Securities are no longer listed or quoted, as the case may be, on the New York
Stock Exchange, AMEX or the Nasdaq National Market, or until such earlier time
upon which the Company is required to be liquidated, the Company shall engage
Lowenstein Sandler PC ("LOWENSTEIN"), for a one-time fee of $5,000, to deliver
and update to the Underwriters on a timely basis, but in any event at the
beginning of each fiscal quarter, a written report detailing those states in
which the Public Securities may be traded in non-issuer transaction under the
Blue Sky laws of the fifty States (the "SECONDARY MARKET TRADING SURVEY").
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3.11.4 Trading Reports. During such time as the Public Securities
are quoted on the NASD OTC Bulletin Board (or any successor trading market such
as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar publisher of
quotations) and no other automated quotation system, the Company shall provide
to the Representative, at its expense, such reports published by the NASD or the
Pink Sheets, LLC relating to price trading of the Public Securities, as the
Representative shall reasonably request. In addition to the requirements of the
preceding sentence, for a period of two (2) years from the Closing Date, the
Company, at its expense, shall provide the Representative a subscription to the
Company's weekly Depository Transfer Company Security Position Reports.
3.12 Disqualification of Form S-1 and S-3. For a period equal to seven
years from the date hereof, the Company will not take any action or actions
which may prevent or disqualify the Company's use of Form S-1 or S-3 (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 fees and 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 listing
of the Public Securities on AMEX; (iv) the qualification of the Public
Securities under state or foreign securities or Blue Sky laws, including the
costs of printing and mailing the "Preliminary Blue Sky Memorandum," and all
amendments and supplements thereto, fees and disbursements for the
Representative's counsel retained for such purpose (such fees shall be capped at
$35,000 in the aggregate (of which $15,000 has previously been paid)), and a
one-time fee of $5,000 payable to the Representative's counsel for the
preparation of the Secondary Market Trading Survey, if required; (v) filing
fees, costs and expenses (including fees of Representative's counsel and
disbursements for the Representative's counsel) incurred in registering the
Offering with the NASD (including all COBRADesk fees); (vi) costs of placing
"tombstone" advertisements in The Wall Street Journal, The New York Times and a
third publication to be selected by the Representative not to exceed $__________
in the aggregate; (vii) fees and disbursements of the transfer and warrant
agent; (viii) the Company's expenses associated with "due diligence" meetings
arranged by the Representative; (ix) the preparation, binding and delivery of
leather bound volumes in form and style reasonably satisfactory to the
Representative and transaction lucite cubes or similar commemorative items in a
style and quantity as reasonably requested by the Representative; (x) all costs
and expenses associated with "road show" marketing and "due diligence" trips for
the Company's management to meet with prospective investors, including without
limitation, all travel, food and lodging expenses associated with such trips;
and (xi) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section 3.13.1. The Representative may deduct from the net proceeds of the
Offering payable to the Company on the Closing Date, or the Option Closing Date,
if any, the expenses set forth above to be paid by the Company to the
Representative and others. The Company also agrees that, if requested by the
Representative, it will engage and pay for an investigative search firm of the
Representative's choice to conduct an investigation of the principals of the
Company as shall be selected by the Representative. If the Offering is
successfully consummated, any amounts paid by the Company in connection with
such investigative search firm shall be credited against the non-accountable
expenses to be paid to the Representative pursuant to Section 3.13.2 hereof. If
the Offering is not consummated for any reason whatsoever, except as a result of
the Representatives or any Underwriter's breach or default with respect to any
of its obligations described in this Agreement, then the Company shall reimburse
the Representative in full for their out of pocket accountable expenses actually
incurred by the Representative, including, without limitation, its legal fees
(up to a maximum of $50,000, less any amounts previously paid).
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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 percent (1%) of the gross proceeds received by the Company from the sale
of the Firm Units (of which $50,000 has previously been paid) by deduction from
the proceeds of the Offering contemplated herein.
3.13.3 Fee on Business Combination. Upon consummation of a
Business Combination, the Company further agrees that in addition to the
expenses payable pursuant to Sections 3.13.1 and 3.13.2, it will pay to the
Representative an additional underwriting commission equal to one percent (1%)
of the gross proceeds received by the Company from the sale of the Firm Units
and the Option Units, if any.
3.14 Application of Net Proceeds. The Company will apply the net
proceeds from the Offering received by it in a manner consistent with the
application described under the caption "Use Of Proceeds" in the Prospectus.
3.15 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.16 Notice to NASD.
3.16.1 Business Combination. In the event any person or entity
(regardless of any NASD affiliation or association) is engaged to assist the
Company in its search for a merger candidate or to provide any other merger and
acquisition services, the Company will provide the following to the NASD and
Representative prior to the consummation of the Business Combination: (i)
complete details of all services and copies of agreements governing such
services; and (ii) justification as to why the person or entity providing the
merger and acquisition services should not be considered an "underwriter and
related person" with respect to the Company's initial public offering, as such
term is defined in Rule 2710 of the NASD's Conduct Rules. The Company also
agrees that proper disclosure of such arrangement or potential arrangement will
be made in the proxy statement which the Company will file for purposes of
soliciting stockholder approval for the Business Combination.
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3.16.2 Broker/Dealer. In the event the Company intends to
register as a broker/dealer, merge with or acquire a registered broker/dealer,
or otherwise become a member of NASD, it shall promptly notify the NASD.
3.17 Stabilization. Except with respect to the agreement among the
Company, John Pappajohn and the Representative annexed as Exhibit 10.8 to the
Registration Statement, neither the Company, nor, to its knowledge, any of its
employees, directors or stockholders (without the consent of Maxim) has taken or
will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in, under
the Exchange Act, or otherwise, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Units.
3.18 Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.19 Accountants. For a period of five years from the Effective Date or
until such earlier time upon which the Company is required to be liquidated, the
Company shall retain LWBJ or other independent public accountants reasonably
acceptable to Maxim.
3.20 Form 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date (the "AUDITED FINANCIAL STATEMENTS") reflecting the
receipt by the Company of the proceeds of the initial public offering. As soon
as the Audited Financial Statements become available, the Company shall
immediately file a Current Report on Form 8-K with the Commission, which Report
shall contain the Company's Audited Financial Statements.
3.21 NASD. The Company shall advise the NASD if it is aware that any 5%
or greater stockholder of the Company becomes an affiliate or associated person
of an NASD member participating in the distribution of the Company's Public
Securities.
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3.22 Corporate Proceedings. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriters.
3.23 Investment Company. The Company shall cause the proceeds of the
Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Prospectus. The Company will otherwise conduct its business in
a manner so that it will not become subject to the Investment Company Act.
Furthermore, once the Company consummates a Business Combination, it will be
engaged in a business other than that of investing, reinvesting, owning, holding
or trading securities.
3.24 Business Combination Announcement. Within five (5) Business Days
following the consummation by the Company of a Business Combination, the Company
shall cause an announcement ("BUSINESS COMBINATION ANNOUNCEMENT") to be placed,
at its cost, in The Wall Street Journal, The New York Times and a third
publication to be selected by Maxim announcing the consummation of the Business
Combination and indicating that Maxim was the managing underwriter in the
Offering. The Company shall supply Maxim with a draft of the Business
Combination Announcement and provide Maxim with a reasonable advance opportunity
to comment thereon. The Company will not place the Business Combination
Announcement without the final approval of Maxim, which approval will not be
unreasonably withheld.
3.25 Press Releases. The Company agrees that it will not issue press
releases or engage in any other publicity, without Maxim's prior written consent
(not to be unreasonably withheld), for a period of forty (40) days after the
Closing Date.
3.26 Key-Man Insurance. Prior to the consummation of the Business
Combination, the Company will obtain key person life insurance with an insurer
rated at least AA or better in the most recent addition of "Best's Life Reports"
in the amount of $3,000,000 on the life of key management to be agreed upon by
the Company and Maxim prior to the Closing Date. Such insurance shall be
maintained in full force and effect for a period of three years from the
consummation of the Business Combination. The Company shall be the sole
beneficiary of such policy.
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3.27 Electronic Prospectus. The Company shall cause to be prepared and
delivered to the Representative, at its expense, within one (1) business day
from the effective date of this Agreement, an Electronic Prospectus to be used
by the Underwriters in connection with the Offering. As used herein, the term
"ELECTRONIC PROSPECTUS" means a form of prospectus, and any amendment or
supplement thereto, that meets each of the following conditions: (i) it shall be
encoded in an electronic format, satisfactory to the Representative, that may be
transmitted electronically by the other Underwriters to offerees and purchasers
of the Units for at least the period during which a Prospectus relating to the
Units is required to be delivered under the Securities Act; (ii) it shall
disclose the same information as the paper prospectus and prospectus filed
pursuant to EDGAR, except to the extent that graphic and image material cannot
be disseminated electronically, in which case such graphic and image material
shall be replaced in the electronic prospectus with a fair and accurate
narrative description or tabular representation of such material, as
appropriate; and (iii) it shall be in or convertible into a paper format or an
electronic format, satisfactory to the Representative, that will allow
recipients thereof to store and have continuously ready access to the prospectus
at any future time, without charge to such recipients (other than any fee
charged for subscription to the Internet as a whole and for on-line time). The
Company hereby confirms that it has included or will include in the Prospectus
filed pursuant to EDGAR or otherwise with the Commission and in the Registration
Statement at the time it was declared effective an undertaking that, upon
receipt of a request by an investor or his or her representative within the
period when a prospectus relating to the Units is required to be delivered under
the Securities Act, the Company shall transmit or cause to be transmitted
promptly, without charge, a paper copy of the Prospectus.
3.28 Reservation of Shares. The Company will reserve and keep
available that maximum number of its authorized but unissued securities which
are issuable upon exercise of the Warrants and the Representative's Purchase
Option and Representative's Warrants outstanding from time to time.
3.29 Additional Independent Directors. Within one (1) year of the
Closing Date, the Company shall have appointed at least two additional
independent directors to serve on the Company's Board of Directors and one
additional independent director to serve on each of the Company's audit
committee and nominating committee in compliance with the rules and regulations
of AMEX.
3.30 AMEX Listing. The Company will use its best efforts to maintain
the listing of the Public Securities on AMEX or other national securities
exchange acceptable to the Representative for a period of at least five (5)
years from the date of this Agreement.
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 Lowenstein.
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.
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4.1.3 No Commission Stop Order. As of either on the Closing Date
or the Option Closing Date, the Commission has not issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus, the Prospectus or any part thereof, and has not
instituted or threatened to institute any proceedings with respect to such an
order.
4.1.4 No Blue Sky Stop Orders. No order suspending the sale of
the Units in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued on either on the Closing Date or the Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.1.5 AMEX Listing. The Public Securities shall have been
approved for listing on AMEX.
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective Date,
the Representative shall have received the favorable opinion of Ellenoff
Grossman & Schole LLP ("EGS"), counsel to the Company, dated the Effective Date,
addressed to the Representative and in form and substance satisfactory to the
Representative to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation, with full power and authority to own its properties and conduct
its business as described in the Registration Statement and the Prospectus. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing, except where the failure to qualify would not have a material adverse
effect on the Company.
(ii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of law
or under the Amended and Restated 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 and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth in the
Prospectus. The Units, the Common Stock and the Warrants conform to the
descriptions thereof contained in the Registration Statement and the Prospectus.
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(iii) The Securities have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by reason
of being such holders. The Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company arising by
operation of law or under the Amended and Restated Certificate of Incorporation
or Bylaws of the Company or, to such counsel's knowledge, similar rights that
entitle or will entitle any person to acquire any security from the Company upon
issuance or sale thereof. When issued, the Representative's Purchase Option, the
Representative's Warrants and the Warrants will constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for thereby
and such Warrants, the Representative's Purchase Option, and the
Representative's Warrants, when issued, in each case, are enforceable against
the Company in accordance with their respective terms, except: (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (b) as enforceability of any
indemnification or contribution provision may be limited under the United States
and state securities laws; and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The certificates representing the Securities are in due and
proper form. A sufficient number of shares of Common Stock have been reserved
for issuance upon exercise of the Warrants and the Representative's Warrants.
The shares of Common Stock underlying the Warrants and the Representative's
Warrant will, upon exercise of the Warrants and the Representative's Warrant and
payment of the exercise price thereof, be duly and validly issued, fully paid
and non-assessable and will not have been issued in violation of or subject to
preemptive or, to such counsel's knowledge, similar rights that entitle or will
entitle any person to acquire any securities from the Company upon issuance
thereof.
(iv) The Company has full right, power and authority to
execute and deliver this Agreement, the Warrant Agreement, the Services
Agreements, the Trust Agreement, the Escrow Agreement and the Representative's
Purchase Option and to perform its obligations thereunder, and all corporate
action required to be taken for the due and proper authorization, execution and
delivery of this Agreement, the Warrant Agreement, the Services Agreements, the
Trust Agreement, the Escrow Agreement and the Representative's Purchase Option
and consummation of the transactions contemplated by the Underwriting Agreement,
the Registration Statement and the Prospectus and as described in the
Registration Statement and the Prospectus have been duly and validly taken.
(v) This Agreement, the Warrant Agreement, the Services
Agreements, the Trust Agreement and the Escrow Agreement have each been duly and
validly authorized and, when executed and delivered by the Company, constitute,
and the Representative's Purchase Option has been duly and validly authorized by
the Company and, when executed and delivered, will constitute, the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except: (a) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (b) as enforceability of any indemnification or
contribution provisions may be limited under the United States and state
securities laws; and (c) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
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(vi) The execution, delivery and performance of this
Agreement, the Warrant Agreement, the Representative's Purchase Option, the
Escrow Agreement, the Trust Agreement and the Services Agreements, the issuance
and sale of the Securities, the consummation of the transactions contemplated
hereby and thereby, and compliance by the Company with the terms and provisions
hereof and thereof, do not and will not, with or without the giving of notice or
the lapse of time, or both, (a) to such counsel's knowledge, conflict with, or
result in a breach of, any of the terms or provisions of, or constitute a
default under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of, any mortgage, deed of trust, note, indenture,
loan, contract, commitment or other agreement or instrument filed as an exhibit
to the Registration Statement, (b) result in any violation of the provisions of
the Amended and Restated Certificate of Incorporation or the By-Laws of the
Company, or (c) to such counsel's knowledge, violate any statute or any
judgment, order or decree, rule or regulation applicable to the Company of any
court, domestic or foreign, or of any federal, state or other regulatory
authority or other governmental body having jurisdiction over the Company, its
properties or assets.
(vii) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements included therein, as to which no opinion
need be rendered) each as of their respective dates complied as to form in all
material respects with the requirements of the Act and Regulations. The
Securities and each agreement filed as an exhibit to the Registration Statement
conform in all material respects to the description thereof contained in the
Registration Statement and the Prospectus. No United States or state statute or
regulation required to be described in the Prospectus is not described as
required (except as to the Blue Sky laws of the various states, as to which such
counsel expresses no opinions), nor are any contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement not so
described or filed as required (except for the contracts and documents described
in the "Underwriting" section of the Registration Statement, as to which such
counsel expresses no opinions).
(viii) The Registration Statement is effective under the Act.
To such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act or applicable state
securities laws.
(ix) To such counsel's knowledge, there is no action, suit or
proceeding before or by any court of governmental agency or body, domestic or
foreign, now pending, or threatened against the Company that is required to be
described in the Registration Statement.
(x) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any judicial,
regulatory or other legal or governmental agency or body is required for the
execution, delivery and performance of the Underwriting Agreement or
consummation of the transactions contemplated by the Underwriting Agreement, the
Registration Statement and the Prospectus, except for (1) such as may be
required under state securities or blue sky laws in connection with the purchase
and distribution of the Units by the Underwriters (as to which such counsel need
express no opinion), (2) such as have been made or obtained under the Securities
Act and (3) such as are required by the NASD.
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(xi) The statements under the captions "Description of
Securities" and Item 14 of Part II of the Registration Statement, insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings.
(xii) The Shares are duly authorized for listing on AMEX.
The opinion of counsel shall further include a statement to
the effect that counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriters at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed and although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as otherwise set
forth in this opinion), no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or the
Prospectus or any amendment or supplement thereto, as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus).
4.2.2 Closing Date and Option Closing Date Opinion of Counsel. On
each of the Closing Date and the Option Closing Date, if any, the Representative
shall have received the favorable opinion of EGS, dated the Closing Date or the
Option Closing Date, as the case may be set forth above, addressed to the
Representative and in form and substance reasonably satisfactory to the counsel
to the Representative, confirming as of the Closing Date and, if applicable, the
Option Closing Date, the statements made by EGS in its opinion delivered on the
Effective Date.
4.2.3 Reliance. In rendering such opinion, such counsel may rely:
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
the Representative) of other counsel reasonably acceptable to the
Representative, familiar with the applicable laws; and (ii) as to matters of
fact, to the extent they deem proper, on certificates or other written
statements of officers of the Company and officers of departments of various
jurisdiction having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to the Underwriters' counsel if requested. The
opinion of counsel for the Company and any opinion relied upon by such counsel
for the Company shall include a statement to the effect that it may be relied
upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.
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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
Lowenstein from LWBJ dated, respectively, as of the date of this Agreement and
as of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations and that they have not, during the periods covered by the financial
statements included in the Prospectus, provided to the Company any non-audit
services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of the
Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that: (a) the unaudited financial statements of
the Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements of the Company included in the
Registration Statement; (b) at a date not later than five days prior to the
Effective Date, Closing Date or Option Closing Date, as the case may be, there
was any change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity of the Company as compared with amounts
shown in the , 2005 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any decrease, setting forth the amount of such decrease, and (c) during the
period from , 2005 to a specified date not later than five days prior to the
Effective Date, Closing Date or Option Closing Date, as the case may be, there
was any decrease in revenues, net earnings or net earnings per share of Common
Stock, in each case as compared with the corresponding period in the preceding
year and as compared with the corresponding period in the preceding quarter,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
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(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary or Assistant Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed all covenants and complied with all conditions
required by this Agreement to be performed or complied with by the Company prior
to and as of the Closing Date, or the Option Closing Date, as the case may be,
and that the conditions set forth in Section 4.5 hereof have been satisfied as
of such date and that, as of Closing Date and the Option Closing Date, as the
case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct. In addition, the Representative will have
received such other and further certificates of officers of the Company as the
Representative may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary or Assistant Secretary of the
Company, dated the Closing Date or the Option Date, as the case may be,
respectively, certifying: (i) that the By-Laws and Amended and Restated
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.
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4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any: (i) there shall have been no material adverse
change or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or any
Initial Stockholder before or by any court or federal or state commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; (iii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission; and (iv) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
(in the case of the Prospectus, in light of the circumstances under which they
were made), not misleading.
4.6 Delivery of Agreements.
4.6.1 Effective Date Deliveries. On the Effective Date, the
Company shall have delivered to the Representative executed copies of the Escrow
Agreement, the Trust Agreement, the Warrant Agreement, the Services Agreement
and all of the Insider Letters.
4.6.2 Closing Date Deliveries. On the Closing Date, the Company
shall have delivered to the Representative executed copies of the
Representative's Purchase Option.
4.7 Secondary Market Trading Survey. In the event the Public Securities
are not listed on the New York Stock Exchange or AMEX or quoted on the Nasdaq
National Market, on the Closing Date, the Representative shall have received the
Secondary Market Trading Survey from Lowenstein.
5. Indemnification.
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5.1 Indemnification of Underwriters.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters and each
dealer selected by you that participates in the offer and sale of the Units
(each a "Selected Dealer") and each of their respective directors, officers and
employees and each person, if any, who controls any such Underwriter
("CONTROLLING PERSON") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
federal, state or local statute, law, rule, regulation or ordinance or at common
law or otherwise or under the laws, rules and regulation of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in (i) any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time each may be amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Representative's Purchase
Option; or (iii) any application or other document or written communication (in
this Section 5 collectively called "APPLICATION") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Units under the securities laws thereof or filed with the
Commission, any state securities commission or agency, the OTC Bulletin Board or
Nasdaq or any securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to an Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be,
which furnished written information, it is expressly agreed, consists solely of
the information described in the last sentence of Section 2.3.1. With respect to
any untrue statement or omission or alleged untrue statement or omission made in
the Preliminary Prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of any Underwriter to the extent that any loss,
liability, claim, damage or expense of such Underwriter results from the fact
that a copy of the Prospectus was not given or sent to the person asserting any
such loss, liability, claim or damage at or prior to the written confirmation of
sale of the Securities to such person as required by the Act and the
Regulations, and if the untrue statement or omission has been corrected in the
Prospectus, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with its obligations under Section 3.4 hereof. The
Company agrees promptly to notify the Representative of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or Prospectus.
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5.1.2 Procedure. If any action is brought against an Underwriter
or controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the reasonable approval of such Underwriter) and payment of actual
expenses. Such Underwriter or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless: (i) the employment of such counsel at the expense of the Company shall
have been authorized in writing by the Company in connection with the defense of
such action; (ii) the Company shall not have employed counsel to have charge of
the defense of such action; or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the reasonable fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter and/or controlling person shall be borne
by the Company. Notwithstanding anything to the contrary contained herein, if
the Underwriter or controlling person shall assume the defense of such action as
provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company, its directors,
officers and employees and agents who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to the several Underwriters, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions
made in any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment or supplement thereto or in any application, in reliance upon, and
in strict conformity with, written information furnished to the Company with
respect to such Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application, which furnished
written information, it is expressly agreed, consists solely of the information
described in the last sentence of Section 2.3.1. . In case any action shall be
brought against the Company or any other person so indemnified based on any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
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5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each director,
officer and employee of an Underwriter or the Company, as applicable, and each
person, if any, who controls an Underwriter or the Company, as applicable,
within the meaning of Section 15 of the Act shall have the same rights to
contribution as the Underwriters or the Company, as applicable.
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.
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6.2 Default Exceeding 10% of Firm Units or Option Units. In the event
that the default addressed in Section 6.1 above relates to more than 10% of the
Firm Units or Option Units, you may in your discretion arrange for yourself or
for another party or parties to purchase such Firm Units or Option Units to
which such default relates on the terms contained herein. If within one business
day after such default relating to more than 10% of the Firm Units or Option
Units you do not arrange for the purchase of such Firm Units or Option Units,
then the Company shall be entitled to a further period of one business day
within which to procure another party or parties satisfactory to you to purchase
said Firm Units or Option Units on such terms. In the event that neither you nor
the Company arrange for the purchase of the Firm Units or Option Units to which
a default relates as provided in this Section 6, this Agreement may be
terminated by you or the Company without liability on the part of the Company
(except as provided in Sections 3.15 and 5 hereof) or the several Underwriters
(except as provided in Section 5 hereof); provided, however, that if such
default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm Units or
Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7. Additional Covenants.
7.1 Additional Shares or Options. The Company hereby agrees that until
the Company consummates a Business Combination (as such term is defined in the
Registration Statement), it shall not issue any shares of Common Stock or any
options or other securities convertible into Common Stock, or any shares of
Preferred Stock which participate in any manner in the Trust Fund or which vote
as a class with the Common Stock on a Business Combination.
7.2 Trust Fund Waiver Acknowledgments. The Company hereby agrees that
it will not commence its due diligence investigation of any operating business
which the Company seeks to acquire (each, a "TARGET BUSINESS") or obtain the
services of any vendor unless and until such Target Business or vendor
acknowledges in writing, whether through a letter of intent, memorandum of
understanding or other similar document (and subsequently acknowledges the same
in any definitive document replacing any of the foregoing), that (a) it has read
the Prospectus and understands that the Company has established the Trust Fund,
initially in an amount of $57,600,000 (without giving effect to any exercise of
the Over-allotment Option) for the benefit of the Public Stockholders and that
the Company may disburse monies from the Trust Fund only (i) to the Public
Stockholders in the event of the conversion of their shares or the liquidation
of the Company or (ii) to the Company after it consummates a Business
Combination and (b) for and in consideration of the Company (1) agreeing to
evaluate such Target Business for purposes of consummating a Business
Combination with it or (2) agreeing to engage the services of the vendor, as the
case may be, such Target Business or vendor agrees that it does not have any
right, title, interest or claim of any kind in or to any monies of the Trust
Fund ("Claim") and waives any Claim it may have in the future as a result of, or
arising out of, any negotiations, contracts or agreements with the Company and
will not seek recourse against the Trust Fund for any reason whatsoever. The
foregoing letters shall substantially be in the form attached hereto as Exhibit
A and B, respectively. Furthermore, each officer and director of the Company
shall execute a waiver letter in the form attached hereto as Exhibit C.
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7.3 Insider Letters. The Company shall not take any action or omit to
take any action which would cause a breach of any of the Insider Letters
executed between each Initial Stockholder and Maxim and will not allow any
amendments to, or waivers of, such Insider Letters without the prior written
consent of Maxim.
7.4 Amended and Restated Certificate of Incorporation and By-Laws. The
Company shall not take any action or omit to take any action that would cause
the Company to be in breach or violation of its Amended and Restated Certificate
of Incorporation or By-Laws. Prior to the consummation of a Business
Combination, the Company will not amend its Amended and Restated Certificate of
Incorporation without the prior written consent of Maxim.
7.5 Blue Sky Requirements. The Company shall provide counsel to the
Representative with ten copies of all proxy information and all related material
filed with the Commission in connection with a Business Combination concurrently
with such filing with the Commission. In addition, the Company shall furnish any
other state in which its initial public offering was registered, such
information as may be requested by such state.
7.6 Acquisition/Liquidation Procedure. The Company agrees: (i) that,
prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("BUSINESS
COMBINATION VOTE") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law; and (ii)
that, in the event that the Company does not effect a Business Combination
within 18 months from the consummation of this Offering (subject to extension
for an additional six-month period, as described in the Prospectus), the Company
will be liquidated and will distribute to all holders of IPO Shares (defined
below) an aggregate sum equal to the Company's "Liquidation Value." The
Company's "LIQUIDATION VALUE" shall mean the Company's book value, as determined
by the Company and audited by LWBJ. In no event, however, will the Company's
Liquidation Value be less than the amount contained in the Trust Fund at that
time, inclusive of any net interest income thereon. Only holders of IPO Shares
(as defined below) shall be entitled to receive liquidating distributions and
the Company shall pay no liquidating distributions with respect to any other
shares of capital stock of the Company. With respect to the Business Combination
Vote, the Company shall cause all of the Initial Stockholders to vote the shares
of Common Stock owned by them immediately prior to this Offering in accordance
with the vote of the holders of a majority of the IPO Shares. At the time the
Company seeks approval of any potential Business Combination, the Company will
offer each of the holders of the Company's Common Stock issued in this Offering
(the "IPO SHARES") the right to convert their IPO Shares at a per share price
equal to (A) the amount in the Trust Fund (inclusive of any interest income
therein) on the record date (the "CONVERSION PRICE") for determination of
stockholders entitled to vote upon the proposal to approve such Business
Combination (the "RECORD DATE") divided by (B) the total number of IPO Shares.
If holders of less than 20% in interest of the Company's IPO Shares vote against
such approval of a Business Combination, the Company may, but will not be
required to, proceed with such Business Combination. If the Company elects to so
proceed, it will convert shares, based upon the Conversion Price, from those
holders of IPO Shares who affirmatively requested such conversion and who voted
against the Business Combination. If holders of 20% or more in interest of the
IPO Shares vote against approval of any potential Business Combination, the
Company will not proceed with such Business Combination and will not convert
such shares.
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7.7 Rule 419. The Company agrees that it will use its best efforts to
prevent the Company from becoming subject to Rule 419 under the Act prior to the
consummation of any Business Combination, including, but not limited to, using
its best efforts to prevent any of the Company's outstanding securities from
being deemed to be a "penny stock" as defined in Rule 3a-51-1 under the Exchange
Act during such period.
7.8 Presentation of Potential Target Businesses. The Company shall
cause each of the Initial Stockholders to agree that, in order to minimize
potential conflicts of interest which may arise from multiple affiliations, the
Initial Stockholders will present to the Company for its consideration, prior to
presentation to any other person or company, any suitable opportunity to acquire
an operating business, until the earlier of the consummation by the Company of a
Business Combination, the liquidation of the Company or until such time as the
Initial Stockholders cease to be an officer or director of the Company, subject
to any pre-existing fiduciary obligations the Initial Stockholders might have.
7.9 Target Net Assets. The Company agrees that the initial Target
Business that it acquires must have a fair market value equal to at least 80% of
the Company's net assets at the time of such acquisition. The fair market value
of such business must be determined by the Board of Directors of the Company
based upon standards generally accepted by the financial community, such as
actual and potential sales, earnings and cash flow and book value. If the Board
of Directors of the Company is not able to independently determine that the
target business has a fair market value of at least 80% of the Company's net
assets at the time of such acquisition, the Company will obtain an opinion from
an unaffiliated, independent investment banking firm which is a member of the
NASD with respect to the satisfaction of such criteria. The Company is not
required to obtain an opinion from an investment banking firm as to the fair
market value if the Company's Board of Directors independently determines that
the Target Business does have sufficient fair market value.
7.10 Purchases by Maxim. Within three (3) months of the Warrants and
the Common Stock trading separately, and subject in all instances to the
requirements of applicable laws, rules and regulations, Maxim hereby agrees that
either it or certain of its principals, affiliates or designees, shall purchase
up to $500,000 of Warrants for its own account in the open market at a price not
to exceed $1.20 per Warrant.
8. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Date or the Option Closing Date, if any, and such
representations, warranties and agreements of the Underwriters and Company,
including the indemnity agreements contained in Section 5 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the several Underwriters until the earlier of the expiration of
any applicable statute of limitations and the seventh anniversary of the later
of the Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
-36-
9. Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
9.2 Termination. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will in
the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the American
Stock Exchange, the Boston Stock Exchange or on the NASD OTC Bulletin Board (or
successor trading market) shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been fixed, or maximum ranges for prices for securities
shall have been required on the NASD OTC Bulletin Board or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a war or an increase in major
hostilities, or (iv) if a banking moratorium has been declared by a New York
State or federal authority, or (v) if a moratorium on foreign exchange trading
has been declared which materially adversely impacts the United States
securities market, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Units, or (vii) if any of the Company's representations, warranties or
covenants hereunder are breached, or (viii) if the Representative shall have
become aware after the date hereof of such a material adverse change in the
conditions or prospects of the Company, or such adverse material change in
general market conditions, including, without limitation, as a result of
terrorist activities after the date hereof, as in the Representative's judgment
would make it impracticable to proceed with the offering, sale and/or delivery
of the Units or to enforce contracts made by the Underwriters for the sale of
the Units.
9.3 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
out of pocket expenses related to the transactions contemplated herein shall be
governed by Section 3.13 hereof.
9.4 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way effected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
-37-
10. Miscellaneous.
10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered by
hand or reputable overnight courier or delivered by facsimile transmission (with
printed confirmation of receipt) and confirmed and shall be deemed given when so
mailed, delivered or faxed (or if mailed, two days after such mailing):
If to the Representative:
Maxim Group LLC
405 Lexington Avenue
New York, New York 10174
Attn: Clifford Teller, Managing Director
Copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Attn: Steven Skolnick, Esq.
If to the Company:
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley, President
Copy to:
Ellenoff Grossman & Schole LLP
370 Lexington Avenue, 19th Floor
New York, New York 10017
Attn: Stuart Neuhauser, Esq.
11.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
11.3 Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
-38-
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, Venue, etc.
11.6.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to the conflict of laws principles thereof. Each of the Representative
and the Company (and any individual signatory hereto): (i) agrees that any legal
suit, action or proceeding arising out of or relating to this engagement letter
and/or the transactions contemplated hereby shall be instituted exclusively in
New York Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, (ii) waives any objection which
such party may have or hereafter to the venue of any such suit, action or
proceeding and (iii) irrevocably and exclusively consents to the jurisdiction of
the New York Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding.
11.6.2 Each of the Representative and the Company (and any
individual signatory hereto) further agrees to accept and acknowledge service of
any and all process which may be served in any such suit, action or proceeding
in the New York Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company or any such individual mailed by certified mail to the
Company's address shall be deemed in every respect effective service of process
upon the Company or any such individual in any such suit, action or proceeding,
and service of process upon the Representative mailed by certified mail to the
Representative's address shall be deemed in every respect effective service
process upon the Representative, in any such suit, action or proceeding.
11.6.3 THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST
EXTENT PERMITTED BY LAW, ON BEHALF OF ITS EQUITY HOLDERS AND CREDITORS) HEREBY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, THE REGISTRATION STATEMENT AND THE PROSPECTUS.
11.6.4 The Company agrees that the prevailing party(ies) in any
such action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
-39-
11.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto. Delivery of a signed
counterpart of this Agreement by fax or email/pdf transmission shall constitute
valid and sufficient delivery thereof.
11.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-40-
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
HEALTHCARE ACQUISITION CORP.
By:
---------------------------
Name: Matthew P. Kinley
Title: President
Accepted on the date first
above written.
MAXIM GROUP LLC
By:
----------------------------
Name:
Title:
-41-
SCHEDULE A
HEALTHCARE ACQUISITION CORP.
8,000,000 UNITS
NUMBER OF FIRM UNITS
UNDERWRITER TO BE PURCHASED
- ----------------------------------------------------- -----------------------
Maxim Group LLC
-----------------------
8,000,000
- ------------------------------------------------------------------------------
-42-
EXHIBIT A
FORM OF TARGET BUSINESS LETTER
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
Gentlemen:
Reference is made to the Final Prospectus of Healthcare Acquisition
Corporation ("HAC"), dated , 2005 (the "PROSPECTUS"). Capitalized terms used and
not otherwise defined herein shall have the meanings assigned to them in
Prospectus.
We have read the Prospectus and understand that HAC has established the
Trust Fund, initially in an amount of at least $57,600,000 for the benefit of
the Public Stockholders and that HAC may disburse monies from the Trust Fund
only (i) to the Public Stockholders in the event of the redemption of their
shares or the liquidation of HAC or (ii) to HAC after it consummates a Business
Combination.
For and in consideration of HAC agreeing to evaluate the undersigned
for purposes of consummating a Business Combination with it, the undersigned
hereby agrees that it does not have any right, title, interest or claim of any
kind in or to any monies in the Trust Fund (the "CLAIM") and hereby waives any
Claim it may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with HAC and will not seek recourse
against the Trust Fund for any reason whatsoever.
-----------------------------------------
Print Name of Target Business
-----------------------------------------
Authorized Signature of Target Business
-43-
EXHIBIT B
FORM OF VENDOR LETTER
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
Gentlemen:
Reference is made to the Final Prospectus of Healthcare Acquisition
Corporation ("HAC"), dated , 2005 (the "PROSPECTUS"). Capitalized terms used and
not otherwise defined herein shall have the meanings assigned to them in
Prospectus.
We have read the Prospectus and understand that HAC has established the
Trust Fund, initially in an amount of at least $57,600,000 for the benefit of
the Public Stockholders and that HAC may disburse monies from the Trust Fund
only (i) to the Public Stockholders in the event of the redemption of their
shares or the liquidation of HAC or (ii) to HAC after it consummates a Business
Combination.
For and in consideration of HAC agreeing to evaluate the undersigned
for purposes of consummating a Business Combination with it, the undersigned
hereby agrees that it does not have any right, title, interest or claim of any
kind in or to any monies in the Trust Fund (the "CLAIM") and hereby waives any
Claim it may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with HAC and will not seek recourse
against the Trust Fund for any reason whatsoever.
---------------------------------
Print Name of Vendor
---------------------------------
Authorized Signature of Vendor
-44-
EXHIBIT C
FORM OF DIRECTOR/OFFICER LETTER
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
Gentlemen:
The undersigned officer or director of Healthcare Acquisition
Corporation ("HAC") hereby acknowledges that HAC has established the Trust Fund,
initially in an amount of at least $57,600,000 for the benefit of the Public
Stockholders and that HAC may disburse monies from the Trust Fund only (i) to
the Public Stockholders in the event of the redemption of their shares or the
liquidation of HAC or (ii) to HAC after it consummates a Business Combination.
The undersigned hereby agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund (the
"CLAIM") and hereby waives any Claim it may have in the future as a result of,
or arising out of, any contracts or agreements with HAC and will not seek
recourse against the Trust Fund for any reason whatsoever.
Notwithstanding the foregoing, such waiver shall not apply to any
shares acquired by the undersigned in the public market.
-----------------------------------------
Print Name of Officer/Director
-----------------------------------------
Authorized Signature of Officer/Director
-45-
Exhibit 1.2
HEALTHCARE ACQISITION CORPORATION
SELECTED DEALER AGREEMENT
Ladies and Gentlemen:
Maxim Group LLC ("MAXIM") is acting as the representative of the
underwriters (the "Underwriters") in a firm commitment, underwritten offering
(the "OFFERING") to sell 8,000,000 units (the "Units")(1) of Healthcare
Acquisition Corporation (the "COMPANY") as described in the prospectus for the
Offering (the "PROSPECTUS"). Maxim is hereby inviting the entity signatory
hereto (the "SELECTED DEALER"), subject to the other terms and conditions set
forth herein and in the Prospectus, to act as a selected dealer in connection
with the Offering, and by executing this Selected Dealer Agreement (this
"AGREEMENT"), Maxim hereby approves such signatory as a Selected Dealer in
connection with the Offering.
1. This Agreement shall be effective when the registration statement
relating to the Units (and including the Prospectus) (the "REGISTRATION
STATEMENT") filed by the Company under the Securities Act of 1933, as amended
(the "ACT"), has become effective with the Securities and Exchange Commission.
The terms of the Offering and the Selected Dealer's participation therein are as
follows:
Authorized Public Offering Price: $8.00 per Unit.
Selected Dealers' Selling Concession: Not to exceed $____ per Unit payable
upon termination of this Agreement,
except as provided below. Maxim
reserves the right not to pay such
concessions on any of the Units
purchased by the Selected Dealer from
Maxim and repurchased by Maxim at or
below the price stated above prior to
such termination.
Reallowance: The Selected Dealer may reallow not in
excess of $___ per Unit as a selling
concession to dealers who are members
in good standing of National
Association of Securities Dealers,
Inc. (the "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.
- -------------------
(1) Plus the over-allotment option available to the Underwriters to purchase up
to an additional 1,200,000 Units.
Delivery and Payment: Delivery of the Units shall be made on
or about ___________, 2005 or such
later date as Maxim may advise on not
less than one day's notice to the
Selected Dealer, at Maxim's principal
office located at 405 Lexington
Avenue, 2nd Floor, New York, New York
10174 or at such other place as Maxim
may advise on not less than one day's
notice to the Selected Dealer. Payment
for the Units is to be made, against
delivery, at the authorized public
offering price stated above, or, if
Maxim shall so advise, at the
authorized public offering price less
the dealers' selling concession stated
above, by a certified or official bank
check in New York Clearing House Funds
or wire transfer of immediately
available funds payable to the order
of Maxim Group LLC.
Termination: 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 Maxim's discretion
for a period or periods not to exceed
in the aggregate 30 additional days.
Maxim may terminate this Agreement,
whether or not extended, at any time
and for any reason, without notice. In
addition, this Agreement shall
automatically terminate if the
Selected Dealer: (a) ceases to be a
member in good standing of the NASD,
(b) becomes subject to NASD
suspension, or (c) has its
registration as a broker-dealer under
the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT") is
terminated or suspended. Upon
termination, all rights and
obligations under this Agreement shall
cease, except rights and obligations
accrued or unsatisfied at the date of
termination.
2. Any of the Units purchased by the Selected Dealer hereunder are
to be offered by the Selected Dealer to the public at the public offering price,
except as herein otherwise provided and except that a reallowance from such
public offering prices 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 the Selected Dealer that they will promptly
reoffer such Units at the public offering price and will abide by the conditions
set forth in paragraph 8 below.
-2-
3. By its signature hereto, the Selected Dealer agrees that: (a)
upon effectiveness of the Registration Statement and receipt of the Prospectus,
to take up and pay for the number of Units allotted and confirmed to the
Selected Dealer by Maxim, (b) not to use any of the Units to reduce or cover any
short position of the Selected Dealer, (c) upon Maxim's request, to advise Maxim
of the number of Units purchased from Maxim remaining unsold by the Selected
Dealer and to resell to Maxim any or all of such unsold Units at the public
offering prices stated above, less all or such part of the concession allowed
the Selected Dealer as Maxim may determine, and (d) to make available a copy of
the Prospectus to all persons who on behalf of the Selected Dealer will solicit
orders for the Units prior to the making of such solicitations by such persons.
The Selected Dealer is 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. As contemplated by Rule 15c2-8 under the Exchange, Maxim agrees
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 the
Exchange Act, the mailing to be made to the address given in the request. The
Selected Dealer confirms that it has received and reviewed the Prospectus and
delivered all preliminary prospectuses and revised preliminary prospectuses, if
any, required to be delivered under the provisions of Rule 15c2-8 and agrees to
deliver all copies of the Prospectus required to be delivered thereunder. The
Selected Dealer acknowledges that Maxim has heretofore delivered to the Selected
Dealer such preliminary prospectuses as have been required by the Selected
Dealer, receipt of which is hereby acknowledged, and will deliver reasonable
quantities of additional prospectuses (any supplements or amendments thereto) as
may be reasonably requested by the Selected Dealer.
5. The Selected Dealer agrees that until termination of this
Agreement, the Selected Dealer will not make purchases or sales of the Units
except: (a) pursuant to this Agreement, (b) pursuant to written authorization
received from Maxim, or (c) in the ordinary course of business as broker or
agent for a customer pursuant to any unsolicited order.
6. The Units are offered by Maxim for delivery when, as and if sold
to, and accepted by, Maxim and subject to the terms herein and in the Prospectus
or any supplements or amendments thereto, to Maxim's right to vary the
concessions and terms of the 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.
7. Upon written application to Maxim, the Selected Dealer shall be
informed as to the jurisdictions under the securities or blue sky laws of which
Maxim believes the Units are eligible for sale, but Maxim assumes no
responsibility as to such eligibility or the right of the Selected Dealer or any
other selected dealers in the Offering to sell any of the Units in any
jurisdiction. Maxim has 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 Offering, the Selected
Dealer agrees to promptly furnish to Maxim, upon request, territorial
distribution reports setting forth each jurisdiction in which sales of the Units
were made by the Selected Dealer, the number of Units sold in such jurisdiction,
and any further information Maxim may request in order to permit Maxim to file
on a timely basis any report that Maxim, as the representative of the
Underwriters or manager of the selected dealers in the Offering, may be required
to file pursuant to the securities or blue sky laws of any jurisdiction.
-3-
8. By its signature hereto, as a condition of the approval by Maxim
of the Selected Dealer as such, the Selected Dealer confirms that it is either:
(a) a member in good standing of the NASD and that it is currently registered as
a dealer under the Exchange Act or (b) a foreign dealer that has 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. The Selected Dealer
hereby agrees to comply with the provisions of Rule 2810 of the Rules of Fair
Practice of the NASD. In addition, the Selected Dealer hereby agrees to comply
with the provisions of Rules 2710, 2420, 2730, 2740 and 2750 of the Rules of
Fair Practice of the NASD to the extent such sections are applicable to the
Selected Dealer's activities in connection with the Offering, as well as all
other applicable federal, state and foreign laws, rules and regulations,
including, without limitation, those relating to money laundering.
9. The Selected Dealer agrees that it shall act solely as an
independent contractor under this Agreement. Nothing herein shall be deemed to
create any partnership, joint venture or other association or entity between
Maxim and the Selected Dealers; provided, however, that the Selected Dealer
agrees, notwithstanding any prior settlement of accounts or termination of this
Agreement, to bear its proper proportion of any tax or other liability based
upon the claim that the selected dealers in the Offering constitute a
partnership, joint venture or other association or entity and a like share of
any expenses of resisting any such claim.
10. Maxim shall be the managing underwriter of the Offering and the
manager of all of the selected dealers of the Offering (including the Selected
Dealer) and shall have full authority to take such action as it may deem
advisable in respect of all matters pertaining to the Offering or such selected
dealers or any one of them. Except as expressly stated herein, or as may arise
under the Act, Maxim shall be under no liability to the Selected Dealer 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 any
underwriting agreement entered into in connection with the Offering, 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.
11. If, for federal income tax purposes, should the Selected Dealer
and Maxim (together or with others), be deemed to constitute a partnership, then
the Selected Dealer elects to be excluded from the application of Subchapter K,
Chapter 1, Subtitle A of the Internal Revenue Code of 1986, as amended, and the
Selected Dealer agrees not to take any position inconsistent with such election.
The Selected Dealer authorizes Maxim, in its sole discretion, to execute and
file on the Selected Dealer's behalf, such evidence of such election as may be
required by the Internal Revenue Service.
-4-
12. All communications from the Selected Dealer shall be addressed
to Maxim Group LLC, 405 Lexington Avenue, 2nd Floor, New York, New York 10174,
Attention: Clifford A. Teller. Any notice from Maxim to the Selected Dealer
shall be deemed to have been fully authorized by the Underwriters and to have
been duly given if mailed or sent by confirmed facsimile transmittal to the
Selected Dealer at the address to which this Agreement is initial sent. 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 Selected Dealer, please advise us to that
effect immediately by facsimile transmission and sign and return to us the
enclosed counterpart of this letter.
Very truly yours,
MAXIM GROUP LLC
By:__________________________
Name:
Title:
We agree to act as a Selected Dealer in connection with the Offering
on the terms specified above.
Dated: _______________, 2005
-----------------------------
(Selected Dealer)
-----------------------------
(Sign Here)
-----------------------------
(Print Signatory's Title)
-5-
Exhibit 4.4
WARRANT AGREEMENT
Agreement made as of ___________, 2005 between HEALTHCARE ACQUISITION
CORP., a Delaware corporation, with offices at 2116 Financial Center, 666 Walnut
Street, Des Moines, Iowa 50309 (the "COMPANY"), and CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, a New York corporation, with offices at 17 Battery Place, New
York, New York 10004 (the "WARRANT AGENT").
WHEREAS, the Company is engaged in a public offering (a "PUBLIC
OFFERING") of Units (the "UNITS") and, in connection therewith, has determined
to issue and deliver up to (i) 9,200,000 Warrants (the "PUBLIC WARRANTs") to the
public investors, and (ii) as part of an Underwriter's purchase option, 400,000
Warrants to Maxim Group LLC. ("MAXIM") or its designees (the "REPRESENTATIVE'S
WARRANTS" and, together with the Public Warrants, the "WARRANTS"), which
Representative's Warrants shall have an exercise price of $7.50, subject to
adjustment, each of such Public Warrants evidencing the right of the holder
thereof to purchase one share of common stock, par value $.0001 per share, of
the Company's Common Stock (the "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, No. 333-124712 on Form S-1 (as the same may
be amended from time to time, the "REGISTRATION STATEMENT") for the
registration, under the Securities Act of 1933, as amended (the "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 Chief Executive Officer 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
(the "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 (the "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 (and the
Units will thereafter cease trading) unless Maxim informs the Company of its
decision to allow earlier separate trading, but in no event will Maxim 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 any 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 WARRANTS AND REPRESENTATIVE'S WARRANTS. The Representative's
Warrants shall have the same terms and be in the same form as the Public
Warrants, except with respect to the Warrant Price as set forth below in Section
3.1.
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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. Each Representative's Warrant shall, when
countersigned by the Warrant Agent, entitle the Registered Holder thereof,
subject to the provisions of such Representative's Warrant and of this Warrant
Agreement, to purchase from the Company the number of shares of Common stock
stated therein, at the price of $7.50 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; provided, that the period of
time during which such reduction in the Warrant Price is in effect shall not be
less than ten business days.
3.2. Duration of Warrants. A Warrant may be exercised only during
the period (the "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 (a "BUSINESS COMBINATION") (as
described more fully in the Company's Registration Statement) and (ii)
_________, 2006, and terminating at 5:00 p.m., New York City time on the earlier
to occur of (i) ____________, 2009 or (ii) the date fixed for redemption of the
Warrants as provided in Section 6 of this Agreement (the "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. In the event the Company elects to
extend the Expiration Date and the Company's securities are then traded on the
American Stock Exchange, the Company shall provide at least twenty (20) days
prior written notice of such extension to the American Stock Exchange.
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, in lawful money
of the United States, in cash, good certified check or good bank draft payable
to the order of the Company (or as otherwise agreed to by the Company), 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, the exchange of the Warrant for the Common Stock, and the
issuance of the Common Stock.
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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. Warrant Solicitation and Warrant Solicitation Fee.
a. The Company has engaged Maxim, on a non-exclusive basis, as
its agent for the solicitation of the exercise of the Warrants. The Company, at
its cost, will (i) assist Maxim with respect to such solicitation, if requested
by Maxim, and (ii) provide Maxim, and direct the Company's transfer agent and
the Warrant Agent to deliver to Maxim, lists of the record and, to the extent
known, beneficial owners of the Company's Warrants. The Company hereby instructs
the Warrant Agent to cooperate with Maxim in every respect in connection with
Maxim's solicitation activities, including, but not limited to, providing to
Maxim, at the Company's cost, a list of record and beneficial holders of the
Warrants and circulating a prospectus or offering circular disclosing the
compensation arrangements referenced in Section 3.3.5(b) below to holders of the
Warrants at the time of exercise of the Warrants. In addition to the conditions
set forth in Section 3.3.5(b), Maxim shall accept payment of the warrant
solicitation fee provided in Section 3.3.5(b) only if it has provided bona fide
services to the Company in connection with the exercise of the Warrants and only
to the extent that an investor who exercises his Warrants specifically
designates, in writing, that Maxim solicited his exercise. In addition to
soliciting, either orally or in writing, the exercise of Warrants by a Warrant
holder, such services may also include disseminating information, either orally
or in writing, to Warrant holders about the Company or the market for the
Company's securities, or assisting in the processing of the exercise of
Warrants.
-4-
b. In each instance in which a Warrant is exercised, the
Warrant Agent shall promptly give written notice of such exercise to the Company
and Maxim (the "WARRANT AGENT'S EXERCISE NOTICE"). If, upon the exercise of any
Warrant more than one year from the effective date of the Registration
Statement, (i) the market price of the Company's Common Stock is greater than
the Warrant Price, (ii) disclosure of compensation arrangements between the
Company and Maxim with respect to the solicitation of the exercise of the
Warrants was made both at the time of the Public Offering and at the time of
exercise (by delivery of the Prospectus or as otherwise required by applicable
law, rule or regulation), (iii) the holder of the Warrant confirms in writing
that the exercise of the Warrant was solicited by Maxim, (iv) the Warrant was
not held in a discretionary account, and (v) the solicitation of the exercise of
the Warrant was not in violation of Regulation M (as such rule or any successor
rule may be in effect as of such time of exercise) promulgated under the
Securities Exchange Act of 1934, as amended, then the Warrant Agent,
simultaneously with the distribution of the Common Stock underlying the Warrants
so exercised in accordance with the instructions from the Company following
receipt of the proceeds to the Company received upon exercise of such
Warrant(s), shall, on behalf of the Company, pay to Maxim a fee of 4% of the
cash proceeds received upon exercise of the Warrants, provided that Maxim
delivers to the Warrant Agent within ten (10) business days from the date on
which Maxim has received the Warrant Agent's Exercise Notice, a certificate that
the conditions set forth in the preceding clauses (iii), (iv) and (v) have been
satisfied. Notwithstanding the foregoing, no fee will be paid to Maxim with
respect to the exercise by the Underwriters or their affiliates or the Company's
officers or directors of Warrants purchased by it or them and still held by them
for its or their own account. Maxim and the Company may at any time during
business hours, examine the records of the Warrant Agent, including its ledger
of original Warrant certificates returned to the Warrant Agent upon exercise of
Warrants.
c. The provisions of this Section 3.3.5. may not be modified,
amended or deleted without the prior written consent of Maxim.
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.
-5-
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 the 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 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.
-6-
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 (the "REDEMPTION PRICE"), provided that the last sales price
of the Common Stock has been at least $11.50 per share, for any twenty (20)
trading days within a thirty (30) trading day period ending on the third
business day prior to the date on which notice of redemption is given.
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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 in accordance with Section 3 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. 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 Maxim.
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.
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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 Maxim.
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.
-9-
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 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.
-10-
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 the Company's 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, or sent
by facsimile transmission (with confirmation of receipt), addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
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, or sent by facsimile transmission (with
confirmation of receipt) 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
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with a copy in each case to:
Ellenoff Grossman & Schole LLP
370 Lexington Avenue
New York, New York 10017
Attn: Stuart Neuhauser, Esq.
and
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Attn: Steven Skolnick, Esq.
and
Maxim Group LLC.
405 Lexington Avenue
New York, New York 10174
Attn: Clifford Teller, Managing Director
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 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 Agreement shall be brought and enforced in
the courts of the State of New York located in New York County 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 entity other than the parties hereto and the Registered Holders of the
Warrants (who shall, for all purposes hereunder, be deemed third party
beneficiaries of this Agreement) and, for the purposes of Sections 3.3.5, 6.1,
6.4, 7.4 and 9.2 hereof, Maxim, any right, remedy, or claim under or by reason
of this Warrant Agreement or of any covenant, condition, stipulation, promise,
or agreement hereof. Maxim shall be deemed to be a third-party beneficiary of
this Agreement with respect to Sections 3.3.5, 6.1, 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 Maxim with respect to the Sections 3.3.5, 6.1, 6.4, 7.4 and 9.2
hereof) and their successors and assigns and of the Registered Holders of the
Warrants.
-12-
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
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.
[Remainder of Page Intentionally Left Blank]
-13-
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
HEALTHCARE ACQUISITION CORP.
By:________________________
Name: Matthew P. Kinley
Title: President
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:_______________________
Name: Steven Nelson
Title: Chairman
-14-
Exhibit 5.1
July 12, 2005
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-1 (File No.
333-124712), as amended (the "Registration Statement") filed by Healthcare
Acquisition Corp. (the "Company"), a Delaware corporation, under the Securities
Act of 1933, as amended (the "Act"), covering (i) 8,000,000 units, with each
unit consisting of one share of the Company's common stock, par value $.0001 per
share (the "Common Stock"), and one warrant to purchase one share of the
Company's Common Stock (the "Warrants", and the shares of Common Stock
underlying the Warrants, the "Warrant Shares") to the underwriters for whom
Maxim Group LLC is acting as representative (collectively, the "Underwriters"),
(ii) up to 1,200,000 Units which the Underwriters will have a right to purchase
from the Company to cover over-allotments, if any, (the "Over-Allotment Units",
collectively with the 8,000,000 units to be sold pursuant to the terms of the
Registration Statement, the "Units"), (iii) up to 9,200,000 shares of Common
Stock underlying the Units, (iv) up to 9,200,000 Warrants underlying the Units,
(v) up to 9,200,000 Warrant Shares, (vi) up to 400,000 Units (the "PO Units")
which Maxim Group LLC will have the right to purchase (the "Purchase Option")
for its own account or that of its designees, (vii) up to 400,000 shares of
Common Stock and up to 400,000 Warrants issued as part of the PO Units (the "PO
Shares" and the "PO Warrants", respectively) and (viii) up to 400,000 shares of
Common Stock issuable upon exercise of the Warrants included in the PO Units
(the "PO Warrant Shares").
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. Units. When the Registration Statement becomes effective under the
Act, when the terms of the Units and of their issuance and sale are duly
established, and when such Units are duly executed and issued, delivered, sold
and paid for, as contemplated by the Registration Statement, such Units will be
validly issued, fully paid and non-assessable.
2. Common Stock. When the Registration Statement becomes effective
under the Act, and such Common Stock is duly issued, delivered, sold and paid
for as part of the Units, as contemplated by the Registration Statement, the
shares of Common Stock will be validly issued, fully paid and non-assessable.
3. Warrants and Warrant Shares. When the Registration Statement becomes
effective under the Act, when the terms of the warrant agreement under which the
Warrants are to be issued (the "Warrant Agreement") are duly established and the
Warrant Agreement is duly executed and delivered, when the terms of the Warrants
underlying the Units and of their issuance and sale are duly established in
conformity with the Warrant Agreement and when such Warrants are duly executed
and authenticated in accordance with the Warrant Agreement and issued,
delivered, sold and paid for as part of the Units, as contemplated by the
Registration Statement, such Warrants will be duly issued, fully paid and
non-assessable, and the Warrant Shares underlying such Warrants, when duly
issued, delivered, sold and paid for upon exercise of such Warrants, as
contemplated by the Warrant Agreement, such Warrants and the Registration
Statement, will be validly issued, fully paid and non-assessable.
4. Purchase Option. When the Registration Statement becomes effective
under the Act, when the terms of the Purchase Option and of its issuance and
sale are duly established and the Purchase Option is duly executed and issued,
delivered, sold and paid for, as contemplated by the Registration Statement,
such Purchase Option will be validly issued, fully paid and non-assessable.
5. PO Units. When the Registration Statement has become effective under
the Act, when the terms of the PO Units and of their issuance and sale are duly
established, and when such PO Units are duly executed and issued, delivered,
sold and paid for upon exercise of the Purchase Option, as contemplated by the
Purchase Option and the Registration Statement, such PO Units will be validly
issued, fully paid and non-assessable.
6. PO Shares. When the Registration Statement becomes effective under
the Act, the terms of the PO Shares underlying the PO Units and the sale thereof
are duly established, and such PO Shares are duly issued, delivered, sold and
paid for as part of such PO Units, as contemplated by the Purchase Option and
the Registration Statement, the PO Shares will be validly issued, fully paid and
non-assessable.
7. PO Warrants and PO Warrant Shares. When the Registration Statement
becomes effective under the Act, when the terms of the Warrant Agreement are
duly established and the Warrant Agreement is duly executed and delivered, when
the terms of the PO Warrants underlying the PO Units and of their issuance and
sale are duly established in conformity with the Warrant Agreement and when such
PO Warrants are duly executed and authenticated in accordance with the Warrant
Agreement and issued, delivered, sold and paid for as part of the PO Units, as
contemplated by the Purchase Option and the Registration Statement, such PO
Warrants will be validly issued, fully paid and non-assessable, and the PO
Warrant Shares underlying such PO Warrants, when duly issued, delivered, sold
and paid for upon exercise of such PO Warrants, as contemplated by the Warrant
Agreement, such PO Warrants and the Registration Statement, will be validly
issued, fully paid and non-assessable.
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. This opinion is given as of the effective date of the Registration
Statement, and we are under no duty to update the opinions contained herein.
Very truly yours,
/s/ Ellenoff Grossman & Schole LLP
----------------------------------
Ellenoff Grossman & Schole LLP
Exhibit 10.1.4
June 8, 2005
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, IA 50309
Maxim Group LLC
405 Lexington Avenue
New York, NY 10174
RE: INITIAL PUBLIC OFFERING
Gentlemen:
The undersigned stockholder, officer and/or director of Healthcare Acquisition
Corp. ("Company"), in consideration of Maxim Group LLC ("Maxim") 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 11 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 18 months from the effective date ("Effective Date") of the registration
statement relating to the IPO (or 24 months under the circumstances described in
the prospectus relating to the IPO), the undersigned will take all reasonable
actions within his power to cause the Company to liquidate as soon as reasonably
practicable. In such event, the undersigned hereby waives any and all right,
title, interest or claim of any kind in or to any liquidating distributions by
the Company, including, without limitation, any distribution of the Trust Fund
(as defined in the Letter of Intent) 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. 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)
to which the Company may become subject as a result of any claim by any vendor
that is owed money by the Company for services rendered or products sold 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 (as defined in the
Letter of Intent).
-16-
Healthcare Acquisition Corp. June 8, 2005
Maxim Group LLC
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, and not to any other person or entity unless the opportunity is
rejected by the Company, those opportunities to acquire an operating company the
undersigned reasonably believes are suitable opportunity for the Company, 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 fiduciary 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 Maxim 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 of the undersigned will be entitled to receive and will not accept
any compensation for services rendered to the Company prior to 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, or 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 his Insider Shares for the three-year period
commencing on the Effective Date 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 Maxim 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 Section 401 of Regulation S-K, promulgated under the Securities Act of 1933.
The undersigned's Questionnaire furnished to the Company and Maxim and annexed
as Exhibit B hereto is true and accurate in all respects. The undersigned
represents and warrants that:
-2-
Healthcare Acquisition Corp. June 8, 2005
Maxim Group LLC
(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 authorizes any employer, financial institution, or consumer
credit reporting agency to release to Maxim and its legal representatives or
agents (including any investigative search firm retained by Maxim) any
information they may have about the undersigned's background and finances
("Information"). Neither Maxim 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.
11. 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 that provides services selected by the
Company; (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 owned by an Insider prior to the
IPO; and (iv) "IPO Shares" shall mean the shares of Common Stock issued in the
Company's IPO.
-3-
Healthcare Acquisition Corp. June 8, 2005
Maxim Group LLC
12. The undersigned hereby agrees that any action, proceeding or claim against
the undersigned 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 undersigned hereby
waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenience forum.
By: /s/ Edward B. Berger
Edward B. Berger
-4-
Exhibit 10.1.5
June 8, 2005
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, IA 50309
Maxim Group LLC
405 Lexington Avenue
New York, NY 10174
RE: INITIAL PUBLIC OFFERING
Gentlemen:
The undersigned stockholder, officer and/or director of Healthcare Acquisition
Corp. ("Company"), in consideration of Maxim Group LLC ("Maxim") 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 11 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 18 months from the effective date ("Effective Date") of the registration
statement relating to the IPO (or 24 months under the circumstances described in
the prospectus relating to the IPO), the undersigned will take all reasonable
actions within his power to cause the Company to liquidate as soon as reasonably
practicable. In such event, the undersigned hereby waives any and all right,
title, interest or claim of any kind in or to any liquidating distributions by
the Company, including, without limitation, any distribution of the Trust Fund
(as defined in the Letter of Intent) 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. 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)
to which the Company may become subject as a result of any claim by any vendor
that is owed money by the Company for services rendered or products sold 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 (as defined in the
Letter of Intent).
Healthcare Acquisition Corp. June 8, 2005
Maxim Group LLC
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, and not to any other person or entity unless the opportunity is
rejected by the Company, those opportunities to acquire an operating company the
undersigned reasonably believes are suitable opportunity for the Company, 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 fiduciary 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 Maxim 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 of the undersigned will be entitled to receive and will not accept
any compensation for services rendered to the Company prior to 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, or 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 his Insider Shares for the three-year period
commencing on the Effective Date 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 Maxim 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 Section 401 of Regulation S-K, promulgated under the Securities Act of 1933.
The undersigned's Questionnaire furnished to the Company and Maxim and annexed
as Exhibit B hereto is true and accurate in all respects. The undersigned
represents and warrants that:
-2-
Healthcare Acquisition Corp. June 8, 2005
Maxim Group LLC
(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 authorizes any employer, financial institution, or consumer
credit reporting agency to release to Maxim and its legal representatives or
agents (including any investigative search firm retained by Maxim) any
information they may have about the undersigned's background and finances
("Information"). Neither Maxim 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.
11. 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 that provides services selected by the
Company; (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 owned by an Insider prior to the
IPO; and (iv) "IPO Shares" shall mean the shares of Common Stock issued in the
Company's IPO.
-3-
Healthcare Acquisition Corp. June 8, 2005
Maxim Group LLC
12. The undersigned hereby agrees that any action, proceeding or claim against
the undersigned 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 undersigned hereby
waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenience forum.
By: /s/ Wayne A. Schellhammer
-------------------------
Wayne A. Schellhammer
-4-
Exhibit 10.2
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Agreement is made as of ___________, 2005 by and between
HEALTHCARE ACQUISITION CORP. (the "COMPANY") and CONTINENTAL STOCK TRANSFER &
TRUST COMPANY (the "TRUSTEE").
WHEREAS, the Company's Registration Statement on Form S-1, File No.
333-124712 (the "REGISTRATION STATEMENT"), for its initial public offering of
securities (the "IPO") has been declared effective as of the date hereof by the
Securities and Exchange Commission (the "EFFECTIVE DATE"); and
WHEREAS, Maxim Group LLC ("MAXIM") is acting as the representative
of the underwriters in the IPO; and
WHEREAS, as described in the Company's Registration Statement, and
in accordance with the Company's Certificate of Incorporation, $57,600,000 of
the gross proceeds of the IPO ($66,414,000 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 (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;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Agreements and Covenants of Trustee. The Trustee hereby agrees and
covenants to:
(a) Hold the Property in trust for the Beneficiaries in accordance
with the terms of this Agreement in a segregated trust account ("TRUST ACCOUNT")
established by the Trustee at a branch of JPMorgan Chase NY Bank selected by the
Trustee;
(b) Manage, supervise and administer the Trust Account subject to
the terms and conditions set forth herein;
(c) In a timely manner, upon the instruction of the Company, to
invest and reinvest the Property in any "GOVERNMENT SECURITY." As used herein,
Government Security means any Treasury Bill issued by the United States, having
a maturity of one hundred and eighty days or less;
(d) Collect and receive, when due, all principal and income
arising from the Property, which shall become part of the "PROPERTY," as such
term is used herein;
(e) Promptly notify the Company of all communications received by
it with respect to any Property requiring action by the Company;
(f) Supply any necessary information or documents as may be
requested by the Company in connection with the Company's preparation of the tax
returns for the Trust Account;
(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 Maxim, 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 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, signed on behalf of the Company by its Chief Executive Officer or
President and Secretary, and complete the liquidation of the Trust Account and
distribute the Property in the Trust Account only as directed in the Termination
Letter and the other documents referred to therein. The Trustee understands and
agrees that disbursements from the Trust Account shall be made only pursuant to
a duly executed Termination Letter, together with the other documents referenced
herein. In all cases, the Trustee shall provide Maxim 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.
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 Chief Executive Officer or President. In addition,
except with respect to its duties under paragraph 1(i) 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. The Company
may participate in such action with its own counsel; and
-2-
(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 or be subject to any setoff or claim by the
Trustee, under such paragraph or under any other section of this Agreement).
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;
-3-
(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 (it being
expressly understood that the Property shall not be used to pay any such taxes
and that such taxes, if any, shall be paid by the Company from funds not held in
the Trust Account).
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, during which time the Trustee shall
continue to act in accordance with this Agreement. 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 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;
(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); or
(c) On such date after _________, 2007, when the Trustee deposits
the Property with the United States District Court for the Southern District of
New York in the event that, prior to such date, the Trustee has not received a
Termination Letter from the Company pursuant to paragraph 1(i).
-4-
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 C. The Company and
the Trustee will each restrict access to confidential information relating to
such security procedures to authorized persons. Each party must notify the other
party immediately if it has reason to believe unauthorized persons may have
obtained access to such information, or of any change in its authorized
personnel. In executing funds transfers, the Trustee will rely upon account
numbers or other identifying numbers of a beneficiary, beneficiary's bank or
intermediary bank, rather than names. The Trustee shall not be liable for any
loss, liability or expense resulting from any error in an account number or
other identifying number, provided it has accurately transmitted the numbers
provided.
(b) This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without giving effect to
conflict of laws. It may be executed in several counterparts, each one of which
may be delivered by facsimile transmission and each 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. 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
Maxim, who, along with the other underwriters of the IPO, the parties
specifically agree, are and shall be a third-party beneficiary for purposes of
this Agreement. As to any claim, cross-claim or counterclaim in any way relating
to this Agreement, each party waives the right to trial by jury.
(d) The parties hereto consent to the jurisdiction and venue of
any state or federal court located in the State and County of New York for
purposes of resolving any disputes hereunder. The parties hereto irrevocably
submit to such jurisdiction, which jurisdiction shall be exclusive. The parties
hereto hereby waive any objection to such exclusive jurisdiction and that such
courts represent an inconvenient forum.
(e) Any notice, consent or request to be given in connection with
any of the terms or provisions of this Agreement shall be in writing and shall
be sent by express mail or similar private courier service, by certified mail
(return receipt requested), by hand delivery or by facsimile transmission:
if to the Trustee, to:
Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New York 10004
Attn: Steven G. Nelson
Fax No.: (212) 509-5150
-5-
if to the Company, to:
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
Fax No.: (515) 244-2346
in either case with a copy to:
Maxim Group LLC
405 Lexington Avenue
New York, New York 10174
Attn: Clifford Teller
Fax No.: (212) 895-3500
(f) This Agreement may not be assigned by the Trustee without the
prior consent of the Company.
(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
Maxim is a third party beneficiary of this Agreement.
[Remainder of Page Intentionally Left Blank]
-6-
IN WITNESS WHEREOF, the parties have duly executed this Investment
Management Trust Agreement as of the date first written above.
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Trustee
By:
--------------------------
Name:
Title:
HEALTHCARE ACQUISITION CORP.
By:
---------------------------
Name: Matthew P. Kinley
Title: President
-7-
EXHIBIT A
[LETTERHEAD OF COMPANY]
[INSERT DATE]
Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New York 10004
Attn: Steven Nelson
Re: Trust Account No. _______________ Termination Letter
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement
between Healthcare Acquisition Corp. ("COMPANY") and Continental Stock Transfer
& Trust Company ("TRUSTEE"), dated as of ________, 2005 ("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 (a "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 the Business Combination has been consummated and
(ii) the Company shall deliver to you written instructions with respect to the
transfer of the funds held in the Trust Account ("INSTRUCTION LETTER"). You are
hereby directed and authorized to transfer the funds held in the Trust Account
immediately upon your receipt of the counsel's letter and the Instruction
Letter, in accordance with the terms of the Instruction Letter. In the event
that certain deposits held in the Trust Account may not be liquidated by the
Consummation Date without penalty, you will notify the Company of the same and
the Company shall direct you as to whether such funds should remain in the Trust
Account and 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.
-8-
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.
Very truly yours,
HEALTHCARE ACQUISITION CORP.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
cc: Maxim Group LLC
-9-
EXHIBIT B
[LETTERHEAD OF COMPANY]
[INSERT DATE]
Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New York 10004
Attn:
Re: Trust Account No. _______________ Termination Letter
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement
between Healthcare Acquisition Corp. ("COMPANY") and Continental Stock Transfer
& Trust Company ("TRUSTEE"), dated as of __________, 2005 ("TRUST AGREEMENT"),
this is to advise you that the Board of Directors of the Company has voted to
dissolve and liquidate the Trust Account. Attached hereto is a copy of the
minutes of the meeting of the Board of Directors of the Company relating
thereto, certified by the Secretary of the Company as true and correct and in
full force and effect.
In accordance with the terms of the Trust Agreement, we hereby
authorize you, to commence liquidation of the Trust Account. You will notify the
Company and JPMorgan Chase NY Bank ("DESIGNATED PAYING Agent") in writing as to
when all of the funds in the Trust Account will be available for immediate
transfer ("TRANSFER DATE"). The Designated Paying Agent shall thereafter notify
you as to the account or accounts of the Designated Paying Agent that the funds
in the Trust Account should be transferred to on the Transfer Date so that the
Designated Paying Agent may commence distribution of such funds in accordance
with the Company's instructions. You shall have no obligation to oversee the
Designated Paying Agent's distribution of the funds. Upon the payment to the
Designated Paying Agent of all the funds in the Trust Account, the Trust
Agreement shall be terminated.
[Remainder of Page Intentionally Left Blank]
Very truly yours,
-10-
HEALTHCARE ACQUISITION CORP.
By:
-------------------------------
Name:
Title
By:
-------------------------------
Name:
Title:
cc: Maxim Group LLC
-11-
EXHIBIT C
AUTHORIZED INDIVIDUAL(S) AUTHORIZED
FOR TELEPHONE CALL BACK TELEPHONE NUMBER(S)
- ----------------------- -------------------
COMPANY:
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley (575) 244-5746
TRUSTEE:
Continental Stock Transfer
& Trust Company
17 Battery Place
New York, New York 10004
Attn: Steven G. Nelson, Chairman (212) 845-3200
-12-
Exhibit 10.3
STOCK ESCROW AGREEMENT
STOCK ESCROW AGREEMENT, dated as of __________, 2005 (the "AGREEMENT"),
by and among HEALTHCARE ACQUISITION CORP., a Delaware corporation (the
"COMPANY"), JOHN PAPPAJOHN, DERACE L. SCHAFFER, M.D., MATTHEW P.KINLEY, EDWARD
B. BERGER AND WAYNE A. SCHELLHAMMER (collectively the "INITIAL STOCKHOLDERS")
and CONTINENTALSTOCK TRANSFER & TRUST COMPANY, a New York corporation (the
"ESCROW AGENT").
WHEREAS, the Company has entered into an Underwriting Agreement, dated
__________, 2005 (the "UNDERWRITING AGREEMENT"), with Maxim Group LLC ("MAXIM")
acting as representative of the several underwriters (collectively, the
"UNDERWRITERS"), pursuant to which, among other matters, the Underwriters have
agreed topurchase 8,000,000 units (the "UNITS") of the Company. Each Unit
consists of one share of the Company's Common Stock, par value $.0001 per share,
and one Warrant, each Warrant to purchase one share of Common Stock, all as more
fully described in the Company's final Prospectus, dated ___________, 2005 (the
"PROSPECTUS") comprising part of the Company's Registration Statement on Form
S-1 (File No. 333-124712) under the Securities Act of 1933, as amended (the
"REGISTRATION STATEMENT"), declared effective on _________, 2005 (the "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
the "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 third anniversary of the Effective Date (the "ESCROW
PERIOD"), on which date it shall, upon written instructions from each Initial
Stockholder, disburse each of the Initial Stockholder's Escrow Shares 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 and; provided further,
that if, after the Company consummates a Business Combination (as such term is
defined in the Registration Statement), it (or the surviving entity)
subsequently consummates a liquidation, merger, stock exchange or other similar
transaction which results in all of 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 or Chief Financial 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 (the "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 Maxim and the Company, dated as indicated on Exhibit A
hereto, and which is filed as an exhibit to the Registration Statement (the
"INSIDER LETTER"), respecting the rights and obligations of such Initial
Stockholder in certain events, including but not limited to the liquidation of
the Company.
-2-
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.
-3-
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 Company and a majority of the Initial Stockholders,
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 regard to the conflicts of laws principles thereof.
6.2 Third Party Beneficiaries. Each of the Initial Stockholders,
the Company, and Escrow Agent hereby specifically acknowledge and agree 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 Maxim.
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 be 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 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, or sent by
facsimile transmission (with confirmation of receipt), addressed as follows:
-4-
If to the Company, to:
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
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:
Ellenoff Grossman & Schole LLP
370 Lexington Avenue
New York, New York 10017
Attn: Stuart Neuhauser, Esq.
and:
Maxim Group LLC
405 Lexington Avenue
New York, New York 10174
Attn: Clifford Teller, Managing Director
and:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Attn: Steven Skolnick, Esq.
The parties may change the persons and addresses to which the
notices or other communications are to be sent by giving written notice to any
such change in the manner provided herein for giving notice.
6.7 Liquidation of Company. The Company shall give the Escrow
Agent written notification of the liquidation and dissolution of the Company in
the event that the Company fails to consummate a Business Combination within the
time period(s) specified in the Prospectus.
-5-
6.8 Counterparts. This Agreement may be executed in several
counterparts, each one of which shall constitute an original and may be
delivered by facsimile transmission, and together shall constitute one
instrument.
WITNESS the execution of this Agreement as of the date first above
written.
HEALTHCARE ACQUISITION CORP.
By:
------------------------
Name: Matthew P. Kinley
Title: President
INITIAL STOCKHOLDERS
----------------------------
John Pappajohn
----------------------------
Derace L. Shaffer, M.D.
----------------------------
Matthew P. Kinley
----------------------------
Edward B. Berger
----------------------------
Wayne A. Schellhammer
-6-
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:
------------------------
Name:
Title:
-7-
EXHIBIT A
NAME AND ADDRESS OF NUMBER STOCK DATE OF
INITIAL STOCKHOLDER OF SHARES CERTIFICATE NUMBER INSIDER LETTER
- ------------------- --------- ------------------ --------------
John Pappajohn 784,000 5/6/05
c/o Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Derace L. Schaffer, M.D. 784,000 5/6/05
c/o Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Matthew P. Kinley 392,000 5/6/05
c/o Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Edward B. Berger 20,000 6/8/05
c/o Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Wayne A. Schellhammer 20,000 6/8/05
c/o Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
-8-
Exhibit 10.7
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) MAXIM GROUP LLC OR ITS AFFILIATES ("MAXIM") OR AN UNDERWRITER OR A
SELECTED DEALER IN CONNECTION WITH THE OFFERING (DEFINED HEREIN), OR (II) A BONA
FIDE OFFICER, PARTNER OR EMPLOYEE OF MAXIM OR OF ANY SUCH UNDERWRITER OR
SELECTED DEALER.
THIS PURCHASE OPTION IS NOT EXERCISABLE PRIOR TO THE LATER OF (I)
______________, 2006 AND (II) THE CONSUMMATION BY HEALTHCARE ACQUISITION
CORPORATION ("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)). THIS
PURCHASE OPTION SHALL BE VOID AFTER 5:00 P.M, NEW YORK CITY TIME, ON
_____________, 2010.
UNIT PURCHASE OPTION
FOR THE PURCHASE OF
400,000 UNITS
OF
HEALTHCARE ACQUISITION CORP.
1. Purchase Option.
THIS CERTIFIES THAT, in consideration of $100 duly paid by or on
behalf of Maxim Partners LLC (collectively, with its successors and permitted
assigns and/or transferees, the "HOLDER"), as registered owner of this Purchase
Option, to Healthcare Acquisition Corp. (the "COMPANY"), Holder is entitled, at
any time or from time to time upon the later of (i) the consummation of a
Business Combination and (ii) ___________, 2006 ("COMMENCEMENT DATE"), and at or
before 5:00 p.m., Eastern Time, _____________, 2010 ("EXPIRATION DATE"), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
Four Hundred Thousand (400,000) units (the "UNITS") of the Company, each Unit
consisting of one share of common stock of the Company, par value $.0001 per
share (the "COMMON STOCK"), and one warrant (the "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 (the "OFFERING"). Each Warrant is exercisable at $6.00 per share (as
adjusted from time to time) and is the same as the warrants included in the
Units being registered for sale to the public by way of the Registration
Statement, except that the Warrants underlying the Units comprising this
Purchase Option have an exercise price of $7.50 per share. 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 $10.00 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 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 (the "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-
2.3 Cashless Exercise. 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 (the "CONVERSION RIGHT") as follows: upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without payment
by the Holder of any of the Exercise Price in cash) 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 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
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 such as the Bulletin Board 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 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 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 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 such as the Bulletin Board
Exchange), the last sale price of the Common Stock (or 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 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 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.
2.4 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-
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) Maxim or an underwriter or
a selected dealer in connection with the Offering, or (ii) a bona fide officer
or partner of Maxim 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 Lowenstein Sandler PC 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 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, except in the case of an exercise of
this Purchase Option contemplated by Section 2.3 hereof, 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.
-4-
5. Registration Rights.
5.1 Demand Registration.
5.1.1 Grant of Right. The Company, upon written demand (an
"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 (the
"MAJORITY HOLDERS"), agrees to register 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 Company covenants and agrees
to give written notice of its receipt of any Initial Demand Notice by any
Holder(s) to all other registered Holders of the Purchase Options and/or the
Registrable Securities within ten days from the date of the receipt of any such
Initial Demand Notice.
5.1.2 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 Grant of Right. In addition to the demand right of
registration, the Holders of the Purchase Options shall have the right for a
period of seven years commencing on the Effective Date, to include the
Registrable Securities as part of any other registration of securities filed by
the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8); provided, however,
that if, in the written opinion of the Company's managing underwriter or
underwriters, if any, for such offering, the inclusion of the Registrable
Securities, when added to the securities being registered by the Company or the
selling stockholder(s), will exceed the maximum amount of the Company's
securities (the "MAXIMUM NUMBER OF SHARES") which can be marketed (i) at a price
reasonably related to their then current market value, and (ii) without
materially and adversely affecting the entire offering, then the Company shall
include in any such registration:
-5-
(i) If the registration is undertaken for the Company's account:
(A) first, the shares of Common Stock or other securities that the Company
desires to sell that can be sold without exceeding the Maximum Number of Shares;
(B) second, to the extent that the Maximum Number of Shares has not been reached
under the foregoing clause (A), the shares of Common Stock, if any, including
the Registrable Securities, as to which registration has been requested pursuant
to written contractual piggy-back registration rights of security holders (pro
rata in accordance with the number of shares of Common Stock which each such
person has actually requested to be included in such registration, regardless of
the number of shares of Common Stock with respect to which such persons have the
right to request such inclusion) that can be sold without exceeding the Maximum
Number of Shares; and
(ii) If the registration is a "demand" registration undertaken
at the demand of persons other than the holders of Registrable Securities
pursuant to written contractual arrangements with such persons, (A) first, the
shares of Common Stock for the account of the demanding persons that can be sold
without exceeding the Maximum Number of Shares; (B) second, to the extent that
the Maximum Number of Shares has not been reached under the foregoing clause
(A), the shares of Common Stock or other securities that the Company desires to
sell that can be sold without exceeding the Maximum Number of Shares; and (C)
third, to the extent that the Maximum Number of Shares has not been reached
under the foregoing clauses (A) and (B), the Registrable Securities as to which
registration has been requested under this Section 5.2 (pro rata in accordance
with the number of shares of Registrable Securities held by each such holder);
and (D) fourth, to the extent that the Maximum Number of Shares has not been
reached under the foregoing clauses (A), (B) and (C), the shares of Common
Stock, if any, as to which registration has been requested pursuant to written
contractual piggy-back registration rights which other shareholders desire to
sell that can be sold without exceeding the Maximum Number of Shares.
5.2.2 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. The Company agrees,
at its sole expenses, 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.
-6-
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 materially 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 (the "EXCHANGE ACt"), and any of their respective heirs,
successors, permitted assigns and transfers, and agents and representatives,
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 6 of the Underwriting Agreement
between the Company, Maxim 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.
-7-
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
Maxim, 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 Maxim, 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 Maxim, 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. (the "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 Maxim, as representative of the Holders,
shall reasonably request. The Company shall not be required to disclose any
confidential information or other records to Maxim, 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.
-8-
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 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.
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:
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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 $10.00 per whole Unit (each Warrant
underlying the Units is exercisable for $7.50 per share), upon effectiveness of
the dividend, this Purchase Option will be adjusted to allow for the purchase of
one Unit at $10.00 per Unit, each Unit entitling the holder to receive two
shares of Common Stock and two Warrants (each Warrant exercisable for $3.75 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.
-10-
6.2 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.
6.3 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 or down 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 Warrants may then be
listed and/or quoted.
8. Certain Notice Requirements.
-11-
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 or a
merger of the Company wherein the separate existence of the Company shall cease
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 (a "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, mailed by express mail or
private courier service, or sent by facsimile transmission, with confirmation of
receipt: (i) If to the registered Holder of the Purchase Option, to the address
and/or fax number of such Holder as shown on the books of the Company, or (ii)
if to the Company, to the following address or fax number or to such other
address or and fax number as the Company may designate by notice to the Holders:
Healthcare Acquisition Corp.
2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
Attn: Matthew P. Kinley
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9. Miscellaneous.
9.1 Amendments. The Company and Maxim 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 Maxim may deem necessary or desirable and
that the Company and Maxim 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.
10. 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.
10.1 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.
10.2 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. Each of the
Company and Maxim agree 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 located in New York County 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.
Each of the Company and Maxim 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.
-13-
10.3 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, non-compliance or non-fulfillment.
10.4 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.
10.5 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 Maxim
enter into an agreement (an "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.
10.6 Underlying Warrants. At any time after exercise by the Holder
of this Purchase Option, the Holder may exchange his Warrants (with a $7.50
exercise price) for Public Warrants (with a $6.00 exercise price) upon payment
to the Company of the difference between the exercise price of his Warrant and
the exercise price of the Public Warrants.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the ____ day of __________, 2005.
HEALTHCARE ACQUISITION CORP
By:______________________________
Name: Matthew P. Kinley
Title: President
-15-
Form to be used to exercise Purchase Option
Healthcare Acquisition Corp.
- -----------------------------
- -----------------------------
Date:_________________, 200__
The undersigned hereby elects irrevocably to exercise all or a portion
of the within Purchase Option and to purchase ____ Units of Healthcare
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.
------------------------
Signature
------------------------
Signature Guaranteed
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name_____________________________________________________________
Print in Block Letters)
Address__________________________________________________________
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER
THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON A
REGISTERED NATIONAL SECURITIES EXCHANGE.
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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 Healthcare Acquisition Corp. (the
"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_
----------------------
Signature
----------------------
Signature Guaranteed
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER
THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON A
REGISTERED NATIONAL SECURITIES EXCHANGE.
-17-
Exhibit 14
HEALTHCARE ACQUISITION CORP.
CODE OF ETHICS
OVERVIEW
This Code of Ethics sets forth the guiding principles by which we operate our
company and conduct our daily business with our stockholders, customers, vendors
and with each other. These principles apply to all of the directors, officers
and employees of Healthcare Acquisition Corp. and its subsidiaries (referred to
in this Code as the "COMPANY").
PRINCIPLES
COMPLYING WITH LAWS, REGULATIONS, POLICIES AND PROCEDURES
All directors, officers and employees of the Company are expected to understand,
respect and comply with all of the laws, regulations, policies and procedures
that apply to them in their positions with the Company. Employees are
responsible for talking to their supervisors to determine which laws,
regulations and Company policies apply to their position and what training is
necessary to understand and comply with them.
Directors, officers and employees are directed to specific policies and
procedures available to persons they supervise.
CONFLICTS OF INTEREST
All directors, officers and employees of the Company should be scrupulous in
avoiding any action or interest that conflicts with, or gives the appearance of
a conflict with, the Company's interests. A "conflict of interest" exists
whenever an individual's private interests interfere or conflict in any way (or
even appear to interfere or conflict) with the interests of the Company. A
conflict situation can arise when an employee, officer or director takes actions
or has interests that may make it difficult to perform his or her work for the
Company objectively and effectively. Conflicts of interest may also arise when a
director, officer or employee or a member of his or her family receives improper
personal benefits as a result of his or her position with the Company, whether
from a third party or from the Company. Company employees are encouraged to
utilize the Company's products and services, but this should generally be done
on an arm's length basis and in compliance with applicable law.
Conflicts of interest may not always be clear-cut, so if a question arises, an
officer or employee should consult with higher levels of management, the board
of directors or company counsel. Any employee, officer or director who becomes
aware of a conflict or potential conflict should bring it to the attention of a
supervisor, manager or other appropriate personnel.
CORPORATE OPPORTUNITY
Directors, officers and employees are prohibited from (a) taking for themselves
personally opportunities that properly belong to the Company or are discovered
through the use of corporate property, information or position; (b) using
corporate property, information or position for personal gain; and (c) subject
to pre-existing fiduciary obligations, competing with the Company. Directors,
officers and employees owe a duty to the Company to advance its legitimate
interests when the opportunity to do so arises.
CONFIDENTIALITY
Directors, officers and employees must maintain the confidentiality of
confidential information entrusted to them by the Company or its suppliers or
customers, except when disclosure is specifically authorized by the board of
directors or required by laws, regulations or legal proceedings. Confidential
information includes all non-public information that might be material to
investors or of use to competitors of the Company or harmful to the Company or
its customers or employees if disclosed.
FAIR DEALING
We seek to outperform our competition fairly and honestly. We seek competitive
advantages through superior performance, never through unethical or illegal
business practices. Stealing proprietary information, possessing or utilizing
trade secret information that was obtained without the owner's consent or
inducing such disclosures by past or present employees of other companies is
prohibited.
Each director, officer and employee is expected to deal fairly with the
Company's customers, suppliers, competitors, officers and employees. No one
should take unfair advantage of anyone through manipulation, concealment, abuse
of privileged information, misrepresentation of material facts or any other
unfair dealing.
PROTECTION AND PROPER USE OF THE COMPANY ASSETS
All directors, officers and employees should protect the Company's assets and
ensure their efficient use. All Company assets should be used only for
legitimate business purposes.
PUBLIC COMPANY REPORTING
As a public company, it is of critical importance that the Company's filings
with the Securities and Exchange Commission be accurate and timely. Depending on
their position with the Company, an employee, officer or director may be called
upon to provide necessary information to assure that the Company's public
reports are complete, fair and understandable. The Company expects employees,
officers and directors to take this responsibility very seriously and to provide
prompt accurate answers to inquiries related to the Company's public disclosure
requirements.
FINANCIAL STATEMENTS AND OTHER RECORDS
All of the Company's books, records, accounts and financial statements must be
maintained in reasonable detail, must appropriately reflect the Company's
transactions and must both conform to applicable legal requirements and to the
Company's system of internal controls. Unrecorded or "off the books" funds or
assets should not be maintained unless permitted by applicable law or
regulation.
Records should always be retained or destroyed according to the Company's record
retention policies. In accordance with those policies, in the event of
litigation or governmental investigation, please consult the board of directors.
REPORTING ILLEGAL OR UNETHICAL BEHAVIOR
REPORTING ILLEGAL OR UNETHICAL BEHAVIOR
Employees, officers and directors who suspect or know of violations of this Code
or illegal or unethical business or workplace conduct by employees, officers or
directors have an obligation to contact either their supervisor or superiors. If
the individuals to whom such information is conveyed are not responsive, or if
there is reason to believe that reporting to such individuals is inappropriate
in particular cases, then the employee, officer or director may contact the
Chief Executive Officer or the President of the Company. Such communications
will be kept confidential to the extent feasible. If the employee is still not
satisfied with the response, the employee may contact the chairman of the board
of directors or any of the Company's outside directors.
ACCOUNTING COMPLAINTS
The Company's policy is to comply with all applicable financial reporting and
accounting regulations. If any director, officer or employee of the Company has
unresolved concerns or complaints regarding questionable accounting or auditing
matters of the Company, then he or she is encouraged to submit those concerns or
complaints (anonymously, confidentially or otherwise) to the Company's audit
committee. Subject to its legal duties, the audit committee and the board of
directors will treat such submissions confidentially. Such submissions may be
directed to the attention of the Company's audit committee, or any director who
is a member of the Company's audit committee.
NON-RETALIATION
The Company prohibits retaliation of any kind against individuals who have made
good faith reports or complaints of violations of this Code or other known or
suspected illegal or unethical conduct.
AMENDMENT, MODIFICATION AND WAIVER
This code may be amended or modified by the board of directors of the Company.
Only the board of directors or a committee of the board of directors with
specific delegated authority may grant waivers of this Code of Ethics. Waivers
will be disclosed to stockholders as required by the Securities Exchange Act of
1934 and the rules thereunder and the applicable rules of the American Stock
Exchange.
VIOLATIONS
Violation of this Code of Ethics is grounds for disciplinary action up to and
including termination of employment. Such action is in addition to any civil or
criminal liability which might be imposed by any court or regulatory agency.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in Amendment No. 2 to the Registration Statement on
Form S-1 of our report dated May 6, 2005, relating to the financial statements
of Healthcare Acquisition Corp. (a corporation in the development stage) as of
April 30, 2005, and the related statements of operations, stockholders' equity
and cash flows for the period from April 25, 2005 (inception) to April 30, 2005,
which appear in such Registration Statement. We also consent to the reference to
us under the heading "Experts" in such Registration Statement.
/s/ LWBJ, LLP
West Des Moines, Iowa
July 11, 2005
Exhibit 99.1
HEALTHCARE ACQUISITION CORP.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The board of directors (the "BOARD") of Healthcare Acquisition Corp. (the
"COMPANY") hereby establishes the Audit Committee of the Board with the
following purpose, authority, powers, duties and responsibilities.
PURPOSE
The purpose of the Audit Committee is to represent and assist the board of
directors (the "BOARD") of the Company in its general oversight of the Company's
accounting and financial reporting processes, audits of the financial
statements, and internal control and audit functions. Management is responsible
for (1) the preparation, presentation and integrity of the Company's financial
statements; (2) accounting and financial reporting principles; and (3) the
Company's internal controls and procedures designed to promote compliance with
accounting standards and applicable laws and regulations. The Company's
independent auditing firm is responsible for performing an independent audit of
the consolidated financial statements in accordance with generally accepted
auditing standards in the United States ("GAAP").
The Audit Committee members are not professional accountants or auditors
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditor, nor can the Audit Committee certify
that the independent auditor is "independent" under applicable rules. The Audit
Committee serves a board level oversight role where it oversees the relationship
with the independent auditor, as set forth in this charter, receives information
and provides advice, counsel and general direction, as it deems appropriate, to
management and the auditors, taking into account the information it receives,
discussions with the auditor, and the experience of the Audit Committee's
members in business, financial and accounting matters.
MEMBERSHIP AND STRUCTURE
The Audit Committee is comprised of at least [three] directors determined
by the Board to meet the director and audit committee member independence
requirements and financial literacy requirements of the American Stock Exchange,
Inc. ("AMEX"). At least one member of the Audit Committee must be financially
sophisticated, as determined by the Board, and no Audit Committee member may
have participated in the preparation of the financial statements of the Company
or any of the Company's current subsidiaries at any time during the past three
years, each as required by Amex listing standards. Appointment to the Audit
Committee and the designation of any Audit Committee members as "audit committee
financial experts" shall be made on an annual basis by the full Board.
Meetings of the Audit Committee shall be held at such times and places as
the Audit Committee shall determine, including by written consent. When
necessary, the Audit Committee shall meet in executive session outside of the
presence of any senior officer of the Company. The Chair of the Audit Committee
shall report on activities of the Audit Committee to the full Board. In
fulfilling its responsibilities the Audit Committee shall have authority to
delegate its authority to subcommittees, in each case to the extent permitted by
applicable law.
RESPONSIBILITIES
The Audit Committee:
o is directly responsible for the appointment, replacement,
compensation, and oversight of the work of the independent auditor.
The independent auditor shall report directly to the Audit
Committee.
o obtains and reviews annually a report by the independent auditor
describing the Company's internal quality-control procedures, any
material issues raised by the most recent internal quality-control
review or by any inquiry or investigation by governmental or
professional authorities, and any steps taken to deal with any such
issues.
o reviews and discusses with the independent auditor the written
statement from the independent auditor concerning any relationship
between the auditor and the Company or any other relationships that
may adversely affect the independence of the auditor, and, based on
such review, assesses the independence of the auditor.
o establishes policies and procedures for the review and pre-approval
by the Audit Committee of all auditing services and permissible
non-audit services (including the fees and terms thereof) to be
performed by the independent auditor.
o reviews and discusses with the independent auditor: (a) its audit
plans, and audit procedures, including the scope, fees and timing of
the audit; (b) the results of the annual audit examination and
accompanying management letters; and (c) the results of the
independent auditor's procedures with respect to interim periods.
o reviews and discusses reports from the independent auditors on (a)
all critical accounting policies and practices used by the Company,
(b) alternative accounting treatments within GAAP related to
material items that have been discussed with management, including
the ramifications of the use of the alternative treatments and the
treatment preferred by the independent auditor, and (c) other
material written communications between the independent auditor and
management.
o reviews and discusses with the independent auditor the independent
auditor's judgments as to the quality, not just the acceptability,
of the Company's accounting principles and such further matters as
the independent auditors present the Audit Committee under GAAP.
o discusses with the Company's officers and the independent auditor
quarterly earnings press releases, including the interim financial
information and other disclosures included therein, reviews the
year-end audited financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and,
if deemed appropriate, recommends to the Board of Directors that the
audited financial statements be included in the Company's Annual
Report on Form 10-K for the year.
o reviews and discusses with the Company's officers and the
independent auditor various topics and events that may have
significant financial impact on the Company or that are the subject
of discussions between the Company's officers and the independent
auditors.
o reviews and discusses with the Company's officers the Company's
major financial risk exposures and the steps the Company's officers
have taken to monitor and control such exposures.
o reviews, passes on the fairness of, and approves related-party
transactions.
o reviews and discusses with the independent auditor, and the
Company's officers: (a) the adequacy and effectiveness of the
Company's internal controls (including any significant deficiencies
and significant changes in internal controls reported to the
Committee by the independent auditor or management; (b) the
Company's internal audit procedures; and (c) the adequacy and
effectiveness of the Company's disclosures controls and procedures,
and management reports thereon.
o reviews annually with the Company's officers the scope of the
internal audit program, and reviews annually the performance of both
the internal audit group and the independent auditor in executing
their plans and meeting their objectives.
o reviews the use of auditors other than the independent auditor.
o reviews matters related to the corporate compliance activities of
the Company.
o establishes procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
o establishes policies for the hiring of employees and former
employees of the independent auditor.
o prepares the report of the Audit Committee required by the rules of
the United States Securities and Exchange Commission to be included
in the Company's annual proxy statement.
o when appropriate, designates one or more of its members to perform
certain of its duties on its behalf, subject to such reporting to or
ratification by the Audit Committee as the Audit Committee shall
direct.
ADVISORS
The Audit Committee shall have the authority to engage independent legal,
accounting and other advisors, as it determines necessary to carry out its
duties. The Audit Committee shall have sole authority to approve related fees
and retention terms.
Exhibit 99.2
HEALTHCARE ACQUISITION CORP.
NOMINATING COMMITTEE CHARTER
The Nominating Committee's responsibilities and powers as delegated by the
board of directors are set forth in this charter. Whenever the Committee takes
an action, it shall exercise its independent judgment on an informed basis that
the action is in the best interests of the Company and its stockholders.
I. PURPOSE
As set forth herein, the Committee shall, among other things, discharge the
responsibilities of the board of directors relating to the appropriate size,
functioning and needs of the board including, but not limited to, recruitment
and retention of high quality board members and committee composition and
structure, and shall be guided in the discharge of their responsibilities
hereunder by the Board of Directors Candidate Guidelines appended hereto.
II. MEMBERSHIP
The Committee shall initially consist of at least two members of the board
of directors as determined from time to time by the board, with an additional
one to be appointed with one year of the closing of the Company's initial public
offering. Each member shall be "independent" in accordance with the listing
standards of the American Stock Exchange, as amended from time to time.
The board of directors shall elect the members of this Committee at the
first board meeting practicable following the annual meeting of stockholders and
may make changes from time to time pursuant to the provisions below. Unless a
chair is elected by the board of directors, the members of the Committee shall
designate a chair by majority vote of the full Committee membership.
A Committee member may resign by delivering his or her written resignation
to the chairman of the board of directors, or may be removed by majority vote of
the board of directors by delivery to such member of written notice of removal,
to take effect at a date specified therein, or upon delivery of such written
notice to such member if no date is specified.
III. MEETINGS AND COMMITTEE ACTION
The Committee shall meet at such times as it deems necessary to fulfill its
responsibilities. Meetings of the Committee shall be called by the chairman of
the Committee upon such notice as is provided for in the by-laws of the company
with respect to meetings of the board of directors. A majority of the members
shall constitute a quorum. Actions of the Committee may be taken in person at a
meeting or in writing without a meeting. Actions taken at a meeting, to be
valid, shall require the approval of a majority of the members present and
voting. Actions taken in writing, to be valid, shall be signed by all members of
the Committee. The Committee shall report its minutes from each meeting to the
board of directors.
The chairman of the Committee shall establish such rules as may from time
to time be necessary or appropriate for the conduct of the business of the
Committee. At each meeting, the chairman shall appoint as secretary a person who
may, but need not, be a member of the Committee. A certificate of the secretary
of the Committee or minutes of a meeting of the Committee executed by the
secretary setting forth the names of the members of the Committee present at the
meeting or actions taken by the Committee at the meeting shall be sufficient
evidence at all times as to the members of the Committee who were present, or
such actions taken.
IV. COMMITTEE AUTHORITY AND RESPONSIBLITIES
o Developing the criteria and qualifications for membership on the
board.
o Recruiting, reviewing and nominating candidates for election to the
board of directors or to fill vacancies on the board of directors.
o Reviewing candidates proposed by stockholders, and conducting
appropriate inquiries into the background and qualifications of any such
candidates.
o Establishing subcommittees for the purpose of evaluating special or
unique matters.
o Monitoring and making recommendations regarding committee functions,
contributions and composition.
o Evaluating, on an annual basis, the Committee's performance.
VI. REPORTING
The Committee shall prepare a statement each year concerning its compliance
with this charter for inclusion in the Company's proxy statement.
HEALTHCARE ACQUISITION CORP.
BOARD OF DIRECTOR CANDIDATE GUIDELINES
The Nominating Committee of Healthcare Acquisition Corp. (the "Company")
will identify, evaluate and recommend candidates to become members of the Board
of Directors ("Board") with the goal of creating a balance of knowledge and
experience. Nominations to the Board may also be submitted to the Nominating
Committee by the Company's stockholders in accordance with the Company's policy,
a copy of which is attached hereto. Candidates will be reviewed in the context
of current composition of the Board, the operating requirements of the Company
and the long-term interests of the Company's stockholders. In conducting this
assessment, the Committee will consider and evaluate each director-candidate
based upon its assessment of the following criteria:
o Whether the candidate is independent pursuant to the requirements of
the American Stock Exchange.
o Whether the candidate is accomplished in his or her field and has a
reputation, both personal and professional, that is consistent with the image
and reputation of the Company.
o Whether the candidate has the ability to read and understand basic
financial statements. The Nominating Committee also will determine if a
candidate satisfies the criteria for being an "audit committee financial expert,
" as defined by the Securities and Exchange Commission.
o Whether the candidate has relevant experience and expertise and
would be able to provide insights and practical wisdom based upon that
experience and expertise.
o Whether the candidate has knowledge of the Company and issues
affecting the Company.
o Whether the candidate is committed to enhancing stockholder value.
o Whether the candidate fully understands, or has the capacity to
fully understand, the legal responsibilities of a director and the governance
processes of a public company.
o Whether the candidate is of high moral and ethical character and
would be willing to apply sound, objective and independent business judgment,
and to assume broad fiduciary responsibility.
o Whether the candidate has, and would be willing to commit, the
required hours necessary to discharge the duties of Board membership.
o Whether the candidate has any prohibitive interlocking relationships
or conflicts of interest.
o Whether the candidate is able to develop a good working relationship
with other Board members and contribute to the Board's working relationship with
the senior management of the Company.
o Whether the candidate is able to suggest business opportunities to
the Company.
STOCKHOLDER RECOMMENDATIONS FOR DIRECTORS
Stockholders who wish to recommend to the Nominating Committee a candidate
for election to the Board of Directors should send their letters to 2116
Financial Center, 666 Walnut Street, Des Moines, Iowa 50309, Attention:
Nominating Committee. The Corporate Secretary will promptly forward all such
letters to the members of the Nominating Committee. Stockholders must follow
certain procedures to recommend to the Nominating Committee candidates for
election as directors. In general, in order to provide sufficient time to enable
the Nominating Committee to evaluate candidates recommended by stockholders in
connection with selecting candidates for nomination in connection with the
Company's annual meeting of stockholders, the Corporate Secretary must receive
the stockholder's recommendation no later than thirty (30) days after the end of
the Company's fiscal year.
The recommendation must contain the following information about the
candidate:
o Name;
o Age;
o Business and current residence addresses, as well as residence
addresses for the past 20 years;
o Principal occupation or employment and employment history (name and
address of employer and job title) for the past 10 years (or such shorter period
as the candidate has been in the workforce);
o Educational background;
o Permission for the Company to conduct a background investigation,
including the right to obtain education, employment and credit information;
o The number of shares of common stock of the Company beneficially
owned by the candidate;
o The information that would be required to be disclosed by the
Company about the candidate under the rules of the SEC in a Proxy Statement
soliciting proxies for the election of such candidate as a director (which
currently includes information required by Items 401, 404 and 405 of Regulation
S-K); and
o A signed consent of the nominee to serve as a director of the
Company, if elected.
Correspondence
July 12, 2005
VIA FEDERAL EXPRESS AND EDGAR
United States Securities and Exchange Commission
Mail Stop 3561
Washington, D.C. 20549
Attn: John Reynolds
Assistant Director
Re: HEALTHCARE ACQUISITION CORP.
REGISTRATION STATEMENT ON FORM S-1 FILED MAY 6, 2005
AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM S-1 FILED
JUNE 9, 2005
AMENDMENT NO. 2 TO REGISTRATION STATEMENT ON FORM S-1 FILED
JULY 12, 2005
FILE NO. 333-124712
Ladies and Gentlemen:
On behalf of Healthcare Acquisition Corp. (the "Company"), we are
electronically transmitting hereunder a conformed copy of Amendment No. 2
("Amendment No. 2") to the Registration Statement on Form S-1 (the "Registration
Statement"). Marked courtesy copies of this filing are being sent via overnight
mail to John Reynolds, Maureen Bauer and John Zitko.
This letter is being filed in response to the Staff's comments to
Amendment No. 1 to Registration Statement on Form S-1 filed June 9, 2005. The
Staff's comments are set forth in a letter from John Reynolds, Assistant
Director, addressed to Matthew P. Kinley, President and Treasurer of the
Company, dated July 7, 2005.
Please be advised that, in addition to the changes requested by the
Staff, Amendment No. 2 has been revised to reflect an increase in the size of
the offering as well as our application to list on the American Stock Exchange.
In this letter, we have recited the comments from the Staff in bold and
have followed each comment with the Company's response.
1. WE PARTIALLY REISSUE COMMENT FOUR FROM OUR LETTER OF JUNE 6, 2005. WE
NOTE YOUR RESPONSE THAT THE REGISTRATION STATEMENT HAS BEEN MODIFIED
THROUGHOUT TO DELETE REFERENCES TO THE PRIOR CONSENT REQUIRED OF MAXIM
GROUP LLC BUT IT APPEARS THAT THE COPY OF THE UNDERWRITING AGREEMENT
FILED WITH THIS AMENDMENT DOES PROVIDE FOR MAXIM'S CONSENT PRIOR TO ANY
WARRANT REDEMPTION. PLEASE RECONCILE.
The underwriting agreement and the other related exhibits have been
re-filed with Amendment No. 2 and references to Maxim's consent have
been deleted.
2. PLEASE UPDATE THE DISCLOSURE IN THE FOURTH RISK FACTOR. YOUR REFERENCE
TO THE NUMBER OF BLANK CHECK COMPANIES AND THE AMOUNT OF FUNDS HELD IN
TRUST NO LONGER APPEARS CURRENT. IN ADDITION, THE RISK FACTOR SHOULD BE
REVISED TO INCLUDE REFERENCE TO NOT ONLY THOSE OFFERINGS WHICH ARE
CURRENTLY SEEKING BUSINESS COMBINATION TRANSACTIONS, BUT ALSO THOSE
PROPOSED OFFERINGS WHICH ARE CURRENTLY IN REGISTRATION WITH THE
COMMISSION. PLEASE CONSULT WITH YOUR SOURCES AND REVISE AS APPROPRIATE.
The fourth risk factor has been updated as requested. As of today's
date there are approximately 21 blank check companies with more than
$923 million in trust, and may be at least 28 additional blank check
companies with more than $2.1 billion in trust that are seeking to
carry out a business plan similar to our business plan.
3. WE NOTE RISK FACTOR 12 AND THE STATEMENT THAT YOUR EXISTING
STOCKHOLDERS WILL NOT RECEIVE REIMBURSEMENT FOR ANY OUT-OF-POCKET
EXPENSES INCURRED BY THEM TO THE EXTENT THAT SUCH EXPENSES EXCEED THE
AMOUNT IN THE TRUST FUND UNLESS THE BUSINESS COMBINATION IS
CONSUMMATED. PLEASE CLARIFY WHAT IS MEANT BY THIS STATEMENT AS IT
APPEARS TO THE STAFF THAT THE AMOUNTS IN THE TRUST FUND WOULD NOT BE
AVAILABLE FOR REIMBURSEMENT OF EXPENSES INCURRED BY YOUR EXISTING
SHAREHOLDERS. IN CONNECTION WITH THIS COMMENT, PLEASE ADDITIONALLY SEE
COMMENT SIX, BELOW.
We have clarified our disclosure to explain that reimbursement from the
trust fund may be made after consummation of the business combination
only if there are sufficient funds available after such consummation.
4. WE PARTIALLY REISSUE COMMENT 22 FROM OUR LETTER OF JUNE 6, 2005. WE
NOTE THE REVISED STATEMENT "TO DATE, WE DO NOT HAVE ANY SPECIFIC
MERGER, CAPITAL STOCK EXCHANGE, ASSET ACQUISITION OR OTHER BUSINESS
COMBINATION UNDER CONSIDERATION OR CONTEMPLATION AND WE HAVE NOT, NOR
HAS ANYONE ON OUR BEHALF; CONTACTED ANY POTENTIAL TARGET BUSINESS OR
HAD ANY DISCUSSIONS, FORMAL OR OTHERWISE, WITH RESPECT TO SUCH A
TRANSACTION." PLEASE EXPAND THIS DISCLOSURE, IF ACCURATE, TO
AFFIRMATIVELY CONFIRM THAT NO AGENT OR REPRESENTATIVE OF THE REGISTRANT
HAS TAKEN ANY MEASURE, DIRECT OR INDIRECT, TO LOCATE A TARGET BUSINESS
AT ANY TIME, PAST OR PRESENT. IF ANY PARTY, AFFILIATED OR UNAFFILIATED
WITH THE REGISTRANT, HAS APPROACHED YOU WITH A POSSIBLE CANDIDATE OR
CANDIDATES, THEN SO DISCLOSE OR ADVISE US. AS STATED IN OUR LETTER OF
JUNE 6, 2005, WE ARE NOT SEEKING SIMPLY WHETHER A POTENTIAL BUSINESS
COMBINATION CANDIDATE HAS BEEN "SELECTED" BUT, RATHER, ARE LOOKING MORE
TO THE TYPE, NATURE AND RESULTS TO DATE OF ANY AND ALL DILIGENCE,
DISCUSSIONS, NEGOTIATIONS AND/OR OTHER SIMILAR ACTIVITIES UNDERTAKEN,
WHETHER DIRECTLY BY THE REGISTRANT OR AN AFFILIATE THEREOF, OR BY AN
UNRELATED THIRD PARTY, WITH RESPECT TO A BUSINESS COMBINATION
TRANSACTION INVOLVING THE REGISTRANT. WE ALSO NOTE SIMILAR DISCLOSURE
IN THE SUMMARY AND IN RISK FACTOR ONE. PLEASE REVISE SUCH IN LINE WITH
THIS COMMENT AS WELL. WE MAY HAVE FURTHER COMMENT.
We have modified the disclosure as requested in the summary, risk
factor one and in the business section.
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5. WE NOTE YOUR DISCLOSURE THAT CERTAIN PERSONS "MAY BE DEEMED" PROMOTERS.
PLEASE AFFIRMATIVELY IDENTIFY ALL PROMOTERS OF THE COMPANY. PLEASE
REFER TO THE DEFINITION OF "PROMOTER" IN RULE 405 OF REGULATION C.
We have affirmatively identified the promoters as requested.
6. WE NOTE YOUR DISCLOSURE THAT THERE IS NO LIMIT TO THE OUT-OF-POCKET
EXPENSES THAT MAY BE INCURRED BY INITIAL SHAREHOLDERS. PLEASE REVISE TO
CLARIFY HOW SUCH EXCESS EXPENSES WOULD BE REPAID IF THERE ARE NOT
ENOUGH PROCEEDS NOT HELD IN TRUST TO SATISFY SUCH EXPENSES. WE NOTE THE
RELATION TO RISK FACTOR 12, COMMENTED UPON ABOVE, WITH RESPECT TO THIS
ISSUE.
We have added disclosure in this section consistent with the disclosure
in the risk factor and in conformity with our response to comment 3
above.
7. WE NOTE YOUR DISCLOSURE REGARDING THE UNDERWRITER PURCHASE OPTION ON
PAGE F-9. PLEASE DISCLOSE IN THE FINANCIAL STATEMENTS THE MATERIAL
TERMS OF THE UNDERWRITER'S OPTION, INCLUDING THE CONSIDERATION TO BE
PAID BY THE UNDERWRITER, AND THE TERMS OF THE NET EXERCISE FEATURE
CONTAINED IN THE OPTION. IN ADDITION, PLEASE TELL US HOW YOU INTEND TO
ACCOUNT FOR THE UNDERWRITER'S PURCHASE OPTION IN YOUR FINANCIAL
STATEMENTS. EXPLAIN YOUR BASIS FOR THE PROPOSED TREATMENT AND REFER TO
EITF 00-19 AND OTHER AUTHORITATIVE GUIDANCE. AS APPLICABLE, EXPAND MD&A
TO DISCUSS THE TRANSACTION AND THE LIKELY FUTURE EFFECT ON YOUR FUTURE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Disclosure in the footnotes to the financial statements has been
expanded and the proposed accounting treatment identified with
reference to EITF 00-19. We do not believe that the effects of such
treatment are material enough to warrant further disclosure in MD&A.
8. YOUR ATTENTION IS DIRECTED TO SECTION 210.3-12 OF REGULATION S-X AND
THE POSSIBLE NEED FOR UPDATED FINANCIAL STATEMENTS AND RELATED
DISCLOSURES.
Duly noted.
9. YOU ARE REMINDED THAT A CURRENTLY DATED CONSENT OF THE INDEPENDENT
ACCOUNTANTS WITH TYPED SIGNATURE SHOULD BE INCLUDED IN ANY AMENDMENT TO
THE REGISTRATION STATEMENT.
A currently dated consent is included with Amendment No. 2.
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If you have any questions, please contact the undersigned at
515-244-5746, or Stuart Neuhauser, Esq. of Ellenoff Grossman & Schole LLP at
212-370-1300.
Very truly yours,
HEALTHCARE ACQUISITION CORP.
By: /s/ Matthew P. Kinley
------------------------
Matthew P. Kinley
President and Treasurer
cc: Maureen Bauer
John Zitko
John Pappajohn
Derace L. Schaffer, M.D.
Clifford A. Teller
Andrew Scott
Barry I. Grossman, Esq.
Stuart Neuhauser, Esq.
Michael A. Midura, Esq.
Paul Juffer
Steven Skolnick, Esq.
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