INVESTMENT MANAGEMENT TRUST AGREEMENT

 

INVESTMENT MANAGEMENT TRUST AGREEMENT

 

This Agreement is made as of April 19, 2007 by and between Pinpoint Advance Corp. (the “Company”) and American Stock Transfer & Trust Company (“Trustee”).

 

WHEREAS, the Company’s Registration Statement on Form S-1, File No. 333-138110 (“Registration Statement”), for its initial public offering of securities (“IPO”) has been declared effective on April 19, 2007 by the Securities and Exchange Commission (“Effective Date”); and

 

WHEREAS, the Company has issued securities in a private placement (the “Placement”); and

 

WHEREAS, Maxim Group LLC (“Maxim”) is acting as the representative of the underwriters (the “Underwriters”); and

 

WHEREAS, as described in the Company’s Registration Statement, (i) in accordance with the Company’s Amended and Restated Certificate of Incorporation, $22,516,000 of the net proceeds of the IPO ($26,003,500 if the Underwriters’ over-allotment option is exercised in full), (ii) in accordance with the Amended and Restated Subscription Agreement, dated as of February 15, 2007, among the Company and certain purchasers, $1,500,000 of the gross proceeds of the Placement (together with the IPO proceeds, the “Base Deposit”), and (iii) in accordance with the Underwriting Agreement, dated April 19, 2007, between the Company and Maxim, as representative of the Underwriters, an additional $750,000 ($862,500 if the Underwriters’ over-allotment option is exercised in full), representing a portion of the Underwriters’ discount (the “Deferred Discount”), $24,766,000 will be delivered to the Trustee as of April 25, 2007 to be deposited and held in a trust account for the benefit of the Company, the public holders of the common stock, par value $.0001 per share, of the Company (“Common Stock”) included in the units of the Company’s securities issued in the IPO (the “Units”) and Maxim and in the event the securities offered in the IPO are registered in Colorado, pursuant to Section 11-51-302 (6) of the Colorado Revised Statutes (“CRS”), a copy of which is attached hereto, and made a part hereof. The amount to be delivered to the Trustee will be referred to herein as the “Property,” the stockholders for whose benefit the Trustee shall hold the Property will be referred to as the “Public Stockholders,” and the Public Stockholders, the Company and Maxim and the Underwriters 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 foregoing and the mutual covenants and agreements herein contained, the parties hereto agree as follows:

 

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

 

(a)    Hold the Property in trust for the Beneficiaries in accordance with the terms of this Agreement, including, without limitation, with respect to the Public Stockholders, the terms of Section 11-51-302(6) of the CRS in segregated trust accounts (“Trust Account”) established by the Trustee with Lehman Brothers, Inc.;

  

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

 

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

 

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

 

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

 

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

 

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

 

(i)    Commence liquidation of the Trust Account upon receipt of the Officers Certificate signed by the Chief Executive Officer and Chief Financial Officer in accordance with the terms of a letter (“Termination Letter”), in a form substantially similar to that attached hereto as Exhibit A or Exhibit B , signed on behalf of the Company by its Chief Executive Officer and Chief Financial Officer, 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 , as part of the Company’s plan of dissolution and liquidation approved by the Company’s stockholders. The Trustee understands and agrees that, except as provided in Section 3(j) and Section 2 hereof, disbursements from the Trust Account shall be made only pursuant to a duly executed Termination Letter, together with the other documents referenced herein, including, without limitation, an independently certified oath and report of inspector of election in respect of the stockholder vote in favor of the Business Combination (as hereinafter defined). In all cases, the Trustee shall provide Maxim with a copy of any Termination Letters, Officers Certificates and/or any other correspondence that it receives with respect to any proposed withdrawal from the Trust Account promptly after it receives same. As used in this Agreement, the term “Business Combination” means the acquisition by the Company, through merger, capital stock exchange, asset or stock acquisition of, or similar business combination with, one or more entities located in Israel or Europe as more fully described in the prospectus forming a part of the Registration Statement; and

 

(j) Commence liquidation of the Trust Account only upon receipt of and only in accordance with the terms of a letter (the “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 President or Chairman of the Board 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.

 

2.   Limited Distributions of Income on Property.

 

(a)    If there is any income tax obligation relating to the income from the Property in the Trust Account, then, at the written instruction of the Company, the Trustee shall disburse to the Company or the Internal Revenue Service by wire transfer or check (as directed by the Company in its instruction letter), out of the Property in the Trust Account, the amount indicated by the Company as required to pay income taxes.

 

(b)    Upon written request from the Company containing certification that such distribution pursuant to this Section 2(b) shall only be used to fund the working capital requirements of the Company and the costs related to identifying, researching and acquiring a prospective target businesses, in each case as described in the prospectus that forms a part of the Registration Statement, the Trustee shall distribute to the Company an amount equal to up to $1,500,000 of the income earned on the Base Deposit, net of taxes payable, through the last day of the month immediately preceding the date of receipt of the Company’s written request, provided; however, that in the event the over-allotment option is exercised in full, the Company shall be prohibited from receiving distributions of income earned on the Base Deposit until after the first $114,900 of income is earned on the Base Deposit (net of taxes payable), which amount shall be added to the Base Deposit resulting in amount of $9.91 for each share represented by certificates held by Public Stockholders.

 

(c)     Upon receipt by the Trustee of a written instruction from the Company for distributions from the Trust Account in connection with a plan of dissolution and distribution, accompanied by an Officers Certificate signed by the Chief Executive Officer and Chief Financial Officer of the Company certifying as true, accurate and complete (i) a statement of the amount of actual expenses incurred or, where known with reasonable certainty, imminently to be incurred by the Company in connection with its dissolution and distribution, including any fees and expenses incurred or imminently to be incurred by the Company in connection with seeking stockholder approval of the Company’s plan of dissolution and distribution, (ii) any amounts due to pay creditors or required to reserve for payment to creditors, and (iii) the sum of (i) and (ii), the Trustee shall distribute to the Company an amount, as directed by the Company in the instruction letter, up to the sum of (i) and (ii) as indicated in the instruction letter.

 

(d)   Except as provided in this Section 2, no other distributions from the Trust Account shall be permitted except in accordance with Sections 1(i) and 3(j) hereof.

 

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

 

(a)    To provide all instructions to the Trustee hereunder in writing, signed by the Company’s Chief Executive Officer and Chief Financial Officer. In addition, except with respect to its duties under paragraph 1(i) and 3(j), the Trustee shall be entitled to rely on, and shall be protected in relying on, any verbal or telephonic advice or instruction which it in good faith believes to be given by any one of the persons authorized above to give written instructions, provided that the Company and/or Maxim shall promptly confirm such instructions in writing;

 

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

 

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

 

(d)    That, in the event that the Company consummates a Business Combination and the Trust Account is liquidated in accordance with Section 1(i) hereof, the Trustee or another independent party designated by Maxim shall act as the inspector of election to certify the results of the stockholder vote;

 

(e)    That the Officers Certificate referenced in Sections 1(i) and 3(j) hereof shall require the Company’s Chief Executive Officer and Chief Financial Officer to each certify the following (wherever applicable): (1) prior to the LOI Termination Date, the Company has entered into a bona fide Letter of Intent with a target business; and/or (2) prior to the LOI Termination Date, the Company has entered into a Business Combination with a target business, the terms of which are consistent with the requirements set forth in the Registration Statement; and/or (3) prior to the Second Termination Date, the Company has entered into a Business Combination with a target business, the terms of which are consistent with the requirements set forth in the Registration Statement; and (4) the Board of Directors (the “Board”) pursuant to the unanimous written consent of the Board has approved (where applicable): (i) the Letter of Intent; and/or (ii) the Business Combination. A copy of such consent and the Letter of Intent and/or the definitive agreement relating to the Business Combination so approved shall be attached as an exhibit to the Officers Certificate;

 

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

 

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

 

(h) Within five business days after the Underwriters’ over-allotment option (or any unexercised portion thereof) expires or is exercised in full, to provide the Trustee notice in writing (with a copy to the Underwriters) of the total amount of the Deferred Fee and Deferred Discount, which shall in no event be less than $750,000; and

 

(i) Intentionally left blank.

 

 (j) ( i )    Subject to the limitations and conditions set forth in paragraph ( ii ) of this section 3(j), as soon as practicable after the date 18 months from the date of this Agreement (the “LOI Termination Date”) (or 24 months from the date hereof in the event the Company has executed a Letter of Intent (defined below) prior to the LOI Termination Date but failed to consummate a Business Combination (“Second Termination Date”)), instruct the Trustee to commence liquidation of the Trust Account as part of the Company’s plan of dissolution and liquidation approved by the Company’s stockholders. The Trustee, upon receiving written instruction from the Company and Maxim, shall deliver a notice to Public Stockholders of record as of the LOI Termination Date or Second Termination Date, whichever the case may be, by U.S. mail or via the Depository Trust Company (“DTC”), within five days of receiving instructions from the Company to do so, notifying the Public Stockholders of such event. The Trustee shall deliver to each Public Stockholder its ratable share of the Property against satisfactory evidence of delivery of the stock certificates by the Public Stockholders to the Company through DTC, its Deposit Withdraw Agent Commission (DWAC) system or as otherwise presented to the Trustee.

 

 

(x)     If the Company has entered into a bona fide, executed letter of intent, agreement in principle or engagement letter (a “Letter of Intent”) for a Business Combination prior to the LOI Termination Date, then the Company shall not be required to send an instruction to the Trustee relating to the liquidation of the Trust Account until the earlier of a Business Combination or the Second Termination Date.

(y)    On the date on which the Trustee is to begin delivery to each Public Stockholder of its ratable share of the Property, the Company shall provide written instructions to the Trustee to deliver the Property according to the following schedule: First, to each Public Stockholder an amount equal to $9.91 for each share represented by certificates delivered by such Public Stockholder to the Company or the Trustee as prescribed in Paragraph ( i ) of Section 3(j) of this Agreement, and Second, to deliver to each Public Stockholder the remainder, if any, of its ratable share of the Property.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

  

(g)    Verify the correctness of the information set forth in the Registration Statement or to confirm or assure that any acquisition made by the Company or any other action taken by it is as contemplated by the Registration Statement; and

 

(h)    Pay any taxes on behalf of the Trust Account (it being expressly understood that the Trustee’s sole obligation with respect to taxes shall be to issue the checks with respect thereto provided for by Section 2(a) hereof).

 

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

 

5.   Certain Rights Of Trustee.

 

(a)    Before the Trustee acts or refrains from acting, it may require an Officers Certificate or opinion of counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers Certificate or opinion of counsel. The Trustee may consult with counsel and the advice of such counsel or any opinion of counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

 

(b)    The Trustee may act through its attorneys and agents and shall not be responsi