TRUST ACCOUNT AGREEMENT
This TRUST ACCOUNT AGREEMENT (the “ Agreement ”) is made as of January 17, 2008 by and between SAPPHIRE INDUSTRIALS CORP., a Delaware corporation (the “ Company ”), and MELLON BANK, N.A., a national banking association, as account agent (the “ Account Agent ”).
WHEREAS , the Company’s Registration Statement on Form S-1, No. 333-146620 (“ Registration Statement ”), for its initial public offering of its units (“ IPO ”), each comprised of one share of common stock, par value $0.001 per share, and one warrant to purchase one share of common stock has been declared effective as of the date hereof by the Securities and Exchange Commission; and
WHEREAS , Citigroup Global Markets Inc. (“Citigroup”) is acting as the underwriter in the IPO pursuant to an underwriting agreement dated on or about the date hereof between the Company and Citigroup Global Markets Inc. (the “ Underwriting Agreement ”); and
WHEREAS , as described in the Company’s Registration Statement, and in accordance with the Company’s Amended and Restated Certificate of Incorporation, $799,650,000 of the net proceeds of the IPO and the proceeds of the sale to Lazard Funding Limited LLC of warrants to purchase shares of common stock (or $917,838,000 if the underwriter’s over-allotment option is exercised in full) will be delivered to the Account Agent (the “ Account Property ”) to be deposited and held in a trust account for the benefit of the Company, Citigroup and the holders of the Company’s common stock issued in the IPO as hereinafter provided (the stockholders for whose benefit the Account Agent shall hold the Account 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 , pursuant to the Underwriting Agreement, a portion of the Account Property equal to $31,800,000 (or $36,888,000, if the underwriter’s over-allotment option is exercised in full or a pro rata portion thereof pursuant to the terms of the Underwriting Agreement if the underwriter’s over-allotment option is exercised in part, but not in full, prior to the time of its expiration) is attributable to deferred underwriting discounts and commissions that will become payable by the Company to Citigroup Global Markets Inc. upon the consummation of a Business Combination (the “ Deferred Discount ”); and
WHEREAS , the Company desires to enter into this Agreement to set forth the terms and conditions pursuant to which the Account Agent shall hold the Account Property;
NOW, THEREFORE , in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
Section 1. Appointment of Account Agent; Deposit of Account Property . The Account Agent is hereby instructed to establish a segregated trust account (Account Number 102-3482) (the “ Trust Account ”) at Mellon Bank, N.A. The Company shall cause the Account Property to be delivered to the Account Agent in connection with the closing of the IPO, and the Account Agent is hereby instructed to hold the Account Property in the Trust Account in accordance with this Agreement. The Account Agent shall acknowledge receipt of the Account Property.
Section 2. Investment by Account Agent . In a timely manner, upon the written instruction of the Company, the Account Agent shall invest and reinvest the Account Property in (a) a Mellon Bank, N.A. money market deposit account or (b) one or more money market funds for which The Dreyfus Corporation or any subsidiary or affiliate thereof serves as investment advisor, administrator, shareholder servicing agent, custodian or subcustodian, selected by the Company, which money market funds invest principally either in short-term securities issued or guaranteed by the United States having a rating in the highest investment category granted thereby by a recognized credit rating agency at the time of acquisition or in tax exempt municipal bonds issued by governmental entities located within the United States, and (c) upon written request of the Company, the Account Agent shall be required to (x) invest such requested amount directly in United States treasury bonds, bills or notes (“ Treasuries ”) identified by the Company and (y) sell, transfer or otherwise dispose of Treasuries identified by the Company, provided, that the amount of Treasuries held at any time may not exceed $10 million, notwithstanding that (i) The Dreyfus Corporation is an affiliate of the Account Agent, (ii) the Account Agent and any of its affiliates may charge, collect and retain for its own account fees and expenses from such funds for services rendered (provided that such charges, fees and expenses are on terms consistent with terms negotiated at arm’s length) and (iii) the Account Agent and any of its affiliates may charge, collect and retain for its own account fees and expenses for services rendered pursuant to this Agreement and for services rendered to the Company under other agreements, including without
limitation for services as transfer agent, warrant agent or escrow agent, and may, in addition to such fees and expenses, earn other income relating to the Account Property. The Account Agent shall collect and receive in trust, when due, all principal and income arising from the Account Property, which shall become part of the Account Property, as such term is used herein.
Section 3. Distribution and Release of Account Property . The Account Agent shall commence liquidation of the Trust Account only after and as promptly as practicable after receipt of and only in accordance with the terms of a letter (a “ 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, President or Chief Financial Officer, and complete the liquidation of the Trust Account and distribute the Account Property in the Trust Account only as directed in the Termination Letter and the other documents referred to therein; provided , however , that in the event that a Termination Letter has not been received by the Account Agent by the date which is 24-months after the date of the final prospectus for the IPO (the “ Last Date ”), such date to be as set forth in a notice to be delivered to the Account Agent not more than five (5) business days following the consummation of the IPO, or a notice (an “ Extension Notice ”) stating that the time of termination has been extended (an “ Extension ”) by not more than twelve months following the Last Date (in which case the date set forth in such notice shall be deemed to be the Last Date for all subsequent purposes under this Agreement), the Trust Account shall be liquidated in accordance with the procedures set forth in the Termination Letter attached as Exhibit B hereto and distributed to the Public Stockholders of record as of the Last Date. In all cases, the Account Agent shall provide Citigroup Global Markets Inc. with a copy of any Termination Letters and/or any other correspondence that it receives with respect to any proposed withdrawal from the Trust Account promptly after it receives same. The Account Agent shall also disburse such funds from the Trust Account from time to time as may be necessary to pay in a timely manner any taxes incurred as a result of interest or other income earned on the Account Property or other tax obligations of the Company upon receipt and only in accordance with the terms of a letter (a “ Tax Disbursement Letter ”), in a form substantially similar to that attached hereto as Exhibit C , signed on behalf of the Company by its Chief Executive Officer, President or Chief Financial Officer, and complete the disbursement of funds from the Trust Account and distribute such funds only as directed in the Tax Disbursement Letter and the other documents referred to therein.
Section 4. Agreements and Covenants of Account Agent . The Account Agent hereby agrees and covenants to:
(a) Hold the Account Property in the Trust Account in trust in accordance with the terms of this Agreement;
(b) Manage, supervise and administer the Trust Account in accordance with the terms and conditions set forth herein;
(c) As promptly as practicable, notify the Company of all communications received by it with respect to any Account Property requiring action by the Company;
(d) As promptly as practicable, supply any necessary information or documents as may be reasonably requested by the Company in connection with the Company’s preparation of the tax returns for the Trust Account;
(e) Participate, at the Company’s cost and expense, in any plan or proceeding for protecting or enforcing any right or interest arising from the Account Property if, as and when instructed by the Company to do so;
(f) Render to the Company and to such other person as the Company may instruct, monthly written statements of the activities of and amounts in the Trust Account reflecting all receipts and disbursements of the Trust Account;
(g) Release to the Company each month the interest earned on the Account Property, provided , however , that the aggregate amount of all such distributions shall not exceed the lesser of (y) the aggregate amount of income actually received on amounts in the Trust Account less an amount equal to estimated taxes that are or will be due on such income at an assumed rate of 40% and (z) $6,000,000;
(h) Distribute, upon receipt of written notice from the Company, the Deferred Discount to Citibank Global Markets Inc.;
(i) The limited distributions referred to in Section 3 for tax obligations of the Company and Section 4(g) above shall be made only from interest collected on the Property. No distributions from the Trust Account shall be permitted except in accordance with Sections 3, 4(g), 4(h) and 4(j) hereof; and
(j) Distribute, upon receipt of an Extension Notice, to Public Stockholders who exercised their conversion rights in connection with an Extension an amount equal to the pro rata share of the Account Property relating to the shares for which such Public Stockholders have exercised conversion rights in connection with a vote of stockholders for an Extension.
Section 5. Agreements and Covenants of the Company . The Company hereby agrees and covenants to:
(a) Give all instructions and requests to the Account Agent hereunder in writing, signed by the Company’s Chief Executive Officer, President or Chief Financial Officer;
(b) Hold the Account Agent harmless and indemnify the Account Agent from and against, any and all costs, expenses, disbursements and advances, including reasonable counsel fees and disbursements, or loss or damage suffered by the Account Agent in connection with any action, suit or other proceeding brought against the Account Agent involving any claim or demand, or in connection with any claim or demand, that in any way arises out of or relates to this Agreement, the services of the Account Agent hereunder, the Account Property or any income earned from investment of the Account Property, except for costs, expenses, disbursements, advances, losses and damages resulting from the Account Agent’s gross negligence or willful misconduct (as determined by a final non-appealable order of a court of competent jurisdiction). Promptly after the receipt by the Account Agent of notice of demand or claim or the commencement of any action, suit or proceeding with respect to which the Account Agent intends to seek indemnification under this paragraph, it shall notify the Company in writing thereof (hereinafter referred to as the “ Indemnified Claim ”); provided, however, that any failure or delay of the Account Agent in giving such notice shall not relieve the Company of any of its obligations hereunder except to the extent the Company is actually prejudiced thereby, but only to the extent of such prejudice. The Company shall assume the defense of the Account Agent and pay any and all costs and expenses associated with any such action or proceeding, provided that the Account Agent consents to the Company’s selection of counsel, such consent not to be unreasonably withheld or delayed. Notwithstanding the foregoing, the Account Agent shall have the right to employ one (1) separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Company shall pay the reasonable fees and expenses of such separate counsel but shall not be obligated to otherwise assume the defense of the Account Agent if the Account Agent is advised that (i) an actual conflict of interest exists by reason of common representation or (ii) there are legal defenses available to the Account Agent that are different from or are in addition to those available to the Company or if all parties commonly represented do not agree as to the action (or inaction) of counsel.
(c) Pay the Account Agent (i) an initial acceptance fee of $5,000, (ii) an annual fee of $3,500 and (iii) a transaction processing fee of $100 for each disbursement made pursuant to Section 3 and 4(g) hereof. The Company shall pay such acceptance fee and the first year’s annual fee to the Account Agent on the date hereof and thereafter shall pay each succeeding year’s annual fee in advance on each anniversary of the date hereof. Said transaction processing fees shall be deducted by the Account Agent from the disbursements made to the Company pursuant to Section 3 and 4(g) hereof. The Account Agent shall refund to the Company the annual fee (on a pro rata basis) with respect to any period after the liquidation of the Trust Account. The fees set forth in this Section 5(c) shall be in addition to, and shall not include, any fee referred to in Section 6(a) hereof (it being expressly understood that the Account Property, other than portions of the disbursements made pursuant to Section 4(g) hereof, shall not be used to make any payments to the Account Agent under this paragraph);
(d) Reimburse the Account Agent upon request for all reasonable costs, expenses, disbursements, and advances incurred or made by the Account Agent in implementing or enforcing any of the provisions of this Agreement (including without limitation any fees, expenses and disbursements of its counsel), except any such cost, expense, disbursement, or advance as may arise from the Account Agent’s gross negligence or willful misconduct, as determined by a final non-appealable order of a court of competent jurisdiction (it being expressly understood that the Account Property, other than portions of the disbursements made pursuant to Section 4(g), shall not be used to make any reimbursements to the Account Agent under this paragraph);
(e) In connection with any vote of the Company’s stockholders regarding a Business Combination or an Extension, provide to the Account Agent an affidavit or certificate of a firm regularly engaged in the business of soliciting proxies and/or tabulating stockholder votes (which firm may be the Account Agent) verifying the vote of the Company’s stockholders regarding such Business Combination or Extension;
(f) Include in any Extension Notice delivered to the Account Agent hereunder instructions for the distribution of funds to any Public Stockholders who exercised their conversion option in connection with an Extension;
(g) Within five (5) business days after Citigroup Global Markets Inc.’s over-allotment option (or any unexercised portion thereof) expires or is exercised in full, provide the Account Agent with a notice in writing (with a copy to Citigroup Global Markets Inc.) of the total amount of the Deferred Discount to be released to Citigroup Global Markets Inc. upon consummation of