As filed with the Securities and
Exchange Commission on June 25, 2010
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
HICKS
ACQUISITION COMPANY II, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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6770
(Primary Standard Industrial
Classification Code Number)
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80-0611167
(I.R.S. Employer
Identification Number)
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100
Crescent Court, Suite 1200
Dallas, TX 75201
(214) 615-2300
(Address,
including zip code, and telephone number,
including area code, of
registrants principal executive offices)
Robert M.
Swartz
c/o Hicks
Acquisition Company II, Inc.
100 Crescent Court, Suite 1200
Dallas, TX 75201
(214) 615-2300
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies to:
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Bruce Mendelsohn
James A. Deeken
Akin Gump Strauss Hauer & Feld LLP
One Bryant Park
New York, New York 10036
(212) 872-1000
(212) 872-1002
Facsimile
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Ann F. Chamberlain
Floyd I. Wittlin
Bingham McCutchen LLP
399 Park Avenue
New York, New York 10022-4689
(212) 705-7700
(212) 705-5378 Facsimile
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box. o
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. o
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. o
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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
(Do not check if a smaller reporting company)
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Smaller reporting company o
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CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount Being
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Offering
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Aggregate
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Registration
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Security Being Registered
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Registered
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Price per Security(1)
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Offering Price(1)
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Fee
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Units, each consisting of one share of common stock,
$.0001 par value, and one warrant(2)
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23,000,000 Units
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$
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10.00
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$
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230,000,000
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$
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16,399
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Shares of common stock included as part of the units(2)
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23,000,000 Shares
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(3)
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Warrants included as part of the units(2)
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23,000,000 Warrants
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(3)
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Total
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$
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230,000,000
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$
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16,399
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(1)
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Estimated solely for the purpose of
calculating the registration fee.
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(2)
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Includes 3,000,000 units,
consisting of 3,000,000 shares of common stock and
3,000,000 warrants, which may be issued upon exercise of a
45-day
option granted to the underwriters to cover over-allotments, if
any.
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(3)
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No fee pursuant to Rule 457(g).
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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, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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 jurisdiction where the offer or sale is not
permitted.
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SUBJECT TO
COMPLETION, DATED JUNE 25, 2010
PRELIMINARY PROSPECTUS
$200,000,000
Hicks Acquisition Company II,
Inc.
20,000,000
Units
Hicks Acquisition Company II, Inc. is a newly organized blank
check company formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more
businesses, which we refer to throughout this prospectus as our
initial business combination. We have not identified any
acquisition target and we have not, nor has anyone on our
behalf, initiated any substantive discussions with an entity
that we will acquire in our initial business combination. We are
not limited to a particular industry, geographic region or
minimum transaction value for purposes of consummating an
initial business combination. HH-HACII, L.P., which we refer to
throughout this prospectus as our sponsor, our officers and
directors have agreed that we will have only 21 months from
the closing of this offering to consummate our initial business
combination.
This is an initial public offering of our securities. We are
offering 20,000,000 units. Each unit has an offering price
of $10.00 and consists of one share of our common stock and one
warrant. Each warrant entitles the holder to purchase one share
of our common stock at a price of $12.00, subject to adjustment
as described in this prospectus. The warrants will become
exercisable on the later of 30 days after the completion of
our initial business combination or 12 months from the
closing of this offering, provided that in each case we have an
effective registration statement covering the shares of common
stock issuable upon exercise of the warrants and a current
prospectus relating to them is available, and will expire five
years after the completion of our initial business combination,
unless earlier redeemed. We have also granted the underwriters a
45-day
option to purchase up to an additional 3,000,000 units to
cover over-allotments, if any.
We will provide our stockholders with the opportunity to redeem
their shares of our common stock for cash equal to their pro
rata share of the aggregate amount then on deposit in the trust
account described below, less accrued and unpaid taxes and
deferred underwriting commissions, upon the consummation of our
initial business combination, subject to the limitations
described herein. There will be no redemption rights or
liquidating distributions with respect to our warrants, which
will expire worthless if we fail to consummate a business
combination within 21 months from the closing of this
offering. Unlike other blank check companies that hold
stockholder votes and conduct proxy solicitations in conjunction
with their initial business combinations and provide for related
redemptions of shares of common stock for cash upon consummation
of such initial business combinations even when a vote is not
required by law, we intend to consummate our initial business
combination and conduct the redemptions without a stockholder
vote pursuant to the tender offer rules of the Securities and
Exchange Commission, or the SEC, and file tender offer documents
with the SEC. The tender offer documents will contain
substantially the same financial and other information about the
initial business combination and the redemption rights as is
required under the SECs proxy rules. If, however, a
stockholder vote is required by law, or we decide to hold a
stockholder vote for business or other legal reasons, we will,
like other blank check companies, offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy
rules and not pursuant to the tender offer rules. If we seek
stockholder approval, we will consummate our initial business
combination only if a majority of the outstanding shares of
common stock voted are voted in favor of the business
combination. Our sponsor has agreed to waive its redemption
rights with respect to any shares held by it in connection with
the consummation of a business combination. If we are unable to
consummate a business combination within 21 months from the
closing of this offering, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as
reasonably possible, redeem 100% of the common stock sold as
part of the units in this offering, which we refer to throughout
this prospectus as our public shares, at a per-share price,
payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law.
Our sponsor has committed to purchase an aggregate of 6,666,667
warrants at a price of $0.75 per warrant ($5.0 million in
the aggregate) in a private placement that will occur
simultaneously with the consummation of this offering. We refer
to these warrants throughout this prospectus as the sponsor
warrants. The proceeds from the sale of the sponsor warrants in
the private placement will be deposited into a trust account and
will be subject to a trust agreement, each as described below,
and in the event we are unable to consummate a business
combination within the required timeframe, will be used to fund
the redemption of our public shares. Each of the sponsor
warrants will be substantially similar to the warrants included
in the units sold in this offering, except that the sponsor
warrants: (i) will not be redeemable by us so long as they
are held by our sponsor or its permitted transferees,
(ii) will be subject to certain transfer restrictions
described in more detail in this prospectus and (iii) may
be exercised for cash or on a cashless basis, as described in
this prospectus.
Currently, there is no public market for our units, common stock
or warrants. It is anticipated that our units will be quoted on
the
Over-the-Counter
Bulletin Board quotation system, or the OTCBB, under the
symbol
on or promptly after the date of this prospectus. The common
stock and warrants comprising the units will begin separate
trading on the 52nd day following the date of this
prospectus unless Citigroup Global Markets Inc. informs us of
its decision to allow earlier separate trading, subject to our
filing a Current Report on
Form 8-K
with the SEC containing an audited balance sheet reflecting our
receipt of the gross proceeds of this offering and issuing a
press release announcing when such separate trading will begin.
Once the securities comprising the units begin separate trading,
the common stock and warrants will be traded on the OTCBB under
the symbols
and
,
respectively.
Investing in our securities involves a high degree of risk.
See Risk Factors beginning on page 21 for a
discussion of information that should be considered in
connection with an investment in our securities.
Neither the SEC 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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Per Unit
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Total Proceeds
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Public offering price
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$
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10.00
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$
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200,000,000
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Underwriting discounts and commissions(1)
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0.50
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10,000,000
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Proceeds, before expenses, to us
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$
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9.50
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$
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190,000,000
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(1)
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Includes $0.25 per unit, or
approximately $5.0 million in the aggregate (approximately
$5.75 million if the underwriters over-allotment
option is exercised in full), payable to the underwriters for
deferred underwriting commissions to be placed in the trust
account described below. Such funds will be released to the
underwriters only on completion of an initial business
combination, as described in this prospectus.
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Of the proceeds we receive from this offering and the sale of
the sponsor warrants described in this prospectus, approximately
$9.85 per unit, or approximately $197.0 million in the
aggregate (approximately $9.83 per unit or approximately
$226.25 million if the underwriters over-allotment
option is exercised in full) will be deposited into a trust
account at JP Morgan Chase, N.A. with Continental Stock
Transfer & Trust Company, as trustee. Except for
a portion of the interest income earned on the trust account
balance that may be released to us to pay any taxes on such
interest and to fund our working capital requirements, and any
amounts necessary to purchase up to 15% of our public shares,
each as described in this prospectus, none of the funds held in
trust will be released from the trust account until the earlier
of (i) the completion of our initial business combination
or (ii) the redemption of 100% of our public shares if we
are unable to consummate a business combination within
21 months from the closing of this offering (subject to the
requirements of law). The proceeds deposited in the trust
account could become subject to the claims of our creditors, if
any, which could have priority over the claims of our public
stockholders.
The underwriters are offering the units on a firm commitment
basis. The underwriters expect to deliver the units to
purchasers on or
about ,
2010.
Sole
Book-Running Manager
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Citi
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Deutsche
Bank Securities |
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2010
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. We
are not, and the underwriters are not, making an offer of these
securities in any jurisdiction where the offer is not permitted.
You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the
front of this prospectus. The information may be required to be
updated at a later date.
TABLE OF
CONTENTS
i
SUMMARY
This summary only highlights the more detailed information
appearing elsewhere in this prospectus. As this is a summary, it
does not contain all of the information that you should consider
in making an investment decision. You should read this entire
prospectus carefully, including the information under Risk
Factors and our financial statements and the related notes
included elsewhere in this prospectus, before investing.
References in this prospectus to we, us
or our company refer to Hicks Acquisition Company
II, Inc. References in this prospectus to our public
shares are to shares of our common stock sold as part of
the units in this offering (whether they are purchased in this
offering or thereafter in the open market) and references to
public stockholders refer to the holders of our
public shares, including our sponsor (as defined below) to the
extent our sponsor purchases public shares, provided that its
status as a public stockholder shall only exist with
respect to such public shares. References in this prospectus to
our management or our management team
refer to our officers and directors and references to our
sponsor refer to HH-HACII, L.P., a Delaware limited
partnership. Unless we tell you otherwise, the information in
this prospectus assumes that the underwriters will not exercise
their over-allotment option.
General
We are a newly organized blank check company formed under the
General Corporation Law of the State of Delaware, or the DGCL,
for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar
business combination with one or more businesses. We have not
identified any acquisition target and we have not, nor has
anyone on our behalf, initiated any substantive discussions with
an entity that we will acquire in our initial business
combination. We are not limited to a particular industry,
geographic region or minimum transaction value for purposes of
consummating an initial business combination.
We will seek to capitalize on the significant investing
experience of our management team, including the 38 years
of private equity expertise of Thomas O. Hicks, our founder and
chairman of the board. Since 2005, Mr. Hicks has served as
the chairman of Hicks Holdings LLC, a holding company for real
estate, private equity and sports investments of Mr. Hicks
and his family. Mr. Hicks co-founded Hicks, Muse,
Tate & Furst, a nationally prominent private equity
firm in the United States that specialized in leveraged
acquisitions, and served as its chairman from 1989 through 2004.
During Mr. Hicks tenure as chairman, Hicks Muse
raised over $12 billion of private equity funds,
consummated over $50 billion of leveraged acquisitions, and
was one of the most active private investment firms in the
country. Mr. Hicks also co-founded and served as co-chief
executive officer of the leveraged buyout firm,
Hicks & Haas, from 1984 to 1989.
Mr. Hicks and his affiliates are also, directly or
indirectly, the controlling shareholders of Latrobe Specialty
Steel Company, a specialty steel manufacturer; DirecPath, a
company that provides bundled DIRECTV programming, broadband
voice and data services, security and other locally based
services to multiple dwelling units across the United States;
Ocular LCD, Inc., a designer, manufacturer and marketer of
high-performance liquid crystal displays, modules and systems;
Grupo Pilar, an animal and pet food company in Argentina;
Anvita, Inc., a provider of decision support systems for
healthcare professionals; the National Hockey Leagues
Dallas Stars; Major League Baseballs Texas Rangers; and a
50% interest in the English Premier Leagues Liverpool
Football Club. A sale of the Texas Rangers is pending through a
voluntary, prepackaged, court-supervised process under
Chapter 11 of the U.S. Bankruptcy Code pursuant to a
plan previously negotiated and agreed to by the current owners
of the Texas Rangers and the prospective buyers.
In addition, all of our directors and our senior executive
officers were officers or directors of a blank check company,
Hicks Acquisition Company I, Inc., or HACI, which conducted
an initial public offering in September 2007 and consummated a
business combination with Resolute Energy Corporation on
September 25, 2009. All of our directors and senior
executive officers played a key role throughout the business
combination transaction for HACI, including assisting in
identifying numerous suitable acquisition candidates, including
the ultimate target, and assisting in the proxy solicitation of
stockholder approval for such acquisition. Investors in
HACIs initial public offering who held the units through
the effective date of the business combination with Resolute
Energy Corporation on September 25, 2009 realized total and
annualized returns of 2.8% and 1.4%,
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respectively, compared to a total return of the S&P 500 of
-31.8% over the same time frame. Investors who purchased units
of HACI in its initial public offering and held them through
June 17, 2010 realized total and annualized returns of
58.5% and 26.0%, respectively, compared to a total return of the
S&P 500 of -27.1% over the same time frame.
We anticipate structuring a business combination to acquire 100%
of the equity interest or assets of the target business or
businesses. We may, however, structure a business combination to
acquire less than 100% of such interests or assets of the target
business, but we will only consummate such business combination
if we will become the controlling stockholder of the target or
are otherwise not required to register as an investment company
under the Investment Company Act of 1940, as amended, or the
Investment Company Act. We will not consider any transaction
that does not meet such criteria.
We have identified the following general criteria and guidelines
that we believe are important in evaluating prospective target
businesses. We will use these criteria and guidelines in
evaluating acquisition opportunities. However, we may decide to
enter into a business combination with a target business that
does not meet these criteria and guidelines.
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Established Companies with Proven Track
Records. We will seek to acquire established
companies with sound historical financial performance. We will
typically focus on companies with a history of strong operating
and financial results. We do not intend to acquire
start-up
companies.
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Companies with Strong Free Cash Flow
Characteristics. We will seek to acquire
companies that have a history of strong, stable free cash flow
generation. We will focus on companies that have predictable,
recurring revenue streams and an emphasis on low working capital
and capital expenditure requirements.
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Strong Competitive Industry
Position. We will seek to acquire businesses
that operate within industries that have strong fundamentals.
The factors we will consider include growth prospects,
competitive dynamics, level of consolidation, need for capital
investment and barriers to entry. Within these industries, we
will focus on companies that have a leading or niche market
position. We will analyze the strengths and weaknesses of target
businesses relative to their competitors, focusing on product
quality, customer loyalty, cost impediments associated with
customers switching to competitors, patent protection and brand
positioning. We will seek to acquire businesses that demonstrate
advantages when compared to their competitors, which may help to
protect their market position and profitability and deliver
strong free cash flow.
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Experienced Management Team. We will
seek to acquire businesses that have strong, experienced
management teams. We will focus on management teams with a
proven track record of driving revenue growth, enhancing
profitability and generating strong free cash flow. We believe
that the operating expertise of our officers and directors will
complement, not replace, the targets management team.
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Diversified Customer and Supplier
Base. We will seek to acquire businesses that
have a diversified customer and supplier base. Companies with a
diversified customer and supplier base are generally better able
to endure economic downturns, industry consolidation, changing
business preferences and other factors that may negatively
impact their customers, suppliers and competitors.
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We anticipate that target business candidates will be brought to
our attention from various unaffiliated sources, including
investment bankers, venture capital funds, private equity funds,
leveraged buyout funds, management buyout funds and other
members of the financial community. Target businesses may be
brought to our attention by such unaffiliated sources as a
result of being solicited by us through calls or mailings. These
sources may also introduce us to target businesses in which they
think we may be interested on an unsolicited basis, since many
of these sources will have read this prospectus and know what
types of businesses we are targeting. Our officers and
directors, as well as their affiliates, may also bring to our
attention target business candidates that they become aware of
through their business contacts as a result of formal or
informal inquiries or discussions they may have, as well as by
attending trade shows or conventions. In addition, we expect to
receive a number of proprietary deal flow opportunities that
would not otherwise
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necessarily be available to us as a result of the track record
and business relationships of Mr. Hicks, our founder and
chairman of the board, and as a result of the transaction with
Resolute Energy Corporation.
We have not established any other specific attributes or
criteria (financial or otherwise) for prospective target
businesses. In evaluating a prospective target business, our
management may consider a variety of factors, including one or
more of the following:
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financial condition and results of operations;
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growth potential;
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brand recognition and potential;
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experience and skill of management and availability of
additional personnel;
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capital requirements;
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stage of development of the business and its products or
services;
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existing distribution arrangements and the potential for
expansion;
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degree of current or potential market acceptance of the products
or services;
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proprietary aspects of products and the extent of intellectual
property or other protection for products or formulas;
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impact of regulation on the business;
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regulatory environment of the industry;
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seasonal sales fluctuations and the ability to offset these
fluctuations through other business combinations, introduction
of new products, or product line extensions;
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costs associated with effecting the business combination;
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industry leadership, sustainability of market share and
attractiveness of market sectors in which a target business
participates; and
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macro competitive dynamics in the industry within which the
company competes.
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These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular initial business
combination may be based, to the extent relevant, on the above
factors as well as other considerations, factors and criteria
our management deems relevant to our business objective. In
evaluating a prospective target business, we expect to conduct
an extensive due diligence review which will encompass, among
other things, meetings with incumbent management and employees,
document reviews, interviews of customers and suppliers,
inspection of facilities, as well as review of financial and
other information which will be made available to us.
While we do not intend to pursue an initial business combination
with any company that is affiliated with our sponsor, officers
or directors, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial
business combination with such a company, we would obtain an
opinion from an independent investment banking firm which is a
member of the Financial Industry Regulatory Authority, or FINRA,
that such an initial business combination is fair to our
stockholders from a financial point of view.
In order to minimize potential conflicts of interest that may
arise from multiple corporate affiliations, each of our officers
has agreed, pursuant to a written agreement with us, that until
the earliest of our initial business combination, our
liquidation or such time as he or she ceases to be an officer,
to present to us for our consideration, prior to presentation to
any other entity, any business opportunity with an enterprise
value of $100 million or more, subject to any pre-existing
fiduciary or contractual obligations he or she might have. As
more fully discussed in Management Conflicts
of Interest, if any of our officers becomes aware of a
business combination opportunity that falls within the line of
business of any entity to which he or she has pre-existing
fiduciary or contractual obligations, he or she may be required
to present such business
3
combination opportunity to such entity prior to presenting such
business combination opportunity to us. All of our officers
currently have certain relevant fiduciary duties or contractual
obligations that may take priority over their duties to us.
We will provide our stockholders with the opportunity to redeem
their public shares for cash equal to their pro rata share of
the aggregate amount then on deposit in the trust account, less
accrued and unpaid taxes and deferred underwriting commissions,
upon the consummation of our initial business combination,
subject to the limitations described herein. The amount in the
trust account is initially anticipated to be approximately $9.85
per share (or approximately $9.83 per share if the
over-allotment option is exercised in full), or approximately
$0.15 less than the
per-unit
offering price of $10.00 (approximately $0.17 less if the
over-allotment option is exercised in full). There will be no
redemption rights or liquidating distributions with respect to
our warrants, which will expire worthless in the event we do not
consummate a business combination. Unlike other blank check
companies that hold stockholder votes and conduct proxy
solicitations in conjunction with their initial business
combinations and provide for related redemptions of public
shares for cash upon consummation of such initial business
combinations even when a vote is not required by law, we intend
to consummate our initial business combination and conduct the
redemptions without stockholder vote pursuant to
Rule 13e-4
and Regulation 14E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, which regulate issuer tender
offers, and will file tender offer documents with the Securities
and Exchange Commission, or the SEC. The tender offer documents
will contain substantially the same financial and other
information about the initial business combination and the
redemption rights as is required under Regulation 14A of
the Exchange Act, which regulates the solicitation of proxies.
If, however, a stockholder vote is required by law, or we decide
to hold a stockholder vote for business or other legal reasons,
we will, like other blank check companies, offer to redeem
shares in conjunction with a proxy solicitation pursuant to the
proxy rules and not pursuant to the tender offer rules. If we
seek stockholder approval, we will consummate our initial
business combination only if a majority of the outstanding
shares of common stock voted are voted in favor of the business
combination. In such case, our sponsor has agreed to vote its
founder shares (as defined below) in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination. In addition, our
sponsor has agreed to waive its redemption rights with respect
to its founder shares and public shares in connection with the
consummation of an initial business combination.
Our sponsor, officers and directors have agreed that we will
have only 21 months from the closing of this offering to
consummate our initial business combination. If we are unable to
consummate a business combination within such
21-month
period, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. Our sponsor has agreed to waive its redemption
and liquidation rights with respect to its founder shares if we
fail to consummate a business combination within the
21-month
time period, although it will be entitled to redemption and
liquidation rights with respect to any public shares it holds if
we fail to consummate a business combination within such time
period.
Private
Placements
In June 2010, our sponsor purchased an aggregate of
3,285,714 shares, which we refer to throughout this
prospectus as the founder shares, for an aggregate purchase
price of $25,000, or approximately $0.0076 per share. The
founder shares held by our sponsor include an aggregate of
428,571 shares subject to forfeiture to the extent that the
underwriters over-allotment option is not exercised in
full, so that our sponsor will own 12.5% of our issued and
outstanding shares after this offering (assuming our sponsor
does not purchase units
4
in this offering). In addition, a portion of the founders shares
in an amount equal to 2.5% of our issued and outstanding shares
after this offering, which we refer to as founder earnout shares
throughout this prospectus, will be subject to forfeiture by our
sponsor in the event the last sales price of our stock does not
equal or exceed $12.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the
like) for any 20 trading days within any 30-trading day period
within one year following the closing of our initial business
combination.
The founder shares are identical to the shares of common stock
included in the units being sold in this offering except that:
(i) the founder shares are subject to certain transfer
restrictions, as described in more detail below, and
(ii) our sponsor has agreed (A) to waive its
redemption rights with respect to its founder shares and public
shares it in connection with the consummation of a business
combination and (B) to waive its redemption and liquidation
rights with respect to its founder shares if we fail to
consummate a business combination within 21 months from the
closing of this offering, although it will be entitled to
redemption and liquidation rights with respect to any public
shares it holds if we fail to consummate a business combination
within such time period. If we submit our initial business
combination to our public stockholders for a vote, our sponsor
has agreed to vote its founder shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination. Our sponsor has
agreed not to transfer, assign or sell any of the founder shares
until (i) one year after the completion of our initial
business combination or earlier if, subsequent to our business
combination, the last sales price of our common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing
at least 150 days after our initial business combination or
(ii) we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction which results in all of
our stockholders having the right to exchange their shares of
common stock for cash, securities or other property (except as
described below under Principal Stockholders
Transfers of Common Stock and Warrants by Our Sponsor and
Mr. Hicks).
In addition, our sponsor has committed to purchase an aggregate
of 6,666,667 sponsor warrants at a price of $0.75 per warrant
($5.0 million in the aggregate) in a private placement that
will occur simultaneously with the closing of this offering.
Each sponsor warrant entitles the holder to purchase one share
of our common stock at $12.00 per share. The $5.0 million
proceeds from the private placement of the sponsor warrants will
be added to the proceeds of this offering and placed in a trust
account at JP Morgan Chase, N.A. with Continental Stock
Transfer & Trust Company, as trustee. If we do
not complete an initial business combination within
21 months from the closing of this offering, the
$5.0 million proceeds from the sale of the sponsor warrants
will be used to fund the redemption of our public shares, and
the sponsor warrants will expire worthless.
The sponsor warrants are identical to the warrants included in
the units sold in this offering except that the sponsor
warrants: (i) will not be redeemable by us so long as they
are held by our sponsor or any of its permitted transferees,
(ii) will be subject to certain transfer restrictions
described in more detail below and (iii) may be exercised
for cash or on a cashless basis, as described in this
prospectus. Our sponsor has agreed not to transfer, assign or
sell any of the sponsor warrants, including the common stock
issuable upon exercise of the sponsor warrants (except as
described below under Principal Stockholders
Transfers of Common Stock and Warrants by Our Sponsor and
Mr. Hicks), until 30 days after the completion
of our initial business combination.
Our executive offices are located at 100 Crescent Court,
Suite 1200, Dallas, Texas, 75201, and our telephone number
is
(214) 615-2300.
5
The
Offering
In making your decision on whether to invest in our
securities, you should take into account not only the
backgrounds of the members of our management team, but also the
special risks we face as a blank check company and the fact that
this offering is not being conducted in compliance with
Rule 419 promulgated under the Securities Act of 1933, as
amended, or the Securities Act. You will not be entitled to
protections normally afforded to investors in Rule 419
blank check offerings. You should carefully consider these and
the other risks set forth in the section below entitled
Risk Factors beginning on page 21 of this
prospectus.
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Securities offered |
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20,000,000 units, at $10.00 per unit, each unit consisting
of: |
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one share of common stock; and
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one warrant.
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Trading commencement and separation of common stock and
warrants |
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The units will begin trading on or promptly after the date of
this prospectus. The common stock and warrants comprising the
units will begin separate trading on the 52nd day following the
date of this prospectus unless Citigroup Global Markets Inc.
informs us of its decision to allow earlier separate trading,
subject to our having filed the Current Report on
Form 8-K
described below and having issued a press release announcing
when such separate trading will begin. |
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Separate trading of the common stock and warrants is
prohibited until we have filed a Current Report on
Form 8-K |
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In no event will the common stock and warrants be traded
separately until we have filed a Current Report on
Form 8-K
with the SEC containing an audited balance sheet reflecting our
receipt of the gross proceeds of this offering. We will file the
Current Report on
Form 8-K
upon the consummation of this offering, which is anticipated to
take place three business days from the date of this prospectus.
If the over-allotment option is exercised following the initial
filing of such Current Report on
Form 8-K,
a second or amended Current Report on
Form 8-K
will be filed to provide updated financial information to
reflect the exercise of the over-allotment option. |
Units:
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Number outstanding before this
offering |
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0 |
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Number outstanding after this offering |
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20,000,000
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Common
stock:
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Number outstanding before this offering |
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3,285,714(1)(2)
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Number outstanding after this offering |
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22,857,143(2)(3)
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(1) |
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This number includes an aggregate of 428,571 founder shares held
by our sponsor that are subject to forfeiture to the extent that
the over-allotment option is not exercised by the underwriters. |
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(2) |
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This number includes a portion of the founder shares in an
amount equal to 2.5% of our issued and outstanding shares after
this offering that are subject to forfeiture by our sponsor in
the event the last sales price of our stock does not equal or
exceed $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period within one
year following the closing of our initial business combination. |
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(3) |
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Assumes no exercise of the over-allotment option and the
resulting forfeiture of 428,571 founder shares. |
6
Warrants:
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Number of sponsor warrants to be sold
simultaneously with closing of this offering |
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6,666,667
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Number of warrants to be outstanding after
this offering and the private placement |
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26,666,667
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Exercisability |
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Each warrant offered in this offering is exercisable to purchase
one share of our common stock. |
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Exercise price |
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$12.00 per share, subject to adjustments as described herein. |
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Exercise period |
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The warrants will become exercisable on the later of: |
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30 days after the completion of our initial
business combination, or
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12 months from the closing of this offering;
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provided in each case that we have an effective registration
statement under the Securities Act covering the shares of common
stock issuable upon exercise of the warrants and a current
prospectus relating to them is available. |
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We are not registering the shares of common stock issuable upon
exercise of the warrants at this time. However, we have agreed
to use our best efforts to file and have an effective
registration statement covering the shares of common stock
issuable upon exercise of the warrants as of the date the
warrants become exercisable and to maintain a current prospectus
relating to those shares of common stock until the warrants
expire or are redeemed. |
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The warrants will expire at 5:00 p.m., New York time, five
years after the completion of our initial business combination
or earlier upon redemption. On the exercise of any warrant, the
warrant exercise price will be paid directly to us and not
placed in the trust account. |
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Redemption of warrants |
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Once the warrants become exercisable, we may redeem the
outstanding warrants (except as described below with respect to
the sponsor warrants): |
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in whole and not in part;
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at a price of $.01 per warrant;
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upon a minimum of 30 days prior written
notice of redemption (the
30-day
redemption period); and
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if, and only if, the last sale price of our common
stock equals or exceeds $18.00 per share for any 20 trading days
within a 30 trading day period ending three business days before
we send the notice of redemption to the warrant holders.
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We will not redeem the warrants unless an effective registration
statement covering the shares of common stock issuable upon
exercise of the warrants is current and available throughout the
30-day
redemption period. |
7
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If we call the warrants for redemption as described above, our
management will have the option to require all holders that wish
to exercise warrants to do so on a cashless basis.
In such event, each holder would pay the exercise price by
surrendering the warrants for that number of shares of common
stock equal to the quotient obtained by dividing (x) the
product of the number of shares of common stock underlying the
warrants, multiplied by the difference between the exercise
price of the warrants and the fair market value
(defined below) by (y) the fair market value. The
fair market value shall mean the average reported
last sale price of the common stock for the 10 trading days
ending on the third trading day prior to the date on which the
notice of redemption is sent to the holders of warrants. |
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None of the sponsor warrants will be redeemable by us so long as
they are held by our sponsor or its permitted transferees. |
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Reasons for redemption limitations on warrants |
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We have established the above conditions to our exercise of
redemption rights to: |
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provide warrant holders with adequate notice of
redemption;
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permit redemption only after the then-prevailing
common stock price is substantially above the warrant exercise
price; and
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ensure a sufficient differential between the
then-prevailing common stock price and the warrant exercise
price so there is a buffer to absorb the market reaction, if
any, to our redemption of the warrants.
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If the foregoing conditions are satisfied and we issue a notice
of redemption, each warrant holder can exercise his, her or its
warrant prior to the scheduled redemption date. However, the
price of the common stock may fall below the $18.00 trigger
price as well as the $12.00 warrant exercise price after the
redemption notice is issued. |
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Proposed OTCBB symbols |
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Units:
Common Stock:
Warrants:
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Founder shares |
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In June 2010, our sponsor purchased an aggregate of 3,285,714
founder shares for an aggregate purchase price of $25,000, or
approximately $0.0076 per share. The founder shares held by our
sponsor include an aggregate of 428,571 shares subject to
forfeiture to the extent that the underwriters
over-allotment option is not exercised in full, so that our
sponsor will own 12.5% of our issued and outstanding shares
after this offering (assuming our sponsor does not purchase
units in this offering). If the number of units we offer to the
public is increased or decreased, a share dividend or a
contribution back to capital, as applicable, would be
effectuated in order to maintain our sponsors share
ownership at 12.5% of our issued and outstanding shares after
giving effect to this offering and the increase or decrease, if
any, in the number of units offered hereby. In addition, the
founder earnout shares (equal to 2.5% of our issued and
outstanding shares after this offering) will be subject |
8
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to forfeiture by our sponsor in the event the last sales price
of our stock does not equal or exceed $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period within one year following the closing
of our initial business combination. |
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The founder shares are identical to the shares of common stock
included in the units being sold in this offering, except that: |
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the founder shares are subject to certain transfer
restrictions, as described in more detail below, and
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our sponsor has agreed (i) to waive its
redemption rights with respect to its founder shares and public
shares in connection with the consummation of a business
combination and (ii) to waive its redemption and
liquidation rights with respect to its founder shares if we fail
to consummate a business combination within 21 months from
the closing of this offering (although it will be entitled to
redemption and liquidation rights with respect to any public
shares it holds if we fail to consummate a business combination
within such time period).
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If we submit our initial business combination to our public
stockholders for a vote, our sponsor has agreed to vote its
founder shares in accordance with the majority of the votes cast
by the public stockholders and to vote any public shares
purchased during or after the offering in favor of our initial
business combination. |
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Transfer restrictions on founder shares |
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Our sponsor has agreed not to transfer, assign or sell any of
the founder shares until (i) one year after the completion
of our initial business combination or earlier if, subsequent to
our business combination, the last sales price of our common
stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day
period commencing at least 150 days after our initial
business combination or (ii) we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction
which results in all of our stockholders having the right to
exchange their shares of common stock for cash, securities or
other property (except as described below under Principal
Stockholders Transfers of Common Stock and Warrants
by Our Sponsor and Mr. Hicks). |
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Sponsor warrants |
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Our sponsor has committed to purchase 6,666,667 sponsor
warrants, each exercisable to purchase one share of our common
stock at $12.00 per share, at a price of $0.75 per warrant
($5.0 million in the aggregate) in a private placement that
will occur simultaneously with the closing of this offering. The
purchase price of the sponsor warrants will be added to the
proceeds from this offering to be held in the trust account. If
we do not complete a business combination within 21 months
from the closing of this offering, the proceeds of the sale of
the sponsor warrants will used to fund the redemption of our
public shares (subject to the requirements of applicable law),
and the sponsor warrants will expire worthless. |
9
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Transfer restrictions on sponsor warrants |
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The sponsor warrants (including the common stock issuable upon
exercise of the sponsor warrants) will not be transferable,
assignable or salable until 30 days after the completion of
our initial business combination and they will be non-redeemable
so long as they are held by the sponsor or its permitted
transferees (except as described below under Principal
Stockholders Transfers of Common Stock and Warrants
by Our Sponsor and Mr. Hicks). If the sponsor
warrants are held by holders other than the sponsor or its
permitted transferees, the sponsor warrants will be redeemable
by us and exercisable by the holders on the same basis as the
warrants included in the units being sold in this offering.
Otherwise, the sponsor warrants have terms and provisions that
are identical to those of the warrants being sold as part of the
units in this offering, except that such warrants may be
exercised by the holders on a cashless basis. |
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Exercise of sponsor warrants |
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Our sponsor and its permitted transferees will be entitled to
exercise the sponsor warrants as described above for cash or on
a cashless basis using the same formula that would apply to
other warrant holders if they were required to exercise their
warrants on a cashless basis. |
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Registration rights |
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Concurrently with the issuance and sale of securities in this
offering, we will enter into a registration rights agreement
with our sponsor with respect to our securities held by it from
time to time. The registration rights agreement will provide
that, in certain instances, the holders of the founder shares
and sponsor warrants may require us to register any of our
securities held by them on a registration statement filed under
the Securities Act, provided that such registration statement
would not become effective until termination of the applicable
lock-up
period, which occurs (i) in the case of the founder shares,
(A) one year after the completion of our initial business
combination or earlier if, subsequent to our business
combination, the last sales price of our common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period
commencing at least 150 days after our initial business
combination or (B) when we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction
which results in all of our stockholders having the right to
exchange their shares of common stock for cash, securities or
other property and (ii) in the case of the sponsor warrants
and the respective common stock underlying such warrants,
30 days after the completion of our initial business
combination. We will bear the expenses incurred in connection
with filing any such registration statements. |
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Proceeds to be held in trust account |
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$197.0 million, or approximately $9.85 per unit of the
proceeds of this offering and the proceeds of the private
placement of the sponsor warrants ($226.25 million, or
approximately $9.83 per unit, if the underwriters
over-allotment option is exercised in full) will be placed in a
segregated trust account at JP Morgan Chase, N.A., maintained by
Continental Stock Transfer & Trust Company, as |
10
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trustee. These proceeds include approximately $5.0 million
(or approximately $5.75 million if the underwriters
over-allotment option is exercised in full) in deferred
underwriting commissions. |
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If we elect to increase the initial amount held in the trust
account from approximately $9.85 per unit, such increase would
be funded by an increase in the amount of the deferral of the
underwriting commissions payable in connection with this
offering, an increase in the number of sponsor warrants to be
purchased by our sponsor at a price of $0.75 per warrant and /or
a reduction from $1,250,000 of the amount initially available to
us for working capital that is not held in the trust account.
Public stockholders would own a smaller percentage of our
outstanding common stock on a fully diluted basis to the extent
that our sponsor purchases additional warrants. |
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Except for a portion of the interest income that may be released
to us to pay any income or franchise taxes on such interest and
to fund our working capital requirements, and any amounts
necessary to purchase up to 15% of our public shares, as
discussed below, none of the funds held in trust will be
released from the trust account until the earlier of
(i) the completion of our initial business combination or
(ii) the redemption of 100% of our public shares if we are
unable to consummate a business combination within
21 months from the closing of this offering (subject to the
requirements of law). The proceeds deposited in the trust
account could become subject to the claims of our creditors, if
any, which could have priority over the claims of our public
stockholders. |
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None of the warrants may be exercised until 30 days after
the consummation of our business combination and, thus, after
the funds in the trust account have been disbursed. Accordingly,
the warrant exercise price will be paid directly to us and not
placed in the trust account. |
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Anticipated expenses and funding sources |
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Unless and until we complete our initial business combination,
no proceeds held in the trust account, other than up to
$3.0 million, subject to adjustment as described below, of
the interest earned on the trust account (net of accrued and
unpaid taxes payable on such interest), and any amounts
necessary to purchase up to 15% of our public shares will be
available for our use and we may pay our expenses only from: |
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such interest; and
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the net proceeds of this offering not held in the
trust account, which will be $1.25 million in working
capital after the payment of approximately $1.75 million in
expenses relating to this offering.
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In the event that our offering expenses are in excess of
$1.75 million, we may fund such amounts out of the
$1.25 million not to be held in the trust account. In such
case, the amount not held in the trust account would be less
than $1.25 million by a corresponding amount. Conversely,
in the event that the offering expenses are less |
11
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than $1.75 million, the $1.25 million not held in the
trust account would increase by a corresponding amount. |
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If the size of this offering is increased or decreased, it could
result in a proportionate increase or decrease in the amount of
interest we may withdraw from the trust account. Assuming a 20%
increase in the size of this offering, the per share redemption
or liquidation amount could decrease by as much as approximately
$0.02 (or $0.03 if the underwriters over-allotment option
is exercised in full). |
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In addition, in order to finance transaction costs in connection
with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be
required. If we consummate an initial business combination, we
would repay such loaned amounts. In the event that the initial
business combination does not close, we may use a portion of the
working capital held outside the trust account to repay such
loaned amounts but no proceeds from our trust account would be
used for such repayment. Such loans may be convertible into
warrants of the post business combination entity at a price of
$0.75 per warrant at the option of the lender. The warrants
would be identical to the sponsor warrants. The terms of such
loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such
loans. |
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We believe that, on the date of this prospectus, the funds
available to us outside of the trust account, plus the interest
earned on the funds held in the trust account that may be
available to us and amounts that may be loaned to us by our
sponsor or an affiliate of our sponsor or certain of our
officers or directors, will be sufficient to allow us to operate
for at least the next 21 months, assuming that our initial
business combination is not consummated during that time. Over
this time period, we will use these funds to identify and
evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices,
plants or similar locations of prospective target businesses or
their representatives or owners, review corporate documents and
material agreements of prospective target businesses, and
structure, negotiate and consummate a business combination. |
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Conditions to consummating our initial business
combination |
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There is no limitation on our ability to raise funds privately
or through loans in connection with our initial business
combination. Because, unlike other blank check companies, we do
not have the limitation that a target business have a minimum
fair market enterprise value of the net assets held in the trust
account at the time of our signing a definitive agreement in
connection with our initial business combination, our management
will have virtually unrestricted flexibility in identifying and
selecting one or more prospective target businesses. We will
consummate our initial business combination only if we will
become the controlling stockholder of the target or are
otherwise not required to register as an investment company
under the Investment Company Act. |
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While we do not intend to pursue an initial business combination
with any company that is affiliated with our sponsor, officers
or directors, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial
business combination with such a company, we would obtain an
opinion from an independent investment banking firm which is a
member of FINRA that such an initial business combination is
fair to our stockholders from a financial point of view. |
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Permitted purchases of shares |
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If we seek stockholder approval of our initial business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules,
prior to the consummation of a business combination, there could
be released to us from the trust account amounts necessary to
purchase up to 15% of the shares sold in this offering
(3,000,000 shares, or 3,450,000 shares if the
over-allotment option is exercised in full) at any time
commencing after the filing of a preliminary proxy statement for
our initial business combination and ending on the record date
for the stockholder meeting to approve the initial business
combination. Purchases will be made only in open market
transactions at times when we are not in possession of any
material non-public information and may not be made during a
restricted period under Regulation M under the Exchange
Act. It is intended that purchases will comply with
Rule 10b-18
under the Exchange Act, at prices (inclusive of commissions) not
to exceed the per-share amount then held in the trust account
(approximately $9.85 per share or approximately $9.83 per share
if the over-allotment option is exercised in full). We can
purchase any or all of the 3,000,000 shares (or
3,450,000 shares if the over-allotment option is exercised
in full) we are entitled to purchase. It will be entirely in our
discretion as to how many shares are purchased. Purchasing
decisions will be made based on various factors, including the
then current market price of our common stock and the terms of
the proposed business combination. All shares purchased by us
will be immediately cancelled. |
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Redemption rights for public stockholders upon consummation
or our initial business combination |
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We will provide our stockholders with the opportunity to redeem
their public shares for cash equal to their pro rata share of
the aggregate amount then on deposit in the trust account, less
accrued and unpaid taxes and deferred underwriting commissions,
upon the consummation of our initial business combination,
subject to the limitations described herein. The amount in the
trust account is initially anticipated to be approximately $9.85
per share (or approximately $9.83 per share if the
over-allotment option is exercised in full), or approximately
$0.15 less than the
per-unit
offering price of $10.00 (approximately $0.17 less if the
over-allotment option is exercised in full). There will be no
redemption rights upon the consummation of our initial business
combination with respect to our warrants. Unlike other blank
check companies that hold stockholder votes and conduct proxy
solicitations in conjunction with their business combinations
and provide for related redemptions of public shares for cash
upon consummation of such initial business |
13
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combinations even when a vote is not required by law, we intend
to consummate our initial business combination and conduct the
redemptions without a stockholder vote pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act, which regulate
issuer tender offers, and file tender offer documents with the
SEC. The tender offer documents will contain substantially the
same financial and other information about the initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
business or other legal reasons, we will, like other blank check
companies, offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If we seek stockholder approval, we will
consummate our initial business combination only if a majority
of the outstanding shares of common stock voted are voted in
favor of the business combination. |
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Traditionally, blank check companies would not be able to
consummate a business combination if the holders of the
companys public shares voted against a proposed business
combination and elected to redeem or convert more than a
specified percentage of the shares sold in such companys
initial public offering, which percentage threshold is typically
between 19.99% and 39.99%. As a result, many blank check
companies have been unable to complete business combinations
because the amount of shares voted by their public stockholders
electing conversion exceeded the maximum conversion threshold
pursuant to which such company could proceed with a business
combination. Since we have no redemption threshold, our
structure is different in this respect from the structure that
has been used by most blank check companies. |
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Redemption payments if we hold a stockholder vote |
|
If we hold a stockholder vote to approve our initial business
combination, public stockholders electing to exercise their
redemption rights will be entitled to receive cash equal to
their pro rata share of the aggregate amount then on deposit in
the trust account, including any amounts representing interest
earned on the trust account, less accrued and unpaid taxes and
deferred underwriting commissions. If our initial business
combination is not completed, then public stockholders electing
to exercise their redemption rights will not be entitled to
receive such payments. |
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Private transactions if we hold a stockholder vote |
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If we hold a stockholder vote to approve our initial business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules, we
may enter into privately negotiated transactions to purchase,
with proceeds from our trust account, public shares from
stockholders upon consummation of the initial business
combination. Our sponsor, directors, officers, advisors or their
affiliates may also purchase shares in privately negotiated
transactions. Neither we nor our directors, officers, advisors
or their affiliates will make any such purchases when we or they
are in possession of any material non- |
14
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public information not disclosed to the seller. Although we do
not currently anticipate paying any premium purchase price for
such public shares, in the event we do, the payment of a premium
may not be in the best interest of those stockholders not
receiving any such additional consideration. In addition, the
payment of a premium by us may not be in the best interest of
the remaining stockholders, who will experience a reduction in
book value per share compared to the value received by
stockholders that have their shares purchased by us at a premium. |
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10% limitation on redemption rights if we hold stockholder
vote |
|
Notwithstanding the foregoing redemption rights, if we hold a
stockholder vote to approve our initial business combination and
we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, our amended and
restated certificate of incorporation provides that a public
stockholder, together with any affiliate of such stockholder or
any other person with whom such stockholder is acting in concert
or as a group (as defined under Section 13 of
the Exchange Act), will be restricted from redeeming its shares
with respect to more than an aggregate of 10% of the shares sold
in this offering. We believe this restriction will discourage
stockholders from accumulating large blocks of shares, and
subsequent attempts by such holders to use their ability to
redeem their shares as a means to force us or our management to
purchase their shares at a significant premium to the
then-current market price or on other undesirable terms. Absent
this provision, a public stockholder holding more than an
aggregate of 10% of the shares sold in this offering could
threaten to exercise its redemption rights if such holders
shares are not purchased by us or our management at a premium to
the then-current market price or on other undesirable terms. By
limiting our stockholders ability to redeem no more than
10% of the shares sold in this offering, we believe we will
limit the ability of a small group of stockholders to
unreasonably attempt to block our ability to consummate a
business combination, particularly in connection with a business
combination with a target that requires as a closing condition
that we have a minimum net worth or a certain amount of cash.
However, we would not be restricting our stockholders
ability to vote all of their shares for or against a business
combination. |
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Right of first review |
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In order to minimize potential conflicts of interest that may
arise from multiple corporate affiliations, each of our officers
has agreed, pursuant to a written agreement with us, that until
the earliest of our initial business combination, our
liquidation or such time as he or she ceases to be an officer,
to present to us for our consideration, prior to presentation to
any other entity, any business opportunity with an enterprise
value of $100 million or more, subject to any pre-existing
fiduciary or contractual obligations he or she might have. If
any of our officers becomes aware of a business combination
opportunity that falls within the line of business of any entity
to which he or she has pre-existing fiduciary or contractual
obligations, he or she may be required to present such business
combination opportunity to such entity prior to presenting such
business combination opportunity to us. All of our officers |
15
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currently have certain relevant fiduciary duties or contractual
obligations that may take priority over their duties to us. |
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Release of funds in trust account on closing of our initial
business combination |
|
On the closing of our initial business combination, all amounts
held in the trust account will be released to us. We will use
these funds to pay amounts due to any public stockholders who
exercise their redemption rights and to pay the underwriters
their deferred underwriting commissions. Funds released from the
trust account to us can be used to pay all or a portion of the
purchase price of the business or businesses we acquire in our
initial business combination. If our initial business
combination is paid for using stock or debt securities, or not
all of the funds released from the trust account are used for
payment of the purchase price in connection with our business
combination, we may apply the cash released to us from the trust
account that is not applied to the purchase price for general
corporate purposes, including for maintenance or expansion of
operations of acquired businesses, the payment of principal or
interest due on indebtedness incurred in consummating the
initial business combination, to fund the purchase of other
companies or for working capital. |
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Redemption of common stock and distribution and liquidation
if no initial business combination |
|
Our sponsor, officers and directors have agreed that we will
have only 21 months from the closing of this offering to
consummate our initial business combination. If we are unable to
consummate a business combination within such
21-month
period, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. There will be no redemption rights or
liquidating distributions with respect to our warrants, which
will expire worthless if we fail to consummate a business
combination within the
21-month
time period. |
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Our sponsor has waived its redemption and liquidation rights
with respect to its founder shares if we fail to consummate an
initial business combination within 21 months from the
closing of this offering. However, if our sponsor, or any of our
officers, directors or affiliates acquires public shares in or
after this offering, they will be entitled to redemption and
liquidation rights with respect to such |
16
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public shares if we fail to consummate a business combination
within the required time period. |
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The distribution of our assets in contemplation of liquidation
must provide for all claims against us to be paid in full or for
us to make provision for payments to be made in full, as
applicable, if there are sufficient assets. These claims must be
paid or provided for before we make any distribution of our
remaining assets to our stockholders. We cannot assure you that
we will have access to funds sufficient to pay or provide for
all creditors claims. |
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Although we will seek to have all vendors, service providers
(other than our independent accountants), prospective target
businesses or other entities with which we do business enter
into 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. It is also
possible that such waiver agreements would be held
unenforceable, and there is no guarantee that the third parties
would not otherwise challenge the agreements and later bring
claims against the trust account for amounts owed them. In
addition, there is no 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. Mr. Hicks, our founder and chairman of the board,
has agreed that he will be liable to us if and to the extent any
claims by a vendor for services rendered or products sold to us,
or a prospective target business with which we have discussed
entering into a transaction agreement reduce the amounts in the
trust account to below $9.85 per share (or approximately $9.83
per share if the underwriters over-allotment option is
exercised in full), except as to any claims by a third party who
executed a waiver of any and all rights to seek access to the
trust account and except as to any claims under our indemnity of
the underwriters of this offering against certain liabilities,
including liabilities under the Securities Act. In the event
that an executed waiver is deemed to be unenforceable against a
third party, Mr. Hicks will not be responsible to the
extent of any liability for such third party claims. |
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After distributing the proceeds of our trust account pursuant to
the redemption of our public shares as described in this
prospectus, we will promptly distribute the balance of our net
assets, if any, to the public stockholders, subject to and in
accordance with, a plan of dissolution adopted by our board of
directors and remaining stockholders. We expect that all costs
and expenses associated with implementing our plan of
dissolution, as well as payments to any creditors, will be
funded from amounts remaining out of the $1.25 million of
proceeds held outside the trust account and from the up to
$3.0 million, subject to adjustment, in interest income on
the balance of the trust account (net of accrued and unpaid
taxes payable on such interest) that may be available to us to
fund our working capital requirements, although we cannot assure
you that there will be sufficient funds for such purpose.
However, if those |
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funds are not sufficient to cover the costs and expenses
associated with implementing our plan of dissolution, to the
extent that there is any interest accrued in the trust account
not required to pay income taxes on interest income earned on
the trust account balance, we may request the trustee to release
to us an additional amount of up to $100,000 of such accrued
interest to pay those costs and expenses. |
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The underwriters have agreed to waive their rights to their
deferred underwriting commission held in the trust account in
the event we do not consummate a business combination within
21 months from the closing of this offering and in such
event, such amounts will be included with the funds held in the
trust account that will be available to fund the redemption of
our public shares. |
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Limited payments to insiders |
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There will be no finders fees, reimbursements or cash
payments made to our sponsor, officers, directors, or our or
their affiliates for services rendered to us prior to or in
connection with the consummation of our initial business
combination, other than: |
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Repayment of a $225,000 loan made to us by
Mr. Hicks to cover offering-related and organizational
expenses;
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A payment of an aggregate of $10,000 per month to
Hicks Holdings Operating LLC, an affiliate of Mr. Hicks,
for office space, secretarial and administrative services;
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Reimbursement for any
out-of-pocket
expenses related to identifying, investigating and consummating
an initial business combination, provided that no proceeds of
this offering held in the trust account may be applied to the
payment of such expenses prior to the consummation of a business
combination, except to the extent paid out of up to
$3.0 million, subject to adjustment, of interest earned on
the trust account that may be released to us to fund working
capital requirements; and
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Repayment of loans made by our sponsor or an
affiliate of our sponsor or certain of our officers and
directors to finance transaction costs in connection with an
intended initial business combination, provided that if we do
not consummate an initial business combination, we may use a
portion of the working capital held outside the trust account to
repay such loaned amounts but no proceeds from our trust account
would be used for such repayment. Such loans may be convertible
into warrants of the post business combination entity at a price
of $0.75 per warrant at the option of the lender. The warrants
would be identical to the sponsor warrants. The terms of such
loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such
loans.
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Our independent directors will review on a quarterly basis all
payments that were made to our sponsor, officers, directors or
our or their affiliates. |
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Determination of offering amount |
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In determining the size of this offering, our management
concluded, based on their collective experience, that an
offering of this size, together with the proceeds of the sponsor
warrants, would |
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provide us with sufficient equity capital to execute our
business plan. We believe that this amount of equity capital,
plus our ability to finance an acquisition using stock or debt
in addition to the cash held in the trust account, will give us
substantial flexibility in selecting an acquisition target and
structuring our initial business combination. This belief is not
based on any research, analysis, evaluations, discussions, or
compilations of information with respect to any particular
investment or any such action undertaken in connection with our
organization. We cannot assure you that our belief is correct,
that we will be able to successfully identify acquisition
candidates, or that we will be able to obtain any necessary
financing. |
Risks
We are a newly formed company that has conducted no operations
and has generated no revenues. Until we complete our initial
business combination, we will have no operations and will
generate no operating revenues. In making your decision whether
to invest in our securities, you should take into account not
only the background of our management team, but also the special
risks we face as a blank check company. This offering is not
being conducted in compliance with Rule 419 promulgated
under the Securities Act. Accordingly, you will not be entitled
to protections normally afforded to investors in Rule 419
blank check offerings. For additional information concerning how
Rule 419 blank check offerings differ from this offering,
please see Proposed Business Comparison of
This Offering to Those of Blank Check Companies Subject to
Rule 419. You should carefully consider these and the
other risks set forth in the section entitled Risk
Factors beginning on page 21 of this prospectus.
19
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.
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June 16, 2010
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Actual
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As Adjusted
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Balance Sheet Data:
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Working capital (deficiency)
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$
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(85,000
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)
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$
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193,270,000
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Total assets
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$
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355,000
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$
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198,270,000
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Total liabilities
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$
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335,000
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$
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5,000,000
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Stockholders equity(1)
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$
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20,000
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$
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193,270,000
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(1) |
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Includes shares subject to redemption rights in connection with
our successful consummation of our initial business combination. |
The as adjusted information gives effect to the sale
of the units in this offering, the sale of the sponsor warrants,
repayment of the $225,000 loan made to us by Mr. Hicks, our
founder and chairman of the board, and the payment of the
estimated expenses of this offering. The as adjusted
total assets amount includes the $197,000,000 held in the trust
account for the benefit of our public stockholders, which
amount, less deferred underwriting commissions, will be
available to us only upon the consummation of a business
combination within 21 months from the closing of this
offering. The as adjusted working capital and
as adjusted total assets include approximately
$5.0 million being held in the trust account (approximately
$5.75 million if the underwriters over-allotment
option is exercised in full) representing deferred underwriting
commissions.
If no business combination is consummated within 21 months
from the closing of this offering, the proceeds held in the
trust account, including the deferred underwriting commissions
and all interest thereon, net of accrued and unpaid income and
franchise taxes on such interest, up to $100,000 of such net
interest to pay dissolution expenses, any interest income
released to us to fund our working capital requirements and any
amounts released to purchase up to 15% of our public shares, as
described in this prospectus, will be used to fund the
redemption of our public shares. Our sponsor has agreed to waive
its redemption and liquidation rights with respect to its
founder shares if we fail to consummate a business combination
within such
21-month
time period.
20
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. If any of the following events occur, our business,
financial condition and operating results may be materially
adversely affected. In that event, the trading price of our
securities could decline, and you could lose all or part of your
investment. This prospectus also contains forward-looking
statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the
forward-looking statements as a result of specific factors,
including the risks described below.
We are
a newly formed development stage company with no operating
history and no revenues, and you have no basis on which to
evaluate our ability to achieve our business
objective.
We are a recently formed development stage company with no
operating results, and we will not commence operations until
obtaining funding through this offering. Because we lack an
operating history, you have no basis upon which to evaluate our
ability to achieve our business objective of completing our
initial business combination with one or more target businesses.
We have no plans, arrangements or understandings with any
prospective target business concerning a business combination
and may be unable to complete a business combination. If we fail
to complete a business combination, we will never generate any
operating revenues.
The
report of KPMG LLP, our independent registered public accounting
firm, says that we may be unable to continue as a going
concern.
We have no revenues from our operations and our viability as a
going concern depends on our ability to consummate this offering
successfully. The report of KPMG LLP, our independent registered
public accountants, on our financial statements includes an
explanatory paragraph stating that our business plan is
dependent upon our obtaining adequate financing which raises
substantial doubt about our ability to continue as a going
concern. The financial statements do not include any adjustments
that might result from our inability to consummate this offering
or our ability to continue as a going concern.
Our
public stockholders may not be afforded an opportunity to vote
on our proposed business combination, unless such vote is
required by law.
We may not hold a stockholder vote before we consummate our
initial business combination unless the business combination
would require stockholder approval under applicable state law or
if we decide to hold a stockholder vote for business or other
legal reasons. Accordingly, we may consummate our initial
business combination even if holders of a majority of our public
shares do not approve of the business combination we consummate.
Your
only opportunity to affect the investment decision regarding a
potential business combination will be limited to the exercise
of your right to redeem your shares from us for cash, unless we
seek stockholder approval of the business
combination.
At the time of your investment in us, you will not be provided
with an opportunity to evaluate the specific merits or risks of
one or more target businesses. Since our board of directors may
consummate a business combination without seeking stockholder
approval, public stockholders may not have the right or
opportunity to vote on the business combination, unless we seek
such stockholder vote. Accordingly, your only opportunity to
affect the investment decision regarding a potential business
combination may be limited to exercising your redemption rights
within the period of time set forth in our tender offer
documents mailed to our public stockholders in which we describe
our business combination. In addition, we may enter into a
transaction agreement with a prospective target that requires as
a closing condition that we have a minimum net worth or a
certain amount of cash. If too many stockholders exercise their
redemption rights, we may not be able to meet such closing
condition, and as a result, would not be able to proceed with
the business
21
combination. In such case, we would not proceed with the
redemption of our public shares and instead may search for an
alternate business combination.
The
ability of a larger number of our stockholders to exercise
redemption rights may not allow us to consummate the most
desirable business combination or optimize our capital
structure.
If our business combination requires us to use substantially all
of our cash to pay the purchase price, because we will not know
how many stockholders may exercise such redemption rights, we
may either need to reserve part of the trust account for
possible payment upon such redemption, or we may need to arrange
third party financing to help fund our business combination in
case a larger percentage of stockholders exercise their
redemption rights than we expect. If the acquisition involves
the issuance of our stock as consideration, we may be required
to issue a higher percentage of our stock to the target or its
stockholders to make up for the failure to satisfy a minimum
cash requirement. Raising additional funds to cover any
shortfall may involve dilutive equity financing or incurring
indebtedness at higher than desirable levels. This may limit our
ability to effectuate the most attractive business combination
available to us.
We may
not be able to consummate a business combination within
21 months from the closing of this offering, in which case
we would cease all operations except for the purpose of winding
up and we would redeem our public shares and
liquidate.
Our sponsor, officers and directors have agreed that we must
complete our initial business combination within 21 months
from the closing of this offering. If we have not consummated a
business combination within such
21-month
period, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. We may not be able to find suitable target
businesses within such time period. In addition, our negotiating
position and our ability to conduct adequate due diligence on
any potential target may be reduced as we approach the deadline
for the consummation of our initial business combination.
If we
are unable to complete our initial business combination within
the prescribed time frame, our public stockholders will receive
less than $10.00 per share on our redemption and our warrants
will expire worthless.
If we are unable to complete our initial business combination
within the prescribed time frame and are forced to cease
operations and ultimately liquidate, the per-share redemption
amount received by stockholders will be less than $10.00 because
of the expenses of this offering, our general and administrative
expenses and the anticipated costs of seeking our initial
business combination. If we were unable to conclude our initial
business combination and expended all of the net proceeds of
this offering, other than the proceeds deposited in the trust
account, and without taking into account interest, if any,
earned on the trust account, net of income taxes payable on such
interest and net of up to $3.0 million, subject to
adjustment, in interest income on the trust account balance
previously released to us to fund working capital requirements,
the per-share redemption amount received by stockholders would
be $9.85, or $0.15 less than the
per-unit
offering price of $10.00 (or $9.83, or $0.17 less if the
underwriters over-allotment option is exercised in full).
Furthermore, our outstanding warrants are not entitled to
participate in a liquidating distribution and the warrants will
therefore expire worthless if we liquidate before completing our
initial business combination.
22
If we
are unable to consummate our initial business combination, our
public stockholders will be forced to wait, at a minimum, the
full 21 months from the closing of this offering before
receiving distributions from the trust account.
We have until the date that is 21 months from the closing
of this offering to consummate our initial business combination.
If we are unable to consummate a business combination within
21 months from the closing of this offering, we will
(i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible, redeem 100% of
our public shares, at a per-share price, payable in cash, equal
to the aggregate amount including interest then on deposit in
the trust account, but net of any accrued and unpaid taxes (less
up to $100,000 of such net interest to pay dissolution
expenses), divided by the number of then outstanding public
shares, together with the contingent right to receive, in cash,
following our dissolution, a pro rata share of the balance of
our net assets, if any, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, dissolve
and liquidate, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. If our plan to redeem our
public shares is not consummated for any reason, compliance with
Delaware law may require that we submit a plan of dissolution to
our then-existing stockholders for approval prior to the
distribution of the proceeds held in our trust account. In that
case, investors may be forced to wait beyond 21 months
before they receive the return of their pro rata portion of the
proceeds from our trust account. Except for the above
redemption, we have no obligation to return funds to investors
prior to the date of our liquidation unless we consummate a
business combination prior thereto and only then in cases where
investors have sought to redeem their shares.
Our
purchase of common stock in the open market may support the
market price of the common stock and/or warrants during the
buyback period and, accordingly, the termination of the support
provided by such purchases may materially adversely affect the
market price of the common stock and/or warrants.
If we seek stockholder approval of our initial business
combination, prior to the consummation of a business
combination, there could be released to us from the trust
account amounts necessary to purchase up to 15% of the shares
sold in this offering (3,000,000 shares, or
3,450,000 shares if the over-allotment option is exercised
in full) at any time commencing after the filing of a
preliminary proxy statement for our initial business combination
and ending on the record date for the stockholder meeting to
approve the initial business combination. Purchases will be made
only in open market transactions at times when we are not in
possession of material non-public information and will not be
made during a restricted period under Regulation M under
the Exchange Act. Consequently, if the market does not view our
initial business combination positively, these purchases may
have the effect of counteracting the markets view of our
initial business combination, which would otherwise be reflected
in a decline in the market price of our securities. The
termination of the support provided by these purchase may
materially adversely affect the market price of our securities.
If we
seek stockholder approval of our business combination, we, our
sponsor, directors, officers, advisors and their affiliates
could affect the outcome of the consummation of our business
combination if we or they elect to purchase shares from
stockholders.
If we seek stockholder approval of our business combination and
we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, we may privately
negotiate transactions to purchase shares upon the closing of
the business combination from stockholders who would have
otherwise elected to have their shares redeemed in conjunction
with a proxy solicitation pursuant to the proxy rules. Our
sponsor, directors, officers, advisors or their affiliates may
also purchase shares in privately negotiated transactions.
Neither we nor our directors, officers, advisors or their
affiliates will make any such purchases when we or they are in
possession of any material non-public information not disclosed
to the seller. Such a purchase would include a contractual
acknowledgement that such stockholder, although still the record
holder of our shares is no longer the beneficial owner thereof
and therefore agrees not to exercise its redemption rights. In
the event that we or our sponsor, directors, officers, advisors
or their affiliates purchase shares in privately negotiated
transactions from public stockholders who have already elected
to exercise their redemption rights, such selling stockholders
would be required to revoke their prior elections to redeem
their
23
shares. Although we do not currently anticipate paying any
premium purchase price for such public shares, in the event we
do, the payment of a premium may not be in the best interest of
those stockholders not receiving any such additional
consideration. In addition, in the event we seek stockholder
approval of our business combination, we may make purchases of
our common stock, in an amount up to 15% of the shares sold in
this offering (3,000,000 shares, or 3,450,000 shares
if the overallotment option is exercised in full), in the open
market in a manner intended to comply with
Rule 10b-18
under the Exchange Act, using funds held in the trust account so
long as the price paid for such shares does not exceed the
per-share amount then held in the trust account (approximately
$9.85 per share or approximately $9.83 per share if the
over-allotment option is exercised in full).
The purpose of such purchases would be to (i) increase the
likelihood of obtaining stockholder approval of the business
combination or (ii), where the purchases are made by our
sponsor, directors, officers, advisors or their affiliates, to
satisfy a closing condition in an agreement with a target that
requires us to have a minimum net worth or a certain amount of
cash at the closing of the business combination, where it
appears that such requirement would otherwise not be met. This
may result in the consummation of a business combination that
may not otherwise have been possible. In addition, purchases in
the open market would provide liquidity to public stockholders
in advance of the closing of the business combination.
Our
purchases of common stock in the open market or in privately
negotiated transactions would reduce the funds available to us
after the business combination, may make it more difficult for
us to list our common stock on a national securities exchange,
and may have negative economic effects on stockholders from whom
we do not purchase common stock in such private or public
transactions.
If we seek stockholder approval of our business combination and
we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, we may privately
negotiate transactions to purchase shares upon the closing of
the business combination from stockholders who would have
otherwise elected to have their shares redeemed in conjunction
with a proxy solicitation pursuant to the proxy rules for a
per-share pro rata portion of the trust account. In addition, in
the event we seek stockholder approval of our business
combination, we may make purchases of our common stock, in an
amount up to 15% of the shares sold in this offering
(3,000,000 shares, or 3,450,000 shares if the
overallotment option is exercised in full), in the open market
in a manner intended to comply with
Rule 10b-18
under the Exchange Act, using funds held in the trust account so
long as the price paid for such shares does not exceed the
per-share amount then held in the trust account (approximately
$9.85 per share or approximately $9.83 per share if the
over-allotment option is exercised in full).
As a consequence of such purchases:
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the funds in our trust account that are so used will not be
available to us after the business combination;
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the public float of our common stock may be reduced
and the number of beneficial holders of our securities may be
reduced, which may make it difficult to obtain the quotation,
listing or trading of our securities on a national securities
exchange if we determine to apply for such quotation or listing
in connection with the business combination;
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because the stockholders who sell their shares in a privately
negotiated transaction or pursuant to market transactions as
described above may receive a per share purchase price payable
from the trust account that is not reduced by a pro rata share
of the deferred underwriting commissions or accrued and unpaid
taxes on the interest earned by the trust account, our remaining
stockholders may bear the entire payment of such deferred
commissions and accrued and unpaid taxes (as well as up to
$100,000 of net interest that may be released to us from the
trust account to fund our dissolution expenses in the event we
do not complete our initial business combination within
21 months for the closing of this offering). That is, if we
seek stockholder approval of our initial business combination,
the redemption price per share payable to public stockholders
who elect to have their shares redeemed will be reduced by a
larger percentage of the deferred underwriting commissions and
accrued and unpaid taxes than it would have been in the absence
of such privately negotiated or market transactions, and
stockholders
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who do not elect to have their shares redeemed and remain our
stockholders after the business combination will bear the
economic burden of the deferred commissions and accrued and
unpaid income taxes because such amounts will be payable by
us; and
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the payment of any premium would result in a reduction in book
value per share for the remaining stockholders compared to the
value received by stockholders that have their shares purchased
by us at a premium.
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You
will not have any rights or interests in funds from the trust
account, except under certain limited
circumstances.
Our public stockholders will be entitled to receive funds from
the trust account only upon the earlier to occur of:
(i) our consummation of an initial business combination,
and then only in connection with those shares of our common
stock that such stockholder properly elected to redeem, subject
to the restrictions described in this prospectus or
(ii) the redemption of our public shares, if we are unable
to consummate an initial business combination, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes, divided by the number of then
outstanding public shares, subject to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. In no other circumstances
will a stockholder have any right or interest of any kind in the
trust account.
We do
not intend to establish an audit committee or a compensation
committee until the consummation of an initial business
combination.
Our board of directors intends to establish an audit committee
and a compensation committee upon consummation of an initial
business combination. At that time our board of directors
intends to adopt charters for these committees. Prior to such
time we do not intend to establish either committee.
Accordingly, there will not be a separate committee comprised of
some members of our board of directors with specialized
accounting and financial knowledge to meet, analyze and discuss
solely financial matters concerning prospective target
businesses nor will there be a separate committee to review the
reasonableness of expense reimbursement requests by anyone other
than our board of directors, which includes persons who may seek
such reimbursements.
Our
securities will be quoted on the
Over-the-Counter
Bulletin Board quotation system, which will limit the
liquidity and price of our securities more than if our
securities were quoted or listed on the Nasdaq Stock Market or
another national securities exchange.
Our units, common stock and warrants will be traded in the
over-the-counter
market and will be quoted on the
Over-the-Counter
Bulletin Board quotation system, or the OTCBB, which is a
FINRA-sponsored and operated inter-dealer automated quotation
system for equity securities not included in the Nasdaq Stock
Market. Quotation of our securities on the OTCBB will limit the
liquidity and price of our securities more than if our
securities were quoted or listed on the Nasdaq Stock Market or a
national securities exchange. Lack of liquidity will limit the
price at which you may be able to sell our securities or your
ability to sell our securities at all.
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 an initial 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 our securities will be quoted on
the OTCBB, we will have net tangible assets in excess of
$5.0 million upon the successful consummation of this
offering and will file a Current Report on
Form 8-K,
including an audited balance sheet demonstrating this fact, we
are exempt from rules promulgated by the SEC to protect
investors in blank check companies, such as Rule 419.
Accordingly, investors will not be afforded the benefits or
protections of those rules. Among other things, this means our
units will be immediately tradable and we will have a longer
period of time to complete a business
25
combination than do companies subject to Rule 419.
Moreover, offerings subject to Rule 419 would prohibit the
release of any interest earned on funds held in the trust
account to us and the release of funds to us to purchase up to
15% of our public shares unless and until the funds in the trust
account were released to us in connection with our consummation
of an initial business combination. However, if upon the
redemption of our public shares other than upon our winding up
if we have not completed a business combination within
21 months from the closing of this offering we do not have
net tangible assets in excess of $5.0 million, we may be
deemed a blank check company subject to Rule 419. For a
more detailed comparison of our offering to offerings that
comply with Rule 419, please see Proposed
Business Comparison of This Offering to Those of
Blank Check Companies Subject to Rule 419.
Because
of our limited resources and the significant competition for
business combination opportunities, it may be more difficult for
us to complete a business combination.
We expect to encounter intense competition from other entities
having a business objective similar to ours, including private
investors (which may be individuals or investment partnerships),
other blank check companies and other entities, domestic and
international, competing for the types of businesses we intend
to acquire. Many of these individuals and entities are
well-established and have extensive experience in identifying
and effecting, directly or indirectly, acquisitions of companies
operating in or providing services to various industries. Many
of these competitors possess greater technical, human and other
resources, or more local industry knowledge than we do and our
financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe there
are numerous target businesses we could potentially acquire with
the net proceeds of this offering, our ability to compete with
respect to the acquisition of certain target businesses that are
sizable will be limited by our available financial resources.
This inherent competitive limitation gives others an advantage
in pursuing the acquisition of certain target businesses.
Furthermore, if we are obligated to pay cash for the shares of
common stock redeemed and, in the event we seek stockholder
approval of our business combination, we make purchases of our
common stock in the open market in a manner intended to comply
with
Rule 10b-18
under the Exchange Act using available funds from the trust
account, then the resources available to us for a business
combination may be reduced. Any of these obligations may place
us at a competitive disadvantage in successfully negotiating a
business combination.
If the
net proceeds of this offering not being held in the trust
account, together with the up to $3.0 million, subject to
adjustment, of interest in the trust account (net of accrued and
unpaid taxes payable on such interest) which may be released to
us for working capital purposes, are insufficient to allow us to
operate for at least the next 21 months, we may be unable
to complete our initial business combination.
We believe that, upon closing of this offering, the funds
available to us outside of the trust account, plus the interest
earned on the funds held in the trust account that may be
available to us, will be sufficient to allow us to operate for
at least the next 21 months, assuming that our initial
business combination is not consummated during that time.
However, we cannot assure you that our estimate will be
accurate. We could use a portion of the funds available to us to
pay fees to consultants to assist us with our search for a
target business. We could also use a portion of the funds as a
down payment or to fund a no-shop provision (a
provision in letters of intent designed to keep target
businesses from shopping around for transactions
with other companies on terms more favorable to such target
businesses) with respect to a particular proposed business
combination, although we do not have any current intention to do
so. If we entered into a letter of intent where we paid for the
right to receive exclusivity from a target business and were
subsequently required to forfeit such funds (whether as a result
of our breach or otherwise), we might not have sufficient funds
to continue searching for, or conduct due diligence with respect
to, a target business.
26
The
current low interest rate environment could limit the amount
available to fund our search for a target business or businesses
and complete our initial business combination since we will
depend on interest earned on the trust account to fund our
search, to pay our accrued and unpaid taxes and to complete our
initial business combination.
Of the net proceeds of this offering, only $1.25 million
will be available to us initially outside the trust account to
fund our working capital requirements. In the event that our
offering expenses are in excess of $1.75 million, we may
fund such amounts out of the $1.25 million not to be held
in the trust account. In such case, the amount not held in the
trust account would be less than $1.25 million by a
corresponding amount. Conversely, in the event that the offering
expenses are less than $1.75 million, the
$1.25 million not held in the trust account would increase
by a corresponding amount. We will depend on sufficient interest
being earned on the proceeds held in the trust account to
provide us with up to $3.0 million, subject to adjustment,
of additional working capital we may need to identify one or
more target businesses and to complete our initial business
combination, as well as to pay any accrued and unpaid taxes that
we may owe. The current low interest rate environment may make
it more difficult for us to have sufficient funds available to
structure, negotiate or close our initial business combination.
In such event, we would need to borrow funds from our sponsor or
management team to operate or may be forced to liquidate.
Neither our sponsor nor our management team is under any
obligation to advance funds to us in such circumstances.
Subsequent
to our consummation of our initial business combination, we may
be required to subsequently take write-downs or write-offs,
restructuring and impairment or other charges that could have a
significant negative effect on our financial condition, results
of operations and our stock price, which could cause you to lose
some or all of your investment.
Even if we conduct extensive due diligence on a target business
with which we combine, we cannot assure you that this diligence
will surface all material issues that may be present inside a
particular target business, that it would be possible to uncover
all material issues through a customary amount of due diligence,
or that factors outside of the target business and outside of
our control will not later arise. As a result of these factors,
we may be forced to later write-down or write-off assets,
restructure our operations, or incur impairment or other charges
that could result in our reporting losses. Even if our due
diligence successfully identifies certain risks, unexpected
risks may arise and previously known risks may materialize in a
manner not consistent with our preliminary risk analysis. Even
though these charges may be non-cash items and not have an
immediate impact on our liquidity, the fact that we report
charges of this nature could contribute to negative market
perceptions about us or our securities. In addition, charges of
this nature may cause us to violate net worth or other covenants
to which we may be subject as a result of assuming pre-existing
debt held by a target business or by virtue of our obtaining
post-combination debt financing.
If the
size of the offering is increased, it could result in a
proportionate increase or decrease in the amount of interest we
may withdraw from the trust account, which will reduce the
per-share amount payable to our public stockholders upon our
liquidation or their exercise of redemption
rights.
If the size of this offering is increased, it could result in a
proportionate increase in the amount of interest we may withdraw
from the trust account, which will reduce the per-share amount
payable to our public stockholders upon our liquidation or their
exercise of redemption rights. Assuming a 20% increase in the
size of this offering, the per share redemption or liquidation
amount could decrease by as much as approximately $0.02 (or
$0.03 if the underwriters over-allotment option is
exercised in full).
If
third parties bring claims against us, the proceeds held in the
trust account could be reduced and the per-share redemption
amount received by stockholders may be less than approximately
$9.85 per share.
Our placing of funds in the trust account may not protect those
funds from third party claims against us. Although we will seek
to have all vendors, service providers (other than our
independent accountants), prospective target businesses or other
entities with which we do business 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, such parties may not execute such
agreements, or even if they execute such agreements
27
they may not be prevented from bringing claims against the trust
account, including, but not limited to, fraudulent inducement,
breach of fiduciary responsibility or other similar claims, as
well as claims challenging the enforceability of the waiver, in
each case in order to gain advantage with respect to a claim
against our assets, including the funds held in the trust
account. If any third party refuses to execute an agreement
waiving such claims to the monies held in the trust account, our
management will perform an analysis of the alternatives
available to it and will only enter into an agreement with a
third party that has not executed a waiver if management
believes that such third partys engagement would be
significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third party
that refuses to execute a waiver include the engagement of a
third party consultant whose particular expertise or skills are
believed by management to be significantly superior to those of
other consultants that would agree to execute a waiver or in
cases where management is unable to find a service provider
willing to execute a waiver. In addition, there is no 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. Upon
redemption of our public shares, if we are unable to complete a
business combination within the required time frame, or upon the
exercise of a redemption right in connection with a business
combination, we will be required to provide for payment of
claims of creditors that were not waived that may be brought
against us within the 10 years following redemption.
Accordingly, the per-share redemption amount received by
stockholders could be less than the $9.85 per share held in the
trust account, including interest but net of any accrued and
unpaid taxes (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full),
due to claims of such creditors. Mr. Hicks, our founder and
chairman of the board, has agreed that he will be liable to us
if and to the extent any claims by a vendor for services
rendered or products sold to us, or a prospective target
business with which we have discussed entering into a
transaction agreement, reduce the amounts in the trust account
to below $9.85 per share except as to any claims by a third
party who executed a waiver of any and all rights to seek access
to the trust account and except as to any claims under our
indemnity of the underwriters of this offering against certain
liabilities, including liabilities under the Securities Act.
Moreover, in the event that an executed waiver is deemed to be
unenforceable against a third party, Mr. Hicks will not be
responsible to the extent of any liability for such third party
claims. However, we have not asked Mr. Hicks to reserve for
such indemnification obligations and we cannot assure you that
Mr. Hicks would be able to satisfy those obligations.
Additionally, if we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed,
the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority
over the claims of our stockholders. To the extent any
bankruptcy claims deplete the trust account, we may not be able
to return $9.85 per share to our public stockholders.
Our
directors may decide not to enforce Mr. Hicks
indemnification obligations, resulting in a reduction in the
amount of funds in the trust account available for distribution
to our public stockholders.
In the event that the proceeds in the trust account are reduced
below $9.85 per share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full)
and Mr. Hicks asserts that he is unable to satisfy his
obligations or that he has no indemnification obligations
related to a particular claim, our independent directors would
determine whether to take legal action against Mr. Hicks to
enforce their indemnification obligations. While we currently
expect that our independent directors would take legal action on
our behalf against Mr. Hicks to enforce his indemnification
obligations to us, it is possible that our independent directors
in exercising their business judgment may choose not to do so in
any particular instance. If our directors choose not to enforce
these indemnification obligations, the amount of funds in the
trust account available for distribution to our public
stockholders may be reduced below $9.85 per share.
28
If we
are deemed to be an investment company under the Investment
Company Act, 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, our activities may be restricted,
including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities,
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each of which may make it difficult for us to complete a
business combination.
In addition, we may have imposed upon us burdensome
requirements, including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy and disclosure
requirements and other rules and regulations.
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We do not believe that our anticipated principal activities will
subject us to the Investment Company Act. The proceeds held in
the trust account may be invested by the trustee only in
U.S. government treasury bills with a maturity of
180 days or less or in money market funds meeting certain
conditions under
Rule 2a-7
under the Investment Company Act. Because the investment of the
proceeds will be restricted to these instruments, we believe we
will meet the requirements for the exemption provided in
Rule 3a-1
promulgated under the Investment Company Act. If we were deemed
to be subject to the Investment Company Act, compliance with
these additional regulatory burdens would require additional
expenses for which we have not allotted funds.
Changes
in laws or regulations, or a failure to comply with any laws and
regulations, may adversely affect our business, investments and
results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments. In particular, upon admission,
we will be required to comply with certain SEC and other legal
requirements. Compliance with, and monitoring of, applicable
laws and regulations may be difficult, time consuming and
costly. Those laws and regulations and their interpretation and
application may also change from time to time and those changes
could have a material adverse effect on our business,
investments and results of operations. In addition, a failure to
comply with applicable laws or regulations, as interpreted and
applied, by any of the persons referred to above could have a
material adverse effect on our business and results of
operations.
Our
stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them upon
redemption of their shares.
Our sponsor, officers and directors have agreed that we will
have only 21 months from the closing of this offering to
consummate our initial business combination. If we are unable to
consummate a business combination within such
21-month
period, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. Under the DGCL, stockholders may be held liable
for claims by third parties against a corporation to the extent
of distributions received by them pursuant to a dissolution, and
the redemption of our public shares may be deemed a liquidating
distribution. If a corporation complies with certain procedures
set forth in Section 280 of the DGCL intended to ensure
that it
29
makes reasonable provision for all claims against it, including
a 60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. Because we will not be complying with certain
procedures set forth in Section 280 of the DGCL, as set
forth above, a stockholder who received distributions in the
redemption may be liable for the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder until the third anniversary of
the dissolution.
We do
not currently intend to hold an annual meeting of stockholders
until after our consummation of a business
combination.
We do not currently intend to hold an annual meeting of
stockholders until after we consummate a business combination,
and thus may not be in compliance with Section 211(b) of
the DGCL, which requires an annual meeting of stockholders be
held for the purposes of electing directors in accordance with a
companys bylaws unless such election is made by written
consent in lieu of such a meeting. Therefore, if our
stockholders want us to hold an annual meeting prior to our
consummation of a business combination, they may attempt to
force us to hold one by submitting an application to the
Delaware Court of Chancery in accordance with
Section 211(c) of the DGCL.
In
certain circumstances, our board of directors may be viewed as
having breached its fiduciary duty to our creditors, thereby
exposing it and us to claims of punitive damages.
If we file a bankruptcy petition or an involuntary bankruptcy
petition is filed against us that is not dismissed, any
distributions received by stockholders could be viewed under
applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders. Furthermore, because we intend to redeem our
public shares for a per-share pro rata portion of the trust
account in the event we do not consummate a business combination
within 21 months from the closing of this offering, this
may be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access
to or distributions from our assets. Furthermore, our board of
directors may be viewed as having breached its fiduciary duty to
our creditors
and/or
having acted in bad faith, thereby exposing itself and us to
claims of punitive damages, by paying public stockholders from
the trust account prior to addressing the claims of creditors.
We are
not registering the shares of common stock issuable upon
exercise of the warrants at this time. Although we have agreed
to file a registration statement registering such shares prior
to the time the warrants become exercisable, an effective
registration statement may not be in place when an investor
desires to exercise warrants, thus precluding such investor from
being able to exercise its warrants and causing such warrants to
expire worthless.
No warrant held by a public stockholder will be exercisable and
we will not be obligated to issue shares of common stock unless,
at the time such holder seeks to exercise such warrant, we have
a registration statement under the Securities Act in effect
covering the shares of common stock issuable upon the exercise
of the warrants and a current prospectus relating to the common
stock. Under the terms of the warrant agreement, we have agreed
to use our best efforts to file and have a registration
statement in effect covering shares of common stock issuable
upon exercise of the warrants from the date the warrants became
exercisable and to maintain a current prospectus relating to the
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, and if we do not maintain a current
prospectus related to the common stock issuable upon exercise of
the warrants, holders will be unable to exercise their warrants
and we will not be required to settle any such warrant exercise,
whether by net cash settlement or otherwise. If the prospectus
relating to the common stock issuable upon the exercise of the
warrants is not current, the warrants held by public
stockholders may have no value, we will have no
30
obligation to settle the warrants for cash, the market for such
warrants may be limited, such warrants may expire worthless and,
as a result, an investor may have paid the full unit price
solely for the shares of common stock included in the units.
The
grant of registration rights to our sponsor may make it more
difficult to complete our initial business combination, and the
future exercise of such rights may adversely affect the market
price of our common stock.
Pursuant to an agreement to be entered into concurrently with
the issuance and sale of the securities in this offering, our
sponsor and its permitted transferees can demand that we
register the founder shares and the sponsor warrants, and the
shares of common stock issuable upon exercise of the sponsor
warrants. The registration rights will be exercisable with
respect to the founder shares and the sponsor warrants and the
shares of common stock issuable upon exercise of such sponsor
warrants. We will bear the cost of registering these securities.
The registration and availability of such a significant number
of securities for trading in the public market may have an
adverse effect on the market price of our common stock. In
addition, the existence of the registration rights may make our
initial business combination more costly or difficult to
conclude. This is because the stockholders of the target
business may increase the equity stake they seek in the combined
entity or ask for more cash consideration to offset the negative
impact on the market price of our common stock that is expected
when the securities owned by our sponsor are registered.
An
investor will only be able to exercise a warrant if the issuance
of common stock upon such exercise has been registered or
qualified or is deemed exempt under the securities laws of the
state of residence of the holder of the warrants.
No warrants will be exercisable and we will not be obligated to
issue shares of common stock unless the common stock issuable
upon such exercise 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. However, some states may not permit
us to register the shares issuable upon exercise of our warrants
for sale. The value of the warrants will be greatly reduced if
the securities are not qualified, or exempt from qualification,
in the states in which the holders of warrants reside. We have
no obligation to issue, cash, securities or other compensation
in exchange for the warrants in the event that we are unable to
register the shares underlying the warrants under applicable
state securities laws, and the warrants may expire unexercised
and unredeemed. Holders of warrants who reside in jurisdictions
in which the shares underlying the warrants are not qualified
and in which there is no exemption will be unable to exercise
their warrants and would either have to sell their warrants in
the open market or allow them to expire unexercised. In such
event, holders who acquired their warrants as part of a purchase
of units will have paid the full unit purchase price solely for
the shares underlying the units. If and when the warrants become
redeemable by us, we may exercise our redemption right even if
we are unable to qualify the underlying securities for sale
under all applicable state securities laws.
Since
we have not yet selected a particular industry or target
business with which to complete our initial business
combination, you will be unable to currently ascertain the
merits or risks of the industry or business in which we may
ultimately operate.
We may consummate our initial business combination with a
company in any industry and are not limited to any particular
type of business. Accordingly, there is no current basis for you
to evaluate the possible merits or risks of the particular
industry in which we may ultimately operate or the target
business which we may ultimately acquire. To the extent we
complete our initial business combination with a financially
unstable company or an entity in its development stage, we may
be affected by numerous risks inherent in the business
operations of those entities. If we complete our initial
business combination with an entity in an industry characterized
by a high level of risk, we may be affected by the currently
unascertainable risks of that industry. Although our management
will endeavor to evaluate the risks inherent in a particular
industry or target business, we cannot assure you that we will
properly ascertain or assess all of the significant risk
factors. Even if we properly assess those risks, some of them
may be outside of our control or ability to affect.
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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.
Unlike
most other blank check companies, we are not required to acquire
a target with a valuation equal to a certain percentage of the
amount held in the trust account. Managements unrestricted
flexibility in identifying and selecting a prospective
acquisition candidate, along with our managements
financial interest in consummating an initial business
combination, may lead management to enter into an acquisition
agreement that is not in the best interest of our
stockholders.
Most blank check companies are required to consummate their
initial business combination with a target whose value is equal
to at least 80% of the amount of money held in the trust account
of the blank check company at the time of entry into a
definitive agreement for a business combination. Because we do
not have the requirement that a target business have a minimum
fair market enterprise value equal to a certain percentage of
the net assets held in the trust account at the time of our
signing a definitive agreement in connection with our initial
business combination, we will have virtually unrestricted
flexibility in identifying and selecting a prospective
acquisition candidate. Investors will be relying on
managements ability to identify business combinations,
evaluate their merits, conduct or monitor diligence and conduct
negotiations. In addition, we may consummate a business
combination with a target whose enterprise value is
significantly less than the amount of money held in the trust
account, thereby resulting in our ability to use the remaining
funds in the trust account to make additional acquisitions
without seeking stockholder approval or providing redemption
rights. Managements unrestricted flexibility in
identifying and selecting a prospective acquisition candidate,
along with managements financial interest in consummating
an initial business combination, may lead management to enter
into an acquisition agreement that is not in the best interest
of our stockholders.
We are
not required to obtain an opinion from an independent investment
banking firm that the price we are paying for the business is
fair to our stockholders.
Unless we consummate a business combination with an affiliated
entity, we are not required to obtain an opinion from an
independent investment banking firm that the price we are paying
is fair to our stockholders. If no opinion is obtained, our
stockholders will be relying on the judgment of our board of
directors.
We may
issue additional common or preferred shares to complete our
initial business combination or under an employee incentive plan
after consummation of our initial business combination, which
would dilute the interest of our stockholders and likely present
other risks.
Our amended and restated certificate of incorporation authorizes
the issuance of up to 500,000,000 shares of common stock,
par value $0.0001 per share, and 1,000,000 shares of
preferred stock, par value $0.0001 per share. Immediately after
this offering, there will be 501,000,000 (assuming that the
underwriters have not exercised their over-allotment option)
authorized but unissued shares of common stock available for
issuance. We may issue a substantial number of additional shares
of common or preferred stock to complete our initial business
combination or under an employee incentive plan after
consummation of our initial business combination. The issuance
of additional shares of common or preferred stock:
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may significantly dilute the equity interest of investors in
this offering;
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may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
our common stock;
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could cause a change in control if a substantial number of
common stock is issued, which may affect, among other things,
our ability to use our net operating loss carry forwards, if
any, and could result in the resignation or removal of our
present officers and directors; and
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may adversely affect prevailing market prices for our common
stock and/or
warrants.
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Resources
could be wasted in researching acquisitions that are not
consummated, which could materially adversely affect subsequent
attempts to locate and acquire or merge with another
business.
It is anticipated that the investigation of each specific target
business and the negotiation, drafting, and execution of
relevant agreements, disclosure documents, and other instruments
will require substantial management time and attention and
substantial costs for accountants, attorneys and others. If a
decision is made not to complete a specific initial business
combination, the costs incurred up to that point for the
proposed transaction likely would not be recoverable.
Furthermore, even if an agreement is reached relating to a
specific target business, we may fail to consummate our initial
business combination for any number of reasons including those
beyond our control. Any such event will result in a loss to us
of the related costs incurred which could materially adversely
affect subsequent attempts to locate and acquire or merge with
another business. In addition, the event we seek stockholder
approval of our business combination and we do not conduct
redemptions in connection with our business combination pursuant
to the tender offer rules, we may make purchases of our common
stock, in an amount up to 15% of the shares sold in this
offering, in the open market in a manner intended to comply with
Rule 10b-18
under the Exchange Act. If such business combination is not
consummated, these purchases would have the effect of reducing
the funds available in the trust account for future business
combinations.
The
requirement that we complete a business combination within
21 months from the closing of this offering may give
potential target businesses leverage over us in negotiating a
business combination.
If we have not consummated a business combination within
21 months from the closing of this offering, we will
(i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible, redeem 100% of
the common stock sold as part of the units in this offering,
which we refer to throughout this prospectus as our public
shares, at a per-share price, payable in cash, equal to the
aggregate amount, including interest then on deposit in the
trust account but net of any accrued and unpaid taxes (less up
to $100,000 of such net interest to pay dissolution expenses),
divided by the number of then outstanding public shares,
together with the contingent right to receive, in cash,
following our dissolution, a pro rata share of the balance of
our net assets, if any, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, dissolve
and liquidate, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. Any potential target
business with which we enter into negotiations concerning a
business combination will be aware of this requirement.
Consequently, such target businesses may obtain leverage over us
in negotiating a business combination, knowing that if we do not
complete a business combination with that particular target
business, we may be unable to complete a business combination
with any target business. This risk will increase as we get
closer to the timeframe described above.
We are
dependent upon Mr. Hicks and his loss could adversely
affect our ability to operate.
Our operations are dependent upon a relatively small group of
individuals and, in particular, upon our founder and chairman of
the board, Mr. Hicks. We believe that our success depends
on the continued service of Mr. Hicks, at least until we
have consummated a business combination. In addition,
Mr. Hicks is not required to commit any specified amount of
time to our affairs and, accordingly, will have conflicts of
interest in allocating management time among various business
activities, including identifying potential business
combinations and monitoring the related due diligence. We do not
have an employment agreement with, or key-man insurance on the
life of, Mr. Hicks. The unexpected loss of the services of
Mr. Hicks could have a detrimental effect on us.
Our
ability to successfully effect our initial business combination
and to be successful thereafter will be totally dependent upon
the efforts of our key personnel, some of whom may join us
following our initial business combination.
Our ability to successfully effect our initial business
combination is dependent upon the efforts of our key personnel.
The role of our key personnel in the target business, however,
cannot presently be ascertained. Although some of our key
personnel may remain with the target business in senior
management or advisory positions following a business
combination, it is likely that some or all of the management of
the target
33
business will remain in place. While we intend to closely
scrutinize any individuals we engage after a business
combination, we cannot assure you that our assessment of these
individuals will prove to be correct. These individuals may be
unfamiliar with the requirements of operating a company
regulated by the SEC, which could cause us to have to expend
time and resources helping them become familiar with such
requirements.
Our
key personnel may negotiate employment or consulting agreements
with a target business in connection with a particular business
combination. These agreements may provide for them to receive
compensation following a business combination and as a result,
may cause them to have conflicts of interest in determining
whether a particular business combination is the most
advantageous.
Our key personnel may be able to remain with the company after
the consummation of a business combination only if they are able
to negotiate employment or consulting agreements in connection
with the business combination. Such negotiations would take
place simultaneously with the negotiation of the business
combination and could provide for such individuals to receive
compensation in the form of cash payments
and/or our
securities for services they would render to us after the
consummation of the business combination. The personal and
financial interests of such individuals may influence their
motivation in identifying and selecting a target business.
However, we believe the ability of such individuals to remain
with us after the consummation of a business combination will
not be the determining factor in our decision as to whether or
not we will proceed with any potential business combination.
There is no certainty, however, that any of our key personnel
will remain with us after the consummation of a business
combination. We cannot assure you that any of our key personnel
will remain in senior management or advisory positions with us.
The determination as to whether any of our key personnel will
remain with us will be made at the time of our initial business
combination.
The
officers and directors of an acquisition candidate may resign
upon consummation of a business combination.
The role of an acquisition candidates key personnel upon
the consummation of a business combination cannot be ascertained
at this time. Although we contemplate that certain members of an
acquisition candidates management team will remain
associated with the acquisition candidate following a business
combination, it is possible that members of the management of an
acquisition candidate will not wish to remain in place.
Our
officers and directors will allocate their time to other
businesses thereby causing conflicts of interest in their
determination as to how much time to devote to our affairs. This
conflict of interest could have a negative impact on our ability
to consummate a business combination.
Our officers and directors are not required to commit their full
time to our affairs, which could create a conflict of interest
when allocating their time between our operations and their
other commitments. We do not intend to have any full time
employees prior to the consummation of a business combination.
All of our executive officers are engaged in several other
business endeavors and are not obligated to devote any specific
number of hours to our affairs. If our officers and
directors other business affairs require them to devote
more substantial amounts of time to such affairs, it could limit
their ability to devote time to our affairs and could have a
negative impact on our ability to consummate a business
combination. We cannot assure you that these conflicts will be
resolved in our favor.
Certain
of our officers and directors are now, and all of them may in
the future become, affiliated with entities engaged in business
activities similar to those intended to be conducted by us and,
accordingly, may have conflicts of interest in allocating their
time and determining to which entity a particular business
opportunity should be presented.
Certain of our officers and directors are now, and all of them
may in the future become, affiliated with entities, engaged in
business activities similar to those intended to be conducted by
us. In order to minimize potential conflicts of interest that
may arise from multiple corporate affiliations, each of our
officers has agreed, pursuant to a written agreement with us,
that until the earliest of our initial business combination, our
liquidation or such time as he or she ceases to be an officer,
to present to us for our consideration, prior to presentation to
34
any other entity, any business opportunity with an enterprise
value of $100 million or more, subject to any pre-existing
fiduciary or contractual obligations he or she might have. All
of our officers currently have certain relevant fiduciary duties
or contractual obligations that may take priority over their
duties to us.
In addition, our officers may become involved with subsequent
blank check companies similar to our company, although they have
agreed not to participate in the formation of, or become an
officer or director of, any blank check company that is not
limited to a particular industry until we have entered into a
definitive agreement regarding our initial business combination
or we have failed to complete our initial business combination
within 21 months from the closing of this offering. Our
officers may become aware of business opportunities which may be
appropriate for presentation to us and the other entities to
which they owe certain fiduciary duties. Accordingly, they may
have conflicts of interest in determining to which entity a
particular business opportunity should be presented. We cannot
assure you that these conflicts will be resolved in our favor or
that a potential target business would not be presented to
another entity prior to its presentation to us.
Our
officers, directors, security holders and their respective
affiliates may have competitive pecuniary interests that
conflict with our interests.
We have not adopted a policy that expressly prohibits our
directors, officers, security holders or affiliates from having
a direct or indirect pecuniary interest in any investment to be
acquired or disposed of by us or in any transaction to which we
are a party or have an interest. Nor do we have a policy that
expressly prohibits any such persons from engaging for their own
account in business activities of the types conducted by us.
Accordingly, such persons or entities may have a conflict
between their interests and ours.
Since
our sponsor will lose its entire investment in us if a business
combination is not consummated and our officers and directors
have significant financial interests in us, a conflict of
interest may arise in determining whether a particular
acquisition target is appropriate for our initial business
combination.
In June 2010, our sponsor purchased an aggregate of 3,285,714
founder shares for an aggregate purchase price of $25,000, or
approximately $0.0076 per share (which includes up to
428,571 shares that are subject to forfeiture to the extent
that the over-allotment option is not exercised in full by the
underwriters) that will be worthless if we do not consummate a
business combination. Our sponsor has committed to purchase
6,666,667 sponsor warrants, each exercisable for one share of
our common stock at $12.00 per share, for a purchase price of
$5.0 million, or $0.75 per warrant, that will also be
worthless if we do not consummate a business combination. In
addition, the founder earnout shares (equal to 2.5% of our
issued and outstanding shares after this offering) will be
subject to forfeiture by our sponsor in the event the last sales
price of our stock does not equal or exceed $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period within one year following the closing
of our initial business combination. The personal and financial
interests of our officers and directors may influence their
motivation in identifying and selecting a target business
combination and completing an initial business combination.
Consequently, the discretion of our officers and directors in
identifying and selecting a suitable target business combination
may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular initial
business combination are appropriate and in the best interest of
our public stockholders.
We may
issue notes or other debt securities, or otherwise incur
substantial debt, to complete a business combination, which may
adversely affect our leverage and financial
condition.
Although we have no commitments as of the date of this
prospectus to issue any notes or other debt securities, or to
otherwise incur outstanding debt, we may choose to incur
substantial debt to complete a business combination. The
incurrence of debt could result in:
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default and foreclosure on our assets if our operating revenues
after an initial business combination are insufficient to repay
our debt obligations;
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acceleration of our obligations to repay the indebtedness even
if we make all principal and interest payments when due if we
breach certain covenants that require the maintenance of certain
financial ratios or reserves without a waiver or renegotiation
of that covenant;
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our immediate payment of all principal and accrued interest, if
any, if the debt security is payable on demand;
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our inability to obtain necessary additional financing if the
debt security contains covenants restricting our ability to
obtain such financing while the debt security is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal
and interest on our debt, which will reduce the funds available
for dividends on our common stock if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
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limitations on our flexibility in planning for and reacting to
changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation; and
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limitations on our ability to borrow additional amounts for
expenses, capital expenditures, acquisitions, debt service
requirements, execution of our strategy and other purposes and
other disadvantages compared to our competitors who have less
debt.
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We may
only be able to complete one business combination with the
proceeds of this offering, which will cause us to be solely
dependent on a single business which may have a limited number
of products or services.
The net proceeds from this offering will provide us with
approximately $197.0 million (or approximately
$226.25 million if the underwriters over-allotment
option is exercised in full) that we may use to complete a
business combination.
We may effect an initial business combination with a single
target business or multiple target businesses simultaneously.
However, we may not be able to effect a business combination
with more than one target business because of various factors,
including the existence of complex accounting issues and the
requirement that we prepare and file pro forma financial
statements with the SEC that present operating results and the
financial condition of several target businesses as if they had
been operated on a combined basis. By consummating an initial
business combination with only a single entity, our lack of
diversification may subject us to numerous economic, competitive
and regulatory developments. Further, we would not be able to
diversify our operations or benefit from the possible spreading
of risks or offsetting of losses, unlike other entities which
may have the resources to complete several business combinations
in different industries or different areas of a single industry.
Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single
business, or
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dependent upon the development or market acceptance of a single
or limited number of products, processes or services.
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This lack of diversification may subject us to numerous
economic, competitive and regulatory developments, any or all of
which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to an initial
business combination.
Alternatively, if we determine to simultaneously acquire several
businesses that are owned by different sellers, we will need for
each of such sellers to agree that our purchase of its business
is contingent on the simultaneous closings of the other business
combinations, which may make it more difficult for us, and delay
our ability, to complete the initial business combination. With
multiple business combinations, we could also face additional
risks, including additional burdens and costs with respect to
possible multiple negotiations and due diligence
36
investigations (if there are multiple sellers) and the
additional risks associated with the subsequent assimilation of
the operations and services or products of the acquired
companies in a single operating business. If we are unable to
adequately address these risks, it could negatively impact our
profitability and results of operations.
In pursuing our acquisition strategy, we may seek to effect our
initial business combination with a privately held company. By
definition, very little public information exists about private
companies, and we could be required to make our decision on
whether to pursue a potential initial business combination on
the basis of limited information.
We may
not be able to maintain control of a target business after our
initial business combination.
We may structure a business combination to acquire less than
100% of the equity interests or assets of a target business, but
we will only consummate such business combination if we will
become the controlling stockholder of the target or are
otherwise not required to register as an investment company
under the Investment Company Act. Other minority stockholders
may subsequently combine their holdings resulting in a single
person or group obtaining a larger share of the companys
stock than we initially acquired. Accordingly, this may make it
more likely that we will not be able to maintain our control of
the target business.
Unlike
other blank check companies, we do not have a maximum redemption
threshold. The absence of such a redemption threshold will make
it easier for us to consummate a business combination with which
a substantial majority of our stockholders do not
agree.
Since we have no redemption threshold, our structure is
different in this respect from the structure that has been used
by most blank check companies. Traditionally, blank check
companies would not be able to consummate a business combination
if the holders of the companys public shares voted against
a proposed business combination and elected to redeem or convert
more than a specified percentage of the shares sold in such
companys initial public offering, which percentage
threshold is typically between 19.99% and 39.99%. As a result,
many blank check companies have been unable to complete business
combinations because the amount of shares voted by their public
stockholders electing conversion exceeded the maximum conversion
threshold pursuant to which such company could proceed with a
business combination. As a result, we may be able to consummate
a business combination even though a substantial majority of our
public stockholders do not agree with the transaction and have
redeemed their shares or, if we hold a stockholder vote to
approve our initial business combination and do not conduct
redemptions in connection with our business combination pursuant
to the tender offer rules, have entered into privately
negotiated agreements to sell their shares to us or our sponsor,
officers, directors, advisors or their affiliates.
The
exercise price for the public warrants is higher than in many
similar blank check company offerings in the past, and,
accordingly, the warrants are more likely to expire
worthless.
The exercise price of the warrants is higher than is typical in
many similar blank check companies. Historically, the exercise
price of a warrant was generally a fraction of the purchase
price of the units in the initial public offering. The exercise
price for our public warrants is $12.00 per share. As a result,
the warrants are less likely to ever be in the money and more
likely to expire worthless.
In
order to effect a business combination, blank check companies
have, in the recent past, amended various provisions of their
charters and modified governing instruments. We cannot assure
you that we will not seek to amend our certificate of
incorporation or governing instruments in order to effect our
initial business combination.
In order to effect a business combination, blank check companies
have, in the recent past, amended various provisions of their
charters and modified governing instruments. For example, blank
check companies have amended the definition of business
combination, increased redemption thresholds and changed
industry focus. We cannot assure you that we will not seek to
amend our charter or governing instruments in order to effect
our initial business combination.
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Unlike
most other blank check companies, the provisions of our amended
and restated certificate of incorporation may be amended with
the approval of 65% of our stockholders.
Most blank check companies have a provision in their charter
which prohibits the amendment of certain of its provisions,
including those which relate to a companys pre-business
combination activity, without approval by a certain percentage
of the companys stockholders. Typically, amendment of
these provisions requires approval by between 90% and 100% of
the companys public stockholders. Our amended and restated
certificate of incorporation provides that any of its
provisions, including those related to pre-business combination
activity, may be amended if approved by 65% of our stockholders,
in accordance with Section 242 of the DGCL. As a result, we
may be able to amend the provisions of our amended and restated
certificate of incorporation which govern our pre-business
combination behavior more easily that other blank check
companies, and this may increase our ability to consummate a
business combination with which you do not agree.
We may
be dependent on a single business or asset that is likely to
operate in a non-diverse industry or segment and which may have
a limited number of products or services.
The prospects for our success may be solely dependent upon the
performance of a single business, property or asset that we
acquire through our initial business combination. 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.
We may
be unable to obtain additional financing to complete our initial
business combination or to fund the operations and growth of a
target business, which could compel us to restructure or abandon
a particular business combination.
Although we believe that the net proceeds of this offering,
including the interest earned on the proceeds held in the trust
account that may be available to us for a business combination,
will be sufficient to allow us to consummate our initial
business combination, because we have not yet identified any
prospective target business we cannot ascertain the capital
requirements for any particular transaction. If the net proceeds
of this offering prove to be insufficient, either because of the
size of our initial business combination, the depletion of the
available net proceeds in search of a target business, the
obligation to repurchase for cash a significant number of shares
from stockholders who elect redemption in connection with our
initial business combination or the terms of negotiated
transactions to purchase shares in connection with our initial
business combination, we will be required to seek additional
financing. We cannot assure you that such financing will be
available on acceptable terms, if at all. To the extent that
additional financing proves to be unavailable when needed to
consummate our initial business combination, we would be
compelled to either restructure the transaction or abandon that
particular initial business combination and seek an alternative
target business candidate. Even if we do not need additional
financing to consummate our initial business combination we may
require such 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
sponsor, which is an entity controlled by Thomas O. Hicks, our
founder and chairman of the board, controls a substantial
interest in us and thus may influence certain actions requiring
a stockholder vote.
Upon closing of this offering, our sponsor (an entity controlled
by Mr. Hicks) will own 12.5% of our issued and outstanding
shares of common stock (assuming it does not purchase any units
in this offering and it is not required to forfeit its founder
earnout shares, as described in this prospectus). Our board of
directors is and will be divided into three classes, each of
which will generally serve for a term of three years with only
one class of directors being elected in each year. It is
unlikely that there will be an annual meeting of stockholders to
elect new directors prior to the consummation of a business
combination, in which case all of the current directors will
continue in office until at least the consummation of the
business combination. If there is an annual meeting, as a
consequence of our staggered board of directors,
only a minority of the board of directors will be considered for
election and our sponsor, because of its ownership position,
will have considerable influence regarding the outcome.
Accordingly, our sponsor will continue to exert control at least
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until the consummation of our initial business combination.
Neither our sponsor nor, to our knowledge, any of our officers
or directors, has any current intention to purchase additional
securities, other than as disclosed in this prospectus. Factors
that would be considered in making such additional purchases
would include consideration of the current trading price of our
common stock.
Our
sponsor paid us an aggregate of $25,000, or approximately
$0.0076 per founder share 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
(allocating all of the unit purchase price to the common stock
and none to the warrant included in the unit) 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. Our sponsor acquired the founder shares at a
nominal price, significantly contributing to this dilution. Upon
closing of this offering, and assuming no value is ascribed to
the warrants included in the units, you and the other public
stockholders will incur an immediate and substantial dilution of
approximately 113.1% or $11.31 per share (the difference between
the pro forma net tangible book value per share of $(1.31) and
the initial offering price of $10.00 per unit).
We may
amend the terms of the warrants in a manner that may be adverse
to holders with the approval by the holders of at least 65% of
the then outstanding public warrants.
Our warrants will be issued in registered form under a warrant
agreement between Continental Transfer & Stock
Company, as warrant agent, and us. The warrant agreement
provides that the terms of the warrants may be amended without
the consent of any holder to cure any ambiguity or correct any
defective provision, but requires the approval by the holders of
at least 65% of the then outstanding public warrants to make any
change that adversely affects the interests of the registered
holders. Accordingly, we may amend the terms of the warrants in
a manner adverse to a holder if holders of at least 65% of the
then outstanding public warrants approve of such amendment.
We may
redeem your unexpired warrants prior to their exercise at a time
that is disadvantageous to you, thereby making your warrants
worthless.
We have the ability to redeem outstanding warrants at any time
after they become exercisable and prior to their expiration, at
a price of $0.01 per warrant, provided that the last reported
sales price of the common stock equals or exceeds $18.00 per
share for any 20 trading days within a 30
trading-day
period ending on the third business day prior to proper notice
of such redemption provided that on the date we give notice of
redemption and during the entire period thereafter until the
time we redeem the warrants, we have an effective registration
statement under the Securities Act covering the shares of common
stock issuable upon exercise of the warrants and a current
prospectus relating to them is available. Redemption of the
outstanding warrants could force you (i) to exercise your
warrants and pay the exercise price therefor at a time when it
may be disadvantageous for you to do so, (ii) to sell your
warrants at the then-current market price when you might
otherwise wish to hold your warrants or (iii) to accept the
nominal redemption price which, at the time the outstanding
warrants are called for redemption, is likely to be
substantially less than the market value of your warrants. None
of the sponsor warrants will be redeemable by us so long as they
are held by the sponsor or its permitted transferees.
Our
outstanding warrants may have an adverse effect on the market
price of our common stock and make it more difficult to effect a
business combination.
We will be issuing warrants to purchase 20,000,000 shares
of our common stock (or up to 23,000,000 shares of common
stock if the underwriters over-allotment option is
exercised) as part of the units offered by this prospectus and,
simultaneously with the closing of this offering, we will be
issuing in a private placement 6,666,667 sponsor warrants, each
exercisable to purchase one share of common stock at $12.00 per
share. The sponsor warrants are identical to the warrants sold
as part of the units in this offering except that (i) they
will not be redeemable by us so long as they are held by our
sponsor or its permitted transferees, (ii) they (including
the common stock issuable upon exercise of these warrants) may
not, subject to certain
39
limited exceptions, be transferred, assigned or sold by the
sponsor until 30 days after the completion of our initial
business combination and (iii) they may be exercised by the
holders on a cashless basis.
The
determination of the offering price of our units and the size of
this offering is more arbitrary than the pricing of securities
and size of an offering of an operating company in a particular
industry.
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
underwriters. In determining the size of this offering,
management held customary organizational meetings with
representatives of the underwriters, both prior to our inception
and thereafter, with respect to the state of capital markets,
generally, and the amount the underwriters believed they
reasonably could raise on our behalf. Factors considered in
determining the size of this offering, prices and terms of the
units, including the common stock and warrants underlying the
units, include:
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the history and prospects of companies whose principal business
is the acquisition of other companies;
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prior offerings of those companies;
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our prospects for acquiring an operating business at attractive
values;
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a review of debt to equity ratios in leveraged transactions;
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our capital structure;
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an assessment of our management and their experience in
identifying operating companies;
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general conditions of the securities markets at the time of this
offering; and
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other factors as were deemed relevant.
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Although these factors were considered, the determination of our
offering price is more arbitrary than the pricing of securities
of an operating company in a particular industry since we have
no historical operations or financial results.
There
is currently no market for our securities and a market for our
securities may not develop, which would adversely affect the
liquidity and price of our securities.
There is currently no market for our securities. Stockholders
therefore have no access to information about prior market
history on which to base their investment decision. Following
this offering, the price of our securities may vary
significantly due to our reports of operating losses, one or
more potential business combinations and general market or
economic conditions. Furthermore, an active trading market for
our securities may never develop or, if developed, it may not be
sustained. In addition, the price of our securities after the
offering may vary due to general economic conditions and
forecasts, our general business condition and the release of our
financial reports. You may be unable to sell your securities
unless a market can be established and sustained. Moreover, if
the closing of the offering does not occur the offering will be
withdrawn, all subscriptions for the units will be disregarded,
any allotments made will be deemed not to have been made and any
subscription payments made will be annulled.
Because
we must furnish our stockholders with target business financial
statements, we may not be able to complete an initial business
combination with some prospective target
businesses.
The federal proxy rules require that a proxy statement with
respect to a vote on a business combination meeting certain
financial significance tests include historical
and/or pro
forma financial statement disclosure in periodic reports. We
will include the same financial statement disclosure in
connection with our tender offer documents, whether or not they
are required under the tender offer rules. These financial
statements must be prepared in accordance with, or be reconciled
to, U.S. generally accepted accounting principles, or GAAP,
and the historical financial statements must be audited in
accordance with the standards of the Public Company Accounting
Oversight Board (United States), or PCAOB. These financial
statement requirements may limit the pool of potential target
businesses we may acquire.
40
If you
are not an institutional investor, you may purchase our
securities in this offering only if you reside within certain
states in which we will apply to have the securities registered.
Although resales of our securities are exempt from state
registration requirements, state securities commissioners who
view blank check offerings unfavorably may attempt to hinder
resales in their states.
We will offer and sell the units to retail customers only in
Colorado, Delaware, the District of Columbia, Florida, Georgia,
Hawaii, Illinois, Indiana, Louisiana, New York, Rhode Island and
Wyoming. If you are not an institutional investor,
you must be a resident of one of these jurisdictions to purchase
our securities in the offering. We may offer and sell the units
to institutional investors in every state except Idaho and
Oregon in this offering pursuant to an exemption provided for
sales to these investors under the Blue Sky laws of various
states. The definition of an institutional investor
varies from state to state but generally includes financial
institutions, broker-dealers, banks, insurance companies and
other qualified entities. Under the National Securities Markets
Improvement Act of 1996, the resale of the units and, once they
become separately transferable, the common stock and warrants
comprising the units are exempt from state registration
requirements. However, each state retains jurisdiction to
investigate and bring enforcement actions with respect to fraud
or deceit, or unlawful conduct by a broker or dealer, in
connection with the sale of securities. Although we are not
aware of a state having used these powers to prohibit or
restrict resales of securities issued by blank check companies
generally, certain state securities commissioners view blank
check companies unfavorably and might use these powers, or
threaten to use these powers, to hinder the resale of securities
of blank check companies in their state. For a complete
discussion of the Blue Sky state securities laws and
registrations affecting this offering, please see the section
entitled Underwriting State Blue Sky
Information below.
Compliance
with the Sarbanes-Oxley Act of 2002 will require substantial
financial and management resources and may increase the time and
costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, requires that we evaluate and report on our
system of internal controls and requires that we have such
system of internal controls audited beginning with our Annual
Report on
Form 10-K
for the year ending December 31, 2011. If we fail to
maintain the adequacy of our internal controls, we could be
subject to regulatory scrutiny, civil or criminal penalties
and/or
stockholder litigation. Any inability to provide reliable
financial reports could harm our business. Section 404 of
the Sarbanes-Oxley Act also requires that our independent
registered public accounting firm report on managements
evaluation of our system of internal controls. A target company
may not be in compliance with the provisions of the
Sarbanes-Oxley Act regarding adequacy of its internal controls.
The development of the internal controls of any such entity to
achieve compliance with the Sarbanes-Oxley Act may increase the
time and costs necessary to complete any such acquisition.
Furthermore, any failure to implement required new or improved
controls, or difficulties encountered in the implementation of
adequate controls over our financial processes and reporting in
the future, could harm our operating results or cause us to fail
to meet our reporting obligations. Inferior internal controls
could also cause investors to lose confidence in our reported
financial information, which could have a negative effect on the
trading price of our stock and warrants.
Provisions
in our amended and restated certificate of incorporation and
Delaware law may inhibit a takeover of us, which could limit the
price investors might be willing to pay in the future for our
common stock and could entrench management.
Our amended and restated certificate of incorporation contains
provisions that may discourage unsolicited takeover proposals
that stockholders may consider to be in their best interests.
These provisions include a staggered board of directors and the
ability of the board of directors to designate the terms of and
issue new series of preferred shares, which may make more
difficult the removal of management and may discourage
transactions that otherwise could involve payment of a premium
over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware
law, which could delay or prevent a change of control. Together
these provisions may make more difficult the removal of
management and may
41
discourage transactions that otherwise could involve payment of
a premium over prevailing market prices for our securities.
There
may be tax consequences to our business combinations that may
adversely affect us.
While we expect to undertake any merger or acquisition so as to
minimize taxes both to the acquired business
and/or asset
and us, such business combination might not meet the statutory
requirements of a tax-free reorganization, or the parties might
not obtain the intended tax-free treatment upon a transfer of
shares or assets. A non-qualifying reorganization could result
in the imposition of substantial taxes.
42
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this prospectus that are not purely
historical are forward-looking statements. Our forward-looking
statements include, but are not limited to, statements regarding
our or our managements expectations, hopes, beliefs,
intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including
any underlying assumptions, are forward-looking statements. The
words anticipate, believe,
continue, could, estimate,
expect, intends, may,
might, plan, possible,
potential, predict, project,
should, would and similar expressions
may identify forward-looking statements, but the absence of
these words does not mean that a statement is not
forward-looking. Forward-looking statements in this prospectus
may include, for example, statements about:
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our ability to complete our initial business combination;
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our success in retaining or recruiting, or changes required in,
our officers, key employees or directors following our initial
business combination;
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our officers and directors allocating their time to other
businesses and potentially having conflicts of interest with our
business or in approving our initial business combination, as a
result of which they would then receive expense reimbursements;
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our potential ability to obtain additional financing to complete
our initial business combination;
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our pool of prospective target businesses;
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the ability of our officers and directors to generate a number
of potential investment opportunities;
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our public securities potential liquidity and trading;
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the lack of a market for our securities;
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the use of proceeds not held in the trust account or available
to us from interest income on the trust account balance; or
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our financial performance following this offering.
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The forward-looking statements contained in this prospectus are
based on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no
assurance that future developments affecting us will be those
that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are
beyond our control) or other assumptions that may cause actual
results or performance to be materially different from those
expressed or implied by these forward-looking statements. These
risks and uncertainties include, but are not limited to, those
factors described under the heading Risk Factors
beginning on page 21. Should one or more of these risks or
uncertainties materialize, or should any of our assumptions
prove incorrect, actual results may vary in material respects
from those projected in these forward-looking statements. We
undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable
securities laws.
43
USE OF
PROCEEDS
We are offering 20,000,000 units at an offering price of
$10.00 per unit. We estimate that the net proceeds of this
offering, in addition to the funds we will receive from the sale
of the sponsor warrants (all of which will be deposited into the
trust account), will be as set forth in the following table.
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Without Over-
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Over-Allotment
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Allotment Option
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Option Exercised
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Gross proceeds
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Gross proceeds from units offered to public(1)
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$
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200,000,000
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$
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230,000,000
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Gross proceeds from sponsor warrants offered in the private
placement
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5,000,000
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5,000,000
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Total gross proceeds
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$
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205,000,000
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$
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235,000,000
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Offering expenses(2)
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Underwriting commissions (2.5% of gross proceeds from units
offered to public, excluding deferred portion)(3)
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$
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5,000,000
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$
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5,750,000
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Legal fees and expenses
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500,000
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500,000
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Printing and engraving expenses
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80,000
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80,000
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Accounting fees and expenses
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200,000
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200,000
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Blue Sky filing fees
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20,500
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20,500
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SEC/FINRA Expenses
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40,000
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40,000
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Miscellaneous expenses
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909,500
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909,500
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Total offering expenses
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$
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6,750,000
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$
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7,500,000
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Proceeds after offering expenses
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$
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198,250,000
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$
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227,500,000
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Held in trust account(3)
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$
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197,000,000
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$
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226,250,000
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% of public offering size
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98.5
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98.3
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Not held in trust account
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$
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1,250,000
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$
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1,250,000
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Use of net proceeds not held in trust account and up to an
additional $3.0 million, subject to adjustment, of interest
earned on our trust account (net of accrued and unpaid income
and franchise taxes payable on such interest) that may be
released to us to cover operating expenses(4)
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Amount
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% of Total
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Legal, accounting and other expenses in connection with any
business combination
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$
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1,650,000
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38.8
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%
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Legal and accounting fees related to regulatory reporting
obligations
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$
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525,000
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12.4
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%
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Payment for office space, administrative and support services
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$
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210,000
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4.9
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%
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Working capital to cover miscellaneous expenses
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$
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1,865,000
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43.9
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%
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Total
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$
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4,250,000
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100
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%
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(1) |
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Includes amounts payable to public stockholders who properly
redeem their shares in connection with our successful
consummation of our initial business combination. |
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(2) |
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In addition, a portion of the offering expenses have been paid
from the proceeds of a $225,000 loan from Mr. Hicks, as
described in this prospectus. This loan will be repaid upon
consummation of this offering out of the $1.75 million of
offering proceeds that has been allocated for the payment of
offering expenses. In the event that offering expenses are less
than set forth in this table, any such amounts will be used for
post-closing working capital expenses. |
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(3) |
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The underwriters have agreed to defer approximately
$5.0 million of their underwriting commissions (or
approximately $5.75 million if the over-allotment option is
exercised in full), which equals 2.5% of the |
44
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gross proceeds from the units offered to the public, until
consummation of initial business combination. Upon consummation
of our initial business combination, approximately
$5.0 million, which constitutes the underwriters
deferred commissions (or approximately $5.75 million if the
underwriters over allotment option is exercised in full)
will be paid to the underwriters from the funds held in the
trust account, and the remaining funds will be released to us
and can be used to pay all or a portion of the purchase price of
the business or businesses with which our initial business
combination occurs, general corporate purposes, payment of
principal or interest on indebtedness incurred in connection
with our initial business combination, to fund the purchases of
other companies or for working capital. |
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(4) |
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These expenses are estimates only. Our actual expenditures for
some or all of these items may differ from the estimates set
forth herein. For example, we may incur greater legal and
accounting expenses than our current estimates in connection
with negotiating and structuring a business combination based
upon the level of complexity of such business combination. In
the event we identify an acquisition target in a specific
industry subject to specific regulations, we may incur
additional expenses associated with legal due diligence and the
engagement of special legal counsel. In addition, our staffing
needs may vary and as a result, we may engage a number of
consultants to assist with legal and financial due diligence. We
do not anticipate any change in our intended use of proceeds,
other than fluctuations among the current categories of
allocated expenses, which fluctuations, to the extent they
exceed current estimates for any specific category of expenses,
would not be available for our expenses. The amount of interest
available to us from the trust account may be less than
$3.0 million as a result of the current interest rate
environment. |
The net proceeds held in the trust account may be used as
consideration to pay the sellers of a target business with which
we ultimately complete a business combination. If our initial
business combination is paid for using stock or debt securities,
or not all of the funds released from the trust account are used
for payment of the purchase price in connection with our
business combination, we may apply the cash released from the
trust account that is not applied to the purchase price for
general corporate purposes, including for maintenance or
expansion of operations of acquired businesses, the payment of
principal or interest due on indebtedness incurred in
consummating the initial business combination, to fund the
purchase of other companies or for working capital.
A total of approximately $5.0 million (or approximately
$5.75 million if the underwriters over-allotment
option is exercised in full) of the net proceeds from this
offering and the sale of the sponsor warrants described in this
prospectus, including approximately $5.0 million (or
approximately $5.75 million if the underwriters
over-allotment option is exercised in full) of deferred
underwriting commissions will be placed in a trust account at JP
Morgan Chase Bank with Continental Stock Transfer &
Trust Company, as trustee and will be invested only in
U.S. government treasury bills with a maturity of
180 days or less or in money market funds meeting certain
conditions under
Rule 2a-7
under the Investment Company Act. Except for a portion of the
interest income that may be released to us to pay any income and
franchise taxes on such interest and to fund our working capital
requirements, as discussed below, and any amounts necessary to
purchase up to 15% of our public shares, none of the funds held
in the trust account will be released until the earlier of
(i) the completion of our initial business combination or
(ii) the redemption of 100% of our public shares if we are
unable to consummate a business combination within
21 months from the closing of this offering (subject to the
requirements of law).
If we elect to increase the initial amount held in the trust
account from approximately $9.85 per unit, such increase would
be funded by an increase in the amount of the deferral of the
underwriting commissions payable in connection with this
offering, an increase in the number of sponsor warrants to be
purchased by our sponsor at a price of $0.75 per warrant and /or
a reduction from $1,250,000 of the amount initially available to
us for working capital that is not held in the trust account.
Public stockholders would own a smaller percentage of our
outstanding common stock on a fully diluted basis to the extent
that our sponsor purchases additional warrants.
We believe that amounts not held in trust, as well as the
interest income of up to $3.0 million, subject to
adjustment, earned on the trust account balance (net of accrued
and unpaid taxes payable on such interest) that may be released
to fund our working capital requirements will be sufficient to
pay the costs and expenses to which such proceeds are allocated.
This belief is based on the fact that while we may begin
preliminary due
45
diligence of a target business in connection with an indication
of interest, we intend to undertake in-depth due diligence,
depending on the circumstances of the relevant prospective
acquisition, only after we have negotiated and signed a letter
of intent or other preliminary agreement that addresses the
terms of a business combination. However, if our estimate of the
costs of undertaking in-depth due diligence and negotiating a
business combination is less than the actual amount necessary to
do so, or the amount of interest available to use from the trust
account is less than $3.0 million as a result of the
current interest rate environment, we may be required to raise
additional capital, the amount, availability and cost of which
is currently unascertainable. In this event, we could seek such
additional capital through loans or additional investments from
members of our management team, but such members of our
management team are not under any obligation to advance funds
to, or invest in, us. To the extent that the underwriters
exercise their over-allotment option, the maximum amount of
interest income we may withdraw from the trust account will
proportionately increase. In addition, if the size of this
offering is increased or decreased, it could result in a
proportionate increase or decrease in the amount of interest we
may withdraw from the trust account. Assuming a 20% increase in
the size of this offering, the per share redemption or
liquidation amount could decrease by as much as approximately
$0.02 (or $0.03 if the underwriters over-allotment option
is exercised in full). We will use such a proportionate increase
in interest income to cover our working capital expenses. While
we currently do not know what our future working capital
expenses will be and while they will not necessarily be
proportionate to the size of the offering, we believe that any
additional interest income released to us would facilitate our
ability to finance the exploration and consideration of a
greater number of potential acquisition targets.
Commencing on the closing of this offering, we have agreed to
pay Hicks Holdings Operating LLC, an entity owned and controlled
by Thomas O. Hicks, our founder and chairman of the board, a
total of $10,000 per month for office space, administrative
services and secretarial support. This arrangement is being
agreed to by Mr. Hicks for our benefit and is not intended
to provide Mr. Hicks compensation in lieu of salary or
other remuneration. We believe that such fees are at least as
favorable as we could have obtained from an unaffiliated person.
Upon completion of our initial business combination or our
liquidation, we will cease paying these monthly fees.
As of the date of this prospectus, Mr. Hicks, our founder
and chairman of the board, has advanced to us a total of
$225,000 to be used for a portion of the expenses of this
offering. These advances are non-interest bearing, unsecured and
are due at the earlier of December 31, 2010 or the closing
of this offering. The loan will be repaid upon the closing of
this offering out of the $1.75 million of offering proceeds
that has been allocated to the payment of offering expenses.
In addition, in order to finance transaction costs in connection
with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be
required. If we consummate an initial business combination, we
would repay such loaned amounts. In the event that the initial
business combination does not close, we may use a portion of the
working capital held outside the trust account to repay such
loaned amounts but no proceeds from our trust account would be
used to repay such loaned amounts. Such loans may be convertible
into warrants of the post business combination entity at a price
of $0.75 per warrant at the option of the lender. The warrants
would be identical to the sponsor warrants. The terms of such
loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such
loans.
If we seek stockholder approval of our initial business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules,
prior to the consummation of a business combination, there could
be released to us from the trust account amounts necessary to
purchase up to 15% of the shares sold in this offering
(3,000,000 shares, or 3,450,000 shares if the
over-allotment option is exercised in full) at any time
commencing after the filing of a preliminary proxy statement for
our initial business combination and ending on the record date
for the stockholder meeting to approve the initial business
combination. Purchases will be made only in open market
transactions at times when we are not in possession of any
material non-public information and may not be made during a
restricted period under Regulation M under the Exchange
Act. It is intended that purchases will comply with
Rule 10b-18
under the Exchange Act, at prices (inclusive of commissions) not
to exceed the per-share amount then held in the trust account
(approximately $9.85 per share or approximately $9.83 per share
if the over-allotment option is exercised in
46
full). We can purchase any or all of the 3,000,000 shares
(or 3,450,000 shares if the over-allotment option is
exercised in full) we are entitled to purchase. It will be
entirely in our discretion as to how many shares are purchased.
Purchasing decisions will be made based on various factors,
including the then current market price of our common stock and
the terms of the proposed business combination. All shares
purchased by us will be immediately cancelled.
If we hold a stockholder vote to approve our initial business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules, we
may enter into privately negotiated transactions to purchase,
with proceeds from our trust account, public shares from
stockholders upon consummation of the initial business
combination. Our sponsor, directors, officers, advisors or their
affiliates may also purchase shares in privately negotiated
transactions. Neither we nor our directors, officers, advisors
or their affiliates will make any such purchases when we or they
are in possession of any material non-public information not
disclosed to the seller. Although we do not currently anticipate
paying any premium purchase price for such public shares, in the
event we do, the payment of a premium may not be in the best
interest of those stockholders not receiving any such additional
consideration. In addition, the payment of a premium may not be
in the best interest of the remaining stockholders, who will
experience a reduction in book value per share compared to the
value received by stockholders that have their shares purchased
by us at a premium.
The net proceeds of this offering not held in the trust account
and not immediately required for the purposes set forth above
will be invested by the trustee only in U.S. government
treasury bills with a maturity of 180 days or less or in
money market funds meeting certain conditions under
Rule 2a-7
under the Investment Company Act. Because the investment of the
proceeds will be restricted to these instruments, we believe we
will meet the requirements for the exemption provided in
Rule 3a-1
promulgated under the Investment Company Act. Interest income of
up to $3.0 million, subject to adjustment, on the trust
account balance (net of accrued and unpaid taxes payable on such
interest) may be released to us from the trust account to fund a
portion of our working capital requirements.
A public stockholder will be entitled to receive funds from the
trust account only upon the earlier to occur of: (i) our
consummation of an initial business combination, and then only
in connection with those shares of our common stock that such
stockholder properly elected to redeem, subject to the
restrictions described in this prospectus or (ii) the
redemption of our public shares, if we are unable to consummate
an initial business combination, at a per-share price, payable
in cash, equal to the aggregate amount including interest then
on deposit in the trust account, but net of any accrued and
unpaid taxes and excluding up to $100,000 of such net interest
to pay dissolution expenses, divided by the number of then
outstanding public shares, subject to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. In no other circumstances
will a stockholder have any right or interest of any kind in the
trust account. In no other circumstances will a public
stockholder have any right or interest of any kind to or in the
trust account.
Our sponsor has agreed to waive its redemption rights with
respect to its founder shares and public shares in connection
with the consummation of a business combination. In addition,
our sponsor has agreed to waive its redemption and liquidation
rights with respect to its founder shares if we fail to
consummate a business combination within 21 months from the
closing of this offering. However, if our sponsor, or any of our
officers, directors or affiliates acquire public shares in or
after this offering, they will be entitled to redemption and
liquidation rights with respect to such public shares if we fail
to consummate a business combination within the required time
period.
47
DIVIDEND
POLICY
We have not paid any cash dividends on our common stock to date
and do not intend to pay cash dividends prior to the completion
of an initial business combination. The payment of cash
dividends in the future will be dependent upon our revenues and
earnings, if any, capital requirements and general financial
condition subsequent to completion of an initial business
combination. The payment of any dividends subsequent to an
initial business combination will be within the discretion of
our board of directors at such time. 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 of
directors does not anticipate declaring any dividends in the
foreseeable future. In addition, our board of directors is not
currently contemplating and does not anticipate declaring any
stock dividends in the foreseeable future, except if we increase
the size of the offering pursuant to Rule 462(b) under the
Securities Act, in which case we will effect a stock dividend
immediately prior to the consummation of the offering in such
amount as to maintain our sponsors ownership at 12.5% of
our issued and outstanding shares of our common stock upon the
consummation of this offering. Further, if we incur any
indebtedness in connection with a business combination, our
ability to declare dividends may be limited by restrictive
covenants we may agree to in connection therewith.
48
DILUTION
The difference between the public offering price per share of
common stock, assuming no value is attributed to the warrants
included in the units we are offering pursuant to this
prospectus or the sponsor warrants, and the pro forma net
tangible book value per share of our common stock after this
offering constitutes the dilution to investors in this offering.
Such calculation does not reflect any dilution associated with
the sale and exercise of warrants, including the sponsor
warrants, which would cause the actual dilution to the public
stockholders to be higher, particularly where a cashless
exercise is utilized. In addition, such calculation does not
reflect any dilution associated with purchases we may make prior
to the consummation of our initial business combination of up to
15% of the shares sold in this offering using the trust
proceeds. 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 redeemed for cash), by the number of
outstanding shares of our common stock.
At June 16, 2010, our net tangible book value was a
deficiency of $(85,000), or approximately $(0.03) per share of
common stock. After giving effect to the sale of
20,000,000 shares of common stock included in the units we
are offering by this prospectus, the sale of the sponsor
warrants and the deduction of underwriting commissions and
estimated expenses of this offering, our pro forma net tangible
book value at June 16, 2010 would have been $(3,730,000) or
$(1.31) per share, representing an immediate decrease in net
tangible book (as decreased by the value of the approximately
20,000,000 shares of common stock that may be redeemed for
cash and assuming no exercise of the underwriters
over-allotment option) value of $1.28 per share to our sponsor
as of the date of this prospectus and an immediate dilution of
$11.31 per share or 113.1% to our public stockholders not
exercising their redemption rights.
The following table illustrates the dilution to the public
stockholders on a per-share basis, assuming no value is
attributed to the warrants included in the units or the sponsor
warrants:
|
|
|
|
|
|
|
|
|
Public offering price
|
|
|
|
|
|
$
|
10.00
|
|
Net tangible book value before this offering
|
|
$
|
(0.03
|
)
|
|
|
|
|
Increase attributable to public stockholders
|
|
|
8.49
|
|
|
|
|
|
Decrease attributable to public shares subject to redemption
|
|
|
(9.77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value after this offering and the
sale of the sponsor warrants
|
|
|
|
|
|
$
|
(1.31
|
)
|
|
|
|
|
|
|
|
|
|
Dilution to public stockholders
|
|
|
|
|
|
$
|
11.31
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth information with respect to our
sponsor and the public stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Price
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
per Share
|
|
|
Sponsor
|
|
|
2,857,143
|
|
|
|
12.5
|
%
|
|
$
|
25,000
|
|
|
|
0.01
|
%
|
|
$
|
0.01
|
|
Public Stockholders
|
|
|
20,000,000
|
|
|
|
87.5
|
%
|
|
|
200,000,000
|
|
|
|
99.99
|
%
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,857,143
|
|
|
|
100.0
|
%
|
|
$
|
200,025,000
|
|
|
|
100.0
|
%
|
|
$
|
8.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
The pro forma net tangible book value per share after the
offering is calculated as follows:
|
|
|
|
|
Numerator:
|
|
|
|
|
Net tangible book value before this offering
|
|
$
|
(85,000
|
)
|
Proceeds from this offering and sale of the sponsor warrants,
net of expenses
|
|
|
198,250,000
|
|
Offering costs excluded from net tangible book value before this
offering
|
|
|
105,000
|
|
Less: deferred underwriters commissions payable
|
|
|
(5,000,000
|
)
|
Less: amount of common stock subject to redemption:
20,000,000 shares at $9.85 per share
|
|
|
(197,000,000
|
)
|
|
|
|
|
|
|
|
$
|
(3,730,000
|
)
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Shares of common stock outstanding prior to this offering
|
|
|
3,285,714
|
|
Shares forfeited if over-allotment is not exercised
|
|
|
(428,571
|
)
|
Shares of common stock included in the units offered
|
|
|
20,000,000
|
|
Less: shares subject to redemption
|
|
|
(20,000,000
|
)
|
|
|
|
|
|
|
|
|
2,857,143
|
|
|
|
|
|
|
50
CAPITALIZATION
The following table sets forth our capitalization at
June 16, 2010 and as adjusted to give effect to the sale of
our units and the sponsor warrants and the application of the
estimated net proceeds derived from the sale of such securities:
|
|
|
|
|
|
|
|
|
|
|
June 16, 2010
|
|
|
|
Actual
|
|
|
As Adjusted(1)
|
|
|
Deferred underwriting commissions
|
|
$
|
|
|
|
$
|
5,000,000
|
|
Notes payable to affiliate(2)
|
|
|
225,000
|
|
|
|
|
|
Common stock, subject to redemption: 20,000,000 shares at
$9.85 per share(3)
|
|
|
|
|
|
|
197,000,000
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 1,000,000 shares
authorized; none issued or outstanding
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 500,000,000 shares
authorized; 3,285,714 shares issued and outstanding,
23,285,714 shares issued and 22,857,143 outstanding, as
adjusted
|
|
|
329
|
|
|
|
2,286
|
(4)
|
Additional paid-in capital
|
|
|
24,671
|
|
|
|
1,272,714
|
|
Deficit accumulated during the development stage
|
|
|
(5,000
|
)
|
|
|
(5,000
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
20,000
|
|
|
|
1,270,000
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
245,000
|
|
|
$
|
203,270,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the $5.0 million we will receive from the sale of
the sponsor warrants. |
|
(2) |
|
Note payable to affiliate is a promissory note issued in the
amount of $225,000 in the aggregate to
Thomas O. Hicks. The note is non-interest bearing and
is payable on the earlier of December 31, 2010 or the
consummation of this offering. |
|
(3) |
|
Upon the consummation of our initial business combination, we
will provide our stockholders with the opportunity to redeem
their public shares for cash equal to their pro rata share of
the aggregate amount then on deposit in the trust account,
including any amounts representing interest earned on the trust
account, less accrued and unpaid taxes and deferred underwriting
commissions, subject to the limitations described herein. |
|
(4) |
|
Assumes the over-allotment option has not been exercised and an
aggregate of 428,571 founder shares held by our sponsor have
been forfeited, but no forfeiture of the earn out shares. |
51
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We are a blank check company formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with
one or more businesses. We have not identified any acquisition
target and we have not, nor has anyone on our behalf, initiated
any substantive discussions with an entity that we will acquire
in our initial business combination. Our management team is
engaged in the private equity business and evaluates various
acquisition opportunities from time to time in connection with
their ordinary course of business. We are not limited to a
particular industry, geographic region or minimum transaction
value for purposes of consummating an initial business
combination. We intend to effect our initial business
combination using cash from the proceeds of this offering and
the private placement of the sponsor warrants, our capital
stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in a business
combination:
|
|
|
|
|
may significantly dilute the equity interest of investors in
this offering;
|
|
|
|
may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
our common stock;
|
|
|
|
could cause a change in control if a substantial number of
shares of our common stock is issued, which may affect, among
other things, our ability to use our net operating loss carry
forwards, if any, and could result in the resignation or removal
of our present officers and directors;
|
|
|
|
may have the effect of delaying or preventing a change of
control of us by diluting the stock ownership or voting rights
or a person seeking to obtain control of us; and
|
|
|
|
may adversely affect prevailing market prices for our common
stock and/or
warrants.
|
Similarly, if we issue debt securities, it could result in:
|
|
|
|
|
default and foreclosure on our assets if our operating revenues
after an initial business combination are insufficient to repay
our debt obligations;
|
|
|
|
acceleration of our obligations to repay the indebtedness even
if we make all principal and interest payments when due if we
breach certain covenants that require the maintenance of certain
financial ratios or reserves without a waiver or renegotiation
of that covenant;
|
|
|
|
our immediate payment of all principal and accrued interest, if
any, if the debt security is payable on demand;
|
|
|
|
our inability to obtain necessary additional financing if the
debt security contains covenants restricting our ability to
obtain such financing while the debt security is outstanding;
|
|
|
|
our inability to pay dividends on our common stock;
|
|
|
|
using a substantial portion of our cash flow to pay principal
and interest on our debt, which will reduce the funds available
for dividends on our common stock if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
|
|
|
|
limitations on our flexibility in planning for and reacting to
changes in our business and in the industry in which we operate;
|
|
|
|
increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation; and
|
|
|
|
limitations on our ability to borrow additional amounts for
expenses, capital expenditures, acquisitions, debt service
requirements, execution of our strategy and other purposes and
other disadvantages compared to our competitors who have less
debt.
|
52
As indicated in the accompanying financial statements, at
June 16, 2010, we had $250,000 in cash and deferred
offering costs of $105,000. Further, we expect to continue to
incur significant costs in the pursuit of our acquisition plans.
Our managements plans to address this uncertainty through
this offering are discussed above. We cannot assure you that our
plans to raise capital or to consummate our initial business
combination will be successful. These factors, among others,
raise substantial doubt about our ability to continue as a going
concern.
Results
of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any
revenues to date. Our only activities since inception have been
organizational activities and those necessary to prepare for
this offering. Following this offering, we will not generate any
operating revenues until after completion of our initial
business combination. We will generate non-operating income in
the form of interest income on cash and cash equivalents after
this offering. There has been no significant change in our
financial or trading position and no material adverse change has
occurred since the date of our audited financial statements.
After this offering, we expect to incur increased expenses as a
result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as for
due diligence expenses. We expect our expenses to increase
substantially after the closing of this offering.
Liquidity
and Capital Resources
Our liquidity needs have been satisfied to date through receipt
of $25,000 from the sale of the founder shares to our sponsor
and a loan from Mr. Hicks, our founder and chairman of the
board, in the amount of $225,000. We estimate that the net
proceeds from (i) the sale of the units in this offering,
after deducting offering expenses of approximately
$1.75 million, but including deferred underwriting
commissions of approximately $5.0 million (or approximately
$5.75 million if the underwriters over-allotment
option is exercised in full), and (ii) the sale of the
sponsor warrants for a purchase price of $5.0 million, will
be approximately $198.25 million (or approximately
$227.5 million if the underwriters over-allotment
option is exercised in full). Approximately $197.0 million
(or approximately $226.25 million if the underwriters
over-allotment option is exercised in full), will be held in the
trust account, which includes approximately $5.0 million
(or approximately $5.75 million if the underwriters
over-allotment option is exercised in full) of deferred
underwriting commissions. The remaining $1.25 million will
not be held in the trust account. In the event that our offering
expenses are in excess of $1.75 million, we may fund such
amounts out of the $1.25 million not to be held in the
trust account. In such case, the amount not held in the trust
account would be less than $1.25 million by a corresponding
amount. Conversely, in the event that the offering expenses are
less than $1.75 million, the $1.25 million not held in
the trust account would increase by a corresponding amount.
We intend to use substantially all of the funds held in the
trust account (net of accrued and unpaid taxes and deferred
underwriting commissions) to consummate our initial business
combination, including identifying and evaluating prospective
target businesses, selecting one or more target businesses, and
structuring, negotiating and consummating the initial business
combination. To the extent that our capital stock or debt is
used, in whole or in part, as consideration to consummate our
initial business combination, the remaining proceeds held in the
trust account will be used as working capital to finance the
operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
Over this time period, we will use these funds to identify and
evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices,
plants or similar locations of prospective target businesses or
their representatives or owners, review corporate documents and
material agreements of prospective target businesses, and
structure, negotiate and consummate a business combination. If
the size of this offering is increased or decreased, it could
result in a proportionate increase or decrease in the amount of
interest we may withdraw from the trust account. Assuming a 20%
increase in the size of this offering, the per share redemption
or liquidation amount could decrease by as much as approximately
$0.02 (or $0.03 if the underwriters over-allotment option
is exercised in full).
53
In addition, in order to finance transaction costs in connection
with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be
required. If we consummate an initial business combination, we
would repay such loaned amounts. In the event that the initial
business combination does not close, we may use a portion of the
working capital held outside the trust account to repay such
loaned amounts but no proceeds from our trust account would be
used for such repayment. Such loans may be convertible into
warrants of the post business combination entity at a price of
$0.75 per warrant at the option of the lender. The warrants
would be identical to the sponsor warrants. The terms of such
loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such
loans.
We expect our primary liquidity requirements during that period
to include approximately $1.65 million for legal,
accounting and other expenses associated with structuring,
negotiating and documenting business combinations; $210,000 for
office space, administrative services and support payable to
Hicks Holdings Operating LLC, an entity controlled by Thomas O.
Hicks, our founder and chairman of the board, representing
$10,000 per month for up to 21 months; $525,000 for legal
and accounting fees related to regulatory reporting
requirements; and approximately $1.865 million for general
working capital that will be used for miscellaneous expenses and
reserves, including additional expenses that may be incurred by
us in connection with this offering over and above the amounts
listed in the section of this prospectus entitled Use of
Proceeds.
These amounts are estimates and may differ materially from our
actual expenses. In addition, we could use a portion of the
funds not being placed in trust to pay commitment fees for
financing, fees to consultants to assist us with our search for
a target business or as a down payment or to fund a
no-shop provision (a provision designed to keep
target businesses from shopping around for
transactions with other companies on terms more favorable to
such target businesses) with respect to a particular proposed
business combination, although we do not have any current
intention to do so. If we entered into an agreement where we
paid for the right to receive exclusivity from a target
business, the amount that would be used as a down payment or to
fund a no-shop provision would be determined based
on the terms of the specific business combination and the amount
of our available funds at the time. Our forfeiture of such funds
(whether as a result of our breach or otherwise) could result in
our not having sufficient funds to continue searching for, or
conducting due diligence with respect to, prospective target
businesses.
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 will rely on
the funds available to us outside of the trust account and
interest earned of up to $3.0 million, subject to
adjustment, on the trust account (net of accrued and unpaid
taxes payable on such interest) that may be available to us to
fund such expenditures along with any loans from our sponsor,
affiliates of our sponsor, our directors or our officers, as
discussed above. If our estimates of the costs of undertaking
in-depth due diligence and negotiating an initial business
combination is less than the actual amount necessary to do so,
or the amount of interest available to us from the trust account
is less than $3.0 million as a result of the current
interest rate environment, we may have insufficient funds
available to operate our business prior to our initial business
combination. Moreover, we may need to obtain additional
financing either to consummate our initial business combination
or because we become obligated to redeem a significant number of
our public shares upon consummation of our initial business
combination, in which case we may issue additional securities or
incur debt in connection with such business combination. Subject
to compliance with applicable securities laws, we would only
consummate such financing simultaneously with the consummation
of our initial business combination. Following our initial
business combination, if cash on hand is insufficient, we may
need to obtain additional financing in order to meet our
obligations.
Controls
and Procedures
We are not currently required to maintain an effective system of
internal controls as defined by Section 404 of the
Sarbanes-Oxley Act. We will be required to comply with the
internal control requirements of the Sarbanes-Oxley Act for the
fiscal year ending December 31, 2011. As of the date of
this prospectus, we have not completed an assessment, nor have
our auditors tested our systems, of internal controls. We expect
to assess the internal controls of our target business or
businesses prior to the completion of our initial business
54
combination and, if necessary, to implement and test additional
controls as we may determine are necessary in order to state
that we maintain an effective system of internal controls. A
target business may not be in compliance with the provisions of
the Sarbanes-Oxley Act regarding the adequacy of internal
controls. Many small and mid-sized target businesses we may
consider for a business combination may have internal controls
that need improvement in areas such as:
|
|
|
|
|
staffing for financial, accounting and external reporting areas,
including segregation of duties;
|
|
|
|
reconciliation of accounts;
|
|
|
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proper recording of expenses and liabilities in the period to
which they relate;
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evidence of internal review and approval of accounting
transactions;
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documentation of processes, assumptions and conclusions
underlying significant estimates; and
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documentation of accounting policies and procedures.
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Because it will take time, management involvement and perhaps
outside resources to determine what internal control
improvements are necessary for us to meet regulatory
requirements and market expectations for our operation of a
target business, we may incur significant expense in meeting our
public reporting responsibilities, particularly in the areas of
designing, enhancing, or remediating internal and disclosure
controls. Doing so effectively may also take longer than we
expect, thus increasing our exposure to financial fraud or
erroneous financing reporting.
Once our managements report on internal controls is
complete, we will retain our independent auditors to audit and
render an opinion on such report when required by
Section 404. The independent auditors may identify
additional issues concerning a target businesss internal
controls while performing their audit of internal control over
financial reporting.
Quantitative
and Qualitative Disclosures about Market Risk
The net proceeds of this offering, including amounts in the
trust account, will be invested in U.S. government treasury
bills with a maturity of 180 days or less or in money
market funds meeting certain conditions under
Rule 2a-7
under the Investment Company Act. Due to the short-term nature
of these investments, we believe there will be no associated
material exposure to interest rate risk.
Related
Party Transactions
In June 2010, our sponsor purchased an aggregate of 3,285,714
founder shares for an aggregate purchase price of $25,000, or
approximately $0.0076 per share. Thomas O. Hicks, our founder
and chairman of the board, is the sole member of HH-HACII GP,
LLC, the general partner of our sponsor. In addition,
Mr. Hicks, Robert M. Swartz, our president and chief
executive officer, Christina Weaver Vest, our chief financial
officer and a senior vice president of our company, Eric C.
Neuman, a senior vice president of our company, Curt Crofford, a
vice president of our company, Thomas O. Hicks, Jr., our
secretary and a vice president of our company, and Mack H.
Hicks, a vice president of our company, are each limited
partners of our sponsor.
As of the date of this prospectus, Mr. Hicks has advanced
on our behalf a total of $225,000 for payment of offering
expenses. This advance is non-interest bearing, unsecured and is
due at the earlier of December 31, 2010 or the closing of
this offering. This loan will be repaid upon the closing of this
offering out of the $1.75 million of offering proceeds that
has been allocated for the payment of offering expenses. We are
also obligated, on the date of this prospectus, to pay Hicks
Holdings Operating LLC, an entity controlled by Mr. Hicks,
a monthly fee of $10,000 for office space and general
administrative services.
In addition, in order to finance transaction costs in connection
with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be
required. If we consummate an initial business combination, we
would repay such loaned amounts. In the event that the initial
business combination does not close, we may use a portion of the
working capital held outside the trust account to repay such
loaned amounts but no proceeds
55
from our trust account would be used for such repayment. Such
loans may be convertible into warrants of the post business
combination entity at a price of $0.75 per warrant at the option
of the lender. The warrants would be identical to the sponsor
warrants. The holders of a majority of such warrants (or
underlying shares) will be entitled to demand that we register
these securities pursuant to an agreement to be entered into at
the time of the loan. The holders of a majority of these
securities would have certain piggy-back
registration rights with respect to registration statements
filed subsequent to such date. We will bear the costs and
expenses of filing any such registration statements. The terms
of such loans by our officers and directors, if any, have not
been determined and no written agreements exist with respect to
such loans.
Our sponsor has committed to purchase an aggregate of 6,666,667
sponsor warrants at a price of $0.75 per warrant
($5.0 million in the aggregate) in a private placement that
will occur simultaneously with the closing of this offering.
Each sponsor warrant entitles the holder to purchase one share
of our common stock at $12.00 per share. Our sponsor will be
permitted to transfer the sponsor warrants held by it to our
officers and directors, and other persons or entities affiliated
with our sponsor, but the transferees receiving such securities
will be subject to the same agreements with respect to such
securities as our sponsor. Otherwise, these warrants will not,
subject to certain limited exceptions, be transferable or
salable by the sponsor until 30 days after the completion
of our initial business combination. The sponsor warrants will
be non-redeemable so long as they are held by the sponsor or its
permitted transferees. The sponsor warrants may also be
exercised by the sponsor or its permitted transferees for cash
or on a cashless basis. Otherwise, the sponsor warrants have
terms and provisions that are identical to those of the warrants
being sold as part of the units in this offering.
Pursuant to a registration rights agreement we will enter into
with our sponsor on or prior to the date of this prospectus, we
may be required to register certain securities for sale under
the Securities Act. These stockholders are entitled under the
registration rights agreement to make up to three demands that
we register certain of our securities held by them for sale
under the Securities Act. In addition, these stockholders have
the right to include their securities in other registration
statements filed by us. However, the registration rights
agreement provides that we will not permit any registration
statement filed under the Securities Act to become effective
until termination of the applicable
lock-up
period, which occurs (i) in the case of the founder shares,
(A) one year after the completion of our initial business
combination or earlier if, subsequent to our business
combination, the last sales price of our common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing
at least 150 days after our initial business combination or
(B) when we consummate a subsequent liquidation, merger,
stock exchange or other similar transaction which results in all
of our stockholders having the right to exchange their shares of
common stock for cash, securities or other property and
(ii) in the case of the sponsor warrants and the respective
common stock underlying such warrants, 30 days after the
completion of our initial business combination. We will bear the
costs and expenses of filing any such registration statements.
Off-Balance
Sheet Arrangements; Commitments and Contractual Obligations;
Quarterly Results
As of June 16, 2010, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K
and did not have any commitments or contractual obligations. No
unaudited quarterly operating data is included in this
prospectus as we have conducted no operations to date.
56
PROPOSED
BUSINESS
Introduction
We are a newly organized blank check company formed for the
purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We are not limited to a
particular industry, geographic region or minimum transaction
value for purposes of consummating an initial business
combination. We have not identified any acquisition target and
we have not, nor has anyone on our behalf, initiated any
substantive discussions with an entity that we will acquire in
our initial business combination. From the period prior to our
formation through the date of this prospectus, there have been
no communications or discussions between any of our officers,
directors or our sponsor and any of their potential contacts or
relationships regarding a potential initial business
combination. Additionally, we have not engaged or retained any
agent or other representative to identify or locate any suitable
acquisition candidate, to conduct any research or take any
measures, directly or indirectly, to locate or contact a target
business.
Business
Strategy
We have identified the following general criteria and guidelines
that we believe are important in evaluating prospective target
businesses. We will use these criteria and guidelines in
evaluating acquisition opportunities. However, we may decide to
enter into a business combination with a target business that
does not meet these criteria and guidelines.
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Established Companies with Proven Track
Records. We will seek to acquire established
companies with sound historical financial performance. We will
typically focus on companies with a history of strong operating
and financial results. We do not intend to acquire
start-up
companies.
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Companies with Strong Free Cash Flow
Characteristics. We will seek to acquire
companies that have a history of strong, stable free cash flow
generation. We will focus on companies that have predictable,
recurring revenue streams and an emphasis on low working capital
and capital expenditure requirements.
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Strong Competitive Industry
Position. We will seek to acquire businesses
that operate within industries that have strong fundamentals.
The factors we will consider include growth prospects,
competitive dynamics, level of consolidation, need for capital
investment and barriers to entry. Within these industries, we
will focus on companies that have a leading or niche market
position. We will analyze the strengths and weaknesses of target
businesses relative to their competitors, focusing on product
quality, customer loyalty, cost impediments associated with
customers switching to competitors, patent protection and brand
positioning. We will seek to acquire businesses that demonstrate
advantages when compared to their competitors, which may help to
protect their market position and profitability and deliver
strong free cash flow.
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Experienced Management Team. We will
seek to acquire businesses that have strong, experienced
management teams. We will focus on management teams with a
proven track record of driving revenue growth, enhancing
profitability and generating strong free cash flow. We believe
that the operating expertise of our officers and directors will
complement, not replace the targets management team.
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Diversified Customer and Supplier
Base. We will seek to acquire businesses that
have a diversified customer and supplier base. Companies with a
diversified customer and supplier base are generally better able
to endure economic downturns, industry consolidation, changing
business preferences and other factors that may negatively
impact their customers, suppliers and competitors.
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Competitive
Strengths
We believe we have the following competitive strengths:
Management
Expertise
We will seek to capitalize on the significant investing
experience of our management team, including the 38 years
of private equity expertise of Thomas O. Hicks, our founder and
chairman of the board. Since 2005, Mr. Hicks has served as
the chairman of Hicks Holdings LLC, a holding company for real
estate, private equity and sports investments of Mr. Hicks
and his family. Mr. Hicks co-founded Hicks, Muse,
Tate & Furst, a nationally prominent private equity
firm in the United States that specialized in leveraged
acquisitions, and served as its chairman from 1989 through 2004.
During Mr. Hicks tenure as Chairman, Hicks Muse
raised over $12 billion of private equity funds,
consummated over $50 billion of leveraged acquisitions, and
was one of the most active private investment firms in the
country. Mr. Hicks also co-founded and served as co-chief
executive officer of the leveraged buyout firm,
Hicks & Haas, from 1984 to 1989.
Mr. Hicks and affiliates are also, directly or indirectly,
the controlling shareholders of Latrobe Specialty Steel Company,
a specialty steel manufacturer; DirecPath, a company that
provides bundled DIRECTV programming, broadband voice and data
services, security and other locally based services to multiple
dwelling units across the United States; Ocular LCD, Inc., a
designer, manufacturer and marketer of high-performance liquid
crystal displays, modules and systems; Grupo Pilar, an animal
and pet food company in Argentina; Anvita, Inc., a provider of
decision support systems for healthcare professionals; the
National Hockey Leagues Dallas Stars; Major League
Baseballs Texas Rangers; and a 50% interest in the English
Premier Leagues Liverpool Football Club. A sale of the
Texas Rangers is pending through a voluntary, prepackaged,
court-supervised process under Chapter 11 of the
U.S. Bankruptcy Code pursuant to a plan previously
negotiated and agreed to by the current owners of the Texas
Rangers and the prospective buyers. Mr. Hicks, together
with Mr. Swartz, our president and chief executive officer,
Ms. Vest, our chief financial officer and a senior vice
president of our company, Mr. Neuman, a senior vice
president of our company, Mr. Crofford, a vice president of
our company, Thomas O. Hicks, Jr., our secretary and a vice
president, and Mack H. Hicks, a vice president, have substantial
experience in identifying, acquiring and operating a wide
variety of businesses. Together, they have nearly 100 years
of aggregate private equity investing experience. We will seek
to acquire a business whose operations can be improved and
enhanced with our capital resources and where there are
substantial opportunities for both organic and acquisition
growth. We are not limited to a particular industry, geographic
region or minimum transaction value for purposes of consummating
an initial business combination.
Prior
Blank Check Company Experience
All of our directors and senior executive officers were officers
or directors of HACI, a blank check company, which conducted an
initial public offering in September 2007 and consummated a
business combination with Resolute Energy Corporation on
September 25, 2009. Our executive officers played a key
role throughout the business combination transaction for HACI
including assisting in identifying numerous suitable acquisition
candidates, including the ultimate target, and assisting in the
proxy solicitation of stockholder approval for such acquisition.
We believe our managements prior acquisition experience
with a blank check company represents a significant competitive
strength.
Status
as a public company
We believe our structure will make us an attractive business
combination partner to target businesses. As an existing public
company, we offer a target business an alternative to the
traditional initial public offering through a merger or other
business combination. In this situation, the owners of the
target business would exchange their shares of stock in the
target business for shares of our stock or for a combination of
shares of our stock and cash, allowing us to tailor the
consideration to the specific needs of the sellers. Although
there are various costs and obligations associated with being a
public company, we believe target businesses will find this
method a more certain and cost effective method to becoming a
public company than the typical
58
initial public offering. In a typical initial public offering,
there are additional expenses incurred in marketing, roadshow
and public reporting efforts that may not be present to the same
extent in connection with a business combination with us.
Furthermore, once a proposed business combination is
consummated, the target business will have effectively become
public, whereas an initial public offering is always subject to
the underwriters ability to complete the offering, as well
as general market conditions, that could prevent the offering
from occurring. Once public, we believe the target business
would then have greater access to capital and an additional
means of providing management incentives consistent with
stockholders interests. It can offer further benefits by
augmenting a companys profile among potential new
customers and vendors and aid in attracting talented employees.
Financial
position
With funds available for a business combination initially in the
amount of approximately $192.0 million, we offer a target
business a variety of options such as creating a liquidity event
for its owners, providing capital for the potential growth and
expansion of its operations or strengthening its balance sheet
by reducing its debt ratio. Because we are able to consummate a
business combination using our cash, debt or equity securities,
or a combination of the foregoing, we have the flexibility to
use the most efficient combination that will allow us to tailor
the consideration to be paid to the target business to fit its
needs and desires. However, we have not taken any steps to
secure third party financing and there can be no assurance it
will be available to us.
Effecting
our initial business combination
General
We are not presently engaged in, and we will not engage in, any
operations for an indefinite period of time following this
offering. We intend to effect our business combination using
cash from the proceeds of this offering and the private
placement of the sponsor warrants, our capital stock, debt or a
combination of these as the consideration to be paid in our
initial business combination. Accordingly, prospective investors
will at the time of their investment in us not be provided an
opportunity to evaluate the specific merits or risks of a target
business. We may seek to consummate our initial business
combination with a company or business that may be financially
unstable or in its early stages of development or growth, which
would subject us to the numerous risks inherent in such
companies and businesses.
If our initial business combination is paid for using stock or
debt securities, or not all of the funds released from the trust
account are used for payment of the purchase price in connection
with our business combination or used for redemptions of
purchases of our common stock, we may apply the cash released to
us from the trust account that is not applied to the purchase
price for general corporate purposes, including for maintenance
or expansion of operations of acquired businesses, the payment
of principal or interest due on indebtedness incurred in
consummating our initial business combination, to fund the
purchase of other companies or for working capital.
We have not identified any acquisition target and we have not,
nor has anyone on our behalf, initiated any substantive
discussions with an entity that we will acquire in our initial
business combination. From the period prior to our formation
through the date of this prospectus, there have been no
communications or discussions between any of our officers,
directors or our sponsor and any of their potential contacts or
relationships regarding a potential initial business
combination. Additionally, we have not engaged or retained any
agent or other representative to identify or locate any suitable
acquisition candidate, to conduct any research or take any
measures, directly or indirectly, to locate or contact a target
business.
Because, unlike other blank check companies, we do not have the
limitation that a target business have a minimum fair market
enterprise value of the net assets held in the trust account at
the time of our signing a definitive agreement in connection
with our initial business combination, we will have virtually
unrestricted flexibility in identifying and selecting one or
more prospective target businesses. Accordingly, there is no
59
current basis for investors in this offering to evaluate the
possible merits or risks of the target business with which we
may ultimately complete our initial business combination.
Although our management will assess the risks inherent in a
particular target business with which we may combine, we cannot
assure you that this assessment will result in our identifying
all risks that a target business may encounter. Furthermore,
some of those risks may be outside of our control, meaning that
we can do nothing to control or reduce the chances that those
risks will adversely impact a target business.
We will provide our stockholders with the opportunity to redeem
their public shares for cash equal to a pro rata share of the
aggregate amount then on deposit in the trust account, less
accrued and unpaid taxes and deferred underwriting commissions,
upon the consummation of our initial business combination,
subject to the limitations described herein. The amount in the
trust account is initially anticipated to be approximately $9.85
per share, or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full.
Unlike other blank check companies that hold stockholder votes
and conduct proxy solicitations in conjunction with their
initial business combinations and provide for related
redemptions of public shares for cash upon consummation of such
initial business combinations even when a vote is not required
by law, we intend to consummate our initial business combination
and conduct the redemptions without stockholder vote pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act, which regulate
issuer tender offers, and file tender offer documents with the
SEC. The tender offer documents will contain substantially the
same financial and other information about the initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
business or other legal reasons, we will, like other blank check
companies, offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If we seek stockholder approval, we will
consummate a business combination only if a majority of the
outstanding shares of common stock voted are voted in favor of
the business combination. In such case, our sponsor has agreed
to vote its founder shares in accordance with the majority of
the votes cast by the public stockholders and to vote any public
shares purchased during or after the offering in favor of our
initial business combination. In addition, our sponsor has
agreed to waive its redemption rights with respect to its
founder shares and public shares in connection with the
consummation of a business combination.
We may seek to raise additional funds through a private offering
of debt or equity securities in connection with the consummation
of our initial business combination, and we may effect an
initial business combination using the proceeds of such offering
rather than using the amounts held in the trust account. Subject
to compliance with applicable securities laws, we would
consummate such financing only simultaneously with the
consummation of our business combination. In the case of an
initial business combination funded with assets other than the
trust account assets, our notice disclosing the business
combination would disclose the terms of the financing and, only
if required by law, we would seek stockholder approval of such
financing. In the absence of a requirement by law, we would not
seek separate stockholder approval of such financing inasmuch as
the financing portion of any initial business combination would
be disclosed in our notice materials. There are no prohibitions
on our ability to raise funds privately or through loans in
connection with our initial business combination. At this time,
we are not a party to any arrangement or understanding with any
third party with respect to raising any additional funds through
the sale of securities or otherwise.
Sources
of target businesses
We anticipate that target business candidates will be brought to
our attention from various unaffiliated sources, including
investment bankers, venture capital funds, private equity funds,
leveraged buyout funds, management buyout funds and other
members of the financial community. Target businesses may be
brought to our attention by such unaffiliated sources as a
result of being solicited by us through calls or mailings. These
sources may also introduce us to target businesses in which they
think we may be interested on an unsolicited basis, since many
of these sources will have read this prospectus and know what
types of businesses we are targeting. Our officers and
directors, as well as their affiliates, may also bring to our
attention target business candidates that they become aware of
through their business contacts as a result of formal or
informal inquiries or discussions they may have, as well as
attending trade shows or conventions. In
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addition, we expect to receive a number of proprietary deal flow
opportunities that would not otherwise necessarily be available
to us as a result of the track record and business relationships
of Mr. Hicks, our founder and chairman of the board, and as
a result of the transaction with Resolute Energy Corporation.
While we do not presently anticipate engaging the services of
professional firms or other individuals that specialize in
business acquisitions on any formal basis, we may engage these
firms or other individuals in the future, in which event we may
pay a finders fee, consulting fee or other compensation to
be determined in an arms length negotiation based on the
terms of the transaction. We will engage a finder only to the
extent our management determines that the use of a finder may
bring opportunities to us that may not otherwise be available to
us or if finders approach us on an unsolicited basis with a
potential transaction that our management determines is in our
best interest to pursue. Payment of finders fees is
customarily tied to completion of a transaction, in which case
any such fee will be paid out of the funds held in the trust
account. In no event, however, will our sponsor or any of our
existing officers or directors, or any entity with which they
are affiliated, be paid any finders fee, consulting fee or
other compensation prior to, or for any services they render in
order to effectuate, the consummation of our initial business
combination (regardless of the type of transaction that it is).
None of our sponsor, officers, directors and any of their
respective affiliates will be allowed to receive any
compensation, finders fees or consulting fees from a
prospective acquisition target in connection with a contemplated
acquisition of such target by us. Although some of our officers
and directors may enter into employment or consulting agreements
with the acquired business following our initial business
combination, the presence or absence of any such arrangements
will not be used as a criteria in our selection process of an
acquisition candidate.
While we do not intend to pursue an initial business combination
with a target business that is affiliated with our sponsor,
officers, advisors or directors, or any of our or their
affiliates, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial
business combination with such a target business, we would
obtain an opinion from an independent investment banking firm
which is a member of FINRA that such an initial business
combination is fair to our stockholders from a financial point
of view. Generally, such opinion is rendered to a companys
board of directors and investment banking firms may take the
view that stockholders may not rely on the opinion. Such view
will not impact our decision on which investment banking firm to
hire.
Selection
of a target business and structuring of our initial business
combination
Because, unlike other blank check companies, we do not have the
limitation that a target business have a minimum fair market
enterprise value of the net assets held in the trust account at
the time of our signing a definitive agreement in connection
with our initial business combination, our management will have
virtually unrestricted flexibility in identifying and selecting
one or more prospective target businesses. However, we will only
consummate an initial business combination in which we become
the controlling shareholder of the target or are otherwise not
required to register as an investment company under the
Investment Company Act. There is no basis for investors in this
offering to evaluate the possible merits or risks of any target
business with which we may ultimately complete a business
combination. To the extent we effect a business combination with
a company or business that may be financially unstable or in its
early stages of development or growth, we may be affected by
numerous risks inherent in such company or business. 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.
We have not established any other specific attributes or
criteria (financial or otherwise) for prospective target
businesses. In evaluating a prospective target business, our
management may consider a variety of factors, including one or
more of the following:
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financial condition and results of operations;
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growth potential;
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brand recognition and potential;
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experience and skill of management and availability of
additional personnel;
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capital requirements;
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stage of development of the business and its products or
services;
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existing distribution arrangements and the potential for
expansion;
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degree of current or potential market acceptance of the products
or services;
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proprietary aspects of products and the extent of intellectual
property or other protection for products or formulas;
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impact of regulation on the business;
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regulatory environment of the industry;
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seasonal sales fluctuations and the ability to offset these
fluctuations through other business combinations, introduction
of new products, or product line extensions;
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costs associated with effecting the business combination;
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industry leadership, sustainability of market share and
attractiveness of market sectors in which target business
participates; and
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macro competitive dynamics in the industry within which the
company competes.
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These criteria are not intended to be exhaustive and our
management may consider additional factors it deems to be
relevant. Any evaluation relating to the merits of a particular
initial business combination may be based, to the extent
relevant, on the above factors as well as other considerations
our management deems relevant to our business objective. In
evaluating a prospective target business, we expect to conduct
an extensive due diligence review which will encompass, among
other things, meetings with incumbent management and employees,
document reviews, interviews of customers and suppliers,
inspection of facilities, as well as review of financial and
other information which will be made available to us.
The time required to select and evaluate a target business and
to structure and complete our initial business combination, and
the costs associated with this process, are not currently
ascertainable 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 our incurring losses and
will reduce the funds we can use to complete another business
combination. We will not pay any finders or consulting fees to
members of our management team, or any of their respective
affiliates, for services rendered to or in connection with a
business combination.
Lack
of business diversification
For an indefinite period of time after consummation of our
initial business combination, the prospects for our success may
depend entirely on the future performance of a single business.
Unlike other entities that have the resources to complete
business combinations with multiple entities in one or several
industries, it is probable that we will not have the resources
to diversify our operations and mitigate the risks of being in a
single line of business. By consummating a business combination
with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact on the particular industry in which we operate after our
initial business combination, and
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cause us to depend on the marketing and sale of a single product
or limited number of products or services.
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Limited
ability to evaluate the targets management
team
Although we intend to closely scrutinize the management of a
prospective target business when evaluating the desirability of
effecting a business combination with that business, our
assessment of the target business
62
management may not prove to be correct. In addition, the future
management may not have the necessary skills, qualifications or
abilities to manage a public company. Furthermore, the future
role of members of our management team, if any, in the target
business cannot presently be stated with any certainty. While it
is possible that one or more of our directors will remain
associated in some capacity with us following a business
combination, it is unlikely that any of them will devote their
full efforts to our affairs subsequent to a business
combination. Moreover, we cannot assure you that members of our
management team will have significant experience or knowledge
relating to the operations of the particular target business. We
cannot assure you that any of our key personnel will remain in
senior management or advisory positions with the combined
company. The determination as to whether any of our key
personnel will remain with the combined company will be made at
the time of our initial business combination.
Following a business combination, we may seek to recruit
additional managers to supplement the incumbent management of
the target business. We cannot assure you that we will have the
ability to recruit additional managers, or that additional
managers will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Stockholders
may not have the ability to approve a business
combination
We intend to conduct redemptions without a stockholder vote
pursuant to the tender offer rules of the SEC. Therefore we do
not intend to seek stockholder approval before we effect our
initial business combination as not all business combinations
require stockholder approval under applicable state law.
However, we may conduct a stockholder vote, if it is required by
law, or we decide to hold such vote for business or other legal
reasons. Presented in the table below is a graphic explanation
of the types of initial business combinations we may consider
and whether stockholder approval would be required under
Delaware law for each such transaction.
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Whether Stockholder
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Type of Transaction
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Approval is Required
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Purchase of assets
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No
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Purchase of stock of target not involving a merger with the
company
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No
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Merger of target into a subsidiary of the company
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No
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Merger of the company with a target
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Yes
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Permitted
purchases of our securities
If we hold a stockholder vote to approve our initial business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules,
prior to the consummation of a business combination, there could
be released to us from the trust account amounts necessary to
purchase up to 15% of the shares sold in this offering
(3,000,000 shares, or 3,450,000 shares if the
over-allotment option is exercised in full) at any time
commencing after the filing of a preliminary proxy statement for
our initial business combination and ending on the record date
for the stockholder meeting to approve the initial business
combination. Purchases will be made only in open market
transactions at times when we are not in possession of any
material non-public information and may not be made during a
restricted period under Regulation M under the Exchange
Act. It is intended that purchases will comply with
Rule 10b-18
under the Exchange Act, at prices (inclusive of commissions) not
to exceed the per-share amount then held in trust (approximately
$9.85 per share or approximately $9.83 per share if the
over-allotment option is exercised in full). We can purchase any
or all of the 3,000,000 shares (or 3,450,000 shares if
the over-allotment option is exercised in full) we are entitled
to purchase. It will be entirely in our discretion as to how
many shares are purchased. Purchasing decisions will be made
based on various factors, including the then current market
price of our common stock and the terms of the proposed business
combination. All shares purchased by us will be immediately
cancelled.
63
Redemption
rights for public stockholders upon consummation of our initial
business combination
We will provide our stockholders with the opportunity to redeem
their public shares for cash equal to their pro rata share of
the aggregate amount then on deposit in the trust account,
including any amounts representing interest earned on the trust
account, less accrued and unpaid taxes and deferred underwriting
commissions, upon the consummation of our initial business
combination, subject to the limitations described herein. The
amount in the trust account is initially anticipated to be
approximately $9.85 per share, or approximately $9.83 per share
if the underwriters over-allotment option is exercised in
full. Unlike other blank check companies that hold stockholder
votes and conduct proxy solicitations in conjunction with their
initial business combinations and provide for related
redemptions of public shares for cash upon consummation of such
initial business combinations even if not required by law, we
intend to consummate our initial business combination and
conduct the redemptions without stockholder vote pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act, which regulate
issuer tender offers, and file tender offer documents with the
SEC. The tender offer documents will contain substantially the
same financial and other information about the initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
business or other legal reasons, we will, like other blank check
companies, offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If we seek stockholder approval, we will
consummate our initial business combination only if a majority
of the outstanding shares of common stock voted are voted in
favor of the business combination. In such case, our sponsor has
agreed to vote its founder shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination. In addition, our
sponsor has agreed to waive its redemption rights with respect
to its founder shares and public shares in connection with the
consummation of a business combination.
Traditionally, blank check companies would not be able to
consummate a business combination if the holders of the
companys public shares voted against a proposed business
combination and elected to redeem or convert more than a
specified percentage of the shares sold in such companys
initial public offering, which percentage threshold is typically
between 19.99% and 39.99%. As a result, many blank check
companies have been unable to complete business combinations
because the amount of shares voted by their public stockholders
electing conversion exceeded the maximum conversion threshold
pursuant to which such company could proceed with a business
combination. Since we have no redemption threshold, our
structure is different in this respect from the structure that
has been used by most blank check companies.
Conduct
of redemption pursuant to tender offer rules
When we conduct the redemptions upon consummation of our initial
business combination in compliance with the tender offer rules,
the redemption offer will be made to all of our stockholders,
not just our public stockholders. Our sponsor has agreed to
waive its redemption rights with respect to its founder shares
and public shares in connection with the consummation of a
business combination.
Submission
of our initial business combination to a stockholder
vote
In the event that we seek stockholder approval of our initial
business combination, we will distribute proxy materials and, in
connection therewith, provide our public stockholders with
redemption rights upon consummation of the initial business
combination. Public stockholders electing to exercise their
redemption rights will be entitled to receive cash equal to
their pro rata share of the aggregate amount then on deposit in
the trust account, including any amounts representing interest
earned on the trust account, less accrued and unpaid taxes and
deferred underwriting commissions. If our initial business
combination is not completed, then public stockholders electing
to exercise their redemption rights will not be entitled to
receive such payments.
If we submit our initial business combination to our
stockholders for approval, our sponsor has agreed to vote its
founder shares in accordance with the majority of the votes cast
by the public stockholders and to vote any public shares
purchased during or after the offering in favor of our initial
business combination. In
64
addition, our sponsor has agreed to waive its redemption rights
with respect to its founder shares and public shares in
connection with the consummation of a business combination.
In the event we seek stockholder approval of our business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules, we
may privately negotiate transactions to purchase shares upon the
closing of the business combination from stockholders who would
have otherwise elected to have their shares redeemed in
conjunction with a proxy solicitation pursuant to the proxy
rules for a per-share pro rata portion of the trust account. Our
sponsor, directors, officers, advisors or their affiliates may
also purchase shares in privately negotiated transactions.
Neither we nor our directors, officers, advisors or their
affiliates will make any such purchases when we or they are in
possession of any material non-public information not disclosed
to the seller. Such a purchase would include a contractual
acknowledgement that such stockholder, although still the record
holder of our shares is no longer the beneficial owner thereof
and therefore agrees not to exercise its redemption rights. In
the event that we or our sponsor, directors, officers, advisors
or their affiliates purchase shares in privately negotiated
transactions from public stockholders who have already elected
to exercise their redemption rights, such selling stockholders
would be required to revoke their prior elections to redeem
their shares. In addition, in the event we seek stockholder
approval of our business combination, we may make purchases of
our common stock, in an amount up to 15% of the shares sold in
this offering (3,000,000 shares, or 3,450,000 shares
if the overallotment option is exercised in full), in the open
market in a manner intended to comply with
Rule 10b-18
under the Exchange Act, using funds held in the trust account so
long as the price paid for such shares does not exceed the
per-share amount then held in the trust account (approximately
$9.85 per share or approximately $9.83 per share if the
over-allotment option is exercised in full).
The purpose of such purchases would be to (i) increase the
likelihood of obtaining stockholder approval of the business
combination or (ii), where the purchases are made by our
sponsor, directors, officers, advisors or their affiliates, to
satisfy a closing condition in an agreement with a target that
requires us to have a minimum net worth or a certain amount of
cash at the closing of the business combination, where it
appears that such requirement would otherwise not be met. This
may result in the consummation of a business combination that
may not otherwise have been possible.
In the event we seek stockholder approval of our business
combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules, we
may privately negotiate transactions to purchase shares upon the
closing of the business combination from stockholders who would
have otherwise elected to have their shares redeemed in
conjunction with a proxy solicitation pursuant to the proxy
rules for a per-share pro rata portion of the trust account. In
addition, in the event we seek stockholder approval of our
business combination, we may make purchases of our common stock,
in an amount up to 15% of the shares sold in this offering
(3,000,000 shares, or 3,450,000 shares if the
overallotment option is exercised in full), in the open market
in a manner intended to comply with
Rule 10b-18
under the Exchange Act, using funds held in the trust account so
long as the price paid for such shares does not exceed the
per-share amount then held in the trust account (approximately
$9.85 per share or approximately $9.83 per share if the
over-allotment option is exercised in full).
As a consequence of such purchases:
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the funds in our trust account that are so used will not be
available to us after the business combination;
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the public float of our common stock may be reduced
and the number of beneficial holders of our securities may be
reduced, which may make it difficult to obtain the quotation,
listing or trading of our securities on a national securities
exchange; and
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because the stockholders who sell their shares in a privately
negotiated transaction or pursuant to market transactions as
described above may receive a per share purchase price payable
from the trust account that is not reduced by a pro rata share
of the deferred underwriting commissions or accrued and unpaid
taxes on the interest earned by the trust account, our remaining
stockholders may bear the entire payment of such deferred
commissions and accrued and unpaid taxes (as well as up to
$100,000
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of net interest that may be released to us from the trust
account to fund our dissolution expenses in the event we do not
complete our initial business combination within 21 months
for the closing of this offering). That is, if we seek
stockholder approval of our initial business combination, the
redemption price per share payable to public stockholders who
elect to have their shares redeemed will be reduced by a larger
percentage of the deferred underwriting commissions and accrued
and unpaid taxes than it would have been in the absence of such
privately negotiated or market transactions, and stockholders
who do not elect to have their shares redeemed and remain our
stockholders after the business combination will bear the
economic burden of the deferred commissions and accrued and
unpaid income taxes because such amounts will be payable by us.
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Our sponsor, officers, directors
and/or their
affiliates anticipate that they will identify the stockholders
with whom the sponsor, officers, directors or their affiliates
may pursue privately negotiated purchases by either the
stockholders contacting us directly or by our receipt of
redemption requests submitted by stockholders following our
mailing of tender offer materials in connection with our initial
business combination. To the extent that our sponsor, officers,
directors, advisors or their affiliates enter into a private
purchase, they would identify and contact only potential selling
stockholders who have expressed their election to redeem their
shares for a pro rata share of the trust account or vote against
the business combination. Pursuant to the terms of such
arrangements, any shares so purchased by our sponsor, officers,
advisors, directors
and/or their
affiliates would then revoke their election to redeem such
shares. The terms of such purchases would operate to facilitate
our ability to consummate a proposed business combination by
potentially reducing the number of shares redeemed for cash.
Limitation
on redemption rights upon consummation of a business combination
if we seek a stockholder vote
Notwithstanding the foregoing, if we hold a stockholder vote to
approve our initial business combination and we do not conduct
redemptions in connection with our business combination pursuant
to the tender offer rules, our amended and restated certificate
of incorporation provides that a public stockholder, together
with any affiliate of such stockholder or any other person with
whom such stockholder is acting in concert or as a
group (as defined under Section 13 of the
Exchange Act), will be restricted from seeking redemption rights
with respect to more than an aggregate of 10% of the shares sold
in this offering. We believe this restriction will discourage
stockholders from accumulating large blocks of shares, and
subsequent attempts by such holders to use their ability to
exercise their redemption rights as a means to force us or our
management to purchase their shares at a significant premium to
the then-current market price or on other undesirable terms.
Absent this provision, a public stockholder holding more than an
aggregate of 10% of the shares sold in this offering could
threaten to exercise its redemption rights if such holders
shares are not purchased by us or our management at a premium to
the then-current market price or on other undesirable terms. By
limiting our stockholders ability to redeem no more than
10% of the shares sold in this offering, we believe we will
limit the ability of a small group of stockholders to
unreasonably attempt to block our ability to consummate a
business combination, particularly in connection with a business
combination with a target that requires as a closing condition
that we have a minimum net worth or a certain amount of cash.
However, we would not be restricting our stockholders
ability to vote all of their shares for or against a business
combination.
Tendering
stock certificates in connection with a tender offer or
redemption rights
We may require our public stockholders seeking to exercise their
redemption rights, whether they are record holders or hold their
shares in street name, to either tender their
certificates to our transfer agent prior to the date set forth
in the tender offer documents or proxy materials mailed to such
holders, or up to two business days prior to the vote on the
proposal to approve the business combination in the event we
distribute proxy materials, or to deliver their shares to the
transfer agent electronically using Depository
Trust Companys DWAC (Deposit/Withdrawal At Custodian)
System, at the holders option. The tender offer or proxy
materials, as applicable, that we will furnish to holders of our
public shares in connection with our initial business
combination will indicate whether we are requiring public
stockholders to satisfy such delivery requirements. Accordingly,
a public stockholder would have from the time we send out our
tender offer materials until the
66
close of the tender offer period, or up to two days prior to the
vote on the business combination if we distribute proxy
materials, as applicable, to tender its shares if it wishes to
seek to exercise its redemption rights. Given the relatively
short exercise period, it is advisable for stockholders to use
electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced
tendering process and the act of certificating the shares or
delivering them through the DWAC System. The transfer agent will
typically charge the tendering broker $35.00 and it would be up
to the broker whether or not to pass this cost on to the
redeeming holder. However, this fee would be incurred regardless
of whether or not we require holders seeking to exercise
redemption rights to tender their shares. The need to deliver
shares is a requirement of exercising redemption rights
regardless of the timing of when such delivery must be
effectuated.
The foregoing is different from the procedures used by many
blank check companies. Traditionally, in order to perfect
redemption rights in connection with a blank check
companys business combination, the company would
distribute proxy materials for the stockholders vote on an
initial business combination, and a holder could simply vote
against a proposed business combination and check a box on the
proxy card indicating such holder was seeking to exercise his
redemption rights. After the business combination was approved,
the company would contact such stockholder to arrange for him to
deliver his certificate to verify ownership. As a result, the
stockholder then had an option window after the
consummation of the business combination during which he could
monitor the price of the companys stock in the market. If
the price rose above the redemption price, he could sell his
shares in the open market before actually delivering his shares
to the company for cancellation. As a result, the redemption
rights, to which stockholders were aware they needed to commit
before the stockholder meeting, would become a
redemption right surviving past the consummation of
the business combination until the redeeming holder delivered
its certificate. The requirement for physical or electronic
delivery prior to the meeting ensures that a redeeming
holders election to redeem is irrevocable once the
business combination is approved.
Any request to redeem such shares, once made, may be withdrawn
at any time up to the date set forth in the tender offer
materials or the date of the shareholder meeting set forth in
our proxy materials, as applicable. Furthermore, if a holder of
a public share delivered its certificate in connection with an
election of redemption rights and subsequently decides prior to
the applicable date not to elect to exercise such rights, such
holder may simply request that the transfer agent return the
certificate (physically or electronically). It is anticipated
that the funds to be distributed to holders of our public shares
electing to redeem their shares will be distributed promptly
after the completion of a business combination.
If the initial business combination is not approved or completed
for any reason, then our public stockholders who elected to
exercise their redemption rights would not be entitled to redeem
their shares for the applicable pro rata share of the trust
account. In such case, we will promptly return any certificates
delivered by public holders who elected to redeem their shares.
If our initial proposed business combination is not consummated,
we may continue to try to consummate a business combination with
a different target until 21 months from the closing of this
offering. Public stockholders would be entitled to receive their
pro rata share of the aggregate amount on deposit in the trust
account, less taxes and deferred underwriting commissions, only
in the event that the initial business combination is
consummated. If the proposed business combination is not
consummated then a stockholders election to exercise its
redemption rights will not be honored, and such redemption will
not be entitled to a cash payment, even if such redemption right
was properly exercised.
Redemption
of common stock and liquidation if no initial business
combination
Our sponsor, officers and directors have agreed that we will
have only 21 months from the closing of this offering to
consummate our initial business combination. If we are unable to
consummate a business combination within such
21-month
period, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the
67
number of then outstanding public shares, together with the
contingent right to receive, in cash, following our dissolution,
a pro rata share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. Pursuant to the terms of our amended and
restated certificate of incorporation, our powers following the
expiration of the permitted time period for consummating a
business combination will automatically thereafter be limited to
acts and activities relating to dissolving and winding up our
affairs.
Our sponsor has agreed to waive its redemption and liquidation
rights with respect to its founder shares if we fail to
consummate a business combination within 21 months from the
closing of this offering. However, if our sponsor, or any of our
officers, directors or affiliates acquire public shares in or
after this offering, they will be entitled to redemption and
liquidation rights with respect to such public shares if we fail
to consummate a business combination within the required time
period. There will be no liquidating distributions with respect
to our warrants, which will expire worthless in the event we do
not consummate a business combination within the
21-month
time period. We expect that all costs and expenses associated
with implementing our plan of dissolution, as well as payments
to any creditors, will be funded from amounts remaining out of
the $1.25 million of proceeds held outside the trust
account and from the up to $3.0 million, subject to
adjustment, in interest income on the balance of the trust
account (net of accrued and unpaid taxes payable on such
interest) that will be released to us to fund our working
capital requirements, although we cannot assure you that there
will be sufficient funds for such purpose. However, if those
funds are not sufficient to cover the costs and expenses
associated with implementing our plan of dissolution, to the
extent that there is any interest accrued in the trust account
not required to pay income taxes on interest income earned on
the trust account balance, we may request the trustee to release
to us an additional amount of up to $100,000 of such accrued
interest to pay those costs and expenses.
If we were to expend all of the net proceeds of this offering,
other than the proceeds deposited in the trust account, and
without taking into account interest, if any, earned on the
trust account, the per-share redemption amount received by
stockholders upon our dissolution would be approximately $9.85
(or approximately $9.83 if the underwriters over-allotment
option is exercised in full). The proceeds deposited in the
trust account could, however, become subject to the claims of
our creditors which would have higher priority than the claims
of our public stockholders. We cannot assure you that the actual
per-share redemption amount received by stockholders will not be
less than approximately $9.85, plus interest (net of any accrued
and unpaid taxes). Under Section 281(b) of the DGCL, our
plan of dissolution must provide for all claims against us to be
paid in full or make provision for payments to be made in full,
as applicable, if there are sufficient assets. These claims must
be paid or provided for before we make any distribution of our
remaining assets to our stockholders. While we intend to pay
such amounts, if any, we cannot assure you that we will have
funds sufficient to pay or provide for all creditors
claims.
Although we will seek to have all vendors, service providers
(other than our independent accountants), prospective target
businesses or other entities with which we do business 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 or even if they execute
such agreements that they would be prevented from bringing
claims against the trust account including but not limited to
fraudulent inducement, breach of fiduciary responsibility or
other similar claims, as well as claims challenging the
enforceability of the waiver, in each case in order to gain an
advantage with respect to a claim against our assets, including
the funds held in the trust account. If any third party refuses
to execute an agreement waiving such claims to the monies held
in the trust account, our management will perform an analysis of
the alternatives available to it and will only enter into an
agreement with a third party that has not executed a waiver if
management believes that such third partys engagement
would be significantly more beneficial to us than any
alternative. Examples of possible instances where we may engage
a third party that refuses to execute a waiver include the
engagement of a third party consultant whose particular
expertise or skills are believed by management to be
significantly superior to those of other consultants that would
agree to execute a waiver or in cases where management is unable
to find a service provider willing to execute a
68
waiver. In addition, there is no 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. In order to protect the amounts held in
the trust account, Mr. Hicks, our founder and chairman of
the board, has agreed that he will be liable to us if and to the
extent any claims by a vendor for services rendered or products
sold to us, or a prospective target business with which we have
discussed entering into a transaction agreement, reduce the
amounts in the trust account to below $9.85 per share (or
approximately $9.83 per share if the underwriters
over-allotment option is exercised in full), except as to any
claims by a third party who executed a waiver of any and all
rights to seek access to the trust account and except as to any
claims under our indemnity of the underwriters of this offering
against certain liabilities, including liabilities under the
Securities Act. In the event that an executed waiver is deemed
to be unenforceable against a third party, Mr. Hicks will
not be responsible to the extent of any liability for such third
party claims. We cannot assure you, however, that Mr. Hicks
would be able to satisfy those obligations.
In the event that the proceeds in the trust account are reduced
below $9.85 per share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full)
and in the event we redeem 100% of our public shares for a
per-share pro rata portion of the trust account, or upon our
liquation, and Mr. Hicks asserts that he is unable to
satisfy any applicable obligations or that he has no
indemnification obligations related to a particular claim, our
independent directors would determine whether to take legal
action against Mr. Hicks to enforce his indemnification
obligations. While we currently expect that our independent
directors would take legal action on our behalf against
Mr. Hicks to enforce their indemnification obligations to
us, it is possible that our independent directors in exercising
their business judgment may choose not to do so in any
particular instance. Accordingly, we cannot assure you that due
to claims of creditors the actual value of the per-share
redemption price will not be less than $9.85 per share (or
approximately $9.83 per share if the underwriters
over-allotment option is exercised in full).
We will seek to reduce the possibility that Mr. Hicks will
have to indemnify the trust account due to claims of creditors
by endeavoring to have all vendors, service providers (other
than our independent accountants), prospective target businesses
or other entities with which we do business execute agreements
with us waiving any right, title, interest or claim of any kind
in or to monies held in the trust account. Mr. Hicks will
also not be liable as to any claims under our indemnity of the
underwriters of this offering against certain liabilities,
including liabilities under the Securities Act. We will have
access to up to $1.25 million from the proceeds of this
offering, and the up to $3.0 million, subject to
adjustment, in interest income on the balance of the trust
account (net of accrued and unpaid taxes payable on such
interest) with which to pay any such potential claims (including
costs and expenses incurred in connection with our liquidation,
currently estimated to be no more than approximately $100,000).
In the event that we liquidate and it is subsequently determined
that the reserve for claims and liabilities is insufficient,
stockholders who received funds from our trust account could be
liable for claims made by creditors. In the event that our
offering expenses are in excess of $1.75 million, we may
fund such amounts out of the $1.25 million not to be held
in the trust account. In such case, the amount not held in the
trust account would be less than $1.25 million by a
corresponding amount. Conversely, in the event that the offering
expenses are less than $1.75 million, the
$1.25 million not held in the trust account would increase
by a corresponding amount.
Under the DGCL, stockholders may be held liable for claims by
third parties against a corporation to the extent of
distributions received by them in a dissolution. The pro rata
portion of our trust account distributed to our public
stockholders upon the redemption of 100% of our public shares in
the event we do not consummate our initial business combination
within 21 months from the closing of this offering may be
considered a liquidation distribution under Delaware law. If the
corporation complies with certain procedures set forth in
Section 280 of the DGCL intended to ensure that it makes
reasonable provision for all claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of
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the dissolution. If we are unable to consummate a business
combination within 21 months from the closing of this
offering, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. Accordingly, it is our intention to redeem our
public shares as soon as reasonably possible following our
21st month and, therefore, we do not intend to comply with
those procedures. As such, our stockholders could potentially be
liable for any claims to the extent of distributions received by
them (but no more) and any liability of our stockholders may
extend well beyond the third anniversary of such date. Because
we will not be complying with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan,
based on facts known to us at such time that will provide for
our payment of all existing and pending claims or claims that
may be potentially brought against us within the subsequent
10 years. However, because we are a blank check company,
rather than an operating company, and our operations will be
limited to searching for prospective target businesses to
acquire, the only likely claims to arise would be from our
vendors (such as lawyers, investment bankers, etc.) or
prospective target businesses. As described above, pursuant to
the obligation contained in our underwriting agreement, we will
seek to have all vendors, service providers (other than our
independent accountants), prospective target businesses or other
entities with which we do business execute agreements with us
waiving any right, title, interest or claim of any kind in or to
any monies held in the trust account. As a result of this
obligation, the claims that could be made against us are
significantly limited and the likelihood that any claim that
would result in any liability extending to the trust account is
remote. Further, Mr. Hicks may be liable only to the extent
necessary to ensure that the amounts in the trust account are
not reduced below $9.85 per share (or approximately $9.83 per
share if the underwriters over-allotment option is
exercised in full) less any per-share amounts distributed from
our trust account to our public stockholders in the event we are
unable to consummate a business combination within
21 months from the closing of this offering, and will not
be liable as to any claims under our indemnity of the
underwriters of this offering against certain liabilities,
including liabilities under the Securities Act. In the event
that an executed waiver is deemed to be unenforceable against a
third party, Mr. Hicks will not be responsible to the
extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy
petition is filed against us that is not dismissed, the proceeds
held in the trust account could be subject to applicable
bankruptcy law, and may be included in our bankruptcy estate and
subject to the claims of third parties with priority over the
claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, we cannot assure you we will be able
to return $9.85 per share to our public stockholders.
Additionally, if we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed,
any distributions received by stockholders could be viewed under
applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders. Furthermore, because we intend to distribute the
proceeds held in the trust account to our public stockholders
promptly after the termination of our corporate existence, this
may be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access
to or distributions from our assets. Furthermore, our board may
be viewed as having breached its fiduciary duty to our creditors
and/or may
have acted in bad faith, and thereby exposing itself and our
company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the
claims of creditors. We cannot assure you that claims will not
be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from
the trust account only in the event of the redemption of 100% of
our public shares if we do not consummate a business combination
within 21 months from the closing of this offering or if
they redeem their respective shares for cash upon the
consummation of the initial business combination. In no other
circumstances will a stockholder have any right or interest of
any kind to or in the trust account. In the event we seek
stockholder approval in connection with our initial business
combination, a stockholders voting in connection with the
business combination alone will not result
70
in a stockholders redeeming its shares to us for an
applicable pro rata share of the trust account. Such stockholder
must have also exercised its redemption rights described above.
Comparison
of This Offering to Those of Blank Check Companies Subject to
Rule 419
The following table compares the terms of this offering to the
terms of an offering by a blank check company subject to the
provisions of Rule 419. This comparison assumes that the
gross proceeds, underwriting commissions and underwriting
expenses of our offering would be identical to those of an
offering undertaken by a company subject to Rule 419, and
that the underwriters will not exercise their over-allotment
option. None of the provisions of Rule 419 apply to our
offering.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Escrow of offering proceeds
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Approximately $197.0 million of the net offering proceeds, which
includes the $5.0 million net proceeds from the sale of the
sponsor warrants and approximately $5.0 million in deferred
underwriting commissions (approximately $5.75 million if the
underwriters over-allotment option is exercised in full),
will be deposited into a trust account at JP Morgan Chase, N.A.,
maintained by Continental Stock Transfer & Trust Company,
as trustee.
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Approximately $173,925,000 million of the offering proceeds,
representing the gross proceeds of this offering, would be
required to be deposited into either an escrow account with an
insured depositary institution or in a separate bank account
established by a broker-dealer in which the broker-dealer acts
as trustee for persons having the beneficial interests in the
account.
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Investment of net proceeds
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Approximately $197.0 million of the net offering proceeds, which
includes the $5.0 million net proceeds from the sale of the
sponsor warrants and approximately $5.0 million in deferred
underwriting commissions (approximately $5.75 million if the
underwriters over-allotment option is exercised in full)
held in trust will be invested only in U.S. government treasury
bills with a maturity of 180 days or less or in money
market funds meeting certain conditions under Rule 2a-7 under
the Investment Company Act.
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Proceeds could be invested only in specified securities such as
a money market fund meeting conditions of the Investment Company
Act or in securities that are direct obligations of, or
obligations guaranteed as to principal or interest by, the
United States.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Receipt of interest on escrowed funds
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Interest on proceeds from the trust account to be paid to
stockholders is reduced by (i) any income or franchise taxes
paid or accrued and unpaid on the interest generated and then
(ii) up to $3.0 million, subject to adjustment, that can be used
for working capital purposes, and (iii) in the event of our
liquidation for failure to consummate our initial business
combination within the allotted time, up to $100,000 of net
interest that may be released to us should we have no or
insufficient working capital to fund the costs and expenses of
our dissolution and liquidation.
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Interest on funds in escrow account would be held for the sole
benefit of investors, unless and only after the funds held in
escrow were released to us in connection with our consummation
of a business combination.
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Limitation on fair value or net assets of target business
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We are not required to set a minimum valuation on either the
fair market value or net assets of a target business.
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The fair value or net assets of a target business must represent
at least 80% of the maximum offering proceeds.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Trading of securities issued
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The units will begin trading on or promptly after the date of
this prospectus. The common stock and warrants comprising the
units will begin separate trading on the 52nd day following the
date of this prospectus unless Citigroup Global Markets Inc.
informs us of its decision to allow earlier separate trading,
subject to our having filed a Current Report on Form 8-K and
having issued a press release announcing when such separate
trading will begin. In no event will the common stock and
warrants be traded separately until we have filed a Current
Report on Form 8-K with the SEC containing an audited balance
sheet reflecting our receipt of the gross proceeds of this
offering. We will file the Current Report on Form 8-K upon the
consummation of this offering, which is anticipated to take
place three business days from the date of this prospectus. If
the over-allotment option is exercised following the initial
filing of such Current Report on Form 8-K, a second or amended
Current Report on Form 8-K will be filed to provide updated
financial information to reflect the exercise of the
over-allotment option.
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No trading of the units or the underlying common stock and
warrants would be permitted until the completion of a business
combination. During this period, the securities would be held in
the escrow or trust account.
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Exercise of the warrants
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The warrants cannot be exercised until the later of 30 days
after the completion of our initial business combination or
12 months from the closing of this offering.
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The warrants could be exercised prior to the completion of a
business combination, but securities received and cash paid in
connection with the exercise would be deposited in the escrow or
trust account.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Election to remain an investor
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We will provide our public stockholders with the opportunity to
redeem their public shares for cash equal to their pro rata
share of the aggregate amount then on deposit in the trust
account, less accrued and unpaid taxes and deferred underwriting
commissions, upon the consummation of our initial business
combination, subject to the limitations described herein. We may
not hold a stockholder vote. Instead, we may conduct the
redemptions pursuant to the tender offer rules of the SEC and
file tender offer documents with the SEC which will contain
substantially the same financial and other information about the
initial business combination and the redemption rights as is
required under the SECs proxy rules. If, however, we hold
a stockholder vote, we will, like other blank check companies,
offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer
rules. If we seek stockholder approval, we will consummate our
initial business combination only if a majority of the
outstanding shares of common stock voted are voted in favor of
the business combination.
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A prospectus containing information pertaining to the business
combination required by the SEC would be sent to each investor.
Each investor would be given the opportunity to notify the
company in writing, within a period of no less than 20 business
days and no more than 45 business days from the effective date
of a post-effective amendment to the companys registration
statement, to decide if he, she or it elects to remain a
stockholder of the company or require the return of his, her or
its investment. If the company has not received the notification
by the end of the 45th business day, funds and interest or
dividends, if any, held in the trust or escrow account are
automatically returned to the stockholder. Unless a sufficient
number of investors elect to remain investors, all funds on
deposit in the escrow account must be returned to all of the
investors and none of the securities are issued.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Business combination deadline
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If we are unable to complete a business combination
by ,
2012, 21 months from the closing of this offering, we shall
(i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible, redeem 100% of our
public shares, at a per-share price, payable in cash, equal to
the aggregate amount including interest then on deposit in the
trust account, but net of any accrued and unpaid taxes (less up
to $100,000 of such net interest to pay dissolution expenses),
divided by the number of then outstanding public shares,
together with the contingent right to receive, in cash,
following our dissolution, a pro rata share of the balance of
our net assets, if any, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, dissolve
and liquidate, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law.
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If an acquisition has not been consummated within 18 months
after the effective date of the companys registration
statement, funds held in the trust or escrow account are
returned to investors.
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Release of funds
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Except for up to $3.0 million, subject to adjustment, of the
interest income earned on the trust account balance (net of
accrued and unpaid income and franchise taxes payable on such
interest) released to us to pay any income and franchise taxes
on such interest and to fund our working capital requirements,
and any amounts necessary to purchase up to 15% of our public
shares, none of the funds held in trust will be released from
the trust account until the earlier of (i) the completion of our
initial business combination or (ii) the redemption of 100% of
our public shares if we are unable to consummate a business
combination within 21 months from the closing of this
offering (subject to the requirements of applicable law).
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The proceeds held in the escrow account are not released until
the earlier of the completion of a business combination or the
failure to effect a business combination within the allotted
time.
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Competition
In identifying, evaluating and selecting a target business for a
business combination, we may encounter intense competition from
other entities having a business objective similar to ours,
including other blank check companies, private equity groups and
leveraged buyout funds, and operating businesses seeking
strategic acquisitions. Many of these entities are well
established and have extensive experience identifying and
effecting business combinations directly or through affiliates.
Moreover, many of these competitors possess greater financial,
technical, human and other resources than us. Our ability to
acquire larger target businesses will be limited by our
available financial resources. This inherent limitation gives
others an advantage in pursuing the acquisition of a target
business. Furthermore:
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our obligation to pay cash in connection with our public
stockholders who exercise their redemption rights may reduce the
resources available to us for an initial business
combination; and
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our outstanding warrants, and the future dilution they
potentially represent, may not be viewed favorably by certain
target businesses.
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Either of these factors may place us at a competitive
disadvantage in successfully negotiating a business combination.
Facilities
We currently maintain our executive offices at 100 Crescent
Court, Suite 1200, Dallas, Texas 75201. The cost for this
space is included in the $10,000 per month fee described above
that Hicks Holdings Operating LLC charges us for general and
administrative services. We believe, based on rents and fees for
similar services in the Dallas metropolitan area that the fee
charged by Hicks Holdings Operating LLC is at least as favorable
as we could have obtained from an unaffiliated person. We
consider our current office space adequate for our current
operations.
Employees
We currently have seven executive officers. These individuals
are not obligated to devote any specific number of hours to our
matters but they intend to devote as much of their time as they
deem necessary to our affairs until we have completed our
initial business combination. The amount of time they will
devote in any time period will vary based on whether a target
business has been selected for our initial business combination
and the stage of the business combination process we are in. We
do not intend to have any full time employees prior to the
consummation of our initial business combination.
Periodic
Reporting and Financial Information
We have registered our units, common stock and warrants under
the Exchange Act and have reporting obligations, including the
requirement that we file annual, quarterly and current reports
with the SEC. In accordance with the requirements of the
Exchange Act, our annual reports will contain financial
statements audited and reported on by our independent registered
public accountants.
We will provide stockholders with audited financial statements
of the prospective target business as part of the tender offer
materials or proxy solicitation materials sent to stockholders
to assist them in assessing the target business. In all
likelihood, these financial statements will need to be prepared
in accordance with GAAP. We cannot assure you that any
particular target business identified by us as a potential
acquisition candidate will have financial statements prepared in
accordance with GAAP or that the potential target business will
be able to prepare its financial statements in accordance with
GAAP. To the extent that this requirement cannot
76
be met, we may not be able to acquire the proposed target
business. While this may limit the pool of potential acquisition
candidates, we do not believe that this limitation will be
material.
We will be required to have our internal control procedures
audited for the fiscal year ending December 31, 2011 as
required by the Sarbanes-Oxley Act. A target company may not be
in compliance with the provisions of the Sarbanes-Oxley Act
regarding adequacy of their internal controls. The development
of the internal controls of any such entity to achieve
compliance with the Sarbanes-Oxley Act may increase the time and
costs necessary to complete any such acquisition.
Legal
Proceedings
There is no material litigation, arbitration or governmental
proceeding currently pending against us or any members of our
management team in their capacity as such, and we and the
members of our management team have not been subject to any such
proceeding in the 12 months preceding the date of this
prospectus.
77
MANAGEMENT
Directors
and Executive Officers
Our directors, executive officers and director nominees are as
follows:
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Name
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Age
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Position
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Thomas O. Hicks
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64
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Chairman of the Board
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Robert M. Swartz
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58
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President and Chief Executive Officer
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Christina Weaver Vest
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39
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Chief Financial Officer and Senior Vice President
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Eric C. Neuman
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65
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Senior Vice President
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Thomas O. Hicks, Jr.
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32
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Secretary and Vice President
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Mack H. Hicks
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29
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Vice President
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Curt L. Crofford
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37
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Vice President
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William A. Montgomery
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61
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Director Nominee
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William F. Quinn
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62
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Director Nominee
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Thomas O. Hicks, our founder, has been our chairman of
the board since our inception. Since 2005, Mr. Hicks has
served as the chairman of Hicks Holdings LLC, a holding company
for real estate, private equity and sports investments of
Mr. Hicks and his family. Mr. Hicks and his affiliates
are also, directly or indirectly, the controlling stockholders
of Latrobe Specialty Steel Company, a specialty steel
manufacturer; DirecPath, a company that provides bundled DIRECTV
programming, broadband voice and data services, security and
other locally based services to multiple dwelling units across
the United States; Ocular LCD, Inc., a designer, manufacturer
and marketer of high-performance liquid crystal displays,
modules and systems; Grupo Pilar, an animal and pet food company
in Argentina; Anvita, Inc., a provider of decision support
systems for healthcare professionals; the National Hockey
Leagues Dallas Stars; Major League Baseballs Texas
Rangers; and a 50% interest in the English Premier Leagues
Liverpool Football Club. A sale of the Texas Rangers is pending
through a voluntary, prepackaged, court-supervised process under
Chapter 11 of the U.S. Bankruptcy Code pursuant to a
plan previously negotiated and agreed to by the current owners
of the Texas Rangers and the prospective buyers. Mr. Hicks
co-founded Hicks, Muse, Tate & Furst, a nationally
prominent private equity firm in the United States that
specialized in leveraged acquisitions, and served as its
chairman from 1989 through 2004. During Mr. Hicks
tenure as chairman, Hicks Muse raised over $12 billion of
private equity funds, and consummated over $50 billion of
leveraged acquisitions, and was one of the most active private
investment firms in the country. Mr. Hicks also co-founded
and served as co-chief executive officer of the leveraged
buy-out firm Hicks & Haas from 1984 until 1989.
Mr. Hicks currently serves as a director of DirecPath,
Ocular LCD, Inc., Latrobe Specialty Steel Company, Anvita, Inc.,
Fox Pan American Sports, LLC and the English Premier
Leagues Liverpool Football Club. Mr. Hicks received a
Masters of Business Administration degree from the
University of Southern California in 1970 and a Bachelor of
Business Administration degree from the University of Texas in
1968. Mr. Hicks is the father of Thomas O. Hicks, Jr.,
our secretary and a vice president of our company, and Mack
Hicks, a vice president of our company.
In Mr. Hicks position as our chairman, he will have
general supervision and control of our acquisition activities
subject to the ultimate authority of our board of directors and
shall be responsible for the execution of the policies of our
board of directors with respect to such matters.
Robert M. Swartz has been our president and chief
executive officer since our inception. Mr. Swartz has been
a managing director and partner of Hicks Equity Partners since
2007. Mr. Swartz has served as a director of Resolute
Energy Corporation since September 2009. From 1999 until 2007,
Mr. Swartz served in various positions at Centex
Corporation, a New York Stock Exchange home building company,
serving as Senior Vice President of Strategic Planning and
Mergers and Acquisitions from 1999 to 2000 and serving as
Chairman and Chief Executive Officer of Centex HomeTeam Services
from 2000 to 2007. Prior to 1999, Mr. Swartz was an
executive officer of various public companies. Mr. Swartz
currently serves as a director of Anvita, Inc. and Ocular LCD,
Inc. Mr. Swartz received a Bachelors of Science degree in
accounting from the State University
78
of New York in Albany in 1973 and a Master of Business
Administration degree in finance from New Hampshire College in
1976. Mr. Swartz is a Certified Public Accountant.
Christina Weaver Vest has been our chief financial
officer and a senior vice president since our inception.
Ms. Vest currently serves as a managing director and
partner of Hicks Equity Partners LLC, and previously served from
2005 until April 2007 as a senior vice president of its
affiliate, Hicks Holdings LLC. Ms. Vest previously served
as a Principal at HM Capital Partners (formerly Hicks, Muse,
Tate & Furst), which she joined in 1995. At HM
Capital, Ms. Vest principally focused on the firms
domestic branded consumer products investments as well as on
several Latin American media investments. Ms. Vest
currently serves as a director of Ocular LCD, Inc. and Anvita,
Inc. She is also a director of various HM Capital portfolio
companies, including Fox Pan American Sports, LLC, an
international sports programming and production company.
Ms. Vest received a Bachelors of Arts degree from Harvard
University in 1993 and a Masters of Business
Administration degree from Harvard Business School in 1999.
Eric C. Neuman has been a senior vice president since our
inception. Mr. Neuman currently serves as a managing
director and partner of Hicks Equity Partners LLC, and
previously served from 2005 until April 2007 as a senior vice
president of its affiliate, Hicks Holdings LLC. Mr. Neuman
has been a partner of HM Capital (formerly Hicks, Muse,
Tate & Furst), since 2000 and has served as an officer
since 1993. At HM Capital, he was involved in the acquisition of
most of the firms media investments during that time
period. In 2002, Mr. Neuman became responsible for HM
Capitals Latin American portfolio. He remains responsible
for monitoring the remaining investments in this portfolio and
overseeing their liquidation. Mr. Neuman currently serves
on the board of directors of DirecPath, LLC. In addition,
Mr. Neuman currently serves as a director of several HM
Capital portfolio companies, Intercable, an international
provider of television, internet and telephone services, and Fox
Pan American Sports, LLC, an international sports programming
and production company. Prior to joining HM Capital in 1993,
Mr. Neuman served for eight years as managing director of
Communications Partners, Ltd., a private merchant bank focused
on media and communications businesses. From 2001 until
September 2006, Mr. Neuman was a director of Cablevision
S.A., the leading Argentine cable company. Following the
devaluation of the Argentine peso in 2002, Cablevision S.A.
entered into a consensual restructuring agreement under
Argentine law with the majority of its creditors, which was
approved by the Argentine courts in August 2009. From 1976 to
1983, he served as Senior Vice President of InterFirst Bank in
Dallas and President of First Dallas Capital, a small business
investment company. Mr. Neuman received a Bachelors of Arts
degree from the University of South Florida in 1967 and a
Masters of Business Administration, with distinction, from
Northwestern University in 1970.
Thomas O. Hicks, Jr. has been a vice president and
secretary since our inception. Since 2005, Mr. Hicks has
served as a vice president of Hicks Holdings LLC. From 2003 to
2005, Mr. Hicks served as director of corporate sales and
suite sales for the Texas Rangers Baseball Club. From 2001 to
2003, Mr. Hicks was an analyst at Greenhill & Co.
LLC, a New York based merchant banking firm. As an analyst,
Mr. Hicks was involved in numerous private equity, mergers
and acquisition advisory and financial restructuring
transactions. Mr. Hicks currently serves as a director of
Resolute Energy Corporation. Mr. Hicks received a Bachelors
of Arts degree in government from the University of Texas at
Austin in 2001. Mr. Hicks is the son of Thomas O. Hicks,
our founder and chairman of the board, and the brother of Mack
H. Hicks, one of our vice presidents.
Mack H. Hicks has been a vice president since our
inception. Since January 2007, Mr. Hicks has served as a
vice president of Hicks Holdings LLC. From January 2006 to
December 2006, Mr. Hicks served as a research analyst at
Halcyon Asset Management LLC, a multi-strategy investment firm.
From June 2004 to January 2006, he served as an analyst in the
financial sponsors group of Credit Suisse, an investment banking
firm. As an analyst, Mr. Hicks was involved with several
leveraged buyouts, recapitalizations and acquisitions.
Mr. Hicks currently serves as a director of Wahanda, a
supplier of health, beauty and wellness products. Mr. Hicks
received a Bachelors of Arts degree from the University of Texas
at Austin in 2003. Mr. Hicks is the son of Thomas O. Hicks,
our founder and chairman of the board, and the brother of Thomas
O. Hicks, Jr., our secretary and a vice president of our
company.
Curt L. Crofford has been a vice president since our
inception. Since April 2007, Mr. Crofford has served as a
vice president of Hicks Equity Partners and from May 2005 to
April 2007 he was an associate
79
with HM Capital Partners. From 2003 to 2005, Mr. Crofford
attended the Fuqua School of Business at Duke University where
he earned his Masters of Business Administration. From 2000 to
2003, Mr. Crofford served as Director of Equities Research
for Dresdner Kleinwort Wasserstein in London, England. From 1995
to 2000, Mr. Crofford served as an Equities Research
Analyst for Donaldson, Lufkin & Jenrette and BT Alex
Brown in New York, where he provided investment recommendations
on stocks of companies in the U.S., European and Latin American
media industries. Mr. Crofford serves as a director of
various HM Capital portfolio companies, including Fox Pan
American Sports, LLC, an international sports programming and
production company; Grupo MVS, a Mexican pay television and
radio broadcasting operator; and Intercable, a Venezuelan
provider of pay television, internet and telephone services.
Mr. Crofford received his undergraduate degree from
Vanderbilt University.
William A. Montgomery has agreed to serve as a director
of our company and will join our board upon the closing of this
offering. Mr. Montgomery has been a private investor since
1999. Mr. Montgomery served as a director for Hicks
Acquisition Company I, Inc. from its inception in 2007
through consummation of a business combination with Resolute
Energy Corporation in 2009. From 1989 to 1999,
Mr. Montgomery was Chief Executive Officer of SA-SO
Company, a company engaged in the distribution of municipal and
traffic control products based in Dallas, Texas. Prior to 1989,
Mr. Montgomery worked as a registered representative in the
financial services industry, most recently serving with Morgan
Stanley in the Private Client Services group from 1985 to 1989.
Mr. Montgomery is also a board member and serves as
Compensation Committee Chairman of Windstream Corporation, a
telecommunications company headquartered in Little Rock,
Arkansas. Mr. Montgomery received a Bachelor of Science
degree in Business Administration and Finance from the
University of Arkansas in 1971.
William F. Quinn has agreed to serve as a director of our
company and will join our board upon the closing of this
offering. Mr. Quinn serves as the Chairman of American
Beacon Advisors, Inc., which manages approximately
$45 billion, including the American Airlines pension
and short-term fixed income assets and the American Beacon
mutual funds. Prior to being named to his current position,
Mr. Quinn served as both chairman and chief executive
officer from April 2006 to April 2009, president from November
1986 to April 2006, and director since 2001. Mr. Quinn
served as a director for Hicks Acquisition Company I, Inc.
from its inception in 2007 through consummation of a business
combination with Resolute Energy Corporation in 2009.
Mr. Quinn also served as a trustee of American Beacon
Advisors, Inc. and related mutual funds from 1987 until April
2008. He currently serves as chairman of Lighthouse Holdings,
Inc. From 1994 until August 2007, Mr. Quinn served as a
trust manager of Crescent Real Estate Equities Company. Prior to
his positions with American Beacon Advisors, Inc.,
Mr. Quinn held several management positions with American
Airlines and its subsidiaries. He has served as a director of
the board of American Airlines Federal Credit Union from July
1979 to present, including serving as chairman of the board from
November 1989 to May 2003. He concluded serving a two-year term
as chairman of the United Way of Tarrant County in June 2010,
where he has been a director since 2005 (with prior tenure from
1988 2000). He served as a director of the
Association for Financial Professionals from 2006 until 2008 and
served as the chairman of the Committee on the Investment of
Employee Benefit Assets (CIEBA) from 2006 to 2008. He currently
serves on the advisory board of the Dallas Society of Financial
Analysts. Mr. Quinn has served on the advisory board for
Southern Methodist Universitys Endowment Fund since
September 1996, the investment committee of the United Way of
Tarrant Countys Endowment funds since 1999 and is
currently serving his third term on the New York Stock Exchange
Pension Management Advisory Committee. Mr. Quinn received a
Bachelor of Science degree in Accounting from Fordham University
in 1969 and is a Certified Public Accountant.
Number
and Terms of Office of Directors and Officers
Our board of directors is divided into three classes with only
one class of directors being elected in each year and each class
(except for those directors appointed prior to our first annual
meeting of stockholders) serving a three-year term. The term of
office of the first class of directors, consisting of
Mr. Montgomery, will expire at our first annual meeting of
stockholders. The term of office of the second class of
directors, consisting of Mr. Hicks, will expire at the
second annual meeting of stockholders. The term of office of the
third class of directors, consisting of Mr. Quinn, will
expire at the third annual meeting of stockholders.
80
Our officers are appointed by the board of directors and serve
at the discretion of the board of directors, rather than for
specific terms of office. Our board of directors is authorized
to appoint persons to the offices set forth in our amended and
restated bylaws as it deems appropriate. Our amended and
restated bylaws provide that our officers may consist of a
chairman of the board, chief executive officer, president, chief
financial officer, vice presidents, secretary, treasurer and
such other offices as may be determined by the board of
directors.
Collectively, through their positions described above, our
officers and directors have extensive experience in the private
equity business. These individuals will play a key role in
identifying and evaluating prospective acquisition candidates,
selecting the target businesses, and structuring, negotiating
and consummating their acquisition.
Director
Independence
Although we are not required to have a majority of independent
directors on our board of directors, we have elected to have a
majority of independent directors. An independent
director is defined generally as a person other than an
officer or employee of the company or its subsidiaries or any
other individual having a relationship, which, in the opinion of
the companys board of directors would interfere with the
directors exercise of independent judgment in carrying out
the responsibilities of a director.
Our board of directors has determined that each of
Mr. Montgomery and Mr. Quinn, who have agreed to join
our board of directors and are expected to join our board of
directors upon the closing of this offering, will be independent
directors as such term is defined under the rules of the
American Stock Exchange and
Rule 10A-3
of the Exchange Act. Although our company will not be listed on
the American Stock Exchange upon consummation of this offering,
we have voluntarily applied the definition of director
independence used by the American Stock Exchange in making the
determinations with respect to Mr. Montgomery and
Mr. Quinn. In making the foregoing determinations, our
board of directors considered that investment clients of
American Beacon Advisors, Mr. Quinns employer, have
co-invested, on arms length terms and on a passive basis, with
affiliates of Mr. Hicks, our founder and chairman of the
board, in past private investments that are unrelated to our
company. Our independent directors will have regularly scheduled
meetings at which only independent directors are present.
Executive
Officer and Director Compensation
None of our executive officers or directors received any cash
compensation for services rendered. Commencing on the date of
this prospectus through the earlier of consummation of our
initial business combination or our liquidation, we will pay
Hicks Holdings Operating LLC, an entity owned and controlled by
Mr. Hicks, our founder and chairman of the board, a total
of $10,000 per month for office space and administrative
services, including secretarial support. This arrangement is
being agreed to by Hicks Holdings Operating LLC for our benefit
and is not intended to provide Mr. Hicks compensation in
lieu of a salary. We believe that such fees are at least as
favorable as we could have obtained from an unaffiliated third
party for such services. Other than this $10,000 per month fee,
no compensation of any kind, including finders and
consulting fees, will be paid to our sponsor, executive officers
and directors, or any of their respective affiliates, for
services rendered prior to or in connection with the
consummation of an initial 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. Our independent
directors will review on a quarterly basis all payments that
were made to our sponsor, officers, directors or our or their
affiliates.
After the completion of our initial business combination,
directors or members of our management team who remain with us,
may be paid consulting, management or other fees from the
combined company with any and all amounts being fully disclosed
to stockholders, to the extent then known, in the tender offer
materials or proxy solicitation materials furnished to our
stockholders in connection with a proposed business combination.
It is unlikely the amount of such compensation will be known at
the time, as it will be up to the directors of the
post-combination business to determine executive and director
compensation. Any compensation to be paid to our officers will
be determined, or recommended to the board of directors for
determination,
81
either by a compensation committee constituted solely by
independent directors or by a majority of the independent
directors on our board of directors.
We do not intend to take any action to ensure that members of
our management team maintain their positions with us after the
consummation of our initial business combination, although it is
possible that some or all of our executive officers and
directors may negotiate employment or consulting arrangements to
remain with us after the initial business combination. The
existence or terms of any such employment or consulting
arrangements to retain their positions with us may influence our
managements motivation in identifying or selecting a
target business but we do not believe that the ability of our
management to remain with us after the consummation of an
initial business combination will be a determining factor in our
decision to proceed with any potential business combination. We
are not party to any agreements with our executive officers and
directors that provide for benefits upon termination of
employment.
Board
Committees
Our board of directors intends to establish an audit committee
and a compensation committee upon consummation of a business
combination. At that time our board of directors intends to
adopt charters for these committees. Prior to such time we do
not intend to establish either committee. Accordingly, there
will not be a separate committee comprised of some members of
our board of directors with specialized accounting and financial
knowledge to meet, analyze and discuss solely financial matters
concerning prospective target businesses. We do not believe a
compensation committee is necessary prior to a business
combination as there will be no salary, fees or other
compensation being paid to our officers or directors prior to a
business combination other than as disclosed in this prospectus.
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.
Conflicts
of Interest
In order to minimize potential conflicts of interest that may
arise from multiple corporate affiliations, each of our officers
has agreed, pursuant to a written agreement with us, that until
the earliest of our initial business combination, our
liquidation or such time as he or she ceases to be an officer,
to present to us for our consideration, prior to presentation to
any other entity, any business opportunity with an enterprise
value of $100 million or more, subject to any pre-existing
fiduciary or contractual obligations he or she might have. If
any of our officers becomes aware of a business combination
opportunity that falls within the line of business of any entity
to which he or she has pre-existing fiduciary or contractual
obligations, he or she may be required to present such business
combination opportunity to such entity prior to presenting such
business combination opportunity to us or, in the case of a
noncompete obligation, possibly prohibited from referring such
opportunity to us. All of our officers currently have certain
relevant fiduciary duties or contractual obligations that may
take priority over their duties to us.
Thomas O. Hicks has relevant pre-existing fiduciary duties to
Latrobe Specialty Steel Company, a specialty steel manufacturer;
DirecPath, a provider of bundled DIRECTV programming, broadband
voice and data services, security and other locally based
services to multiple dwelling units; Ocular LCD, Inc., a
designer, manufacturer and marketer of high-performance liquid
crystal displays, modules and systems; Anvita, Inc., a provider
of decision support systems for health care professionals; Hicks
Sports Group, which owns and operates the Texas Rangers baseball
team and the Dallas Stars hockey team; and Fox Pan America
Sports, LLC, an international sports programming and production
company.
Certain of our officers who are employees of Hicks Holdings or
Hicks Equity Partners also have pre-existing fiduciary duties to
some of the above-referenced entities. Specifically, both
Christina Weaver Vest and Robert Swartz have pre-existing duties
to Ocular LCD, Inc. and Anvita, Inc. Both Mr. Swartz and
Thomas O. Hicks, Jr. have pre-existing fiduciary duties to
Resolute Energy Corporation. Mack Hicks has pre-existing
fiduciary duties to Wahanda, a supplier of health, beauty and
wellness products. Eric Neuman has pre-existing
82
fiduciary duties to DirecPath, Persona Cable, a cable,
television, internet and telecommunications provider in Canada,
and Urban Radio Communications, a radio broadcasting company.
Mr. Crofford has pre-existing fiduciary duties to Grupo
MVS, a Mexican pay television and radio broadcasting operator
and Intercable, a Venezuelan provider of pay television,
internet and telephone services. Ms. Vest and
Messrs. Neuman and Crofford have pre-existing fiduciary
duties to Fox Pan America Sports, LLC.
We do not believe that any of the foregoing pre-existing
fiduciary duties or contractual obligations will materially
undermine our ability to consummate a business combination
because the foregoing entities have specific industry focuses
and even, within those industries, may have constraints on the
size of acquisitions they would consider.
Each of our executive officers and directors may become involved
with subsequent blank check companies similar to our company,
although they have agreed not to participate in the formation
of, or become an officer or director of, any blank check company
that is not limited to a particular industry until we have
entered into a definitive agreement regarding our initial
business combination or we have failed to complete our initial
business combination within 21 months from the closing of
this offering.
Potential investors should also be aware of the following other
potential conflicts of interest:
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None of our officers and directors is required to commit his or
her full time to our affairs and, accordingly, may have
conflicts of interest in allocating his or her time among
various business activities.
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In the course of their other business activities, our officers
and directors may become aware of investment and business
opportunities which may be appropriate for presentation to us as
well as the other entities with which they are affiliated. Our
management may have conflicts of interest in determining to
which entity a particular business opportunity should be
presented. For a complete description of our managements
other affiliations, see Directors and
Executive Officers.
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Our sponsor purchased founder shares prior to the date of this
prospectus and our sponsor will purchase sponsor warrants in a
transaction that will close simultaneously with the closing of
this offering. Our sponsor has agreed to waive its redemption
rights with respect to its founder shares and public shares in
connection with the consummation of a business combination.
Additionally, our sponsor has agreed to waive its redemption and
liquidation rights with respect to its founder shares if we fail
to consummate a business combination within 21 months from
the closing of this offering. If we do not complete our initial
business combination within such
21-month
time period, the proceeds of the sale of the sponsor warrants
will be used to fund the redemption of our public shares, and
the sponsor warrants will expire worthless. With certain limited
exceptions, the founder shares and sponsor warrants (including
the common stock issuable upon exercise of the sponsor warrants)
will not be transferable, assignable or salable by our sponsor
(i) in the case of the founder shares, until (A) one
year after the completion of our initial business combination or
earlier if, subsequent to our business combination, the last
sales price of our common stock equals or exceeds $12.00 per
share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at
least 150 days after our initial business combination or
(B) we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction which results in all of
our stockholders having the right to exchange their shares of
common stock for cash, securities or other property, and
(ii) in the case of the sponsor warrants and the respective
common stock underlying such warrants, until 30 days after
the completion of our initial business combination. Since
Mr. Hicks, Mr. Swartz, Ms. Vest, Mr. Neuman,
Mr. Crofford, Thomas O. Hicks, Jr. and Mack H. Hicks
will indirectly own shares of our common stock or warrants
through our sponsor, our officers and directors may have a
conflict of interest in determining whether a particular target
business is an appropriate business with which to effect a
business combination.
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Our officers and directors may have a conflict of interest with
respect to evaluating a particular business combination if the
retention or resignation of any such officers and directors was
included by a target business as a condition to any agreement
with respect to a business combination.
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83
While we do not intend to pursue an initial business combination
with any company that is affiliated with our sponsor, officers
or directors, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial
business combination with such a company, we would obtain an
opinion from an independent investment banking firm which is a
member of FINRA, that such an initial business combination is
fair to our stockholders from a financial point of view.
Furthermore, in no event will our sponsor or any of our existing
officers or directors, or any of their respective affiliates, be
paid any finders fee, consulting fee or other compensation
prior to, or for any services they render in order to
effectuate, the consummation of our initial business combination.
In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present
business opportunities to a corporation if:
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the corporation could financially undertake the opportunity;
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the opportunity is within the corporations line of
business; and
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it would not be fair to the corporation and its stockholders for
the opportunity not to be brought to the attention of the
corporation.
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Accordingly, as a result of multiple business affiliations, our
officers and directors may have similar legal obligations
relating to presenting business opportunities meeting the
above-listed criteria to multiple entities. Each of
Messrs. Hicks, Swartz, Neuman and Crofford, Ms. Vest,
Thomas O. Hicks, Jr. and Mack H. Hicks is an officer,
member or partner of Hicks Holdings LLC or Hicks Equity Partners
LLC. However, each of such person will be required to offer all
suitable business opportunities with an enterprise value of less
than $100 million for a business combination to Hicks
Holdings LLC or Hicks Equity Partners LLC prior to presenting it
to us. 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 the event that we submit our initial business combination to
our public stockholders for a vote, our sponsor has agreed to
vote its founder shares in accordance with the majority of the
votes cast by the public stockholders and to vote any shares
purchased during or after the offering in favor of our initial
business combination.
Limitation
on Liability and Indemnification of Directors and
Officers
Our amended and restated certificate of incorporation provides
that our directors and officers will be indemnified by us to the
fullest extent authorized by Delaware law, as it now exists or
may in the future be amended. In addition, our amended and
restated certificate of incorporation provides that our
directors will not be personally liable for monetary damages to
us for breaches of their fiduciary duty as directors, unless
they violated their duty of loyalty to us or our stockholders,
acted in bad faith, knowingly or intentionally violated the law,
authorized unlawful payments of dividends, unlawful stock
purchases or unlawful redemptions, or derived an improper
personal benefit from their actions as directors.
We will enter into agreements with our officers and directors to
provide contractual indemnification in addition to the
indemnification provided for in our amended and restated
certificate of incorporation. We believe that these provisions
and agreements are necessary to attract qualified directors. Our
amended and restated bylaws also will permit us to secure
insurance on behalf of any officer, director or employee for any
liability arising out of his or her actions, regardless of
whether Delaware law would permit such indemnification. We will
purchase a policy of directors and officers
liability insurance that insures our directors and officers
against the cost of defense, settlement or payment of a judgment
in some circumstances and insures us against our obligations to
indemnify our directors and officers.
These provisions may discourage stockholders from bringing a
lawsuit against our directors for breach of their fiduciary
duty. These provisions also may have the effect of reducing the
likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a
stockholders investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions. We believe that these provisions, the insurance and
the indemnity agreements are necessary to attract and retain
talented and experienced directors and officers.
84
PRINCIPAL
STOCKHOLDERS
The following table sets forth information regarding the
beneficial ownership of our common stock as of the date of this
prospectus, and as adjusted to reflect the sale of our common
stock included in the units offered by this prospectus, and
assuming no purchase of units in this offering, by:
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each person known by us to be the beneficial owner of more than
5% of our outstanding shares of common stock;
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each of our officers and directors; and
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all our officers and directors as a group.
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Unless otherwise indicated, we believe that all persons named in
the table have sole voting and investment power with respect to
all shares of common stock beneficially owned by them. The
following table does not reflect record or beneficial ownership
of the sponsor warrants as these warrants are not exercisable
within 60 days of the date of this prospectus.
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Approximate
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Percentage of
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Outstanding
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Common Stock
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Number of Shares
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Before
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After
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Name and Address of Beneficial Owner
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Beneficially Owned
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Offering
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Offering(1)
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HH-HACII, L.P. (our sponsor)
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3,285,714
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100
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%
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12.5
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%
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100 Crescent Court, Suite 1200
Dallas, Texas 75201
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Thomas O. Hicks(2)
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3,285,714
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100
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%
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12.5
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%
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c/o Hicks
Holdings LLC
100 Crescent Court, Suite 1200
Dallas, Texas 75201
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All directors and executive officers as a group
(nine individuals)
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3,285,714
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100
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%
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12.5
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%
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(1) |
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Assumes exercise of the over-allotment option and no resulting
forfeiture of an aggregate of 428,571 founder shares held by our
sponsor and includes a portion of the founder shares in an
amount equal to 2.5% of our issued and outstanding shares after
this offering that are subject to forfeiture by our sponsor in
the event the last sales price of our stock does not equal or
exceed $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period within one
year following the closing of our initial business combination. |
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(2) |
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Mr. Hicks is the sole member of HH-HACII GP, LLC, the
general partner of our sponsor, and may be considered to have
beneficial ownership of our sponsors interests in us.
Mr. Hicks disclaims beneficial ownership of any shares of
our common stock in which he does not have a pecuniary interest. |
In June 2010, our sponsor purchased 3,285,714 founder shares for
an aggregate purchase price of $25,000, or approximately $0.0076
per share. Mr. Hicks, our founder and chairman of the
board, is the sole member of HH-HACII GP, LLC, the general
partner of our sponsor. In addition, Mr. Hicks, Robert M.
Swartz, our president and chief executive officer, Christina
Weaver Vest, our chief financial officer and a senior vice
president of our company, Eric C. Neuman, a senior vice
president of our company, Curt Crofford, a vice president of our
company, Thomas O. Hicks, Jr., our secretary and a vice
president of our company, and Mack H. Hicks, a vice
president of our company, are each limited partners of our
sponsor.
Immediately after this offering (assuming no exercise of the
underwriters over-allotment option), our sponsor will
beneficially own 12.5% of the then issued and outstanding shares
of our common stock. Because of this ownership block, it 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 our initial business combination.
85
To the extent the underwriters do not exercise the
over-allotment option, up to an aggregate of 428,571 founder
shares held by our sponsor will be subject to forfeiture. Our
sponsor will be required to forfeit only a number of founder
shares necessary to maintain our sponsors 12.5% ownership
interest in our common stock on a fully-diluted basis after
giving effect to the offering and the exercise, if any, of the
underwriters over-allotment option. In addition, the
founder earnout shares (equal to 2.5% of our issued and
outstanding shares after this offering) will be subject to
forfeiture by our sponsor in the event the last sales price of
our stock does not equal or exceed $12.00 per share (as adjusted
for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period within one year following the closing
of our initial business combination.
Our sponsor has committed to purchase 6,666,667 sponsor warrants
at a price of $0.75 per warrant ($5.0 million in the
aggregate) in a private placement that will occur simultaneously
with the closing of this offering. Each sponsor warrant entitles
the holder to purchase one share of our common stock at $12.00
per share. The purchase price of the sponsor warrants will be
added to the proceeds from this offering to be held in the trust
account pending our completion of our initial business
combination. If we do not complete our initial business
combination within 21 months from the closing of this
offering, the proceeds of the sale of the sponsor warrants will
be used to fund the redemption of our public shares, and the
sponsor warrants will expire worthless. The sponsor warrants are
subject to the transfer restrictions described below. The
sponsor warrants will not be redeemable by us so long as they
are held by our sponsor or its permitted transferees. If the
sponsor warrants are held by holders other than the sponsor or
its permitted transferees, the sponsor warrants will be
redeemable by us and exercisable by the holders on the same
basis as the warrants included in the units being sold in this
offering. The sponsor warrants may also be exercised by the
sponsor or its permitted transferees on a cashless basis.
Otherwise, the sponsor warrants have terms and provisions that
are identical to those of the warrants being sold as part of the
units in this offering.
Transfers
of Common Stock and Warrants by our Sponsor and
Mr. Hicks
The founder shares, sponsor warrants and any shares of common
stock and warrants purchased in this offering or issued upon
exercise of the sponsor warrants are each subject to transfer
restrictions pursuant to lockup provisions in the letter
agreements with us and the underwriters to be entered into by
our sponsor and Mr. Hicks. Those lockup provisions provide
that such securities are not transferable or salable (i) in
the case of the founder shares, until (A) one year after
the completion of our initial business combination or earlier
if, subsequent to our business combination, the last sales price
of our common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 150 days
after our initial business combination or (B) we consummate
a subsequent liquidation, merger, stock exchange or other
similar transaction which results in all of our stockholders
having the right to exchange their shares of common stock for
cash, securities or other property, and (ii) in the case of
the sponsor warrants and the respective common stock underlying
such warrants, until 30 days after the completion of our
initial business combination, except (a) to our officers or
directors, any affiliates or family members of any of our
officers or directors or any affiliates of our sponsor,
(b) by virtue of the laws of the state of Delaware or our
sponsors limited partnership agreement upon dissolution of
our sponsor; (c) in the event of our liquidation prior to
our completion of our initial business combination or
(d) in the event of our 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 consummation of our initial business
combination; provided, however, that these permitted transferees
must enter into a written agreement agreeing to be bound by
these transfer restrictions.
Registration
Rights
The holders of the founder shares and sponsor warrants will hold
registration rights to require us to register a sale of any of
our securities held by them pursuant to a registration rights
agreement to be signed prior to or on the effective date of this
offering. These stockholders will be entitled to make up to
three demands that we register such securities for sale under
the Securities Act. In addition, these stockholders will
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have piggy-back registration rights to include their
securities in other registration statements filed by us.
However, the registration rights agreement provides that we will
not permit any registration statement filed under the Securities
Act to become effective until termination of the applicable
lock-up
period, which occurs (i) in the case of the founder shares,
(A) one year after the completion of our initial business
combination or earlier if, subsequent to our business
combination, the last sales price of our common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing
at least 150 days after our initial business combination or
(B) when we consummate a subsequent liquidation, merger,
stock exchange or other similar transaction which results in all
of our stockholders having the right to exchange their shares of
common stock for cash, securities or other property, and
(ii) in the case of the sponsor warrants and the respective
common stock underlying such warrants, 30 days after the
completion of our initial business combination. We will bear the
costs and expenses of filing any such registration statements.
87
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In June 2010, we issued an aggregate of 3,285,714 founder shares
to our sponsor for an aggregate purchase price of $25,000 in
cash, or approximately $0.0076 per share. If the underwriters
determine the size of the offering should be increased, a stock
dividend would be effectuated in order to maintain the ownership
represented by the founder shares at the same percentage, as was
the case before the stock dividend.
If the underwriters do not exercise all or a portion of their
over-allotment option, our sponsor has agreed, pursuant to a
written agreement with us, that it will forfeit up to an
aggregate of 428,571 founder shares in proportion to the portion
of the over-allotment option that was not exercised. In
addition, the founder earnout shares (equal to 2.5% of our
issued and outstanding shares after this offering) will be
subject to forfeiture by our sponsor in the event the last sales
price of our stock does not equal or exceed $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period within one year following the closing
of our initial business combination. If such shares are
forfeited, we would record the aggregate fair value of the
shares forfeited and reacquired to treasury stock and a
corresponding credit to additional paid-in capital based on the
difference between the fair market value of the forfeited shares
and the price paid to us for such forfeited shares of
approximately $3,260. Upon receipt, such forfeited shares would
then be immediately cancelled, which would result in the
retirement of the treasury stock and a corresponding charge to
additional paid-in capital.
Thomas O. Hicks, our founder and chairman of the board, is the
sole member of HH-HACII GP, LLC, the general partner of our
sponsor. In addition, Mr. Hicks, Robert M. Swartz, our
president and chief executive officer, Christina Weaver Vest,
our chief financial officer and a senior vice president of our
company, Eric C. Neuman, a senior vice president of our company,
Curt Crofford, a vice president of our company, Thomas O.
Hicks, Jr., our secretary and a vice president of our
company, and Mack H. Hicks, a vice president of our company, are
each limited partners of our sponsor.
Our sponsor has committed to purchase 6,666,667 sponsor warrants
in a private placement that will occur simultaneously with the
closing of this offering. Each sponsor warrant entitles the
holder to purchase one share of our common stock at $12.00 per
share. Our sponsor has agreed that the sponsor warrants
(including the common stock issuable upon exercise of the
sponsor warrants) will not, subject to certain limited
exceptions, be transferred, assigned or sold by it until
30 days after the completion of our initial business
combination.
Each of Messrs. Hicks, Swartz, Neuman and Crofford,
Ms. Vest, Thomas O. Hicks, Jr. and Mack H. Hicks is an
officer, member or partner of Hicks Holdings LLC or Hicks Equity
Partners LLC. In order to minimize potential conflicts of
interest that may arise from multiple corporate affiliations,
each of our officers has agreed, pursuant to a written agreement
with us, that until the earliest of our initial business
combination, our liquidation or such time as he or she ceases to
be an officer, to present to us for our consideration, prior to
presentation to any other entity, any business opportunity with
an enterprise value of $100 million or more, subject to any
pre-existing fiduciary or contractual obligations he or she
might have. However, each such persons will be required to offer
all suitable business opportunities with an enterprise value of
less than $100 million for a business combination to Hicks
Holdings LLC or Hicks Equity Partners LLC prior to presenting it
to us. As more fully discussed in Management
Conflicts of Interest, if any of our officers becomes
aware of a business combination opportunity that falls within
the line of business of any entity to which he or she has
pre-existing fiduciary or contractual obligations, he or she may
be required to present such business combination opportunity to
such entity prior to presenting such business combination
opportunity to us. All of our officers currently have certain
relevant fiduciary duties or contractual obligations that may
take priority over their duties to us.
Hicks Holdings Operating LLC, an entity controlled by Thomas O.
Hicks, our founder and chairman of the board, has agreed to,
from the date of the closing of this offering through the
earlier of our consummation of a business combination or our
liquidation, make available to us office space and certain
office and secretarial services, as we may require from time to
time. We have agreed to pay Hicks Holdings Operating LLC $10,000
per month for these services. However, this arrangement is
solely for our benefit and is not intended to provide
Mr. Hicks compensation in lieu of salary. We believe, based
on rents and fees for similar
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services in the Dallas metropolitan area, that the fee charged
by Hicks Holdings Operating LLC is at least as favorable as we
could have obtained from an unaffiliated person.
Other than the $10,000 per-month administrative fee paid to
Hicks Holdings Operating LLC and reimbursement of 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, no compensation
or fees of any kind, including finders fees, consulting
fees or other similar compensation, will be paid to our sponsor,
officers or directors, or to any of their respective affiliates,
prior to or with respect to our initial business combination
(regardless of the type of transaction that it is). Our
independent directors will review on a quarterly basis all
payments that were made to our sponsor, officers, directors or
our or their affiliates.
As of the date of this prospectus, Mr. Hicks has also
advanced to us an aggregate of $225,000 to cover expenses
related to this offering. This loan will be payable without
interest on the earlier of December 31, 2010 or the closing
of this offering. We intend to repay this loan from the proceeds
of this offering not placed in the trust account.
In addition, in order to finance transaction costs in connection
with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be
required. If we consummate an initial business combination, we
would repay such loaned amounts. In the event that the initial
business combination does not close, we may use a portion of the
working capital held outside the trust account to repay such
loaned amounts but no proceeds from our trust account would be
used for such repayment. Such loans may be convertible into
warrants of the post business combination entity at a price of
$0.75 per warrant at the option of the lender. The warrants
would be identical to the sponsor warrants. The holders of a
majority of such warrants (or underlying shares) will be
entitled to demand that we register these securities pursuant to
an agreement to be entered into at the time of the loan. The
holders of a majority of these securities would have certain
piggy-back registration rights with respect to
registration statements filed subsequent to such date. We will
bear the costs and expenses of filing any such registration
statements. The terms of such loans by our officers and
directors, if any, have not been determined and no written
agreements exist with respect to such loans.
After our initial business combination, members of our
management team who remain with us may be paid consulting,
management or other fees from the combined company with any and
all amounts being fully disclosed to our stockholders, to the
extent then known, in the tender offer or proxy solicitation
materials, as applicable, furnished to our stockholders. It is
unlikely the amount of such compensation will be known at the
time of distribution of such tender offer materials or at the
time of a stockholder meeting held to consider our initial
business combination, as applicable, as it will be up to the
directors of the post-combination business to determine
executive and director compensation.
All ongoing and future transactions between us and any member of
our management team or his or her respective affiliates will be
on terms believed by us at that time, based upon other similar
arrangements known to us, to be no less favorable to us than are
available from unaffiliated third parties. It is our intention
to obtain estimates from unaffiliated third parties for similar
goods or services to ascertain whether such transactions with
affiliates are on terms that are no less favorable to us than
are otherwise available from such unaffiliated third parties. If
a transaction with an affiliated third party were found to be on
terms less favorable to us than with an unaffiliated third
party, we would not engage in such transaction.
We have entered into a registration rights agreement with
respect to the founder shares and sponsor warrants, which is
described under the heading Principal
Stockholders Registration Rights.
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DESCRIPTION
OF SECURITIES
Our authorized capital stock consists of 500,000,000 shares
of common stock, $0.0001 par value, and
1,000,000 shares of undesignated preferred stock,
$0.0001 par value. The following description summarizes the
material terms of our capital stock. Because it is only a
summary, it may not contain all the information that is
important to you.
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 comprising the units will
begin separate trading on the 52nd day following the date
of this prospectus unless Citigroup Global Markets Inc. informs
us of its decision to allow earlier separate trading, subject to
our having filed the Current Report on
Form 8-K
described below and having issued a press release announcing
when such separate trading will begin.
In no event will the common stock and warrants be traded
separately until we have filed with the SEC a Current Report on
Form 8-K
which includes an audited balance sheet reflecting our receipt
of the gross proceeds of this offering. We will file a Current
Report on
Form 8-K
which includes this audited balance sheet upon the consummation
of this offering, which is anticipated to take place three
business days after the date of this prospectus. The audited
balance sheet will include proceeds we received from the
exercise of the over-allotment option if such option is
exercised prior to the filing of the Current Report on
Form 8-K.
If the underwriters over-allotment option is exercised
following the initial filing of such Current Report on
Form 8-K,
a second or amended Current Report on
Form 8-K
will be filed to provide updated financial information to
reflect the exercise of the underwriters over-allotment
option.
Common
Stock
As of the date of this prospectus, there were
3,285,714 shares of our common stock outstanding, all of
which were held of record by our sponsor. This includes an
aggregate of 428,571 shares of common stock subject to
forfeiture by our sponsor to the extent that the
underwriters over-allotment option is not exercised in
full so that our sponsor will own 12.5% of our issued and
outstanding shares after this offering (assuming our sponsor
does not purchase units in this offering). Mr. Hicks, our
founder and chairman of the board, is the sole member of
HH-HACII GP, LLC, the general partner of our sponsor. In
addition, Mr. Hicks, Robert M. Swartz, our president and
chief executive officer, Christina Weaver Vest, our chief
financial officer and a senior vice president of our company,
Eric C. Neuman, a senior vice president of our company, Curt
Crofford, a vice president of our company, Thomas O.
Hicks, Jr., our secretary and a vice president of our
company, and Mack H. Hicks, a vice president of our company, are
each limited partners of our sponsor. Upon closing of this
offering, 22,857,143 shares of our common stock will be
outstanding (assuming no exercise of the underwriters
over-allotment option).
Common stockholders of record are entitled to one vote for each
share held on all matters to be voted on by stockholders. Our
board of directors is divided into three classes, each of which
will generally serve for a term of three years with only one
class of directors being elected in each year. There is no
cumulative voting with respect to the election of directors,
with the result that the holders of more than 50% of the shares
voted for the election of directors can elect all of the
directors. Our stockholders are entitled to receive ratable
dividends when, as and if declared by the board of directors out
of funds legally available therefor.
Because our amended and restated certificate of incorporation
authorizes the issuance of up to 500,000,000 shares of
common stock, if we were to enter into a business combination,
we may (depending on the terms of such a business combination)
be required to increase the number of shares of common stock
which we are authorized to issue at the same time as our
stockholders vote on the business combination to the extent we
seek stockholder approval in connection with a business
combination.
We do not currently intend to hold an annual meeting of
stockholders until after we consummate a business combination,
and thus may not be in compliance with Section 211(b) of
the DGCL. Therefore, if our
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stockholders want us to hold an annual meeting prior to our
consummation of a business combination, they may attempt to
force us to hold one by submitting an application to the
Delaware Court of Chancery in accordance with
Section 211(c) of the DGCL.
Unlike other blank check companies that hold stockholder votes
and conduct proxy solicitations in conjunction with their
initial business combinations and provide for related
redemptions of public shares for cash upon consummation of such
initial business combinations even when a vote is not required
by law, we intend to consummate our initial business combination
and conduct the redemptions without a stockholder vote pursuant
to the tender offer rules of the SEC, and file tender offer
documents with the SEC. The tender offer documents will contain
substantially the same financial and other information about the
initial business combination and the redemption rights as is
required under the SECs proxy rules. If, however, a
stockholder vote is required by law, or we decide to hold a
stockholder vote for business or other legal reasons, we will,
like other blank check companies, offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy
rules and not pursuant to the tender offer rules. If we seek
stockholder approval, we will consummate our initial business
combination only if a majority of the outstanding shares of
common stock voted are voted in favor of the business
combination. However, the participation of our sponsor,
officers, directors, advisors or their affiliates in
privately-negotiated transactions (as described in this
prospectus), if any, could result in the approval of a business
combination even if a majority of our public stockholders vote,
or indicate their intention to vote against, such business
combination. For purposes of seeking approval of the majority of
our outstanding shares of common stock, non-votes will have no
effect on the approval of a business combination once a quorum
is obtained. We intend to give approximately 30 days (but
not less than 10 days nor more than 60 days) prior
written notice of any such meeting, if required, at which a vote
shall be taken to approve a business combination.
If we seek stockholder approval in connection with a business
combination, our sponsor has agreed to vote its founder shares
in accordance with the majority of the votes cast by the public
stockholders and to vote any public shares purchased during or
after the offering in favor of our initial business combination.
In addition, our sponsor has agreed to waive its redemption
rights with respect to its founder shares and public shares in
connection with the consummation of a business combination,
although it will be entitled to redemption and liquidation
rights with respect to any public shares it holds if we fail to
consummate a business combination within the required time
period.
Pursuant to our amended and restated certificate of
incorporation, if we are unable to consummate a business
combination within 21 months from the closing of this
offering, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares, at a per-share
price, payable in cash, equal to the aggregate amount including
interest then on deposit in the trust account, but net of any
accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following our dissolution, a pro rata
share of the balance of our net assets, if any, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law. Our sponsor has agreed to waive its redemption
and liquidation rights with respect to its founder shares if we
fail to consummate a business combination within 21 months
from the closing of this offering. However, if our sponsor or
any of our officers, directors or affiliates acquire public
shares in or after this offering, they will be entitled to
redemption and liquidation rights with respect to such public
shares if we fail to consummate a business combination within
the required time period.
In the event of a liquidation, dissolution or winding up of the
company after a business combination, our stockholders are
entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after
provision is made for each class of stock, if any, having
preference over the common stock. Our stockholders have no
preemptive or other subscription rights. There are no sinking
fund provisions applicable to the common stock, except that we
will provide our stockholders with the opportunity to redeem
their shares of our common stock for cash equal to their pro
rata share of the aggregate amount including interest then on
deposit in the trust account, but net of any accrued and unpaid
taxes and deferred
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underwriting commissions, upon the consummation of our initial
business combination, subject to the limitations described
herein.
Founder
Shares
The founder shares are identical to the shares of common stock
included in the units being sold in this offering, and holders
of founder shares have the same stockholder rights as public
stockholders, except that (i) the founder shares are
subject to certain transfer restrictions, as described in more
detail below, and (ii) our sponsor has agreed (A) to
waive its redemption rights with respect to its founder shares
and public shares in connection with the consummation of a
business combination and (B) to waive its redemption and
liquidation rights with respect to its founder shares if we fail
to consummate a business combination within 21 months from
the closing of this offering, although it will be entitled to
redemption and liquidation rights with respect to any public
shares it holds if we fail to consummate a business combination
within such time period. If we submit our initial business
combination to our public stockholders for a vote, our sponsor
has agreed to vote its founder shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination.
With certain limited exceptions, the founder shares are not
transferable, assignable or salable (except to our officers and
directors and other persons or entities affiliated with the
sponsor, each of whom will be subject to the same transfer
restrictions) until (i) one year after the completion of
our initial business combination or earlier if, subsequent to
our business combination, the last sales price of our common
stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day
period commencing at least 150 days after our initial
business combination or (ii) we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction
which results in all of our stockholders having the right to
exchange their shares of common stock for cash, securities or
other property. In addition, the founder earnout shares (equal
to 2.5% of our issued and outstanding shares after this
offering) will be subject to forfeiture by our sponsor in the
event the last sales price of our stock does not equal or exceed
$12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period within one year
following the closing of our initial business combination.
Preferred
Stock
Our amended and restated certificate of incorporation provides
that shares of preferred stock may be issued from time to time
in one or more series. Our board of directors will be authorized
to fix the voting rights, if any, designations, powers,
preferences, the relative, participating, optional or other
special rights and any qualifications, limitations and
restrictions thereof, applicable to the shares of each series.
Our board of directors will be able to, without stockholder
approval, issue preferred stock with voting and other rights
that could adversely affect the voting power and other rights of
the holders of the common stock and could have anti-takeover
effects. The ability of our board of directors to issue
preferred stock without stockholder approval could have the
effect of delaying, deferring or preventing a change of control
of us or the removal of existing management. We have no
preferred stock outstanding at the date hereof. 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. No
shares of preferred stock are being issued or registered in this
offering. Notwithstanding the foregoing, our amended and
restated certificate of incorporation prohibits us from issuing
shares of preferred stock prior to our initial business
combination, except in connection with the consummation of our
initial business combination that has been approved by a
majority of the votes cast by our public stockholders.
Warrants
Public
Stockholders Warrants
Each warrant entitles the registered holder to purchase one
share of our common stock at a price of $12.00 per share,
subject to adjustment as discussed below, at any time commencing
on the later of 12 months from the closing of this offering
or 30 days after the completion of our initial business
combination.
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However, the warrants will be exercisable only if a registration
statement relating to the common stock issuable upon exercise of
the warrants is effective and current. The warrants will expire
five years after the completion of our initial business
combination, at 5:00 p.m., New York time, or earlier upon
redemption or liquidation.
Once the warrants become exercisable, we may call the warrants
for redemption:
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon not less than 30 days prior written notice of
redemption (the
30-day
redemption period to each warrant holder; and
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if, and only if, the reported last sale price of the common
stock equals or exceeds $18.00 per share for any 20 trading days
within a 30 trading day period ending three business days before
we send to the notice of redemption to the warrant holders.
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We have established the last of the redemption criterion
discussed above to prevent a redemption call unless there is at
the time of the call a significant premium to the warrant
exercise price. If the foregoing conditions are satisfied and we
issue a notice of redemption of the warrants, each warrant
holder will be entitled to exercise his, her or its warrant
prior to the scheduled redemption date. However, the price of
the common stock may fall below the $18.00 redemption trigger
price as well as the $12.00 warrant exercise price after the
redemption notice is issued.
If we call the warrants for redemption as described above, our
management will have the option to require any holder that
wishes to exercise his, her or its warrant to do so on a
cashless basis. If our management takes advantage of
this option, all holders of warrants would pay the exercise
price by surrendering his, her or its warrants for that number
of shares of common stock equal to the quotient obtained by
dividing (x) the product of the number of shares of common
stock underlying the warrants, multiplied by the difference
between the exercise price of the warrants and the fair
market value (defined below) by (y) the fair market
value. The fair market value shall mean the average
reported last sale price of the common stock for the 10 trading
days ending on the third trading day prior to the date on which
the notice of redemption is sent to the holders of warrants. If
our management takes advantage of this option, the notice of
redemption will contain the information necessary to calculate
the number of shares of common stock to be received upon
exercise of the warrants, including the fair market
value in such case. Requiring a cashless exercise in this
manner will reduce the number of shares to be issued and thereby
lessen the dilutive effect of a warrant redemption. We believe
this feature is an attractive option to us if we do not need the
cash from the exercise of the warrants after a business
combination. If we call our warrants for redemption and our
management does not take advantage of this option, our sponsor,
and its permitted transferees would still be entitled to
exercise their sponsor warrants for cash or on a cashless basis
using the same formula described above that other warrant
holders would have been required to use had all warrant holders
been required to exercise their warrants on a cashless basis, as
described in more detail below.
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, stock
split, extraordinary dividend, or our recapitalization,
reorganization, merger or consolidation. However, the exercise
price and number of shares of common stock issuable on exercise
of the warrants will not be adjusted for issuances of common
stock at a price below the warrant exercise price.
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 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 (or on a
cashless
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basis, if applicable), by certified or official bank check
payable to us, for the number of warrants being exercised. The
warrant holders do not have the rights or privileges of holders
of common stock and any voting rights until they exercise their
warrants and receive shares of common stock. After the issuance
of shares of common stock upon exercise of the warrants, each
holder will be entitled to one vote for each share held of
record on all matters to be voted on by stockholders.
No warrants will be exercisable unless at the time of exercise a
prospectus relating to the common stock issuable upon exercise
of the warrants is current and available throughout the
30-day
redemption period 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. We are not
registering the shares of common stock issuable upon exercise of
the warrants at this time. However, under the terms of the
warrant agreement, we have agreed to meet these conditions and
use our best efforts to file a registration statement covering
such shares and 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, and if we do not maintain a current
prospectus related to the common stock issuable upon exercise of
the warrants, holders will be unable to exercise their warrants
and we will not be required to settle any such warrant exercise.
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, we
will not be required to net cash settle or cash settle the
warrant exercise, the warrants may have no value, the market for
the warrants may be limited and the warrants may expire
worthless.
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.
Sponsor
Warrants
The sponsor warrants (including the common stock issuable upon
exercise of the sponsor warrants) will not be transferable,
assignable or salable until 30 days after the completion of
our initial business combination (except, among other limited
exceptions as described under Principal
Stockholders Transfers of Common Stock and Warrants
by Our Sponsor and Mr. Hicks, to our officers and
directors and other persons or entities affiliated with the
sponsor) and they will not be redeemable by us so long as they
are held by the sponsor or its permitted transferees. Otherwise,
the sponsor warrants have terms and provisions that are
identical to those of the warrants being sold as part of the
units in this offering, except that such warrants may be
exercised by the holders on a cashless basis. If the sponsor
warrants are held by holders other than the sponsor or its
permitted transferees, the sponsor warrants will be redeemable
by us and exercisable by the holders on the same basis as the
warrants included in the units being sold in this offering.
If holders of the sponsor warrants elect to exercise them on a
cashless basis, they would pay the exercise price by
surrendering his, her or its warrants for that number of shares
of common stock equal to the quotient obtained by dividing
(x) the product of the number of shares of common stock
underlying the warrants, multiplied by the difference between
the exercise price of the warrants and the fair market
value (defined below) by (y) the fair market value.
The fair market value shall mean the average
reported last sale price of the common stock for the 10 trading
days ending on the third trading day prior to the date on which
the notice of warrant exercise is sent to the warrant agent. The
reason that we have agreed that these warrants will be
exercisable on a cashless basis so long as they are held by our
sponsor, Mr. Hicks or their affiliates and permitted
transferees is because it is not known at this time whether they
will be affiliated with us following a business combination. If
they remain affiliated with us, their ability to sell our
securities in the open market will be significantly limited. We
expect to have policies in place that prohibit insiders from
selling our securities except during specific periods of time.
Even during such periods of time when insiders will be permitted
to sell our securities, an insider cannot trade in our
securities if he or she is in possession of material non-public
information. Accordingly, unlike public stockholders who could
exercise their warrants and sell the shares of common stock
received upon such exercise freely in the open market in order
to recoup the cost of such exercise, the insiders could be
significantly restricted from selling such securities. As a
result, we believe that allowing the holders to exercise such
warrants on a cashless basis is appropriate.
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Our sponsor and Mr. Hicks have agreed not to transfer,
assign or sell any of the sponsor warrants (including the common
stock issuable upon exercise of any of these warrants) until the
date that is 30 days after the date we complete our initial
business combination, except that, among other limited
exceptions as described under Principal
Stockholders Transfers of Common Stock and Warrants
by our Sponsor and Mr. Hicks transfers can be made to
our officers and directors and other persons or entities
affiliated with the sponsor.
Dividends
We have not paid any cash dividends on our common stock to date
and do not intend to pay cash dividends prior to the completion
of a business combination. The payment of cash dividends in the
future will be dependent upon our revenues and earnings, if any,
capital requirements and general financial condition subsequent
to completion of a business combination. The payment of any
dividends subsequent to a business combination will be within
the discretion of our board of directors at such time. 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 of directors does not anticipate
declaring any dividends in the foreseeable future. In addition,
our board of directors is not currently contemplating and does
not anticipate declaring any stock dividends in the foreseeable
future, except if we increase the size of the offering pursuant
to Rule 462(b) under the Securities Act, in which case we
will effect a stock dividend immediately prior to the
consummation of the offering in such amount as to maintain our
sponsors ownership at 12.5% of our issued and outstanding
shares of our common stock upon the consummation of this
offering. Further, if we incur any indebtedness, our ability to
declare dividends may be limited by restrictive covenants we may
agree to in connection therewith.
Our
Transfer Agent and Warrant Agent
The transfer agent for our common stock and warrant agent for
our warrants is Continental Stock Transfer &
Trust Company. We have agreed to indemnify Continental
Stock Transfer & Trust Company in its roles as
transfer agent and warrant agent, its agents and each of its
stockholders, directors, officers and employees against all
claims and losses that may arise out of acts performed or
omitted for its activities in that capacity, except for any
liability due to any gross negligence or intentional misconduct
of the indemnified person or entity.
Amendments
to our Certificate of Incorporation
Our amended and restated certificate of incorporation contains
certain requirements and restrictions relating to this offering
that will apply to us until the consummation of our business
combination. These provisions cannot be amended without the
approval of a majority of our stockholders. Specifically, our
amended and restated certificate of incorporation provides,
among other things, that:
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on the date of this prospectus, $197.0 million (or
$226.25 million if the underwriters over-allotment
option is exercised in full) shall be placed into the trust
account;
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if we are unable to consummate a business combination within
21 months from the closing of this offering, we will
(i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible, redeem 100% of
our public shares, at a per-share price, payable in cash, equal
to the aggregate amount including interest then on deposit in
the trust account, but net of any accrued and unpaid taxes (less
up to $100,000 of such net interest to pay dissolution
expenses), divided by the number of then outstanding public
shares, together with the contingent right to receive, in cash,
following our dissolution, a pro rata share of the balance of
our net assets, if any, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, dissolve
and liquidate, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law;
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prior to our initial business combination, we may not issue
additional stock that participates in any manner in the proceeds
of the trust account, or that votes as a class with the common
stock sold in this offering on a business combination; and
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although we do not intend to enter into a business combination
with a target business that is affiliated with our sponsor, our
directors or officers, we are not prohibited from doing so. In
the event we enter into such a transaction, we will obtain an
opinion from an independent investment banking firm that is a
member of FINRA that such a business combination is fair to our
stockholders from a financial point of view.
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In the event we seek stockholder approval in connection with our
business combination, our amended and restated certificate of
incorporation provides that we may consummate our initial
business combination if approved by a majority of the shares of
common stock voted by our stockholders at a duly held
stockholders meeting.
Certain
Anti-Takeover Provisions of Delaware Law
We will be subject to the provisions of Section 203 of the
DGCL regulating corporate takeovers upon consummation of this
offering. This statute prevents certain Delaware corporations,
under certain circumstances, from engaging in a business
combination with:
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a stockholder who owns 15% or more of our outstanding voting
stock (otherwise known as an interested stockholder);
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an affiliate of an interested stockholder; or
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an associate of an interested stockholder, for three years
following the date that the stockholder became an interested
stockholder.
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A business combination includes a merger or sale of
more than 10% of our assets. However, the above provisions of
Section 203 do not apply if:
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our board of directors approves the transaction that made the
stockholder an interested stockholder, prior to the
date of the transaction;
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after the completion of the transaction that resulted in the
stockholder becoming an interested stockholder, that stockholder
owned at least 85% of our voting stock outstanding at the time
the transaction commenced, other than statutorily excluded
shares of common stock; or
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on or subsequent to the date of the transaction, the business
combination is approved by our board of directors and authorized
at a meeting of our stockholders, and not by written consent, by
an affirmative vote of at least two-thirds of the outstanding
voting stock not owned by the interested stockholder.
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Securities
Eligible for Future Sale
Immediately after this offering (assuming no exercise of the
underwriters over-allotment option and the forfeiture of
428,571 founder shares held by our sponsor) we will have
22,857,143 shares of common stock outstanding. Of these
shares, the 20,000,000 shares sold in this offering 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 2,857,143 shares and
all 6,666,667 sponsor warrants are restricted securities under
Rule 144, in that they were issued in private transactions
not involving a public offering.
Rule 144
Pursuant to Rule 144, a person who has beneficially owned
restricted shares of our common stock or warrants for at least
six months would be entitled to sell their securities provided
that (i) such person 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 (ii) we are subject to the
Exchange Act periodic reporting requirements for at least three
months before the sale and have filed all required reports under
Section 13 or 15(d) of the Exchange Act during the
12 months (or such shorter period as we were required to
file reports) preceding the sale.
Persons who have beneficially owned restricted shares of our
common stock or warrants for at least six months but who are our
affiliates at the time of, or at any time during the three
months preceding, a sale,
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would be subject to additional restrictions, by which such
person would be entitled to sell within any three-month period
only a number of securities that does not exceed the greater of:
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1% of the total number of shares of common stock then
outstanding, which will equal 228,571 shares immediately
after this offering (or 262,857 if the underwriters exercise
their over-allotment option); or
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the average weekly reported trading volume of the common stock
during the four calendar weeks preceding the filing of a notice
on Form 144 with respect to the sale.
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Sales by our affiliates under Rule 144 are also limited by
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell
Companies
Rule 144 is not available for the resale of securities
initially issued by shell companies (other than business
combination related shell companies) or issuers that have been
at any time previously a shell company. However, Rule 144
also includes an important exception to this prohibition if the
following conditions are met:
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the issuer of the securities that was formerly a shell company
has ceased to be a shell company;
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the issuer of the securities is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act;
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the issuer of the securities has filed all Exchange Act reports
and material required to be filed, as applicable, during the
preceding 12 months (or such shorter period that the issuer
was required to file such reports and materials), other than
Form 8-K
reports; and
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at least one year has elapsed from the time that the issuer
filed current Form 10 type information with the SEC
reflecting its status as an entity that is not a shell company.
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As a result, our sponsor will be able to sell its founder shares
and sponsor warrants pursuant to Rule 144 without
registration one year after we have completed our initial
business combination.
Registration
rights
The holders of the founder shares and sponsor warrants (and any
shares of common stock issuable upon the exercise of any of the
foregoing) will be entitled to registration rights pursuant to a
registration rights agreement to be signed prior to or on the
effective date of this offering. The holders of the majority of
these securities are entitled to make up to three demands that
we register such securities. In addition, the holders have
certain piggy-back registration rights with respect
to registration statements filed subsequent to our consummation
of an initial business combination. However, the registration
rights agreement provides that we will not permit any
registration statement filed under the Securities Act to become
effective until termination of the applicable
lock-up
period, which occurs (i) in the case of the founder shares,
(A) one year after the completion of our initial business
combination or earlier if, subsequent to our business
combination, the last sales price of our common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing
at least 150 days after our initial business combination or
(B) when we consummate a subsequent liquidation, merger,
stock exchange or other similar transaction which results in all
of our stockholders having the right to exchange their shares of
common stock for cash, securities or other property, and
(ii) in the case of the sponsor warrants and the respective
common stock underlying such warrants, 30 days after the
completion of our initial business combination. We will bear the
expenses incurred in connection with the filing of any such
registration statements.
Quotation
of Securities
We have applied to have our units, common stock and warrants
quoted on the on the OTCBB under the symbols
, ,
, respectively. We anticipate that
our units will be quoted on the OTCBB on or promptly after the
effective date of the registration statement. Following the date
the shares of our common stock and warrants are eligible to
trade separately, we anticipate that the shares of our common
stock and warrants will be quoted separately and as a unit on
the on the OTCBB.
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MATERIAL
U.S. FEDERAL TAX CONSIDERATIONS
This is a general summary of the material U.S. federal tax
consequences of the acquisition, ownership and disposition of
our units, common stock and warrants, which we refer to
collectively as our securities, purchased by public stockholders
pursuant to this offering. This discussion assumes that
stockholders will hold our securities as capital assets within
the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended (the Code). This discussion does
not address all aspects of U.S. federal taxation that may
be relevant to a public stockholder in light of such
stockholders particular circumstances. In addition, this
discussion does not address (i) U.S. gift or estate
tax laws except to the limited extent set forth below,
(ii) state, local or foreign tax consequences,
(iii) the special tax rules that may apply to certain
stockholders, including without limitation banks, insurance
companies, financial institutions, broker-dealers, taxpayers
that have elected
mark-to-market
accounting, taxpayers subject to the alternative minimum tax
provisions of the Code, tax-exempt entities,
S corporations, regulated investment companies, real estate
investment trusts, taxpayers whose functional currency is not
the U.S. dollar, U.S. expatriates or former long-term
residents of the United States, or governments or their agencies
or instrumentalities, or (iv) the special tax rules that
may apply to a stockholder that acquires, holds, or disposes of
our securities as part of a straddle, hedge, wash sale (except
to the limited extent described below), constructive sale or
conversion transaction or other integrated investment.
Additionally, this discussion does not consider the tax
treatment of partnerships (including entities treated as
partnerships for U.S. federal tax purposes) or other
pass-through entities or persons who hold our securities through
such entities. The tax treatment of a partnership and each
partner thereof will generally depend upon the status and
activities of the partnership and such partner. Thus,
partnerships, other pass-through entities and persons holding
our securities through such entities should consult their own
tax advisors.
This discussion is based on current provisions of the Code,
U.S. Treasury regulations promulgated under the Code,
judicial opinions, and published rulings and procedures of the
United States Internal Revenue Service (IRS), all as
in effect on the date of this prospectus and all of which are
subject to change, possibly with retroactive effect. We have not
sought, and will not seek, any ruling from the IRS or any
opinion of counsel with respect to the tax consequences
discussed below, and there can be no assurance that the IRS will
not take a position contrary to the tax consequences discussed
below or that any position taken by the IRS would not be
sustained.
As used in this Material U.S. Federal Tax
Considerations section only, the term
U.S. person means a person that is, for
U.S. federal income tax purposes (i) an individual
citizen or resident of the United States, (ii) a
corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any State thereof or the
District of Columbia, (iii) an estate the income of which
is subject to U.S. federal income taxation regardless of
its source, or (iv) a trust if (A) a court within the
United States is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the
trust, or (B) it has in effect a valid election to be
treated as a U.S. person. As used in this discussion, the
term U.S. holder means a beneficial owner of
our securities that is a U.S. person and the term
non-U.S. holder
means a beneficial owner of our securities (other than an entity
that is treated as a partnership or as a disregarded entity for
U.S. federal income tax purposes) that is not a
U.S. person.
This discussion is only a summary of material U.S. federal
income and estate tax consequences of the acquisition, ownership
and disposition of our securities. Each prospective investor is
urged to consult its own tax advisors with respect to the
U.S. federal, state, local and foreign tax consequences to
such investor of the acquisition, ownership and disposition of
our securities.
Company
Personal
Holding Company Status
We could be subject to a second level of U.S. federal
income tax on a portion of our income if we are determined to be
a personal holding company (PHC) for
U.S. federal income tax purposes. A U.S. corporation
generally will be classified as a PHC for U.S. federal
income tax purposes in a given taxable year if (i) at any
time during the last half of such taxable year, five or fewer
individuals (without regard to their citizenship
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or residency and including as individuals for this purpose
certain entities such as certain tax-exempt organizations,
pension funds, and charitable trusts) own or are deemed to own
(pursuant to certain constructive ownership rules) more than 50%
of the stock of the corporation by value and (ii) at least
60% of the corporations adjusted ordinary gross income, as
determined for U.S. federal income tax purposes, for such
taxable year consists of PHC income (which includes, among other
things, dividends, interest, certain royalties, annuities and,
under certain circumstances, rents).
Depending on the date and size of our initial business
combination, it is possible that at least 60% of our adjusted
ordinary gross income may consist of PHC income as discussed
above. In addition, depending on the concentration of our stock
in the hands of individuals, including our founders and certain
tax-exempt organizations, pension funds, and charitable trusts,
it is possible that more than 50% of our stock will be owned or
deemed owned (pursuant to the constructive ownership rules) by
such persons during the last half of a taxable year. Thus, no
assurance can be given that we will not become a PHC following
this offering or in the future. If we are or were to become a
PHC in a given taxable year, we would be subject to an
additional PHC tax on our undistributed PHC income, which
generally includes our taxable income, subject to certain
adjustments. For taxable years beginning after December 31,
2010, the tax rate on undistributed PHC income will be equal to
the highest marginal rate on ordinary income applicable to
individuals (scheduled to be 39.6% after December 31,
2010). For the tax year ending December 31, 2010, the tax
rate is 15%.
Public
Shareholders
General
There is no authority addressing the treatment, for
U.S. federal income tax purposes, of securities with terms
substantially the same as the units, and, therefore, that
treatment is not entirely clear. Each unit should be treated for
U.S. federal income tax purposes as an investment unit
consisting of one share of our common stock and a warrant to
acquire one share of our common stock. Each holder of a unit
must allocate the purchase price paid by such holder for such
unit between the share of common stock and the warrant based on
their respective relative fair market values. A holders
initial tax basis in the common stock and the warrant included
in each unit should equal the portion of the purchase price of
the unit allocated thereto.
The foregoing treatment of the common stock and warrants and a
holders purchase price allocation are not binding on the
IRS or the courts. Because there are no authorities that
directly address instruments that are similar to the units, no
assurance can be given that the IRS or the courts will agree
with the characterization described above or the discussion
below. Accordingly, each prospective investor is urged to
consult its own tax advisors regarding the U.S. federal,
state, local and any foreign tax consequences of an investment
in a unit (including alternative characterizations of a unit).
Unless otherwise stated, the following discussions are based on
the assumption that the characterization of the common stock and
warrants and the allocation described above are accepted for
U.S. federal tax purposes.
U.S.
Holders
Taxation
of Distributions
If we pay cash distributions to U.S. holders of shares of
our common stock, such distributions generally will constitute
dividends for U.S. federal income tax purposes to the
extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax
principles. Distributions in excess of current and accumulated
earnings and profits will constitute a return of capital that
will be applied against and reduce (but not below zero) the
U.S. holders adjusted tax basis in our common stock.
Any remaining excess will be treated as gain realized on the
sale or other disposition of the common stock and will be
treated as described under U.S. Holders
Gain or Loss on Sale, Taxable Exchange or Other Taxable
Disposition of Common Stock below.
Dividends we pay to a U.S. holder that is a taxable
corporation generally will qualify for the dividends received
deduction if the requisite holding period is satisfied. With
certain exceptions (including, but not limited to, dividends
treated as investment income for purposes of investment interest
deduction limitations),
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and provided certain holding period requirements are met,
dividends we pay to a non-corporate U.S. holder generally
will constitute qualified dividends that will be
subject to tax at the maximum tax rate accorded to long-term
capital gains (currently 15%) for tax years beginning on or
before December 31, 2010, after which the rate applicable
to dividends is currently scheduled to return to the tax rate
generally applicable to ordinary income (currently scheduled to
increase to a maximum rate of 39.6% for 2011 and 2012, and 43.4%
for 2013 and later years). It is unclear whether the redemption
rights with respect to the common stock described in this
prospectus may prevent a U.S. holder from satisfying the
applicable holding period requirements with respect to the
dividends received deduction or the preferential tax rate on
qualified dividend income, as the case may be.
Gain
or Loss on Sale, Taxable Exchange or Other Taxable Disposition
of Common Stock
In general, a U.S. holder must treat any gain or loss
recognized upon a sale, taxable exchange or other taxable
disposition of our common stock (which would include a
dissolution and liquidation in the event we do not consummate an
initial business combination within the required timeframe) as
capital gain or loss. Any such capital gain or loss will be
long-term capital gain or loss if the U.S. holders
holding period for the common stock so disposed of exceeds one
year. There is substantial uncertainty, however, as to whether
the redemption rights with respect to the common stock described
in this prospectus may suspend the running of the applicable
holding period for this purpose. Generally, a U.S. holder
will recognize gain or loss in an amount equal to the difference
between (i) the sum of the amount of cash and the fair
market value of any property received in such disposition (or,
if the common stock is held as part of a unit at the time of the
disposition, the portion of the amount realized on such
disposition that is allocated to the common stock based upon the
then fair market values of the common stock and the warrant
included in the unit) and (ii) the U.S. holders
adjusted tax basis in its common stock so disposed of. A
U.S. holders adjusted tax basis in its common stock
generally will equal the U.S. holders acquisition
cost (that is, as discussed above, the portion of the purchase
price of a unit allocated to a share of common stock) less any
prior return of capital. Long-term capital gain realized by a
non-corporate U.S. holder generally will be subject to a
maximum rate of 15% for tax years beginning on or before
December 31, 2010, after which the maximum long-term
capital gains rate is scheduled to increase to 20% for 2011 and
2012, and 23.8% for 2013 and later years. The deduction of
capital losses is subject to limitations, as is the deduction
for losses realized upon a taxable disposition by a
U.S. holder of our common stock (whether or not held as
part of a unit) if, within a period beginning 30 days
before the date of such disposition and ending 30 days
after such date, such U.S. holder has acquired (by purchase
or by an exchange on which the entire amount of gain or loss was
recognized by law), or has entered into a contract or option so
to acquire, substantially identical stock or securities.
Redemption
of Common Stock
In the event that a U.S. holder redeems common stock
pursuant to the redemption provisions described in this
prospectus, the treatment of the transaction for
U.S. federal income tax purposes will depend on whether the
redemption qualifies as sale of the common stock. If that
redemption qualifies as a sale of common stock by the
U.S. holder under Section 302 of the Code, the
U.S. holder will be treated as described under
U.S. Holders Gain or Loss on Sale,
Taxable Exchange or Other Taxable Disposition of Common
Stock above. If that redemption does not qualify as a sale
of common stock under Section 302 of the Code, the
U.S. holder will be treated as receiving a corporate
distribution with the tax consequences described above. Whether
that redemption qualifies for sale treatment will depend largely
on the total number of shares of our stock treated as held by
the U.S. holder (including any stock constructively owned
by the U.S. holder as a result of, among other things,
owning warrants) relative to all of our shares both before and
after the redemption. The redemption of common stock generally
will be treated as a sale of the common stock (rather than as a
corporate distribution) if the redemption (i) is
substantially disproportionate with respect to the
U.S. holder, (ii) results in a complete
termination of the U.S. holders interest in us
or (iii) is not essentially equivalent to a
dividend with respect to the U.S. holder. These tests
are explained more fully below.
In determining whether any of the foregoing tests are satisfied,
a U.S. holder takes into account not only stock actually
owned by the U.S. holder, but also shares of our stock that
are constructively owned by it. A
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U.S. holder may constructively own, in addition to stock
owned directly, stock owned by certain related individuals and
entities in which the U.S. holder has an interest or that
have an interest in such U.S. holder, as well as any stock
the U.S. holder has a right to acquire by exercise of an
option, which would generally include common stock which could
be acquired pursuant to the exercise of the warrants. In order
to meet the substantially disproportionate test, the percentage
of our outstanding voting stock actually and constructively
owned by the U.S. holder immediately following the
redemption of common stock must, among other requirements, be
less than 80 percent of the percentage of our outstanding
voting stock actually and constructively owned by the
U.S. holder immediately before the redemption. There will
be a complete termination of a U.S. holders interest
if either (i) all of the shares of our stock actually and
constructively owned by the U.S. holder are redeemed or
(ii) all of the shares of our stock actually owned by the
U.S. holder are redeemed and the U.S. holder is
eligible to waive, and effectively waives in accordance with
specific rules, the attribution of stock owned by certain family
members and the U.S. holder does not constructively own any
other stock. The redemption of the common stock will not be
essentially equivalent to a dividend if a
U.S. holders conversion results in a meaningful
reduction of the U.S. holders proportionate
interest in us. Whether the redemption will result in a
meaningful reduction in a U.S. holders proportionate
interest in us will depend on the particular facts and
circumstances. However, the IRS has indicated in a published
ruling that even a small reduction in the proportionate interest
of a small minority stockholder in a publicly held corporation
who exercises no control over corporate affairs may constitute
such a meaningful reduction. A U.S. holder
should consult with its own tax advisors as to the tax
consequences of a redemption.
If none of the foregoing tests are satisfied, then the
redemption will be treated as a corporate distribution and the
tax effects will be as described under
U.S. Holders Taxation of
Distributions, above. After the application of those
rules, any remaining tax basis of the U.S. holder in the
redeemed common stock will be added to the
U.S. holders adjusted tax basis in its remaining
stock, or, if it has none, to the U.S. holders
adjusted tax basis in its warrants or possibly in other stock
constructively owned by it.
The tax treatment of the receipt of any premium
purchase price by U.S. holders in connection with a
privately negotiated transaction as described in this prospectus
(see The Offering Private transactions if we
hold a stockholder vote) is unclear. The premium may be
treated as either (i) additional consideration received in
exchange for the tendered common stock in a redemption, in which
case such payments will be taken into account in determining the
amount of gain or loss on the exchange as discussed above, or
(ii) a separate fee for voting in favor of the proposed
business combination, in which case such payments will be
treated as ordinary income to recipient U.S. holders. There
can be no assurance that the IRS will not attempt to treat the
receipt of the premiums as the receipt of separate consideration
for voting in favor of the proposed business combination.
U.S. holders are urged to consult their own tax advisers as
to the proper treatment of the premiums.
U.S. holders who actually or constructively own one percent
or more of our stock (by vote or value) may be subject to
special reporting requirements with respect to a redemption of
common stock, and such holders should consult with their own tax
advisors with respect to their reporting requirements.
Exercise
of a Warrant
Except as discussed below with respect to the cashless exercise
of a warrant, a U.S. holder will not be required to
recognize taxable gain or loss upon exercise of a warrant. The
U.S. holders tax basis in the share of our common
stock received upon exercise of the warrant generally will be an
amount equal to the sum of the U.S. holders initial
investment in the warrant (i.e., the portion of the
U.S. holders purchase price for a unit that is
allocated to the warrant, as described above under
General) and the exercise price. The
U.S. holders holding period for the share of our
common stock received upon exercise of the warrant will begin on
the date following the date of exercise (or possibly the date of
exercise) of the warrant and will not include the period during
which the U.S. holder held the warrant.
The tax consequences of a cashless exercise of a warrant are not
clear under current tax law. A cashless exercise may be
tax-free, either because the exercise is not a gain realization
event or because the exercise is treated as a recapitalization
for U.S. federal income tax purposes. In either tax-free
situation, a U.S. holders basis
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in the common stock received would equal the holders basis
in the warrant. If the cashless exercise were treated as not
being a gain realization event, a U.S. holders
holding period in the common stock would be treated as
commencing on the date following the date of exercise (or
possibly the date of exercise) of the warrant. If the cashless
exercise were treated as a recapitalization, the holding period
of the common stock would include the holding period of the
warrant.
It is also possible that a cashless exercise could be treated as
a taxable exchange in which gain or loss would be recognized. In
such event, a U.S. holder could be deemed to have
surrendered warrants equal to the number of common shares having
a value equal to the exercise price for the total number of
warrants to be exercised. The U.S. holder would recognize
capital gain or loss in an amount equal to the difference
between the fair market value of the common stock represented by
the warrants deemed surrendered and the U.S. holders
tax basis in the warrants deemed surrendered. In this case, a
U.S. holders tax basis in the common stock received
would equal the sum of the fair market value of the common stock
represented by the warrants deemed surrendered and the
U.S. holders tax basis in the warrants exercised. A
U.S. holders holding period for the common stock
would commence on the date following the date of exercise (or
possibly the date of exercise) of the warrant.
Due to the absence of authority on the U.S. federal income
tax treatment of a cashless exercise, there can be no assurance
which, if any, of the alternative tax consequences and holding
periods described above would be adopted by the IRS or a court
of law. Accordingly, U.S. holders should consult their tax
advisors regarding the tax consequences of a cashless exercise.
Sale,
Taxable Exchange, Redemption or Expiration of a
Warrant
Upon a sale, taxable exchange (other than by exercise),
redemption, or expiration of a warrant, a U.S. holder will
be required to recognize taxable gain or loss in an amount equal
to the difference between (i) the amount realized upon such
disposition or expiration (or, if the warrant is held as part of
a unit at the time of the disposition of the unit, the portion
of the amount realized on such disposition that is allocated to
the warrant based on the then fair market values of the warrant
and the common stock included in the unit) and (ii) the
U.S. holders tax basis in the warrant (that is, as
discussed above, the portion of the U.S. holders
purchase price for a unit that is allocated to the warrant, as
described above under General). Such
gain or loss would generally be treated as long-term capital
gain or loss if the warrant was held by the U.S. holder for
more than one year at the time of such disposition or
expiration. As discussed above, the deductibility of capital
losses is subject to certain limitations, as is the deduction
for losses upon a taxable disposition by a U.S. holder of a
warrant (whether or not held as part of a unit) if, within a
period beginning 30 days before the date of such
disposition and ending 30 days after such date, such
U.S. holder has acquired (by purchase or by an exchange on
which the entire amount of gain or loss was recognized by law),
or has entered into a contract or option so to acquire,
substantially identical stock or securities.
Non-U.S.
Holders
Taxation
of Distributions
In general, any distributions we make to a
non-U.S. holder
of shares of our common stock, to the extent paid out of our
current or accumulated earnings and profits (as determined under
U.S. federal income tax principles), generally will
constitute dividends for U.S. federal income tax purposes
and, provided such dividends are not effectively connected with
the
non-U.S. holders
conduct of a trade or business within the United States, we
generally will be required to withhold tax from the gross amount
of the dividend at a rate of 30%, unless such
non-U.S. holder
is eligible for a reduced rate of withholding tax under an
applicable income tax treaty and provides proper certification
of its eligibility for such reduced rate (usually on an IRS
Form W-8BEN).
Any distribution not constituting a dividend will be treated
first as reducing (but not below zero) the
non-U.S. holders
adjusted tax basis in its shares of our common stock and, to the
extent such distribution exceeds the
non-U.S. holders
adjusted tax basis, as gain realized from the sale or other
disposition of the common stock, which will be treated as
described under
Non-U.S. Holders
Gain on Sale, Taxable Exchange or Other Taxable Disposition of
Common Stock and Warrants below. In addition, if we
determine that we are likely to
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be classified as a United States real property holding
corporation (see
Non-U.S. Holders
Gain on Sale, Taxable Exchange or Other Taxable Disposition of
Common Stock and Warrants below), we will withhold 10% of
any distribution that exceeds our current and accumulated
earnings and profits.
Dividends we pay to a
non-U.S. holder
that are effectively connected with such
non-U.S. holders
conduct of a trade or business within the United States
generally will not be subject to U.S. withholding tax,
provided such
non-U.S. holder
complies with certain certification and disclosure requirements
(usually by providing an IRS
Form W-8ECI).
Instead, such dividends generally will be subject to
U.S. federal income tax, net of certain deductions, at the
same graduated individual or corporate rates applicable to
U.S. holders (subject to an exemption or reduction in such
tax as may be provided by an applicable income tax treaty). If
the
non-U.S. holder
is a corporation, dividends that are effectively connected
income may also be subject to a branch profits tax
at a rate of 30 percent (or such lower rate as may be
specified by an applicable income tax treaty).
Exercise
of a Warrant
The U.S. federal income tax treatment of a
non-U.S. holders
exercise of a warrant generally will correspond to the
U.S. federal income tax treatment of the exercise of a
warrant by a U.S. holder, as described under
U.S. Holders Exercise of a Warrant
above, although to the extent a cashless exercise results in a
taxable exchange, the consequences would be similar to those
described below in
Non-U.S. Holders
Gain on Sale, Taxable Exchange or Other Taxable Disposition of
Common Stock and Warrants.
Gain
on Sale, Taxable Exchange or Other Taxable Disposition of Common
Stock and Warrants
A
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax in respect of gain recognized on a sale, taxable
exchange or other taxable disposition of our common stock (which
would include a dissolution and liquidation in the event we do
not consummate an initial business combination within the
required timeframe) or warrants (including an expiration or
redemption of our warrants), in each case without regard to
whether those securities were held as part of a unit, unless:
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the gain is effectively connected with the conduct of a trade or
business by the
non-U.S. holder
within the United States (and, under certain income tax
treaties, is attributable to a United States permanent
establishment or fixed base maintained by the
non-U.S. holder);
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the
non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of disposition and
certain other conditions are met; or
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we are or have been a U.S. real property holding
corporation for U.S. federal income tax purposes at
any time during the shorter of the five-year period ending on
the date of disposition or the period that the
non-U.S. holder
held our common stock, and, in the case where shares of our
common stock are regularly traded on an established securities
market, the
non-U.S. holder
has owned, directly or indirectly, more than 5% of our common
stock at any time within the shorter of the five-year period
preceding the disposition or such
non-U.S. holders
holding period for the shares of our common stock. There can be
no assurance that our common stock will be treated as regularly
traded on an established securities market for this purpose.
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Unless an applicable treaty provides otherwise, gain described
in the first bullet point above will be subject to tax at
generally applicable U.S. federal income tax rates. Any
gains described in the first bullet point above of a
non-U.S. holder
that is a foreign corporation may also be subject to an
additional branch profits tax at a 30% rate (or
lower treaty rate). Gain described in the second bullet point
above (which may be offset by U.S. source capital losses)
will be subject to a flat 30% U.S. federal income tax.
Non-U.S. holders
should consult their own tax advisors regarding possible
eligibility for benefits under income tax treaties.
Although we currently are not a U.S. real property holding
corporation, we cannot determine whether we will be a United
States real property holding corporation in the future until we
consummate an initial business combination. We will be
classified as a U.S. real property holding corporation if
the fair market value of our U.S. real property
interests equals or exceeds 50 percent of the sum of
the fair market value of our worldwide
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real property interests plus our other assets used or held for
use in a trade or business, as determined for U.S. federal
income tax purposes.
Redemption
of Common Stock
The characterization for U.S. federal income tax purposes
of a
non-U.S. holders
redemption of our common stock pursuant to the redemption
provisions described in this prospectus generally will
correspond to the U.S. federal income tax characterization
of the exercise of such a redemption by a U.S. holder, as
described under
U.S. Holders Redemption of Common
Stock above, and the consequences of the redemption to the
non-U.S. holder
will be as described above under
Non-U.S. Holders
Taxation of Distributions and
Non-U.S. Holders
Gain on Sale, Taxable Exchange or Other Taxable Disposition of
Common Stock and Warrants, as applicable.
As discussed above in U.S. Holders
Redemption of Common Stock, the treatment of the receipt
of any premiums in connection with a privately negotiated
transaction as described in this prospectus is unclear.
Accordingly, we intend to withhold U.S. federal income tax
at a rate of 30% from any premium paid to a
non-U.S. Holder,
unless (i) the
non-U.S. holder
is engaged in the conduct of a trade or business in the United
States to which the receipt of the premium is effectively
connected and provides a properly executed IRS
Form W-8ECI
or (ii) a U.S. tax treaty either eliminates or reduces
such withholding tax with respect to the premium paid to the
non-U.S. holder
and the
non-U.S. holder
provides a properly executed IRS
Form W-8BEN
(claiming exemption or reduction under an applicable treaty),
and in both cases, neither we nor our paying agent knows or has
reason to know that such certification is false. If such
withholding results in an overpayment of taxes, the applicable
non-U.S.
holder may be able to obtain a refund or credit, provided that
the required information is timely furnished to the IRS.
Non-U.S. holders
should consult their tax advisors with respect to the tax
treatment of any such premium.
Information
Reporting and Backup Withholding
We must report annually to the IRS and to each holder the amount
of dividends or other distributions we pay to such holder on our
shares of common stock and the amount of tax withheld with
respect to those distributions, regardless of whether
withholding is required. In the case of a
non-U.S. holder,
the IRS may make copies of the information returns reporting
those dividends and amounts withheld available to the tax
authorities in the country in which the
non-U.S. holder
resides pursuant to the provisions of an applicable income tax
treaty or exchange of information treaty.
The gross amount of dividends and proceeds from the disposition
of our common stock or warrants paid to a holder that fails to
provide the appropriate certification in accordance with
applicable U.S. Treasury regulations generally will be
subject to backup withholding at the applicable rate.
Information reporting and backup withholding generally are not
required with respect to the amount of any proceeds from the
sale by a
non-U.S. holder
of common stock or warrants outside the United States through a
foreign office of a foreign broker that does not have certain
specified connections to the United States. However, if a
non-U.S. holder
sells common stock or warrants through a U.S. broker or the
U.S. office of a foreign broker, the broker will be
required to report to the IRS the amount of proceeds paid to
such holder, unless the
non-U.S. holder
provides appropriate certification (usually on an IRS
Form W-8BEN)
to the broker of its status as a
non-U.S. holder
or such
non-U.S. holder
is an exempt recipient. In addition, for information reporting
purposes, certain
non-U.S. brokers
with certain type of relationships with the United States will
be treated in a manner similar to United States brokers.
Backup withholding is not an additional tax. Any amounts we
withhold under the backup withholding rules may be refunded or
credited against the holders U.S federal income tax
liability, if any, by the IRS if the required information is
furnished to the IRS in a timely manner.
Recent legislation may impose additional reporting or
certification requirements on certain
non-U.S. holders.
Each
non-U.S. holder
is urged to consult its own tax advisor with respect to any
reporting and certifications applicable to it.
104
Federal
Estate Tax
Shares of our common stock or warrants owned or treated as owned
by an individual who is not a U.S. citizen or resident (as
specifically defined for U.S. federal estate tax purposes)
at the time of his or her death will be included in the
individuals gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise, and therefore may be subject to U.S. federal
estate tax. Although the U.S. federal estate tax was
repealed in the 2010 calendar year, new legislation may
retroactively reinstate the estate tax for 2010. The estate tax
is scheduled to be reinstated on January 1, 2011. Each
non-U.S. holder
should consult its own tax advisor regarding the
U.S. federal estate tax.
105
UNDERWRITING
Citigroup Global Markets Inc. is acting as sole book-running
manager of this offering and as representative of the
underwriters named below. Subject to the terms and conditions
stated in the underwriting agreement dated the date of this
prospectus, each underwriter named below has severally agreed to
purchase and we have agreed to sell to that underwriter, the
number of units set forth opposite the underwriters name.
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Underwriter
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Number of Units
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Citigroup Global Markets Inc.
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Deutsche Bank Securities Inc.
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Total
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20,000,000
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The underwriting agreement provides that the obligations of the
underwriters to purchase the units included in this offering are
subject to approval of legal matters by counsel and to other
conditions. The underwriters are obligated to purchase all of
the units (other than those covered by the over-allotment option
described below) if they purchase any of the units.
Units sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus. Any units sold by the underwriters to
securities dealers may be sold at a discount from the initial
public offering price not to exceed
$ per unit. If all of the units
are not sold at the initial offering price, the underwriters may
change the offering price and the other selling terms. Citigroup
Global Markets Inc. has advised us that the underwriters do not
intend to make sales to discretionary accounts.
If the underwriters sell more units than the total number set
forth in the table above, we have granted to the underwriters an
option, exercisable for 45 days from the date of this
prospectus, to purchase up to 3,000,000 additional units at the
public offering price less the underwriting discount. The
underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, in connection with this
offering. To the extent the option is exercised, each
underwriter must purchase a number of additional units
approximately proportionate to that underwriters initial
purchase commitment. Any units issued or sold under the option
will be issued and sold on the same terms and conditions as the
other units that are the subject of this offering.
We and our officers and directors have agreed that, for a period
of 180 days from the date of this prospectus, we and they
will not, without the prior written consent of Citigroup Global
Markets Inc., offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any units, warrants, shares
of common stock or any other securities convertible into, or
exercisable, or exchangeable for, shares of common stock.
Citigroup Global Markets Inc. in its sole discretion may release
any of the securities subject to these
lock-up
agreements at any time without notice.
Our sponsor has agreed not to, subject to certain limited
exceptions, transfer, assign or sell any of the founder shares
until (i) one year after the completion of our initial
business combination or earlier if, subsequent to our business
combination, the last sales price of our common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing
at least 150 days after our initial business combination or
(ii) we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction which results in all of
our stockholders having the right to exchange their shares of
common stock for cash, securities or other property. In
addition, our sponsor has agreed not to, subject to certain
limited exceptions, transfer, assign or sell any of the sponsor
warrants (including the common stock issuable upon exercise of
the sponsor warrants) until 30 days after the completion of
our initial business combination.
Prior to this offering, there has been no public market for our
securities. Consequently, the initial public offering price for
the units was determined by negotiations between us and the
representative. The determination of our per unit offering price
was more arbitrary than would typically be the case if we were
an operating company. Among the factors considered in
determining initial public offering price were the history and
prospectus of companies whose principal business is the
acquisition of other companies, prior offerings of those
companies, our management, our capital structure, and currently
prevailing general conditions in equity
106
securities markets, including current market valuations of
publicly traded companies considered comparable to our company.
We cannot assure you, however, that the price at which the
units, common stock or warrants will sell in the public market
after this offering will not be lower than the initial public
offering price or that an active trading market in our units,
common stock or warrants will develop and continue after this
offering.
We will apply to have our units quoted on the OTC
Bulletin Board (OTCBB) under the symbol and,
once the common stock and warrants begin separate trading, to
have our common stock and warrants listed on the OTCBB under the
symbols
and ,
respectively.
The following table shows the underwriting discounts and
commissions that we are to pay to the underwriters in connection
with this offering. These amounts are shown assuming both no
exercise and full exercise of the underwriters
over-allotment option.
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Paid by Hicks Acquisition Company II, Inc.
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No Exercise
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Full Exercise
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Per Unit
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$
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0.50
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$
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0.50
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Total(1)
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$
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10,000,000
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$
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11,500,000
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The underwriters have agreed to defer $5,000,000, or
$5.75 million if the underwriters over-allotment
option is exercised in full, of the underwriting discounts and
commissions, equal to 2.5% of the gross proceeds of the units
being offered to the public, until the consummation of a
business combination. Upon the consummation of a business
combination, deferred underwriting discounts and commissions
shall be released to the underwriters out of the gross proceeds
of this offering held in a trust account maintained by
Continental Stock Transfer & Trust Company, as
trustee. The underwriters will not be entitled to any interest
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If we do not complete our initial business combination within
21 months from the closing of this offering, the trustee
and the underwriters have agreed that (i) they will forfeit
any rights or claims to their deferred underwriting discounts
and commissions, including any accrued interest thereon, then in
the trust account, and (ii) that the deferred
underwriters discounts and commissions will be distributed
on a pro rata basis, together with any accrued interest thereon
and net of accrued and unpaid income taxes on such interest, to
the public stockholders.
In connection with the offering, the underwriters may purchase
and sell units in the open market. Purchases and sales in the
open market may include short sales, purchases to cover short
positions, which may include purchases pursuant to the
over-allotment option, and stabilizing purchases.
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Short sales involve secondary market sales by the underwriters
of a greater number of shares than they are required to purchase
in the offering.
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Covered short sales are sales of units in an amount
up to the number of units represented by the underwriters
over-allotment option.
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Naked short sales are sales of units in an amount in
excess of the umber of units represented by the
underwriters over-allotment option.
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Covering transactions involve purchases of units either pursuant
to the over-allotment option or in the open market after the
distribution has been completed in order to cover short
positions.
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To close a naked short position, the underwriters must purchase
shares in the open market after the distribution has been
completed. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward
pressure on the price of the units in the open market after
pricing that could adversely affect investors who purchase in
the offering.
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To close a covered short position, the underwriters must
purchase units in the open market after the distribution has
been completed or must exercise the over-allotment option. In
determining the source of shares to close the covered 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 they may purchase units through
the over-allotment option.
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Stabilizing transactions involve bids to purchase units so long
as the stabilizing bids do not exceed a specified maximum.
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Purchases to cover short positions and stabilizing purchase, as
well as other purchases by the underwriters for their own
accounts, may have the effect of preventing or retarding a
decline in the market price of the units. They may also cause
the price of the units to be higher than the price that would
otherwise exist in the open market in the absence of these
transactions. The underwriters may conduct these transactions in
the
over-the-counter
market or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
We estimate that our portion of the total expenses of this
offering payable by us will be $1,750,000, excluding
underwriting discounts and commissions.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make because of any of those liabilities.
We are not under any contractual obligation to engage any of the
underwriters to provide any services for us after this offering,
and have no present intent to do so. However, any of the
underwriters may introduce us to potential target businesses or
assist us in raising additional capital in the future. If any of
the underwriters provide services to us after this offering, we
may pay such underwriter fair and reasonable fees that would be
determined at that time in an arms length negotiation;
provided that no agreement will be entered into with any of the
underwriters and no fees for such services will be paid to any
of the underwriters prior to the date that is 90 days from
the date of this prospectus, unless FINRA determines that such
payment would not be deemed underwriters compensation in
connection with this offering and we may pay the underwriters of
this offering or any entity with which they are affiliated a
finders fee or other compensation for services rendered to
us in connection with the consummation of a business combination.
State
Blue Sky Information
We will offer and sell the units to retail customers only in
Colorado, Delaware, the District of Columbia, Florida, Georgia,
Hawaii, Illinois, Indiana, Louisiana, New York, Rhode Island and
Wyoming. In New York and Hawaii, we have relied on exemptions
from the state registration requirements. In the other states,
we will apply to have the units registered for sale and will not
sell the units to retail customers in these states unless and
until such registration is effective (including in Colorado,
pursuant to
11-51-302(6)
of the Colorado Revised Statutes).
If you are not an institutional investor, you may purchase our
securities in this offering only in the jurisdictions described
directly above. Institutional investors in every state except in
Idaho and Oregon may purchase the units in this offering
pursuant to exemptions under the Blue Sky laws of various
states. The definition of an institutional investor
varies from state to state but generally includes financial
institutions, broker-dealers, banks, insurance companies and
other qualified entities.
Under the National Securities Markets Improvement Act of 1996,
the resale of the units, from and after the effective date, and
the common stock and warrants comprising the units, once they
become separately transferable, are exempt from state
registration requirements because we will file periodic and
annual reports under the Securities Exchange Act of 1934.
However, states are permitted to require notice filings and
collect fees with regard to these transactions and a state may
suspend the offer and sale of securities within such state if
any such required filing is not made or fee is not paid.
Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts,
Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey,
New Mexico, New York,
108
North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina,
South Dakota, Utah, Virginia, Washington, West Virginia,
Wisconsin and Wyoming either do not presently require any notice
filings or fee payments or have not yet issued rules or
regulations indicating whether notice filings or fee payments
will be required. The District of Columbia, Illinois, Maryland,
Michigan, Montana, Nebraska, New Hampshire, North Dakota, Ohio,
Oregon, Puerto Rico, Rhode Island, Tennessee, Texas and Vermont
currently permit the resale of the units, and the common stock
and warrants comprising the units, once they become separately
transferable, if the proper notice filings and fees have been
submitted. As of the date of this prospectus, we have not
determined in which, if any, of these states we will submit the
required filings or pay the required fee. Additionally, if any
of these states that has not yet adopted a statute relating to
the National Securities Markets Improvement Act adopts such a
statute in the future requiring a filing or fee or if any state
amends its existing statutes with respect to its requirements,
we would need to comply with those new requirements in order for
our securities to continue to be eligible for resale in those
jurisdictions.
Under the National Securities Markets Improvement Act, the
states retain the jurisdiction to investigate and bring
enforcement actions with respect to fraud or deceit, or unlawful
conduct by a broker or dealer, in connection with the sale of
securities. Although we are not aware of a state having used
these powers to prohibit or restrict resales of securities
issued by blank check companies generally, certain state
securities commissioners view blank check companies unfavorably
and might use these powers, or threaten to use these powers, to
hinder the resale of securities of blank check companies in
their states.
Aside from the exemption from registration provided by the
National Securities Markets Improvement Act, we believe that the
units, from and after the effective date, and the common stock
and warrants comprising the units, once they become separately
transferable, will be eligible for sale on a secondary market
basis in various states based on the availability of another
applicable exemption from state registration requirements, in
certain instances subject to waiting periods, notice filings or
fee payments.
Notice to
Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area
that has implemented the Prospectus Directive (each, a relevant
member state), with effect from and including the date on which
the Prospectus Directive is implemented in that relevant member
state (the relevant implementation date), an offer
of units described in this prospectus may not be made to the
public in that relevant member state prior to the publication of
a prospectus in relation to the units that has been approved by
the competent authority in that relevant member state or, where
appropriate, approved in another relevant member state and
notified to the competent authority in that relevant member
state, all in accordance with the Prospectus Directive, except
that, with effect from and including the relevant implementation
date, an offer of our units may be made to the public in that
relevant member state at any time:
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to any legal entity that is authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity that has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined below) subject to obtaining the prior
consent of the underwriter for any such offer; or
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in any other circumstances that do not require the publication
of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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Each purchaser of units described in this prospectus located
within a relevant member state will be deemed to have
represented, acknowledged and agreed that it is a
qualified investor within the meaning of
Article 2(1)(e) of the Prospectus Directive.
For the purpose of this provision, the expression an offer
to the public in any relevant member state means the
communication in any form and by any means of sufficient
information on the terms of the offer
109
and the units to be offered so as to enable an investor to
decide to purchase or subscribe for the units, as the expression
may be varied in that member state by any measure implementing
the Prospectus Directive in that member state, and the
expression Prospectus Directive means Directive
2003/71/EC and includes any relevant implementing measure in
each relevant member state.
We have not authorized and do not authorize the making of any
offer of units through any financial intermediary on their
behalf, other than offers made by the underwriters with a view
to the final placement of the units as contemplated in this
prospectus. Accordingly, no purchaser of the units, other than
the underwriters, is authorized to make any further offer of the
units on behalf of us or the underwriters.
Notice to
Prospective Investors in the United Kingdom
This prospectus is only being distributed to, and is only
directed at, persons in the United Kingdom that are qualified
investors within the meaning of Article 2(1)(e) of the
Prospectus Directive that are also (i) investment
professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005
(the Order) or (ii) high net worth entities,
and other persons to whom it may lawfully be communicated,
falling within Article 49(2)(a) to (d) of the Order
(all such persons together being referred to as a relevant
person). This prospectus and its contents are confidential
and should not be distributed, published or reproduced (in whole
or in part) or disclosed by recipients to any other persons in
the United Kingdom. Any person in the United Kingdom that is not
a relevant person should not act or rely on this document or any
of its contents.
Notice to
Prospective Investors in France
Neither this prospectus nor any other offering material relating
to the units described in this prospectus has been submitted to
the clearance procedures of the Autorité des Marchés
Financiers or by the competent authority of another member state
of the European Economic Area and notified to the Autorité
des Marchés Financiers. The units have not been offered or
sold and will not be offered or sold, directly or indirectly, to
the public in France. Neither this prospectus nor any other
offering material relating to the units has been or will be:
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released, issued, distributed or caused to be released, issued
or distributed to the public in France; or
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used in connection with any offer for subscription or sale of
the units to the public in France.
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Such offers, sales and distributions will be made in France only:
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to qualified investors (investisseurs qualifiés)
and/or to a
restricted circle of investors (cercle restreint
dinvestisseurs), in each case investing for their own
account, all as defined in, and in accordance with,
Article L.411-2,
D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the
French Code monétaire et financier;
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to investment services providers authorized to engage in
portfolio management on behalf of third parties; or
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in a transaction that, in accordance with
article L.411-2-II-1°-or-2°-or
3° of the French Code monétaire et financier and
article 211-2
of the General Regulations (Règlement Général) of
the Autorité des Marchés Financiers, does not
constitute a public offer (appel public à
lépargne).
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The units may be resold directly or indirectly, only in
compliance with
Articles L.411-1,
L.411-2,
L.412-1 and
L.621-8 through L.621-8-3 of the French Code monétaire et
financier.
110
LEGAL
MATTERS
Akin Gump Strauss Hauer & Feld LLP, New York, New York
is acting as counsel in connection with the registration of our
securities under the Securities Act, and as such, will pass upon
the validity of the securities offered in this prospectus. In
connection with this offering Bingham McCutchen LLP, New York,
New York, is acting as counsel to the underwriters.
EXPERTS
The financial statements of Hicks Acquisition Company II, Inc.
(a development stage company) as of June 16, 2010 and for
the period June 15, 2010 (inception) through June 16,
2010, have been included herein in reliance upon the report of
KPMG LLP, independent registered public accounting firm,
appearing elsewhere herein, and upon the authority of KPMG LLP
as experts in accounting and auditing.
The audit report covering the June 16, 2010 financial
statements contains an explanatory paragraph that states that
the business plan is dependent upon obtaining adequate financial
resources, which raises substantial doubt about the
Companys ability to continue as a going concern. The
financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act with respect to the securities we are
offering by this prospectus. This prospectus does not contain
all of the information included in the registration statement.
For further information about us and our securities, you should
refer to the registration statement and the exhibits and
schedules filed with the registration statement. Whenever we
make reference in this prospectus to any of our contracts,
agreements or other documents, the references are materially
complete but may not include a description of all aspects of
such contracts, agreements or other documents, and you should
refer to the exhibits attached to the registration statement for
copies of the actual contract, agreement or other document.
Upon completion of this offering, we will be subject to the
information requirements of the Exchange Act and will file
annual, quarterly and current event reports, proxy statements
and other information with the SEC. You can read our SEC
filings, including the registration statement, over the Internet
at the SECs website at www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference
facility at 100 F Street, N.E., Washington, D.C.
20549.
You may also obtain copies of the documents at prescribed rates
by writing to the Public Reference Section of the SEC at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
facilities.
111
HICKS
ACQUISITION COMPANY II, INC.
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Page
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Audited Financial Statements of Hicks Acquisition Company II,
Inc.
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Hicks Acquisition Company II, Inc.:
We have audited the accompanying balance sheet of Hicks
Acquisition Company II, Inc. (a development stage company) (the
Company) as of June 16, 2010, and the related
statements of operations, stockholders equity, and cash
flows for the period June 15, 2010 (date of inception)
through June 16, 2010. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with 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. 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 Hicks Acquisition Company II, Inc. as of June 16, 2010,
and the results of its operations and its cash flows for the
period June 15, 2010 (date of inception) through
June 16, 2010, in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements have been prepared
assuming that Hicks Acquisition Company II, Inc. will continue
as a going concern. The Company has generated a net loss, has a
working capital deficiency and has no operations. This raises
substantial doubt about the Companys ability to continue
as a going concern. As discussed in Note 1, the Company is
in the process of raising capital through a proposed offering of
equity securities. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Dallas, Texas
June 25, 2010
F-2
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ASSETS
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Current asset:
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Cash
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$
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250,000
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Noncurrent asset:
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Deferred offering costs
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105,000
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Total assets
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$
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355,000
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accrued expenses
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$
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110,000
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Note payable related party
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225,000
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Total current liabilities
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335,000
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Commitments and contingencies
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Stockholders equity:
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Preferred stock, $0.0001 par value. Authorized
1,000,000 shares; none issued or outstanding at
June 16, 2010
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Common stock, $0.0001 par value. Authorized
225,000,000 shares; 3,285,714 shares issued and
outstanding at June 16, 2010
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329
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Additional paid-in capital
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24,671
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Deficit accumulated during the development stage
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(5,000
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)
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Total stockholders equity
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20,000
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Total liabilities and stockholders equity
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$
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355,000
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See accompanying notes to financial statements.
F-3
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Formation and operating costs
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$
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5,000
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Net loss
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$
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(5,000
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)
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Loss per common share:
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Basic and diluted
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$
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Average common shares outstanding:
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Basic and diluted
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3,285,714
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See accompanying notes to financial statements.
F-4
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Deficit
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Accumulated
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During the
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Common Stock
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Additional
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Development
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Stockholders
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Shares
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Amount
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Paid-In Capital
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Stage
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Equity
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Initial capital from founding stockholder for cash
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3,285,714
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$
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329
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$
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24,671
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$
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$
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25,000
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Net loss
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(5,000
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)
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(5,000
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Balance at June 16, 2010
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3,285,714
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$
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329
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$
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24,671
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$
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(5,000
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$
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20,000
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See accompanying notes to financial statements.
F-5
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Cash flows from operating activities:
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Net loss
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$
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(5,000
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Change in operating assets and liabilities:
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Accrued expenses
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5,000
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Net cash provided by operating activities
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Cash flows from financing activities:
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Proceeds from note payable related party
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225,000
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Proceeds from the sale of common stock
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25,000
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Net cash provided by financing activities
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250,000
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Increase in cash
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250,000
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Cash at inception
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Cash at June 16, 2010
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$
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250,000
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Supplemental disclosure of noncash financing activities:
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Deferred offering costs included in accrued expenses
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$
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105,000
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See accompanying notes to financial statements.
F-6
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(1)
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Organization
and Nature of Business Operations
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Hicks Acquisition Company II, Inc. (the Company) is a newly
organized blank check company formed on June 15, 2010 for
the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business
combination with one or more businesses.
The Companys sponsor is HH-HACI I, L.P. (the
Sponsor). At June 16, 2010, the Company had not commenced
any operations. All activity through June 16, 2010 relates
to the Companys formation and the proposed offering
described below in Note 4. The Company has selected
December 31 as its fiscal year-end.
The Companys ability to commence operations is contingent
upon obtaining adequate financial resources through a proposed
offering as discussed in Note 4. The Companys
management has broad discretion with respect to the specific
application of the net proceeds of the proposed offering,
although substantially all of the net proceeds of the proposed
offering are intended to be generally applied toward effecting a
merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with
one or more businesses. The Companys efforts in
identifying prospective target businesses will not be limited to
a particular industry. Instead, the Company intends to focus on
various industries and target businesses that may provide
significant opportunities for growth.
Net proceeds of $197 million from the proposed offering and
simultaneous private placement of the Companys warrants to
purchase common stock will be held in a trust account. Except
for a portion of the interest income that may be released to pay
any income and franchise taxes on such interest and to fund the
Companys working capital requirements, and any amounts
necessary to purchase up to 15% of the Companys public
shares if we seek stockholder approval for the Companys
initial business combination, none of the funds held in trust
will be released until the earlier of (i) the completion of
the Companys initial business combination or (ii) the
redemption of 100% of the Companys public shares if we are
unable to consummate a business combination within
21 months from the closing of this offering (subject to the
requirements of law). The proceeds deposited in the trust
account could become subject to the claims of the Companys
creditors, if any, which could have priority over the claims of
the Companys public stockholders.
The Company will provide its stockholders with the opportunity
to redeem their public shares for cash equal to their pro rata
share of the aggregate amount then on deposit in the trust
account, less taxes and deferred underwriting commissions, upon
the consummation of the Companys initial business
combination, subject to the limitations described herein. There
will be no redemption rights or liquidating distributions with
respect to outstanding warrants, which will expire worthless in
the event the Company does not consummate a business
combination. Unlike other blank check companies that hold
stockholder votes and conduct proxy solicitations in conjunction
with their initial business combinations and related redemptions
of public shares for cash upon consummation of such initial
business combinations even when a vote is not required by law,
the Company intends to consummate the Companys initial
business combination and conduct the redemptions without
stockholder vote pursuant to
Rule 13e-4
and Regulation 14E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, which regulate issuer tender
offers, and will file tender offer documents with the Securities
and Exchange Commission (the SEC). The tender offer documents
will contain substantially the same financial and other
information about the initial business combination and the
redemption rights as is required under Regulation 14A of
the Exchange Act, which regulates the solicitation of proxies.
If, however, a stockholder vote is required by law, or the
Company decides to hold a stockholder vote for business or other
legal reasons, the Company will conduct the redemptions like
other blank check companies in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If the Company seeks stockholder approval,
the Company will consummate its initial business combination
only if a majority of the outstanding shares of common stock
voted are voted in favor of the business combination. In such
case, the Sponsor has agreed to vote its Founder Shares (as
defined below in Note 6) in
F-7
HICKS
ACQUISITION COMPANY II, INC.
(a Development Stage Company)
NOTES TO THE FINANCIAL
STATEMENTS (Continued)
accordance with the majority of the votes cast by the public
stockholders and to vote any public shares purchased during or
after the offering in favor of the Companys initial
business combination. In addition, the Sponsor has agreed to
waive its redemption rights in connection with the consummation
of a business combination with respect to its Founder Shares and
any shares issued as part of the Units described in Note 4
below (public shares) that it may purchase in or after the
proposed offering.
If a business combination is approved and completed, each public
stockholder will be entitled to redeem its shares of common
stock for a pro rata share of the aggregate amount then on
deposit in the trust account less accrued and unpaid taxes and
deferred underwriting commissions, upon consummation of the
business combination. There will be no redemption rights or
liquidating distributions with respect to the Companys
warrants, which will expire worthless in the event the Company
does not consummate a business combination.
If the Company does not effect a business combination within
21 months from the closing of the offering as discussed in
Note 4, the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as
reasonably possible, redeem 100% of its public shares, at a
per-share price, payable in cash, equal to the aggregate amount
including interest then on deposit in the trust account, but net
of any accrued and unpaid taxes (less up to $100,000 of such net
interest to pay dissolution expenses), divided by the number of
then outstanding public shares, together with the contingent
right to receive, in cash, following the Companys
dissolution, a pro rata share of the balance of the
Companys net assets, if any, and (iii) as promptly as
reasonably possible following such redemption, subject to the
approval of the Companys remaining stockholders and the
Companys board of directors, dissolve and liquidate,
subject in each case to the Companys obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. The Sponsor has agreed to
waive its redemption and liquidation rights with respect to its
founder shares if the Company fails to consummate a business
combination within the
21-month
time period, although the Sponsor will be entitled to redemption
and liquidation rights with respect to any public shares it
holds if the Company fails to consummate a business combination
within such time period. In the event of a liquidation, it is
likely that the per share value of the residual assets remaining
available for distribution (including trust account 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 4).
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(2)
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Basis of
Presentation and Going Concern
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The accompanying financial statements of have been prepared in
conformity with accounting principles generally accepted in the
United States of America (GAAP). The Company follows the
Financial Accounting Standard Boards Accounting Standards
Codification (the Codification). The Codification is the single
source of authoritative accounting principles applied by
nongovernmental entities in the preparation of financial
statements in conformity with GAAP.
The Codification does not change current GAAP, but is intended
to simplify user access to GAAP by providing all the
authoritative literature related to a particular topic in one
place. As of the effective date, all existing accounting
standard documents were superseded. Accordingly, this report
references the Codification as the sole source of authoritative
literature.
The financial statements have been prepared assuming the Company
will continue as a going concern. The company has generated a
net loss, has a working capital deficiency and has no
operations. These factors raise substantial doubt about the
Companys ability to continue as a going concern.
F-8
HICKS
ACQUISITION COMPANY II, INC.
(a Development Stage Company)
NOTES TO THE FINANCIAL
STATEMENTS (Continued)
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(3)
|
Summary
of Significant Accounting Policies
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(a)
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Cash
and Cash Equivalents
|
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents. At June 16, 2010, there were no cash
equivalents. At times, cash and cash equivalents may be in
excess of the Federal Deposit Insurance Corporation insurance
limit.
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(b)
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Fair
Value of Financial Instruments
|
Unless otherwise disclosed, the fair values of financial
instruments, including cash and the note payable related party,
approximate their carrying amount due primarily to their
short-term nature.
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(c)
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Loss
per Common Share
|
Loss per share is computed by dividing net loss applicable to
common stockholders by the weighted average number of common
shares outstanding for the period.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from those estimates.
Deferred income taxes are provided for the differences between
the bases 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 temporary differences related to organizational costs,
aggregating approximately $1,750. In recognition of the
uncertainty regarding the ultimate amount of income tax benefits
to be derived, the Company has recorded a full valuation
allowance at June 16, 2010.
The effective tax rate of zero differs from the statutory rate
of 35% due to the establishment of the valuation allowance.
The Company evaluates the uncertainty in tax positions taken or
expected to be taken in the course of preparing the
Companys financial statements to determine whether the tax
positions are more likely than not of being
sustained by the applicable tax authority. Tax positions deemed
not to meet the more likely than not threshold would
be recorded as a tax expense in the current period. The Company
has no uncertain tax positions at June 16, 2010.
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(f)
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Deferred
Offering Costs
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Deferred offering costs consist principally of legal fees
incurred through the balance sheet date that are related to the
proposed offering (discussed in Note 4) and that will
be charged to additional paid-in capital upon the receipt of the
capital raised.
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(g)
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Recent
Accounting Pronouncements
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Management does not believe that any recently issued, but not
effective, accounting standards, if currently adopted, would
have a material effect on the Companys financial
statements.
F-9
HICKS
ACQUISITION COMPANY II, INC.
(a Development Stage Company)
NOTES TO THE FINANCIAL
STATEMENTS (Continued)
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(4)
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Proposed
Public Offering
|
The proposed offering calls for the Company to offer for sale
20,000,000 units (Units) at a price of $10.00 per unit.
Each Unit will consist of one share of the Companys common
stock, $0.0001 par value, and one warrant. Each warrant
will entitle the holder to purchase one share of the
Companys common stock at a price of $12.00 per share,
subject to adjustment. The warrants will become exercisable on
the later of 30 days after the completion of the
Companys initial business combination or twelve months
from the closing of the public offering, provided in each case
that the Company has an effective registration statement
covering the shares of common stock issuable upon exercise of
the warrants and a current prospectus relating to them is
available, and will expire five years after the completion of
the Companys initial business combination, unless earlier
redeemed. The warrants will be redeemable in whole and not in
part at a price of $0.01 per warrant upon a minimum of
30 days notice after the warrants become exercisable,
only in the event that the last sale price of the common stock
equals or exceeds $18.00 per share for any 20 trading days
within a 30 trading day period.
The underwriters will also be granted a
45-day
option to purchase up to an additional 3,000,000 Units to cover
over-allotments, if any.
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(5)
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Related
Party Transactions
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(a)
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Note
Payable Related Party
|
The Company issued an aggregate of $225,000 in an unsecured
promissory note to Thomas O. Hicks, the Companys founder
and chairman of the board, on June 15, 2010. The note is
non-interest bearing and is payable on the earlier of
December 31, 2010 or the consummation of the proposed
offering by the Company. Due to the short-term nature of the
note, the fair value of the note approximated the carrying
amount at June 16, 2010.
As of the date of the prospectus, the Company will agree to pay
up to $10,000 a month in total for office space and general and
administrative services to Hicks Holdings Operating LLC, an
affiliate of the Companys founder and chairman,
Mr. Hicks. Services will commence promptly after the
effective date of the offering and will terminate upon the
earlier of: (i) the consummation of an initial business
combination; or (ii) the liquidation of the Company.
The Sponsor will agree to purchase an aggregate of 6,666,667
warrants at price of $0.75 per warrant (for a total purchase
price of $5 million) from the Company in a private
placement that will occur simultaneously with the consummation
of the proposed offering (Sponsor Warrants). Mr. Hicks, the
Companys chairman of the board, is the sole member of
HH-HACII GP, LLC which is the general partner of HH-HACII, L.P.
In addition, all of the Companys executive officers are
each limited partners of HH-HACII, L.P. The Sponsor will be
permitted to transfer the warrants held by it to the
Companys officers, directors, and other persons or
entities affiliated with such Sponsor or to investors in
affiliates, but the transferees receiving such securities will
be subject to the same agreements with respect to such
securities as the Sponsor. Otherwise, these warrants will not be
transferable or salable by the Sponsor (except as described
below) until 30 days after the completion of an initial
business combination. The Sponsor Warrants will be
non-redeemable so long as they are held by the Sponsor or the
Sponsors permitted transferees. The Sponsor Warrants may
be exercised for cash or on a cashless basis. Otherwise, the
Sponsor Warrants have terms and provisions that are identical to
those of the warrants being sold as part of the units in the
proposed offering.
On June 15, 2010, the Sponsor purchased
3,285,714 shares of common stock (Founder Shares) for an
aggregate amount of $25,000, or $0.0076 per share.
F-10
HICKS
ACQUISITION COMPANY II, INC.
(a Development Stage Company)
NOTES TO THE FINANCIAL
STATEMENTS (Continued)
The Founder Shares are identical to the shares of common stock
included in the units being sold in the Proposed Offering except
that: (i) the Founder Shares are subject to certain
transfer restrictions, as described in more detail below, and
(ii) the Sponsor has agreed (A) to waive its
redemption rights with respect to its Founder Shares and public
shares it may own in connection with the consummation of a
business combination and (B) to waive its redemption and
liquidation rights with respect to its Founder Shares if the
Company does not complete a business combination within
21 months from the closing of this offering, although it
will be entitled to redemption and liquidation rights with
respect to any public shares it holds if the Company does not
consummate a business combination within such time period. If
the Company submits its initial business combination to the
Companys public stockholders for a vote, the Sponsor has
agreed to vote its Founder Shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of the Companys initial business combination. The
Sponsor has agreed not to transfer, assign or sell any of the
Founder Shares until (i) one year after the completion of
the Companys initial business combination or earlier if,
subsequent to the Companys business combination, the last
sales price of the Companys common stock equals or exceeds
$12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at
least 150 days after the Companys initial business
combination or (ii) the Company consummates a subsequent
liquidation, merger, stock exchange or other similar transaction
which results in all of the Companys stockholders having
the right to exchange their shares of common stock for cash,
securities or other property.
Simultaneously with the consummation of the proposed offering,
the Sponsor will agree to forfeit up to 428,571 Founder Shares
to the extent that the over-allotment option is not exercised in
full by the underwriters as described in Note 4. The
forfeiture will be adjusted to the extent that the
over-allotment option is not exercised in full by the
underwriters so that the Sponsor will own 12.5% of the
Companys issued and outstanding shares after this offering
(assuming the Sponsor does not purchase units in this offering).
In addition, a portion of the founders shares in an amount equal
to 2.5% of the Companys issued and outstanding shares
after this offering (the founder earnout shares), will be
subject to forfeiture by the Sponsor in the event the last sales
price of the Companys stock does not equal or exceed
$12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any
30-trading
day period within one year following the closing of the
Companys initial business combination.
(a) Preferred
Stock
The Company is authorized to issue up to 1,000,000 shares
of preferred stock, par value $0.0001 with such designations,
voting and other rights and preferences as may be determined
from time to time by the board of directors. No shares were
issued and outstanding as of June 16, 2010
(b) Common
Stock
The authorized common stock of the Company includes up to
225,000,000 shares. The holders of the common shares are
entitled to one vote for each share of common stock. In
addition, the holders of the common stock are entitled to
receive dividends when, as and if declared by the board of
directors.
Management has performed an evaluation of subsequent events
through June 25, 2010, the date of issuance of the
financial statements noting no items which require adjustment or
disclosure.
F-11
$200,000,000
Hicks Acquisition Company II,
Inc.
20,000,000 Units
PRELIMINARY PROSPECTUS
,
2010
Citi
Deutsche Bank
Securities
Until ,
2010 (25 days after the date of this prospectus), all
dealers that buy, sell or trade shares of our common stock,
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.
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
representatives non-accountable expense allowance) will be
as follows:
|
|
|
|
|
Initial Trustees fee(1)
|
|
$
|
1,500
|
|
SEC/FINRA Expenses
|
|
|
40,000
|
|
Accounting fees and expenses
|
|
|
200,000
|
|
Blue sky services and expenses
|
|
|
20,500
|
|
Printing and engraving expenses
|
|
|
80,000
|
|
Directors & Officers liability insurance premiums(2)
|
|
|
600,000
|
|
Legal fees and expenses
|
|
|
500,000
|
|
Miscellaneous(3)
|
|
|
308,000
|
|
|
|
|
|
|
Total
|
|
$
|
1,750,000
|
|
|
|
|
(1) |
|
In addition to the initial acceptance fee that is charged by
Continental Stock Transfer & Trust Company, as
trustee, the registrant will be required to pay
to
annual fees of $ for acting as
trustee, $ for acting as transfer
agent of the registrants common stock,
$ for acting as warrant agent for
the registrants warrants and
$ for acting as escrow agent. |
|
(2) |
|
This amount represents the approximate amount of annual director
and officer liability insurance premiums the registrant
anticipates paying following the consummation of its initial
public offering and until it consummates a business combination. |
|
(3) |
|
This amount represents additional expenses that may be incurred
by the Company in connection with the offering over and above
those specifically listed above, including distribution and
mailing costs. |
|
|
Item 14.
|
Indemnification
of Directors and Officers.
|
Our amended and restated 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 persons
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 persons 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 persons official capacity and as to action
in another capacity while holding such office. A right to
indemnification or to advancement of expenses arising under a
provision of the certificate of incorporation or a bylaw shall
not be eliminated or impaired by an amendment to such provision
after the occurrence of the act or omission that is the subject
of the civil, criminal, administrative or investigative action,
suit or proceeding for which indemnification or advancement of
expenses is sought, unless the provision in effect at the time
of such act or omission explicitly authorizes such elimination
or impairment after such action or omission has occurred.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any
such capacity, or arising out of such persons status as
such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
II-2
(h) For purposes of this section, references to the
corporation shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, shall stand in the same position under this
section with respect to the resulting or surviving corporation
as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to other
enterprises shall include employee benefit plans;
references to fines shall include any excise taxes
assessed on a person with respect to any employee benefit plan;
and references to serving at the request of the
corporation shall include any service as a director,
officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
not opposed to the best interests of the corporation
as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement
of expenses or indemnification brought under this section or
under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may
summarily determine a corporations 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.
In accordance with Section 102(b)(7) of the DGCL, our
amended and restated certificate of incorporation, which we
intend to adopt prior to the closing of the offering, will
provide that no director shall be personally liable to us or any
of our stockholders for monetary damages resulting from breaches
of their fiduciary duty as directors, except to the extent such
limitation on or exemption from liability is not permitted under
the DGCL. The effect of this provision of our amended and
restated certificate of incorporation is to eliminate our rights
and those of our stockholders (through stockholders
derivative suits on our behalf) to recover monetary damages
against a director for breach of the fiduciary duty of care as a
director, including breaches resulting from negligent or grossly
negligent behavior, except, as restricted by
Section 102(b)(7) of the DGCL. However, this provision does
not limit or eliminate our rights or the rights of any
stockholder to seek non-monetary relief, such as an injunction
or rescission, in the event of a breach of a directors
duty of care.
If the DGCL is amended to authorize corporate action further
eliminating or limiting the liability of directors, then, in
accordance with our amended and restated certificate of
incorporation, the liability of our directors to us or our
stockholders will be eliminated or limited to the fullest extent
authorized by the DGCL, as so amended. Any repeal or amendment
of provisions of our amended and restated certificate of
incorporation limiting or eliminating the liability of
directors, whether by our stockholders or by changes in
II-3
law, or the adoption of any other provisions inconsistent
therewith, will (unless otherwise required by law) be
prospective only, except to the extent such amendment or change
in law permits us to further limit or eliminate the liability of
directors on a retroactive basis.
Our amended and restated certificate of incorporation will also
provide that we will, to the fullest extent authorized or
permitted by applicable law, indemnify our current and former
directors and officers, as well as those persons who, while
directors or officers of our corporation, are or were serving as
directors, officers, employees or agents of another entity,
trust or other enterprise, including service with respect to an
employee benefit plan, in connection with any threatened,
pending or completed proceeding, whether civil, criminal,
administrative or investigative, against all expense, liability
and loss (including, without limitation, attorneys fees,
judgments, fines, ERISA excise taxes and penalties and amounts
paid in settlement) reasonably incurred or suffered by any such
person in connection with any such proceeding. Notwithstanding
the foregoing, a person eligible for indemnification pursuant to
our amended and restated certificate of incorporation will be
indemnified by us in connection with a proceeding initiated by
such person only if such proceeding was authorized by our board
of directors, except for proceedings to enforce rights to
indemnification.
The right to indemnification conferred by our amended and
restated certificate of incorporation is a contract right that
includes the right to be paid by us the expenses incurred in
defending or otherwise participating in any proceeding
referenced above in advance of its final disposition, provided,
however, that if the DGCL requires, an advancement of expenses
incurred by our officer or director (solely in the capacity as
an officer or director of our corporation) will be made only
upon delivery to us of an undertaking, by or on behalf of such
officer or director, to repay all amounts so advanced if it is
ultimately determined that such person is not entitled to be
indemnified for such expenses under our amended and restated
certificate of incorporation or otherwise.
The rights to indemnification and advancement of expenses will
not be deemed exclusive of any other rights which any person
covered by our amended and restated certificate of incorporation
may have or hereafter acquire under law, our amended and
restated certificate of incorporation, our amended and restated
bylaws, an agreement, vote of stockholders or disinterested
directors, or otherwise.
Any repeal or amendment of provisions of our amended and
restated certificate of incorporation affecting indemnification
rights, whether by our stockholders or by changes in law, or the
adoption of any other provisions inconsistent therewith, will
(unless otherwise required by law) be prospective only, except
to the extent such amendment or change in law permits us to
provide broader indemnification rights on a retroactive basis,
and will not in any way diminish or adversely affect any right
or protection existing at the time of such repeal or amendment
or adoption of such inconsistent provision with respect to any
act or omission occurring prior to such repeal or amendment or
adoption of such inconsistent provision. Our amended and
restated certificate of incorporation will also permit us, to
the extent and in the manner authorized or permitted by law, to
indemnify and to advance expenses to persons other that those
specifically covered by our amended and restated certificate of
incorporation.
Our amended and restated bylaws, which we intend to adopt
immediately prior to the closing of this offering, include the
provisions relating to advancement of expenses and
indemnification rights consistent with those set forth in our
amended and restated certificate of incorporation. In addition,
our amended and restated bylaws provide for a right of
indemnitee to bring a suit in the event a claim for
indemnification or advancement of expenses is not paid in full
by us within a specified period of time. Our amended and
restated bylaws also permit us to purchase and maintain
insurance, at our expense, to protect us
and/or any
director, officer, employee or agent of our corporation or
another entity, trust or other enterprise against any expense,
liability or loss, whether or not we would have the power to
indemnify such person against such expense, liability or loss
under the DGCL.
Any repeal or amendment of provisions of our amended and
restated bylaws affecting indemnification rights, whether by our
board of directors, stockholders or by changes in applicable
law, or the adoption of any other provisions inconsistent
therewith, will (unless otherwise required by law) be
prospective only, except to the extent such amendment or change
in law permits us to provide broader indemnification rights on a
retroactive basis, and will not in any way diminish or adversely
affect any right or protection existing
II-4
thereunder with respect to any act or omission occurring prior
to such repeal or amendment or adoption of such inconsistent
provision.
We will enter into indemnification agreements with each of our
officers and directors. These agreements will require us to
indemnify these individuals to the fullest extent permitted
under Delaware law against liabilities that may arise by reason
of their service to us, and to advance expenses incurred as a
result of any proceeding against them as to which they could be
indemnified.
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.
|
|
Item 15.
|
Recent
Sales of Unregistered Securities.
|
On June 15, 2010, HH-HACI, L.P., our sponsor, purchased
3,285,714 shares of our common stock for an aggregate
offering price of $25,000 at an average purchase price of
approximately $0.0076 per share. Such securities were issued in
connection with our organization pursuant to the exemption from
registration contained in Section 4(2) of the Securities
Act.
Thomas O. Hicks, our officers and various officers of Hicks
Holdings LLC and Hicks Equity Partners, LLC are equity holders
in our sponsor. Our sponsor is an accredited investor for
purposes of Rule 501 of Regulation D. Each of the
equity holders in our sponsor will be accredited investors under
Rule 501 of Regulation D. The sole business of our
sponsor is to act as the companys sponsor in connection
with this offering. The limited partnership agreement of our
sponsor provides that its partnership interests may only be
transferred to officers or directors of the company or other
persons affiliated with our sponsor, or in connection with
estate planning transfers.
In addition, our sponsor has committed to purchase from us
6,666,667 sponsor warrants at $0.75 per warrant (for an
aggregate purchase price of $5.0 million). These purchases
will take place on a private placement basis simultaneously with
the consummation of our initial public offering. These issuances
will be made pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act. Our
sponsors obligation to purchase the sponsor warrants was
made pursuant to a Sponsor Warrants Purchase Agreement, dated as
of June 23, 2010. Such obligation was made prior to the
filing of the Registration Statement, and the only conditions to
the obligation undertaken by our sponsor are conditions outside
of our sponsors control. Consequently, the investment
decision relating to the purchase of the warrants was made prior
to the filing of the Registration Statement relating to the
public offering and therefore constitutes a completed
private placement.
No underwriting discounts or commissions were paid with respect
to such sales.
|
|
Item 16.
|
Exhibits
and Financial Statement Schedules.
|
(a) The following exhibits are filed as part of this
Registration Statement:
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement.**
|
|
3
|
.1
|
|
Form of Amended and Restated Certificate of Incorporation.**
|
|
3
|
.2
|
|
Form of Amended and Restated 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 and
the Registrant.**
|
|
5
|
.1
|
|
Opinion of Akin Gump Strauss Hauer & Feld LLP.**
|
|
10
|
.1
|
|
Promissory Note, dated June 15, 2010, issued to Thomas O.
Hicks.*
|
II-5
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.2
|
|
Letter Agreement, dated as
of ,
2010, among the Registrant, Citigroup Global Markets Inc.,
HH-HACII,
L.P. and Thomas O. Hicks.**
|
|
10
|
.3
|
|
Form of Letter Agreement among the Registrant, Citigroup Global
Markets Inc. and each executive officer and director.**
|
|
10
|
.4
|
|
Form of Investment Management Trust Agreement
between and
the Registrant.**
|
|
10
|
.5
|
|
Letter Agreement, dated as of June 23, 2010, between Hicks
Holdings Operating LLC and Registrant regarding administrative
support.*
|
|
10
|
.6
|
|
Registration Rights Agreement, dated as
of ,
2010, among the Registrant, HH-HACII, L.P. and Thomas O. Hicks.**
|
|
10
|
.7
|
|
Securities Purchase Agreement, effective as of June 15,
2010, between the Registrant and HH-HACII, L.P.*
|
|
10
|
.8
|
|
Sponsor Warrants Purchase Agreement, dated as of June 23,
2010, between the Registrant and
HH-HACII,
L.P.*
|
|
10
|
.9
|
|
Form of Indemnity Agreement.**
|
|
14
|
.
|
|
Form of Code of Ethics.**
|
|
23
|
.1
|
|
Consent of KPMG LLP.*
|
|
23
|
.2
|
|
Consent of Akin Gump Strauss Hauer & Feld LLP
(included on Exhibit 5.1).**
|
|
24
|
.
|
|
Power of Attorney (included on signature page of this
Registration Statement).*
|
|
99
|
.1
|
|
Consent of William A. Montgomery.*
|
|
99
|
.2
|
|
Consent of William F. Quinn*
|
|
|
|
* |
|
Filed herewith |
|
** |
|
To be filed by amendment. |
(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.
II-6
(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.
(4) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, in a primary
offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any
of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant 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-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on the
25th day
of June, 2010.
HICKS ACQUISITION COMPANY II, INC.
Robert M. Swartz
Chief Executive Officer and President
POWER OF
ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas O. Hicks and
Robert M. Swartz his true and lawful attorney-in-fact, with full
power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and
all amendments including post-effective amendments to this
registration statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact or his substitute,
each acting alone, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
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Name
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Position
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Date
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/s/ Thomas
O. Hicks
Thomas
O. Hicks
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Chairman of the Board
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June 25, 2010
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/s/ Robert
M. Swartz
Robert
M. Swartz
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Chief Executive Officer and President (Principal executive
officer)
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June 25, 2010
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/s/ Christina
Weaver Vest
Christina
Weaver Vest
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Chief Financial Officer and Senior Vice President
(Principal financial and accounting officer)
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June 25, 2010
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S-1
EXHIBIT INDEX
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Exhibit
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No.
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Description
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1
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.1
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Form of Underwriting Agreement.**
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3
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.1
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Form of Amended and Restated Certificate of Incorporation.**
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3
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.2
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Form of Amended and Restated By-laws.**
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4
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.1
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Specimen Unit Certificate.**
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4
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.2
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Specimen Common Stock Certificate.**
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4
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.3
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Specimen Warrant Certificate.**
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4
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.4
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Form of Warrant Agreement
between and
the Registrant.**
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5
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.1
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Opinion of Akin Gump Strauss Hauer & Feld LLP.**
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10
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.1
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Promissory Note, dated June 15, 2010, issued to Thomas O.
Hicks.*
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10
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.2
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Letter Agreement, dated as
of ,
2010, among the Registrant, Citigroup Global Markets Inc.,
HH-HACII,
L.P. and Thomas O. Hicks.**
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10
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.3
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Form of Letter Agreement among the Registrant, Citigroup Global
Markets Inc. and each executive officer and director.**
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10
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.4
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Form of Investment Management Trust Agreement
between and
the Registrant.**
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10
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.5
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Letter Agreement, dated as of June 23, 2010, between Hicks
Holdings Operating LLC and Registrant regarding administrative
support.*
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10
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.6
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Registration Rights Agreement, dated as
of ,
2010, among the Registrant, HH-HACII, L.P. and Thomas O. Hicks.**
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10
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.7
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Securities Purchase Agreement, effective as of June 15,
2010, between the Registrant and HH-HACII, L.P.*
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10
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.8
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Sponsor Warrants Purchase Agreement, dated as of June 23,
2010, between the Registrant and
HH-HACII,
L.P.*
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10
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.9
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Form of Indemnity Agreement.**
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14
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.
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Form of Code of Ethics.**
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23
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.1
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Consent of KPMG LLP.*
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23
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.2
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Consent of Akin Gump Strauss Hauer & Feld LLP
(included on Exhibit 5.1).**
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24
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.
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Power of Attorney (included on signature page of this
Registration Statement).*
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99
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.1
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Consent of William A. Montgomery.*
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99
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.2
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Consent of William F. Quinn*
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* |
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Filed herewith |
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** |
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To be filed by amendment. |
E-1