Attached files
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EX-23.1 - RLJ Acquisition, Inc. | v204436_ex23-1.htm |
EX-10.2 - RLJ Acquisition, Inc. | v204436_ex10-2.htm |
EX-10.3 - RLJ Acquisition, Inc. | v204436_ex10-3.htm |
EX-10.4 - RLJ Acquisition, Inc. | v204436_ex10-4.htm |
EX-10.1 - RLJ Acquisition, Inc. | v204436_ex10-1.htm |
EX-10.5 - RLJ Acquisition, Inc. | v204436_ex10-5.htm |
As filed with the
Securities and Exchange Commission on December 3, 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
RLJ
ACQUISITION, INC.
(Exact name of
registrant as specified in its charter)
Nevada
(State
or other jurisdiction of
incorporation
or organization)
|
6770
(Primary
Standard Industrial
Classification
Code Number)
|
27-3970903
(I.R.S.
Employer
Identification
Number)
|
3
Bethesda Metro Center, Suite 1100
Bethesda,
MD 20814
(301)
280-7737
(Address, including
zip code, and telephone number,
including area
code, of registrant’s principal executive offices)
H.
Van Sinclair
c/o RLJ
Acquisition, Inc.
3
Bethesda Metro Center, Suite 1100
Bethesda,
MD 20814
(301) 280-7737
(Name, address,
including zip code, and telephone number,
including area
code, of agent for service)
Copies
to:
Alan
I. Annex
Jason
Simon
Greenberg
Traurig, LLP
MetLife
Building
200
Park Avenue
New
York, New York 10166
(212) 801-9200
(212) 801-6400 —
Facsimile
|
Thomas
J. Ivey
Gregg
A. Noel
Skadden,
Arps, Slate, Meagher & Flom LLP
525
University Avenue, Suite 1100
Palo
Alto, California 94301
(650)
470-4500
(650)
470-4570 — Facsimile
|
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. ¨
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
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):
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer þ
(Do not check if a smaller reporting company)
|
Smaller reporting company o
|
CALCULATION OF REGISTRATION
FEE
Proposed
Maximum
|
Proposed
Maximum
|
Amount
of
|
||||||||||||
Title
of Each Class of
|
Amount
Being
|
Offering
|
Aggregate
|
Registration
|
||||||||||
Security Being
Registered
|
Registered
|
Price per
Security(1)
|
Offering
Price(1)
|
Fee
|
||||||||||
Units,
each consisting of one share of common stock, $.001 par value, and
one warrant(2)
|
14,375,000
Units
|
$ | 10.00 | $ | 143,750,000 | $ | 10,250 | |||||||
Shares
of common stock included as part of the units(2)
|
14,375,000 Shares
|
— | — | — | (3) | |||||||||
Warrants
included as part of the units(2)
|
14,375,000
Warrants
|
— | — | — | (3) | |||||||||
Total
|
$ | 143,750,000 | $ | 10,250 |
(1)
|
Estimated solely for the purpose
of calculating the registration
fee.
|
(2)
|
Includes 1,875,000 units,
consisting of 1,875,000 shares of common stock and 1,875,000
warrants, which may be issued upon exercise of a 45-day option granted to
the underwriters to cover over-allotments, if
any.
|
(3)
|
No fee pursuant to
Rule 457(g).
|
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.
|
SUBJECT
TO COMPLETION, DATED DECEMBER 3, 2010
PRELIMINARY
PROSPECTUS
$125,000,000
RLJ Acquisition,
Inc.
12,500,000
Units
RLJ
Acquisition, 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. RLJ SPAC Acquisition,
LLC, 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, or 27 months
from the closing of this offering if a letter of intent, agreement in principle
or definitive agreement relating to a prospective business combination is
executed before the 21-month period ends.
This is
an initial public offering of our securities. We are offering
12,500,000 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. We have also granted the
underwriters a 45-day option to purchase up to an additional
1,875,000 units to cover over-allotments, if any.
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 Lazard Capital Markets LLC informs us of its
decision to allow earlier separate trading, subject to our filing a Current
Report on Form 8-K with the Securities and Exchange Commission, or 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 [•] 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.
Per Unit
|
Total
Proceeds
|
|||||||
Public
offering price
|
$
|
10.00
|
$
|
125,000,000
|
||||
Underwriting
discounts and commissions(1)
|
$
|
0.50
|
$
|
6,250,000
|
||||
Proceeds,
before expenses, to us
|
$
|
9.50
|
$
|
118,750,000
|
(1)
|
Includes
$0.25 per unit, or approximately $3.1 million in the aggregate
(approximately $3.6 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. See
also “Underwriting” beginning on page
[•].
|
The
underwriters are offering the units on a firm commitment basis. The underwriters
expect to deliver the units to purchasers on or
about ,
2011.
Lazard
Capital Markets
|
,
2011
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.
TABLE OF
CONTENTS
Page
|
|
Summary
|
1
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Summary
Financial Data
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13
|
Risk
Factors
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14
|
Cautionary
Note Regarding Forward-Looking Statements
|
38
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Use
Of Proceeds
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39
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Dividend
Policy
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43
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Dilution
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44
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Capitalization
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46
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Management’s
Discussion And Analysis Of Financial Condition And Results Of
Operations
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46
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Proposed
Business
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52
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Principal
Stockholders
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77
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Certain
Relationships And Related Party Transactions
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80
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Description
Of Securities
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82
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Material
U.S. Federal Tax Considerations
|
91
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Underwriting
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99
|
Legal
Matters
|
102
|
Experts
|
102
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Where
You Can Find Additional Information
|
102
|
Index
to Financial Statements
|
F-1
|
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 RLJ
Acquisition, 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 initial stockholders (as defined below) to the extent our initial
stockholders purchase public shares, provided that each initial stockholder’s
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, references to our “sponsor” refer to
RLJ SPAC Acquisition, LLC, a Delaware limited liability company, and references
to our “initial stockholders” refer to our sponsor, William S. Cohen and Morris
Goldfarb. 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 corporate laws of the State
of Nevada 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, except
that we will not effect a business combination with another blank check company
or a similar type of company with nominal operations.
We will seek to capitalize
on the significant investing experience of our management team, including Robert
L. Johnson, our founder and chairman of the board. Mr. Johnson is the
founder and chairman of The RLJ Companies which, together with Mr. Johnson, owns
or holds interests in a diverse portfolio of companies primarily in the banking,
private equity, real estate, hospitality, professional sports, film production,
gaming and automobile dealership industries. Businesses within Mr.
Johnson’s and The RLJ Companies portfolio include:
|
•
|
RLJ
Development, LLC/RLJ Urban Lodging Funds, real estate enterprises that
primarily own upscale select service hotels and one compact full service
hotel in major markets in North
America;
|
|
•
|
RLJ
Equity Partners, LLC, a private equity fund founded with The Carlyle Group
that specializes in middle-market leveraged buy-outs, leveraged
recapitalizations and growth
equity;
|
|
•
|
RolloverSystems,
a financial services company that provides outsourced retirement plan
rollover services for financial services institutions, plan sponsors and
third party administrators;
|
|
•
|
RLJ
Western Asset Management, LLC, the only minority-owned entity designated
by the U.S. Treasury Department as a pre-qualified fund manager to
participate in the Public Private Investment Fund
Program;
|
|
•
|
RLJ-McLarty-Landers
Automotive Holdings, LLC, which operates 35 automotive franchises and,
with an affiliate, three Harley-Davidson motorcycle dealerships across the
South Central, Southeast and Midwest regions of the United
States;
|
|
•
|
Bobcat
Sports & Entertainment, which comprises the franchise and arena
operations of the Charlotte Bobcats NBA professional basketball
team;
|
1
|
•
|
Caribbean
CAGE, LLC, a gaming company that focuses on the installation, operation
and management of video lottery terminals, linked gaming systems and game
content throughout the Caribbean and Latin
America;
|
|
•
|
Our
Stories Films, LLC, a film production studio that produces theatrical
motion pictures that showcase the talents of African Americans on both
sides of the camera and in the creative process;
and
|
|
•
|
The
RLJ Kendeja Resort & Villas, a luxury resort hotel located on 13-acres
of ocean front property overlooking the Atlantic Ocean outside of
Monrovia, Liberia.
|
Prior to forming The RLJ
Companies , Mr. Johnson was founder and chairman of Black Entertainment
Television, or BET, the nation’s first and leading television network providing
quality entertainment, music, news, sports and public affairs programming for
the African American audience. Under Mr. Johnson’s leadership, BET
became the first African American-owned company publicly traded on the New York
Stock Exchange. In 2001, Mr. Johnson sold BET to Viacom for
approximately $3 billion and remained the Chief Executive Officer through
2006.
Our
independent directors, William S. Cohen, Mario Gabelli and Morris Goldfarb, also
have significant business experience. Mr. Cohen has been Chairman and
Chief Executive Officer of The Cohen Group, a business consulting firm, since
January 2001, and prior to that served as the United States Secretary of Defense
from January 1997 to 2001, as a United States Senator from 1979 to 1997, and as
a member of the United States House of Representatives from 1973 to
1979. Mr. Gabelli has served as Chairman, Chief Executive
Officer, Chief Investment Officer — Value Portfolios and a director of
GAMCO Investors, Inc. since November 1976. In connection with those
responsibilities, he serves as director or trustee of registered investment
companies managed by GAMCO and its affiliates. Mr. Gabelli has been a portfolio
manager for Teton Advisors, Inc. since 1998 through the present, an asset
management company which was spun-off from GAMCO in March 2009. Mr.
Goldfarb serves as Chairman of the Board and Chief Executive Officer of G-III
Apparel Group, Ltd. (Nasdaq: GIII), a designer, manufacturer, importer and
marketer of apparel, handbags and luggage. Mr. Goldfarb has served as
an executive officer and director of G-III and its predecessors since its
formation in 1974.
We
anticipate acquiring 100% of the equity interest or assets of the target
business or businesses in our initial business combination. We may, however,
structure a business combination to acquire less than 100% of such interests or
assets of the target business, and may consider select venture capital
investment opportunities, but we will only consummate such a business
combination if RLJ
Acquisition, Inc. (or its stockholders if it is not the surviving
corporation) will become the controlling stockholder of the target or is
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.
•
|
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.
|
•
|
Companies
with Strong Free Cash Flow Characteristics. We will seek
to acquire companies that have a history of strong, stable free cash flow
generation (i.e.
companies that typically generate cash in excess of that required to
maintain or expand the business’s asset base). We will focus on companies
that have predictable, recurring revenue streams and an emphasis on low
capital expenditure requirements. An example of such a company could be
one that typically sells its inventory, is paid on time by its customers
on a generally predictable basis and does not need to materially acquire
or upgrade physical assets on a regular
basis.
|
2
•
|
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.
|
•
|
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.
|
•
|
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.
|
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 these general guidelines as well as other considerations, factors
and criteria that our management may deem relevant. In the event that we decide
to enter into a business combination with a target business that does not meet
the above criteria and guidelines, we will disclose that the target business
does not meet the above criteria in our stockholder communications related to
our initial business combination, which, as discussed in this prospectus, would
be in the form of tender offer or proxy solicitation materials, as applicable,
that we would file with the Securities and Exchange Commission, or the SEC. 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 that we are
seeking a business combination. 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 (i.e. opportunities that would not generally be offered
publicly) as a result of the track record and business relationships of
Mr. Johnson, our founder and chairman of the board.
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 presently intend to pursue an initial business combination with a 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, or a committee of our
independent directors, would obtain an opinion from an independent investment
banking firm that is a member of the Financial Industry Regulatory Authority, or
FINRA, that such an initial business combination is fair to our company 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 and Robert L. Johnson, the chairman
of our board of directors, 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 or director, 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 or Mr. Johnson 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 and Mr. Johnson
currently have certain relevant fiduciary duties or contractual obligations that
may take priority over their duties to us. In addition, our officers and Mr.
Johnson have agreed not to participate in the formation of, or become an officer
or director of, any other blank check company 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, or 27 months from the closing of this offering if
a letter of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period
ends.
3
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 franchise and income taxes payable, 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 $9.95 per share (or approximately $9.92 per share if the
underwriters’ over-allotment option is exercised in full), or approximately
$0.05 less than the per-unit offering price of $10.00 (approximately $0.08 less
if underwriters’ the over-allotment option is exercised in full). There will be
no redemption rights or liquidating distributions with respect to our warrants.
Our initial stockholders have agreed to waive their redemption rights with
respect to their founder shares (as defined below) and any public shares they
may hold in connection with the consummation of a business combination. The
founder shares will be excluded from the pro rata calculation used to determine
the per-share redemption price. Unlike many 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
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 SEC. The tender offer documents will
contain substantially the same financial and other information about our initial
business combination and the redemption rights as is required under
Regulation 14A of the Exchange Act, which regulates the solicitation of
proxies. In the event we conduct redemptions pursuant to the tender offer rules,
our offer to redeem shares shall remain open for at least 20 business days, in
accordance with Rule 14e-1(a) under the Exchange Act. 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 initial stockholders have agreed to vote
their founder shares as well as any public shares purchased during or after the
offering in favor of our 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, or 27 months from the closing of this offering if a letter
of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period
ends. If we are unable to consummate a business combination within
such 21- or 27-month period, we will liquidate the trust account and distribute
the amount held in the trust account, including interest but net of franchise
and income taxes payable and less up to $100,000 of such net interest that may
be released to us from the trust account to pay liquidation expenses, to our
public shareholders, subject in each case to our obligations under Nevada law to
provide for claims of creditors and the requirements of other applicable
law.
Our
initial stockholders have agreed to waive their rights to liquidating
distributions under the trust account with respect to their founder shares if we
fail to consummate a business combination within the 21- or 27-month time
period, although they will be entitled to liquidating distributions under the
trust account with respect to any public shares they hold if we fail to
consummate a business combination within such time period.
4
Private
Placements
In
November 2010, our sponsor and two of our director nominees, William S. Cohen
and Morris Goldfarb, purchased an aggregate of 3,593,750 shares, which we
refer to throughout this prospectus as the founder shares, for an aggregate
purchase price of $25,000, or approximately $0.007 per share. We
refer to our sponsor and Messrs. Cohen and Goldfarb as our initial
stockholders throughout this prospectus. The founder shares held by
our initial stockholders include an aggregate of 468,750 shares subject to
forfeiture to the extent that the underwriters’ over-allotment option is not
exercised in full, so that our initial stockholders will collectively own 20% of
our issued and outstanding shares after this offering (assuming none of our
initial stockholders purchase units in this offering). In addition, a portion of
the founder shares in an amount equal to 2.5% of our issued and outstanding
shares immediately after this offering will be subject to forfeiture by our
initial stockholders 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 at least one period of 20
trading days within any 30-trading day period within 12 months following
the closing of our initial business combination. An additional 2.5%
of our issued and outstanding shares immediately after this offering will be
subject to forfeiture by our initial stockholders in the event the last sales
price of our stock does not equal or exceed $13.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like)
for at least one period of 20 trading days within any 30-trading day period
between 12 and 24 months following the closing of our initial business
combination. We refer to these shares collectively as founder earnout
shares throughout this prospectus.
In
addition, our sponsor has committed to purchase an aggregate of 6,166,667
sponsor warrants at a price of $0.75 per warrant ($4,625,000 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 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 [•] 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, or 27
months from the closing of this offering if a letter of intent, agreement in
principle or definitive agreement relating to a prospective business combination
is executed before the 21-month period ends, the $4,625,000 proceeds from
the sale of the sponsor warrants will be distributed to our public
stockholders as part of the liquidation of our trust account, and the sponsor
warrants will not be entitled to participate in a liquidating distribution of
our trust account and will expire worthless.
Our
executive offices are located at 3 Bethesda Metro Center, Suite 1000, Bethesda,
Maryland 20814, and our telephone number is (301) 280-7737.
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 [•] of this
prospectus.
Securities
offered
|
12,500,000
units, at $10.00 per unit, each unit consisting of:
|
•
one share of common stock; and
|
|
•
one warrant.
|
|
Trading
commencement and separation of common stock and warrants
|
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
Lazard Capital Markets LLC 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.
|
Separate trading of the common
stock and warrants is prohibited until we have filed a Current Report on Form
8-K
|
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 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.
|
Units:
|
|
Number outstanding before
this offering
|
0
|
Number outstanding after
this offering
|
12,500,000
|
Common
stock:
|
|
Number outstanding before
this offering
|
3,593,750(1)(2)
|
Number outstanding after
this offering
|
15,625,000(2)(3)
|
(1)
|
This
number includes an aggregate of 468,750 founder shares held by our initial
stockholders that are subject to forfeiture to the extent that the
over-allotment option is not exercised by the
underwriters.
|
6
(2)
|
This
number includes a portion of the founder shares in an amount equal to 2.5%
of our issued and outstanding shares immediately after this
offering that will be subject to forfeiture by our initial
stockholders 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 at least one period
of 20 trading days within any 30-trading day period within 12 months
following the closing of our initial business combination, and additional
2.5% of our issued and outstanding shares immediately after this offering
that will be subject to forfeiture by our initial stockholders in the
event the last sales price of our stock does not equal or exceed $13.00
per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for at least one period of 20 trading days
within any 30-trading day period between 12 and 24 months following
the closing of our initial business
combination.
|
(3)
|
Assumes
no exercise of the underwriters’ over-allotment option and the resulting
forfeiture of 468,750 founder
shares.
|
Warrants:
Number of sponsor warrants to
be sold
simultaneously with the closing of this offering
|
6,166,667
|
|
Number
of warrants to be outstanding after this offering and the private
placement
|
18,666,667
|
|
Exercisability
|
Each
warrant offered in this offering is exercisable to purchase one share of
our common stock.
|
|
Exercise
price
|
$12.00
per share, subject to adjustments as described herein.
|
|
Exercise
period
|
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
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.
|
||
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 and to maintain a
current prospectus relating to those shares of common stock until the
warrants expire or are redeemed.
|
||
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
of the warrants as described below or liquidation of our trust account. On
the exercise of any warrant, the warrant exercise price will be paid
directly to us and not placed in the trust account.
|
||
Redemption
of warrants
|
Once
the warrants become exercisable, we may redeem the outstanding warrants
(except as described below with respect to the sponsor
warrants):
|
|
•
in whole and not in part;
|
||
•
at a price of $.01 per
warrant;
|
7
•
upon a minimum of 30 days’ prior written notice of redemption, which we
refer to throughout this prospectus as the 30-day redemption period;
and
|
|
•
if, and only if, the last sales price of our common stock equals or
exceeds $17.50 per share for any 20 trading days within the 30-trading day
period ending on the third business day before we send the notice of
redemption to the warrant holders.
|
|
We
will not redeem the warrants unless a registration statement covering the
shares of common stock issuable upon exercise of the warrants is effective
and a current prospectus relating to those shares of common stock is
available throughout the 30-day redemption period.
|
|
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 last sales 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.
|
|
None
of the sponsor warrants will be redeemable by us so long as they are held
by our sponsor or its permitted transferees.
|
|
OTCBB
symbols
|
Units: “[•]”
|
Common
Stock: “[•]”
|
|
Warrants:
“[•]”
|
|
Founder
shares
|
In
November 2010, our initial stockholders purchased an aggregate of
3,593,750 shares for an aggregate purchase price of $25,000, or
approximately $0.007 per share. The founder shares held by our
initial stockholders include an aggregate of 468,750 shares subject to
forfeiture to the extent that the underwriters’ over-allotment option is
not exercised in full, so that our initial stockholders will collectively
own 20% of our issued and outstanding shares after this offering (assuming
none of our initial stockholders purchase units in this offering). In
addition, a portion of the founder shares in an amount equal to 2.5% of
our issued and outstanding shares immediately after this offering will be
subject to forfeiture by our initial stockholders 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 at least one period of 20 trading days
within any 30-trading day period within 12 months following the closing of
our initial business combination. An additional 2.5% of our
issued and outstanding shares immediately after this offering will be
subject to forfeiture by our initial stockholders in the event the last
sales price of our stock does not equal or exceed $13.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for at least one period of 20 trading days
within any 30-trading day period between 12 and 24 months following the
closing of our initial business
combination.
|
8
Sponsor
warrants
|
Our
sponsor has committed to purchase 6,166,667 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 ($4,625,000
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, or 27 months from the closing of
this offering if a letter of intent, agreement in principle or definitive
agreement relating to a prospective business combination is executed
before the 21-month period ends, the proceeds of the sale of the sponsor
warrants will be distributed
to our public stockholders as part of the liquidation of our trust
account (subject to the requirements of applicable law), and the
sponsor warrants will not participate in a liquidating distribution of our
trust account and
will expire worthless.
|
Transfer
restrictions on founder shares and sponsor warrants
|
Our
initial stockholders have agreed not to transfer, assign or sell any
founder shares which
are no longer subject to forfeiture until the earlier
of:
|
•
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 at least one period of 20 trading days within any 30-trading day
period commencing at least 150 days after our initial business
combination); and
|
|
•
the date on which we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction that 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
Initial Stockholders”).
|
|
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 Initial
Stockholders”). 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.
|
|
Founder
shares which are subject to forfeiture will not be transferable except in
certain limited circumstances.
|
|
Proceeds
to be held in trust account
|
Approximately
$124.4 million, or approximately $9.95 per unit of the proceeds of this
offering and the proceeds of the private placement of the sponsor warrants
(approximately $142.7 million, or approximately $9.92 per unit, if the
underwriters’ over-allotment option is exercised in full) will be placed
in a segregated trust account at [•], maintained by Continental Stock
Transfer & Trust Company, as trustee. These proceeds include
approximately $3.1 million (or approximately $3.6 million if the
underwriters’ over-allotment option is exercised in full) in deferred
underwriting
commissions.
|
9
An
increase in the size of the offering will reduce the per-share amount
payable to our public stockholders upon our liquidation or our
stockholders’ exercise of their redemption rights because the portion of
the trust account attributable to the sales proceeds of the sponsor
warrants will be allocated pro rata among a greater number of public
shares. Assuming a 20% increase in the size of this offering, the
per-share redemption or liquidation amount could decrease by as much as
approximately $0.03.
|
|
If
we elect to increase the initial amount held in the trust account from
approximately $9.95 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 the $1.0 million 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.
|
|
Except
for a portion of the interest income that may be released to us to pay any
income or franchise taxes and to fund our working capital requirements,
and any amounts necessary to purchase up to 25% of our public shares, as
discussed below, none of the funds held in the trust account will be
released until the earlier of the completion of our initial business
combination and the liquidation of our trust account if we are unable to
consummate a business combination within 21 months (or 27 months if a
letter of intent, agreement in principle or definitive agreement relating
to a prospective business combination is executed before the 21-month
period ends) 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.
|
|
None
of the warrants may be exercised until 30 days after the consummation of
our initial 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.
|
|
Anticipated
expenses and funding sources
|
Unless
and until we complete our initial business combination, no proceeds held
in the trust account, other than up to $2 million, subject to adjustment
as described below, of the interest earned on the trust account (net of
franchise and income taxes payable), and any amounts necessary to purchase
up to 25% of our public shares will be available for our use, and we may
pay our expenses only from:
|
•
such interest; and
|
|
•
the net proceeds of this offering not held in the trust account, which
will be $1.0 million in working capital after the payment of approximately
$1.1 million in expenses relating to this offering (excluding the
underwriting discounts).
|
|
10
In
the event that our offering expenses (excluding the underwriting
discounts) are in excess of approximately $1.1 million, we may fund such
amounts out of the $1.0 million not to be held in the trust account. In
such case, the amount not held in the trust account would be less than
$1.0 million by a corresponding amount. Conversely, in the event that the
offering expenses (excluding the underwriting discounts) are less than
approximately $1.1 million, the $1.0 million not held in the trust account
would increase by a corresponding amount.
|
||
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 would result in a proportionate increase or
decrease in the amount of interest we may withdraw from the trust
account.
|
||
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, other than the interest on such proceeds that may be released
to us for working capital purposes. Such loans may be
convertible into founders shares or 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. None of the sponsor warrants, any shares of common
stock issuable upon exercise thereof, or the founders shares will have
recourse to the proceeds held in our trust account. The terms
of such loans by our sponsor, an affiliate of our sponsor or certain of
our officers and directors, if any, have not been determined and no
written agreements exist with respect to such loans.
|
||
Permitted purchases of shares if we hold a stockholder vote | If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules in connection with 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 25% of the shares sold in this offering (3,125,000 shares, or 3,593,750 shares if the underwriters’ over-allotment option is exercised in full). These purchases could occur 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 $9.95 per share or approximately $9.92 per share if the underwriters’ over-allotment option is exercised in full). We can purchase any or all of the 3,125,000 shares (or 3,593,750 shares if the underwriters’ 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 initial business combination. All shares purchased by us will be immediately cancelled. Such open market purchases, if any, would be conducted by us to minimize any disparity between the then-current market price of our common stock and the per-share amount held in the trust account. A market price below the per-share trust amount could provide an incentive for purchasers to buy our shares after the filing of our preliminary proxy statement at a discount to the per-share amount held in the trust account for the sole purpose of voting against our initial business combination and exercising redemption rights for the full per-share amount held in the trust account. Such trading activity could enable such investors to block a business combination regardless of its merits by making it difficult to obtain the approval of such business combination by the vote of a majority of the outstanding shares of common stock voted. |
11
Private
transactions if we hold a stockholder vote
|
If
we hold a stockholder vote to approve our initial business combination and
we do not conduct redemptions pursuant to the tender offer rules in
connection with our initial business combination, we may enter into
privately negotiated transactions to purchase public shares from
stockholders after consummation of the initial business combination with
proceeds from our 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. In the event we are the buyer in the privately negotiated
purchases, we could elect to use trust account proceeds to pay the
purchase price in such transaction after the closing of our initial
business combination. 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.
|
|
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, less franchise and income taxes payable,
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 $9.95 per share (or approximately $9.92
per share if the underwriters’ over-allotment option is exercised in
full), or approximately $0.05 less than the per-unit offering price of
$10.00 (approximately $0.08 less if the underwriters’ 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. Our initial stockholders have agreed to waive their redemption
rights with respect to their founder and any public shares. However, if
our initial stockholders, or any of our officers, directors or affiliates
acquire public shares in or after this offering, and we are unable to
consummate a business combination within 21- or 27- month period, they
will be entitled to liquidating distributions with respect to such public
shares upon the liquidation of the trust account. The founder shares will
be excluded from the pro rata calculation used to determine the per-share
redemption price. Unlike many 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 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 our initial business
combination and the redemption rights as is required under Regulation 14A
of the Exchange Act, which regulates the solicitation of proxies. In the
event we conduct redemptions pursuant to the tender offer rules, our offer
to redeem shares shall remain open for at least 20 business days, in
accordance with Rule 14e-1(a) under the Exchange Act. 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
initial stockholders have agreed to vote their founder shares as well as
any public shares purchased during or after the offering in favor of our
initial business combination.
|
12
Traditionally,
blank check companies would not be able to consummate a business
combination if the holders of the company’s 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 company’s 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 number 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 specified maximum redemption threshold, our
structure is different in this respect from the structure that has been
used by most blank check companies.
|
|
In
no event, however, will we redeem our public shares in an amount that
would cause our stockholders’ equity to be less than $5,000,001. If we
enter into an acquisition agreement with a prospective target that
requires as a closing condition to our initial business combination that
we maintain a minimum net worth or certain amount of cash that is greater
than $5,000,001, we will communicate the details of the closing condition
to our public stockholders through our tender offer or proxy solicitation
materials, as applicable. Our articles of incorporation require us to
provide all of our stockholders with an opportunity to redeem all of their
shares in connection with the consummation of any initial business
combination. Consequently, if accepting all properly submitted redemption
requests would cause our stockholders’ equity to be less than $5,000,001
or such greater amount necessary to satisfy a closing condition as
described above, we would not proceed with such redemption and the related
business combination and may instead search for an alternate business
combination.
|
13
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 franchise and
income taxes payable, provided that such stockholders follow the specific
procedures for redemption that will be set forth in the proxy statement
relating to the stockholder vote on a proposed initial business
combination. Unlike many other blank check companies, our public
stockholders would not be required to vote against our initial business
combination in order to exercise their redemption rights. 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. As would be the case if we do not hold a stockholder
vote to approve an initial business combination, we will not complete an
initial business combination if, upon consummation, our stockholders’
equity would be less than $5,000,001.
|
|
10%
limitation on redemption rights if we hold a stockholder
vote
|
If
we hold a stockholder vote to approve our initial business combination and
we do not conduct redemptions pursuant to the tender offer rules in
connection with our initial business combination, our amended and restated
articles of incorporation provide 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 holder’s 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.
|
14
Distribution and liquidation of
trust account 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, or 27 months from the closing of this offering if a
letter of intent, agreement in principle or definitive agreement relating
to a prospective business combination is executed before the 21-month
period ends. If we are unable to consummate a business combination within
such 21- or 27- month period, we will liquidate the trust account and
distribute the amount held in the trust account, including interest but
net of franchise and income taxes payable and less up to $100,000 of such
net interest that may be released to us from the trust account to pay
liquidation expenses, to our public shareholders, subject to
the requirements of Nevada law that a corporation not make a distribution
to stockholders if, after giving effect to the distribution, either (i)
the corporation would not be able to pay its debts as they become due in
the usual course of business or (ii) the corporation’s total assets would
be less than the sum of its total liabilities plus the amount that would
be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution. Following such liquidation of the trust
account, unless we determine to dissolve and liquidate, each of our
stockholders, including the initial stockholders, will retain their shares
and continue to be a stockholder of our company. We will
continue in existence as a public shell company and, subject to the
provisions of our amended and restated articles of incorporation, our
management will have broad discretion to determine the future of our
business, if any. In addition, as substantially all of our
assets will have been distributed pursuant to the liquidation of our trust
account, unless we obtain third-party financing, the surviving public
shell company will have limited, or no, financial resources to pursue a
new business.
|
|
There
will be no redemption rights or liquidating distributions with respect to
our warrants, which will expire worthless.
|
||
Our
initial stockholders have waived their rights to liquidating distributions
under the trust account with respect to their founder shares if we fail to
consummate an initial business combination within 21 or 27 months, as
applicable, from the closing of this offering. However, if our initial
stockholders, or any of our officers, directors or affiliates acquire
public shares in or after this offering, they will be entitled to
liquidating distributions under the trust account with respect to
such public shares if we fail to consummate a business combination within
the required time period.
|
||
Both
the distribution of our assets in contemplation of liquidation and the
liquidation of the trust assets 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 or make liquidating distributions under the
trust. We cannot assure you that we will have access to 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 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. Johnson, our founder and
chairman of the board, has agreed that upon the liquidation of our trust,
or our liquidation, 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
$9.95 per share (or approximately $9.92 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. Johnson will not
be responsible to the extent of any liability for such third party
claims.
|
15
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 our initial business combination within 21 months from the
closing of this offering (or 27 months from the closing of this offering
if a letter of intent, agreement in principle or definitive agreement
relating to a prospective business combination is executed before the
21-month period ends), and in such event such amounts will be included
with the funds held in the trust account that will be available for
distribution to our public stockholders.
|
|
Determination
of offering amount
|
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 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.
These
risks include, among others:
|
•
|
We
are a newly formed development stage company with no operating results,
which means that stockholders will have no basis upon which to evaluate
our ability to complete an initial business combination with one or more
target businesses.
|
|
•
|
We
may not hold a stockholder vote before we consummate our initial business
combination, which means that we may consummate our initial business
combination even though a substantial number of our public stockholders do
not support such a combination.
|
|
•
|
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 liquidation amount received by stockholders may
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.
|
|
•
|
This
offering is not being conducted in compliance with Rule 419
(Offerings by Blank Check Companies) promulgated under the Securities Act,
which means that stockholders will not be entitled to protections normally
afforded to investors in Rule 419 blank check
offerings.
|
16
You
should carefully consider these and the other risks set forth in the section
entitled “Risk Factors” beginning on page [•] of this prospectus. 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.”
17
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.
November 18, 2010
|
||||||||
Actual
|
As Adjusted
|
|||||||
Balance Sheet
Data:
|
||||||||
Working
capital (deficiency)
|
$ | (28,936 | ) | $ | 122,476,311 | |||
Total
assets
|
$ | 280,247 | $ | 125,601,311 | ||||
Total
liabilities
|
$ | 278,936 | $ | 3,125,000 | ||||
Value
of common stock that may be redeemed in connection with our initial
business combination
|
$ | — | $ | 117,476,310 | ||||
Stockholder’s
equity(1)
|
$ | 1,311 | $ | 5,000,001 |
(1)
|
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
our sponsor, and the payment of the estimated expenses of this offering. The “as
adjusted” total assets amount includes the $124,375,000 held in the trust
account for the benefit of our public stockholders. Except for a portion of the
interest income earned on the trust account balance that may be released to us
to pay franchise and income taxes and to fund our working capital requirements,
and any amounts necessary to purchase up to 25% of our public shares as
described in this prospectus, the funds held in the trust account will be
available to us only upon the consummation of a business combination within 21
months from the closing of this offering (or 27 months from the closing of this
offering if a letter of intent, agreement in principle or definitive agreement
relating to a prospective business combination is executed before the 21-month
period ends). The “as adjusted” working capital and “as adjusted” total assets
include approximately $3.1 million being held in the trust account
(approximately $3.6 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 (or 27 months from the closing of this offering if a letter of intent,
agreement in principle or definitive agreement relating to a prospective
business combination is executed before the 21-month period ends), the proceeds
held in the trust account, including the deferred underwriting commissions and
all interest thereon, net of franchise and income taxes payable, up to $100,000
of such net interest to pay expenses associated with the liquidation of our
trust account, any interest income released to us to fund our working capital
requirements and any amounts released to purchase up to 25% of our public
shares, as described in this prospectus, will be used to fund the liquidation of
our trust account. Our initial stockholders have agreed to waive their rights to
liquidating distributions with respect to their founder shares if we fail to
consummate a business combination within such 21- or 27- month time
period.
18
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
newly 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 our initial
business combination and may be unable to complete our initial business
combination. If we fail to complete our initial business combination, we will
never generate any operating revenues.
Our public
stockholders may not be afforded an opportunity to vote on our proposed initial
business combination, which means we may consummate our initial business
combination even though a substantial number or majority of our public
stockholders do not support such a combination.
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 the outstanding shares of
common stock do not approve of the business combination we
consummate.
If we seek
stockholder approval of our initial business combination, our initial
stockholders have agreed to vote in favor of such initial business combination,
regardless of how our public stockholders vote.
Unlike
many other blank check companies in which the founders agree to vote their
founder shares in accordance with the majority of the votes cast by the public
stockholders in connection with an initial business combination, our initial
stockholders have agreed to vote their founder shares, as well as any public
shares purchased during or after the offering, in favor of our initial business
combination. Our initial stockholders will own 20% of our outstanding shares of
common stock immediately following the consummation of this offering.
Accordingly, if we seek stockholder approval of out initial business
combination, it is more likely that the necessary stockholder approval will be
received than would be the case if out initial stockholders agreed to vote their
founder shares in accordance with the majority of the votes cast by our public
stockholders.
Your only
opportunity to affect the investment decision regarding our initial 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 our initial 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 our initial business combination without
seeking stockholder approval, public stockholders may not have the right or
opportunity to vote on our initial 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 (which will be at least 20
business days) set forth in our tender offer documents mailed to our public
stockholders in which we describe our initial business
combination.
19
The ability of
our stockholders to redeem their shares for cash may make our financial
condition unattractive to potential business combination targets, which may make
it difficult for us to enter into a business combination with a
target.
We may
enter into an acquisition agreement with a prospective target that requires as a
closing condition to our initial business combination 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 combination. Furthermore,
in no event will we redeem our public shares in an amount that would cause our
stockholders’ equity to be less than $5,000,001. Our articles of incorporation
require us to provide all of our stockholders with an opportunity to redeem all
of their shares in connection with the consummation of any initial business
combination. Consequently, if accepting all properly submitted redemption
requests would cause our stockholders’ equity to be less than $5,000,001 or such
greater amount necessary to satisfy a closing condition as described above, we
would not proceed with such redemption and the related business combination and
may instead search for an alternate business combination. Prospective targets
would be aware of these risks and, thus, may be reluctant to enter into a
business combination transaction with us.
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
initial 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 their redemption rights, we may either need to reserve part of the
trust account for possible payment upon redemption, or we may need to arrange
third party financing to help fund our initial 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, or 27 months from
the closing of this offering if a letter of intent, agreement in principle or
definitive agreement relating to a prospective business combination is executed
before the 21-month period ends, in which case
we would liquidate our trust account.
Our
sponsor, officers and directors have agreed that we must complete our initial
business combination within 21 months from the closing of this offering, or 27
months from the closing of this offering if a letter of intent, agreement in
principle or definitive agreement relating to a prospective business combination
is executed before the 21-month period ends. We may not be able to find suitable
target businesses within such time period. If we are unable to consummate a
business combination within such 21- or 27-month period, we will liquidate the
trust account and distribute the amount held in the trust account, including
interest but net of franchise and income taxes payable and less up to $100,000
of such net interest that may be released to us from the trust account to pay
expenses associated with liquidating the trust account, to our public
shareholders, subject to the
requirements of Nevada law that a corporation not make a distribution to
stockholders if, after giving effect to the distribution, either (i) the
corporation would not be able to pay its debts as they become due in the usual
course of business or (ii) the corporation’s total assets would be less than the
sum of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
Our negotiating
position and our ability to conduct due diligence on potential business
combination targets may decrease as we approach our dissolution deadline, which
could undermine our ability to consummate our initial business combination that
would produce value for our stockholders.
Pursuant
to our amended and restated Articles of incorporation, among other things, we
must complete our initial business combination within 21 months from the closing
of this offering (or 27 months from the closing of this offering if a letter of
intent, agreement in principle or definitive agreement relating to a prospective
business combination is executed before the 21-month period ends) or liquidate
the trust account. As the end of such time frame nears, our need to consummate
an initial business combination with a then-current prospective target business
will increase, which may decrease our negotiating power to obtain the best
possible deal. In addition, such time restraints may result in limited time to
conduct due diligence and, as a result, our due diligence investigation may not
be as detailed as would otherwise be the case.
20
If we are unable
to complete our initial business combination within the prescribed time frame,
our public stockholders may receive less than $10.00 per share upon the
liquidation of our trust account, and our warrants will not participate in any
liquidating distribution of the trust account and will expire
worthless.
If we are
unable to complete our initial business combination within the prescribed time
frame and are forced to liquidate our trust account, the per-share liquidation
amount received by stockholders may 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. Without taking into account
interest, if any, earned on the trust account, net of franchise and income taxes
payable and net of up to $2.0 million, subject to adjustment, in interest income
on the trust account balance previously released to us to fund working capital
requirements, the per-share liquidation amount received by stockholders would be
$9.95, or $0.05 less than the per-unit offering price of $10.00 (or
approximately $9.92, or $0.08 less if the underwriters’ over-allotment option is
exercised in full). Furthermore, our outstanding warrants are not entitled to
participate in a liquidating distribution of our trust account and will expire
worthless.
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. A stockholder
that needs to liquidate its investment, therefore, would have to sell its public
shares or warrants, potentially at a loss.
We have
until the date that is 21 months from the closing of this offering (or 27 months
from the closing of this offering if a letter of intent, agreement in principle
or definitive agreement relating to a prospective business combination is
executed before the 21-month period ends) to consummate our initial business
combination. If we are unable to consummate a business combination within such
21- or 27-month period, we will liquidate our trust account, as described in
this prospectus. We have no obligation to return funds to investors prior to the
date of our liquidation unless we consummate our initial 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 our initial business combination, there could be released to us
from the trust account amounts necessary to purchase up to 25% of the shares
sold in this offering (3,125,000 shares, or 3,593,750 shares if the
underwriters’ over-allotment option is exercised in full). These purchases could
occur 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 market’s 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 purchases
may materially adversely affect the market price of our
securities.
21
If we seek
stockholder approval of our initial business combination, we, our sponsor,
directors, officers, advisors and their affiliates may elect to purchase shares
from stockholders, in which case we or they may influence a vote in favor of a
proposed business combination that you do not support.
If we
seek stockholder approval of our business combination and we do not conduct
redemptions pursuant to the tender offer rules in connection with our business
combination, we may privately negotiate transactions to purchase shares after
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 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 the event we are the buyer in such privately negotiated
purchases, we could elect to use trust account proceeds to pay the purchase
price in such transactions after the closing of our initial business
combination.
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 25% of the shares
sold in this offering (3,125,000 shares, or 3,593,750 shares if the
underwriters’ over-allotment 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 (inclusive
of commissions) does not exceed the per-share amount then held in the trust
account (approximately $9.95 per share or approximately $9.92 per share if the
underwriters’ over-allotment option is exercised in full).
The
purpose of such purchases would be to increase the likelihood of obtaining
stockholder approval of the business combination or, 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 our initial 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 our initial business combination.
Our purchases of
common stock in the open market or in privately negotiated transactions would
reduce the funds available to us after our initial 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 pursuant to the tender offer rules in connection with our business
combination, we may privately negotiate transactions to purchase shares after
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 25% of the shares sold in this offering (1,875,000 shares, or 2,156,250
shares if the underwriters’ over-allotment 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 $9.95 per share or approximately $9.92 per share if the
underwriters’ over-allotment option is exercised in full).
As a
consequence of such purchases:
•
|
the
funds in our trust account that are so used will not be available to us
after our initial business
combination;
|
•
|
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;
|
22
•
|
because
the stockholders who sell their shares in a privately negotiated
transaction or pursuant to open 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 franchise and income taxes payable, 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 expenses to
liquidate our trust account in the event we do not complete our initial
business combination within 21 months from the closing of this offering,
or 27 months from the closing of this offering if a letter of intent,
agreement in principle or definitive agreement relating to a prospective
business combination is executed before the 21-month period ends). 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
franchise and income taxes payable than it would have been in the absence
of such privately negotiated or open 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 entire
deferred commissions and a larger percentage of the franchise and income
taxes payable; and
|
•
|
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.
|
You
will not have any rights or interests in funds from the trust account, except
under certain limited circumstances. To liquidate your investment, therefore,
you may be forced to sell your public shares or warrants, potentially at a
loss.
Our public stockholders will be
entitled to receive funds from the trust account only upon the earlier to occur
of 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, and
the liquidation of our trust account if we are unable to consummate an initial
business combination within 21 months from the closing of this offering, or 27
months from the closing of this offering if a letter of intent, agreement in
principle or definitive agreement relating to a prospective business combination
is executed before the 21-month period ends. In no other circumstances will a
stockholder have any right or interest of any kind in the trust account. To
liquidate your investment, therefore, you may be forced to sell your public
shares or warrants, potentially at a loss.
We do not intend
to establish an audit committee or a compensation committee until the
consummation of an initial business combination. Until such time, no formal
committee of independent directors will review matters related to our business,
and such lack of review could negatively impact our
business.
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 formal 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. The absence of such
committees to review the matters discussed above until the consummation of our
initial business combination could negatively impact our operations and
profitability.
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, because we will have stockholders’ equity in excess of $5.0 million
upon the 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 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
25% 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. 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.”
23
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. If we are unable to complete our initial business combination, our
public stockholders may receive less than $10.00 per share upon the liquidation
of our trust account, and our warrants will not be entitled to any portion of
the trust account and will expire worthless.
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 we are unable to complete our initial business combination, our
public stockholders may receive less than $10.00 per share upon the liquidation
of our trust account, and our warrants will not be entitled to any portion of
the trust account and will expire worthless.
If the net
proceeds of this offering not being held in the trust account, together with the
up to $2.0 million, subject to adjustment, of interest in the trust account (net
of franchise and income taxes payable) which may be released to us for working
capital purposes, are insufficient to allow us to operate for the next 27
months, we may be unable to complete our initial business
combination.
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, may not be
sufficient to allow us to operate for the next 27 months, assuming that our
initial business combination is not consummated during that time. 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. If we are
unable to complete our initial business combination, our public stockholders may
receive less than $10.00 per share upon the liquidation of our trust account,
and our warrants will not be entitled to any portion of the trust account and
will expire worthless.
24
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 franchise and income taxes and to complete our initial
business combination.
Of the
net proceeds of this offering, only $1.0 million will be available to us
initially outside the trust account to fund our working capital requirements. In
the event that our offering expenses (excluding the underwriting discounts) are
in excess of approximately $1.1 million, we may fund such amounts out of the
$1.0 million not to be held in the trust account. In such case, the amount not
held in the trust account would be less than $1.0 million by a corresponding
amount. Conversely, in the event that the offering expenses (excluding the
underwriting discounts) are less than approximately $1.1 million, the $1.0
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 $2.0 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
franchise and income 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. If we
are unable to complete our initial business combination, our public stockholders
may receive less than $10.00 per share upon the liquidation of our trust
account, and our warrants will not be entitled to any portion of the trust
account and will expire worthless.
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, the portion of the trust account attributable to the
proceeds of the sale of sponsor warrants will be allocated pro rata among a
greater number of public shares, which will reduce the per-share amount payable
to our public stockholders upon the liquidation of our trust account or our
stockholders’ exercise of redemption rights.
If the
size of the offering is increased, there will be no corresponding increase in
the number of sponsor warrants purchased by our sponsor. Accordingly, upon the
liquidation of our trust account or our stockholders’ exercise of redemption
rights, the portion of the trust account attributable to the sale proceeds of
the sponsor warrants ($4,625,000) will be spread pro rata across a greater
number of public shares, which will reduce the per-share amount payable to each
public stockholder. Assuming a 20% increase in the size of this offering, the
per-share redemption or liquidation amount could decrease by as much as
approximately $0.03.
25
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share liquidation amount received by stockholders may be less than approximately $9.95 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
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 other 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 party’s 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 the liquidation of our trust
account 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 six
years following liquidation or redemption. Accordingly, the per-share
liquidation or redemption amount received by stockholders could be less than the
$9.95 per share held in the trust account, including interest but net of any
franchise and income taxes payable and less up to $100,000 of such net interest
that may be released to us from the trust account to pay expenses associated
with liquidating our trust account (or approximately $9.92 per share if the
underwriters’ over-allotment option is exercised in full), due to claims of such
creditors. Mr. Johnson, our founder and chairman of the board, has agreed that
upon the liquidation of us or our trust account, 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 $9.95
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. Johnson will not be responsible to the extent of any liability for
such third party claims. However, we have not asked Mr. Johnson to reserve for
such indemnification obligations and we cannot assure you that Mr. Johnson would
be able to satisfy those obligations.
If the proceeds
of the trust account become subject to a bankruptcy proceeding, the claims of
creditors in such proceeding may have priority over the claims of our
stockholders and the per-share amount that would otherwise be received by our
stockholders in connection with the liquidation of our trust account may be
reduced.
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, the per-share amount that would otherwise be received by our
stockholders in connection with the liquidation of our trust account may be
reduced.
Our directors may
decide not to enforce Mr. Johnson’s 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 $9.95 per share
(or approximately $9.92 per share if the underwriters’ over-allotment option is
exercised in full) by claims that are covered by the indemnification obligations
of Mr. Johnson and Mr. Johnson 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. Johnson to enforce his indemnification obligations.
While we currently expect that our independent directors would take legal action
on our behalf against Mr. Johnson 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 $9.95 per share by claims that are covered by the indemnification
obligations of Mr. Johnson.
26
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:
•
|
restrictions
on the nature of our investments;
and
|
•
|
restrictions
on the issuance of securities,
|
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:
•
|
registration
as an investment company;
|
•
|
adoption
of a specific form of corporate structure;
and
|
•
|
reporting,
record keeping, voting, proxy and disclosure requirements and other rules
and regulations.
|
We do not
believe that our anticipated principal activities will subject us to the
Investment Company Act. 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 and may hinder our ability to consummate a
business combination. If we are unable to complete our initial business
combination, our public stockholders may receive less than $10.00 per share upon
the liquidation of our trust account, and our warrants will not be entitled to
any portion of the trust account and will expire worthless.
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.
We do not
currently intend to hold an annual meeting of stockholders until after our
consummation of a business combination and you will not be entitled to any of
the corporate protections provided by such a meeting.
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 Nevada
Revised Statutes, or NRS, 78.330, which requires an annual meeting of
stockholders be held for the purposes of electing directors 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 district court in accordance with NRS
78.345.
27
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 will liquidate our trust account in the event we do not
consummate a business combination within 21 months from the closing of this
offering (or 27 months from the closing of this offering if a letter of intent,
agreement in principle or definitive agreement relating to a prospective
business combination is executed before the 21-month period ends) and distribute
the proceeds to our public stockholders, 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 use our best efforts 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 of exercise, a
prospectus relating to the common stock issuable upon exercise of the warrants
is current and available and a related registration statement is effective 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 use our best efforts to file a registration statement covering
such shares and maintain a current prospectus relating to the common stock
issuable upon exercise of the warrants until the expiration of the warrants. 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, except pursuant to
cashless exercise provisions in limited circumstances. We will not be required
to settle any such warrant exercise. If the registration statement is not
effective or 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.
The grant of
registration rights to our initial stockholders 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 initial stockholders and their permitted
transferees can demand that we register the founder shares, our sponsor and its
permitted transferees can demand that we register the sponsor warrants and the
shares of common stock issuable upon exercise of the sponsor warrants and
holders of warrants that may be issued upon conversion of working capital loans
may demand that we register such warrants or the common stock issuable upon
conversion of such 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
initial stockholders are registered.
28
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, except that we will not
effect a business combination with another blank check company or a similar type
of company with nominal operations. 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. 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.
Although we
identified general criteria and guidelines that we believe are important in
evaluating prospective target businesses, we may enter into a business
combination with a target that does not meet such criteria and guidelines, and
as a result, the target business with which we enter into our initial business
combination may not have attributes entirely consistent with our general
criteria and guidelines.
Although
we have identified proven track records, strong cash flow characteristics,
strong competitive position, experienced management and diversified customer and
supplier bases as general criteria and guidelines for evaluating prospective
target businesses, it is possible that a target business with which we enter
into our initial business combination will not have all of these attributes. If
we consummate our initial business combination with a target that does not meet
some or all of these guidelines, such combination may not be as successful as a
combination with a business that does meet all of our general criteria and
guidelines. If we announce a prospective business combination with a target that
does not meet our general criteria and guidelines, a greater number of
stockholders may exercise their redemption rights, which may make it difficult
for us to meet any closing condition with a target business that requires us to
have a minimum net worth or a certain amount of cash. In addition, if a
stockholder vote is required by law, or we decide to hold a stockholder vote for
business or other legal reasons, it may be more difficult for us to attain
stockholder approval of our initial business combination if the target business
does not meet our general criteria and guidelines. If we are unable to complete
our initial business combination, our public stockholders may receive less than
$10.00 per share upon the liquidation of our trust account, and our warrants
will not be entitled to any portion of the trust account and will expire
worthless.
29
Unlike many 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.
Management’s unrestricted flexibility in identifying and selecting a prospective
acquisition candidate, along with our management’s 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.
Many
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 management’s 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.
Management’s unrestricted
flexibility in identifying and selecting a prospective acquisition candidate,
along with management’s 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, which would be the case if we pay
too much for the business combination target.
We are not
required to obtain an opinion from an independent investment banking firm, and
consequently you may have no assurance from an independent source, that the
price we are paying for the business is fair to our company from a financial
point of view.
Unless we
consummate our initial 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 company from a financial point of
view. If no opinion is obtained, our stockholders will be relying on the
judgment of our board of directors, who will determine fair market value and
fairness based on standards generally accepted by the financial community. The
application of such standards would involve a comparison, from a valuation
standpoint, of our business combination target to comparable public companies,
as applicable, and a comparison of our contemplated transaction with such
business combination target to other then-recently announced comparable private
and public company transactions, as applicable. The application of such
standards and the basis of the our board of directors’ determination will be
discussed and disclosed in our tender offer or proxy solicitation materials, as
applicable, related to our initial business combination.
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 articles of incorporation will authorize the issuance of up
to 250 million shares of common stock, par value $0.001 per share, and one
million shares of preferred stock, par value $0.001 per share. Immediately after
this offering, there will be approximately 234.4 million (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:
30
•
|
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 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
|
•
|
may
adversely affect prevailing market prices for our common stock and/or
warrants.
|
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. If we are unable to complete our initial business
combination, our public stockholders may receive less than $10.00 per share upon
the liquidation of our trust account, and our
warrants will not be entitled to any portion of the trust account and will
expire worthless.
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, in the event we seek stockholder approval of our initial
business combination and we do not conduct redemptions pursuant to the tender
offer rules in connection with our initial business combination, we may make
purchases of our common stock, in an amount up to 25% 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.
We are dependent
upon Mr. Johnson 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. Johnson. We believe
that our success depends on the continued service of Mr. Johnson, at least until
we have consummated a business combination. In addition, Mr. Johnson 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. Johnson. The unexpected loss of
the services of Mr. Johnson could have a detrimental effect on us.
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.
31
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 not join us following our initial business combination. The loss of
our key personnel could negatively impact the operations and profitability of
our post-combination business.
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, some or all of the
management of the target business may 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 our initial business combination. These agreements may provide
for them to receive compensation following our initial 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 our
initial 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 our initial 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 our initial 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.
We may have a
limited ability to assess the management of a prospective target business and,
as a result, may effect a business combination with a target business whose
management may not have the skills, qualifications or abilities to manage a
public company.
When
evaluating the desirability of effecting a business combination with a
prospective target business, our ability to assess the target business’
management may be limited due to a lack of time, resources or information. Our
assessment of the capabilities of the target’s management, therefore, may prove
to be incorrect and such management may lack the skills, qualifications or
abilities we suspected. Should the target’s management not possess the skills,
qualifications or abilities necessary to manage a public company, the operations
and profitability of the post-combination business may be negatively
impacted.
The officers and
directors of an acquisition target may resign upon consummation of a business
combination. The loss of an acquisition target’s key personnel could negatively
impact the operations and profitability of our post-combination
business.
The role
of an acquisition candidate’s key personnel upon the consummation of a business
combination cannot be ascertained at this time. Although we contemplate that
certain members of an acquisition candidate’s 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. The loss of an acquisition target’s key personnel could
negatively impact the operations and profitability of our post-combination
business.
32
We may in the future hire consultants or advisors on a contingent basis, who would only receive payment in the event a business transaction occurred and, therefore, they might be viewed as having an interest in such business transaction occurring.
We may in
the future hire consultants or advisors to assist us with our search for a
target business or businesses or otherwise advise us in connection with our
initial business transaction and any compensation payable to such persons may be
contingent upon the closing of our initial business transaction. As a result,
such consultants and advisors who provide advice to us would only receive
compensation if a business transaction occurred and therefore they might be
viewed as having an interest in such business transaction occurring that is
different from, or conflicts with, the interests of our public
shareholders.
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 and Mr. Johnson 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 or director, 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. None of
our other independent directors has entered into such an agreement with us. All
of our officers and Mr. Johnson currently have certain relevant fiduciary duties
or contractual obligations that may take priority over their duties to
us.
In addition, our officers and directors
may become involved with subsequent blank check companies similar to our
company, although our officers and Mr. Johnson have agreed not to participate in
the formation of, or become an officer or director of, any blank check company
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 (or 27 months from the
closing of this offering if a letter of intent, agreement in principle or
definitive agreement relating to a prospective business combination is executed
before the 21-month period ends). Our officers or directors 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, or financial, 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, or financial,
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.
We may enter into
an initial business combination with a target business that is affiliated with
our sponsor, directors or officers, which could create a conflict of interest
between our sponsor or such directors or officers, on one hand, and us or our
stockholders on the other.
We are
not prohibited from pursuing an initial business combination with a target
business that is affiliated with our sponsor, directors or officers. If we
pursue such a business combination, we, or a committee of our independent
directors, will obtain an opinion from an independent investment banking firm
that is a member of FINRA that our initial business combination is fair to our
company from a financial point of view, but our public stockholders will have no
assurance that a different business combination would not have been more
profitable.
33
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
November 2010, our initial stockholders purchased an aggregate of 3,593,750
shares, which we refer to throughout this prospectus as the founder shares, for
an aggregate purchase price of $25,000, or approximately $0.007 per share. The
founder shares held by our initial stockholders include an aggregate of 468,750
shares subject to forfeiture to the extent that the underwriters’ over-allotment
option is not exercised in full, so that our initial stockholders will
collectively own 20% of our issued and outstanding shares after this offering
(assuming none of our initial stockholders purchase units in this offering). In
addition, a portion of the founder shares in an amount equal to 2.5% of our
issued and outstanding shares immediately after this offering will be subject to
forfeiture by our initial stockholders 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 at least
one period of 20 trading days within any 30-trading day period within 12 months
following the closing of our initial business combination. An additional 2.5% of
our issued and outstanding shares immediately after this offering will be
subject to forfeiture by our initial stockholders in the event the last sales
price of our stock does not equal or exceed $13.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like)
for at least one period of 20 trading days within any 30-trading day period
between 12 and 24 months 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
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.
Unlike
most blank check companies, our founders and sponsor are not required to vote
their founders shares in proportion to our public stockholders. This will result
in a greater likelihood that an initial business combination is consummated,
compounding this conflict of interest.
We may issue
notes or other debt securities, or otherwise incur substantial debt, to complete
our initial business combination, which may adversely affect our financial
condition and thus negatively impact the value of our stockholders’ investment
in us.
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 our initial business combination. The
incurrence of debt could have a variety of negative effects,
including:
•
|
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;
|
34
•
|
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.
|
We do not
have a maximum debt leverage ratio or a policy with respect to how much debt we
may incur. To the extent that the amount of our debt increases, the impact of
the negative effects listed above may also increase.
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. This lack of diversification may
negatively impact our operations and profitability.
The net
proceeds from this offering and the concurrent private placement will provide us
with approximately $124.4 million (or approximately $142.7 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:
|
•
|
solely
dependent upon the performance of a single business, property or asset,
or
|
|
•
|
dependent
upon the development or market acceptance of a single or limited number of
products, processes or services.
|
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.
We may attempt to
simultaneously consummate business combinations with multiple prospective
targets, which may hinder our ability to consummate an initial business
combination and give rise to increased costs and risks that could negatively
impact our operations and profitability.
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
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.
35
We may attempt to
consummate our initial business combination with a private company about which
little information is available, which may result in a business combination with
a company that is not as profitable as we suspected, if at
all.
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. In a business combination with a
private company, we would be required to rely on the ability of our management
to obtain adequate information about the target and we may have limited ability
to conduct due diligence. As a result, we could be required to make our decision
on whether to pursue a potential business combination on the basis of limited
information, which may result in our consummation of a business combination with
a company that is not as profitable as we suspected, if at all. Furthermore, the
relative lack of information about a private company may hinder our ability to
properly assess the value of such a company in relation to public company
comparables, in which case we may pay too much to acquire a private company in
our initial business combination.
If we attempt to
consummate a business combination with a private company, we may be required to
expend substantial sums in order to bring such company into compliance with the
various reporting requirements applicable to public companies and/or to prepare
required financial statements, and such efforts may harm our operating results
or be unsuccessful altogether.
A private
company target will not be subject to many of the requirements applicable to
public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, or
the Sarbanes-Oxley Act, and the number and qualifications of a private company’s
finance and accounting staff may not be adequate to comply with such
requirements. Section 404 of 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, 2012. Furthermore, we may not have the
ability to conduct a formal evaluation of a private company’s internal controls
over financial reporting prior to the consummation of a business combination
with such company. If a private target company’s finance and accounting staff or
internal controls over financial reporting are inadequate, we may be required to
hire additional staff and incur substantial legal and accounting costs to
address such inadequacies. Moreover, we cannot be certain that our remedial
measures will be effective. Any failure to implement required or improved
controls, or difficulties encountered in their implementation, could harm our
operating results or increase our risk of material weaknesses in internal
controls.
In
addition, 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 because some targets may be unable to provide
such statements in time for us to disclose such statements in accordance with
federal proxy rules and consummate our initial business combination within our
21-month time frame (or 27 months if a letter of intent, agreement in principle
or definitive agreement relating to a prospective business combination is
executed before the 21-month period ends).
We may not be
able to maintain control of a target business after our initial business
combination. We cannot provide assurance that, upon loss of control of a target
business, new management will possess the skills, qualifications or abilities
necessary to profitably operate such business.
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 RLJ Acquisition, Inc. (or its stockholders if it is not
the surviving corporation) will become the controlling stockholder of the
target or is 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 company’s 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. We cannot provide assurance that, upon loss of control of a target
business, new management will possess the skills, qualifications or abilities
necessary to profitably operate such business.
36
Unlike many other blank check companies, we do not have a specified 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 specified maximum 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 company’s 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 company’s 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 number 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. In no event, however, will we redeem
our public shares in an amount that would cause our stockholders’ equity to be
less than $5,000,001. If we enter into an acquisition agreement with a
prospective target that requires as a closing condition to our initial business
combination that we maintain a minimum net worth or certain amount of cash that
is greater than $5,000,001, we will communicate the details of the closing
condition to our public stockholders through our tender offer or proxy
solicitation materials, as applicable. Our articles of incorporation require us
to provide all of our stockholders with an opportunity to redeem all of their
shares in connection with the consummation of any initial business combination.
Consequently, if accepting all properly submitted redemption requests would
cause our stockholders’ equity to be less than $5,000,001 or such greater amount
necessary to satisfy a closing condition as described above, we would not
proceed with such redemption and the related business combination and may
instead search for an alternate business combination.
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 articles of
incorporation or governing instruments in a manner that will make it easier for
us to consummate a business combination that our stockholders may not
support.
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.
37
Certain
provisions of our amended and restated articles of incorporation that relate to
our pre-business combination activity may be amended with the approval of at
least 65% of our outstanding common stock, which is a lower amendment threshold
than that of most blank check companies. It may be easier for us, therefore, to
amend our articles of incorporation to facilitate the consummation of an initial
business combination that our stockholders may not support.
Most
blank check companies have a provision in their charter that prohibits the
amendment of certain of its provisions that relate to pre-business combination
activity without approval by a certain percentage of the company’s stockholders.
Typically, amendment of these provisions requires approval by between 90% and
100% of the company’s public stockholders. Our amended and restated articles of
incorporation provide that its provisions related to pre-business combination
activity may be amended if approved by holders of at least 65% of our
outstanding common stock. As a result, we may be able to amend the provisions of
our amended and restated articles of incorporation that govern our pre-business
combination behavior more easily than other blank check companies, and this may
increase our ability to consummate a business combination with which you do not
agree.
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. If we are unable to
complete our initial business combination, our public stockholders may receive
less than $10.00 per share upon the liquidation of our trust account, and our
warrants will not be entitled to any portion of the trust account and will
expire worthless.
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
controls a substantial interest in us and thus may exert a substantial influence
on actions requiring a stockholder vote, potentially in a manner that you do not
support.
Upon the
closing of this offering, our sponsor, which is an entity controlled by Robert
L. Johnson, our founder and chairman of the board, will own approximately 19% of
the issued and outstanding shares of our 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 at each
annual meeting of stockholders. 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 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.
38
Our initial
stockholders paid an aggregate of $25,000, or
approximately $0.007 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 initial stockholders acquired the founder shares at a nominal
price, significantly contributing to this dilution. Upon the 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 86.9% or $8.69 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. Although our ability to
amend the terms of the warrants with the consent of at least 65% of the then
outstanding warrants is unlimited, examples of such adverse amendments could be
amendments to, among other things, increase the exercise price of the warrants,
shorten the exercise period, provide for redemption of warrants or decrease the
number of shares of our common stock purchasable upon exercise of a
warrant.
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 sales price of our common stock equals or exceeds $17.50
per share for any 20 trading days within the 30-trading day period ending on the
third business day before we send the notice of such redemption to the warrant
holders 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:
|
•
|
to
exercise your warrants and pay the exercise price therefor at a time when
it may be disadvantageous for you to do
so;
|
|
•
|
to
sell your warrants at the then-current market price when you might
otherwise wish to hold your warrants;
or
|
|
•
|
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 12,500,000 shares of our common stock (or
up to 14,375,000 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 6,166,667 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, so long as they are held by our sponsor or its permitted
transferees:
39
|
•
|
they
will not be redeemable by us;
|
|
•
|
they
(including the common stock issuable upon exercise of these warrants) may
not, subject to certain limited exceptions, be transferred, assigned or
sold by the sponsor until 30 days after the completion of our initial
business combination; and
|
|
•
|
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. You may have less assurance, therefore, that
the offering price of our units properly reflects the value of such units than
you would have in a typical offering of an operating
company.
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:
|
•
|
the
history and prospects of companies whose principal business is the
acquisition of other companies;
|
|
•
|
prior
offerings of those companies;
|
|
•
|
our
prospects for acquiring an operating business at attractive
values;
|
|
•
|
a
review of debt to equity ratios in leveraged
transactions;
|
|
•
|
our
capital structure;
|
|
•
|
an
assessment of our management and their experience in identifying operating
companies;
|
|
•
|
general
conditions of the securities markets at the time of this
offering; and
|
|
•
|
other
factors as were deemed relevant.
|
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.
40
In
addition, there is no central place, such as a stock exchange or electronic
trading system, to resell your shares. If you do want to resell your
shares, you will have to locate a buyer and negotiate your own
sale. We plan to contact a market maker to file an application on our
behalf to have our common stock listed for quotation on the Over-the-Counter
Bulletin Board (OTCBB) immediately following the effectiveness of this
Registration Statement. The OTCBB is a regulated quotation service
that displays real-time quotes, last sale prices and volume information in
over-the-counter (OTC) securities. The OTCBB is not an issuer listing
service, market or exchange. Although the OTCBB does not have any
listing requirements per se, to be eligible for quotation on the OTCBB, issuers
must remain current in their filings with the SEC or applicable regulatory
authority. Market makers are not permitted to begin quotation of a
security whose issuer does not meet this filing
requirement. Securities already quoted on the OTCBB that become
delinquent in their required filings will be removed following a 30 or 60 day
grace period if they do not make their required filing during that
time. We cannot guarantee that our application will be accepted or
approved and our stock listed and quoted for sale. As of the date of
this filing, there have been no discussions or understandings between us or
anyone acting on our behalf with any market maker regarding participation in a
future trading market for our securities.
The lack
of a public trading market for our shares may have a negative effect on your
ability to sell your shares in the future and it also may have a negative effect
on the price, if any, for which you may be able to sell your
shares. As a result an investment in our securities may be illiquid
in nature and investors could lose some or all of their investment in our
company.
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 California, Connecticut,
Delaware, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana,
Louisiana, Maryland, New Jersey, New York, Pennsylvania, Rhode Island, South
Dakota, Virginia, Wisconsin 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 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.
Provisions in our
amended and restated articles of incorporation and Nevada 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 articles of incorporation contain 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 Nevada law, which could delay or
prevent a change of control. Together these provisions 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.
41
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
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 management’s 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:
•
|
our
ability to complete our initial business
combination;
|
•
|
our
success in retaining or recruiting, or changes required in, our officers,
key employees or directors following our initial business
combination;
|
•
|
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;
|
•
|
our
potential ability to obtain additional financing to complete our initial
business combination;
|
•
|
our
pool of prospective target
businesses;
|
•
|
the
ability of our officers and directors to generate a number of potential
investment opportunities;
|
•
|
our
public securities’ potential liquidity and
trading;
|
•
|
the
lack of a market for our
securities;
|
•
|
the
use of proceeds not held in the trust account or available to us from
interest income on the trust account
balance; or
|
•
|
our
financial performance following this
offering.
|
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 [•]. 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 12,500,000
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.
|
|
Without Over-
|
|
|
Over-Allotment
|
|
||
|
|
Allotment Option
|
|
|
Option Exercised
|
|
||
Gross
proceeds
|
||||||||
Gross
proceeds from units offered to public(1)
|
$
|
125,000,000
|
$
|
143,750,000
|
||||
Gross
proceeds from sponsor warrants offered in the private
placement
|
4,625,000
|
4,625,000
|
||||||
Total
gross proceeds
|
$
|
129,625,000
|
$
|
148,375,000
|
||||
Offering
expenses(2)
|
||||||||
Underwriting
commissions (2.5% of gross proceeds from units offered to public,
excluding deferred portion)(3)
|
$
|
3,125,000
|
$
|
3,593,750
|
||||
Legal
fees and expenses
|
250,000
|
250,000
|
||||||
Printing
and engraving expenses
|
100,000
|
100,000
|
||||||
Accounting
fees and expenses
|
50,000
|
50,000
|
||||||
Blue
Sky filing fees
|
40,000
|
40,000
|
||||||
SEC/FINRA
Expenses
|
30,000
|
30,000
|
||||||
Travel
and roadshow
|
75,000
|
75,000
|
||||||
Directors
and officers insurance
|
300,000
|
300,000
|
||||||
Repayment
of note payable
|
225,000
|
225,000
|
||||||
Miscellaneous
expenses
|
55,000
|
55,000
|
||||||
Total
offering expenses
|
$
|
4,250,000
|
$
|
4,718,750
|
||||
Proceeds
after offering expenses
|
$
|
125,375,000
|
$
|
143,656,250
|
||||
Held
in trust account(3)
|
$
|
124,375,000
|
$
|
142,656,250
|
||||
% of public offering
size
|
99.5
|
% |
99.2
|
% | ||||
Not
held in trust account
|
$
|
1,000,000
|
$
|
1,000,000
|
Use of net proceeds not held in trust
account and up to an additional $2.0 million, subject to adjustment, of
interest earned on our trust account (net of income and franchise taxes payable)
that may be released to us to cover operating expenses(1)
|
|
Amount
|
|
|
% of Total
|
|
||
Legal,
accounting, due diligence, travel and other expenses in connection with
any business combination
|
$
|
2,000,000
|
66.7
|
%
|
||||
Legal
and accounting fees related to regulatory reporting
obligations
|
250,000
|
8.3
|
%
|
|||||
Payment
for office space, administrative and support services
|
270,000
|
9.0
|
%
|
|||||
Printing
|
50,000
|
1.7
|
%
|
|||||
Consulting
and travel for search for business combination target
|
250,000
|
8.3
|
%
|
|||||
Working
capital to cover miscellaneous expenses
|
180,000
|
6.0
|
%
|
|||||
Total
|
$
|
3,000,000
|
100
|
%
|
(1)
|
Includes
amounts payable to public stockholders who properly redeem their shares in
connection with our successful consummation of our initial business
combination.
|
(2)
|
In
addition, a portion of the offering expenses have been paid from the
proceeds of a $225,000 loan from sponsor, as described in this
prospectus. This loan will be repaid upon consummation of this offering
out of the approximately $1.1 million of offering proceeds that has
been allocated for the payment of offering expenses (excluding the
underwriting discounts). 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.
|
44
(3)
|
The
underwriters have agreed to defer approximately $3.1 million of their
underwriting commissions (or approximately $3.6 million if the
underwriters’ over-allotment option is exercised in full), which equals
2.5% of the gross proceeds from the units offered to the public, until
consummation of our initial business combination. Upon consummation of our
initial business combination, approximately $3.1 million, which
constitutes the underwriters’ deferred commissions (or approximately
$3.6 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.
|
(4)
|
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 $2.0 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 $124.4 million (or approximately $142.7 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 $3.1 million (or approximately
$3.6 million if the underwriters’ over-allotment option is exercised in
full) of deferred underwriting commissions will be placed in a trust account at
[•] 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 and to fund our working capital requirements, as discussed
below, and any amounts necessary to purchase up to 25% of our public shares,
none of the funds held in the trust account will be released until the earlier
of the completion of our initial business combination and the liquidation of our
trust account if we are unable to consummate a business combination within
21 months from the closing of this offering, or 27 months from the closing
of this offering if a letter of intent, agreement in principle or definitive
agreement relating to a prospective business combination is executed before the
21-month period ends (subject to the requirements of law).
If we
elect to increase the initial amount held in the trust account from
approximately $9.95 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 the $1.0 million 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.
45
We
believe that amounts not held in the trust account, as well as the interest
income of up to $2.0 million, subject to adjustment, earned on the trust
account balance (net of franchise and income taxes payable) 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 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 $2.0 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 would result in a proportionate increase or decrease in the amount of
interest we may withdraw from the trust account. 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 date our securities are first quoted on the OTCBB, we have agreed to pay
our sponsor a total of $10,000 per month for office space, administrative
services and secretarial support. This arrangement is being agreed to by sponsor
for our benefit and is not intended to provide sponsor compensation in lieu of
salary or other remuneration to Mr. Johnson. 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, our sponsor 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 60 days following the
closing of this offering. The loan will be repaid upon the closing of this
offering out of the approximately $1.1 million of offering
proceeds that has been allocated to the payment of offering expenses (excluding
the underwriting discounts).
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, other than the
interest on such proceeds that may be released to us for working capital
purposes. Such loans may be convertible into founders shares or
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. None of the sponsor warrants, any shares of common stock
issuable upon exercise thereof or the founders shares will have recourse to the
proceeds held in our trust account. 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 pursuant to the tender offer rules in connection with our
business combination, prior to the consummation of our initial business
combination, there could be released to us from the trust account amounts
necessary to purchase up to 25% of the shares sold in this offering
(3,125,000 shares, or 3,593,750 shares if the underwriters’ over-allotment
option is exercised in full). These purchases could occur 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 $9.95 per share or approximately $9.92 per share if the
underwriters’ over-allotment option is exercised in full). We can purchase any
or all of the 1,875,000 shares (or 2,156,250 shares if the underwriters’
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. Such open
market purchases, if any, would be conducted by us to minimize any disparity
between the then-current market price of our common stock and the per-share
amount held in the trust account. A market price below the per-share trust
amount could provide an incentive for purchasers to buy our shares after the
filing of our preliminary proxy statement at a discount to the per-share amount
held in the trust account for the sole purpose of voting against our initial
business combination and exercising redemption rights for the full per-share
amount held in the trust account. Such trading activity could enable such
investors to block a business combination regardless of its merits by making it
difficult to obtain the approval of such business combination by the vote of a
majority of the outstanding shares of common stock voted.
46
If we
hold a stockholder vote to approve our initial business combination and we do
not conduct redemptions pursuant to the tender offer rules in connection with
our business combination, we may enter into privately negotiated transactions to
purchase public shares from stockholders after consummation of the initial
business combination with proceeds from our 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.
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.
In no
event will we redeem our public shares in an amount that would cause our
stockholders’ equity to be less than $5,000,001. If we enter into an acquisition
agreement with a prospective target that requires as a closing condition to our
initial business combination that we maintain a minimum net worth or certain
amount of cash that is substantially greater than $5,000,001, we will
communicate the details of the closing condition to our public stockholders
through our tender offer or proxy solicitation materials, as applicable. Our
articles of incorporation require us to provide all of our stockholders with an
opportunity to redeem all of their shares in connection with the consummation of
any initial business combination. Consequently, if accepting all properly
submitted redemption requests would cause our stockholders’ equity to be less
than $5,000,001 or such greater amount necessary to satisfy a closing condition
as described above, we would not proceed with such redemption or the related
business combination and may instead search for an alternate business
combination.
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 $2.0 million, subject to adjustment,
on the trust account balance (net of franchise and income taxes payable) 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 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, and in connection with the liquidating distribution paid to our
public shares if we are unable to consummate an initial business combination
within 21 months from the closing of this offering (or 27 months if a
letter of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period ends).
In no other circumstances will a public stockholder have any right or interest
of any kind to or in the trust account.
Our
initial stockholders have agreed to waive their redemption rights with respect
to their shares in connection with the consummation of a business combination.
In addition, initial stockholders have agreed to waive their rights to
liquidating distributions under the trust account with respect to their founder
shares if we fail to consummate a business combination within 21 months
from the closing of this offering (or 27 months if a letter of intent, agreement
in principle or definitive agreement relating to a prospective business
combination is executed before the 21-month period ends). However, if our
initial stockholders, or any of our officers, directors or affiliates acquire
public shares in or after this offering, they will be entitled to liquidating
distributions under the trust account 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 initial stockholders’ ownership at
20.0% of the 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 25% of
the shares sold in this offering using the trust proceeds or privately
negotiated purchases we may make in connection with our initial business
combination. 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
November 18, 2010, our net tangible book value was a deficiency of $(28,936), or
approximately $(0.01) per share of common stock. After giving effect to the sale
of 12,500,000 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 November 18, 2010 would have been $5,000,001, or
approximately $1.31 per share, representing an immediate increase in net
tangible book (as decreased by the value of the approximately
11,806,664 shares of common stock that may be redeemed for cash and
assuming no exercise of the underwriters’ over-allotment option) value of
$1.32 per share to our sponsor as of the date of this prospectus and an
immediate dilution of $8.69 per share or 89.9% 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
|
$
|
(0.01
|
) | |||||
Increase
attributable to public stockholders
|
1.32
|
|||||||
Pro
forma net tangible book value after this offering and the sale of the
sponsor warrants
|
$
|
1.31
|
||||||
Dilution
to public stockholders
|
$
|
8.69
|
The
following table sets forth information with respect to our initial stockholders
and the public stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|||||
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Price
|
|
|||||||||||
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
per Share
|
|
|||||
Initial
Stockholders
|
3,125,000
|
20.0
|
%
|
$
|
25,000
|
0.02
|
%
|
$
|
0.008
|
|||||||||||
Public
Stockholders
|
12,500,000
|
80.0
|
%
|
125,000,000
|
99.98
|
%
|
$
|
10.00
|
||||||||||||
15,625,000
|
100.0
|
%
|
$
|
125,025,000
|
100.0
|
%
|
$
|
8.00
|
The pro
forma net tangible book value per share after the offering is calculated as
follows:
Numerator:
|
||||
Net
tangible book value before this offering
|
$
|
(28,936
|
) | |
Proceeds
from this offering and sale of the sponsor warrants, net of
expenses
|
125,600,000
|
|||
Offering
costs excluded from net tangible book value before this
offering
|
30,247
|
|||
Less:
deferred underwriters’ commissions payable
|
(3,125,000
|
) | ||
Less:
amount of common stock subject to redemption to maintain stockholders’
equity of $5,000,001
|
117,476,310
|
|||
$
|
5,000,001
|
|||
Denominator:
|
||||
Shares
of common stock outstanding prior to this offering
|
3,593,750
|
|||
Shares
forfeited if over-allotment is not exercised
|
(468,750
|
) | ||
Shares
of common stock included in the units offered
|
12,500,000
|
|||
Less:
shares subject to redemption to maintain stockholders’ equity of
$5,000,001
|
11,806,664
|
|||
3,818,336
|
49
CAPITALIZATION
The
following table sets forth our capitalization at November 18, 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:
November 18, 2010
|
||||||||
Actual
|
As Adjusted(1)
|
|||||||
Deferred
underwriting commissions
|
$
|
—
|
$
|
3,125,000
|
||||
Notes
payable to affiliate(2)
|
225,000
|
—
|
||||||
Common
stock, subject to redemption(3)
|
—
|
117,476,310
|
||||||
Stockholder’s
equity (deficit):
|
||||||||
Preferred
stock, $0.001 par value, 1,000,000 shares authorized; none
issued or outstanding
|
—
|
—
|
||||||
Common
stock, $0.001 par value, 250,000,000 shares authorized;
3,593,750 shares issued and outstanding, 15,625,000 shares issued
and outstanding, as adjusted
|
3,594
|
15,625
|
(4)
|
|||||
Additional
paid-in capital
|
21,406
|
5,800,065
|
||||||
Deficit
accumulated during the development stage
|
(23,689
|
) |
(23,689
|
) | ||||
Total
stockholder’s equity
|
1,311
|
5,000,001
|
||||||
Total
capitalization
|
$
|
280,247
|
$
|
125,601,311
|
(1)
|
Includes
the $4,625,000 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 our sponsor. The note is non-interest
bearing and is payable 60 days following 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 franchise and income taxes payable, subject to the
limitations described herein whereby our stockholders’ equity will be
maintained at a minimum of
$5,000,001.
|
(4)
|
Assumes
the over-allotment option has not been exercised and an aggregate of
468,750 founder shares held by our initial stockholders have been
forfeited, but no forfeiture of the founder earnout
shares.
|
50
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, except that we will not effect a business
combination with another blank check company or a similar type of company with
nominal operations or with an entity that is affiliated with our sponsor and
engaged in the business of owning or operating a professional sports team as its
principal business. Nor are we prohibited from entering into a business
combination with a target business that is an affiliate of our sponsor,
directors or officers, although we do not intend to do so. 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;
|
51
•
|
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.
|
As
indicated in the accompanying financial statements, at November 18, 2010, we had
$250,000 in cash and deferred offering costs of $30,247. Further, we expect
to continue to incur significant costs in the pursuit of our acquisition plans.
Our management’s 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.
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 our sponsor in the
amount of $225,000. We estimate that the net proceeds from the sale of the units
in this offering, after deducting offering expenses (excluding the underwriting
discounts) of approximately $1.1 million, but including deferred
underwriting commissions of approximately $3.1 million (or approximately
$3.6 million if the underwriters’ over-allotment option is exercised in
full), and the sale of the sponsor warrants for a purchase price
of $4,625,000 will be approximately $125.4 million (or approximately
$143.7 million if the underwriters’ over-allotment option is exercised in
full). Approximately $124.4 million (or approximately $142.7 million
if the underwriters’ over-allotment option is exercised in full), will be held
in the trust account, which includes approximately $3.1 million (or
approximately $3.6 million if the underwriters’ over-allotment option is
exercised in full) of deferred underwriting commissions. The remaining
$1.0 million will not be held in the trust account. In the event that our
offering expenses (excluding the underwriting discounts) are in excess of
approximately $1.1 million, we may fund such amounts out of the
$1.0 million not to be held in the trust account. In such case, the amount
not held in the trust account would be less than $1.0 million by a
corresponding amount. Conversely, in the event that the offering expenses
(excluding the underwriting discounts) are less than approximately
$1.1 million, the $1.0 million not held in the trust account would
increase by a corresponding amount.
We may
use substantially all of the funds held in the trust account (net of franchise
and income taxes payable 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, or the purchase
price together with funds used for redemption is less than the amount in the
trust account, 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 or pursue our growth strategies.
52
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. 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 would result in a proportionate
increase or decrease in the amount of interest we may withdraw from the trust
account.
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, other than the interest on such proceeds that
may be released to us for working capital purposes. Such loans may be
convertible into founders shares or 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. None of the sponsor
warrants, any shares of common stock issuable upon exercise thereof or the
founders shares will have recourse to the proceeds held in our trust account.
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 prior to the consummation of our initial
business combination or our liquidation to include approximately
$2.0 million for legal, accounting and other expenses associated with
structuring, negotiating and documenting successful business combinations;
$270,000 for office space, administrative services and support payable to our
sponsor, representing $10,000 per month for up to 27 months; $250,000 for
legal and accounting fees related to regulatory reporting requirements; $50,000
for printing; $250,000 for consulting and travel for the search for a business
combination target; and approximately $180,000 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 the trust
account 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 $2.0 million, subject to adjustment, on the trust account
(net of franchise and income taxes payable) 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
$2.0 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.
53
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
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;
|
•
|
proper
recording of expenses and liabilities in the period to which they
relate;
|
•
|
evidence
of internal review and approval of accounting
transactions;
|
•
|
documentation
of processes, assumptions and conclusions underlying significant
estimates; and
|
•
|
documentation
of accounting policies and
procedures.
|
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
management’s 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 business’s 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
November 2010, our initial stockholders purchased an aggregate of
3,593,750 founder shares for an aggregate purchase price of $25,000, or
approximately $0.007 per share. The founder shares held by our
initial stockholders include an aggregate of 468,750 shares subject to
forfeiture to the extent that the underwriters’ over-allotment option is not
exercised in full, so that our initial stockholders will collectively own 20% of
our issued and outstanding shares after this offering (assuming none of our
initial stockholders purchase units in this offering). In addition, a portion of
the founder shares in an amount equal to 2.5% of our issued and outstanding
shares immediately after this offering will be subject to forfeiture by our
initial stockholders 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 at least one period of 20
trading days within any 30-trading day period within 12 months following
the closing of our initial business combination. An additional 2.5%
of our issued and outstanding shares immediately after this offering will be
subject to forfeiture by our initial stockholders in the event the last sales
price of our stock does not equal or exceed $13.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like)
for at least one period of 20 trading days within any 30-trading day period
between 12 and 24 months following the closing of our initial business
combination.
54
Our
sponsor, RLJ SPAC Acquisition, LLC, is a Delaware limited liability company of
which The RLJ Companies, LLC is the sole manager and is the sole voting member
(holding approximately 85% of the total economic interest) and certain employees
of The RLJ Companies, LLC hold an aggregate of approximately 15% profits
interest pursuant to long-term incentive arrangements. Robert L.
Johnson is the sole manager and the sole voting member of The RLJ Companies,
LLC.
As of the
date of this prospectus, our sponsor 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 60 days following the closing of this
offering. This loan will be repaid upon the closing of this offering out of the
approximately $1.1 million of offering proceeds that has been allocated for
the payment of offering expenses (excluding the underwriting discounts). We are
also obligated, on the date our securities are first quoted on the OTCBB, to pay
our sponsor 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 from our
trust account would be used for such repayment, other than the interest that may
be released to us for working capital purposes. Such loans may be convertible
into founders shares or 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. None of the sponsor warrants, any shares
of common stock issuable upon exercise thereof or the founders shares will have
recourse to the proceeds held in our trust account. The holders
of such warrants (and the underlying shares) would have demand and “piggy-back”
registration rights with respect to such securities. 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 6,166,667 sponsor
warrants at a price of $0.75 per warrant ($4,625,000 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 initial
stockholders 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, excluding short form registration 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. In the case of the founder shares, the lock-up period terminates with
respect to founder shares no longer subject to forfeiture immediately after
this offering upon the earlier of 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 at least one period of 20 trading days within any 30-trading
day period commencing at least 150 days after our initial business
combination) and the date on which we consummate a subsequent liquidation,
merger, stock exchange or other similar transaction that results in all of our
stockholders having the right to exchange their shares of common stock for cash,
securities or other property. In the case of the sponsor warrants and the
respective common stock underlying such warrants, the lock up period terminates
30 days after the completion of our initial business combination. We will
bear the costs and expenses of filing any such registration
statements.
55
Off-Balance
Sheet Arrangements; Commitments and Contractual Obligations; Quarterly
Results
As of
November 18, 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,
except that we will not effect a business combination with another blank check
company or a similar type of company with nominal operations or with an entity
that is affiliated with our sponsor and engaged in the business of owning or
operating a professional sports team as its principal business. Nor are we
prohibited from entering into a business combination with a target business that
is an affiliate of our sponsor, directors or officers, although we do not intend
to do so. 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.
•
|
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.
|
•
|
Companies
with Strong Free Cash Flow Characteristics. We will seek
to acquire companies that have a history of strong, stable free cash flow
generation (i.e.
companies that typically generate cash in excess of that required to
maintain or expand the business’s asset base). We will focus on companies
that have predictable, recurring revenue streams and an emphasis on low
capital expenditure requirements. An example of such a company could be
one that typically sells its inventory, is paid on time by its customers
on a generally predictable basis and does not need to materially acquire
or upgrade physical assets on a regular
basis.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
57
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 these general guidelines as well as other considerations, factors
and criteria that our management may deem relevant. In the event that we decide
to enter into a business combination with a target business that does not meet
the above criteria and guidelines, we will disclose that the target business
does not meet the above criteria in our stockholder communications related to
our initial business combination, which, as discussed is this prospectus, would
be in the form of tender offer or proxy solicitation materials, as applicable,
that we would file with the SEC.
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 Robert L. Johnson, our founder and chairman of the
board. Mr. Johnson is the founder and chairman of The RLJ Companies
which, together with Mr. Johnson, owns or holds interests in a diverse portfolio
of companies primarily in the banking, private equity, real estate, hospitality,
professional sports, film production, gaming and automobile dealership
industries. Businesses within Mr. Johnson’s and The RLJ Companies
portfolio include:
|
•
|
RLJ
Development, LLC/RLJ Urban Lodging Funds, real estate enterprises that
primarily own upscale select service hotels and one compact full service
hotel in major markets in North
America;
|
|
•
|
RLJ
Equity Partners, LLC, a private equity fund founded with The Carlyle Group
that specializes in middle-market leveraged buy-outs, leveraged
recapitalizations and growth
equity;
|
|
•
|
RolloverSystems,
a financial services company that provides outsourced retirement plan
rollover services for financial services institutions, plan sponsors and
third party administrators;
|
|
•
|
RLJ
Western Asset Management, LLC, the only minority-owned entity designated
by the U.S. Treasury Department as a pre-qualified fund manager to
participate in the Public Private Investment Fund
Program;
|
|
•
|
RLJ-McLarty-Landers
Automotive Holdings, LLC, which operates 35 automotive franchises and,
with an affiliate, three Harley-Davidson motorcycle dealerships across the
South Central, Southeast and Midwest regions of the United
States;
|
|
•
|
Bobcat
Sports & Entertainment, which comprises the franchise and arena
operations of the Charlotte Bobcats NBA professional basketball
team;
|
|
•
|
Caribbean
CAGE, LLC, a gaming company that focuses on the installation, operation
and management of video lottery terminals, linked gaming systems and game
content throughout the Caribbean and Latin
America;
|
|
•
|
Our
Stories Films, LLC, a film production studio that produces theatrical
motion pictures that showcase the talents of African Americans on both
sides of the camera and in the creative process;
and
|
|
•
|
The
RLJ Kendeja Resort & Villas, a luxury resort hotel located on 13-acres
of ocean front property overlooking the Atlantic Ocean outside of
Monrovia, Liberia.
|
Prior to forming The RLJ
Companies , Mr. Johnson was founder and chairman of Black Entertainment
Television, or BET, the nation’s first and leading television network providing
quality entertainment, music, news, sports and public affairs programming for
the African American audience. Under Mr. Johnson’s leadership, BET
became the first African American-owned company publicly traded on the New York
Stock Exchange. In 2001, Mr. Johnson sold BET to Viacom for
approximately $3 billion and remained the Chief Executive Officer through
2006.
58
Our independent directors,
William S. Cohen, Mario Gabelli and Morris Goldfarb, also have significant
business experience. Mr. Cohen has been Chairman and
Chief Executive Officer of The Cohen Group, a business consulting firm, since
January 2001, and prior to that served as the United States Secretary of Defense
from January 1997 to 2001, as a United States Senator from 1979 to 1997, and as
a member of the United States House of Representatives from 1973 to
1979. Mr. Gabelli has served as Chairman, Chief Executive
Officer, Chief Investment Officer — Value Portfolios and a director of
GAMCO Investors, Inc. since November 1976. In connection with those
responsibilities, he serves as director or trustee of registered investment
companies managed by GAMCO and its affiliates. Mr. Gabelli has been a portfolio
manager for Teton Advisors, Inc. since 1998 through the present, an asset
management company which was spun-off from GAMCO in March 2009. Mr.
Goldfarb serves as Chairman of the Board and Chief Executive Officer of G-III
Apparel Group, Ltd. (Nasdaq: GIII), a designer, manufacturer, importer and
marketer of apparel, handbags and luggage. Mr. Goldfarb has served as
an executive officer and director of G-III and its predecessors since its
formation in 1974.
Mr. Johnson,
together with Mr. Sinclair, our president and chief executive officer, and
Ms. Pickrum, our chief financial officer, have substantial experience in
identifying, acquiring and operating a wide variety of businesses. 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, except that we will not effect a business combination with
another blank check company or a similar type of company with nominal
operations.
Status
as a public company
We
believe our structure as a public company 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
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 company’s
profile among potential new customers and vendors and aid in attracting talented
employees.
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.
59
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 many 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 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 franchise and income taxes payable, 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
$9.95 per share, or approximately $9.92 per share if the underwriters’
over-allotment option is exercised in full. Our initial stockholders have agreed
to waive their redemption rights with respect to their founder shares and any
public shares they may hold in connection with the consummation of a business
combination. The founder shares will be excluded from the pro rata calculation
used to determine the per-share redemption price. Unlike many 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 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 our initial business combination
and the redemption rights as is required under Regulation 14A of the
Exchange Act, which regulates the solicitation of proxies. In the event we
conduct redemptions pursuant to the tender offer rules, our offer to redeem
shares shall remain open for at least 20 business days, in accordance with
Rule 14e-1(a) under the Exchange Act. 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 initial stockholders have agreed to vote their founder shares as well
as any public shares purchased during or after the offering in favor of our
initial business combination.
60
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. Further, we do not have a maximum debt leverage ratio or a
policy with respect to how much debt we may incur. The amount of debt we will be
willing to incur will depend upon the facts and circumstances of the proposed
business combination and market conditions at the time of the potential 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 that we are
seeking a business combination. 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 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. Johnson,
our founder and chairman of the board. While we do not presently anticipate
engaging the services of professional firms or other individuals that specialize
in business acquisitions on any formal basis, we may engage these firms or other
individuals in the future, in which event we may pay a finder’s fee, consulting
fee or other compensation to be determined in an arm’s length negotiation based
on the terms of the transaction. 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 finder’s 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 finder’s 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), other than $10,000 per month for office space and administrative services
payable to our sponsor. None of our sponsor, officers, directors and any of
their respective affiliates will be allowed to receive any compensation,
finder’s 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, 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, or a committee of our independent directors, would obtain an
opinion from an independent investment banking firm that is a member of FINRA
that such an initial business combination is fair to our company from a
financial point of view. Generally, such opinion is rendered to a company’s
board of directors, or a committee of independent 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.
Unless we
consummate our initial 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 company from a financial point of
view. If no opinion is obtained, our stockholders will be relying on the
judgment of our board of directors, who will determine fair market value and
fairness based on standards generally accepted by the financial community. The
application of such standards would involve a comparison, from a valuation
standpoint, of our business combination target to comparable public companies,
as applicable, and a comparison of our contemplated transaction with such
business combination target to other then-recently announced comparable private
and public company transactions, as applicable. The application of such
standards and the basis of the our board of directors’ determination will be
discussed and disclosed in our tender offer or proxy solicitation materials, as
applicable, related to our initial business combination.
61
Selection
of a target business and structuring of our initial business
combination
Because,
unlike many 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 RLJ Acquisition, Inc. (or its stockholders if
it is not the surviving corporation) becomes the controlling
stockholder of the target or is 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.
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 many 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:
•
|
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
|
•
|
cause
us to depend on the marketing and sale of a single product or limited
number of products or services.
|
62
Limited
ability to evaluate the target’s 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’ 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 Nevada law for each such
transaction.
|
|
Whether Stockholder
|
Type of Transaction
|
|
Approval is Required
|
Purchase
of assets
|
No
|
|
Purchase
of stock of target not involving a merger with the company
|
No
|
|
Merger
of target into a subsidiary of the company
|
No
|
|
Merger
of the company with a target
|
Yes
|
Permitted
purchases of our securities
If we
hold a stockholder vote to approve our initial business combination and we do
not conduct redemptions pursuant to the tender offer rules in connection with
our 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 25% of the shares sold in this offering (3,125,000 shares,
or 3,593,750 shares if the underwriters’ over-allotment option is exercised in
full). These purchases could occur 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 $9.95 per share or
approximately $9.92 per share if the underwriters’ over-allotment option is
exercised in full). We can purchase any or all of the 1,875,000 shares (or
2,156,250 shares if the underwriters’ 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. Such open market purchases, if any, would be conducted
by us to minimize any disparity between the then current market price of our
common stock and the per-share amount held in the trust account. A market price
below the per-share trust amount could provide an incentive for purchasers to
buy our shares after the filing of our preliminary proxy statement at a discount
to the per-share amount held in the trust account for the sole purpose of voting
against our initial business combination and exercising redemption rights for
the full per-share amount held in the trust account. Such trading activity could
enable such investors to block a business combination regardless of its merits
by making it difficult to obtain the approval of such business combination by
the vote of a majority of the outstanding shares of common stock
voted.
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 franchise and income taxes payable, 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
$9.95 per share, or approximately $9.92 per share if the underwriters’
over-allotment option is exercised in full. Our initial stockholders have agreed
to waive their redemption rights with respect to their founder shares and any
public shares they may hold in connection with the consummation of a business
combination. The founder shares will be excluded from the pro rata calculation
used to determine the per-share redemption price. Unlike many 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 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 our initial business combination and the redemption rights as
is required under Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. In the event we conduct redemptions pursuant to the
tender offer rules, our offer to redeem shares shall remain open for at least 20
business days, in accordance with Rule 14e-1(a) under the Exchange Act. 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 initial stockholders have
agreed to vote their founder shares as well as any public shares purchased
during or after the offering in favor of our initial business
combination. This may result in the consummation of a business
combination that may not otherwise have been possible.
Traditionally,
blank check companies would not be able to consummate a business combination if
the holders of the company’s public shares voted against a proposed business
combination and elected to redeem or convert more than a specified maximum
percentage of the shares sold in such company’s 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 number 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 such specified maximum
redemption threshold, our structure is different in this respect from the
structure that has been used by most blank check companies. In no event,
however, will we redeem our public shares in an amount that would cause our
stockholders’ equity to be less than $5,000,001. If we enter into an acquisition
agreement with a prospective target that requires as a closing condition to our
initial business combination that we maintain a stockholders’ equity or certain
amount of cash that is substantially greater than $5,000,001, we will
communicate the details of the closing condition to our public stockholders
through our tender offer or proxy solicitation materials, as applicable. Our
articles of incorporation require us to provide all of our stockholders with an
opportunity to redeem all of their shares in connection with the consummation of
any initial business combination. Consequently, if accepting all properly
submitted redemption requests would cause our stockholders’ equity to be less
than $5,000,001 or such greater amount necessary to satisfy a closing condition
as described above, we would not proceed with such redemption and the related
business combination and may instead search for an alternate business
combination.
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 initial stockholders
have agreed to waive their redemption rights with respect to their founder
shares and public shares in connection with the consummation of a business
combination.
64
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 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 franchise and income taxes payable,
provided that such stockholders follow the specific procedures for redemption
that will be set forth in the proxy statement relating to the stockholder vote
on a proposed initial business combination. Unlike many other blank check
companies, our public stockholders would not be required to vote against our
initial business combination in order to exercise their redemption rights. 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
initial stockholders have agreed to vote their founder shares as well as any
public shares purchased during or after the offering in favor of our initial
business combination. In addition, our initial stockholders have agreed to waive
their redemption rights with respect to their founder 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 pursuant to the tender offer rules in connection with our
business combination, we may privately negotiate transactions to purchase shares
after 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 25% of the shares sold in this
offering (3,125,000 shares, or 3,593,750 shares if the underwriters’
over-allotment 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 (inclusive
of commissions) does not exceed the per-share amount then held in the trust
account (approximately $9.95 per share or approximately $9.92 per
share if the underwriters’ over-allotment option is exercised in full). Any such
privately negotiated purchases may be effected at purchase prices that are in
excess of the per-share pro rata portion of the trust account. In the event that
we are the buyer in such privately negotiated purchases, we could elect to use
trust account proceeds to pay the purchase price in such transactions after the
closing of our initial business combination.
The
purpose of such purchases would be to increase the likelihood of obtaining
stockholder approval of our initial business combination or, 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 stockholders’ equity 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.
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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•
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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;
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65
|
•
|
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 franchise or income taxes payable, our remaining stockholders may bear
the entire payment of such deferred commissions and franchise and income
taxes payable (as well as up to $100,000 of net interest that may be
released to us from the trust account to fund expenses associated with the
liquidation of our trust account in the event we do not complete our
initial business combination within 21 months from the closing of
this offering, or 27 months from the closing of this offering if a letter
of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period
ends). 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 franchise and
income taxes payable 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 franchise and income taxes payable 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.
|
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 proxy solicitation 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 or voted against the proposed business
combination.
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 pursuant to the tender offer rules
in connection with our business combination, our amended and restated articles
of incorporation provide 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 holder’s 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.
66
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 Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the
holder’s 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 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 company’s 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 company’s 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 holder’s 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 stockholder
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 (or 27 months if a letter of
intent, agreement in principle or definitive agreement relating to a prospective
business combination is executed before the 21-month period ends). Public
stockholders would be entitled to receive their pro rata share of the aggregate
amount on deposit in the trust account, less franchise and income taxes payable,
provided that such stockholders follow the specific procedures for redemption
that will be set forth in the tender offer or proxy solicitation materials, as
applicable. If the proposed business combination is not consummated then a
stockholder’s 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.
67
Liquidation
of trust account 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, or 27 months from the closing of this offering if a letter
of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period ends. If
we are unable to consummate a business combination within such 21- or 27-month
period, we will liquidate the trust account and distribute the amount held in
the trust account, including interest but net of franchise and income taxes
payable and less up to $100,000 of such net interest that may be released to us
from the trust account to pay liquidation expenses, to our public shareholders,
subject to the
requirements of Nevada law that a corporation not make a distribution to
stockholders if, after giving effect to the distribution, either (i) the
corporation would not be able to pay its debts as they become due in the usual
course of business or (ii) the corporation’s total assets would be less than the
sum of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
Following
such liquidation of the trust account, each of our stockholders, including the
initial stockholders, will retain their shares and continue to be a stockholder
of our company. We will continue in existence as a public shell
company and, subject to the provisions of our amended and restated articles of
incorporation, our management will have broad discretion to determine the future
of our business, if any. In addition, as substantially all of our
assets will have been distributed pursuant to the liquidation of our trust
account, unless we obtain third-party financing, the surviving public shell
company will have limited, or no, financial resources to pursue a new
business.
Our
initial stockholders have agreed to waive their rights to liquidating
distributions under the trust account with respect to their founder shares
if we fail to consummate a business combination within 21 months from the
closing of this offering, or 27 months from the closing of this offering if a
letter of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period ends.
However, if our initial stockholders, or any of our officers, directors or
affiliates acquire public shares in or after this offering, and we are unable to
consummate a business combination within a 21- or 27-month period, they will be
entitled to liquidating distributions with respect to such public shares upon
the liquidation of the trust account. There will be no liquidating distributions
with respect to our warrants, which will expire worthless. We expect that all
costs and expenses associated with liquidating our trust account, as well as
payments to any creditors, will be funded from amounts remaining out of the
$1.0 million of proceeds held outside the trust account and from the up to
$2.0 million, subject to adjustment, in interest income on the balance of
the trust account (net of franchise and income taxes payable) 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
liquidating our trust account, to the extent that there is any interest accrued
in the trust account not required to pay franchise and 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 amount received by stockholders
upon the liquidation of our trust account would be approximately $9.95 (or
approximately $9.92 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. 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.
68
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 other 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 party’s
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. In order to protect the
amounts held in the trust account, Mr. Johnson, our founder and chairman of
the board, has agreed that upon the liquidation of our trust account, 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 $9.95 per share (or approximately $9.92 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. Johnson will not be
responsible to the extent of any liability for such third party claims. We
cannot assure you, however, that Mr. Johnson would be able to satisfy those
obligations.
In the
event that the proceeds in the trust account are reduced below $9.95 per
share (or approximately $9.92 per share if the underwriters’ over-allotment
option is exercised in full) by claims that are covered by the indemnification
obligations of Mr. Johnson upon the liquidation of our trust account, and
Mr. Johnson 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. Johnson to enforce his indemnification obligations. While we currently
expect that our independent directors would take legal action on our behalf
against Mr. Johnson 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. Accordingly, we cannot
assure you that due to such claims the actual value of the per-share liquidation
price will not be less than $9.95 per share (or approximately
$9.92 per share if the underwriters’ over-allotment option is exercised in
full).
We will
seek to reduce the possibility that Mr. Johnson 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. Johnson 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 $1.0 million from the proceeds of this offering, and the up to
$2.0 million, subject to adjustment, in interest income on the balance of
the trust account (net of franchise and income taxes payable) with which to pay
any such potential claims (including costs and expenses incurred in connection
with the liquidation of our trust account, currently estimated to be no
more than approximately $100,000). In the event that we liquidate the trust
account 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 (excluding the underwriting discounts) are in excess of
approximately $1.1 million, we may fund such amounts out of the
$1.0 million not to be held in the trust account. In such case, the amount
not held in the trust account would be less than $1.0 million by a
corresponding amount. Conversely, in the event that the offering expenses
(excluding the underwriting discounts) are less than approximately
$1.1 million, the $1.0 million not held in the trust account would
increase by a corresponding amount.
69
Our
stockholders could potentially be liable for any claims to the extent of
distributions received by them (but no more). 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. Further, Mr. Johnson may be liable only
to the extent necessary to ensure that the amounts in the trust account are not
reduced below $9.95 per share (or approximately $9.92 per share if the
underwriters’ over-allotment option is exercised in full) by claims that are
covered by the indemnification obligations of Mr. Johnson 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 (or 27 months if a letter of
intent, agreement in principle or definitive agreement relating to a prospective
business combination is executed before the 21-month period ends), 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. Johnson 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 $9.95 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 expiration of the 21- or 27-month period, 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 liquidation of our trust account if we do not
consummate a business combination within 21 months from the closing of this
offering (or 27 months if a letter of intent, agreement in principle or
definitive agreement relating to a prospective business combination is executed
before the 21-month period ends) 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 stockholder’s voting in connection with the
business combination alone will not result in a stockholder’s 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 (Offerings
by Blank Check Companies). 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.
Terms
of Our Offering
|
Terms
Under a Rule 419 Offering
|
|||
Escrow of offering
proceeds
|
|
Approximately
$124.4 million of the net offering proceeds, which includes
the $4,625,000 net proceeds from the sale of the sponsor warrants and
approximately $3.1 million in deferred underwriting commissions
(approximately $3.6 million if the underwriters’ over-allotment
option is exercised in full), will be deposited into a trust account at
[•] , maintained by Continental Stock Transfer & Trust Company,
as trustee.
|
|
Approximately
$125.0 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.
|
70
Terms
of Our Offering
|
Terms
Under a Rule 419 Offering
|
|||
Investment of
net proceeds
|
Approximately
$124.4 million of the net offering proceeds, which includes
the $4,625,000 net proceeds from the sale of the sponsor warrants and
approximately $3.1 million in deferred underwriting commissions
(approximately $3.6 million if the underwriters’ over-allotment
option is exercised in full held in the trust account 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.
|
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.
|
||
Receipt of
interest on escrowed funds
|
Interest
on proceeds from the trust account to be paid to stockholders is reduced
by:
•
any income or franchise taxes payable;
•
up to $2.0 million, subject to adjustment, that can be used for
working capital purposes; and
•
in the event of the liquidation of our trust account 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 such
liquidation.
|
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.
|
||
Limitation on
fair value or net assets of target business
|
|
We
are not required to set a minimum valuation on either the fair market
value or net assets of a target business.
|
|
The
fair value or net assets of a target business must represent at least 80%
of the maximum offering
proceeds.
|
71
Terms
of Our Offering
|
Terms
Under a Rule 419 Offering
|
|||
Trading of securities
issued
|
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
Lazard Capital Markets, LLC 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.
|
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.
|
||
Exercise of the
warrants
|
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.
|
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.
|
||
Election to remain an
investor
|
|
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 franchise and income
taxes payable, 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 our
initial business combination and the redemption rights as is required
under the SEC’s 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.
|
|
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 company’s 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.
|
72
Terms
of Our Offering
|
Terms
Under a Rule 419 Offering
|
|||
Business combination
deadline
|
If
we are unable to consummate a business combination within such 21- or
27-month period, we will liquidate the trust account and distribute the
amount held in the trust account only to our public stockholders,
including interest but net of franchise and income taxes payable and less
up to $100,000 of such net interest that may be released to us from the
trust account to pay liquidation expenses, to our public shareholders,
subject to
the requirements of Nevada law that a corporation not make a distribution
to stockholders if, after giving effect to the distribution, either (i)
the corporation would not be able to pay its debts as they become due in
the usual course of business or (ii) the corporation’s total assets would
be less than the sum of its total liabilities plus the amount that would
be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
|
If
an acquisition has not been consummated within 18 months after the
effective date of the company’s registration statement, funds held in the
trust or escrow account are returned to investors.
|
||
Release of
funds
|
|
Except
for up to $2.0 million, subject to adjustment, of the interest income
earned on the trust account balance (net of franchise and income taxes
payable) released to us to pay any income and franchise taxes and to fund
our working capital requirements, and any amounts necessary to purchase up
to 25% of our public shares, none of the funds held in the trust account
will be released until the earlier of the completion of our initial
business combination and the liquidation of our trust account if we are
unable to consummate a business combination within 21 months from the
closing of this offering, or 27 months from the closing of this offering
if a letter of intent, agreement in principle or definitive agreement
relating to a prospective business combination is executed before the
21-month period ends (subject to the requirements of applicable law). In
addition, approximately $1.0 million of the offering proceeds will
not be held in the trust account and will be available to us for working
capital purposes.
|
|
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.
|
73
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:
•
|
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
|
•
|
our
outstanding warrants, and the future dilution they potentially represent,
may not be viewed favorably by certain target
businesses.
|
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 3 Bethesda Metro Center, Suite 1100,
Bethesda, MD 20814. The cost for this space is included in the
$10,000 per month fee described above that our sponsor charges us for general
and administrative services. We believe, based on rents and fees for similar
services in the Washington, D.C. metropolitan area that the fee charged by our
sponsor 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 two 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.
74
We will
provide stockholders with audited financial statements of the prospective target
business as part of the tender offer or proxy solicitation materials, as
applicable, 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 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, 2012 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.
75
MANAGEMENT
Directors
and Executive Officers
Our
directors, executive officers and director nominees, and their ages as of
December 1, 2010, are as follows:
Name
|
Age
|
Position
|
||
Robert
L. Johnson
|
64
|
Chairman
of the Board
|
||
H.
Van Sinclair
|
58
|
President,
Chief Executive Officer and Director
|
||
Lisa
P. Pickrum
|
41
|
Chief
Financial Officer
|
||
William
S. Cohen
|
70
|
Director
Nominee
|
||
Mario
T. Gabelli
|
68
|
Director
Nominee
|
||
Morris
Goldfarb
|
60
|
Director
Nominee
|
Robert L. Johnson has served
as our chairman of the board since November 2010. Mr. Johnson is
founder and chairman of The RLJ Companies, an innovative business network that
owns or holds interests in a diverse portfolio of companies in the banking,
private equity, real estate, hospitality, professional sports, film production,
gaming, and automobile dealership industries. Prior to forming The RLJ
Companies, Mr. Johnson was founder and chief executive officer of Black
Entertainment Television (BET), which was acquired by Viacom Inc. in 2001. He
continued to serve as chief executive officer of BET until 2006. In July 2007,
Mr. Johnson was named by USA Today as one of the 25
most influential business leaders of the past 25 years. Mr. Johnson
currently serves on the board of directors of the KB Home, Lowe’s Companies,
Inc., IMG Worldwide, Inc., and Strayer Education, Inc. He previously served as a
director of Hilton Hotels Corporation, US Airways Group, Inc. and General Mills,
Inc.
H. Van Sinclair has served as
our president, chief executive officer and a member of the board of directors
since November 2010. Since February 2003, Mr. Sinclair has served as
president and chief executive officer of The RLJ Companies. Mr. Sinclair has
also served as Vice President of Legal and Business Affairs for the RLJ Urban
Lodging Funds, a private equity fund concentrating on limited and focused
service hotels in the United States and for RLJ Development, which is the RLJ
Companies’ hotel and hospitality company, since 2006. Prior to joining The
RLJ Companies, Mr. Sinclair spent 28 years, from 1978 to 2003, with the law firm
of Arent Fox, PLLC. Mr. Sinclair remains of counsel to Arent Fox.
Lisa W. Pickrum has served as
our chief financial officer since November 2010. Mr. Pickrum has
served as executive vice president and chief operating officer of The RLJ
Companies since August 2004. Prior to that, Ms. Pickrum was a
senior associate at Katalyst Venture Partners, a private equity firm,
from 2000 to 2003.
William
S. Cohen has been Chairman and Chief Executive Officer of The Cohen
Group, a business consulting firm, since January 2001. Prior to founding The
Cohen Group, Mr. Cohen served as the United States Secretary of Defense
from January 1997 to 2001. He also served as a United States Senator from 1979
to 1997, and as a member of the United States House of Representatives from 1973
to 1979. Mr. Cohen currently serves on the board of directors of CBS
Corporation. He has also served as a director of Viacom Inc.
(2003-2006), American International Group, Inc. (2004-2006) and
Head N.V. (2001-2007).
Mario J. Gabelli has served as
Chairman, Chief Executive Officer, Chief Investment Officer — Value
Portfolios and a director of GAMCO Investors, Inc. (NYSE: GBL) since
November 1976. In connection with those responsibilities, he serves as director
or trustee of registered investment companies managed by GAMCO and its
affiliates (“Gabelli Funds”). Mr. Gabelli has been a portfolio manager for Teton
Advisors, Inc. since 1998 through the present, an asset management company which
was spun-off from GAMCO in March 2009. Mr. Gabelli has served as
Chairman of LICT Corporation, a public company engaged in multimedia and other
services, from 2004 to present, director of CIBL, Inc., a holding
company with operations in broadcasting and wireless telecommunications, from
2007 to present and Chairman and Chief Executive Officer of Morgan Group Holding
Co., a public holding company, from 2001 to present. In addition,
Mr. Gabelli is the Chief Executive Officer, a director and the controlling
shareholder of GGCP, Inc., a private company which owns a majority of GAMCO’s
Class B Stock, and the Chairman of MJG Associates, Inc., which acts as a
investment manager of various investment funds and other accounts. Mr. Gabelli
serves as Overseer of Columbia University Graduate School of Business and
Trustee of Boston College and Roger Williams University. He also serves as
Director of The Winston Churchill Foundation, The E. L. Wiegand Foundation, The
National Italian American Foundation, The American-Italian Cancer Foundation,
The Foundation for Italian Art & Culture, and The Mentor/National
Mentoring Partnership and Patron’s Committee for the Immaculate Conception
School. He is also Chairman of the Gabelli Foundation, Inc., a Nevada
private charitable trust.
76
Morris Goldfarb serves as
Chairman of the Board and Chief Executive Officer of G-III Apparel Group, Ltd.
(Nasdaq: GIII), a designer, manufacturer, importer and marketer of apparel,
handbags and luggage. Mr. Goldfarb has served as an executive officer
and director of G-III and its predecessors since its formation in 1974. Mr.
Goldfarb served as a director of Lakes Entertainment, Inc. from June 1998 until
March 2010.
Number
and Terms of Office of Directors and Officers
Upon
completion of this offering, our board of directors will be divided into three
classes with only one class of directors being elected at each annual meeting of
stockholders 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. [•] , will
expire at our first annual meeting of stockholders. The term of office of the
second class of directors, consisting of Messrs. [•] and [•], will
expire at the second annual meeting of stockholders. The term of office of the
third class of directors, consisting of Messrs. [•] and [•], will expire at
the third annual meeting of stockholders. 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 Nevada Revised Statutes, or NRS, 78.330,
which requires an annual meeting of stockholders be held for the purposes of
electing directors 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 district court in accordance
with NRS 78.345.
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, which we believe will help
us 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 company’s board of directors would
interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director.
Our board
of directors has determined that each of Mr. Cohen, Mr. Gabelli and
Mr. Goldfarb, 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. Cohen, Mr. Gabelli and Mr. Goldfarb. Our independent directors
will have regularly scheduled meetings at which only independent directors are
present.
77
Executive
Officer and Director Compensation
None of our executive officers or
directors has received any cash compensation for services rendered. Commencing
on the date our securities are first quoted on the OTCBB through the earlier of
consummation of our initial business combination or our liquidation, we will pay
our sponsor a total of $10,000 per month for office space and administrative
services, including secretarial support. This arrangement is being agreed to by
our sponsor for our benefit and is not intended to provide compensation in lieu
of a salary to Mr. Johnson. 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
finder’s 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 or proxy solicitation materials, as
applicable, 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, 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
management’s 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
our 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. We do not believe a compensation
committee is necessary prior to our initial business combination as there will
be no salary, fees or other compensation being paid to our officers or directors
prior to our initial 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.
78
Conflicts
of Interest
In order to minimize potential conflicts
of interest that may arise from multiple corporate affiliations, each of our
officers and Mr. Johnson 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 or director, 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 or Mr. Johnson 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 and Mr. Johnson currently have certain relevant
fiduciary duties or contractual obligations that may take priority over their
duties to us.
Our
officers and Mr. Johnson have pre-existing fiduciary duties to investment funds
affiliated with The RLJ Companies, as well as to corporations on which they
serve on the board of directors. Specifically, each of Mr. Johnson, Mr.
Sinclair and Ms. Pickrum have pre-existing duties to RLJ Equity Partners Fund I,
L.P. which restrict them and their affiliates from investing outside of that
partnership in any privately negotiated transactions which are substantially
similar to the investments made by that partnership, but specifically excluding,
among other things, investments in publicly traded securities, passive
investments, investments outside of the United States of America and its
territories and possessions, and investments which the advisory committee of the
partnership consent to be pursued outside of the partnership. That fund
seeks to make equity and equity-related investments in a diversified portfolio
of companies with enterprise values between $75 and $300 million, including in
the following preferred industries: business services, general
industrial, consumer and retail, media and telecommunications, aerospace and
defense and automotive and transportation. In addition, each of
them have pre-existing duties to (i) RLJ-McLarty-Landers Automotive
Holdings, LLC which restrict them and their affiliates from investing in
businesses engaged in the sale of new or used motor vehicles or related products
or services, (ii)
RLJ Western Asset PPIF which restrict them and their affiliates from forming or
managing a pooled investment fund formed to invest primarily in certain
commercial mortgage-backed securities and (iii) RLJ Lodging Fund II (PF #1),
L.P. which restrict them and their affiliates from managing or sourcing
transactions for a pooled investment vehicle formed for the purpose of investing
in hotels, or otherwise acquiring focused-service hotels located in the United
States or Canada that meet certain investment criteria. Mr. Johnson
currently serves on the board of directors of KB Home, Lowe’s Companies, Inc.,
IMG Worldwide, Inc. and Strayer Education, Inc.
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.
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 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 (or 27 months if a letter of intent, agreement in principle or
definitive agreement relating to a prospective business combination is executed
before the 21-month period ends).
Potential investors should also be aware
of the following other potential conflicts of interest:
|
•
|
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.
|
|
•
|
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 management’s other affiliations, see
“— Directors and Executive
Officers.”
|
79
|
•
|
Our initial stockholders 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 initial stockholders have agreed to
waive their redemption rights with respect to their founder shares and
public shares in connection with the consummation of our initial business
combination. Additionally, our initial stockholders have agreed to waive
their rights to liquidating distributions with respect to their founder
shares if we fail to consummate our initial business combination within
21 months from the closing of this offering (or 27 months if a letter
of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period
ends). If we do not complete our initial business combination within such
21- or 27-month time period, the proceeds of the sale of the sponsor
warrants will be used to fund the payment of liquidating distributions to
our public shares, and the sponsor warrants will not be entitled to any
such distributions and 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
immediately transferable, assignable or salable by our initial
stockholders. Founder shares which are no longer subject to
forfeiture may not be transferred, assigned or sold until the earlier
of 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 at least one period of 20 trading days within any 30-trading day
period commencing at least 150 days after our initial business
combination) and the date on which we consummate a subsequent liquidation,
merger, stock exchange or other similar transaction that results in all of
our stockholders having the right to exchange their shares of common stock
for cash, securities or other property. Founder shares which are
subject to forfeiture may not be transferred except in certain limited
circumstances. Our initial stockholders may not transfer, assign or
sell the sponsor warrants and the respective common stock underlying such
warrants until 30 days after the completion of our initial business
combination. Since Mr. Johnson, Mr. Sinclair and
Ms. Pickrum 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.
|
|
•
|
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.
|
While we do not intend to pursue an
initial business combination with a 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, or a committee of our independent directors, would obtain an
opinion from an independent investment banking firm that is a member of FINRA,
that such an initial business combination is fair to our company 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 finder’s 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, other than $10,000 per month for office space and
administrative services payable to our sponsor.
In general, officers and directors of a
corporation incorporated under the laws of the State of Nevada are required to
present business opportunities to that corporation under certain
circumstances.
As a result of multiple business
affiliations, our officers and directors may have similar legal obligations
relating to presenting business opportunities to multiple entities. Each of Mr.
Johnson, Mr. Sinclair and Ms. Pickrum is an officer, member or partner of our
sponsor. In addition, conflicts of interest may arise when our board evaluates a
particular business opportunity. 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 initial
stockholders have agreed to vote their founder shares as well as 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 articles of
incorporation provide that our directors and officers will be indemnified by us
to the fullest extent authorized by Nevada law, as it now exists or may in the
future be amended. In addition, our amended and restated articles of
incorporation provide that our directors will not be liable for monetary damages
for breach of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the NRS as the same
exists or may hereafter be amended. Any amendment, modification or repeal of the
applicable provision of the NRS will not adversely affect any right or
protection of a director in respect of any act or omission occurring prior to
such amendment, modification or repeal.
80
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 articles 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, employee or agent for
any liability arising out of his or her actions, regardless of whether Nevada
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 stockholder’s 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.
81
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:
•
|
each person known by us to be the
beneficial owner of more than 5% of our outstanding shares of common
stock;
|
•
|
each of our officers, directors
and director
nominees; and
|
•
|
all our officers, directors and
director nominees as a
group.
|
Unless otherwise indicated, we believe
that all persons named in the table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them. 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.
|
Approximate
|
|||||||||||
|
Percentage of
|
|||||||||||
|
Outstanding
|
|||||||||||
|
Common Stock
|
|||||||||||
|
Number of Shares
|
Before
|
After
|
|||||||||
Name
and Address of Beneficial Owner
|
Beneficially
Owned
|
Offering
|
Offering(1)
|
|||||||||
RLJ
SPAC Acquisition, LLC (our sponsor) (2)
3
Bethesda Metro Center, Suite 1100
Bethesda,
MD 20814
|
3,478,750 | 96.8 | % | 19.4 | % | |||||||
Robert
L. Johnson (2)
c/o The
RLJ Companies
3
Bethesda Metro Center, Suite 1100
Bethesda,
MD 20814
|
3,478,750 | 96.8 | % | 19.4 | % | |||||||
H.
Van Sinclair
c/o The
RLJ Companies
3
Bethesda Metro Center, Suite 1100
Bethesda,
MD 20814
|
- | - | - | |||||||||
Lisa P.
Pickrum
c/o The
RLJ Companies
3
Bethesda Metro Center, Suite 1100
Bethesda,
MD 20814
|
- | - | - | |||||||||
William
S. Cohen (3)
51 West 52nd Street
New York, NY 10019
|
57,500 | 1.6 | % | * | % | |||||||
Mario
J. Gabelli
c/o
GAMCO Investments, Inc.
One
Corporate Center
Rye,
NY 10580-1435
|
- | - | - | |||||||||
Morris
Goldfarb (3)
c/o
G-III Apparel Group, Ltd.
512
Seventh Avenue
New
York, NY 10018
|
57,500 | 1.6 | % | * | % | |||||||
All
directors and executive officers as a group (6 individuals)
(2)(3)
|
3,593,750 | 100 | % | 20 | % |
*
|
Less than
1%.
|
(1)
|
Assumes exercise of the
underwriters’ over-allotment option and no resulting forfeiture of an
aggregate of 468,750 founder shares held by our initial stockholders
and includes a portion of the founder shares in an amount equal to 2.5% of
our issued and outstanding shares immediately 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 at least one period of 20 trading days within any 30-trading day
period within 12 months following the closing of our initial business
combination and an additional 2.5% of our issued and outstanding shares
immediately after this offering that are subject to forfeiture by our
initial stockholders in the event the last sales price of our stock does
not equal or exceed $13.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for at least
one period of 20 trading days within any 30-trading day period between 12
and 24 months following the closing of our initial business
combination.
|
(2)
|
Includes 453,750 shares subject to forfeiture if the underwriters' over-allotment option is not exercised. The RLJ Companies, LLC is the sole manager and is the sole voting member of RLJ SPAC Acquisition, LLC. Robert L. Johnson is the sole manager and the sole voting member of The RLJ Companies, LLC. Mr. Johnson disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. |
(3)
|
Includes 7,500 shares subject to forfeiture if the underwriters' over-allotment option is not exercised. |
82
In November 2010, our initial
stockholders purchased an aggregate of 3,593,750 founder shares for an
aggregate purchase price of $25,000, or approximately $0.007 per share.
The founder shares held by our initial stockholders include an aggregate of
468,750 shares subject to forfeiture to the extent that the underwriters’
over-allotment option is not exercised in full, so that our initial stockholders
will collectively own 20% of our issued and outstanding shares after this
offering (assuming none of our initial stockholders purchase units in this
offering). In addition, a portion of the founder shares in an amount equal to
2.5% of our issued and outstanding shares immediately after this offering will
be subject to forfeiture by our initial stockholders 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 at least one period of 20 trading days within any 30-trading day period
within 12 months following the closing of our initial business
combination. An additional 2.5% of our issued and outstanding shares
immediately after this offering will be subject to forfeiture by our initial
stockholders in the event the last sales price of our stock does not equal or
exceed $13.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for at least one period of 20
trading days within any 30-trading day period between 12 and 24 months
following the closing of our initial business combination.
Immediately after this offering
(assuming no exercise of the underwriters’ over-allotment option), our initial
stockholders will beneficially own 20% of the then issued and outstanding shares
of our common stock. Because of this ownership block, our initial stockholders
may be able to effectively influence the outcome of all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions other than approval of our initial
business combination.
To the extent the underwriters do not
exercise their over-allotment option, up to an aggregate of 468,750 founder
shares held by our initial stockholders will be subject to forfeiture. Our
initial stockholders will be required to forfeit only a number of founder shares
necessary to maintain our initial stockholders’ 20% 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.
Our sponsor has committed to purchase
6,166,667 sponsor warrants at a price of $0.75 per warrant ($4,625,000 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 (or 27 months if a letter of intent, agreement in
principle or definitive agreement relating to a prospective business combination
is executed before the 21-month period ends), the proceeds of the sale of the
sponsor warrants will be distributed to our public stockholders as part of the
liquidation of our trust account, and the sponsor warrants will not participate
in a liquidating distribution of our trust account and 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 Initial Stockholders
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 initial stockholders. Founder shares
which are not subject to forfeiture may not be transferred, assigned or sold
until the earlier of 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 at least one period of 20 trading days within any 30-trading day
period commencing at least 150 days after our initial business combination)
and the date on which we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction that results in all of our stockholders
having the right to exchange their shares of common stock for cash, securities
or other property. Our initial stockholders may not transfer, assign or sell the
sponsor warrants and the respective common stock underlying such warrants until
30 days after the completion of our initial business combination.
Notwithstanding the restrictions above, the founder shares, sponsor warrants and
any shares of common stock underlying the sponsor warrants may be
transferred:
83
•
|
to our officers or directors, any
affiliates or family members of any of our officers or directors, any
limited partners of our sponsor or any affiliates of our
sponsor;
|
|
•
|
by gift to a member of an initial
stockholder’s immediate family or to a trust, the beneficiary of which is
a member of such initial stockholder’s immediate family, an affiliate of
the initial stockholder or to a charitable
organization;
|
|
•
|
by virtue of laws of descent and
distribution upon death of an initial
stockholder;
|
|
•
|
pursuant to a qualified domestic
relations order;
|
|
•
|
by virtue of the laws of the state
of Delaware or our sponsor’s limited liability company agreement upon
dissolution of our sponsor;
|
|
•
|
in the event of our liquidation
prior to our completion of our initial business
combination; or
|
|
•
|
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 in certain cases must enter into a written agreement agreeing to be
bound by these transfer restrictions.
Registration
Rights
The holders of the founder shares,
sponsor warrants and any warrants (including the shares of common stock issuable
upon conversion of such warrants) that may be issued upon conversion of working
capital loans 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, excluding short form
registration demands, that we register such securities for sale under the
Securities Act. In addition, these stockholders will 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. Founder
shares which are not subject to forfeiture may not be transferred, assigned or
sold until the earlier of 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 at least one period of 20 trading days within any 30-trading day
period commencing at least 150 days after our initial business combination)
and the date on which we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction that results in all of our stockholders
having the right to exchange their shares of common stock for cash, securities
or other property. In the case of the sponsor warrants and the respective common
stock underlying such warrants, the lock-up period terminates 30 days after
the completion of our initial business combination. We will bear the costs and
expenses of filing any such registration statements.
84
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In November 2010, our initial
stockholders purchased an aggregate of 3,593,750 founder shares for an
aggregate purchase price of $25,000, or approximately $0.007 per share.
The founder shares held by our initial stockholders include an aggregate of
468,750 shares subject to forfeiture to the extent that the underwriters’
over-allotment option is not exercised in full, so that our initial stockholders
will collectively own 20% of our issued and outstanding shares after this
offering (assuming none of our initial stockholders purchase units in this
offering). In addition, a portion of the founder shares in an amount equal to
2.5% of our issued and outstanding shares immediately after this offering will
be subject to forfeiture by our initial stockholders 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 at least one period of 20 trading days within any 30-trading day period
within 12 months following the closing of our initial business
combination. An additional 2.5% of our issued and outstanding shares
immediately after this offering will be subject to forfeiture by our initial
stockholders in the event the last sales price of our stock does not equal or
exceed $13.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for at least one period of 20
trading days within any 30-trading day period between 12 and 24 months
following the closing of our initial business combination.
Our sponsor, RLJ SPAC Acquisition, LLC,
is a Delaware limited liability company of which The RLJ Companies, LLC is the
sole manager and is the sole voting member (holding approximately 85% of the
total economic interest) and certain employees of The RLJ Companies, LLC hold an
aggregate of approximately 15% profits interest pursuant to long-term incentive
arrangements. Robert L. Johnson is the sole manager and the sole voting
member of The RLJ Companies, LLC.
Our sponsor has committed to purchase
6,166,667 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 Mr. Johnson, Mr. Sinclair and
Ms. Pickrum is an officer, member or partner of our sponsor. In order to
minimize potential conflicts of interest that may arise from multiple corporate
affiliations, each of our officers and Mr. Johnson have 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
or director, 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 or Mr. Johnson 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 and Mr. Johnson currently have certain relevant fiduciary duties
or contractual obligations that may take priority over their duties to us. In
addition, our officers and Mr. Johnson have agreed not to participate in the
formation of, or become an officer or director of, any blank check company 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 (or 27 months if a
letter of intent, agreement in principle or definitive agreement relating to a
prospective business combination is executed before the 21-month period
ends).
Our sponsor has agreed to, from the date
our securities are first quoted on the OTCBB 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 our sponsor $10,000 per month for these
services. However, this arrangement is solely for our benefit and is not
intended to provide compensation in lieu of salary to Mr. Johnson. We believe,
based on rents and fees for similar services in the Washington, D.C.
metropolitan area, that the fee charged by our sponsor is at least as favorable
as we could have obtained from an unaffiliated person.
85
Other than the $10,000 per-month
administrative fee paid to our sponsor 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 finder’s
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, our
sponsor has also advanced to us an aggregate of $225,000 to cover expenses
related to this offering. This loan will be payable without interest 60 days
following 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, other than the interest on such proceeds that may be released to us
for working capital purposes. Such loans may be convertible into founders shares
and 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 founders shares would have no right
to distributions upon any liquidation of our trust account. The holders of such
founders shares and warrants (and the underlying shares) would have demand and
“piggy-back” registration rights with respect to such securities. 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.”
86
DESCRIPTION
OF SECURITIES
Our authorized capital stock will
consist of 250 million shares of common stock, $0.001 par value, and
one million shares of undesignated preferred stock, $0.001 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 Lazard Capital Markets, LLC 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 3,593,750 shares of our common stock outstanding, all of which were
held of record by our initial stockholders. This includes an aggregate of
468,750 shares of common stock subject to forfeiture by our initial
stockholders to the extent that the underwriters’ over-allotment option is not
exercised in full so that our initial stockholders will own 20 % of our
issued and outstanding shares after this offering (assuming none of our initial
stockholders purchase units in this offering). Upon the closing of this
offering, 15,625,000 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
holders of common stock. Our board of directors 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 at each annual meeting of stockholders.
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
articles of incorporation authorizes the issuance of up to 250
million 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 NRS 78.330. 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 district court in accordance with NRS
78.345.
87
Unlike many 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 our initial business combination and the
redemption rights as is required under the SEC’s proxy rules. In the event we
conduct redemptions pursuant to the tender offer rules, our offer to redeem
shares shall remain open for at least 20 business days, in accordance with
Rule 14e-1(a) under the Exchange Act. 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 the outstanding shares of common stock
voted, non-votes will have no effect on the approval of our initial business
combination once a quorum is obtained, except that a merger requiring
stockholder approval under Nevada law would require approval of a majority of
our outstanding shares of common stock, and a non-vote in that case would be
equivalent to a vote against the merger proposal. We intend to give
approximately 30 days (but not less than 10 days nor more than
60 days) prior written notice of any 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 initial stockholders have agreed to
vote their founder shares as well as any public shares purchased during or after
the offering in favor of our initial business combination. In addition, our
initial stockholders have agreed to waive their redemption rights with respect
to their founder shares in connection with the consummation of a business
combination, although they will be entitled to redemption rights with respect to
any public shares they hold if we fail to consummate a business combination
within the required time period.
If we are unable to consummate a
business combination within such 21- or 27-month period, we will liquidate the
trust account and distribute the amount held in the trust account, including
interest but net of franchise and income taxes payable and less up to $100,000
of such net interest that may be released to us from the trust account to pay
expenses associated with the liquidation of our trust account, to our public
shareholders, subject to the
requirements of Nevada law that a corporation not make a distribution to
stockholders if, after giving effect to the distribution, either (i) the
corporation would not be able to pay its debts as they become due in the usual
course of business or (ii) the corporation’s total assets would be less than the
sum of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
In the event of a liquidation,
dissolution or winding up of the company after our initial 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
franchise and income taxes payable, 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:
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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 initial stockholders have
agreed to waive their redemption rights with respect to their founder
shares and public shares in connection with the consummation of our
initial business combination and to waive their rights to liquidating
distributions with respect to their founder shares if we fail to
consummate our initial business combination within 21 months from the
closing of this offering (or 27 months if a letter of intent, agreement in
principle or definitive agreement relating to a prospective business
combination is executed before the 21-month period ends), although they
will be entitled to liquidating distributions with respect to any public
shares they hold if we fail to consummate our initial 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 initial stockholders have
agreed to vote their founder shares as well as 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 our initial
stockholders, each of whom will be subject to the same transfer restrictions)
until the earlier of 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) and the date on
which we consummate a subsequent liquidation, merger, stock exchange or other
similar transaction that results in all of our stockholders having the right to
exchange their shares of common stock for cash, securities or other property. In
addition, a portion of the founder shares in an amount equal to 2.5% of our
issued and outstanding shares immediately after this offering will be subject to
forfeiture by our initial stockholders 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 at least
one period of 20 trading days within any 30-trading day period within
12 months following the closing of our initial business combination.
An additional 2.5% of our issued and outstanding shares immediately after this
offering will be subject to forfeiture by our initial stockholders in the event
the last sales price of our stock does not equal or exceed $13.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for at least one period of 20 trading days within any 30-trading
day period between 12 and 24 months following the closing of our initial
business combination.
Preferred
Stock
Our amended and restated articles of
incorporation provide 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.
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.
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 a prospectus relating to
the common stock issuable upon exercise of the warrants is 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 of
the trust.
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, to each warrant
holder; and
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if, and only if, the last sales
price of the common stock equals or exceeds $17.50 per share for any 20
trading days within the 30-trading day period ending on the third business
day before we send to the notice of redemption to the warrant
holders.
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We will not redeem the warrants unless
there is an effective registration statement covering the shares of common stock
issuable upon exercise of the warrants, and a current prospectus relating to
those shares of common stock is available throughout the 30-day redemption
period.
We have established the last of the
redemption criteria 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 $17.50 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 last sales 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, the redemption 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 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 holders of common
stock.
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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 and a related registration
statement is effective 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 use our best efforts to file a
registration statement covering such shares and maintain a current prospectus
relating to the common stock issuable upon exercise of the warrants until the
expiration of the warrants. 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, except pursuant to cashless exercise provisions in limited
circumstances. We will not be required to settle any such warrant exercise. If
the registration statement is not effective or 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.
If we are unable to consummate an initial business combination in
the time provided, the warrants will expire worthless.
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 Initial Stockholders,” 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 last sales 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. Johnson 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.
Our sponsor and Mr. Johnson 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
Initial Stockholders,” transfers can be made to our officers and directors and
other persons or entities affiliated with the sponsor.
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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 initial stockholders’ ownership at 20.0% of the 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.
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 willful misconduct or bad faith of the indemnified person or
entity.
Amendments
to our Articles of incorporation
Our amended and restated articles 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 holders
of at least 65% of our outstanding shares of common stock. Specifically,
our amended and restated articles of incorporation provide, among other things,
that:
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if we are unable to consummate a
business combination within such 21- or 27-month period, we will liquidate
the trust account and distribute the amount held in the trust account,
including interest but net of franchise and income taxes payable and less
up to $100,000 of such net interest that may be released to us from the
trust account to pay liquidation expenses, to our public shareholders,
subject to
the requirements of Nevada law that a corporation not make a distribution
to stockholders if, after giving effect to the distribution, either (i)
the corporation would not be able to pay its debts as they become due in
the usual course of business or (ii) the corporation’s total assets would
be less than the sum of its total liabilities plus the amount that would
be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
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prior to our initial business
combination, we may not issue additional shares of capital stock that
would entitle the holders thereof to receive funds from the trust account
or vote on any initial business
combination;
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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, or a committee of
our independent directors, 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 company from a financial point of view;
and
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if we seek stockholder approval,
we will consummate our initial business combination only if a majority of
the outstanding shares of common stock voted (or, in the case of a merger
requiring stockholder approval under Nevada law, a majority of our
outstanding shares of common stock) are voted in favor of the business
combination.
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In addition, our amended and restated
articles of incorporation provide that we will not proceed with a redemption of
our public shares if such redemption would result in our failure to have
stockholders’ equity in excess of $5.0 million.
Certain
Anti-Takeover Provisions of Nevada Law
We will
be subject to Nevada’s Combination with Interested Stockholders Statute (NRS
78.411 et. seq.) upon consummation of this offering if we have 200 or more
stockholders of record.
The
Combination with Interested Stockholders Statute prevents an “interested
stockholder” and an applicable Nevada corporation from entering into a
“combination,” unless certain conditions are met. A “combination” means any
merger or consolidation with an “interested stockholder” or affiliate of an
“interested stockholder,” or any sale, lease, exchange, mortgage, pledge,
transfer or other disposition, in one transaction or a series of transactions
with an “interested stockholder” or affiliate of an “interested
stockholder”:
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having
an aggregate market value equal to 5% or more of the aggregate market
value of the assets of the
corporation;
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having
an aggregate market value equal to 5% or more of the aggregate market
value of all of the outstanding shares of the corporation;
or
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representing
10% or more of the earning power or net income of the
corporation.
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An
“interested stockholder” means (i) the beneficial owner of 10% or more of the
voting shares of the corporation or (ii) an affiliate or associate of the
corporation who at any time within 3 years immediately prior to the date in
question was the beneficial owner of 10% or more of the voting shares of the
corporation. A corporation may not engage in a “combination” within three years
after the interested stockholder acquired his shares unless the combination or
the purchase of shares made by the interested stockholder was approved by the
board of directors before the interested stockholder acquired such shares. If
this approval is not obtained, then after the expiration of the three-year
period, the business combination may be consummated (a) if it is approved by a
majority of the voting power held by disinterested stockholders or (b) if the
consideration to be paid by the interested stockholder for disinterested shares
of common and preferred stock, as applicable, is at least equal to the highest
of:
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the
highest price per share of such stock paid by the interested stockholder
within the three years immediately preceding the date of the announcement
of the combination or in the transaction in which the person became an
interested stockholder, whichever is higher, plus interest from that date
through the date of consummation of the combination and less any dividends
paid during the same period;
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the
market value per share of such stock on the date of the announcement of
the combination or the date the interested stockholder acquired the
shares, whichever is higher, plus interest from that date through the date
of consummation of the combination and less any dividends paid during the
same period; or
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for
the holders of preferred stock, the highest liquidation value of the
preferred stock, if it is greater than the value of both of the above, as
applicable to preferred stock pursuant to the
statute.
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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 468,500 founder shares held by our initial stockholders) we
will have 15,625,000 shares of common stock outstanding. Of these shares,
the 12,500,000 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 3,125,000 shares and all
6,166,667 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:
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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
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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.
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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, 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 approximately
156,000 shares immediately after this offering (or approximately
179,000 shares 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 initial stockholders
will be able to sell their founder shares and sponsor warrants, as applicable,
pursuant to Rule 144 without registration one year after we have completed
our initial business combination.
Registration
rights
The holders of the founder shares,
sponsor warrants and any warrants (including the shares of common stock issuable
upon conversion of such warrants) that may be issued upon conversion of working
capital loans 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, excluding short form
registration demands, that we register such securities for sale under the
Securities Act. In addition, these stockholders will 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. Founder
shares which are not subject to forfeiture may not be transferred, assigned or
sold until the earlier of 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 at least one period of 20 trading days within any 30-trading day
period commencing at least 150 days after our initial business combination)
and the date on which we consummate a subsequent liquidation, merger, stock
exchange or other similar transaction that results in all of our stockholders
having the right to exchange their shares of common stock for cash, securities
or other property. In the case of the sponsor warrants and the respective common
stock underlying such warrants, the lock-up period terminates 30 days after
the completion of our initial business combination. We will bear the costs and
expenses of filing any such registration statements.
Quotation
of Securities
We expect our units, common stock and
warrants to be quoted on the on the OTCBB under the symbols ‘‘[•],” ‘‘[•],” and ‘‘[•],” 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 stockholder’s particular circumstances. In
addition, this discussion does not address:
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U.S. gift or estate tax
laws;
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state, local or
foreign tax consequences;
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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
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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.
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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:
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an individual citizen or resident
of the United States;
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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;
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an estate the income of which is
subject to U.S. federal income taxation regardless of its source;
or
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a trust if 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 it has in
effect a valid election to be treated as a
U.S. person.
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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.
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This discussion is only a summary of
material U.S. federal income 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 an additional
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:
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at any time during the last half
of such taxable year, five or fewer individuals (without regard to their
citizenship 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
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at least 60% of the corporation’s
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).
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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
Stockholders
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 holder’s 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 holder’s 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.
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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. holder’s 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), 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. holder’s 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:
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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
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the U.S. holder’s adjusted
tax basis in its common stock so disposed of. A U.S. holder’s
adjusted tax basis in its common stock generally will equal the
U.S. holder’s 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.
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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.
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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 is “substantially disproportionate”
with respect to the U.S. holder, results in a “complete termination” of the U.S.
holder’s interest in us or 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 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. holder’s
interest if either all of the shares of our stock actually and constructively
owned by the U.S. holder are redeemed or 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. holder’s conversion results in
a “meaningful reduction” of the U.S. holder’s proportionate interest in us.
Whether the redemption will result in a meaningful reduction in a U.S. holder’s
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. holder’s adjusted tax basis in its remaining stock,
or, if it has none, to the U.S. holder’s 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 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 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 five
percent (or, if our stock is not then publicly traded, 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.
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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. holder’s 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. holder’s initial investment in the warrant (i.e., the portion of the U.S.
holder’s purchase price for a unit that is allocated to the warrant, as
described above under “— General”) and the exercise price. The U.S.
holder’s 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.
holder’s basis in the common stock received would equal the holder’s basis in
the warrant. If the cashless exercise were treated as not being a gain
realization event, a U.S. holder’s 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. holder’s tax basis
in the warrants deemed surrendered. In this case, a U.S. holder’s 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.
holder’s tax basis in the warrants exercised. A U.S. holder’s 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:
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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
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the
U.S. holder’s tax basis in the warrant (that is, as discussed above, the
portion of the U.S. holder’s purchase price for a unit that is allocated
to the warrant, as described above under
“— General”).
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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.
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Constructive dividends on a Warrant
If we pay a dividend on our common stock while a U.S.
holder holds our warrants, and, pursuant to the anti-dilution provisions of the
warrants set forth in "Description of Securities—Warrants" above, the conversion
rate of the warrants is increased, such increase generally will be deemed to be
the payment of a taxable dividend to the U.S. holder to the extent of our
earnings and profits, notwithstanding the fact that the holder will not have
received any cash or property. If the conversion rate is adjusted in certain
other circumstances (or in certain circumstances, there is a failure to make
adjustments), such adjustments also could result in the deemed payment of a
taxable dividend to U.S. holders. A U.S. holder should consult with its own tax
advisors as to the proper treatment of any adjustments to the conversion rate of
the warrants.
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. holder’s 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). In the case of common stock held by a foreign
intermediary (other than a “qualified intermediary”) or a foreign partnership
(other than a “withholding foreign partnership”) the intermediary or
partnership, as the case may be, generally must provide an IRS Form W-8IMY and
attach thereto an appropriate certification by each beneficial owner or partner.
Any distribution not constituting a dividend will be treated first as
reducing (but not below zero) the non-U.S. holder’s adjusted tax basis in its
shares of our common stock and, to the extent such distribution exceeds the
non-U.S. holder’s 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 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. Non-U.S. holders should consult their own
tax advisors regarding possible eligibility for benefits under income tax
treaties.
Dividends
we pay to a non-U.S. holder that are effectively connected with such non-U.S.
holder’s conduct of a trade or business within the United States (and, under certain income tax treaties, are
attributable to a United States permanent establishment or fixed base maintained
by the non-U.S. holder) 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. holder’s 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.”
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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 or
warrants, and, in the case where shares of our common stock and warrants are regularly traded on an
established securities market (within the
meaning of applicable U.S. Treasury regulations), the non-U.S.
holder has owned, directly or indirectly, more than 5% of our total outstanding common stock or warrants at any time within the shorter
of the five-year period preceding the disposition or such non-U.S.
holder’s holding period for the shares of our common stock or warrants. There can be no assurance
that our common stock or warrants
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 and third 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. The gross proceeds
from transactions described in the third bullet point above will generally be
subject to a 10% withholding tax, which may be claimed by a non-U.S. holder as a
credit against its U.S. federal income tax liability. 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 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. holder’s
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:
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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
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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);
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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 proceeds will be subject to
backup withholding and 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 holder’s 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.
103
UNDERWRITING
In
accordance with the terms and conditions contained in the underwriting
agreement, we have agreed to sell to each of the underwriters named below, and
each of the underwriters, for which Lazard Capital Markets LLC is acting as
representative, has individually agreed to purchase on a firm commitment basis,
the number of units set forth opposite their respective name below:
Underwriters
|
Number
of Units
|
|||
Lazard
Capital Markets LLC
|
||||
Total
|
12,500,000 |
A
copy of the underwriting agreement has been filed as an exhibit to the
registration statement of which this prospectus forms a part.
Pricing of
Securities
We
have been advised by the representative that the underwriters propose to offer
the units to the public at the offering price set forth on the cover page of
this prospectus. They may allow some dealers concessions not in excess of
$ per unit and the dealers may reallow a
concession not in excess of $ per unit to
other dealers.
Prior
to this offering there has been no public market for any of our securities. The
public offering price of the units and insider warrants and the terms of the
warrants were negotiated between us and the representative. Factors considered
in determining the prices and terms of the units, including the common stock and
warrants underlying the units, and the insider warrants include:
|
·
|
the
history and prospects of companies whose principal business is the
acquisition of other companies;
|
|
·
|
prior
offerings of those companies;
|
|
·
|
our
prospects for acquiring an operating business at attractive
values;
|
|
·
|
our
capital structure;
|
|
·
|
an
assessment of our management and their experience in identifying operating
companies;
|
|
·
|
general
conditions of the securities markets at the time of the offering;
and
|
|
·
|
other
factors as were deemed relevant.
|
However,
although these factors were considered, the determination of our offering price
is more arbitrary than the pricing of securities for an operating company in a
particular industry since the underwriters are unable to compare our financial
results and prospects with those of public companies operating in the same
industry.
Over-Allotment
Option
We
have granted to the representative of the underwriters an option, exercisable
during the 45-day period commencing on the date of this prospectus, to purchase
from us at the offering price, less underwriting discounts, up to an aggregate
of 1,875,000 additional units for the sole purpose of covering over-allotments,
if any. The over-allotment option will only be used to cover a net syndicate
short position resulting from the initial distribution. The representative of
the underwriters may exercise the over-allotment option if the underwriters sell
more units than the total number set forth in the table above.
104
Commissions and
Discounts
The
following table shows the public offering price, underwriting discount to be
paid by us to the underwriters, and the proceeds, before expenses, to us. This
information assumes either no exercise or full exercise by the representative of
the underwriters of the over-allotment option.
Per
Unit
|
Without
Option
|
With
Option
|
||||||||||
Public
offering price
|
$ | 10.00 | $ | 125,000,000 | $ | 143,750,000 | ||||||
Discount(1)
|
$ | 0.50 | $ | 6,250,000 | $ | 7,187,500 | ||||||
Proceeds
before expenses(2)
|
$ | 9.50 | $ | 118,750,000 | $ | 136,562,500 |
1)
|
$3,125,000
(or $3,593,750 if the over-allotment option is exercised in full) of the
underwriting discounts will not be payable unless and until we complete a
business combination. The underwriters have waived their right to receive
such payment upon our liquidation if we are unable to complete a business
combination.
|
2)
|
The
offering expenses (other than underwriting discounts) are estimated at
$1,125,000.
|
No
discounts or commissions will be paid on the sale of the insider
warrants.
Regulatory Restrictions on Purchase
of Securities
Rules
of the SEC may limit the ability of the underwriters to bid for or purchase our
units before the distribution of the units is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:
|
·
|
Stabilizing
Transactions. The underwriters may make bids or purchases for the
purpose of preventing or retarding a decline in the price of our units, as
long as stabilizing bids do not exceed the offering price of
$10.00.
|
|
·
|
Over-Allotments and Syndicate
Covering Transactions. The underwriters may create a short position
in our units by selling more of our units than are set forth on the cover
page of this prospectus. If the underwriters create a short position
during the offering, the representative may engage in syndicate covering
transactions by purchasing our units in the open market. The
representative may also elect to reduce any short position by exercising
all or part of the over-allotment
option.
|
|
·
|
Penalty Bids. The
representative may reclaim a selling concession from a syndicate member
when the units originally sold by the syndicate member are purchased in a
stabilizing or syndicate covering transaction to cover syndicate short
positions.
|
Stabilization
and syndicate covering transactions may cause the price of our securities to be
higher than they would be in the absence of these transactions. The imposition
of a penalty bid might also have an effect on the prices of our securities if it
discourages resales of our securities.
Neither
we nor the underwriters make any representation or prediction as to the effect
that the transactions described above may have on the price of our securities.
These transactions may occur in the over-the-counter market or on any trading
market. If any of these transactions are commenced, they may be discontinued
without notice at any time.
Other Terms
Although
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 intention
to do so, any of the underwriters may, among other things, introduce us to
potential target businesses or assist us in raising additional capital, as needs
may arise in the future. If any of the underwriters provide services to us after
this offering, we may pay such underwriter fair and reasonable fees that would
be determined at that time in an arm’s-length negotiation; provided that no
agreement will be entered into with any of the underwriters and no fees for such
services will be paid to any of the underwriters prior to the date that is
90 days after the date of this prospectus, unless the Financial Industry
Regulatory Authority, Inc. determines that such payment would not be deemed
underwriters’ compensation in connection with this offering.
105
Indemnification
We
have agreed to indemnify the underwriters against some liabilities, including
civil liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in this respect.
State
Blue Sky Information
We will
offer and sell the units to retail customers only in California, Connecticut,
Delaware, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana,
Louisiana, Maryland, New Jersey, New York, Pennsylvania, Rhode Island, South
Dakota, Virginia, Wisconsin and Wyoming. In New York and Hawaii, we have relied
on exemptions from the state registration requirements. In the other states
listed above, 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.
If you
are not an institutional investor, you may purchase our securities in this
offering only in the jurisdictions described directly above. Institutional
investors in every state except in Idaho may purchase the units in this offering
pursuant to exemptions under the Blue Sky laws of various states. The definition
of an “institutional investor” varies from state to state but generally includes
financial institutions, broker-dealers, banks, insurance companies and other
qualified entities.
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, 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
Investors
European Economic
Area
In
relation to each Member State of the European Economic Area which has
implemented the European Union Prospectus Directive (Directive 2003/71/EC), each
of which we refer to as a “Relevant Member State,” an offer to the public of any
shares which are the subject of the offering contemplated by this prospectus may
not be made in that Relevant Member State prior to the publication of a
prospectus in relation to our shares which 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 an offer to the public in that Relevant Member
State of any of our shares may be made at any time under the following
exemptions under the Prospectus Directive, if they have been implemented in that
Relevant Member State:
|
•
|
to
legal entities which are 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;
|
|
•
|
to
any legal entity which has two or more of: an average of at least
250 employees during the last financial year; a total balance sheet
of more than 43,000,000 euros; and an annual net turnover of more than
50,000,000 euros, as shown in its last annual or consolidated
accounts;
|
|
•
|
by
the managing underwriters to fewer than 100 natural or legal persons
(other than qualified investors as defined in the Prospectus Directive)
subject to obtaining the prior consent of Jefferies & Company,
Inc. for any such offer; or
|
|
•
|
in
any other circumstances falling within Article 3(2) of the Prospectus
Directive,
|
provided
that no such offer of our shares shall result in a requirement for the
publication by us or any underwriter of a prospectus pursuant to Article 3
of the Prospectus Directive.
For the
purposes of this provision, the expression an “offer to the public” in relation
to any shares in any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the offer and our
shares to be offered so as to enable an investor to decide to purchase or
subscribe our shares, as the same may be varied in that Relevant Member State by
any measure implementing the Prospectus Directive in that Relevant Member State
and the expression “Prospectus Directive” means European Union Directive
2003/71/EC and includes any relevant implementing measure in each Relevant
Member State.
Selling Restrictions Addressing
Additional United Kingdom Securities Laws
With
respect to 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, or 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, with all such persons together being referred to as relevant persons.
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
persons other than relevant 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.
106
LEGAL
MATTERS
Greenberg
Traurig, 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 Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto,
California, is acting as counsel to the underwriters.
EXPERTS
The
financial statements of RLJ Acquisition, Inc. (a corporation in the development
stage) as of November 18, 2010 and for the period November 12, 2010 (date of
inception) through November 18, 2010, have been included herein in reliance upon
the report of Rothstein, Kass & Company, P.C., independent registered public
accounting firm, appearing elsewhere herein, and upon the authority of
Rothstein, Kass & Company, P.C. as experts in accounting and
auditing.
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 SEC’s
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.
107
RLJ
ACQUISITION, INC.
INDEX
TO FINANCIAL STATEMENTS
Page
|
|
Audited
Financial Statements of RLJ Acquisition, Inc.
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Balance
Sheet as of November 18, 2010
|
F-3
|
Statement
of Operations for the period from November 12, 2010 (inception) to
November 18, 2010
|
F-4
|
Statement
of Stockholder’s Equity for the period from November 12, 2010 (inception)
to November 18, 2010
|
F-5
|
Statement
of Cash Flows for the period from November 12, 2010 (inception) to
November 18, 2010
|
F-6
|
Notes
to the Financial Statements
|
F-7
|
F-1
Report of
Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders of
RLJ
Acquisition, Inc.
We have
audited the accompanying balance sheet of RLJ Acquisition, Inc. (a corporation
in the development stage) (the “Company”) as of November 18, 2010 and the
related statements of operations, changes in stockholders’ equity, and cash
flows for the period from November 12, 2010 (date of inception) to November 18,
2010. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of November 18, 2010
and the results of its operations and its cash flows for the period from
November 12, 2010 (date of inception) to November 18, 2010, in conformity with
accounting principles generally accepted in the United States of
America.
/s/
Rothstein, Kass & Company,
P.C.
|
Roseland,
New Jersey
December
2, 2010
F-2
RLJ
Acquisition, Inc.
(a
corporation in the development stage)
BALANCE
SHEET
November
18, 2010
ASSETS
|
||||
Current
asset:
|
||||
Cash
|
$ | 250,000 | ||
Noncurrent
asset:
|
||||
Deferred
offering costs
|
30,247 | |||
Total
assets
|
$ | 280,247 | ||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
Current
liabilities:
|
||||
Accrued
expenses
|
$ | 53,936 | ||
Note
payable-related party
|
225,000 | |||
Total
current liabilities
|
278,936 | |||
Commitments
and contingencies
|
||||
Stockholders'
equity:
|
||||
Common
stock, $0.001 par value. Authorized 25,000,000 shares; 3,593,750
shares
|
||||
issued
and outstanding
|
3,594 | |||
Additional
paid-in captial
|
21,406 | |||
Deficit
accumulated during the development stage
|
(23,689 | ) | ||
Total
stockholders' equity
|
1,311 | |||
Total
liabilities and stockholders' equity
|
$ | 280,247 |
See
accompanying notes to financial statements.
F-3
RLJ
Acquisition, Inc.
(a
corporation in the development stage)
STATEMENT
OF OPERATIONS
For
the Period from November 12, 2010 (inception) to November 18, 2010
Formation
costs
|
$ | 23,689 | ||
Net
loss
|
$ | (23,689 | ) | |
Loss
per common share:
|
||||
Basic
and diluted
|
$ | (0.01 | ) | |
Average
common shares outstanding
|
||||
Basic
and diluted
|
3,593,750 |
See
accompanying notes to financial statements.
F-4
RLJ
Acquisition, Inc.
(a
corporation in the development stage)
STATEMENT
OF STOCKHOLDERS' EQUITY
For
the Period from November 12, 2010 (inception) to November 18, 2010
Deficit
|
||||||||||||||||||||
Accumulated
|
||||||||||||||||||||
During the
|
||||||||||||||||||||
Common Stock
|
Additional
|
Development
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Paid-In Capital
|
Stage
|
Equity
|
||||||||||||||||
Initial
capital from founding stockholders for cash
|
3,593,750 | $ | 3,594 | $ | 21,406 | $ | - | $ | 25,000 | |||||||||||
Net
loss
|
- | - | - | (23,689 | ) | (23,689 | ) | |||||||||||||
Balances
at November 18, 2010
|
3,593,750 | $ | 3,594 | $ | 21,406 | $ | (23,689 | ) | $ | 1,311 |
See
accompanying notes to financial statements.
F-5
RLJ
Acquisition, Inc.
(a
corporation in the development stage)
STATEMENT
OF CASH FLOWS
For
the Period from November 12, 2010 (inception) to November 18, 2010
Cash
flows from operating activities:
|
||||
Net
loss
|
$ | (23,689 | ) | |
Change
in operating assets and liabilities
|
||||
Accrued
expenses
|
23,689 | |||
Net
cash provided by operating activities
|
- | |||
Cash
flows from financing activities:
|
||||
Proceeds
from note payable - related party
|
225,000 | |||
Proceeds
from the sale of common stock
|
25,000 | |||
Net
cash provided by financing activities
|
250,000 | |||
Increase
in cash
|
250,000 | |||
Cash
at inception
|
||||
Cash
at November 18, 2010
|
$ | 250,000 | ||
Supplemental
disclosure of noncash financing activities:
|
||||
Deferred
offering costs included in accrued expenses
|
$ | 30,247 |
See
accompanying notes to financial statements.
F-6
RLJ
ACQUISITION, INC.
(a
corporation in the development stage)
NOTES
TO THE FINANCIAL STATEMENTS
For
the period from November 12, 2010 (date of inception) to November 18,
2010
(1)
|
Organization
and Nature of Business Operations
|
RLJ
Acquisition, Inc. (the Company) is a newly-organized blank check company formed
on November 12, 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
Company's sponsor is RLJ SPAC Acquisition, LLC (the Sponsor). At November 18,
2010, the Company had not commenced any operations. All activity through
November 18, 2010 relates to the Company's formation and the proposed offering
described below in Note 4. The Company has selected December 31 as its fiscal
year-end.
The
Company's ability to commence operations is contingent upon obtaining adequate
financial resources through a proposed offering as discussed in Note 4. The
Company's 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 Company's efforts in identifying prospective target businesses
will not be limited to a particular industry, geographic region or minimum
transaction value for purposes of consummating an initial business combination.
Instead, the Company intends to focus on various industries and target
businesses that may provide significant opportunities for growth.
Net
proceeds of approximately $124.4 million from the proposed offering and
simultaneous private placement of the Sponsor Warrants (as defined below in Note
5) will be held in a trust account. Except for a portion of the interest income
earned on the trust account balance that may be released to the Company to pay
any income and franchise taxes and to fund the Company's working capital
requirements, and any amounts necessary to purchase up to 25% of the Company's
shares issued as part of the Units described in Note 4 (public shares) if the
Company seeks stockholder approval for its initial business combination, none of
the funds held in the trust account will be released until the earlier of the
completion of the Company's initial business combination and the redemption of
100% of the Company's public shares if the Company is unable to consummate a
business combination within 21 months from the closing of the proposed offering
(subject to the requirements of law). The proceeds deposited in the trust
account could become subject to the claims of the Company's creditors, if any,
which could have priority over the claims of the Company's 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 franchise and income taxes payable,
upon the consummation of the Company's initial business combination, subject to
the limitations described herein. There will be no redemption rights with
respect to outstanding warrants, which will expire worthless in the event the
Company does not consummate a business combination. Unlike many 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, the Company intends to
consummate its initial business combination and conduct the redemptions without
a stockholder vote pursuant to Rule 13e-4 and Regulation 14E of the Securities
Exchange Act of 1934, as amended (the Exchange Act), which regulates issuer
tender offers, and the Company 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
Company's initial business combination and the redemption rights as is required
under Regulation 14A of the Exchange Act, which regulates the solicitation of
proxies. In the event the Company conducts redemptions pursuant to the tender
offer rules, its offer to redeem shares shall remain open for at least 20
business days, in accordance with Rule 14e-1(a) under the Exchange Act. 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, like
other blank check companies, conduct the redemptions pursuant to the proxy rules
and not pursuant to the tender offer rules.
F-7
RLJ
ACQUISITION, INC.
(a
corporation in the development stage)
NOTES
TO THE FINANCIAL STATEMENTS — (Continued)
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
initial stockholders (as defined below in Note 6) have agreed to vote their
Founder Shares (as defined below in Note 6) as well as any public shares
purchased during or after the proposed offering in favor of the Company's
initial business combination. In addition, the initial stockholders have agreed
to waive their redemption rights with respect to their Founder Shares and any
public shares they may hold in connection with the consummation by the Company
of a business combination.
If the
Company does not effect a business combination within 21 months from the closing
of the proposed offering, or 27 months from the closing of the proposed offering
if a letter of intent, agreement in principle or definitive agreement relating
to a prospective business combination is executed before the 21-month period
ends, as discussed in Note 4, the Company will liquidate the trust account and
distribute the amount held in the trust account, including interest but net of
franchise and income taxes payable and less up to $100,000 of such net interest
that may be released to the Company from the trust account to pay liquidation
expenses, to the Company’s public shareholders, subject in each case to the
Company’s obligations under Nevada law to provide for claims of creditors and
the requirements of other applicable law.
The
initial stockholders have agreed to waive their redemption rights with respect
to their Founder Shares if the Company fails to consummate a business
combination within the 21-month or 27-month time period, although the initial
stockholders will be entitled to redemption with respect to any public shares
they hold 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).
(2)
|
Basis
of Presentation
|
The
accompanying financial statements are presented in U.S. dollars in conformity
with accounting principles generally accepted in the United States of America
(GAAP) and pursuant to the rules and regulations of the SEC.
(3)
|
Summary
of Significant Accounting Policies
|
(a)
|
Fair
Value of Financial instruments
|
The fair
value of the Company’s assets and liabilities, which qualify as financial
instruments under Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”,
approximates the carrying amounts represented in the balance sheet.
(b)
|
Loss
per Common Share
|
Loss per
common share is computed by dividing net loss applicable to common stockholders
by the weighted average number of common shares outstanding for the
period.
(c)
|
Use
of Estimates
|
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(d)
|
Deferred
Offering Cost
|
The
Company complies with the requirements of the SEC Staff Accounting Bulletin
(SAB) Topic 5A, “Expenses of Offering.” Deferred offering costs consist
principally of $30,247 of legal and regulatory costs incurred through the
balance sheet date that are related to the proposed offering and that will
be charged to shareholder’s equity upon the completion of the proposed offering
or charged to operations if the proposed offering is not
completed.
F-8
RLJ
ACQUISITION, INC.
(a
corporation in the development stage)
NOTES
TO THE FINANCIAL STATEMENTS — (Continued)
(e)
|
Recent
Accounting Pronouncements
|
Management
does not believe that any recently issued, but not effective, accounting
standards, if currently adopted, would have a material effect on the Company's
financial statements.
(f)
|
Concentration
of credit risk
|
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash accounts in a financial institution, which at times, may
exceed the Federal depository insurance coverage of $250,000. The Company
has not experienced losses on these accounts and management believes the Company
is not exposed to significant risks on such accounts.
(g)
|
Development
stage company
|
The
Company complies with the reporting requirement of FASB ASC 915, “Development
Stage Entities.” At November 18, 2010, the Company had not commenced any
operations nor generated revenue to date. All activity through November
18, 2010 relates to the Company’s formation and the proposed offering.
Following such offering, the Company will not generate any operating revenues
until after completion of a business transaction at the earliest, if at
all. The Company will generate non-operating income in the form of
interest income on the designated Trust Account after the proposed
offering.
(h)
|
Income
Taxes
|
The
Company complies with FASB ASC 740, “Income Taxes,” which requires an asset and
liability approach to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result
in future taxable or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The Company
established a full valuation allowance as of November 18, 2010 of $8,000.
Effective tax rates differ from statutory rates due to timing differences in the
deductibility of expenses.
The
Company adopted the provisions of FASB ASC 740-10-25 which establishes
recognition requirements for the accounting for income taxes. There were no
unrecognized tax benefits as of November 18, 2010. The section prescribes a
recognition threshold and a measurement attribute for the financial statement
recognition and measurement of tax positions taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. The
Company recognizes accrued interest and penalties related to unrecognized tax
benefits as income tax expense. No amounts were accrued for the payment of
interest and penalties at November 18, 2010. The Company is currently not aware
of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income
tax examinations by major taxing authorities since inception. The adoption of
the provisions of FASB ASC 740-10-25 did not have a material impact on the
Company’s financial position and results of operation and cash flows as of and
for the period ended November 18, 2010.
F-9
RLJ
ACQUISITION, INC.
(a
corporation in the development stage)
NOTES
TO THE FINANCIAL STATEMENTS — (Continued)
(4)
|
Proposed
Public Offering
|
The
proposed offering calls for the Company to offer for sale 12,500,000 units at a
price of $10.00 per unit (Unit). Each Unit will consist of one share of the
Company's common stock, $0.001 par value, and one warrant (Warrant). Each
Warrant will entitle the holder to purchase one share of the Company's 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 Company's
initial business combination or twelve months from the closing of the proposed
offering, provided in each case that the Company has an effective registration
statement under the Securities Act of 1933, as amended, 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 Company's initial business combination or earlier upon redemption or
liquidation. If the Company is unable to deliver registered shares of
common stock to the holder upon exercise of warrants during the exercise period,
there will be no cash settlement of the warrants and the warrants will expire
worthless. Once the warrants become exercisable, the Company may redeem
the outstanding warrants in whole and not in part at a price of $0.01 per
warrant upon a minimum of 30 days' prior written notice of redemption, only in
the event that the last sales price of the Company's common stock equals or
exceeds $17.50 per share for any 20 trading days within the 30-trading day
period ending on the third business day before the Company sends the notice of
redemption to the warrant holders.
(5)
|
Related
Party Transactions
|
|
(a)
|
Note
Payable – Related
Party
|
The
Company issued an aggregate of $225,000 in an unsecured promissory note to the
Sponsor, on November 18, 2010. The note is non-interest bearing and is payable
within 60 days following the date of 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 November 18, 2010.
(b)
|
Services
Agreement
|
The
Company has agreed to pay $10,000 a month for office space, administrative
services and secretarial support to RLJ Companies, LLC, an affiliate of the
Sponsor. Services will commence on the date the securities are first quoted on
the Over-the-Counter Bulletin Board quotation system and will terminate upon the
earlier of the consummation by the Company of an initial business combination
and the liquidation of the Company.
(c)
|
Sponsor
Warrants
|
The
Sponsor has agreed to purchase, in a private placement, 6,166,667 warrants prior
to the proposed offering at a price of $0.75 per warrant (a purchase price of
$4,625,000) from the Company. Based on the observable market prices, the Company
believes that the purchase price of $0.75 per warrant for such warrants will
exceed the fair value of such warrants on the date of the purchase. The
valuation is based on comparable initial public offerings by blank check
companies in 2010. The Sponsor has agreed that the warrants purchased by it will
not be sold or transferred until 30 days following consummation of a Business
Transaction, subject to certain limited exceptions. If the Company does not
complete a business transaction, then the proceeds will be part of the
liquidating distribution to the public shareholders and the warrants issued to
the Sponsor will expire worthless. The Company intends to classify the private
placement warrants within permanent equity as additional paid-in capital in
accordance with FASB
ASC 815-40.
The
Sponsor will be entitled to registration rights pursuant to a registration
rights agreement to be signed on or before the date of the prospectus for the
proposed offering. The Sponsor will be entitled to demand registration rights
and certain “piggy-back” registration rights with respect to its ordinary
shares, the warrants and the ordinary shares underlying the warrants, commencing
on the date such ordinary shares or warrants are released from lockup. The
Company will bear the expenses incurred in connection with the filing of any
such registration statements.
(6)
|
Founder
Shares
|
On
November 18, 2010, the Sponsor and two of the Company’s director nominees,
William S. Cohen and Morris Goldfarb, purchased 3,593,750 shares of common stock
(Founder Shares) for an aggregate amount of $25,000, or approximately $0.0070
per share.
F-10
RLJ
ACQUISITION, INC.
(a
corporation in the development stage)
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 the Founder Shares are
subject to certain transfer restrictions, as described in more detail
below.
With
certain limited exceptions, the Founder Shares are not transferable, assignable
or salable (except to the Company's officers and directors and other persons or
entities affiliated with the initial stockholders, each of whom will be subject
to the same transfer restrictions) until the earlier of one year after the
completion of the Company's initial business combination or earlier if,
subsequent to the Company's business combination, the last sales price of the
Company's common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for at
least one period of 20 trading days within any 30-trading day period commencing
at least 150 days after the Company's initial business combination and the date
on which the Company consummates a subsequent liquidation, merger, stock
exchange or other similar transaction which results in all of the Company's
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 initial stockholders will
agree to forfeit up to 468,750 Founder Shares to the extent that the
over-allotment option is not exercised in full by the underwriters. The
forfeiture will be adjusted to the extent that the over-allotment option is not
exercised in full by the underwriters so that the initial stockholders will
collectively own 20.0% of the Company's issued and outstanding shares after the
proposed offering (assuming the initial stockholders do not purchase Units in
the proposed offering). In addition, a portion of the Founders Shares in an
amount equal to 2.5% of the Company's issued and outstanding shares immediately
after the proposed offering, will be subject to forfeiture by the initial
stockholders in the event the last sales price of the Company's stock does not
equal or exceed $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for at least one trading period
of 20 trading days within any 30-trading day period within 12 months following
the closing of the Company's initial business combination. An additional
2.5% of the Company’s issued and outstanding shares immediately after the
proposed offering will be subject to forfeiture by the initial stockholders in
the event the last sales price of the Company’s stock does not equal or exceed
$13.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for at least one period of 20
trading days within any 30-trading period during the period between 12 and 24
months following the closing of the Company’s initial business
combination.
(7)
|
Commitments
|
A
contingent fee equal to 2.5% of the aggregate amount of the funds released from
the trust account to the Company or to the target upon consummation of the
initial business transaction will become payable to the underwriter from the
amounts held in the trust account solely in the event the Company consummates
its initial business transaction.
The
underwriters will also be granted a 45-day option to purchase up to an
additional 1,875,000 Units to cover over-allotments, if any.
(8)
|
Subsequent
Events
|
Management
has performed an evaluation of subsequent events through December 2, 2010, the
date of issuance of the financial statements, noting no items which require
adjustment or disclosure.
F-11
$125,000,000
RLJ Acquisition,
Inc.
12,500,000
Units
PRELIMINARY
PROSPECTUS
,
2011
Lazard Capital
Markets
Until ,
2011 (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 representative’s non-accountable expense allowance) will be
as follows:
Initial
Trustees’ fee(1)
|
$
|
*
|
||
SEC/FINRA
Expenses
|
30,000
|
|||
Accounting
fees and expenses
|
50,000
|
|||
Blue
sky services and expenses
|
40,000
|
|||
Printing
and engraving expenses
|
100,000
|
|||
Directors &
Officers liability insurance premiums(2)
|
300,000
|
|||
Repayment
of loan
|
225,000
|
|||
Legal
fees and expenses
|
250,000
|
|||
Miscellaneous(3)
|
55,000
|
|||
Total
|
$
|
*
|
*
|
To
be filed by amendment.
|
(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 annual fees of $[5,000] for acting as
trustee.
|
(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 articles of incorporation provide that all of our
directors, officers, employees and agents shall be entitled to be indemnified by
us to the fullest extent permitted by Nevada law.
NRS
78.7502 concerning indemnification of officers, directors, employees and agents
is set forth below.
NRS
78.7502 Discretionary and mandatory indemnification of officers,
directors, employees and agents: General provisions.
1.
A corporation may
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, except 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
the action, suit or proceeding if the person:
(a) Is
not liable pursuant to NRS 78.138; or
II-1
(b) Acted
in good faith and in a manner which he or she 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 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, does not, of
itself, create a presumption that the person is liable pursuant to NRS 78.138 or
did not act in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the corporation, or that, with
respect to any criminal action or proceeding, he or she had reasonable cause to
believe that the conduct was unlawful.
2.
A corporation may
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 amounts paid in settlement and
attorneys’ fees actually and reasonably incurred by the person in connection
with the defense or settlement of the action or suit if the person:
(a) Is
not liable pursuant to NRS 78.138; or
(b) Acted
in good faith and in a manner which he or she reasonably believed to be in or
not opposed to the best interests of the corporation.
Indemnification
may not be made for any claim, issue or matter as to which such a person has
been adjudged by a court of competent jurisdiction, after exhaustion of all
appeals therefrom, to be liable to the corporation or for amounts paid in
settlement to the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
3.
To the extent that a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue or matter therein, the
corporation shall indemnify him or her against expenses, including attorneys’
fees, actually and reasonably incurred by him or her in connection with the
defense.
Item 15.
|
Recent
Sales of Unregistered
Securities.
|
In
November 2010, our initial stockholders purchased an aggregate of
3,593,750 shares, which we refer to throughout this prospectus as the
founder shares, for an aggregate purchase price of $25,000, or approximately
$0.007 per share. The founder shares held by our initial stockholders include an
aggregate of 468,750 shares subject to forfeiture to the extent that the
underwriters’ over-allotment option is not exercised in full, so that our
initial stockholders will collectively own 20% of our issued and outstanding
shares after this offering (assuming none of our initial stockholders purchase
units in this offering). In addition, a portion of the founder shares in an
amount equal to 2.5% of our issued and outstanding shares immediately after this
offering will be subject to forfeiture by our initial stockholders 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 at least one period of 20 trading days within any 30-trading
day period within 12 months following the closing of our initial business
combination. An additional 2.5% of our issued and outstanding shares immediately
after this offering will be subject to forfeiture by our initial stockholders in
the event the last sales price of our stock does not equal or exceed $13.00 per
share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for at least one period of 20 trading days
within any 30-trading day period between 12 and 24 months following the
closing of our initial business combination.
II-2
In
addition, our sponsor has committed to purchase from us 6,166,667 sponsor
warrants at $0.75 per warrant (for an aggregate purchase price of
$4,625,000). 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 sponsor’s obligation to purchase
the sponsor warrants was made pursuant to a subscription agreement, dated as of
December 2, 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 sponsor’s 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:
II-3
Exhibit
|
||||
No.
|
Description
|
|||
1
|
.1
|
Form
of Underwriting Agreement.**
|
||
3
|
.1
|
Form
of Amended and Restated Articles 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 Continental Stock Transfer & Trust Company and the
Registrant.**
|
||
5
|
.1
|
Opinion of Greenberg
Traurig, LLP.**
|
||
10
|
.1
|
Promissory
Note, dated November 18, 2010, issued to RLJ SPAC Acquisition,
LLC*
|
||
10
|
.2
|
Subscription
Agreement, dated November 18, 2010, executed by RLJ SPAC Acquisition,
LLC*
|
||
10
|
.3
|
Subscription
Agreement, dated November 18, 2010, executed by Morris
Goldfarb*
|
||
10
|
.4
|
Subscription
Agreement, dated November 18, 2010, executed by William S.
Cohen*
|
||
10
|
.5
|
Subscription
Agreement, dated December 2, 2010, between the Registrant and RLJ SPAC
Acquisition, LLC*
|
||
14
|
|
Form of Code of
Ethics.**
|
||
23
|
.1
|
Consent
of Rothstein, Kass & Company, P.C.*
|
||
23
|
.2
|
Consent of Greenberg
Traurig LLP (to be included on Exhibit 5.1).**
|
||
24
|
|
Power of Attorney
(included on signature page).*
|
||
99
|
.1
|
Consent
of Mario J. Gabelli.**
|
||
99
|
.2
|
Consent
of Morris Goldfarb.**
|
||
99
|
.3
|
Consent
of William S. Cohen**
|
*
|
Filed
herewith.
|
**
|
To
be filed by amendment.
|
Item 17.
|
Undertakings.
|
(a) 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.
(b) 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.
(c) 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-4
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 Bethesda, State of
Maryland, on the 3rd day of December, 2010.
RLJ
ACQUISITION, INC.
|
||
By:
|
/s/
H. Van Sinclair
|
|
H.
Van Sinclair
|
||
Chief
Executive Officer and President
|
POWER OF
ATTORNEY
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Robert L. Johnson and H. Van Sinclair as 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.
Name
|
Position
|
Date
|
||
/s/ Robert
L. Johnson
|
||||
Robert
L. Johnson
|
Chairman
of the Board
|
December
3, 2010
|
||
/s/ H.
Van Sinclair
|
||||
H.
Van Sinclair
|
Chief
Executive Officer and President
(Principal
executive officer)
|
December
3, 2010
|
||
/s/ Lisa
W. Pickrum
|
||||
Lisa
W. Pickrum
|
Chief
Financial Officer
|
December
3, 2010
|
||
(Principal
financial and accounting
officer)
|
II-5
EXHIBIT INDEX
Exhibit
|
||||
No.
|
Description
|
|||
1
|
.1
|
Form
of Underwriting Agreement.**
|
||
3
|
.1
|
Form
of Amended and Restated Articles 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 Continental Stock Transfer & Trust Company and the
Registrant.**
|
||
5
|
.1
|
Opinion of Greenberg
Traurig, LLP.**
|
||
10
|
.1
|
Promissory
Note, dated November 18, 2010, issued to RLJ SPAC Acquisition,
LLC*
|
||
10
|
.2
|
Subscription
Agreement, dated November 18, 2010, executed by RLJ SPAC Acquisition,
LLC*
|
||
10
|
.3
|
Subscription
Agreement, dated November 18, 2010, executed by Morris
Goldfarb*
|
||
10
|
.4
|
Subscription
Agreement, dated November 18, 2010, executed by William S.
Cohen*
|
||
10
|
.5
|
Subscription
Agreement, dated December 2, 2010, between the Registrant and RLJ SPAC
Acquisition, LLC*
|
||
14
|
|
Form of Code of
Ethics.**
|
||
23
|
.1
|
Consent
of Rothstein, Kass & Company, P.C.*
|
||
23
|
.2
|
Consent of Greenberg
Traurig LLP (to be included on Exhibit 5.1).**
|
||
24
|
|
Power of Attorney
(included on signature page).*
|
||
99
|
.1
|
Consent
of Mario J. Gabelli.**
|
||
99
|
.2
|
Consent
of Morris Goldfarb.**
|
||
99
|
.3
|
Consent
of William S.
Cohen**
|
*
|
Filed
herewith.
|
**
|
To
be filed by amendment.
|
II-6