Filed Pursuant to Rule
424(B)(4)
Registration Statement No.
333-144799
PROSPECTUS
$300,000,000
Global Consumer Acquisition
Corp.
Global Consumer Acquisition Corp.
is a newly organized blank check company organized for the
purpose of effecting a merger, capital stock exchange, asset or
stock acquisition, exchangeable share transaction or other
similar business combination with one or more domestic or
international operating businesses in the global consumer
products and services industry. We do not have any specific
business combination under consideration and we have not (nor
has anyone on our behalf) contacted any prospective acquisition
candidate or had any discussions, formal or otherwise, with
respect to such a transaction.
This is an initial public offering of our securities. Each unit
has an offering price of $10.00 and consists of:
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one share of our common stock; and
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one warrant.
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Each warrant entitles the holder to purchase one share of our
common stock at a price of $7.50. Each warrant will become
exercisable on the later of our completion of a business
combination and November 27, 2008, and will expire on
November 27, 2012, or earlier upon redemption.
We have granted the underwriters a
30-day
option to purchase up to 4,500,000 additional units solely to
cover over-allotments, if any (over and above the
30,000,000 units referred to above). The over-allotment
option will be used only to cover the net syndicate short
position resulting from the initial distribution.
Hayground Cove Asset Management LLC, our sponsor, and Scott
LaPorta, our Chief Executive Officer, President and a member of
our board of directors, have agreed to purchase 7,500,000
warrants and 1,000,000 warrants, respectively, at a price of
$1.00 per warrant ($8,500,000 in the aggregate) in an insider
private placement that will occur immediately prior to this
offering. The proceeds from the sale of the insider warrants
will be deposited into a trust account and subject to a trust
agreement, described below, and will be part of the funds
distributed to our public stockholders in the event we are
unable to complete a business combination. These insider
warrants will be substantially similar to the warrants included
in the units sold in this offering. The insider warrant holders
have agreed not to transfer, assign or sell any of the insider
warrants (including the common stock to be issued upon exercise
of the insider warrants) until we consummate a business
combination, other than transfers to relatives and trusts for
estate planning purposes or, in the case of our sponsor, to
various funds under our sponsors management.
There is presently no public market for our units, common stock
or warrants. We have applied to have our units listed on the
American Stock Exchange under the symbol GHC.U on or
promptly after the date of this prospectus. The common stock and
warrants comprising the units will begin separate trading five
business days (or as soon as practicable thereafter) following
the earlier to occur of (1) the expiration of the
underwriters over-allotment option and (2) its
exercise in full, subject in either case to our having filed a
Current Report on
Form 8-K
with the Securities and Exchange Commission, containing an
audited balance sheet reflecting our receipt of the gross
proceeds of this offering, including the over-allotment option,
if applicable, 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 American Stock Exchange under the symbols
GHC and GHC.W, respectively. We cannot
assure you that our securities will be or continue to be listed
on the American Stock Exchange.
Investing in our securities involves risk. See Risk
Factors beginning on page 27 of this prospectus for a
discussion of information that should be considered in
connection with an investment in our securities, including, but
not limited to the fact that investors will not be entitled to
protections normally afforded to investors in Rule 419
blank check offerings.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
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Public
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Underwriting Discount
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Proceeds,
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Offering Price
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and Commissions (1)
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Before Expenses
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Per Unit
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$10.00
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$0.70
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$9.30
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Total
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$300,000,000
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$21,000,000
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$279,000,000
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(1)
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Includes deferred underwriting
discounts and commissions of 3% of the gross proceeds, or $0.30
per unit, payable to the underwriters only upon consummation of
a business combination.
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Of the net proceeds from this offering and the insider private
placement of the insider warrants that are described in this
prospectus and which were financed from the insider warrant
holders funds, $295,450,000 ($9.85 per unit) will be
deposited into a trust account (of which $9,000,000 or $0.30 per
unit is attributable to the underwriters discounts and
commissions) at JPMorgan Chase Bank, N.A., maintained by
Continental Stock Transfer & Trust Company,
acting as trustee. The underwriters will not be entitled to any
interest accrued on the deferred fees. All of the funds held in
trust will not be released from the trust account until the
earlier of the completion of a business combination or our
liquidation. In accordance with our certificate of incorporation
and Delaware law, we will liquidate as promptly as possible and
distribute only to our public stockholders the amount, subject
to any valid claims by our creditors which are not covered by
amounts in the trust account or indemnities provided by our
sponsor, in our trust account (including any accrued interest
thereon) plus any remaining net assets if we do not effect a
business combination by November 27, 2009.
We are offering the units for sale on a firm-commitment basis.
Deutsche Bank Securities Inc., acting as representative of the
underwriters, expects to deliver our securities to investors in
this offering on or about November 27, 2007.
Deutsche Bank
Securities
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JMP
Securities
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Thomas Weisel
Partners LLC
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Maxim Group LLC
The date of this prospectus is
November 20, 2007.
This summary highlights certain information appearing
elsewhere in this prospectus. For a more complete understanding
of this offering, you should read the entire prospectus
carefully, including the risk factors and the financial
statements. Unless otherwise stated in this prospectus:
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references to we, us,
our, company or our company
refer to Global Consumer Acquisition Corp.;
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references to our founding stockholders refer to
our sponsor and certain of our officers and directors and other
persons who beneficially own, as of the date of this prospectus,
shares of common stock (referred to herein as the founder
shares);
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unless expressly stated to the contrary, the information in
this prospectus assumes that the representative of the
underwriters will not exercise their over-allotment option;
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references to our insider warrants refer to the
8,500,000 warrants to be purchased by our insider warrant
holders in an insider private placement that will occur
immediately prior to this offering at the price of $1.00 per
warrant;
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references to our insider warrant holder refer to
any holder of our insider warrants;
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references to business combination mean our
initial acquisition of one or more assets or operating
businesses with a fair market value of at least 80% of the
amount held in trust (net of taxes and excluding the amount held
in the trust account representing a portion of the
underwriters discount) at the time of the acquisition
through a merger, capital stock exchange, asset or stock
acquisition, exchangeable share transaction or other similar
business combination, pursuant to which we will require that a
majority of the shares of common stock voted by the public
stockholders are voted in favor of the acquisition and less than
30% of the public stockholders both vote against the proposed
acquisition and exercise their conversion rights;
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references to public stockholders refer to
holders of common stock sold as part of the units in this
offering, including common stock issued upon the exercise of
warrants sold as part of the units in this offering, or in the
public market, including any founding stockholders to the extent
that they purchase or acquire such shares of common stock;
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references to sponsor or Hayground
Cove refer to Hayground Cove Asset Management LLC for
itself and in respect of the funds and accounts it manages and
which will hold ordinary shares as the context requires;
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references to our officers refer to the executive
officers and non-executive officers of Global Consumer
Acquisition Corp.; and
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references to exchangeable share transaction
refer to a business combination whereby our shares are used as
consideration for the transaction.
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Our founding stockholders currently hold an aggregate of
8,625,000 founder shares, which after giving effect to this
offering and the full exercise of the underwriters
over-allotment option would equal 20% of our aggregate issued
and outstanding common stock. We will redeem up to an aggregate
of 1,125,000 founder shares at a purchase price of $0.001 per
share (the purchase price originally paid by our founders) in
the event that the underwriters do not fully exercise their
over-allotment option immediately after the expiration of the
underwriters over-allotment option. We will redeem founder
shares only in an amount sufficient to cause the amount of
issued and outstanding founder shares to equal 20% of our
aggregate amount of issued and outstanding common stock after
giving effect to this offering and the exercise, if any, of the
underwriters over-allotment option. Unless otherwise
indicated, references to shares outstanding before this offering
or shares to be outstanding immediately after this offering
refer to our shares of common stock outstanding after giving
effect to the redemption of 1,125,000 founder shares from our
founding stockholders on a pro rata basis in the event that the
underwriters do not exercise their over-allotment option.
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You should consider our definition of business
combination in your investment decisions in connection
with this offering and ultimately in connection with the
approval of a business combination. We will make an initial
investment in an operating business with a fair market value of
at least 80% of the amount held in trust. Under our definition
of business combination, the acquisition may be consummated
through a merger, capital stock exchange, asset or stock
acquisition, exchangeable share transaction or other similar
business combination. We will have the flexibility to acquire
less than 100% of the target enterprise but in no event will we
acquire less than a controlling share of the target enterprise.
In the event we acquire less than 100% of an acquisition
candidate, the 80% of amount held in trust requirement will be
based on the fair market value of the acquired majority
interest. In evaluating a prospective target acquisition, our
management will consider, among other factors, the following
factors likely to affect the performance of the investment:
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earnings and growth potential;
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experience and skill of management and availability of
additional personnel;
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capital requirements;
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competitive position;
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financial condition and results of operation;
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barriers to entry into the consumer products and services and
related industries;
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stage of development of the products, processes or services;
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breadth of services offered;
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degree of current or potential market acceptance of the services;
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regulatory environment of the industry; and
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costs associated with effecting the business combination.
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You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these
securities in any jurisdiction where the offer is not permitted.
Our
Business
We are a blank check company organized under the laws of the
State of Delaware on June 28, 2007. We were formed to
complete a business combination with one or more businesses in
the global consumer products and services industry, which we
define as the commercial delivery of products and services
directly to the consumer in both the United States and the
international marketplace. Specifically, we are primarily
focused on acquiring a company that offers a branded consumer
product or service that we could expand globally. Targeted
sectors include, but are not limited to, branded consumer
products and services, hospitality, entertainment, health,
beauty, wellness, apparel, retail, marketing, restaurants, and
beverages. To date, our efforts have been limited to
organizational activities.
We do not have any specific business combination under
consideration and we have not (nor has anyone on our behalf)
contacted any prospective target acquisition or had any
discussions, formal or otherwise, with respect to such a
transaction. 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 and directors and any of
their potential contacts or relationships regarding a potential
business combination. Additionally, we have not, nor has anyone
on our behalf, taken any measure, directly or indirectly, to
identify or locate any suitable acquisition candidate, nor have
we engaged or retained any agent or other representative to
identify or locate any such acquisition candidate. We will not
pursue an acquisition of an affiliate of our sponsor or of any
of our officers or directors, including portfolio companies and
other investments or interests held by our sponsor, officers and
directors. In addition, we
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will not consider business opportunities that were presented to
our sponsor or its employees or opportunities that our sponsor
or its employees have become aware of prior to the consummation
of the offering. If we are unable to consummate a business
combination within the allotted time periods set forth in this
prospectus and in our Amended and Restated Certificate of
Incorporation, we will liquidate our trust account and any other
assets to our public stockholders. While we may seek to effect
business transactions with more than one target acquisition, our
business combination must be with a target acquisition (or
acquisitions) whose fair market value is at least equal to 80%
of the amount held in trust (net of taxes and excluding the
amount held in the trust account representing a portion of the
underwriters discount) at the time of such acquisition.
Consequently, initially we may have the ability to complete only
a single business combination, although this may entail our
acquisition of one or more individual assets, properties or
entities.
In the event we ultimately determine to simultaneously acquire
several assets or properties and such assets or properties are
owned by different sellers, we may need for each of such sellers
to agree that our purchase is contingent on the simultaneous
closings of the other acquisition or acquisitions, which may
make it more difficult for us, and delay our ability, to
complete the business combination. With multiple acquisitions,
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
integration of the multiple assets or properties into a single
operating entity.
Our business combination will be an acquisition of a majority
ownership interest in an acquisition candidate. In such case,
the minority ownership interest may be held by third parties who
may or may not have been involved with the properties, assets or
entities prior to our acquisition of such ownership interest.
With such an acquisition, we will face additional risks,
including the additional costs and time required to investigate
and otherwise conduct due diligence on holders of the minority
ownership interest and to negotiate stockholder agreements and
similar agreements. Moreover, the subsequent management and
control of such a business will entail risks associated with
multiple owners and decision-makers. We may further seek to
acquire a target acquisition that has a fair market value
significantly in excess of 80% of the amount held in trust (net
of taxes and excluding the amount held in the trust account
representing a portion of the underwriters discount). In
order to do so, we may seek to raise additional funds through an
offering of debt or equity securities, and we may effect a
business combination using the proceeds of such offering rather
than using the amounts held in the trust account. In the case of
a business combination funded with assets other than the trust
assets, the proxy materials disclosing the business combination
for which we would seek stockholder approval would disclose the
terms of the financing as well and, if required by law or by
regulation of the American Stock Exchange, we would seek
stockholder approval of such financing. In the absence of a
requirement by law or a regulation of the American Stock
Exchange (for example, if such financing involves the issuance
of common stock or securities convertible into common stock
which could result in an increase in our outstanding common
stock of 20% or more), we would not seek separate stockholder
approval of such financing inasmuch as the financing portion of
any business combination would be disclosed in the proxy
materials and would be a consideration of the stockholder
approval process for the business combination under
consideration. There are no prohibitions on our ability to raise
funds privately or through loans that would allow us to acquire
a company through a transaction in which the fair market value
is greater than 80% of the amount held in trust (net of taxes
and excluding the amount held in trust account representing a
portion of the underwriters discount) at the time of the
acquisition. 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.
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Our Sponsor and
Management
Our sponsor, Hayground Cove Asset Management LLC, is a New
York-based investment management firm with approximately
$1.5 billion of assets across funds and managed accounts
under management as of September 30, 2007. Jason N. Ader,
the Chairman of our board of directors, founded and serves as
the President and Chief Executive Officer of Hayground Cove,
Chairman of Hayground Coves Investment Committee and
Co-Chairman
of Hayground Coves Risk Committee. Since 2006,
Mr. Ader has also served as Chairman of the Board of India
Hospitality Corp., a blank-check company formed to acquire
Indian businesses or assets in the hospitality, leisure,
tourism, travel and related industries.
Scott LaPorta is our Chief Executive Officer and President and a
member of our board of directors. Mr. LaPorta is also a
managing director of Hayground Cove, our sponsor, and a director
of India Hospitality Corp. Mr. LaPorta has a strong
acquisition, turnaround, brand repositioning and investment
background.
Effective upon consummation of this offering, we will form an
investment committee to advise and consult with our management
team with respect to our investment policies, financing and
leveraging strategies and investment guidelines. The initial
members of the investment committee will be Jason N. Ader, our
Chairman of the board of directors, who will serve as the
initial chairman of the committee, Scott LaPorta, our Chief
Executive Officer, President and a member of our board of
directors, and Marc Soloway, a member of our board of directors.
See Management Investment Committee.
Our sponsor has agreed to provide us the services of
professionals employed by or affiliated with Hayground Cove in
connection with our search for target businesses pursuant to a
services agreement. Our sponsor will assist Mr. LaPorta in
identifying and acquiring a target business to promote the
timely consummation of a business combination. For a broader
description of the services to be provided by our sponsor, see
the summary of the services agreement on page 99 of
Certain Relationships and Related Transactions.
Mr. LaPorta will lead the acquisition process and draw upon
our sponsors extensive investment experience for support.
We believe that our ability to leverage the experience of our
sponsors team will provide us an advantage in sourcing and
closing a business combination. In seeking a business
combination, we will not consider business opportunities that
were presented to our sponsor or its employees or opportunities
that our sponsor or its employees have become aware of prior to
the consummation of the offering. See
Management Services by Our Sponsor Team
and Certain Relationships and Related
Transactions Services Agreement with Hayground
Cove, below.
We intend to have Mr. LaPorta remain with us after a
business combination. The exact role of Mr. LaPorta after a
business combination will be contingent upon discussions with
potential acquisition candidates. We expect that primary
management functions will be retained by members of the
management team of the acquisition candidate. In addition, some
or all of our directors may remain on our board after the
business combination, however, the composition of the board
after a business combination will also be contingent upon our
negotiations and agreement with specific acquisition candidates.
Conflicts
The discretion of our officers and directors, some of whom are
also officers
and/or
directors of other companies, in identifying and selecting a
suitable target acquisition, may result in a conflict of
interest when determining whether the terms, conditions and
timing of a particular business combination are appropriate and
in our stockholders best interest. However, we will not
pursue an acquisition of an affiliate of our sponsor or of any
of our officers or directors, including portfolio companies and
other investments or interests held by our sponsor, officers and
directors. See Management Conflicts of
Interest for a more detailed discussion of such conflicts.
Our principal executive offices are located at 1370 Avenue of
the Americas, 28th Floor, New York, New York 10019 and our
telephone number is
(212) 445-7800.
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The
Offering
Our founding stockholders currently hold an aggregate of
8,625,000 founder shares, which after giving effect to this
offering and the full exercise of the underwriters
over-allotment option would equal 20% of our aggregate issued
and outstanding common stock. We will redeem up to an aggregate
of 1,125,000 founder shares in the event that the underwriters
do not fully exercise their over-allotment option. We will
redeem founder shares only in an amount sufficient to cause the
amount of issued and outstanding founder shares to equal 20% of
our aggregate amount of issued and outstanding common stock
after giving effect to this offering and the exercise, if any,
of the underwriters over-allotment option. For purposes of
this summary, we assume that the underwriters will not exercise
their over-allotment option and therefore present the amount of
shares outstanding after giving effect to the redemption of
1,125,000 founder shares.
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Securities offered
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30,000,000 units, at $10.00 per unit, each unit consisting
of:
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one share of common stock; and
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one warrant.
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Trading commencement and separation of common stock and warrants
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The units will begin trading on or promptly after the date of
this prospectus. The common stock and warrants comprising the
units will begin separate trading five business days (or as soon
as practicable thereafter) following the earlier to occur of
(1) the expiration of the underwriters over-allotment
option and (2) its exercise in full, subject in either case
to our (i) having filed a Current Report on
Form 8-K
containing an audited balance sheet reflecting our receipt of
the gross proceeds of this offering and (ii) having issued
a press release announcing when such separate trading will begin.
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Following the date the common stock and warrants are eligible to
trade separately, the units will continue to be listed for
trading, and any securityholder may elect to break apart a unit
and trade the common stock or warrants separately or as a unit.
Even if the component parts of the units are broken apart and
traded separately, the units will continue to be listed as a
separate security and, consequently, any subsequent
securityholder owning common stock and warrants may elect to
combine them together and trade them as a unit. Securityholders
will have the ability to trade our securities as units until
such time as the warrants expire or are redeemed. Although we
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will not distribute copies of the Current Report on
Form 8-K
to individual unit holders, the Current Report on
Form 8-K
will be available on the SECs website after the filing.
See the section appearing elsewhere in this prospectus entitled
Where You Can Find Additional Information.
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Common stock:
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Number outstanding before this offering
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7,500,000 shares
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Number to be outstanding after this offering
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37,500,000 shares
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Warrants:
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Number outstanding before this offering and insider
private placement
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0 warrants
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Number to be outstanding after this offering and
insider private placement
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38,500,000 warrants (including 8,500,000 insider warrants to be
sold to the insider warrant holders in an insider private
placement immediately prior to this offering)
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Exercisability
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Each warrant is exercisable for one share of common stock.
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Exercise price
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$7.50
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Exercise period
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The exercise price and number of shares of common stock issuable
upon exercise of the warrants may be adjusted in certain
circumstances, including in the event of a stock dividend,
extraordinary dividend or our recapitalization, reorganization,
merger or consolidation.
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The warrants will be exercisable only if we provide for an
effective registration statement covering the shares of common
stock underlying the warrants. The warrants will become
exercisable on the later of the completion of a business
combination, and November 27, 2008.
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The warrants will expire at 5:00 p.m., New York City time,
on November 27, 2012 or earlier upon redemption.
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Redemption
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We may redeem the outstanding warrants, excluding the insider
warrants:
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in whole and not in part,
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at a price of $0.01 per warrant at any time after
the warrants become exercisable,
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upon a minimum of 30 days prior written
notice of redemption, and
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if, and only if, the last sales price of our common
stock equals or exceeds $14.25 per share for any 20 trading days
within a 30 trading day period ending three business days before
we send the notice of redemption.
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In addition, we may not redeem the public warrants unless the
warrants comprising the units sold in this offering and the
shares of common stock underlying those warrants are covered by
an effective registration statement from the beginning of the
measurement period through the date fixed for the redemption.
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If the foregoing conditions are satisfied and we call the
warrants for redemption, each warrant holder shall then be
entitled to exercise their warrants prior to the date scheduled
for redemption.
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The redemption provisions for our warrants have been established
at a price that is intended to provide warrant holders a premium
to the initial exercise price. There can be no assurance,
however, that the price of the common stock will exceed either
the redemption price of $14.25 or the warrant exercise price of
$7.50 after we call the warrants for redemption. As described
below, insider warrants are non-redeemable as long as the
insider warrant holders or their permitted transferees hold them.
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The underwriters have no right to consent before we can exercise
our redemption right.
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Founder shares
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On July 16, 2007, our founding stockholders purchased an
aggregate of 8,625,000 shares of our common stock for an
aggregate purchase price of $8,625 in a private placement. The
founder shares were purchased separately and not in combination
with warrants in the form of units. We will
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redeem up to an aggregate of 1,125,000 founder shares in the
event that the underwriters do not fully exercise their
over-allotment option. We will redeem founder shares at $0.001
per share to ensure that the amount of issued and outstanding
founder shares will equal 20% of our aggregate amount of issued
and outstanding common stock whether the underwriters exercise
their over-allotment option in full, in part or not at all. The
redemption, if applicable, would take place immediately after
the expiration of the underwriters over-allotment option.
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Our sponsor will hold its founder shares through funds and
accounts it manages, including Hayground Cove Institutional
Partners LP, Hayground Cove Overseas Partners Ltd., Hayground
Cove Turbo Fund LP, Hayground Cove Turbo Fund Ltd., Hayground
Cove Equity Market Neutral Fund LP, Hayground Cove Equity Market
Neutral Fund Ltd., TE Hayground Cove Portfolio Ltd., and Man Mac
Lucendro 5B Limited.
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The founder shares are identical to the shares of common stock
contained in the units being sold in this offering, except that
(i) substantially all of the founder shares will be subject
to a
lock-up
agreement with our underwriters and will not be transferable
before 180 days after the consummation of a business
combination, subject to certain limited exceptions (such as, in
the case of our sponsor, (a) transfers among various funds
under our sponsors management for rebalancing purposes
only and (b) distributions to investors in such funds,
provided that such investors agree to be bound by the
lock-up
agreement, or transfers to relatives and trusts for estate
planning purposes) and (ii) the founder shares are being
purchased pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, or the
Securities Act, and will become freely tradable only after they
are registered pursuant to a registration rights agreement to be
signed in connection with the insider private placement
described below or otherwise in
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compliance with securities laws. Any transfers of founder shares
amongst funds and accounts of our sponsor during the
lock-up
period will take place monthly contingent upon the capital
movements of the funds and accounts. The transfers will be
structured as purchases and sales for the respective funds and
accounts.
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Insider private placement
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Our sponsor and Chief Executive Officer have agreed to purchase
a total of 8,500,000 insider warrants (7,500,000 to be purchased
by our sponsor and 1,000,000 to be purchased by our Chief
Executive Officer) immediately prior to the consummation of this
offering at the price of $1.00 per warrant for a total of
$8,500,000. Our sponsor will hold its insider warrants through
funds and accounts it manages, including Hayground Cove
Institutional Partners LP, Hayground Cove Overseas Partners
Ltd., Hayground Cove Turbo Fund LP, Hayground Cove Turbo Fund
Ltd., Hayground Cove Equity Market Neutral Fund LP, Hayground
Cove Equity Market Neutral Fund Ltd., TE Hayground Cove
Portfolio Ltd., and Man Mac Lucendro 5B Limited. The insider
warrants will be purchased separately and not in combination
with common stock in the form of units. The purchase price of
the insider warrants will be added to the proceeds from this
offering to be held in the trust account pending our completion
of one or more business combinations. If we do not complete one
or more business combinations that meet the criteria described
in this prospectus, then the $8,500,000 purchase price of the
insider warrants will become part of the amount payable to our
public stockholders upon the liquidation of our trust account
and the insider warrants will become worthless. See
Proposed BusinessEffecting a business
combinationLiquidation if no business combination
below.
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The insider warrants have terms and provisions that are
identical to the warrants contained in the units being sold in
this offering, except that (i) such insider warrants will
be subject to a
lock-up
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agreement with our underwriters and will not be transferable
before the consummation of a business combination, subject to
certain limited exceptions (such as, in the case of our sponsor,
(a) transfers among various funds under our sponsors
management for rebalancing purposes only and
(b) distributions to investors in such funds, provided that
such investors agree to be bound by the
lock-up
agreement, or transfers to relatives and trusts for estate
planning purposes), (ii) such insider warrants are being
purchased pursuant to an exemption from the registration
requirements of the Securities Act and will become freely
tradable only after they are registered pursuant to a
registration rights agreement to be signed in connection with
the insider private placement or otherwise in compliance with
securities laws, (iii) the shares underlying the insider
warrants will be non-redeemable so long as the insider warrant
holders or their permitted transferees hold them, and
(iv) the insider warrants are exercisable in the absence of
an effective registration statement covering the shares of
common stock underlying the warrants and by means of cashless
exercise. The transfer restriction does not apply to transfers
made pursuant to registration or an exemption that are
occasioned by operation of law, or for estate planning purposes,
or transfers made among various funds under our sponsors
management. Any transfers of insider warrants amongst funds and
accounts of our sponsor during the
lock-up
period will take place monthly contingent upon the capital
movements of the funds and accounts. The transfers will be
structured as purchases and sales for the respective funds and
accounts.
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If the insider warrant holders acquire warrants or units for its
own account either in or after this offering in the open market,
either through a purchase of warrants or a purchase of units,
any such warrants or the warrants included in those units will
be redeemable. If our other outstanding warrants are redeemed
and the price of our common
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stock rises following such redemption, the insider warrant
holders could potentially realize a larger gain on exercise or
sale of their insider warrants than is available to other
warrant holders, although there is no assurance the price of our
common stock would increase following a warrant redemption. We
have elected to make the insider warrants non-redeemable in
order to provide the insider warrant holders a potentially
longer exercise period for its insider warrants because it will
bear a higher risk than that of public warrant holders due to
the fact the insider warrants are subject to transfer
restrictions and to a longer holding period than that of the
public warrant holders, and also to loss of investment upon
liquidation, as described in the preceding paragraph. If our
stock price declines in periods subsequent to a warrant
redemption and the insider warrant holders continue to hold the
insider warrants, the value of those insider warrants still held
by the insider warrant holders may also decline.
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American Stock Exchange listing
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We have applied to list our securities on the American Stock
Exchange upon consummation of this offering. Although after
giving effect to this offering we expect to meet on a pro forma
basis the minimum initial listing standards set forth in
Section 101(c) of the AMEX Company Guide, which only
requires that we meet certain requirements relating to
stockholders equity, market capitalization, aggregate
market value of publicly held shares and distribution
requirements, we cannot assure you that our securities will
continue to be listed on the American Stock Exchange as we might
not meet certain continued listing standards such as income from
continuing operations.
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AMEX symbols for our:
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Units
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GHC.U
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Common stock
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GHC
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Warrants
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GHC.W
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Offering proceeds to be held in trust
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Of the proceeds of this offering, $295,450,000 ($9.85 per unit),
which
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includes the underwriters deferred discount of $9,000,000
($0.30 per unit), plus the proceeds from our insider private
placement of insider warrants of $8,500,000 ($0.28 per unit),
will be placed in a trust account at JPMorgan Chase Bank, N.A.,
maintained by Continental Stock Transfer &
Trust Company, acting as trustee pursuant to an agreement
to be signed on the effective date of the registration statement
of which this prospectus forms a part. We believe that the
deferment of a portion of the underwriters deferred
discount along with the placement of such deferred discount and
the proceeds from the insider private placement in a trust
account is a benefit to our public stockholders because
additional proceeds will be available for distributions to
investors if we liquidate our trust account prior to our
completing an initial business combination. The proceeds held in
a trust will not be released until the earlier of the completion
of our business combination (with a target acquisition or
acquisitions) whose fair market value is at least equal to 80%
of the amount held in trust (net of taxes and excluding the
amount held in the trust account representing a portion of the
underwriters discount) at the time of such acquisition (or
acquisitions) or liquidation of the company. Unless and until a
business combination is consummated, the proceeds held in the
trust account will not be available for our use for any expenses
related to this offering or expenses which we may incur related
to the investigation and selection of a target business
combination and the negotiation of an agreement to acquire a
business combination; provided, however, that to the extent the
trust account earns interest or we are deemed to have earned
income therewith, we will be permitted to seek disbursements
from the trust account to pay any federal, state or local tax
obligations related thereto, or any franchise tax obligations,
and to seek disbursements of net interest income up to an
aggregate of $4,100,000, for working capital purposes. Expenses
incurred by us while seeking a business
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combination may be paid prior to a business combination only
from the net proceeds of this offering not held in the trust
account (initially, approximately $50,000 after the payment of
the expenses relating to this offering plus up to $4,100,000 of
net interest income permitted to be disbursed from the trust
account). The underwriters have agreed to defer $9,000,000 of
their underwriting discount, equal to 3% of the gross proceeds
of the 30,000,000 units being offered to the public, until
the consummation of a business combination.
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None of the warrants may be exercised until after the
consummation of our business combination and, thus, after the
funds in the trust account have been disbursed. Accordingly, the
warrant exercise price will be paid directly to us and not
placed in the trust account.
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Stockholders must approve business combination
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We will seek stockholder approval before we effect our business
combination, even if the nature of the acquisition would not
ordinarily require stockholder approval under applicable state
law. Public stockholders may vote against a business combination
and exercise their conversion rights described below. In
connection with the vote required for our business combination,
our founding stockholders have agreed to vote their founder
shares in accordance with the majority of the shares of common
stock voted by the public stockholders. In connection with any
securities purchased by our founding stockholders in this
offering or after this offering in the open market, our founding
stockholders have agreed to vote such shares of common stock in
favor of a business combination.
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We will proceed with a business combination only if a majority
of the shares of common stock voted by the public stockholders
are voted in favor of the business combination and public
stockholders owning 30% or more of the shares of common stock
sold in this offering do not both vote against the business
combination and exercise their conversion rights described
below. We
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intend to structure any potential business combination such
that, if up to 29.99% of our public stockholders exercised their
conversion rights, the business combination could still go
forward. Voting against the business combination alone will not
result in conversion of a stockholders shares of common
stock into a pro rata share of the trust account. Such
stockholder must also exercise its conversion rights described
below. Our threshold for conversion rights has been established
at 30% and will increase the likelihood of an approval of any
proposed business combination by making it easier for us to
consummate a business combination with which public stockholders
may not agree. However, the 30% threshold entails certain risks
described under the headings, Risk FactorsUnlike
most other blank check offerings, we allow up to approximately
29.99% of our public stockholders to exercise their conversion
rights. This higher threshold will make it easier for us to
consummate a business combination with which you may not agree,
and you may not receive the full amount of your original
investment upon exercise of your conversion rights and
Unlike most other blank check offerings, we allow up
to approximately 29.99% of our public stockholders to exercise
their conversion rights. The ability of a larger number of
our stockholders to exercise their conversion rights may not
allow us to consummate the most desirable business combination
or optimize our capital structure. For more information,
see the section entitled Proposed BusinessEffecting
a Business CombinationOpportunity for stockholder approval
of a business combination.
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For purposes of seeking approval of the majority of the shares
of common stock voted by the public stockholders, non-votes will
have no effect on the approval of a business combination once a
quorum is obtained.
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Upon the completion of our business combination, unless required
by Delaware law, the federal securities laws and
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the rules and regulations promulgated thereunder, or the rules
and regulations of an exchange upon which our securities are
listed, we do not presently intend to seek stockholder approval
for any subsequent acquisitions.
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Conversion rights for stockholders voting to reject a business
combination
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Public stockholders voting against a business combination will
be entitled to convert their stock into a pro rata share of the
trust account, plus interest earned on their portion of the
trust account (net of taxes payable), if the business
combination is approved and completed. If a business combination
is approved, stockholders that vote against the business
combination and elect to convert their shares of common stock to
cash will be entitled to receive their pro-rata portion of the
$9,000,000 ($0.30 per unit) of deferred underwriting discount
held in the trust account. Public stockholders will not be
entitled to their pro rata share of the trust account simply by
voting against the business combination; each stockholder must
also affirmatively exercise its conversion rights in order to
receive its pro rata share of the trust account. However, if
public stockholders of 30% or more in interest of our shares of
common stock vote against the business combination and elect to
convert their shares of common stock, we will not proceed with
such business combination. Public stockholders that convert
their stock into their pro rata share of the trust account will
continue to have the right to exercise any warrants they may
hold. Founding stockholders are not entitled to convert any of
their founder shares beneficially owned immediately prior to
this offering, or the shares of common stock underlying any
insider warrants acquired by a founding stockholder immediately
prior to this offering, into a pro rata share of the trust
account. However, founding stockholders who acquire shares of
common stock or warrants in or after this offering will be
entitled to a pro rata share of the trust account with respect
to such shares upon the liquidation of the trust account
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in the event we do not consummate a business combination within
the required time period. The founding stockholders will waive
their right to receive any share of the trust account upon such
liquidation of the trust account with respect to their founder
shares and the shares of common stock underlying any insider
warrants acquired by a founding stockholder immediately prior to
this offering.
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Conditions to consummating our initial business combination
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Our initial business combination must occur with one or more
target businesses that have a fair market value of at least 80%
of the amount held in trust (net of taxes and excluding the
amount held in the trust account representing the
underwriters deferred compensation) at the time of such
business combination.
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We will consummate our initial business combination only if a
majority of the shares of common stock voted by the public
stockholders are voted in favor of our initial business
combination and public stockholders owning 30% or more of the
shares sold in this offering do not exercise their redemption
rights described below. Our founding stockholders have agreed
that they will vote their founder shares in accordance with the
majority of the shares of common stock voted by the public
stockholders. The requirement that we not consummate our initial
business combination if public stockholders owning 30% or more
of the shares sold in this offering exercise their redemption
rights described below is set forth in Article Sixth of our
Amended and Restated Certificate of Incorporation and may only
be eliminated by the vote of at least 95% of the voting power of
our outstanding voting stock.
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Our business combination will be an acquisition of a majority
ownership interest in an acquisition candidate.
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Liquidation if no business combination
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If we have not consummated a business combination by
November 27, 2009, our corporate existence will cease
except for the purposes of winding up our affairs and
liquidating pursuant to Section 278 of
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the Delaware General Corporation Law, in which case we will as
promptly as practicable thereafter adopt a plan of distribution
in accordance with Section 281(b) of the Delaware General
Corporation Law. Section 278 provides that our existence
will continue for at least three years after its expiration for
the purpose of prosecuting and defending suits, whether civil,
criminal or administrative, by or against us, and of enabling us
gradually to settle and close our business, to dispose of and
convey our property, to discharge our liabilities and to
distribute to our stockholders any remaining assets, but not for
the purpose of continuing the business for which we were
organized. Our existence will continue automatically even beyond
the three-year period for the purpose of completing the
prosecution or defense of suits begun prior to the expiration of
the three-year period, until such time as any judgments, orders
or decrees resulting from such suits are fully executed.
Section 281(b) of the Delaware General Corporation Law will
require us to adopt a plan that will provide for our payment,
based on facts known to us at such time, of (i) all
existing claims, (ii) all pending claims and (iii) all
claims that may be potentially brought against us within the
subsequent ten years. Accordingly, we would be required to
provide for any creditors known to us at that time as well as
provide for any claims that we believe could potentially be
brought against us within the subsequent ten years prior to
distributing the funds held in the trust to our public
stockholders. We have not assumed that we will have to provide
for payment on any claims that potentially may be brought
against us within the subsequent ten years due to the
speculative nature of such an assumption. We cannot assure you
that we will properly assess all claims that may be potentially
brought against us. As such, our stockholders could potentially
be liable for any claims of creditors 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
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to searching for prospective target businesses to acquire, the
only likely claims to arise would be from our vendors and
service providers (such as accountants, lawyers, investment
bankers, etc.) and potential target businesses. While we will
seek to have all vendors and service providers (which would
include any third parties we engaged to assist us in any way in
connection with our search for a target business) and
prospective target businesses execute agreements with us waiving
any right, title, interest or claim of any kind they may have in
or to any monies held in the trust account, there is no
guarantee that they will execute such agreements. Nor is there
any guarantee that, even if such entities execute such
agreements with us, they will not seek recourse against the
trust account or that a court would not conclude that such
agreements are not legally enforceable. Our sponsor has agreed
that it will be liable to ensure that the proceeds in the trust
account on the date of the consummation of this offering are not
reduced by the claims of target businesses or claims of vendors,
service providers or other entities that are owed money by us
for services rendered or contracted for or products sold to us.
We have an obligation to pursue indemnification from our sponsor
pursuant to the terms of its agreement with us. We believe the
fee income from the sponsors $1.5 billion assets
under management (as of September 30, 2007) will be
sufficient to cover its indemnification obligations. Further,
our sponsor is liable only to the extent necessary to ensure
that the amounts in the trust fund as of the closing of this
offering are not reduced.
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Our founding stockholders have waived their rights to
participate in any liquidation distribution with respect to all
of their founder shares, and the shares of common stock
underlying any insider warrants acquired by a founding
stockholder immediately prior to this offering. In addition, the
underwriters have agreed to waive their rights to the $9,000,000
of deferred underwriting discount deposited in the trust account
in the event we
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liquidate prior to the completion of a business combination.
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We will pay the costs of liquidation from our remaining assets
outside of the trust fund.
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Amended and Restated Certificate of Incorporation
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As discussed below, there are specific provisions in our Amended
and Restated Certificate of Incorporation that may not be
amended (without the affirmative vote cast at a meeting of
stockholders of at least 95% of the common stock issued in this
offering) prior to our consummation of a business combination,
including our requirements to seek stockholder approval of such
a business combination and to allow our stockholders to seek
conversion of their shares if they do not approve of such a
business combination. While we have been advised that such
provisions limiting our ability to amend our Amended and
Restated Certificate of Incorporation may not be enforceable
under Delaware law, we view these provisions, which are
contained in Article Sixth of our Amended and Restated
Certificate of Incorporation, as obligations to our stockholders
and that investors will make an investment decision, relying, at
least in part, on this provision. Thus, we will not take any
action to amend or waive these provisions.
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Our Amended and Restated Certificate of Incorporation also
provides that we will continue in existence only until
November 27, 2009. If we have not completed a business
combination by such date, our corporate existence will cease
except for the purposes of winding up our affairs and
liquidating, pursuant to Section 278 of the Delaware
General Corporation Law. This has the same effect as if our
board of directors and stockholders had formally voted to
approve our dissolution pursuant to Section 275 of the
Delaware General Corporation Law. Accordingly, limiting our
corporate existence to a specified date as permitted by
Section 102(b)(5) of the Delaware General Corporation Law
removes the necessity to comply with the formal procedures set
forth in Section 275 (which would have required our board
of
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directors and stockholders to formally vote to approve our
dissolution and liquidation and to have filed a certificate of
dissolution with the Delaware Secretary of State). We will,
nevertheless, be continued for a term of three years from the
time our existence ceases, or for such longer period as the
Delaware Court of Chancery shall in its discretion direct, for
the purpose of prosecuting and defending suits by or against us
and of enabling us to settle and close our business, to dispose
of and convey our property, to discharge our liabilities and to
distribute to our stockholders any remaining assets, but not for
the purpose of continuing the business for which we were
organized. We cannot assure you that we will properly assess all
liabilities with which we may potentially be charged. As such,
our stockholders could potentially be liable for any of our
obligations 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 liabilities to arise would be from our vendors and
service providers (such as accountants, lawyers, investment
bankers, etc.) and potential target businesses.
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In connection with any proposed business combination we submit
to our stockholders for approval, we will also submit to
stockholders a proposal to amend our Amended and Restated
Certificate of Incorporation to provide for our perpetual
existence, thereby removing this limitation on our corporate
life. We will not seek to amend or waive the provision limiting
our corporate life other than in connection with the approval of
a business combination. We view this as a binding obligation to
our stockholders. We will only consummate a business combination
if stockholders vote both in favor of such business combination
and our amendment to provide for our perpetual existence. Any
vote to extend our corporate life to continue perpetually in
connection with a business combination will be effective only if
the business combination is approved. In connection with
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a business combination, the approval of the proposal to amend
our Amended and Restated Certificate of Incorporation to provide
for our perpetual existence would require the affirmative vote
of a majority of our outstanding shares of common stock.
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Lock-up
of
founder shares, insider warrants
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At the consummation of this offering, substantially all of the
founder shares, and all of the insider warrants to be acquired
by the insider warrant holders in an insider private placement
immediately prior to the consummation of this offering, will be
subject to a
lock-up
agreement with our underwriters. Subject to certain limited
exceptions (such as transfers to relatives and trusts for estate
planning purposes and, in the case of our sponsor,
(a) transfers among various funds under our sponsors
management for rebalancing purposes only and
(b) distributions to investors in such funds, provided that
such investors agree to be bound by the
lock-up
agreement, (i) the founder shares will not be transferable
until 180 days after the consummation of a business
combination and (ii) the insider warrants will not be
transferable until the consummation of a business combination,
in each case at which time such
lock-up
agreement will expire and such shares of common stock and
warrants will be freely transferable (subject to any limitations
under applicable securities laws). However, if we engage in a
transaction after the consummation of our initial business
combination that results in all of the stockholders of the
combined entity having the right to exchange their shares of
common stock for cash, securities or other property, then the
founder shares will no longer be subject to the
lock-up
agreement.
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Audit committee to monitor compliance
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We will establish and maintain an audit committee to, among
other things, monitor compliance with the terms relating to this
offering. If any noncompliance is identified, then the audit
committee will be charged with the responsibility to immediately
take all action necessary to rectify such noncompliance or
otherwise
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cause compliance with the terms of this offering.
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Determination of offering amount
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We determined the size of this offering based on our estimate of
the capital required to facilitate our combination with one or
more viable target businesses with sufficient scale to operate
as a stand-alone public entity. We believe that raising the
amount described in this offering will offer us a broad range of
potential target businesses possessing some or all of the
characteristics we believe are important in evaluating target
businesses.
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Risks
In making your decision on whether to invest in our securities,
you should take into account the special risks we face as a
blank check company, as well as the fact that this offering is
not being conducted in compliance with Rule 419 promulgated
under the Securities Act and, therefore, you will not be
entitled to protections normally afforded investors in
Rule 419 blank check offerings. You should carefully
consider these and the other risks set forth in the section
entitled Risk Factors beginning on page 28 of
this prospectus. Some of our other risks include the following:
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We are a recently incorporated development stage company with no
operating results to date. Since we do not have an operating
history, you will have no basis upon which to evaluate our
ability to achieve our business objective, which is to effect a
business combination.
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We have limited available cash and working capital and our
ability to commence operations is thus dependent on funds raised
in this offering.
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The discretion of Mr. LaPorta and our sponsor in
identifying and selecting a suitable target acquisition may
result in a conflict of interest when determining whether the
terms, conditions and timing of a particular business
combination are appropriate and in our stockholders best
interest. However, we will not pursue any company affiliated
with our sponsor, officers or directors, including portfolio
companies and other investments or interests held by our
sponsor, officers and directors.
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If we are unable to find a suitable target acquisition that
would result in a business combination, the funds being held in
trust may not be returned to you until November 27, 2009.
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If we are forced to liquidate before a business combination and
distribute the trust account in liquidation our warrants will
expire worthless.
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If third parties bring claims against us, the proceeds held in
trust could be reduced and the per-share liquidation price
received by stockholders will be less than the approximately
$9.85 per share held in trust, without taking into account any
interest earned on the trust account (net of any taxes due on
such interest, which taxes, if any, shall be paid from the trust
account).
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Our ability to effect a business combination and to be
successful thereafter will be totally dependent upon the efforts
of our officers, directors and others, who may not continue with
us following a business combination.
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Our officers, directors and their affiliates currently are, and
may in the future become affiliated with additional entities
that are, engaged in business activities similar to those
intended to be conducted by us and, accordingly, may have
conflicts of interest in determining to which entity a
particular business opportunity should be presented.
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Initially, we may only be able to complete one business
combination, which may cause us to be solely dependent on a
single asset or operation. By consummating a business
combination with only a single asset or operation, our lack of
diversification may subject us to numerous economic and
competitive risks.
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Investors in this offering have no basis to evaluate the merits
or risks of a business combination as we have not yet selected
any target acquisition with which to complete a business
combination.
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We are not required to use all or any of the amount in the trust
account for our initial business combination as long as we
consummate an initial business combination with one or more
target acquisitions with a fair market value equal to at least
80% of the amount held in trust (net of taxes and excluding the
portion representing our underwriters deferred discount).
We may use any remaining proceeds held in the trust account for
working capital, including director and officer compensation,
change-in-control
payments or payments to affiliates, to finance the operations of
the target acquisition, make other acquisitions and pursue our
growth strategy.
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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 are
presented.
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July 16, 2007
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Actual
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As Adjusted (1)
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Balance Sheet Data:
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Working capital
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$
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8,625
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$
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295,507,500
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Total assets
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$
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38,625
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$
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295,507,500
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Total liabilities
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$
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30,000
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$
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9,000,000
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Value of common stock which may be converted to cash
(approximately $9.85 per share)(2)
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$
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$
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88,649,990
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Stockholders equity
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$
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8,625
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$
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197,857,510
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(1)
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The as adjusted
information gives effect to the sale of the units we are
offering (other than pursuant to the underwriters
over-allotment option), including the application of the related
gross proceeds and the payment of the estimated remaining costs
from such sale and the repayment of the accrued and other
liabilities to be made.
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The as adjusted working capital and
total assets amounts include the $286,950,000 from the net
proceeds of this offering and the $8,500,000 purchase price of
the insider warrants to be held in the trust account, which will
be available to us only upon the consummation of a business
combination within the time period described in this prospectus.
The adjusted working capital and total assets amounts include
the $9,000,000 being held in the trust account ($10,350,000 if
the underwriters over-allotment option is exercised in
full) representing the underwriters deferred discount. If
we have not consummated a business combination by
November 27, 2009, our corporate existence will cease by
operation of law and we will promptly distribute only to our
public stockholders the amount in our trust account (including
the amounts representing deferred underwriting discounts and
commissions, any accrued interest, net of taxes payable, which
taxes, if any, shall be paid from the trust account) plus any
remaining net assets, subject to our obligations under Delaware
law to provide for claims of creditors. Our founding
stockholders have agreed to waive their respective rights to
participate in any liquidating distributions occurring upon our
failure to consummate a business combination and subsequent
liquidation with respect to their founder shares.
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If the business combination is
consummated, public stockholders who vote against the business
combination and exercise their conversion right will be entitled
to receive $9.85 per share, which amount represents the proceeds
of this offering and the purchase price of the insider warrants,
without taking into account any interest earned on the trust
account (net of any taxes due on such interest, which taxes, if
any, shall be paid from the trust account).
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On August 31, 2007, we issued a promissory note in the
amount of $139,025 in favor of our sponsor, which amount
reflects the funds advanced by our sponsor to us or on our
behalf in connection with this offering. This note bears an
interest rate of 5.0% per annum and is due on the earlier of
(i) December 31, 2007 and (ii) the consummation
of this offering. The principal amount of the note plus any
accrued and unpaid interest thereon to the date of repayment
will be repaid out of the proceeds of this offering.
We will not proceed with a business combination if public
stockholders owning 30% or more of the shares of common stock
sold in this offering vote against the business combination and
exercise their conversion rights. Accordingly, we may effect a
business combination if public stockholders owning up to
approximately 29.99% of the shares of common stock sold in this
offering exercise their conversion rights. It is our intention,
in every case, to structure and consummate a business
combination in which public stockholders owning up to
approximately 29.99% of the shares sold in this offering will be
able to convert their shares into cash. We view this threshold,
which is set forth in our Amended and Restated Certificate of
Incorporation, as an obligation to our stockholders, and neither
we nor our board of directors will propose, or seek stockholder
approval of, any increase or decrease of this threshold. If up
to approximately 29.99% of the 30,000,000 shares sold in
this offering convert their shares into cash and a business
combination is completed, we would be required to convert to
cash from
25
the trust account up to such number of shares at an initial
per-share conversion price of approximately $9.85, or
$88,649,990 in the aggregate, without taking into account
interest earned on the trust account (net of any taxes due on
such interest, which taxes, if any, shall be paid from the trust
account). The actual per-share conversion price will be equal
to: the amount in the trust account, including all accrued
interest (net of taxes payable), as of two business days prior
to the proposed consummation of the business combination,
divided by
the number of shares of common stock sold in
this offering. In connection with any vote required for a
business combination, our founding stockholders have agreed to
vote their founder shares in accordance with the majority of the
shares of common stock voted by our public stockholders (and to
vote any shares of common stock purchased by them in or after
this offering in favor of a business combination). As a result,
our founding stockholders will not have any conversion rights
attributable to their shares in the event that a business
combination is approved by a majority of our public stockholders.
We anticipate recording a compensation expense in connection
with the issuance of 8,500,000 insider warrants in a private
placement. For a more detailed discussion of the compensation
expense, see Note 5 to the financial statements.
26
Investing in our securities involves a high degree of risk.
You should carefully consider the following risk factors and all
other information contained in this prospectus before making a
decision to invest in our units. If any of the following risks
occur, our business, financial conditions or results of
operations may be materially and adversely affected. In that
event, the trading price of our securities could decline, and
you could lose all or part of your investment.
Risks Related to
the Company and the Offering
We are a
development stage company with no operating history and,
accordingly, you will not have any basis on which to evaluate
our ability to achieve our business objective.
We are a recently incorporated development stage company with no
operating results to date. Therefore, our ability to begin
operations is dependent upon obtaining financing through the
public offering of our securities. Since we do not have any
operations or an operating history, you will have no basis upon
which to evaluate our ability to achieve our business objective,
which is to acquire one or more operating businesses in the
global consumer products and services industry. We have not
conducted any discussions and we have no plans, arrangements or
understandings with any prospective target business with respect
to a business combination. We will not generate any revenues or
income until, at the earliest, after the consummation of a
business combination.
We will liquidate
if we do not consummate a business combination.
Pursuant to our Amended and Restated Certificate of
Incorporation, we have 24 months after consummation of this
offering in which to complete a business combination. If we fail
to consummate a business combination within the required time
frame, our corporate existence will cease, in accordance with
our Amended and Restated Certificate of Incorporation, except
for the purposes of winding up our affairs and liquidating. We
may not be able to find suitable target businesses within the
required time frame. In addition, our negotiating position and
our ability to conduct adequate due diligence on any potential
target may be reduced as we approach the deadline for the
consummation of a business combination. We do not have any
specific business combination under consideration, and neither
we, nor any representative acting on our behalf, has had any
contacts with any target businesses regarding a business
combination, nor taken any direct or indirect actions to locate
or search for a target business. We view this obligation to
liquidate as an obligation to our stockholders and that
investors will make an investment decision, relying, at least in
part, on this provision. Thus, without the affirmative vote cast
at a meeting of stockholders of at least 95% of the common stock
issued in this offering, neither we nor our board of directors
will take any action to amend or waive any provision of our
Amended and Restated Certificate of Incorporation to allow us to
survive for a longer period of time. In addition, we will not
support, directly or indirectly, or in any way endorse or
recommend, that stockholders approve an amendment or
modification to such provision if it does not appear we will be
able to consummate a business combination within the foregoing
time period. Our founding stockholders have waived their rights
to participate in any liquidation distribution with respect to
their founder shares, and the shares of common stock underlying
any insider warrants acquired by a founding stockholder
immediately prior to this offering. There will be no
distribution from the trust account with respect to our warrants
which will expire worthless. We will pay the costs of
liquidation from our remaining assets outside of the trust
account. In addition, our sponsor has agreed to indemnify us for
all claims of creditors to the extent that we fail to obtain
valid and enforceable waivers from vendors, service providers,
prospective target business or other entities in order to
protect the amounts held in trust. We believe the fee income
from the sponsors $1.5 billion assets under
management (as of September 30, 2007) will be sufficient to
cover its indemnification obligations; however, we cannot
guarantee that our sponsor will be able to satisfy its
indemnification obligations.
27
We cannot assure
you that other provisions of our Amended and Restated
Certificate of Incorporation will not be amended other than the
time period during which we must consummate a business
combination.
Although we believe that a vote to amend or waive any provision
of our Amended and Restated Certificate of Incorporation would
likely take place only to allow additional time to consummate a
pending business combination, we cannot assure you that other
provisions relating to our consummation of a business
combination of our Amended and Restated Certificate of
Incorporation will not be amended or waived by the affirmative
vote cast at a meeting of stockholders of at least 95% of the
common stock issued in this offering.
You will not have
any rights or interest in funds from the trust account, except
under certain limited circumstances.
Our public stockholders will be entitled to receive funds from
the trust account only in the event of our liquidation or if
they seek to convert their respective shares of common stock
into cash upon a business combination which the stockholder
voted against and which is completed by us. In no other
circumstances will a stockholder have any right or interest of
any kind in the trust account.
If we are forced
to liquidate before the completion of a business combination and
distribute the trust account, our public stockholders may
receive significantly less than $9.85 per share and our warrants
will expire worthless.
We must complete a business combination with a fair market value
of at least 80% of the amount held in trust (net of taxes, and
other than the portion representing our underwriters
deferred discount) at the time of acquisition by
November 27, 2009. If we are unable to complete a business
combination within the prescribed time frame and are forced to
liquidate the trust account, the per-share liquidation price
received by our public stockholders from the trust account will
be less than $10.00 because of the expenses of this offering,
our general and administrative expenses and the anticipated
costs of seeking a business combination. Upon the liquidation of
the trust account, public stockholders will be entitled to
receive (unless there are claims not otherwise satisfied by the
amount not held in the trust account or the indemnification
provided by our sponsor) approximately $9.85 per share plus
interest earned on their pro rata portion of the trust account
(net of taxes payable), which includes $9,000,000 ($0.30 per
unit) of deferred underwriting discounts and commissions and
$8,500,000 ($0.28 per unit) of the purchase price of the insider
warrants. Our sponsor has agreed to indemnify us for all
creditor claims to the extent we do not obtain valid and
enforceable waivers from vendors, service providers, prospective
target businesses or other entities, in order to protect the
amounts held in the trust account. In the event that we
liquidate and it is subsequently determined that the reserve for
claims and liabilities is insufficient, stockholders who
received a return of funds from the liquidation of our trust
account could be liable for claims made by our creditors. We
assume that in the event we liquidate we will not have to adopt
a plan to provide for payment of claims that may potentially be
brought against us. Should this assumption prove to be
incorrect, we may have to adopt such a plan upon our
liquidation, which could result in the per-share liquidation
amount to our stockholders being significantly less than $9.85
per share, without taking into account any interest earned on
the trust account (net of any taxes due on such interest, which
taxes, if any, shall be paid from the trust account).
Furthermore, there will be no distribution with respect to our
outstanding warrants which will expire worthless if we liquidate
the trust account in the event we do not complete a business
combination within the prescribed time period. For a more
complete discussion of the effects on our stockholders if we are
unable to complete a business combination, see the section below
entitled Proposed BusinessEffecting a Business
CombinationLiquidation if no Business Combination.
28
If we are unable
to consummate a business combination, our public stockholders
will be forced to wait more than 24 months before receiving
liquidation distributions.
We have 24 months following the consummation of this
offering in which to complete a business combination. We have no
obligation to return funds to investors prior to such date
unless we consummate a business combination prior thereto and
only then in cases where investors have sought conversion of
their shares. Only after the expiration of this full time period
will public stockholders be entitled to liquidation
distributions if we are unable to complete a business
combination. Accordingly, investors funds may be
unavailable to them until such date.
We may choose to
redeem our outstanding warrants at a time that is
disadvantageous to our warrant holders.
Subject to there being a current prospectus under the Securities
Act with respect to the common stock issuable upon exercise of
the warrants, we may redeem the warrants issued as a part of our
units at any time after the warrants become exercisable in whole
and not in part, at a price of $.01 per warrant, upon a minimum
of 30 days prior written notice of redemption, if and only
if, the last sales price of our common stock equals or exceeds
$14.25 per share for any 20 trading days within a 30-trading day
period ending three business days before we send the notice of
redemption. In addition, we may not redeem the warrants unless
the warrants comprising the units sold in this offering and the
shares of common stock underlying those warrants are covered by
an effective registration statement from the beginning of the
measurement period through the date fixed for the redemption.
Redemption of the warrants could force the warrant holders to
(i) exercise the warrants and pay the exercise price at a
time when it may be disadvantageous for the holders to do so,
(ii) sell the warrants at the then current market price
when they might otherwise wish to hold the warrants, or
(iii) accept the nominal redemption price which, at the
time the warrants are called for redemption, is likely to be
substantially less than the market value of the warrants. We
expect most purchasers of our warrants will hold their
securities through one or more intermediaries and consequently
you are unlikely to receive notice directly from us that the
warrants are being redeemed. If you fail to receive notice of
redemption from a third party and your warrants are redeemed for
nominal value, you will not have recourse to the company.
Although we are
required to use our commercially reasonable efforts to have an
effective registration statement covering the issuance of the
shares of common stock underlying the warrants at the time that
our warrant holders exercise their warrants, we cannot guarantee
that a registration statement will be effective, in which case
our warrant holders may not be able to exercise our warrants and
therefore the warrants could expire worthless.
Holders of our warrants (other than insider warrants) will be
able to exercise the warrants only if (i) a current
registration statement under the Securities Act relating to the
shares of our common stock underlying the warrants is then
effective and (ii) such shares of common stock are
qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various
holders of warrants reside. In addition, under the terms of the
warrant agreement holders of our warrants will not be able to
net cash settle the warrants. Although we have undertaken in the
warrant agreement, and therefore have a contractual obligation,
to use our commercially reasonable efforts to maintain a current
registration statement covering the shares of common stock
underlying the warrants following completion of this offering to
the extent required by federal securities laws, and we intend to
comply with our undertaking, we cannot assure that we will be
able to do so and therefore the warrants could expire worthless.
Such expiration would result in each holder paying the full unit
purchase price solely for the shares of common stock underlying
the unit. In addition, we have
29
agreed to use our commercially reasonable efforts to register
the shares of common stock underlying the warrants under the
blue sky laws of the states of residence of the existing warrant
holders, to the extent an exemption is not available. The value
of the warrants may be greatly reduced if a registration
statement covering the shares of common stock issuable upon the
exercise of the warrants is not kept current or if the
securities are not qualified, or exempt from qualification, in
the states in which the holders of warrants reside. Holders of
warrants who reside in jurisdictions in which the shares of
common stock 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. 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.
Unlike most other
blank check offerings, we allow up to approximately 29.99% of
our public stockholders to exercise their conversion rights.
This higher threshold will make it easier for us to consummate a
business combination with which you may not agree, and you may
not receive the full amount of your original investment upon
exercise of your conversion rights.
When we seek stockholder approval of a business combination, we
will offer each public stockholder (other than our founding
stockholders with respect to their founder shares, and the
shares of common stock underlying any insider warrants acquired
by a founding stockholder immediately prior to this offering)
the right to have his, her or its shares of common stock
converted to cash if the stockholder votes against the business
combination and the business combination is approved and
consummated. We will consummate the initial business combination
only if the following two conditions are met: (i) a
majority of the shares of common stock voted by the public
stockholders are voted in favor of the business combination and
(ii) public stockholders owning 30% or more of the shares
sold in this offering do not vote against the business
combination and exercise their conversion rights. To date, most
other blank check companies have a conversion threshold of 20%,
which makes it more difficult for such companies to consummate
their initial business combination. Thus, because we permit a
larger number of stockholders to exercise their conversion
rights, it will be easier for us to consummate an initial
business combination with a target business which you may
believe is not suitable for us, and you may not receive the full
amount of your original investment upon exercise of your
conversion rights. There can be no assurance that any converting
stockholder will receive equal to or more than his, her or its
full invested amount.
Unlike most other
blank check offerings, we allow up to approximately 29.99% of
our public stockholders to exercise their conversion rights. The
ability of a larger number of our stockholders to exercise their
conversion rights may not allow us to consummate the most
desirable business combination or optimize our capital
structure.
When we seek stockholder approval of a business combination, we
will offer each public stockholder (other than our founding
stockholders with respect to their founder shares, and the
shares of common stock underlying any insider warrants acquired
by a founding stockholder immediately prior to this offering)
the right to have his, her or its shares of common stock
converted to cash if the stockholder votes against the business
combination and the business combination is approved and
consummated. Such holder must both vote against such business
combination and then exercise his, her or its conversion rights
to receive a pro rata share of the trust account. Unlike most
other blank check offerings to date, which have a 20% threshold,
we allow up to approximately 29.99% of our public stockholders
to exercise their conversion rights. Accordingly, if our
business combination requires us to use substantially all of our
cash to pay the purchase price, because we will not know how
many stockholders may
30
exercise such conversion rights, we may either need to reserve
part of the trust account for possible payment upon such
conversion, or we may need to arrange third-party financing to
help fund our business combination in case a larger percentage
of stockholders exercise their conversion rights than we expect.
In the event that the acquisition involves the issuance of our
stock as consideration, we may be required to issue a higher
percentage of our stock to make up for a shortfall in funds.
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 effect the
most attractive business combination available to us.
Our stockholders
may be held liable for claims against us by third parties to the
extent of distributions received by them.
Our Amended and Restated Certificate of Incorporation provides
that we will continue in existence only until 24 months
from the consummation of this offering. If we have not completed
a business combination by such date and amended this provision
in connection therewith, pursuant to the Delaware General
Corporation Law, our corporate existence will cease except for
the purposes of winding up our affairs and liquidating. Under
Sections 280 through 282 of the Delaware General
Corporation Law, stockholders may be held liable for claims by
third parties against a corporation to the extent of
distributions received by them in a dissolution. If the
corporation complies with certain procedures set forth in
Section 280 of the Delaware General Corporation Law
intended to ensure that it makes reasonable provision for all
claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. However, it is our intention to make liquidating
distributions to our stockholders as soon as reasonably possible
after dissolution and, therefore, we do not intend to comply
with those procedures. Because we will not be complying with
those procedures, we are required, pursuant to
Section 281(b) of the Delaware General Corporation Law, to
adopt a plan that will provide for our payment, based on facts
known to us at such time, of (i) all existing claims,
(ii) all pending claims and (iii) all claims that
potentially may be brought against us within the subsequent ten
years. Accordingly, we would be required to provide for any
creditors known to us at that time or those that we believe
could potentially be brought against us within the subsequent
ten years prior to distributing the funds held in the trust to
stockholders. We cannot assure you that we will properly assess
all claims that potentially may be brought against us. As such,
our stockholders could potentially be liable for any claims to
the extent of distributions received by them and any liability
of our stockholders may extend well beyond the third anniversary
of such date. Accordingly, we cannot assure you that third
parties will not seek to recover from our stockholders amounts
owed to them by us. In the event of our liquidation, we may have
to adopt a plan to provide for the payment of claims that may
potentially be brought against us, which could result in the
per-share liquidation amount to our stockholders being
significantly less than $9.85, without taking into account any
interest earned on the trust account (net of any taxes due on
such interest, which taxes, if any, shall be paid from the trust
account).
Our placing of
funds in trust may not protect those funds from third-party
claims against us.
Third-party claims may include contingent or conditional claims
and claims of directors and officers entitled to indemnification
under our Amended and Restated Certificate of Incorporation. We
intend to pay any claims, to the extent sufficient to do so,
from our funds not held in trust. Although we will seek to have
all vendors, service providers and prospective target
31
businesses or other entities with which we execute agreements
waive 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. Even if they execute such agreements,
they could bring claims against the trust account including but
not limited to fraudulent inducement, breach of fiduciary
responsibility or other similar claims, as well as claims
challenging the enforceability of the waiver, in each case in
order to gain an advantage with a claim against our assets,
including the funds held in the trust account. If any third
party refused to execute an agreement waiving such claims to the
monies held in the trust account, we would perform an analysis
of the alternatives available to us if we chose not to engage
such third party and evaluate if such engagement would be in the
best interest of our stockholders if such third party refused to
waive such claims.
Examples of possible instances where we may engage a third party
that refused 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 provider of required
services willing to provide the waiver. In any event, our
management would perform an analysis of the alternatives
available to it and would only enter into an agreement with a
third party that did not execute a waiver if management believed
that such third partys engagement would be significantly
more beneficial to us than any alternative. 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
not seek recourse against the trust account for any reason.
Accordingly, the proceeds held in trust could be subject to
claims that could take priority over the claims of our public
stockholders and the per-share liquidation price could be less
than the $9.85 per share held in the trust account, plus
interest (net of any taxes due on such interest, which taxes, if
any, shall be paid from the trust account), due to claims of
such creditors. If we are unable to complete a business
combination and liquidate the company, our sponsor will be
liable if we did not obtain a valid and enforceable waiver from
any vendor, service provider, prospective target business or
other entity of any rights or claims to the trust account, to
the extent necessary to ensure that such claims do not reduce
the amount in the trust account on the date of the consummation
of this offering. We believe the fee income from the
sponsors $1.5 billion assets under management (as of
September 30, 2007) will be sufficient to cover its
indemnification obligations; however, we cannot assure you that
our sponsor will be able to satisfy those obligations. The
indemnification provisions are set forth in an insider letter to
be executed on behalf of our sponsor. The insider letter
specifically sets forth that in the event we obtain a valid and
enforceable waiver of any right, title, interest or claim of any
kind in or to any monies held in the trust account for the
benefit of our stockholders from a vendor, service provider,
prospective target business or other entity, the indemnification
from our sponsor will not be available. In addition, none of our
officers have agreed to indemnify the trust in their personal
capacity from claims from third party vendors, service
providers, prospective target business, or other entities.
Additionally, if we are forced to file a bankruptcy case or an
involuntary bankruptcy case is filed against us which is not
dismissed, the funds held in our trust account will 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 to our public stockholders the
liquidation amounts due them.
In certain
circumstances, our board of directors may be viewed as having
breached their fiduciary duties to our creditors, thereby
exposing itself and our company to claims of punitive
damages.
If we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us which 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
32
fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders. Furthermore, because we intend to distribute the
proceeds held in the trust account to our public stockholders
promptly after the termination of our existence by operation of
law, 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
may
have acted in bad faith, 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.
If the net
proceeds of this offering not being placed in trust together
with interest earned on the trust account available to us are
insufficient to allow us to operate for at least 24 months
following the consummation of this offering, we may not be able
to complete a business combination.
We currently believe that, upon consummation of this offering,
the funds available to us outside of the trust account together
with up to $4,100,000 of interest earned on the trust account
that may be released to us will be sufficient to allow us to
operate for at least 24 months following the consummation
of this offering, assuming that a business combination is not
consummated during that time. Based upon the experience of the
members of our board and consultation with them regarding a
reasonable budget for consummating a transaction of this kind
and nature, and a review of budgets publicly disclosed by
blank-check companies, we determined that this was an
appropriate approximation of the expenses. As a general matter,
our board of directors will be asked to approve any significant
expenditures in connection with a potential acquisition or any
expenditure associated with the pursuit of a potential business
combination that may cause us to be unable to complete a
business combination within 24 months due to a lack of
sufficient remaining working capital. However, if costs are
higher than expected we might not have sufficient funds to
continue searching for, or conduct due diligence with respect
to, any potential target acquisitions. In such event, we would
need to obtain additional funds from our initial stockholders or
customer source to continue operating. We anticipate that up to
$50,000 not held in the trust account will be reserved for
working capital purposes. We could use a portion of these funds
to pay due diligence costs in connection with a potential
business combination or to pay fees to consultants to assist us
with our search for a target acquisition. We could also use a
portion of these funds as a down payment, reverse
break-up
fee (a provision in a merger agreement designed to
compensate the target for any breach by the buyer which results
in a failure to close the transaction), or to fund a
no-shop provision (a provision in letters of intent
designed to keep target acquisitions from shopping
around for transactions with others on terms more favorable to
such target acquisitions) with respect to a particular proposed
business combination, although we do not have any current
intention to do so. If we entered into such a letter of intent
where we paid for the right to receive exclusivity from a target
acquisition and were subsequently required to forfeit such funds
(whether as a result of our breach or otherwise) or if we agree
to a reverse
break-up
fee
and subsequently were required to pay such fee as a result of
our failure to consummate the transaction in accordance with the
merger agreement, we might not have sufficient funds to continue
searching for, or conduct due diligence with respect to, any
other potential target acquisitions. In such event, we would
need to obtain additional funds from our initial stockholders or
another source to continue operations.
Our current
officers and directors may resign upon consummation of a
business combination.
Upon consummation of a business combination, the role of our
current officers and directors in the target business cannot
presently be fully ascertained. While we expect that one or more
of our current officers, particularly Scott LaPorta, our Chief
Executive Officer, and
33
directors will remain in senior management or as a director
following a business combination, we may employ other personnel
following the business combination. If we acquire a target
business in an all-cash transaction, it would be more likely
that our current officers and our directors would remain with us
if they chose to do so. If a business combination were
structured as a merger whereby the stockholders of the target
company were to control the combined company, following a
business combination, it may be less likely that our current
officers or directors would remain with the combined company
unless it was negotiated as part of the transaction pursuant to
the acquisition agreement, an employment agreement or other
arrangement.
Negotiated
retention of officers and directors after a business combination
may create a conflict of interest.
If, as a condition to a potential business combination, we
negotiate to have our current officers and directors retained
after the consummation of the business combination, including
the anticipated retention of Scott LaPorta, such negotiations
may result in a conflict of interest. The ability of such
individuals to remain with us after the consummation of a
business combination will not be the determining factor in our
decision as to whether or not we will proceed with any potential
business combination. In making the determination as to whether
current management should remain with us following the business
combination, we will analyze the experience and skill set of the
target business management and negotiate as part of the
business combination that our current officers and directors
remain if it is believed that it is in the best interests of the
combined company after the consummation of the business
combination. Although we intend to closely scrutinize any
additional individuals we engage after a business combination,
we cannot assure you that our assessment of these individuals
will prove to be correct.
There may be tax
consequences associated with our acquisition, holding and
disposition of target companies and assets.
We may incur significant taxes in connection with effecting
acquisitions; holding, receiving payments from, and operating
target companies and assets; and disposing of target companies
and assets.
Because any
target business with which we attempt to complete a business
combination will be required to provide our stockholders with
financial statements prepared in accordance with and reconciled
to U.S. generally accepted accounting principles, the pool of
prospective target businesses may be limited.
In accordance with the requirements of U.S. federal
securities laws, in order to seek stockholder approval of a
business combination, a proposed target business will be
required to have certain financial statements which are prepared
in accordance with, or which can be reconciled to,
U.S. generally accepted accounting principles, or
U.S. GAAP, and audited in accordance with
U.S. generally accepted auditing standards. To the extent
that a proposed target business does not have financial
statements which have been prepared with, or which can be
reconciled to, U.S. GAAP, and audited in accordance with
U.S. generally accepted auditing standards, a likely
possibility considering the international nature of the global
consumer products and services industry in general, we will not
be able to acquire that proposed target business. These
financial statement requirements may limit the pool of potential
target businesses.
Because of our
limited resources and the significant competition for business
combination opportunities, including numerous companies with a
business plan similar to ours, it may be more difficult for us
to complete a business combination.
Based upon publicly available information, as of
November 2, 2007, we have identified approximately 129
blank check companies that have gone public since August 2003.
Of these
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companies, only 38 have completed a business combination, while
seven will be or have been liquidating. The remaining
approximately 84 blank check companies have more than
$10.5 billion in trust and are seeking to complete business
acquisitions. Of these companies, only 24 have announced that
they have entered into definitive agreements or letters of
intent with respect to potential business combinations but have
not yet consummated business combinations. Accordingly, there
are approximately 49 blank check companies with more than
$8.1 billion in trust that have filed registration
statements and are seeking, or will be seeking, to complete
business combinations. Furthermore, the fact that only 38 of
such companies have completed business combinations and only 24
other of such companies have entered into definitive agreements
for business combinations, and seven have liquidated or will be
liquidating, may be an indication that there are only a limited
number of attractive targets available to such entities or that
many targets are not inclined to enter into a transaction with a
blank check company, and therefore we also may not be able to
consummate a business combination within the prescribed time
period. If we are unable to consummate an initial transaction
within the prescribed time period, our purpose will be limited
to dissolving, liquidating and winding up.
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 type of businesses that we may
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 consumer
products and services properties, assets and entities. 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 that
there are numerous target acquisitions that we could potentially
acquire with the net proceeds of this offering, our ability to
compete with respect to the acquisition of certain target
acquisitions 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 acquisitions. Furthermore, the obligation we have to seek
stockholder approval of a business combination may delay the
consummation of a transaction. Additionally, our outstanding
warrants and the future dilution they potentially represent may
not be viewed favorably by certain target acquisitions. Also,
our obligation to convert into cash the shares of common stock
in certain instances may reduce the resources available for a
business combination. Any of these obligations may place us at a
competitive disadvantage in successfully negotiating a business
combination.
We cannot assure you we will be able to successfully compete for
an attractive business combination. Additionally, because of
this competition, we cannot assure you we will be able to
effectuate a business combination within the prescribed time
period. If we are unable to consummate a business combination
within the prescribed time period, we will be forced to
liquidate.
You will not be
entitled to protections normally afforded to investors of blank
check companies.
Since the net proceeds of this offering are intended to be used
to complete a business combination with an unidentified target
acquisition, we may be deemed to be a blank check
company under the U.S. securities laws. However, since we
will have net tangible assets in excess of $5,000,000 upon the
successful consummation of this offering and will file a Current
Report on
Form 8-K
with the SEC upon consummation of this offering including an
audited balance sheet demonstrating this fact, we are exempt
from rules promulgated by the SEC to protect investors of blank
check companies such as Rule 419. Accordingly, investors
will not be afforded the benefits or protections of those rules,
such as entitlement to all the interest earned on the funds
deposited in the trust account. Because we are not subject to
these rules, including Rule 419, our units will be
immediately tradable and we have a longer period of time to
complete a business combination in certain circumstances than we
would if we were subject to such rule.
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Since we have not
yet selected any target acquisition with which to complete a
business combination, we are unable to currently ascertain the
merits or risks of the business operations and investors
will be relying on managements ability to source business
transactions.
Because we have not yet identified a prospective target
acquisition, investors in this offering currently have no basis
to evaluate the possible merits or risks of the target
acquisition. Although our management will evaluate the risks
inherent in a particular target acquisition, we cannot assure
you that they will properly ascertain or assess all of the
significant risk factors. We also cannot assure you that an
investment in our units will ultimately prove to be more
favorable to investors than a direct investment, if such
opportunity were available, in a target acquisition. Except for
the limitation that a target acquisition have a fair market
value of at least 80% of the amount held in trust (net of taxes
and other than the portion representing our underwriters
deferred discount) at the time of the acquisition, we will have
virtually unrestricted flexibility in identifying and selecting
a prospective acquisition candidate. Investors will be relying
on managements ability to source business transactions,
evaluate their merits, conduct or monitor diligence and conduct
negotiations. However, we will not acquire an affiliate of our
sponsor or any of our officers or directors, including portfolio
companies and other investments or interests held by our
sponsor, officers and directors. In addition, we will not
consider business opportunities that were presented to our
sponsor or its employees or opportunities that our sponsor or
its employees have become aware of prior to the consummation of
the offering. For a more complete discussion of our selection of
a target acquisition, see the section below entitled
Proposed BusinessEffecting a Business
CombinationWe have Not Identified a Target Business.
We may issue
shares of common stock to complete a business combination, which
would reduce the equity interest of our stockholders and likely
cause a change in control of our ownership.
Our Amended and Restated Certificate of Incorporation authorizes
the issuance of up to 100,000,000 shares of common stock,
par value $0.0001 per share, and 1,000,000 shares of
preferred stock, par value $0.0001 per share. Immediately after
this offering (assuming no exercise of the underwriters
over-allotment option), there will be 24,000,000 authorized but
unissued shares of our common stock available for issuance
(after appropriate reservation for the issuance of shares of
common stock upon full exercise of our outstanding warrants
(including insider warrants)) and all of the
1,000,000 shares of preferred stock available for issuance.
Although we have no commitment as of the effective date of the
registration statement, we are likely to issue a substantial
number of additional shares of our common or preferred stock, or
a combination of common and preferred stock, to complete a
business combination. The issuance of additional shares of our
common stock or any number of shares of our preferred stock:
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may significantly reduce the equity interest of our stockholders;
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may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
to the holders of our common stock;
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will likely cause a change in control if a substantial number of
our shares of common stock are issued, which may affect, among
other things, our ability to use our net operating loss carry
forwards, if any, and most likely will also result in the
resignation or removal of our present officers and
directors; and
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may adversely affect prevailing market prices for our common
stock.
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For a more complete discussion of the possible structure of a
business combination, see the section below entitled
Proposed BusinessEffecting a Business
CombinationWe have Not Identified a Target Business.
We may issue
notes or other debt securities, or otherwise incur substantial
debt, to complete a business combination, which may adversely
affect our leverage and financial condition.
Although we have no commitments as of the date of this
prospectus to issue any notes or other debt securities, or to
otherwise incur outstanding debt, we may choose to incur
substantial debt to complete a business combination. The
incurrence of debt could result in:
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default and foreclosure on our assets if our operating cash flow
after a business combination were insufficient to pay our debt
obligations;
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acceleration of our obligations to repay the indebtedness even
if we have made all principal and interest payments when due, if
the debt security contained covenants that required the
maintenance of certain financial ratios or reserves and any such
covenant were breached without a waiver or renegotiation of that
covenant;
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our immediate payment of all principal and accrued interest, if
any, if the debt security was payable on demand;
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covenants that limit our ability to pay dividends on our common
stock, to acquire capital assets or make additional
acquisitions; and
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our inability to obtain additional financing, if necessary, if
the debt security contained covenants restricting our ability to
obtain additional financing while such security was outstanding.
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In the event we
seek to acquire businesses located in foreign jurisdictions, we
could experience delays and increased costs due to cultural,
legal and administrative differences with respect to the
acquisition process, including due diligence, negotiating and
closing the transaction.
In the event we seek to acquire businesses located in certain
foreign jurisdictions such as South America or Asia, we could
experience delays due to the cultural, legal and administrative
differences with respect to the acquisition process, including
due diligence, negotiating and closing the transaction, that we
may not experience if we were to make an acquisition in
jurisdictions such as the United States. In the event we
experience such delays it could increase the amount of cash we
require to use outside of the trust account for working capital
purposes and result in a longer period of time to present a
business combination to stockholders and ultimately close a
business combination.
Foreign,
cultural, political and financial market conditions could impair
our international operations and financial
performance.
Our target acquisition may be based outside of the United States
and/or some or all of our operations may be conducted or
products may be sold in countries where economic growth has
slowed; or where economies have suffered economic, social
and/or
political instability or hyperinflation or where the ability to
repatriate funds has been delayed or impaired in recent years.
The economies of other foreign countries important to our
operations, including other countries in Europe, Latin America
and Asia, could also suffer slower economic growth or economic,
social
and/or
political instability in the future. International operations,
including manufacturing and sourcing operations (and the
international operations of our customers), are subject to
inherent risks which could adversely affect us, including, among
other things:
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new restrictions on access to markets;
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lack of developed infrastructure;
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inflation;
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fluctuations in the value of currencies;
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changes in and the burdens and costs of compliance with a
variety of foreign laws and regulations, including tax laws,
accounting standards, environmental laws and occupational health
and safety laws;
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political and economic instability;
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increases in duties and taxation;
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restrictions on transfer of funds;
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restrictions on foreign ownership of property
and/or
expropriation of foreign-owned assets; and
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other adverse changes in policies, including monetary
(including, without limitation, local interest rates), tax
and/or
lending policies, encouraging foreign investment or foreign
trade by our host countries.
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Should any of these risks occur, our ability to export our
products or repatriate profits could be impaired and we could
experience a loss of sales and profitability from our
international operations.
If we effect a
business combination with a company located outside of the
United States, we would be subject to a variety of additional
risks that may negatively impact our business operations and
financial results.
We may effect a business combination with a company located
outside of the United States. If we did, we would be subject to
many special considerations or risks associated with companies
operating in the target business governing jurisdiction,
including any of the following:
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rules and regulations or currency conversion or corporate
withholding taxes on individuals;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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longer payment cycles;
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tax issues, such as tax law changes and variations in tax laws
as compared to the United States;
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currency fluctuations;
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challenges in collecting accounts receivable;
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cultural and language differences; and
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employment regulations.
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We cannot assure you that we would be able to adequately address
these additional risks. If we were unable to do so, our
operations might suffer.
If we effect a
business combination with a company located outside of the
United States, the laws applicable to such company will likely
govern all of our material agreements and we may not be able to
enforce our legal rights.
If we effect a business combination with a company located
outside of the United States, the laws of the country in which
such company operates will likely govern almost all of the
material agreements relating to its operations. We cannot assure
you that the target business will be able to enforce any of its
material agreements or that remedies will be available in this
new jurisdiction. The system of laws and the enforcement of
existing laws in such jurisdiction
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may not be as certain in implementation and interpretation as in
the United States. The inability to enforce or obtain a remedy
under any of our future agreements could result in a significant
loss of business, business opportunities or capital.
Our business
combination may take the form of an acquisition of less than a
100% ownership interest, which could adversely affect our
decision-making authority and result in disputes between us and
third party minority owners.
Our business combination may take the form of an acquisition of
less than a 100% ownership interest in certain properties,
assets or entities. In such case, the remaining minority
ownership interest may be held by third parties who may or may
not have been involved with the properties, assets or entities
prior to our acquisition of such ownership interest. With such
an acquisition, we will face additional risks, including the
additional costs and time required to investigate and otherwise
conduct due diligence on holders of the remaining ownership
interest and to negotiate stockholder agreements and similar
agreements. Moreover, the subsequent management and control of
such a business will entail risks associated with multiple
owners and decision-makers. Such acquisitions also involve the
risk that third-party owners of the minority ownership interest
might become insolvent or fail to fund their share of required
capital contributions. Such third parties may have economic or
other business interests or goals which are inconsistent with
our business interests or goals, and may be in a position to
take actions contrary to our policies or objectives. Such
acquisitions may also have the potential risk of impasses on
decisions, such as a sale, because neither we nor the
third-party owners of the minority ownership interest would have
full control over the business entity. Disputes between us and
such third parties may result in litigation or arbitration that
would increase our expenses and distract our officers
and/or
directors from focusing their time and effort on our business.
Consequently, actions by, or disputes with, such third parties
might result in subjecting assets owned by the business entity
to additional risk. We may also, in certain circumstances, be
liable for the actions of such third parties. For example, in
the future we may agree to guarantee indebtedness incurred by
the business entity. Such a guarantee may be on a joint and
several basis with the third-party owners of the minority
ownership interest in which case we may be liable in the event
such third parties default on their guaranty obligation.
Our ability to
successfully effect a business combination and to be successful
thereafter will be totally dependent upon the efforts of our key
personnel, including our officers, directors and others who may
not continue with us following a business combination.
Our ability to successfully effect a business combination is
dependent upon the efforts of our key personnel, including Jason
N. Ader, the Chairman of our board of directors, and Scott
LaPorta, our Chief Executive Officer, President and a member of
our board of directors. Our key personnel will also be officers,
directors,
and/or
members of other entities, who we anticipate we will have access
to on an as needed basis, although there are no assurances that
any such personnel will be able to devote either sufficient
time, effort or attention to us when we need it. Other than
Scott LaPorta, none of our key personnel, including our other
executive officers, will have entered into employment or
consultant agreements with us. Further, although we presently
anticipate that our officers will remain associated in senior
management, advisory or other positions with us following a
business combination, some or all of the management associated
with a target acquisition may also remain in place. As such, our
key personnel may not continue to provide services to us after
the consummation of a business combination if we are unable to
negotiate employment or consulting agreements with them in
connection with or subsequent to the business combination, the
terms of which would be determined at such time between the
respective parties. Such negotiations would take place
simultaneously with the negotiation of the business combination
and could provide for such individuals to receive
39
compensation in the form of cash payments
and/or
our
securities for services they would render to us after the
consummation of the business combination. While the personal and
financial interests of such individuals may influence their
motivation in identifying and selecting a target acquisition,
the ability of such individuals to remain with us after the
consummation of a business combination will not be the
determining factor in our decision as to whether or not we will
proceed with any potential business combination.
We will have only
limited ability to evaluate the management of the target
business.
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 public company which could cause us to have to expend time and
resources helping them become familiar with such requirements.
This could be expensive and time-consuming and could lead to
various operational issues which may adversely affect our
operations.
Our officers and
directors will allocate some portion of 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.
Our executive officers and directors are currently employed by
other entities and are not obligated to devote any specific
number of hours to our affairs. If other entities require them
to devote more substantial amounts of time to their business and
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. For a discussion
of potential conflicts of interest that you should be aware of
see the section below entitled ManagementConflicts
of Interest.
Our sponsor,
officers and directors currently are, and may in the future
become affiliated with additional entities that are, engaged in
business activities similar to those intended to be conducted by
us and, accordingly, may have conflicts of interest in
determining to which entity a particular business opportunity
should be presented.
Our sponsor, officers and directors may in the future become
affiliated with additional entities, including other blank
check companies which may be engaged in activities similar
to those intended to be conducted by us. Additionally, our
sponsor, officers and directors may become aware of business
opportunities which may be appropriate for presentation to us
and the other entities to which they owe fiduciary duties or
other contractual obligations. No formal procedures have been
established to determine how conflicts of interest that may
arise due to duties or obligations owed to other entities will
be resolved. Accordingly, because of their pre-existing
fiduciary duties, our officers and directors may have conflicts
of interest in determining to which entity a particular business
opportunity should be presented. For a more detailed discussion
of our managements business affiliations and the potential
conflicts of interest of which you should be aware, see the
sections entitled ManagementDirectors and Executive
Officers and Certain Relationships and Related
Transactions.
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Our founding
stockholders currently own shares of our common stock which will
not participate in the liquidation of the trust account and a
conflict of interest may arise in determining whether a
particular target acquisition is appropriate for a business
combination.
Our founding stockholders own founder shares (and with respect
to certain founding stockholders, also insider warrants) that
were issued prior to this offering, but have waived their right
to receive distributions with respect to those founder shares
(and the common stock underlying any insider warrants acquired
by a founding stockholder immediately prior to this offering)
upon the liquidation of the trust account if we are unable to
consummate a business combination. Additionally, our sponsor and
Chief Executive Officer have agreed to purchase 7,500,000
insider warrants and 1,000,000 insider warrants, respectively,
directly from us in an insider private placement transaction
immediately prior to the consummation of this offering at a
purchase price of $1.00 per warrant for a total purchase price
of $8,500,000. The founder shares and insider warrants acquired
prior to this offering by our founding stockholders
and/or
the
insider warrant holders will be worthless if we do not
consummate a business combination. The personal and financial
interests of our sponsor and certain of our officers and
directors may influence their motivation in timely identifying
and selecting a target acquisition and completing a business
combination. Consequently, our officers discretion in
identifying and selecting a suitable target acquisition may
result in a conflict of interest when determining whether the
terms, conditions and timing of a particular business
combination are appropriate and in our stockholders best
interest, and as a result of such conflicts management may
choose a target acquisition that is not in the best interests of
our stockholders.
The requirement
that we complete a business combination by November 27,
2009 may give potential target businesses leverage over us in
negotiating a business combination.
We will liquidate and promptly distribute only to our public
stockholders the amount in our trust account (subject to our
obligations under Delaware law for claims of creditors) plus any
remaining net assets if we do not effect a business combination
by November 27, 2009. Any potential target business with
which we enter into negotiations concerning a business
combination will be aware of this requirement. Consequently,
such target businesses may obtain leverage over us in
negotiating a business combination, knowing that if we do not
complete a business combination with that particular target
business, we may be unable to complete a business combination
with any target business. This risk will increase as we get
closer to the time limits referenced above.
The requirement
that we complete a business combination by November 27,
2009 may motivate our sponsor to approve a business combination
during that time period so that they may get their out-of-pocket
expenses reimbursed.
Our sponsor may receive reimbursement for out-of-pocket expenses
it has incurred in connection with activities on our behalf such
as identifying potential target businesses and performing due
diligence on suitable business combinations. The funds for such
reimbursement will be provided from the money not held in trust.
Such payments may be significant and there can be no assurance
that they will not exceed our working capital budget. In the
event that we do not effect a business combination by
November 27, 2009, then any expenses incurred by our
sponsor in excess of the money being held outside of the trust
will not be repaid as we will liquidate at such time. On the
other hand, if we complete a business combination within such
prescribed time period, those expenses will be repaid by the
target business. Consequently, our sponsor may have an incentive
to complete a business combination other than solely in the best
interest of our stockholders.
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Certain of our
officers or directors, or their affiliates, have never been
associated with a blank check company and such lack of
experience could adversely affect our ability to consummate a
business combination.
Certain of our officers or directors, or their affiliates, have
never been associated with a blank check company. Accordingly,
you may not have sufficient information with which to evaluate
the ability of our management team to identify and complete a
business combination using the proceeds of this offering. Our
managements lack of experience in operating a blank check
company could adversely affect our ability to consummate a
business combination and could result in our having to liquidate
our trust account. If we liquidate, our public stockholders
could receive less than the amount they paid for our securities,
causing them to incur significant financial losses.
Other than with
respect to the business combination, our officers, directors,
security holders and their respective affiliates may have a
pecuniary interest in certain transactions in which we are
involved, and may also compete with us.
We will not pursue an acquisition of an affiliate of our sponsor
or of any of our officers or directors, including portfolio
companies and other investments or interests held by our
sponsor, officers and directors. However, other than with
respect to the business combination, we have not adopted a
policy that expressly prohibits our directors, officers,
security holders or affiliates from having a direct or indirect
pecuniary interest in any investment to be acquired or disposed
of by us or in any transaction to which we are a party or have
an interest. Accordingly, such parties may have an interest in
certain transactions such as strategic partnering or joint
venturing in which we are involved, and may also compete with us.
If our common
stock becomes subject to the SECs penny stock rules,
broker-dealers may experience difficulty in completing customer
transactions and trading activity in our securities may be
adversely affected.
If our common stock becomes subject to the penny
stock rules promulgated under the Securities Exchange Act
of 1934, as amended, or the Exchange Act, broker-dealers may
find it difficult to effectuate customer transactions and
trading activity in our securities may be adversely affected. As
a result, the market price of our securities may be depressed,
and you may find it more difficult to sell our securities.
If at any time we have net tangible assets of $5,000,000 or less
and our common stock has a market price per share of less than
$5.00, transactions in our common stock will be subject to these
penny stock rules. Under these rules, broker-dealers
who recommend such securities to persons other than
institutional accredited investors must:
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make a special written suitability determination for the
purchaser;
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receive the purchasers written agreement to the
transaction prior to sale;
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provide the purchaser with risk disclosure documents which
identify certain risks associated with investing in penny
stocks and which describe the market for these penny
stocks as well as a purchasers legal
remedies; and
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obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the
required risk disclosure document before a transaction in a
penny stock can be completed.
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Initially, we may
only be able to complete one business combination, which will
cause us to be solely dependent on a single asset or
property.
The net proceeds from this offering and the insider private
placement (excluding $9,000,000 held in the trust account which
represents deferred underwriting discounts and commissions) will
provide us with approximately $286,450,000 which will be held in
trust and may be used by us to complete a business combination.
We currently have no restrictions on our ability to seek
additional funds through the sale of securities or through
loans. As a consequence, we could seek to acquire a target
business that has a fair market value significantly in excess of
80% of the amount held in trust (net of taxes and excluding the
amount held in the trust account representing a portion of the
underwriters discount). Although as of the date of this
prospectus we have not engaged or retained, had any discussions
with, or entered into any agreements with any third party
regarding any such potential financing transactions, we could
seek to fund such a business combination by raising additional
funds through the sale of our securities or through loan
arrangements. However, if we were to seek such additional funds,
any such arrangement would only be consummated simultaneously
with our consummation of a business combination. Consequently,
it is probable that we will have the ability to complete only a
single business combination, although this may entail the
simultaneous acquisitions of several assets or closely related
operating businesses at the same time. However, should our
management elect to pursue more than one acquisition of target
businesses simultaneously, our management could encounter
difficulties in consummating all or a portion of such
acquisitions due to a lack of adequate resources, including the
inability of management to devote sufficient time to the due
diligence, negotiation and documentation of each acquisition.
Furthermore, even if we complete the acquisition of more than
one target business at substantially the same time, there can be
no assurance that we will be able to integrate the operations of
such target businesses. Accordingly, the prospects for our
ability to effect our business strategy may be:
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solely dependent upon the performance of a single
business; or
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dependent upon the development or market acceptance of a single
or limited number of products, processes or services.
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In this case, we will not be able to diversify our operations or
benefit from the possible spreading of risks or offsetting of
losses, unlike other entities which may have the resources to
complete several business combinations in different industries
or different areas of a single industry. Furthermore, since our
business combination may entail the simultaneous acquisitions of
several assets or operating businesses at the same time and may
be with different sellers, we will need to convince such sellers
to agree that the purchase of their assets or businesses is
contingent upon the simultaneous closings of the other
acquisitions.
Because of our
limited resources and the significant competition for business
combination opportunities, we may not be able to consummate an
attractive business combination.
We expect to encounter intense competition from other entities
having a business objective similar to ours, including private
investors (which may be individuals or investment partnerships),
other blank check companies, and other entities, domestic and
international, competing for the type of businesses that we may
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 consumer
products and services properties, assets and entities. 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 that
there are numerous target acquisitions that we could potentially
acquire with the net proceeds of
43
this offering, our ability to compete with respect to the
acquisition of certain target acquisitions 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 acquisitions. Furthermore, the
obligation we have to seek stockholder approval of a business
combination may delay the consummation of a transaction.
Additionally, our outstanding warrants and the future dilution
they potentially represent may not be viewed favorably by
certain target acquisitions. Also, our obligation to convert
into cash the shares of common stock in certain instances may
reduce the resources available for a business combination. Any
of these obligations may place us at a competitive disadvantage
in successfully negotiating a business combination.
We may be unable
to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the
target business, which could compel us to restructure the
transaction or abandon a particular business
combination.
Although we believe that the net proceeds of this offering and
the insider private placement will be sufficient to allow us to
consummate a business combination, because we have not yet
identified any prospective target acquisition to acquire, we
cannot ascertain the capital requirements for any particular
transaction. If the net proceeds of this offering and the
insider private placement prove to be insufficient, either
because of the size of the business combination, the depletion
of the available net proceeds in the course of searching for
suitable target acquisition that we can afford to acquire, or
the obligation to convert into cash a significant number of
shares of common stock from dissenting stockholders, we will be
required to seek additional financing. We cannot assure you that
any additional financing will be available to us on acceptable
terms, if at all. To the extent that additional financing proves
to be unavailable when needed to consummate a particular
business combination, we would be compelled to either
restructure the transaction or abandon that particular business
combination and seek an alternative target acquisition
candidate. In addition, it is possible that we could use a
portion of the funds not in the trust account to make a deposit,
down payment or fund a no-shop provision with
respect to a proposed business combination, although we do not
have any current intention to do so. In the event that we were
ultimately required to forfeit such funds (whether as a result
of our breach of the agreement relating to such payment or
otherwise), we may not have a sufficient amount of working
capital available outside of the trust account to conduct due
diligence and pay other expenses related to finding a suitable
business combination without securing additional financing. If
we are unable to secure additional financing, we would most
likely fail to consummate a business combination in the allotted
time and would liquidate the trust account, resulting in a loss
of a portion of your investment. In addition, if we consummate a
business combination, we may require additional financing to
fund continuing operations
and/or
growth. The failure to secure additional financing if required
could have a material adverse effect on our ability to continue
to develop and grow, even if we consummate a business
combination. None of our officers, directors or stockholders is
required to provide any financing to us in connection with or
after a business combination. For a more complete discussion
regarding the liquidation of our trust account if we cannot
consummate a business combination, see Proposed
BusinessEffecting a Business CombinationLiquidation
If No Business Combination.
Our founding
stockholders control a substantial interest in us and thus may
influence certain actions requiring a stockholder
vote.
Upon consummation of our offering, and after giving effect to
the insider private placement of founder shares, our founding
stockholders (including all of our officers and directors) will
collectively own 20% of our issued and outstanding common stock
(assuming they do not purchase units in this offering, in which
case they will own a larger percentage). This
44
ownership interest, together with any other acquisitions of our
shares of common stock (or warrants which are subsequently
exercised), could allow the founding stockholders to
collectively influence the outcome of matters requiring
stockholder approval, including the election of directors and
approval of significant corporate transactions after completion
of our initial business combination. In the event that the
founding stockholders acquire shares of our common stock in this
offering or in the aftermarket, we anticipate that they would
vote such shares in favor of our initial business combination.
Thus, additional purchases of shares of our common stock by our
founding stockholders would likely allow them to exert
additional influence over the approval of our initial business
combination. Factors that would be considered in making such
additional purchases would include consideration of the current
trading price of our common stock. The interests of our founding
stockholders and your interests may not always align and taking
actions which require approval of a majority of our
stockholders, such as selling the company, may be more difficult
to accomplish.
If we redeem our
public warrants, the insider warrants, which are non-redeemable
as long as the insider warrant holders or their permitted
transferees hold them, could provide the insider warrant holders
with the ability to realize a larger gain than the public
warrant holders.
The warrants held by our public warrant holders may be called
for redemption at any time after the warrants become exercisable:
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in whole and not in part;
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at a price of $.01 per warrant;
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upon not less than 30 days prior written notice of
redemption to each warrant holder;
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if, and only if, the last sale price of the common stock equals
or exceeds $14.25 per share, for any 20 trading days within a 30
trading day period ending on the third business day prior to the
notice of redemption to warrant holders.
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In addition, we may not redeem the public warrants unless the
warrants comprising the units sold in this offering and the
shares of common stock underlying those warrants are covered by
an effective registration statement from the beginning of the
measurement period through the date fixed for the redemption.
As a result of the insider warrants not being subject to the
redemption features to which that our publicly held warrants are
subject, the insider warrant holders, or their permitted
transferees, could realize a larger gain than our public warrant
holders in the event we redeem our public warrants.
Our founding
stockholders paid an aggregate of $8,625, or approximately
$0.001 per share, for their 8,625,000 founder shares issued and
outstanding prior to this offering 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 and
the pro forma net tangible book value per share of our common
stock after this offering constitutes the dilution to the
investors in this offering. Our founding stockholders acquired
their founder shares of common stock at a nominal price,
significantly contributing to this dilution. Assuming this
offering is consummated, you and the other new investors will
incur an immediate and substantial dilution of approximately
29.6% or $2.96 per share (the difference between the pro forma
net tangible book value per share of $7.04, and the initial
offering price of $10.00 per unit), not including the effect of
certain offering costs for which payment is deferred until
consummation of a business combination.
45
Our outstanding
warrants may have an adverse effect on the market price of
common stock and make it more difficult to effect a business
combination.
In connection with this offering, we will be issuing public
warrants to purchase up to 30,000,000 shares of common
stock. In addition, we have also agreed to issue up to an
additional 4,500,000 warrants to purchase additional shares of
common stock if the over-allotment option that we granted to the
underwriters is exercised in full. To the extent we issue shares
of common stock to effect a business combination, the potential
for the issuance of a substantial number of additional shares of
common stock upon exercise of these warrants could make us a
less attractive acquisition vehicle in the eyes of a target
acquisition. Such securities, when exercised, will increase the
number of issued and outstanding shares of our common stock and
reduce the value of the shares of common stock issued to
complete the business combination. Therefore, our public
warrants may make it more difficult to effectuate a business
combination or increase the cost of acquiring the target
acquisition. Additionally, the sale, or even the possibility of
sale, of the shares of common stock underlying the warrants
could have an adverse effect on the market price for our
securities or on our ability to obtain future financing. If and
to the extent these warrants are exercised, you may experience
dilution to your holdings.
A market for our
securities may not develop, which would adversely affect the
liquidity and price of our securities.
Although we have applied to have our securities listed on the
American Stock Exchange, as of the date of this prospectus,
there is currently no market for our securities. Prospective
stockholders therefore have no access to information about prior
trading history on which to base their investment decision. Once
listed on the American Stock Exchange, an active trading market
for our securities may never develop or, if developed, may not
be sustained. You may be unable to sell your securities unless a
market can be established
and/or
sustained.
If our founding
stockholders exercise their registration rights, it may have an
adverse effect on the market price of our common stock, and the
existence of the registration rights may make it more difficult
to effect a business combination.
Our founding stockholders are entitled to require us to register
the resale of their founder shares at any time after the date on
which such founder shares no longer are subject to a
lock-up
agreement with our underwriters, which, except in limited
circumstances, will not be before 180 days from the
consummation of a business combination. If our founding
stockholders exercise their registration rights with respect to
all of their founder shares beneficially owned by them as of the
date of this prospectus, then there will be an additional
7,500,000 shares of common stock, or 8,625,000 shares
of common stock if the underwriters over-allotment option
is exercised, eligible for trading in the public market.
Further, immediately prior to the consummation of this offering,
the insider warrant holders have agreed to purchase in an
insider private placement an aggregate of 8,500,000 insider
warrants that are identical to the warrants contained in the
units being sold in this offering, respectively, except that
(i) such insider warrants will be subject to a
lock-up
agreement with our underwriters and will not be transferable
before the consummation of a business combination, subject to
certain limited exceptions (such as, in the case of our sponsor,
(a) transfers among various funds under our sponsors
management for rebalancing purposes only and
(b) distributions to investors in such funds, provided that
such investors agree to be bound by the
lock-up
agreement, or transfers to relatives and trusts for estate
planning purposes), (ii) such insider warrants are being
purchased pursuant to an exemption from the registration
requirements of the Securities Act and will become freely
tradable only after they are registered pursuant to a
registration rights agreement to be signed in connection with
the insider private placement, (iii) the shares underlying
the insider warrants will be non-redeemable as long as the
insider warrant holders or their permitted transferees hold
them, and (iv) the insider warrants are exercisable in the
absence of an effective registration statement covering the
shares of common stock underlying the warrants and by means of
cashless exercise. If all of the insider warrants are
46
exercised, there will be an additional 8,500,000 shares of
our common stock eligible for trading in the public market. This
dilution may make it more difficult for us to effect a business
combination.
If we are deemed
to be an investment company under the Investment Company Act of
1940, 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, or
we may be required to incur additional expenses if we are unable
to liquidate after the expiration of the allotted time
periods.
If we are deemed to be an investment company under the
Investment Company Act of 1940, as amended, or the 1940 Act, we
may be subject to certain restrictions that may make it more
difficult for us to complete a business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may have imposed upon us certain burdensome
requirements, including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy, compliance policies
and procedures and disclosure requirements and other rules and
regulations.
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We do not believe that our anticipated principal activities will
subject us to the 1940 Act. To this end, the proceeds held in
trust may be invested by the trust agent only in
U.S. government securities within the meaning
of Section 2(a)(16) of the 1940 Act with a maturity of
180 days or less, or in registered money market funds
meeting certain conditions under
Rule 2a-7
promulgated under the 1940 Act. By restricting the investment of
the proceeds to these instruments, we intend to avoid being
deemed an investment company within the meaning of the 1940 Act.
This offering is not intended for persons who are seeking a
return on investments in government securities. The trust
account and the purchase of government securities for the trust
account is intended as a holding place for funds pending the
earlier to occur of either: (i) the consummation of our
primary business objective, which is a business combination, or
(ii) absent a business combination, liquidation and return
of the funds held in this trust account to our public
stockholders.
If we are deemed to be an investment company at any time, we
will be required to comply with additional regulatory
requirements under the 1940 Act, which would require additional
expenses for which we have not budgeted.
Uncertainties in
managements assessment of a target business could cause us
not to realize the benefits anticipated to result from an
acquisition.
It is possible that, following our initial acquisition,
uncertainties in assessing the value, strengths and potential
profitability of, and identifying the extent of all weaknesses,
risks, contingent and other liabilities (including environmental
liabilities) of, acquisition or other transaction candidates
could cause us not to realize the benefits anticipated to result
from an acquisition.
The potential
loss of key customers, management and employees of a target
business could cause us not to realize the benefits anticipated
to result from an acquisition.
It is possible that, following our initial acquisition, the
potential loss of key customers, management and employees of an
acquired business could cause us not to realize the benefits
anticipated to result from an acquisition.
47
The lack of
synergy from an acquisition could cause us not to realize the
benefits anticipated to result from an acquisition.
It is possible that, following our initial acquisition, the
inability to achieve identified operating and financial
synergies anticipated to result from an acquisition or other
transaction could cause us not to realize the benefits
anticipated to result from an acquisition.
The determination
for the offering price of our units is more arbitrary compared
with the pricing of securities for an operating company in a
particular industry.
The public offering price of the units and the terms of the
warrants were negotiated between us and the representative of
the underwriters. Factors considered in determining the prices
and terms of the units, including the common stock and warrants
underlying the units, include:
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the history and prospects of companies whose principal business
is the acquisition of other companies;
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prior offerings of those companies;
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our prospects for acquiring an operating business at attractive
values;
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our capital structure;
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an assessment of our management and their experience in
identifying operating companies;
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general conditions of the securities markets at the time of the
offering; and
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other factors as were deemed relevant.
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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 we have no historical operations or financial
results with which to compare them.
We may not obtain
an opinion from an unaffiliated third party as to the fair
market value of the target acquisition or that the price we are
paying for the business is fair to our stockholders.
We are not required to obtain an opinion from an unaffiliated
third party that either the target acquisition we select has a
fair market value in excess of 80% of the amount held in trust
(net of taxes and excluding the amount held in the trust account
representing a portion of the underwriters discount) or
that the price we are paying is fair to stockholders unless our
board is not able to independently determine that a target
acquisition has a sufficient market value. In addition, unless
otherwise required by applicable law, our board is not required
to obtain a third party valuation of a proposed business
acquisition if there is a conflict of interest. If no opinion is
obtained, our stockholders will be relying on the judgment of
our board of directors.
In the event that
our securities are listed on the American Stock Exchange, the
American Stock Exchange may delist our securities from quotation
on its exchange which could limit investors ability to
make transactions in our securities and subject us to additional
trading restrictions.
We anticipate that our securities will be listed on the American
Stock Exchange, a national securities exchange, upon
consummation of this offering. We cannot assure you that our
securities, if listed, will continue to be listed on the
American Stock Exchange in the future. In addition, in
connection with a business combination, it is likely that the
American Stock Exchange may require us to file a new listing
application and meet its initial listing
48
requirements, as opposed to its more lenient continued listing
requirements. We cannot assure you that we will be able to meet
those initial listing requirements at that time.
If the American Stock Exchange delists our securities from
trading on its exchange, we could face significant material
adverse consequences, including:
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a limited availability of market quotations for our securities;
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a determination that our common stock is a penny
stock, which would require brokers trading in our common
stock to adhere to more stringent rules and possibly result in a
reduced level of trading activity in the secondary trading
market for our common stock;
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a more limited amount of news and analyst coverage for our
company;
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a decreased ability to issue additional securities or obtain
additional financing in the future; and
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a decreased ability of our security holders to sell their
securities in certain states.
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Provisions in our
charter documents and Delaware law may inhibit a takeover of us,
which could limit the price investors might be willing to pay in
the future for our common stock and could entrench
management.
Our charter and bylaws contain provisions that may discourage
unsolicited takeover proposals that stockholders may consider to
be in their best interests. Moreover, our board of directors has
the ability to designate the terms of and issue new series of
preferred stock and the terms of and issuance of any such series
of preferred stock could reduce the value of our common stock.
Although our charter includes a provision that exempts us from
anti-takeover provisions under Delaware law, we may nonetheless
become subject to such provisions, which could delay or prevent
a change of control. Together these provisions may make the
removal of management more difficult and may discourage
transactions that could otherwise involve payment of a premium
over prevailing market prices for our securities.
Limitations on a
target business ability to protect its intellectual
property rights, including its trade secrets, could cause a loss
in revenue and any competitive advantage.
A target business products or services, and the processes
it uses to produce or provide them, might have been granted
U.S. patent protection, might have patent applications
pending or might be trade secrets. After a business combination,
our business may be adversely affected if our patents are
unenforceable, the claims allowed under our patents are not
sufficient to protect our technology, our patent applications
are denied, or our trade secrets are not adequately protected.
Our competitors may be able to develop technology independently
that is similar to ours without infringing on our patents or
gaining access to our trade secrets.
We may be subject
to litigation if another party claims that we have infringed
upon its intellectual property rights.
The tools, techniques, methodologies, programs and components
that a target business uses in order to provide its services may
infringe upon the intellectual property rights of others.
Infringement claims generally result in significant legal and
other costs and may distract management from running its core
business. Royalty payments under licenses from third parties, if
available, would increase costs. If a license were not available
we might not be able to continue providing a particular product
or service, which would reduce our post business combination
revenue. Additionally, developing non-infringing technologies
would increase our costs.
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The high cost or
unavailability of materials, equipment, supplies and personnel
could adversely affect our ability to execute our operations on
a timely basis.
A target business manufacturing operations could be
dependent on having sufficient raw materials, component parts
and manufacturing capacity available to meet our manufacturing
plans at a reasonable cost while minimizing inventories. A
target business ability to effectively manage our
manufacturing operations and meet these goals can have an impact
on our business, including our ability to meet our manufacturing
plans and revenue goals, control costs and avoid shortages of
raw materials and component parts. Raw materials and components
of particular concern include steel alloys, copper, carbide,
chemicals and electronic components. Our ability to repair or
replace equipment damaged or lost in the well can also impact
our ability to service our customers after a business
combination.
People are a key resource to developing, manufacturing and
delivering products and services to our customers around the
world. A target business ability to recruit, train and
retain the highly skilled workforce required by our plans will
impact our business. A well-trained, motivated work force has a
positive impact on our ability to attract and retain business.
Rapid growth presents a challenge to us and our industry to
recruit, train and retain our employees while managing the
impact of wage inflation and potential lack of available
qualified labor in the markets where we could operate.
Labor-related actions, including strikes, slowdowns and facility
occupations, could also negatively impact on our business after
a business combination.
Compliance with
governmental regulations and changes in laws and regulations and
risks from investigations and legal proceedings could be costly
and could adversely affect operating results.
The global consumer industry is subject to regulation and
intervention by governments throughout the world. A target
business operations in the United States and
internationally can be impacted by changes in the legal and
business environments in which we could operate, as well as the
outcome of ongoing government and internal investigations and
legal proceedings. Also, as a result of new laws and regulations
or other factors, we could be required to curtail or cease
certain operations. Changes that could impact the legal
environment include new legislation, new regulation, new
policies, investigations and legal proceedings and new
interpretations of the existing legal rules and regulations. In
particular, changes in export control laws or exchange control
laws, additional restrictions on doing business in countries
subject to sanctions, and changes in laws in countries
identified by management for immediate focus. Changes that
impact the business environment include changes in accounting
standards, changes in environmental laws, changes in tax laws or
tax rates, the resolution of audits by various tax authorities,
and the ability to fully utilize any tax loss carryforwards and
tax credits. Compliance-related issues could limit our ability
to do business in certain countries. These changes could have a
significant financial impact on our future operations and the
way we conduct, or if we conduct, business in the affected
countries.
Uninsured claims
and litigation could adversely impact our operating
results.
After a business combination, we expect to have insurance
coverage against operating hazards, including product liability
claims and personal injury claims related to our products, to
the extent deemed prudent by our management and to the extent
insurance is available, but no assurance can be given that the
nature and amount of that insurance will be sufficient to fully
indemnify us against liabilities arising out of pending and
future claims and litigation. This insurance will have
deductibles or self-insured retentions and will contain certain
coverage exclusions. The insurance will not cover damages from
breach of contract by us or based on alleged fraud or deceptive
trade practices. Insurance and customer agreements in general
50
do not provide complete protection against losses and risks, and
our results of operations could be adversely affected by
unexpected claims not covered by insurance.
We may
re-incorporate in another jurisdiction in connection with a
business combination, and the laws of such jurisdiction will
likely govern all of our material agreements and we may not be
able to enforce our legal rights.
In connection with a business combination, we may relocate the
home jurisdiction of our business from Delaware to another
jurisdiction, including a
non-U.S. jurisdiction.
If we determine to do this, the laws of such jurisdiction would
likely govern all of our future material agreements. We cannot
assure you that the system of laws and the enforcement of
existing laws in such jurisdiction would be as certain in
implementation and interpretation as in Delaware or, in the case
of a
non-U.S. jurisdiction,
the United States. The inability to enforce or obtain a remedy
under any of our future agreements could result in a significant
loss of business, business opportunities or capital. Any such
reincorporation and the international nature of the global
consumer products and services industry will likely subject us
to foreign regulation.
Risks Related to
the Global Consumer Products and Services Industry
Seasonality and
weather conditions may cause our operating results to vary from
quarter to quarter.
Sales of certain of consumer products and services may be
seasonal. For example, sales of outdoor products would increase
during warm weather months and decrease during winter.
Additionally, sales of home improvement products would be
concentrated in the spring and summer months, while sales of
consumer electronics would be concentrated in our fourth quarter
preceding the holiday season.
Weather conditions may also negatively impact sales. For
instance, we may not sell as many of certain outdoor recreation
products (such as lanterns, tents and sleeping bags) as
anticipated if there are fewer natural disasters such as
hurricanes and ice storms; mild winter weather may negatively
impact sales of electric blankets, heaters, some health products
and smoke or carbon monoxide alarms; and the late arrival of
summer weather may negatively impact sales of outdoor camping
equipment and grills. Additionally, sales of home improvement
products may be negatively impacted by unfavorable weather
conditions and other market trends. Periods of inclement weather
may reduce the amount of time spent on home improvement
projects. These factors could have a material adverse effect on
our business, results of operations and financial condition.
We must
successfully anticipate changing consumer preferences and buying
trends and manage our product line and inventory commensurate
with customer demand.
Our success depends upon our ability to anticipate and respond
to changing merchandise trends and customer demands in a timely
manner. Consumer preferences cannot be predicted with certainty
and may change between selling seasons. We must make decisions
as to design, development, expansion and production of new and
existing product lines. If we misjudge either the market for our
products, the purchasing patterns of our retailers
customers, or the appeal of the design, functionality or variety
of our product lines, our sales may decline significantly, and
we may be required to mark down certain products to sell the
resulting excess inventory or sell such inventory through our
outlet stores, or other liquidation channels, at prices which
can be significantly lower than our normal wholesale prices,
each of which would harm our business and operating results.
In addition, we must manage our inventory effectively and
commensurate with customer demand. A substantial portion of our
inventory may be sourced from vendors located outside the United
States. We generally may commit to purchasing products before we
receive firm
51
orders from our retail customers and frequently before trends
are known. The extended lead times for many of our purchases, as
well as the development time for design and deployment of new
products, may make it difficult for us to respond rapidly to new
or changing trends. In addition, the seasonal nature of our
business may require us to carry a significant amount of
inventory prior to the year-end holiday selling season. As a
result, we will be vulnerable to demand and pricing shifts and
to misjudgments in the selection and timing of product
purchases. If we do not accurately predict our customers
preferences and acceptance levels of our products, our inventory
levels may not be appropriate, and our business and operating
results may be adversely impacted.
Our business
depends, in part, on factors affecting consumer spending that
are out of our control.
Our business depends on consumer demand for our products and,
consequently, is sensitive to a number of factors that influence
consumer spending, including general economic conditions,
disposable consumer income, recession and inflation, incidents
and fears relating to national security, terrorism and war,
hurricanes, floods and other natural disasters, inclement
weather, consumer debt, unemployment rates, interest rates,
sales tax rates, fuel and energy prices, consumer confidence in
future economic conditions and political conditions, and
consumer perceptions of personal well-being and security
generally. Adverse changes in factors affecting discretionary
consumer spending could reduce consumer demand for our products,
change the mix of products we sell to a different mix with a
lower average gross margin, slower inventory turnover and
greater markdowns on inventory, thus reducing our sales and
harming our business and operating results.
Our operations
may be dependent upon third-party suppliers whose failure to
perform adequately could disrupt our business
operations.
We may source a significant portion of parts and products from
third parties. Our ability to select and retain reliable vendors
who provide timely deliveries of quality parts and products will
impact our success in meeting customer demand for timely
delivery of quality products. We expect not to enter into
long-term contracts with our primary vendors and suppliers.
Instead, most parts and products will be supplied on a
purchase order basis. As a result, we may be subject
to unexpected changes in pricing or supply of products. Any
inability of our suppliers to timely deliver quality parts and
products or any unanticipated change in supply, quality or
pricing of products could be disruptive and costly to us.
Our operating
results can be adversely affected by changes in the cost or
availability of raw materials and energy.
Pricing and availability of raw materials for use in our
businesses may be volatile due to numerous factors beyond our
control, including general, domestic and international economic
conditions, labor costs, production levels, competition,
consumer demand, import duties and tariffs and currency exchange
rates. This volatility may significantly affect the availability
and cost of raw materials for us, and may, therefore, have a
material adverse effect on our business, results of operations
and financial condition.
During periods of rising prices of raw materials, there can be
no assurance that we will be able to pass any portion of such
increases on to customers. Conversely, when raw material prices
decline, customer demands for lower prices could result in lower
sale prices and, to the extent we have existing inventory, lower
margins. As a result, fluctuations in raw material prices could
have a material adverse effect on our business, results of
operations and financial condition.
52
Some products require particular types of glass, paper, plastic,
metal, wax, wood or other materials. Supply shortages for a
particular type of material can delay production or cause
increases in the cost of manufacturing our products. This could
have a material adverse effect on our business, results of
operations and financial condition. In particular,
petroleum-derivative raw materials such as waxes, resins and
plastics have experienced price increases in response to, among
other things, higher oil prices. If wax prices, resin prices or
other material prices rise further in the future we can expect
the cost of goods for our businesses to increase. We cannot
assure you that we will be able to pass such cost increases to
our customers, and such increases could have a material adverse
effect on our margins. Similarly, other energy-intensive raw
materials such as metal and glass have experienced price
increases in response to higher energy prices. If such prices
rise further in the future, we can expect the cost of goods to
increase, which could have a material adverse effect on our
business, results of operations and financial condition.
With the growing trend towards consolidation among suppliers of
many of raw materials, we may become increasingly dependent upon
key suppliers whose bargaining strength is growing. In addition,
many of those suppliers have been reducing production capacity
of raw materials in the North American market. We may be
negatively affected by changes in availability and price of raw
materials resulting from this consolidation and reduced
capacity, which could negatively impact our results of
operations.
We may be subject
to several production-related risks which could jeopardize our
ability to realize anticipated sales and profits.
In order to realize sales and operating profits at anticipated
levels, we may manufacture or source and deliver in a timely
manner products of high quality. Among others, the following
factors can have a negative effect on our ability to do these
things:
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labor difficulties;
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scheduling and transportation difficulties;
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management dislocation;
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substandard product quality, which can result in higher
warranty, product liability and product recall costs;
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delays in development of quality new products;
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changes in laws and regulations, including changes in tax rates,
accounting standards, and environmental and occupational laws;
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health and safety laws; and
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changes in the availability and costs of labor.
|
Any adverse change in the above-listed factors could have a
material adverse effect on our business, results of operations
and financial condition.
We may manufacture or source a significant portion of our
products from Asia and other global markets. Accordingly, our
production lead times may be relatively long. Therefore, we may
commit to production in advance of firm customer orders. If we
fail to forecast customer or consumer demand accurately we may
encounter difficulties in filling customer orders or in
liquidating excess inventories, or may find that customers are
canceling orders or returning products. Additionally, changes in
retailer inventory management strategies could make
inventory management more difficult. Any of these results could
have a material adverse effect on our business, results of
operations and financial condition.
53
Competition in
our industries may hinder our ability to execute our business
strategy, achieve profitability, or maintain relationships with
future customers.
We expect to operate in some highly competitive industries. In
these industries, we may compete against numerous other domestic
and foreign companies. Competition in the markets in which we
expect to operate is based primarily on product quality, product
innovation, price and customer service and support, although the
degree and nature of such competition will vary by location and
product line. We also face competition from the manufacturing
operations of some of our potential customers with private label
brands.
Some of our competitors may be more established in their
industries and have substantially greater revenue or resources
than we do. Our competitors may take actions to match new
product introductions and other initiatives. Our competitors may
source their products from third parties, and our ability to
obtain a cost advantage through sourcing may be reduced. Certain
of our competitors may be willing to reduce prices and accept
lower profit margins to compete with us. Further, retailers
often demand that suppliers reduce their prices on existing
products. Competition could cause price reductions, reduced
profits or losses or loss of market share, any of which could
have a material adverse effect on our business, results of
operations and financial condition.
To compete effectively in the future in the global consumer
products and services industry, among other things, we must:
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maintain strict quality standards;
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deliver products on a reliable basis at competitive prices;
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anticipate and quickly respond to changing consumer demands
better than our competitors;
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maintain favorable brand recognition and achieve customer
perception of value;
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effectively market and competitively price our products and
services to consumers in several diverse market segments and
price levels; and
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develop innovative, high-quality products in designs and styles
that appeal to consumers of varying groups, tastes and price
level preferences, and in ways that favorably distinguish us
from our competitors.
|
Our inability to do any of these things could have a material
adverse effect on our business, results of operations and
financial condition.
If we fail to
develop new or expand any existing customer relationships, our
ability to grow our business may be impaired.
Our future growth will depend to a significant degree upon our
ability to develop new customer relationships and to expand
existing relationships with any current customers. We cannot
guarantee that new customers will be found, that any such new
relationships will be successful when they are in place, or that
business with any existing customers will increase. Failure to
develop and expand such relationships could have a material
adverse effect on our business, results of operations and
financial condition.
If we cannot
develop new products in a timely manner, and at favorable
margins, we may not be able to compete effectively.
We believe that our future success will depend, in part, upon
our ability to introduce innovative design extensions for any
existing products and to develop, manufacture and market new
products. We cannot assure you that we will be successful in the
introduction, manufacturing and marketing of any new products or
product innovations, or develop and
54
introduce, in a timely manner, innovations to any existing
products that satisfy customer needs or achieve market
acceptance. Our failure to develop new products and introduce
them successfully and in a timely manner, and at favorable
margins, would harm our ability to successfully grow our
business and could have a material adverse effect on our
business, results of operations and financial condition.
Our results could
be adversely affected if the cost of compliance with
environmental, health and safety laws and regulations becomes
too burdensome.
We expect that our operations will be subject to federal, state
and local environmental and health and safety laws and
regulations, including those that impose workplace standards and
regulate the discharge of pollutants into the environment and
establish standards for the handling, generation, emission,
release, discharge, treatment, storage and disposal of materials
and substances including solid and hazardous wastes. We
anticipate that after our initial business combination we will
be in material compliance with such laws and regulations and
that the cost of maintaining compliance will not have a material
adverse effect on our business, results of operations or
financial condition. However, due to the nature of our
operations and the frequently changing nature of environmental
compliance standards and technology, we cannot assure you that
future material capital expenditures will not be required in
order to comply with applicable environmental laws and
regulations, which may be too burdensome.
We may incur
significant costs in order to comply with environmental
remediation obligations.
In addition to operational standards, environmental laws also
impose obligations on various entities to clean up contaminated
properties or to pay for the cost of such remediation, often
upon parties that did not actually cause the contamination.
Accordingly, we may be liable, either contractually or by
operation of law, for remediation costs even if the contaminated
property is not presently owned or operated by us, is a landfill
or other location where we have disposed wastes, or if the
contamination was caused by third parties during or prior to our
ownership or operation of the property. There can be no
assurance that all potential instances of soil or groundwater
contamination will have been identified, even for those
properties where an environmental site assessment has been
conducted. We do not anticipate that any of our remediation
obligations will have a material adverse effect upon our
business, results of operations or financial condition. However,
future events, such as changes in existing laws or policies or
their enforcement or previously unknown contamination, may give
rise to additional unanticipated remediation liabilities that
may be material.
Changes in the
retail industry and markets for consumer products affecting our
customers or retailing practices could negatively impact any
existing customer relationships and our results of
operations.
We may sell consumer products to retailers, including club,
department store, drug, grocery, mass merchant, sporting goods
and specialty retailers, as well as directly to consumers. A
significant deterioration in the financial condition of any of
our major customers could have a material adverse effect on our
sales and profitability. We will regularly monitor and evaluate
the credit status of our customers and attempt to adjust sales
terms as appropriate. Despite these efforts, a bankruptcy filing
by a key customer could have a material adverse effect on our
business, results of operations and financial condition.
In addition, as a result of the desire of retailers to more
closely manage inventory levels, there is a growing trend among
retailers to make purchases on a
just-in-time
basis. This will require us to shorten our lead time for
production in certain cases and more closely anticipate demand,
which could in the future require us to carry additional
inventories.
55
With the growing trend towards retail trade consolidation, we
may be increasingly dependent upon key retailers whose
bargaining strength is growing. We may be negatively affected by
changes in the policies of our retailer customers, such as
inventory destocking, limitations on access to shelf space, use
of private label brands, price demands and other conditions,
which could negatively impact our results of operations.
Our business
could involve the potential for product recalls, product
liability and other claims against us, which could affect our
earnings and financial condition.
In connection with any manufacturing and distribution of
consumer products, we may be subject to the Consumer Products
Safety Act, which empowers the Consumer Products Safety
Commission to exclude from the market products that are found to
be unsafe or hazardous. Under certain circumstances, the
Consumer Products Safety Commission could require us to
repurchase or recall one or more of our products. Additionally,
laws regulating certain consumer products exist in some cities
and states, as well as in other countries in which we may sell
our products, and more restrictive laws and regulations may be
adopted in the future. Any repurchase or recall of our products
could be costly to us and could damage our reputation. If we
were required to remove, or we voluntarily removed, our products
from the market, our reputation could be tarnished and we might
have large quantities of finished products that we could not
sell.
We could also face exposure to product liability claims in the
event that one of our products is alleged to have resulted in
property damage, bodily injury or other adverse effects.
Although we expect to maintain product liability insurance in
amounts that we believe will be reasonable, we cannot assure you
that we will be able to maintain such insurance on acceptable
terms, if at all, in the future or that product liability claims
will not exceed the amount of insurance coverage. Additionally,
we do not expect to maintain product recall insurance. As a
result, product recalls or product liability claims could have a
material adverse effect on our business, results of operations
and financial condition.
In addition, we face potential exposure to unusual or
significant litigation arising out of alleged defects in any of
our products or otherwise. We plan to spend substantial
resources ensuring compliance with governmental and other
applicable standards. However, compliance with these standards
will not necessarily prevent individual or class action
lawsuits, which can entail significant cost and risk. We do not
expect to maintain insurance against many types of claims
involving alleged defects in our products that do not involve
personal injury or property damage. As a result, these types of
claims could have a material adverse effect on our business,
results of operations and financial condition.
Our product liability insurance program is expected to be an
occurrence-based program based on our targets claims
experience and the availability and cost of insurance. We
currently do not expect to either self-insure or administer a
high retention insurance program for product liability risks. We
cannot assure you that our future product liability expenses
will not exceed our individual per occurrence self-insured
retention.
We may not have
the resources to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses.
Our business combination must be with a target acquisition which
satisfies the minimum valuation standard at the time of such
acquisition, as discussed above. Consequently, we expect to have
the ability to effect only a single business combination,
although this process may entail the simultaneous acquisitions
of several consumer products and services businesses. Therefore,
at least initially, the prospects for our success may be
entirely dependent upon the future performance of a single
business operation. Unlike other entities that may have the
resources to complete several business combinations of entities
or assets operating
56
in multiple industries or multiple areas of a single industry,
it is probable that we will not have the resources to diversify
our operations or benefit from the possible spreading of risks
or offsetting of losses. By consummating a business combination
with only a single entity or asset, our lack of diversification
may:
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|
subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate
subsequent to a business combination, and
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|
|
result in our dependency upon the development or market
acceptance of a single or limited number of products, processes
or services.
|
In the event we ultimately determine to simultaneously acquire
several businesses or assets and such businesses or assets are
owned by different sellers, we may need for each of such sellers
to agree that our purchase of its business or assets is
contingent on the simultaneous closings of the other acquisition
or acquisitions, which may make it more difficult for us, and
delay our ability, to complete the business combination. With
multiple acquisitions, 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 businesses or assets into a
single operating business.
We may have
limited ability to evaluate the target business
management
Although we intend to closely scrutinize the incumbent
management of a prospective target business when evaluating the
desirability of effecting a business combination, we cannot
assure you that our assessment will prove to be correct. In
addition, we cannot assure you that new members that join our
management following a business combination will have the
necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and
directors, if any, in the target business following a business
combination cannot presently be stated with any certainty. While
our current officers and directors may remain associated in
senior management or advisory positions with us following a
business combination, they may not devote their full time and
efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with the company
after the consummation of a business combination if they are
able to negotiate employment or consulting agreements in
connection with such business combination, which would be
negotiated at the same time as the business combination
negotiations are being conducted and which may be a term of 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 the company after
the consummation of the business combination. While the personal
and financial interests of such individuals may influence their
motivation in identifying and selecting a target business, the
ability of such individuals to remain with the company after the
consummation of a business combination will not be the
determining factor in our decision as to whether or not we will
proceed with any potential business combination. Additionally,
we cannot assure you that our officers and directors will have
significant experience or knowledge relating to the operations
of the particular target business.
Following a business combination, we may seek to recruit
additional managers to supplement or replace the incumbent
management of the target business. We cannot assure you that we
will have the ability to recruit such managers, or that any such
managers we do recruit will have the requisite skills, knowledge
or experience necessary to enhance the incumbent management, if
any.
57
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All
statements other than statements of historical fact are, or may
be deemed to be, forward-looking statements. Such
forward-looking statements include statements regarding, among
others, (a) our expectations about possible business
combinations, (b) our growth strategies, (c) our
future financing plans, and (d) our anticipated needs for
working capital. Forward-looking statements, which involve
assumptions and describe our future plans, strategies, and
expectations, are generally identifiable by use of the words
may, will, should,
expect, anticipate,
approximate, estimate,
believe, intend, plan,
budget, could, forecast,
might, predict, shall or
project, or the negative of these words or other
variations on these words or comparable terminology. This
information may involve known and unknown risks, uncertainties,
and other factors that may cause our actual results,
performance, or achievements to be materially different from the
future results, performance, or achievements expressed or
implied by any forward-looking statements. These statements may
be found in this prospectus. Actual events or results may differ
materially from those discussed in forward-looking statements as
a result of various factors, including, without limitation, the
risks outlined under Risk Factors and matters
described in this prospectus generally. In light of these risks
and uncertainties, the events anticipated in the forward-looking
statements may or may not occur.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, potential target
businesses, the economy and other future conditions. Because
forward-looking statements relate to the future, by their
nature, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict. Our
actual results may differ materially from those contemplated by
the forward-looking statements. We caution you, therefore, that
you should not rely on any of these forward-looking statements
as statements of historical fact or as guarantees or assurances
of future performance. Important factors that could cause actual
results to differ materially from those in the forward-looking
statements include changes in local, regional, national or
global political, economic, business, competitive, market
(supply and demand) and regulatory conditions and the following:
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our status as a development stage company;
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our liquidation prior to a business combination;
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the reduction of the proceeds held in trust due to third-party
claims;
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our selection of a prospective target business or asset;
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our issuance of our capital stock or incurrence of debt to
complete a business combination;
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our ability to consummate an attractive business combination due
to our limited resources and the significant competition for
business combination opportunities;
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conflicts of interest of our officers and directors;
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potential current or future affiliations of our officers and
directors with competing businesses;
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our ability to obtain additional financing if necessary;
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the control by our founding stockholders of a substantial
interest in us;
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the adverse effect the outstanding warrants and options may have
on the market price of our common stock;
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58
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the existence of registration rights with respect to the founder
shares owned by our founding stockholders and common stock
underlying insider warrants owned by the insider warrant holders;
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the lack of a market for our securities;
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our being deemed an investment company;
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our dependence on our key personnel;
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our common stock becoming subject to the SECs penny stock
rules;
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our dependence on a single company after our business
combination;
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business and market outlook;
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our growth as a whole;
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our and our customers business strategies;
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environmental, permitting and other regulatory risks;
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foreign currency fluctuations and overall political risk in
foreign jurisdictions;
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our competitive position;
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outcomes of legal proceedings;
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expected results of operations
and/or
financial position;
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future effective tax rates; and
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compliance with applicable laws.
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These risks and others described under Risk Factors
are not exhaustive.
Any forward-looking statement made by us in this prospectus
speaks only as of the date on which we make it, and is expressly
qualified in its entirety by the foregoing cautionary
statements. Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not
possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
59
We estimate that the proceeds of this offering will be used as
set forth in the following table:
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No Exercise of
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Full Exercise
of
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Over-Allotment
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Over-Allotment
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Option
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Option
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Gross proceeds:
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|
|
|
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Gross proceeds from the offering
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$
|
300,000,000
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|
|
$
|
345,000,000
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|
Gross proceeds from the sale of the insider warrants (1)
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|
8,500,000
|
|
|
|
8,500,000
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|
|
|
|
|
|
|
|
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|
Total gross proceeds
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|
$
|
308,500,000
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|
|
$
|
353,500,000
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|
|
|
|
|
|
|
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|
Underwriting expenses
(2):
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|
|
|
|
|
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Underwriting discount (4% of gross public offering proceeds)
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$
|
12,000,000
|
|
|
$
|
13,800,000
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Contingent underwriting discount (3% of gross public offering
proceeds)
|
|
|
9,000,000
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|
|
|
10,350,000
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|
|
|
|
|
|
|
|
|
Total underwriting expenses
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|
$
|
21,000,000
|
|
|
$
|
24,150,000
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|
|
|
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|
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Offering expenses:
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|
|
|
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|
|
Legal fees and expenses
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|
$
|
450,000
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|
|
$
|
450,000
|
|
Printing and engraving expenses
|
|
|
100,000
|
|
|
|
100,000
|
|
Accounting fees and expenses
|
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|
35,000
|
|
|
|
35,000
|
|
SEC registration fee
|
|
|
20,000
|
|
|
|
20,000
|
|
FINRA filing fee
|
|
|
64,025
|
|
|
|
64,025
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|
American Stock Exchange listing fee
|
|
|
70,000
|
|
|
|
70,000
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|
Miscellaneous expenses (3)
|
|
|
260,975
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|
|
|
260,975
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|
|
|
|
|
|
|
|
|
|
Total offering expenses
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|
$
|
1,000,000
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|
|
$
|
1,000,000
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|
|
|
|
|
|
|
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|
|
Net proceeds from the offering and the sale of the insider
warrants:
(4)
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|
|
|
|
|
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Held in trust
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|
$
|
295,450,000
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|
|
$
|
338,650,000
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Not held in trust
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Total net proceeds
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|
$
|
295,500,000
|
|
|
$
|
338,700,000
|
|
|
|
|
|
|
|
|
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Percentage of gross public offering proceeds held in the
trust account
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|
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98.5
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%
|
|
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98.2
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%
|
Anticipated use of the interest earned on the trust account,
net of taxes payable on such interest, up to a maximum of
$4,100,000, that will be released to us to cover our working
capital requirements
(4):
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Legal, accounting and other expenses attendant to the due
diligence investigations, structuring and negotiation of a
business combination
|
|
$
|
2,460,000
|
|
|
$
|
2,460,000
|
|
Legal and accounting fees relating to SEC reporting obligations
(including the proxy statement in connection with a business
combination)
|
|
|
500,000
|
|
|
|
500,000
|
|
Administrative fees relating to services agreement with
Hayground Cove ($10,000 per month for two years)
|
|
|
240,000
|
|
|
|
240,000
|
|
Working capital to cover miscellaneous expenses, D&O
insurance and reserves
|
|
|
900,000
|
|
|
|
900,000
|
|
|
|
|
|
|
|
|
|
|
Total
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|
$
|
4,100,000
|
|
|
$
|
4,100,000
|
|
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(1)
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|
There is no placement fee paid or
payable by us in connection with the sale of the insider
warrants.
|
60
|
|
|
(2)
|
|
Consists of an underwriting
discount of 7% of the gross proceeds of this offering (including
any units sold to cover over-allotments) including 3%, or
$9,000,000, to be held in trust ($10,350,000 if the
underwriters over-allotment option is exercised in full)
until consummation of a business combination. Upon the
consummation of a business combination, such deferred discount
shall be released to the underwriters out of the gross proceeds
of this offering held in a trust account at JPMorgan Chase Bank,
N.A., maintained by Continental Stock Transfer & Trust
Company acting as trustee. The underwriters will not be entitled
to any interest accrued on the deferred discount.
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|
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|
(3)
|
|
Includes the repayment of the
principal amount of the $139,025 promissory note issued by us to
our sponsor in consideration of our sponsors advancement
of expenses in connection with this offering, plus accrued and
unpaid interest to the date of repayment. The note accrues
interest at a rate of 5% per annum.
|
|
(4)
|
|
Includes $9,000,000 representing
the underwriters contingent underwriting discount to be
held in trust until the consummation of a business combination.
|
|
(5)
|
|
$50,000 of the proceeds of this
offering will be held outside of the trust account and available
to us to fund our working capital requirements. In addition, the
interest earned on the trust account, net of taxes payable on
such interest, will be released to us to cover our working
capital requirements, up to a maximum of $4,100,000.
|
We intend to use the proceeds from the sale of the units and the
insider warrants to acquire one or more businesses in the global
consumer products and services industry.
Of the net proceeds of this offering, $277,950,000 (or
$319,800,000 if the over-allotment option is exercised in full)
plus $8,500,000 from the purchase of insider warrants, for an
aggregate of $286,450,000 (or $328,300,000 if the over-allotment
is exercised in full) will be placed in a trust account at
JPMorgan Chase Bank, N.A., maintained by Continental Stock
Transfer & Trust Company, New York, New York, as
trustee. Additionally, $9,000,000 (or $10,350,000 if the
underwriters over-allotment option is exercised in full)
of the proceeds attributable to the underwriters discount
will be deposited into such trust account for a total amount in
trust of $295,450,000 (or $338,650,000 if the over-allotment is
exercised in full). The proceeds will not be released from the
trust account until the earlier of the completion of a business
combination or as part of any liquidation of our trust account.
To the extent the trust account earns interest or we are deemed
to have earned income in connection therewith, we will be
permitted to seek disbursements from the trust account to pay
any federal, state or local tax obligations related thereto or
any franchise tax obligations. The proceeds held in the trust
account may be used as consideration to pay the sellers of a
target acquisition with which we complete a business combination
(excluding the amount held in the trust account representing a
portion of the underwriters discount and any amount
reserved for payment of taxes
and/or
working capital purposes). Any amounts not paid as consideration
to the sellers of the target business will be used to finance
our operations, which may include the target business(es) we
acquired on the consummation of the business combination, to
effect other acquisitions, or for working capital, as determined
by our board of directors at that time. All amounts held in the
trust account that are not converted to cash or released to us
as interest income, net of income taxes, will be released on
closing of our initial business combination with a target
acquisition having a fair market value of at least 80% of the
amount (excluding the amount held in the trust account
representing a portion of the underwriters discount and
any amount reserved for payment of taxes
and/or
working capital purposes) at the time of such business
combination, subject to a majority of our public stockholders
voting in favor of the business combination and less than 30% of
the public stockholders voting against the business combination
and electing their conversion rights.
We believe that prior to the consummation of a business
combination, the $50,000 of proceeds initially held outside of
the trust account, as well as the interest earned on the trust
account, net of taxes payable on such interest, up to a maximum
of $4,100,000, will be sufficient to cover our operating
expenses for the 24 months subsequent to the consummation
of this offering and to cover the expenses incurred in
connection with a business combination.
61
Assuming that a business combination is not consummated during
that time, we anticipate making the following expenditures
during this time period:
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|
|
|
|
approximately $2,460,000 of expenses for legal, accounting and
other expenses attendant to the due diligence investigations,
structuring and negotiating of a business combination, including
without limitation third-party fees for assisting us in
performing due diligence investigations of prospective target
businesses;
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|
approximately $500,000 of expenses in legal and accounting fees
relating to our SEC reporting obligations (including the proxy
statement in connection with a business combination);
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|
approximately $240,000 of expenses in fees relating to our
services agreement with our sponsor and certain general and
administrative services;
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|
approximately $950,000 for general working capital that will be
used for miscellaneous expenses, including reimbursement of any
out-of-pocket expenses incurred by our founding stockholders,
directors and officers in connection with activities on our
behalf, director and officer liability and other insurance
premiums and, if we must dissolve and liquidate, up to
approximately $75,000 for dissolution and liquidation costs.
|
These amounts are based on managements estimate of the
amount needed to fund our operations for the 24 months
subsequent to the consummation of this offering and to
consummate a business combination. This estimate may prove
inaccurate, especially if a portion of the available funds is
used to make a down payment or pay exclusivity or similar fees
in connection with a business combination or if we expend a
significant portion of the available funds in pursuit of a
business combination that is not consummated. While we cannot
assure you the balance of the trust account will be invested to
yield these rates, we believe such rates are representative of
those we may receive on the balance of the trust account. If we
do not have sufficient funds available to cover our expenses, we
may be forced to obtain additional financing, either from our
existing stockholders, directors and officers or third parties.
We may not be able to obtain additional financing and our
existing stockholders, directors and officers are not obligated
to provide any additional financing. If we do not have
sufficient funds and cannot find additional financing, we may be
forced to liquidate prior to consummating a business
combination. If we choose to obtain additional financing in
order to fund due diligence and other expenses associated with
locating a target business, and if such additional financing
were in the form of a loan, such loan would be incurred by us.
To the extent that our capital stock or debt securities are used
in whole or in part as consideration to effect a business
combination, or in the event that indebtedness from third
parties is used, in whole or in part, as consideration to effect
a business combination, the proceeds held in the trust account
which are not used to consummate a business combination will be
disbursed to the combined company and will, along with any other
net proceeds not expended, be used as working capital to finance
our operations. In the event that third-party indebtedness is
used as consideration, our officers and directors would not be
personally liable for the repayment of such indebtedness.
We may not use all of the proceeds in the trust in connection
with a business combination, either because the consideration
for the business combination is less than the proceeds in trust
or because we finance a portion of the consideration with our
capital stock or debt securities. In such event, the proceeds
held in the trust account as well as any other net proceeds not
expended will be used to finance our operations, which may
include the target business(es) that we acquire on the business
combination, to effect other acquisitions, or for working
capital, as determined by our board of directors at that time.
We may use these funds, among other things, for director and
officer compensation,
change-in-control
payments or payments to affiliates, to finance the operations of
the target acquisition, to make other acquisitions and to pursue
our growth strategy.
62
The net proceeds of this offering that are not immediately
required for the purposes set forth above will be invested only
in U.S. government securities, defined as any
Treasury Bill issued by the U.S. government having a
maturity of 180 days or less, or any open-ended investment
company registered under the 1940 Act that holds itself out as a
registered money market fund and bears the highest credit rating
issued by a U.S. nationally recognized rating agency. By
restricting the investment of the proceeds to these instruments,
we intend to meet the requirements for the exemption provided in
Rule 3a-1
promulgated under the 1940 Act so that we are not deemed to be
an investment company under the 1940 Act. The interest income
earned on investment of the net proceeds not held in trust
during this period, net of taxes payable on such interest, as
well as the interest earned on the trust account, net of taxes
payable on such interest, up to a maximum of $4,100,000, will be
used to defray our general and administrative expenses, as well
as costs relating to compliance with securities laws and
regulations, including associated professional fees, until a
business combination is completed.
We do not expect to pay any of our founding stockholders,
directors or officers or any entity with which they are
affiliated, any finders fee for services rendered to us
prior to or in connection with a business combination. However,
our founding stockholders, directors and officers will receive
reimbursement for any reasonable out-of-pocket expenses incurred
by them in connection with our organization, this offering and
activities on our behalf, such as participating in the offering
process, identifying a potential target operating business and
performing due diligence on a suitable business combination. We
have not reserved any specific amount for such payments, which
may have the effect of reducing the available proceeds not
deposited in the trust account for payment of our ongoing
expenses and reimbursement of out-of-pocket expenses incurred on
our behalf. In addition, since the role of present management
after a business combination is uncertain, we have no ability to
determine what remuneration, if any, will be paid to those
persons for periods after a business combination.
A public stockholder (but not our founding stockholders with
respect to their founder shares and shares of common stock
underlying any insider warrants acquired by a founding
stockholder immediately prior to this offering) will be entitled
to receive funds from the trust account (including interest
earned on such stockholders portion of the trust account,
net of taxes payable and amounts disbursed for working capital
purposes) only in the event of our liquidation of the trust
account as part of our liquidation upon our failure to complete
a business combination, or if such public stockholder converts
his, her or its shares of common stock into cash in connection
with a business combination that the public stockholder voted
against and which we actually consummate. In no other
circumstances will a public stockholder have any right or
interest of any kind to or in the trust account. Founding
stockholders are not entitled to convert any of their founder
shares (or shares of common stock underlying any insider
warrants acquired by a founding stockholder immediately prior to
this offering) or shares acquired in or after this offering into
a pro rata share of the trust account. However, founding
stockholders who acquire shares of common stock or warrants in
or after this offering will be entitled to a pro rata share of
the trust account with respect to such shares of common stock
(including shares acquired upon exercise of such warrants) upon
the liquidation of the trust account if we fail to consummate a
business combination within the required time period.
Upon the consummation of a business combination, the
underwriters will be entitled to receive that portion of the
proceeds attributable to the underwriters discount held in
trust excluding any accrued interest thereon. In the event that
we are unable to consummate a business combination and the
trustee is forced to liquidate the trust account, the
underwriters have agreed that: (i) they will forfeit any
rights or claims to such proceeds and any accrued interest
thereon; and (ii) the proceeds attributable to the
underwriters discount will be distributed on a pro-rata
basis among the public stockholders along with any accrued
interest thereon.
63
The difference between the public offering price per share of
common stock, assuming no value is attributed to the warrants
included in the units, and the pro forma net tangible book value
per share of our common stock after this offering constitutes
the dilution to investors in this offering. Net tangible book
value per share is determined by dividing our net tangible book
value, which is our total tangible assets less total liabilities
(including the value of common stock which may be converted into
cash), by the number of outstanding shares of our common stock.
The following table sets forth information with respect to our
founding stockholders and the new investors:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
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Average
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|
|
|
|
|
|
Shares
Purchased
|
|
|
Total
Consideration
|
|
|
Price Per
|
|
|
|
|
|
|
Number (1)
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Share
|
|
|
|
|
|
Founding stockholders
|
|
|
7,500,000
|
|
|
|
20
|
%
|
|
$
|
7,500
|
|
|
|
0.0025
|
%
|
|
$
|
0.001
|
|
|
|
|
|
New investors
|
|
|
30,000,000
|
|
|
|
80
|
%
|
|
$
|
300,000,000
|
|
|
|
99.9975
|
%
|
|
$
|
10.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total
|
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|
37,500,000
|
|
|
|
100
|
%
|
|
$
|
300,007,500
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
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(1)
|
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Amount of shares outstanding after
giving effect to the full redemption of 1,125,000 founder shares
assuming that the underwriters do not exercise their
over-allotment option.
|
At July 16, 2007, our net tangible book value was $8,625.
After giving effect to the sale of 30,000,000 shares of
common stock included in the units and the sale of the 8,500,000
insider warrants, and the deduction of underwriting discounts
and estimated expenses of this offering, our pro forma net
tangible book value at July 16, 2007 would have been $7.04
per share, or $200,557,510, representing an immediate increase
in net tangible book value of $7.04 per share to the founding
stockholders and an immediate dilution of $2.96 per share or
29.6% to new investors.
For purposes of presentation, our pro forma net tangible book
value after this offering is $88,649,990 less than it otherwise
would have been because, if we effect a business combination,
the conversion rights of the public stockholders (but not our
founding stockholders either with respect to their founder
shares or any shares of common stock purchased in this offering
or the aftermarket) may result in the conversion into cash of up
to approximately 29.99% of the aggregate number of the shares of
common stock sold in this offering at a per-share conversion
price equal to the amount in the trust account as of two
business days prior to the consummation of the proposed business
combination, inclusive of any interest, divided by the number of
shares of common stock sold in this offering.
The following table illustrates the dilution to the new
investors on a per-share basis, assuming no value is attributed
to the warrants included in the units:
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|
|
|
|
|
|
|
|
Public offering price
|
|
|
|
|
|
$
|
10.00
|
|
Net tangible book value before this offering
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|
$
|
0.001
|
|
|
|
|
|
Increase attributable to new investors
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|
$
|
7.036
|
|
|
|
|
|
Pro forma net tangible book value after this offering
|
|
|
|
|
|
$
|
7.04
|
|
|
|
|
|
|
|
|
|
|
Dilution to new investors
|
|
|
|
|
|
$
|
2.96
|
|
64
The pro forma net tangible book value after this offering is
calculated as follows:
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|
|
|
Numerator:
|
|
|
|
|
Net tangible book value before this offering and insider private
placement(1)
|
|
$
|
7,500
|
|
Net proceeds from this offering and sale of insider
warrants (2)
|
|
$
|
295,500,000
|
|
Offering costs paid in advance and excluded from net tangible
book value before this offering
|
|
$
|
0
|
|
Less: Deferred underwriters fee paid upon consummation of
a business combination (3)
|
|
$
|
(6,300,000
|
)
|
Less: Proceeds from this offering and sale of insider warrants
held in trust subject to conversion to cash ($9.85 ×
8,999,999)
|
|
$
|
(88,649,990
|
)
|
|
|
|
|
|
|
|
$
|
200,557,510
|
|
Denominator:
|
|
|
|
|
Shares of common stock outstanding prior to this offering and
after sale of insider warrants(4)
|
|
|
7,500,000
|
|
Shares of common stock included in the units offered
|
|
|
30,000,000
|
|
Less: Shares of common stock subject to conversion (30,000,000
× 29.99%)
|
|
|
(8,999,999
|
)
|
|
|
|
|
|
|
|
|
28,500,001
|
|
|
|
|
(1)
|
|
Assumes the net tangible book value
of $8,625 is adjusted by $1,125 due to the redemption of
1,125,000 founders shares from our founding stockholders on a
pro rata basis in the event that the underwriters do not
exercise their over-allotment option.
|
|
(2)
|
|
Net of underwriters discounts
and commissions (excluding $9,000,000 of deferred underwriting
discounts and commissions) and other offering expenses.
|
|
(3)
|
|
Assumes that we have converted the
maximum 8,999,999 shares to cash in connection with our
initial business combination. If no shares were converted to
cash in connection with our initial business combination, the
deferred underwriters fee payable would be $9,000,000.
|
|
(4)
|
|
Assumes the 8,625,000 shares of
common stock are adjusted by 1,125,000 due to the redemption of
founders shares from our founding stockholders on a pro rata
basis in the event that the underwriters do not exercise their
over-allotment option.
|
65
The following table sets forth our capitalization:
|
|
|
|
|
our capitalization at July 16, 2007; and
|
|
|
|
as adjusted to give effect to the sale of our units in this
offering and the sale of insider warrants in the insider private
placement, and the application of the estimated net proceeds
derived from the sale therefrom.
|
|
|
|
|
|
|
|
|
|
|
|
As of
July 16,
|
|
|
|
2007
|
|
|
|
Actual
|
|
|
As
Adjusted (1)
|
|
|
Underwriters fee payable (2)(3)
|
|
$
|
|
|
|
$
|
6,300,000
|
|
|
|
|
|
|
|
|
|
|
Redeemable stockholders equity (3)(4)
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 8,999,999 shares that
are subject to possible conversion at conversion value
|
|
|
|
|
|
|
900
|
|
Additional paid-in capital
|
|
|
|
|
|
|
88,649,090
|
|
|
|
|
|
|
|
|
|
|
Total redeemable stockholders equity
|
|
|
|
|
|
|
88,649,990
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 1,000,000 shares
authorized; none issued or outstanding
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 100,000,000 shares
authorized; 8,625,000 shares of common stock issued and
outstanding; 28,500,001 shares of common stock issued and
outstanding (excluding 8,999,999 shares subject to possible
conversion) as adjusted (5)
|
|
|
863
|
|
|
|
2,850
|
|
Additional paid-in capital
|
|
|
7,762
|
|
|
|
200,554,660
|
|
Deficit accumulated during the development stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total permanent stockholders equity
|
|
|
8,625
|
|
|
|
200,557,510
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
8,625
|
|
|
$
|
295,507,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Assumes full payment to the
underwriters of the underwriters discount out of the
proposed offering.
|
|
(2)
|
|
Represents deferred underwriting
discounts and commissions of 3% of the gross proceeds, or $0.30
per unit.
|
|
(3)
|
|
If we consummate a business
combination, the conversion rights afforded to our public
stockholders (but not to our founding stockholders, either with
respect to their founder shares or any shares of common stock
purchased in this offering or the aftermarket) may result in the
conversion into cash of up to approximately 29.99% of the
aggregate number of shares of common stock sold in this offering
at a per-share conversion price equal to the amount in the trust
account, inclusive of any interest thereon, as of two business
days prior to the proposed consummation of a business
combination divided by the number of shares of common stock sold
in this offering. For purposes of presentation, this table
assumes that we have converted the maximum of
8,999,999 shares to cash in connection with our initial
business combination, reducing the underwriters fee to
approximately $6,300,000, or $0.21 per share. If no shares were
converted to cash in connection with our initial business
combination, the underwriters fee payable would be
$9,000,000, or $0.30 per share.
|
|
(4)
|
|
Includes an aggregate of $8,500,000
payable immediately prior to the consummation of this offering
by our sponsor and Chief Executive Officer, for their purchase
of an aggregate of 8,500,000 insider warrants from us at a
purchase price of $1.00 per warrant. This purchase will take
place on an insider private placement basis immediately prior to
the consummation of this offering.
|
|
(5)
|
|
The As Adjusted column
assumes redemption of 1,125,000 founder shares in the event that
the underwriters do not fully exercise their over-allotment
option, as more fully described in Principal
Stockholders.
|
On August 31, 2007, we issued a promissory note in the
amount of $139,025 in favor of our sponsor, which amount
reflects the funds advanced by our sponsor to us or on our
behalf in connection with this offering. This note bears an
interest rate of 5.0% per annum and is due on the earlier of
(i) December 31, 2007 and (ii) the consummation
of this offering. The principal amount of the note plus any
accrued and unpaid interest therein to the date of repayment
will be repaid out of the proceeds of this offering.
We anticipate recording a compensation expense in connection
with the issuance of 8,500,000 insider warrants in a private
placement. For a more detailed discussion of the compensation
expense, see Note 5 to the financial statements.
66
MANAGEMENTS
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are a blank check company organized under the laws of the
State of Delaware on June 28, 2007. We were formed to
acquire, through a merger, capital stock exchange, asset or
stock acquisition, exchangeable share transaction or other
similar business combination, one or more businesses in the
global consumer products and services industry. Our business
combination will be an acquisition of a majority ownership
interest in an acquisition candidate. We intend to utilize cash
derived from the proceeds of this offering, our capital stock,
debt, or a combination of cash, capital stock and debt, in
effecting a business combination. The issuance of additional
shares of our capital stock:
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|
|
|
|
may significantly reduce the equity interest of our stockholders;
|
|
|
|
may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
to the holders of our common stock;
|
|
|
|
will likely cause a change in control if a substantial number of
our shares of common stock are issued, which may affect, among
other things, our ability to use our net operating loss carry
forwards, if any, and most likely will also result in the
resignation or removal of our present officers and
directors; and
|
|
|
|
may adversely affect prevailing market prices for our common
stock.
|
Similarly, if we incur substantial debt, it could result in:
|
|
|
|
|
default and foreclosure on our assets if our operating cash flow
after a business combination is insufficient to pay our debt
obligations;
|
|
|
|
acceleration of our obligations to repay the indebtedness even
if we have made all principal and interest payments when due if
the debt security contains covenants that require the
maintenance of certain financial ratios or reserves and any such
covenant is breached 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;
|
|
|
|
covenants that limit our ability to acquire capital assets or
make additional acquisitions;
|
|
|
|
our inability to obtain additional financing, if necessary, if
the debt security contains covenants restricting our ability to
obtain additional financing while such 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, working capital, capital
expenditures, acquisitions and other general corporate purposes;
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limitations on our flexibility in planning for and reacting to
changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation; and
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limitations on our ability to borrow additional amounts for
working capital, capital expenditures, acquisitions, debt
service requirements, execution of our strategy and other
purposes; and other disadvantages compared to our competitors
who have less debt.
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67
We have neither engaged in any operations nor generated any
revenues to date. Our entire activity since inception has been
to prepare for our proposed fundraising through an offering of
our equity securities.
We estimate that the net proceeds from the sale of the units in
this offering and the sale of insider warrants in the insider
private placement immediately prior to the consummation of this
offering will be approximately $286,450,000 (or $328,300,000 if
the underwriters over-allotment option is exercised in
full). Other than $50,000 to be used for working capital, this
entire amount will be held in trust. We intend to use
substantially all of the net proceeds of this offering and the
insider private placement of insider warrants, including the
funds held in the trust account, to effect a business
combination. To the extent that our capital stock is used in
whole or in part as consideration to effect a business
combination, the remaining proceeds held in the trust account
(excluding the amount held in the trust account representing a
portion of the underwriters discount) as well as any other
net proceeds not expended will be used to finance our
operations, which may include the operations of the target
business(es) we acquire on the consummation of the business
combination, to effect other acquisitions, or for working
capital, as determined by our board of directors at that time.
We believe that, upon consummation of this offering, the funds
not held in trust, plus up to an aggregate of $4,100,000 in
interest income on the trust account, net of taxes payable on
all interest income earned on the trust account, which we will
be permitted to withdraw from the trust account for working
capital purposes, will be sufficient to allow us to operate for
at least 24 months following the consummation of this
offering, assuming that a business combination is not
consummated during that time. Over this time period, we will be
using these funds for identifying and evaluating prospective
acquisition candidates, performing business due diligence on
prospective target acquisitions, traveling to and from the
property and asset locations that represent prospective target
acquisitions, reviewing corporate, title, environmental, and
financial documents and material agreements regarding
prospective target acquisitions, selecting the target
acquisition to acquire and structuring, negotiating and
consummating the business combination. We anticipate that we
will incur approximately $2,460,000 of expenses for the due
diligence and investigation of a target acquisition (including
expenses for legal, accounting and other expenses attendant to
the due diligence investigations, structuring and negotiating of
a business combination), approximately $500,000 of expenses in
legal and accounting fees relating to our SEC reporting
obligations (including the proxy statement in connection with a
business combination), approximately $240,000 of expenses in
fees relating to our services agreement with our sponsor and
certain general and administrative services, and approximately
$950,000 for general working capital that will be used for
miscellaneous expenses and reserves including the cost of
liquidation, which we currently estimate to be up to $75,000 if
our corporate existence terminates on November 27, 2009,
and including for director and officer liability insurance
premiums. We do not believe we will need to raise additional
funds following this offering in order to meet the expenditures
required for operating our business. However, we may need to
raise additional funds through a private offering of debt or
equity securities if such funds are required to consummate a
business combination that is presented to us.
Our sponsor and Chief Executive Officer have agreed to purchase
a total of 8,500,000 insider warrants (7,500,000 to be purchased
by our sponsor and 1,000,000 to be purchased by our Chief
Executive Officer) immediately prior to the consummation of this
offering at the price of $1.00 per warrant for a total of
$8,500,000 from us in a private placement pursuant to the
exemption from registration contained in Section 4(2) of
the Securities of Act of 1933, as amended. Each insider warrant
entitles the holder to purchase one share of our common stock at
a price of $7.50 per share. The holders of the insider warrants
are entitled, at any time and from time to time, to exercise the
insider warrants on a cashless basis at the discretion of the
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holder. The proceeds from the sale of the insider warrants will
be deposited into a trust account, subject to a trust agreement
and will be part of the funds distributed to our public
stockholders in the event we are unable to complete a business
combination. Based on our observation of market prices for
comparable warrants, we believe $1.10 per warrant for the
insider warrants will represent the fair value of such warrants
on the date of purchase. The valuation is based on all
comparable initial public offerings by blank check companies in
2007. We anticipate recording compensation expense in connection
with the insider warrants equal to the grant date fair value of
the warrants minus the purchase price. We estimate that amount
will be approximately $850,000. The compensation expense will be
recognized over the estimated service period of 24 months.
We have estimated the service period as the estimated time to
complete a business combination.
The public warrants and the insider warrants are not subject to
net cash settlement in the event we are unable to maintain an
effective registration statement under the Securities Act
covering the issuance of the common stock underlying the
warrants. We must use commercially reasonable efforts to file
and maintain the effectiveness of the registration statement for
the warrants set forth above. Except for the warrants included
in the insider warrants, all such warrants are only exercisable
to the extent we are able to maintain such effectiveness. The
insider warrants, however, may be exercised by means of cashless
exercise. If a holder of public warrants does not, or is not
able to, exercise such warrants, as applicable, such warrants
will expire worthless. This expiration would result in such
holders paying the full unit purchase price solely for the
shares of common stock underlying such units. Since we are not
required to net cash settle the warrants, liability
classification is not required under
EITF 00-19.
We will, therefore, account for the warrants as equity.
Our Chief Executive Officer has an option to purchase
475,000 shares of founder shares at a purchase price of
$0.001 per share from our sponsor and its affiliates, which
option will vest on the date (the Trigger Date) that
is one year after the closing of a qualifying business
combination, but the vesting will occur only if the appreciation
of the per share price of our common stock is either
(i) greater than 1x the Russell 2000 hurdle rate on the
Trigger Date or (ii) exceeds the Russell 2000 hurdle rate
for 20 consecutive trading days after the Trigger Date. The
Russell 2000 hurdle rate means the Russell 2000 index
performance over the period between the completion of this
offering and the Trigger Date. We anticipate recording
compensation expense in connection with the options equal to the
grant date fair value of the option. The fair value of the
option is based on a Black-Scholes model on the date of grant
and would be approximately $4,393,340.92 using an expected life
of three years, stock price of $9.25 per share, volatility
of 33.7% and a risk-free interest rate of 4.98%. Because shares
of our common stock do not have a trading history, the
volatility assumption is based on information currently
available to us. We believe that the volatility estimate is a
reasonable benchmark to use in estimating the expected
volatility of shares of our common stock. In addition, we
believe a stock price of $9.25 is a fair assumption based on our
observation of market prices for comparable shares of common
stock. This assumption is based on all comparable initial public
offerings by blank check companies in 2007. The compensation
expense will be recognized over the service period of
24 months. We have estimated the service period as the
estimated time to complete a business combination.
69
Introduction
We are a blank check company organized under the laws of the
State of Delaware on June 28, 2007. We were formed to
acquire, through a merger, capital stock exchange, asset or
stock acquisition, exchangeable share transaction or other
similar business combination, one or more businesses in the
global consumer products and services industry. To date, our
efforts have been limited to organizational activities. We do
not have any specific business combination under consideration,
nor have we had any discussions with any target business
regarding a possible 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 and directors and any of their potential contacts or
relationships regarding a potential business combination. We
believe there are substantial opportunities to operate onshore
as well as offshore, in both domestic and international markets.
We have not conducted any research with respect to identifying
the number and characteristics of the potential acquisition
candidates within any segment of the consumer products and
services chain, or the likelihood or probability of success of
any proposed business combination. In addition, we have not
compiled a database of entities that are suitable acquisition
candidates. We cannot assure you that we will be able to locate
a target business meeting the criteria described above in these
segments or that we will be able to engage in a business
combination with a target business on favorable terms
and/or
in
the prescribed time period. We will not pursue an acquisition of
an affiliate of our sponsor or of any of our officers or
directors, including portfolio companies and other investments
or interests held by our sponsor, officers and directors. In
addition, we will not pursue any acquisition that was presented
to our sponsor or its employees prior to the consummation of
this offering.
Our definition of business combination should be
considered in your investment decisions in connection with this
offering and ultimately in connection with the approval of a
business combination. We will make an initial investment in an
operating business with a fair market value of at least 80% of
the amount held in trust. Under our definition of business
combination, the acquisition may be consummated through a
merger, capital stock exchange, asset or stock acquisition,
exchangeable share transaction or other similar business
combination. We will have the flexibility to acquire less than
100% of the target enterprise, but in no event less than a
majority interest of a business. In the event we acquire less
than 100% of an acquisition candidate, the 80% of the amount
held in trust requirement will be based on the fair market value
of the acquired majority interest. In evaluating a prospective
target acquisition, our management will consider, among other
factors, the following factors likely to affect the performance
of the investment:
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earnings and growth potential;
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experience and skill of management and availability of
additional personnel;
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capital requirements;
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competitive position;
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financial condition and results of operation;
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barriers to entry into the consumer products and services and
related industries;
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stage of development of the products, processes or services;
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breadth of services offered;
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degree of current or potential market acceptance of the services;
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regulatory environment of the industry; and
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costs associated with effecting the business combination.
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70
Management and
Board Expertise
Our executive officers and directors have extensive experience
in the global consumer products and services industry as
managers, principals or directors of worldwide consumer products
and services companies. For instance, our Chief Executive
Officer, Scott LaPorta, has extensive experience in the global
consumer products industry. In the United States he has
executive management experience in the hotel, resort, gaming,
restaurant, entertainment, apparel, and retail businesses. He
also has significant international experience. While he was
Chief Financial Officer of Park Place Entertainment he served on
the Board of Directors of corporations in Australia, Canada, and
Uruguay whose primary businesses included resort hotels, gaming,
restaurant, entertainment, and retail. While Mr. LaPorta
was employed by Levi Strauss he was President of Levi Strauss
Canada and Levi Strauss Mexico where he was responsible for
leading the wholesale and retail businesses for the Levis
and Dockers brands. Additionally, Mr. LaPorta was
responsible for coordinating the development of the Levi Strauss
Signature brand in North America, Latin America, Europe, and
Asia. Finally, his businesses at Levi Strauss sourced product in
Latin America, the Middle East, Africa, and Asia. In addition,
our officers and directors have significant expertise covering
the key areas of the global consumer products and services
industry, with experience in negotiating and structuring
transactions in the areas in which we will attempt to compete.
Prior to the consummation of a business combination, we intend
to leverage the industry experience of our executive officers by
focusing our efforts on identifying a prospective target
business or businesses in the global consumer products and
services industry and negotiating the terms of such transaction.
Subsequent to the consummation of a business combination, we
believe that the strengths of our management team, particularly
their extensive operations experience in the global consumer
products and services industry, will be valuable with respect to
operating any business we may acquire.
Effecting a
Business Combination
General
We were formed to acquire, through a merger, capital stock
exchange, asset or stock acquisition, exchangeable share
transaction or other similar business combination, one or more
businesses in the global consumer products and services
industry. We are not presently engaged in, and we will not
engage in, any substantive commercial business for an indefinite
period of time following this offering. We intend to utilize
cash derived from the proceeds of this offering, our capital
stock, debt or a combination of these in effecting a business
combination. Although substantially all of the net proceeds of
this offering are intended to be applied generally toward
effecting a business combination as described in this
prospectus, the proceeds are not otherwise being designated for
any more specific purposes. Accordingly, investors in this
offering are investing without first having an opportunity to
evaluate the specific merits or risks of any one or more
business combinations.
Subject to the requirement that our business combination must be
with a target acquisition having a fair market value that is at
least 80% of the amount held in trust (net of taxes and
excluding the amount held in the trust account representing a
portion of the underwriters discount) at the time of such
acquisition, there are no limitations on the type of investments
(including investments in securities of entities that own or
finance consumer products and services activities) we can make
or the percentage of our total assets that may be invested in
any one investment. Accordingly, other than the requirement that
our business combination must be with a target acquisition
having a fair market value that is at least 80% of the amount
held in trust (net of taxes and excluding the amount held in the
trust account representing a portion of the underwriters
discount) at the time of such acquisition, our investment
policies may be changed from time to time at the discretion of
our board of directors, without a vote of our stockholders.
Additionally, no limits have been set on the concentration of
investments
71
(including investments in securities of entities that own or
finance consumer products and services activities) in any
location or product type.
We have not
identified a target acquisition
To date, we have not selected any target acquisition on which to
concentrate our search for a business combination. None of our
officers, directors, promoters, our sponsor or other affiliates
is currently engaged in discussions on our behalf or had any
contacts or communications with representatives of other
companies regarding the possibility of a potential merger,
capital stock exchange, asset or stock acquisition or other
similar business combination with us, nor have we, nor any of
our agents or affiliates, been approached by any candidates (or
representatives of any candidates) with respect to a possible
acquisition transaction with us. Additionally, we have not, nor
has anyone on our behalf, taken any measure, directly or
indirectly, to identify or locate any suitable target
acquisition, nor have we engaged or retained any agent or other
representative to identify or locate an acquisition candidate.
We have also not conducted any research with respect to
identifying the number and characteristics of the potential
acquisition candidates. Neither we nor our officers, directors,
promoters or affiliates will engage in any communications with
acquisition candidates until after the consummation of this
offering. As a result, we cannot assure you that we will be able
to locate a target acquisition or that we will be able to engage
in a business combination on favorable terms.
Subject to the limitation that a target acquisition have a fair
market value of at least 80% of the amount held in trust (net of
taxes and excluding the amount held in the trust account
representing a portion of the underwriters discount) at
the time of the transaction, as described below in more detail,
we will have virtually unrestricted flexibility in identifying
and selecting a prospective transaction candidate. Accordingly,
there is no basis for investors in this offering to evaluate the
possible merits or risks of any target acquisition with which we
may ultimately complete a business combination. To the extent we
effect a business combination with a financially unstable asset
or property, including entities without established records of
sales or earnings, we may be affected by numerous risks inherent
in the business and operations of such financially unstable
property or asset. Although our management will endeavor to
evaluate the risks inherent in a particular target acquisition,
we cannot assure you that we will properly ascertain or assess
all significant risk factors.
Sources of target
acquisition
While we have not yet identified any candidates for a business
combination, we believe that there are numerous acquisition
candidates in the global consumer products and services industry
that we intend to target. Target acquisitions may be brought to
our attention by our officers and directors, through their
industry relationships located in the United States and
elsewhere that regularly, in the course of their daily business
activities, see numerous varied opportunities. Target
acquisitions may also be brought to our attention by such
unaffiliated sources such as brokers or others as a result of
being solicited by us through calls or mailings. Unaffiliated
sources, such as brokers, may also introduce us to target
acquisitions they think we may be interested in on an
unsolicited basis, since many of these sources will have read
this prospectus and know what types of businesses we are
targeting. In the event we seek to utilize unaffiliated brokers
or other sources any finders fee will be approved by our
board of directors. In no event will any of our existing
officers, directors or founding stockholders, or any entity with
which they are affiliated, be paid any finders fee for any
services they render, in order to effectuate the consummation of
the initial business combination, nor will we acquire any
affiliate of our sponsor or any of our officers or directors.
72
Selection of a
target acquisition and structuring of a business
combination
Subject to the requirement that our business combination must be
with a target acquisition having a fair market value that is at
least 80% of the amount held in trust (net of taxes and
excluding the amount held in the trust account representing a
portion of the underwriters discount) at the time of such
acquisition our management will have virtually unrestricted
flexibility in identifying and selecting prospective target
acquisitions. We have not established any other specific
attributes or criteria (financial or otherwise) for prospective
target acquisitions.
In evaluating a prospective target acquisition, our management
will consider, among other factors, the following factors likely
to affect the performance of the investment:
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earnings and growth potential;
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experience and skill of management and availability of
additional personnel;
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capital requirements;
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competitive position;
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financial condition and results of operation;
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barriers to entry into the consumer products and services and
related industries;
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stage of development of the products, processes or services;
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breadth of services offered;
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degree of current or potential market acceptance of the services;
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regulatory environment of the industry; and
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costs associated with effecting the business combination.
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These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular business combination will
be based, to the extent relevant, on the above factors as well
as other considerations deemed relevant by our management in
effecting a business combination consistent with our business
objective. In evaluating a prospective target acquisition, we
will conduct an extensive due diligence review which will
encompass, among other things, a review of all environmental
issues, and a review of all relevant financial and other
information which is made available to us. This due diligence
review will be conducted either by our management or by
unaffiliated third parties we may engage, although we have no
current intention to engage any such third parties. We will also
seek to have all owners of any prospective target acquisition
execute agreements with us waiving any right, title, interest or
claim of any kind in or to any monies held in the trust account.
If any prospective business or owner refuses to execute such
agreement, it is unlikely we would continue negotiations with
such business or owner.
In the case of all possible acquisitions, we will seek to
determine whether the transaction is advisable and in the best
interests of us and our stockholders. We believe it is possible
that our attractiveness as a potential buyer of businesses may
increase after the consummation of an initial transaction and
there may or may not be additional acquisition opportunities as
we grow and integrate our acquisitions. We may or may not make
future acquisitions. Fundamentally, however, we believe that,
following an initial transaction, we could learn of, identify
and analyze acquisition targets in the same way after an initial
transaction as we will before an initial transaction. To the
extent we are able to identify multiple acquisition targets and
options as to which business or assets to acquire as part of an
initial transaction, we intend to seek to consummate the
acquisition which is most attractive and provides the greatest
opportunity for creating stockholder value. The determination of
which entity is the most attractive would be
73
based on our analysis of a variety of factors, including whether
such acquisition would be in the best interests of our security
holders, the purchase price, the terms of the sale, the
perceived quality of the assets and the likelihood that the
transaction will be consummated.
The time and costs required to select and evaluate a target
acquisition and to structure and complete the business
combination cannot presently be ascertained with any degree of
certainty. Any costs incurred with respect to the identification
and evaluation of a prospective target acquisition with which a
business combination is not ultimately completed will result in
a loss to us and reduce the amount of capital available to
otherwise complete a business combination. While we may pay fees
or compensation to third parties for their efforts in
introducing us to a potential target business upon the approval
of our board of directors, in no event, however, will we pay any
of our existing officers, directors or founding stockholders, or
any entity with which they are affiliated, any finders fee
in connection with the consummation of the initial business
combination.
Fair market value
of target acquisition
The initial target acquisition that we acquire must have a fair
market value equal to at least 80% of the amount held in trust
(net of taxes and excluding the amount held in the trust account
representing a portion of the underwriters discount) at
the time of such acquisition, subject to the conversion rights
described below, although we may acquire a target acquisition
whose fair market value significantly exceeds 80% of the amount
held in trust (net of taxes and excluding the amount held in the
trust account representing a portion of the underwriters
discount). In the event we acquire less than 100% of an
acquisition candidate, the fair market value of the 80% of the
amount held in trust requirement will be based on fair market
value of the acquired majority interest. To accomplish this, we
may seek to raise additional funds through credit facilities or
other secured financings or a private offering of debt or equity
securities if such funds are required to consummate such a
business combination, although we have not entered into any such
fund-raising arrangement and do not currently anticipate
effecting such a financing other than in connection with the
consummation of the business combination.
Prior to entering into an agreement for a target acquisition,
the fair market value of such target acquisition will be
determined by our board of directors based upon standards
generally accepted by the financial community, such as actual
and potential sales, earnings and cash flow and book value. We
do not intend to seek a third party valuation or fairness
opinion. However, in considering the entire fairness of a
business combination to our stockholders, our board of directors
may determine that an independent valuation or fairness opinion
will be necessary in satisfying its fiduciary duties under
Delaware law, including in determining the fair market value of
the acquired interests, in the event the valuation is a complex
analysis. If no opinion is obtained, our public stockholders
will be relying solely on the judgment of our board of
directors.
Possible lack of
business diversification
Our business combination must be with a target acquisition which
satisfies the minimum valuation standard at the time of such
acquisition, as discussed above. Consequently, we expect to have
the ability to effect only a single business combination,
although this process may entail the simultaneous acquisitions
of several consumer products and services businesses. Therefore,
at least initially, the prospects for our success may be
entirely dependent upon the future performance of a single
business operation. Unlike other entities that may have the
resources to complete several business combinations of entities
or assets operating in multiple industries or multiple areas of
a single industry, it is probable that we will not have the
resources to diversify our operations or benefit from the
possible spreading of risks or
74
offsetting of losses. By consummating a business combination
with only a single entity or asset, our lack of diversification
may:
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subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate
subsequent to a business combination, and
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result in our dependency upon the development or market
acceptance of a single or limited number of products, processes
or services.
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In the event we ultimately determine to simultaneously acquire
several businesses or assets and such businesses or assets are
owned by different sellers, we may need for each of such sellers
to agree that our purchase of its business or assets is
contingent on the simultaneous closings of the other acquisition
or acquisitions, which may make it more difficult for us, and
delay our ability, to complete the business combination. With
multiple acquisitions, 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 businesses or assets into a
single operating business.
Limited ability
to evaluate the target business management
Although we intend to closely scrutinize the incumbent
management of a prospective target business when evaluating the
desirability of effecting a business combination, we cannot
assure you that our assessment will prove to be correct. In
addition, we cannot assure you that new members that join our
management following a business combination will have the
necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and
directors, if any, in the target business following a business
combination cannot presently be stated with any certainty. While
our current officers and directors may remain associated in
senior management or advisory positions with us following a
business combination, they may not devote their full time and
efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with the company
after the consummation of a business combination if they are
able to negotiate employment or consulting agreements in
connection with such business combination, which would be
negotiated at the same time as the business combination
negotiations are being conducted and which may be a term of 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 the company after
the consummation of the business combination. While the personal
and financial interests of such individuals may influence their
motivation in identifying and selecting a target business, the
ability of such individuals to remain with the company after the
consummation of a business combination will not be the
determining factor in our decision as to whether or not we will
proceed with any potential business combination. Additionally,
we cannot assure you that our officers and directors will have
significant experience or knowledge relating to the operations
of the particular target business.
Following a business combination, we may seek to recruit
additional managers to supplement or replace the incumbent
management of the target business. We cannot assure you that we
will have the ability to recruit such managers, or that any such
managers we do recruit will have the requisite skills, knowledge
or experience necessary to enhance the incumbent management, if
any.
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Opportunity for
stockholder approval of business combination
Prior to the completion of our business combination, we will
submit the transaction to our stockholders for approval, even if
the nature of the acquisition is such as would not ordinarily
require stockholder approval under applicable state law. In
connection with seeking stockholder approval of a business
combination, we will furnish our stockholders with proxy
solicitation materials prepared in accordance with the Exchange
Act, which, among other matters, will include a description of
the operations of the target business and, if applicable,
historical financial statements of a target business.
In connection with the stockholder vote required to approve any
business combination, all of our founding stockholders have
agreed to vote all of their founder shares in accordance with
the majority of the shares of common stock of public
stockholders who vote at the special or annual meeting called
for the purpose of approving a business combination. Our
founding stockholders have also agreed that if they acquire
shares of common stock in this offering or following completion
of this offering, they will vote such acquired shares of common
stock in favor of a business combination. We will proceed with
the business combination only if a majority of the shares of
common stock voted by the public stockholders are voted in favor
of the business combination and public stockholders owning less
than 30% of the shares of common stock sold in this offering
exercise their conversion rights. Voting against the business
combination alone will not result in conversion of a
stockholders shares of common stock into a pro rata share
of the trust account. Such stockholder must also exercise its
conversion rights described below.
Upon the completion of our business combination, unless required
by Delaware law, the federal securities laws, and the rules and
regulations promulgated thereunder, or the rules and regulations
of an exchange upon which our securities are listed, we do not
presently intend to seek stockholder approval for any subsequent
acquisitions.
Conversion
rights
At the time we seek stockholder approval of any business
combination, we will offer to each public stockholder (but not
to our founding stockholders, either with respect to their
founder shares or any shares of common stock in this offering or
the aftermarket) the right to have such stockholders
shares of common stock converted to cash if the stockholder
votes against the business combination and the business
combination is approved and completed. Founding stockholders are
not entitled to convert any of their founder shares (and the
shares of common stock underlying any insider warrants acquired
by a founding stockholder immediately prior to this offering) or
shares of common stock acquired in or after this offering into a
pro rata share of the trust account. The actual per-share
conversion price will be equal to the amount in the trust
account, which shall include $8,500,000 from the purchase of the
insider warrants by the insider warrant holders, inclusive of
any interest (net of any taxes due on such interest, which
taxes, if any, shall be paid from the trust account, and amounts
disbursed for working capital purposes, and calculated as of two
business days prior to the consummation of the proposed business
combination), divided by the number of shares of common stock
sold in this offering. Without taking into any account interest
earned on the trust account or taxes payable on such interest,
the initial per-share conversion price would be approximately
$9.85, or $0.15 less than the
per-unit
offering price of $10.00. Because the initial per share
conversion price is $9.85 per share (plus pro rata accrued
interest net of taxes payable and amounts disbursed for working
capital purposes), which may be lower than the market price of
the common stock on the date of the conversion, there may be a
disincentive on the part of public stockholders to exercise
their conversion rights.
If a business combination is approved, stockholders that vote
against the business combination and elect to convert their
shares of common stock to cash will be entitled to receive their
pro-rata portion of the $9,000,000 ($0.30 per share) of deferred
underwriting discount held in the trust account.
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An eligible stockholder may request conversion at any time after
the mailing to our stockholders of the proxy statement and prior
to the vote taken with respect to a proposed business
combination at a meeting held for that purpose. Any request for
conversion, once made, may be withdrawn at any time up to the
date of the meeting. If a stockholder wishes to exercise his
conversion rights, he must vote against the proposed business
combination and, at the same time, demand that we convert his
shares into cash by marking the appropriate space on the proxy
card. If, notwithstanding a stockholders vote, the
proposed business combination is consummated, then such
stockholder will be entitled to receive a pro rata share of the
trust account, including any interest earned thereon as of date
which is two business days prior to the proposed consummation of
the business combination. If a stockholder exercises his
conversion rights, then he will be exchanging his shares of our
common stock for cash and will no longer own these shares of
common stock. A stockholder will only be entitled to receive
cash for these shares if he continues to hold these shares
through the closing date of the proposed business combination
and then tenders his stock certificate to us. If a stockholder
converts his shares of common stock, he will still have the
right to exercise the warrants received as part of the units
purchased in this offering in accordance with the terms hereof.
If the proposed business combination is not consummated then a
stockholders shares will not be converted into cash, even
if such stockholder elected to convert.
Liquidation if no
business combination
Our Amended and Restated Certificate of Incorporation provides
that we will continue in existence only until November 27,
2009. This provision may not be amended except in connection
with the consummation of a business combination. If we have not
completed a business combination by such date, our corporate
existence will cease except for the purposes of winding up our
affairs liquidating, pursuant to Section 278 of the
Delaware General Corporation Law. This has the same effect as if
our board of directors and stockholders had formally voted to
approve our dissolution pursuant to Section 275 of the
Delaware General Corporation Law. Accordingly, limiting our
corporate existence to a specified date as permitted by
Section 102(b)(5) of the Delaware General Corporation Law
removes the necessity to comply with the formal procedures set
forth in Section 275 (which would have required our board
of directors and stockholders to formally vote to approve our
dissolution and liquidation and to have filed a certificate of
dissolution with the Delaware Secretary of State). We view this
provision terminating our corporate existence on
November 27, 2009 as an obligation to our stockholders and
that investors will make an investment decision, relying, at
least in part, on this provision. Thus, without the affirmative
vote cast at a meeting of stockholders of at least 95% of the
common stock issued in this offering, we will not take any
action to amend or waive this provision to allow us to survive
for a longer period of time except in connection with the
consummation of a business combination.
A liquidation after our existence terminates by operation of law
would occur in the event that a business combination is not
consummated within 24 months of the consummation of this
offering. In the event we liquidate after termination of our
existence by operation of law on November 27, 2009, we
anticipate notifying the trustee of the trust account to begin
liquidating such assets promptly after such date.
Our founding stockholders have waived their rights to
participate in any distribution with respect to their founder
shares and the shares of common stock underlying any insider
warrants acquired by a founding stockholder immediately prior to
this offering upon our liquidation prior to a business
combination. However, founding stockholders who acquire shares
of common stock or warrants in or after this offering will be
entitled to a pro rata share of the trust account with respect
to such shares of common stock (including shares acquired upon
exercise of such warrants) upon the liquidation of the trust
account if we fail to consummate a business combination within
the required time period. There will be no distribution with
respect to our warrants which will expire worthless. We expect
that all costs associated with the implementation and
77
completion of our liquidation will be funded by any remaining
net assets outside of the trust fund, although we cannot assure
you that there will be sufficient funds for such purpose.
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 initial per-share liquidation price would be
approximately $9.85 (of which approximately $0.30 per share is
attributable to the underwriters discount), or $0.15 less
than the
per-unit
offering price of $10.00. There can be no assurance that any
converting stockholder will receive equal to or more than his,
her or its full invested amount. The proceeds deposited in the
trust account could, however, become subject to the claims of
our creditors which could have higher priority than the claims
of our public stockholders. We cannot assure you that the actual
per-share liquidation price will not be less than approximately
$9.85, plus interest (net of taxes payable and amounts disbursed
for working capital purposes, which taxes, if any, shall be paid
from the trust account), due to claims of creditors. Although we
will seek to have all vendors, service providers, prospective
target businesses or other entities we engage execute agreements
with us waiving any right, title, interest or claim of any kind
in or to any monies held in the trust account for the benefit of
our public stockholders, there is no guarantee that they will
execute such agreements or even if they execute such agreements
that they would be prevented from bringing claims against the
trust account including but not limited to fraudulent
inducement, breach of fiduciary responsibility or other similar
claims, as well as claims challenging the enforceability of the
waiver, in each case in order to gain an advantage with a claim
against our assets, including the funds held in the trust
account. If any third party refused to execute an agreement
waiving such claims to the monies held in the trust account, we
would perform an analysis of the alternatives available to us if
we chose not to engage such third party and evaluate if such
engagement would be in the best interest of our stockholders if
such third party refused to waive such claims. Examples of
possible instances where we may engage a third party that
refused 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 provider of required
services willing to provide the waiver. In any event, our
management would perform an analysis of the alternatives
available to it and would only enter into an agreement with a
third party that did not execute a waiver if management believed
that such third partys engagement would be significantly
more beneficial to us than any alternative. 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.
Our sponsor agreed, pursuant to an agreement with us that, if we
liquidate prior to the consummation of a business combination,
it will be liable only if a vendor, service provider,
prospective target business or other entity does not provide a
valid and enforceable waiver to any rights or claims to the
trust account as of the date of the consummation of this
offering to pay debts and obligations to creditors.
Additionally, the underwriters have agreed to forfeit any rights
or claims against the proceeds held in the trust account which
includes a portion of their underwriters discount. Based
on information we have obtained from our sponsor, we currently
believe that we have substantial means and capability to fund a
shortfall in our trust account even though we have not reserved
for such an eventuality. Specifically, we believe the fee income
from the sponsors $1.5 billion assets under
management (as of September 30, 2007) will be sufficient to
cover its indemnification obligations. We cannot assure you,
however, that we would be able to satisfy those obligations.
We will seek to reduce the possibility that our sponsor will
have to indemnify the trust account due to claims of creditors
by endeavoring to have all vendors, service providers and
prospective target businesses as well as other entities execute
agreements with us waiving any right, title, interest or claim
of any kind in or to monies held in the trust account. We also
will have access to up to $4,150,000 (comprised of $50,000
available outside of the trust account from the offering
78
proceeds and up to $4,100,000 interest income, net of taxes
payable on all interest income earned on the trust account,
which we may seek to withdraw from the trust account for working
capital purposes) with which to pay any such potential claims
(including costs and expenses incurred in connection with our
liquidation after the termination of our existence by operation
of law on November 27, 2009). The indemnification provision
is set forth in the sponsor insider letter. The sponsor insider
letter specifically sets forth that in the event we obtain a
valid and enforceable waiver of any right, title, interest or
claim of any kind in or to any monies held in the trust account
as of the consummation of this offering for the benefit of our
stockholders from a vendor, service provider, prospective target
business or other entity, the indemnification from our sponsor
will not be available. In the event that we liquidate and it is
subsequently determined that the reserve for claims and
liabilities is insufficient, stockholders who received a return
of funds from the liquidation of our trust account could be
liable for claims made by creditors.
Under the Delaware General Corporation Law, stockholders may be
held liable for claims by third parties against a corporation to
the extent of distributions received by them in a dissolution.
If the corporation complies with certain procedures set forth in
Section 280 of the Delaware General Corporation Law
intended to ensure that it makes reasonable provision for all
claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. However, as stated above, if we do not effect a
business combination by November 27, 2009, it is our
intention to make liquidating distributions to our stockholders
as soon as reasonably possible after such time period and,
therefore, we do not intend to comply with those procedures. As
such, our stockholders could potentially be liable for any
claims to the extent of distributions received by them and any
liability of our stockholders may extend well beyond the third
anniversary of such date. Because we will not be complying with
Section 280, Section 281(b) of the Delaware General
Corporation Law requires us to adopt a plan that will provide
for our payment, based on facts known to us at such time, of
(i) all existing claims, (ii) all pending claims and
(iii) all claims that may be potentially brought against us
within the subsequent ten years. Accordingly, we would be
required to provide for any claims of creditors known to us at
that time or those that we believe could be potentially brought
against us within the subsequent ten years prior to our
distributing the funds in the trust account to our public
stockholders. We have not assumed that we will have to provide
for payment on any claims that may potentially be brought
against us within the subsequent ten years due to the
speculative nature of such an assumption. 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 accountants, lawyers,
investment bankers, etc.) or potential target businesses.
If we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us which 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 to our public stockholders at
least $9.85 per share, without taking into account any interest
earned on the trust account (net of any taxes due on such
interest, which taxes, if any, shall be paid from the trust
account). Additionally, if we are forced to file a bankruptcy
case or an involuntary bankruptcy case is filed against us which
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
79
seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held
in the trust account to our public stockholders promptly after
the termination of our corporate existence, this may be viewed
or interpreted as giving preference to our public stockholders
over any potential creditors with respect to access to or
distributions from our assets. Furthermore, our board may be
viewed as having breached its fiduciary duty to our creditors
and/or
may
have acted in bad faith, and thereby exposing itself and our
company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the
claims of creditors. We cannot assure you that claims will not
be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from
the trust account only in the event of our liquidation or if
they seek to convert their respective shares of common stock
into cash upon a business combination which the stockholder
voted against and which is completed by us. In no other
circumstances will a stockholder have any right or interest of
any kind to or in the trust account. Voting against the business
combination alone will not result in conversion of a
stockholders shares of common stock into a pro rata share
of the trust account. Such stockholder must have also exercised
its conversion rights described above.
Competition
We expect to encounter intense competition from other entities
having a business objective similar to ours, including other
blank check companies and other entities, domestic and
international, competing for the type of businesses that we may
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 consumer
products and services related and consumer products businesses.
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. Our ability
to compete with respect to large acquisitions will be limited by
our available financial resources, giving a competitive
advantage to other acquirers with greater resources.
Our competitors may adopt transaction structures similar to
ours, which would decrease our competitive advantage in offering
flexible transaction terms. In addition, the number of entities
and the amount of funds competing for suitable investment
properties, assets and entities may increase, resulting in
increased demand and increased prices paid for such investments.
If we pay higher prices for a target business, our profitability
may decrease and we may experience a lower return on our
investments. Increased competition may also preclude us from
acquiring those properties, assets and entities that would
generate the most attractive returns to us.
Further, the following may not be viewed favorably by certain
target acquisitions:
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our obligation to seek stockholder approval of a business
combination or obtain the necessary financial information to be
included in the proxy statement to be sent to stockholders in
connection with such business combination may delay or prevent
the completion of a transaction;
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our obligation to convert into cash shares of common stock held
by our public stockholders in certain instances may reduce the
resources available to us for a business combination;
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the requirement to acquire assets or an operating business that
has a fair market value equal to at least 80% of the amount held
in trust (net of taxes and excluding the amount held in the
trust account representing a portion of the underwriters
discount) at the time of the acquisition could require us to
acquire several assets or closely related operating businesses
at the same time, all of which sales would be contingent on the
closings of the other sales, which could make it more difficult
to consummate the business combination; and
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our outstanding warrants, and the potential future dilution they
represent, may not be viewed favorably by certain target
businesses.
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If we succeed in effecting a business combination, there will
be, in all likelihood, intense competition from competitors of
the target acquisition. We cannot assure you that, subsequent to
a business combination, we will have the resources or ability to
compete effectively.
Facilities
We maintain our principal executive offices at 1370 Avenue of
the Americas, New York, NY 10019.
Employees
We currently have three executive officers: Jason N. Ader, Scott
LaPorta and Andrew Nelson. We anticipate that we will have
access to the services of other personnel of our sponsor on an
as-needed basis, although there can be no assurances that any
such personnel will be able to devote sufficient time, effort or
attention to us when we need it. See
ManagementInvestment Committee and
ManagementServices by Our Sponsor Team. Other
than Scott LaPorta, none of our officers have entered into
employment agreements with us and none of our officers,
including Mr. LaPorta, are obligated to devote any specific
number of hours to our matters and intend to devote only as much
time as they deem necessary to our affairs. The amount of time
they will devote in any time period will vary based on whether
we are in the process of (i) seeking a potential target
acquisition, (ii) performing due diligence on one or more
target acquisitions or (iii) completing the business
combination for a selected target acquisition. Our officers may
spend more time than others, or no time at all, on the various
phases of the acquisition process depending on their competing
time requirements apart from our business and their particular
areas of expertise. We do not intend to have any full-time
employees prior to the consummation of a business combination.
Periodic
Reporting and Audited Financial Statements
We will register our units, common stock and warrants under the
Exchange Act, and will have ongoing 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 audited financial statements reported on by our
independent registered public accountants.
Our management will provide stockholders with audited financial
statements of the properties to be acquired as part of the proxy
solicitation materials sent to stockholders to assist them in
assessing each specific target acquisition we seek to acquire.
While the requirement of having available financial information
for the target acquisition may limit the pool of potential
acquisition candidates, given the broad range of target
acquisitions with which we may consummate a business
combination, we do not believe that the narrowing of the pool
will be material.
We will be required to comply with the internal control
requirements of the Sarbanes-Oxley Act for each fiscal year
ending on or after December 15, 2007. A target business 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 litigation currently pending or, to our knowledge,
contemplated against us or any of our officers or directors in
their capacity as such.
81
COMPARISON
TO OFFERINGS OF BLANK CHECK COMPANIES
The following table compares and contrasts the terms of our
offering and the terms of an offering of blank check companies
under Rule 419 promulgated under the Securities Act
assuming that the gross proceeds, underwriting discounts and
underwriting expenses for the Rule 419 offering are the
same as this offering and that the underwriters will not
exercise their over-allotment option. None of the terms of a
Rule 419 offering will apply to this offering.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Escrow of offering proceeds
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$295,450,000 of the net offering proceeds will be deposited into
a trust account at JPMorgan Chase Bank, N.A., maintained by
Continental Stock Transfer & Trust Company, acting as
trustee. These proceeds consist of $286,450,000 from the net
proceeds payable to us and $9,000,000 of the proceeds
attributable to the underwriters discount.
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$258,300,000 of the offering proceeds would be required to be
deposited into either an escrow account with an insured
depositary institution or in a separate bank account established
by a broker-dealer in which the broker- dealer acts as trustee
for persons having the beneficial interests in the account.
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Investment of net proceeds
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The $295,450,000 of net offering proceeds held in trust will
only be invested in U.S. government
securities within the meaning of
Section 2(a)(16) of the 1940 Act with a maturity of
180 days or less, or in registered money market funds
meeting certain conditions under
Rule 2a-7
promulgated under the 1940 Act.
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Proceeds may be invested only in specified securities such as a
registered money market fund meeting conditions of the 1940 Act
or in securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.
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Limitation on fair value or net assets of target acquisition
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The initial target acquisition that we acquire must have a fair
market value equal to at least 80% of the amount held in trust
(net of taxes and excluding the amount held in the trust account
representing a portion of the underwriters discount) at
the time of such acquisition.
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We would be restricted from acquiring a target acquisition
unless the fair value of such business or net assets to be
acquired represent at least 80% of the maximum offering
proceeds.
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Trading of securities issued
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The units will begin trading on or promptly after the
consummation of this offering. The common stock and warrants
comprising the units
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No trading of the units or the underlying common stock and
warrants would be permitted until the completion of a business
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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will begin separate trading five business days (or as soon as
practicable thereafter) following the earlier to occur of
(1) the expiration of the underwriters over-
allotment option and (2) their exercise in full, subject in
either case to our having filed a Current Report on
Form 8-K
as referenced below and having issued a press release announcing
when such separate trading will begin.
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combination. During this period, the securities would be held
in the escrow or trust account.
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In no event will the common stock and warrants begin to trade
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
this
Form 8-K
promptly after the consummation of this offering.
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Exercise of the warrants
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The warrants cannot be exercised until the later of the
completion of a business combination and one year from the
effective date of the registration statement and, accordingly,
will be exercised only after the trust account has been
terminated and distributed.
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The warrants could be exercised prior to the completion of a
business combination, but securities received and cash paid in
connection with the exercise would be deposited in the escrow or
trust account.
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Election to remain an
investor
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We will give our stockholders the opportunity to vote on our
business combination, and in the event that a majority of the
shares of common stock sold in this offering vote in favor of
the proposed business combination, the business combination will
be approved. In connection with seeking stockholder approval, we
will send each stockholder
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A prospectus containing information 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 the post-effective amendment, to
decide
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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a proxy statement containing information required by the SEC. A
stockholder who votes against the transaction and who follows
the procedures described in this prospectus is given the right
to convert his, her or its shares of common stock into his, her
or its pro rata share of the trust account; provided that if
holders of 30% or more of our outstanding common stock both
elect to convert their shares of common stock and vote against
the business combination, we will not consummate such business
combination. However, a stockholder who does not follow these
procedures or a stockholder who does not take any action would
not be entitled to the return of any funds. Although we will not
distribute copies of the Current Report on
Form 8-K
to individual unit holders, the Current Report on
Form 8-K
will be available on the SECs website. See the section
appearing elsewhere in the prospectus entitled Where
You Can Find Additional Information.
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whether 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 would automatically be
returned to the stockholder. Unless a sufficient number of
investors elect to remain investors, all of the deposited funds
in the escrow account must be returned to all investors and none
of the securities will be issued.
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Business combination
deadline
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If we are unable to complete a business combination by
November 27, 2009, our existence will automatically
terminate and as promptly as practicable thereafter the trustee
will commence liquidating the investments constituting the trust
account and distribute the proceeds to our public stockholders,
including any interest earned on the trust account not used to
cover liquidation expenses,
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If an acquisition has not been consummated within
18 months after the effective date of the registration
statement, funds held in the trust or escrow account would be
returned to investors.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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net of income taxes payable on such interest and after
distribution to us of interest income on the trust account
balance as described in the prospectus. However, if we complete
a business combination within this time period, we will amend
this provision to allow for our perpetual existence following
such business combination.
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Release of funds
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The proceeds held in the trust account will not be released
until the earlier of the completion of a business combination or
our liquidation upon failure to effect a business combination
within the allotted time, except that to the extent the trust
account earns interest or we are deemed to have earned income in
connection therewith, we will be permitted to seek disbursements
from the trust account to pay any federal, state or local tax
obligations related thereto. While we intend, in the event of
our liquidation, to distribute funds from our trust account to
our public stockholders as promptly as possible, the actual time
at which our public stockholders receive their funds will be
longer than the five business days under a Rule 419
offering. For a detailed discussion of the timing involved in a
return of funds from our trust account to our public
stockholders, see Proposed BusinessLiquidation if No
Business Combination.
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The proceeds held in the escrow account, including all of the
interest earned thereon (net of taxes payable) would not be
released until the earlier of the completion of a business
combination or the failure to effect a business combination
within 18 months. See Risk FactorsRisks
associated with our businessYou will not be entitled to
protections normally afforded to investors of blank check
companies. In the event a business combination was not
consummated within 18 months, proceeds held in the trust
account would be returned within five business days of such
date.
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Executive
Officers and Directors
Our current executive officers and directors are as follows:
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Name
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Age
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Position
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Jason N. Ader
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Chairman of the Board
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Scott LaPorta
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Chief Executive Officer, President and Director
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Andrew Nelson
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Chief Financial Officer and Assistant Secretary
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Robert M. Foresman
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Director
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Carl H. Hahn
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Director
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Philip A. Marineau
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Director
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Marc Soloway
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Director
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Steven Westly
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Director
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Jason N. Ader
is our Chairman of the Board. Mr. Ader
founded and has served as the President and Chief Executive
Officer of Hayground Cove Asset Management LLC, or Hayground
Cove, a New York-based investment management firm with
approximately $1.5 billion of assets across funds and
accounts under management as of September 30, 2007.
Mr. Ader is the sole member of Hayground Cove Asset
Management LLC, the managing member of Hayground Cove
Fund Management LLC, which is the general partner of
Hayground Cove Associates LP, the investment manager for
Hayground Cove Institutional Partners LP, Hayground Cove
Overseas Partners Ltd., Hayground Cove Turbo Fund LP,
Hayground Cove Turbo Fund Ltd., Hayground Cove Equity
Market Neutral Fund LP, Hayground Cove Equity Market
Neutral Fund Ltd., Atlas Master Fund Ltd., First New
York Securities LLC, TE Hayground Cove Portfolio Ltd., and Man
Mac Lucendro 5B Limited. Mr. Ader also serves as Chairman
of Hayground Coves Investment Committee and Co-Chairman of
Hayground Coves Risk Committee. Since 2006, Mr. Ader
has also served as Chairman of the board of India Hospitality
Corp., a blank check company formed to acquire Indian businesses
or assets in the hospitality, leisure, tourism, travel and
related industries, which consummated the acquisition of
SkyGourmet and Mars Restaurants in July 2007. Mr. Ader
has a strong asset management record and, prior to founding
Hayground Cove, was a Senior Managing Director at Bear
Stearns & Co. Inc., from 1995 to 2003, where he
performed equity and high yield research for more than
50 companies in the gaming, lodging and leisure industries.
From 1993 to 1995, Mr. Ader served as a Senior Analyst at
Smith Barney covering the gaming industry. From 1990 to 1993,
Mr. Ader served as a buy-side analyst at Baron Capital,
where he covered the casino industry. Mr. Ader was rated as
one of the top ranked analysts by Institutional Investor
Magazine for nine consecutive years from 1994 to 2002.
Mr. Ader has a B.S. degree in Economics from New York
University and an M.B.A. in Finance from New York University,
Stern School of Business.
Scott LaPorta
is our Chief Executive Officer and
President and a member of our board of directors.
Mr. LaPorta is also a managing director of Hayground Cove,
our sponsor. Mr. LaPorta has a strong acquisition,
turnaround, brand repositioning and investment background. Prior
to joining us and Hayground Cove, he was an Executive Vice
President of Tennenbaum Capital Partners, LLC from April 2007 to
July 2007 and, prior to that, President of Levi
Strauss & Co.s brands (Dockers, Levis, and
Signature) in Mexico and Canada as well as Levi Strauss
Signature in the United States from October 2003 to March 2007.
His prior responsibilities at Levi Strauss included Senior Vice
President of Sales, Strategy and Finance for Levi Strauss North
America where he was the lead turn around strategist from
February 2002 to October 2003. Mr. LaPorta has prior
experience as the Chief Financial Officer for Park Place
Entertainment overseeing acquisitions, development, investor
relations, corporate finance and financial planning from 1998 to
2001 and, prior to that, as the Treasurer of Hilton Hotels
Corporation from 1996 to 1998. Before joining Hilton,
Mr. LaPorta held a series of financial positions at the
Marriott companies progressing to Treasurer of Host Marriott
Corporation from 1993 to 1996. Mr. LaPorta earned a
Bachelors degree in Accounting from the University of
Virginia and a Masters degree in Business Administration
from
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Vanderbilt University. Prior to attending business school he was
a senior accountant at Price Waterhouse.
Andrew Nelson
is our Chief Financial Officer and
Assistant Secretary. Mr. Nelson has also served as Vice
President of Finance & Accounting at Hayground Cove
since September 2005. In such capacity, Mr. Nelson is
responsible for the finance and accounting functions of the
firm, provides financial reporting and assists with risk
management. Mr. Nelson is also a member of Hayground
Coves Risk Committee. From 2006 to 2007, Mr. Nelson
also served as controller of India Hospitality Corp. Prior to
joining Hayground Cove, Mr. Nelson worked at Context
Capital Management, a hedge fund located in San Diego,
California specializing in the convertible arbitrage strategy,
as a Senior Operations Consultant from September 2004 to August
2005. Prior to that, he was a Fund Associate at Hedgeworks
LLC from September 2002 to August 2004. Mr. Nelson
graduated from the University of Vermont with a B.S. in
Business. Mr. Nelson is a Charted Financial Analyst and is
enrolled in the Executive M.B.A. Program at New York University.
Robert M. Foresman
is a member of our board of directors.
Since 2006, Mr. Foresman has been the Deputy Chairman, Head
of Origination and Coverage of Renaissance Capital, the leading
independent investment banking firm operating in Russia, the
Commonwealth of Independent States (CIS) and Sub Saharan Africa.
From 2001 to 2006, Mr. Foresman was Chairman of the
Management Board, Russia/CIS of Dresdner Kleinwort Wasserstein,
a London-based investment bank. Prior to that, he worked in the
Moscow office of ING Barings, another London-based investment
bank, as the Head of Investment Banking, Russia/CIS. In
addition, from 1993 to 1997, Mr. Foresman was the Head of
Ukraine Privatization Advisory Projects in Kiev and then an
Investment Officer in Washington, DC for the International
Finance Corporation, a member of the World Bank Group.
Mr. Foresman received an M.A. in Regional Studies from
Harvard University Graduate School of Arts & Sciences
in 1993 and a Bachelor of Arts in International Relations and
Russian Studies from Bucknell University in 1990. Furthermore,
he received a Certificate from Moscow Energy Institute in 1989.
Carl H. Hahn, Ph.D.
is a member of our board of
directors. Since June 1996, Dr. Hahn has been a private
investor. From 1982 to 1992, Dr. Hahn was Chairman of the
Board of Management of Volkswagen AG, a leading global
automobile manufacturer. Prior to that, Dr. Hahn was
Chairman of the Board of Management of Continental Gummi-Werke
AG, Hanover, a leading international rubber and tire
manufacturer, from 1972 to 1981. From 1954 to 1971,
Dr. Hahn held various leadership positions at Volkswagen,
including Export Promotion Manager of Volkswagenwerk GmbH and
Chief Executive Officer of Volkswagen of America, Inc. He was
also a member of the Board of Management of Volkswagenwerk AG,
responsible for worldwide sales. Dr. Hahn began his
professional career in 1953 as Administrator at the European
Productivity Agency of the Organisation for European Economic
Cooperation (OEEC) in Paris. He is Honorary Chairman of Audi,
Skoda and Seat, and a member of the Supervisory Boards of
HAWESKO in Germany. In addition, he is a Director of Perot
Systems Corporation in the United States (since April
1993) and serves as a member of the International Advisory
Board of Textron/USA. Furthermore he is Professor of
Industrial Corporate Strategy at the University of
Saxony at Zwickau as well as a member of the Lauder Institute of
Management at the Wharton School of Business of University of
Pennsylvania and of the International Council of the Salk
Institute, California. Eight universities in Germany and other
countries have honored him with honorary academic degrees.
Austria, Belgium, Brazil, Italy, Republic of Kyrgyzstan, Spain,
South Africa, the Federal Republic of Germany as well as the
State of Lower Saxony and Saxony have granted him medals of
honour. Dr. Hahn studied Business Administration at the
Universities of Cologne and Zurich, and subsequently Economics
at Bristol University. He then attended the Institut des
Études Politiques, Paris (Certificat dEtudes
Politiques). He obtained his degree of Doctor of Economics at
the University of Berne, Switzerland.
Philip A. Marineau
is a member of our board of directors.
From September 1999 to November 2006, Mr. Marineau was the
President and Chief Executive Officer of Levi
Strauss & Co. (LS&Co.). Mr. Marineau has
many years of experience in consumer products marketing
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and management. Prior to joining LS&Co., Mr. Marineau
was the President and Chief Executive Officer of Pepsi-Cola
North America from 1997 to 1999. From 1996 to 1997,
Mr. Marineau was President and Chief Operating Officer of
Dean Foods Company. Prior to Dean Foods, Mr. Marineau was a
23-year
veteran of the Quaker Oats Company and its President and Chief
Operating Officer from 1993 to 1996. Currently,
Mr. Marineau is Chairman of the Board of Shutterfly, Inc.
and is a board member of the Meredith Corporation, where he is
the Chairman of its audit committee, Kaiser Permanente, where he
is the Chairman of its compensation committee, the Golden Gate
National Parks Conservancy, the Holy Family Day Home and the
American Institute of Public Service. He also is on the advisory
boards of Northwestern Universitys Kellogg School of
Management and the Vietnam Veterans Memorial Fund.
Mr. Marineau received his Master of Business Administration
from Northwestern University in 1970. He received a Bachelor of
Arts in history at Georgetown University in 1968.
Marc Soloway
is a member of our board of directors.
Mr. Soloway is President of Hayground Cove Overseas
Partners Ltd where he is responsible for assisting the Chief
Executive Officer in the portfolio management process as well as
general firm decisions. Mr. Soloway also serves as
Co-Chairman of Hayground Coves Risk Committee and is a
member of Hayground Coves Investment Committee. He is also
responsible for analyzing investment opportunities in the
retail, apparel, technology and Internet sectors. Prior to
joining Hayground Cove in 2003, Mr. Soloway was an Equity
Research Associate at Smith Barney focusing on Discount and
Department Stores from 2002 to 2003. Prior to joining Smith
Barney, he was a Food and Drug Store Equity Research Associate
at Bear Stearns & Co. Inc. from 2001 to 2002, as well
as a Senior Analyst in the Corporate Finance Division of May
Department Stores Co. from 1997 to 1999. He also has experience
working as an Assistant Buyer for the Famous Barr Division of
MDSC during 1997. Mr. Soloway holds a B.S. in Management
from Purdue University and an M.B.A. from Washington University.
Mr. Soloway is a Chartered Financial Analyst.
Steven Westly
is a member of our board of directors.
Mr. Westly founded and has served as the Chief Executive
Officer of The Westly Group, a venture capital firm, since 2007
and, prior to that, he served as the Controller and Chief Fiscal
Officer of the State of California from 2003 to 2007. As the
Controller, he chaired the State Lands Commission and also
served on various boards and commissions, including CalPERS and
CalSTRS, the nations two largest public pension funds.
Before running for office, Mr. Westly served as the senior
vice president of marketing, business development, M&A, and
international of eBay, an online auction company, from 1997 to
2000. Mr. Westly has also served as a senior executive for
a number of Silicon Valley companies over a twenty-year period,
including WhoWhere (from 1995 to 1996), the nations
leading personal search directory, and Codd & Date
(from 1990 to 1994), a relational database consulting firm with
offices in five countries. Mr. Westly began his career in
Washington, D.C., where he worked first on Capitol Hill and
later in the Office of Conservation and Solar at the
U.S. Department of Energy. Mr. Westly then returned to
California to become special assistant to the president of the
California Public Utilities Commission and served in such
capacity from 1980 to 1981. Mr. Westly also worked for four
years as a program manager for Sprint from 1983 to 1987.
Mr. Westly has a B.A. from Stanford University and an
M.B.A. from Stanfords Graduate School of Business, where
he served on the faculty for five years.
Employment
Agreement with Scott LaPorta
Effective as of August 1, 2007, we entered into an
employment agreement with Mr. LaPorta. The agreement is
effective until the earlier of (i) two years after the
completion of this offering and (ii) the closing of a
qualifying business combination. The agreement may be renewed
for an additional one-year term.
Pursuant to the agreement, Mr. LaPorta has waived all
rights, interests and claims to the amounts in deposit in the
trust account. The agreement also contains non-competition and
confidentiality provisions which limit Mr. LaPorta from
competing against us and using
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information he obtains from us after the termination of his
employment with us. Mr. LaPorta receives indemnification
from us for liabilities arising from the services he provides to
us under the agreement, other than those liabilities due to
fraud, willful misconduct or gross negligence on his part. We
will purchase and maintain an insurance policy on behalf of
Mr. LaPorta against such liabilities.
In connection with entering into the agreement, Mr. LaPorta
obtained an option to purchase 475,000 shares of founder
shares at a purchase price of $0.001 per share from our sponsor
and its affiliates, which option will vest on the date (the
Trigger Date) that is one year after the closing of
a qualifying business combination, but the vesting will occur
only if the appreciation of the per share price of our common
stock is either (i) greater than 1x the Russell 2000
hurdle rate on the Trigger Date or (ii) exceeds the Russell
2000 hurdle rate for 20 consecutive trading days after the
Trigger Date. The Russell 2000 hurdle rate means the Russell
2000 index performance over the period between the completion of
this offering and the Trigger Date.
Director
Independence
Our board of directors has determined that
Messrs. Foresman, Hahn, Marineau and Westly are
independent directors within the meaning of
Rule 121(A) of the American Stock Exchange Company Guide
and
Rule 10A-3
promulgated under the Securities and Exchange Act of 1934, as
amended.
Investment
Committee
Effective upon consummation of this offering, we will form an
investment committee to advise and consult with our management
team with respect to our investment policies, financing and
leveraging strategies and investment guidelines. The initial
members of the investment committee will be Jason N. Ader, the
Chairman of our board of directors, who will serve as the
initial chairman of the committee, Scott LaPorta, our Chief
Executive Officer, President and a member of our board of
directors, and Marc Soloway, a member of our board of directors.
At this time, we have no plans to select additional committee
members nor do we have any understanding that members of the
investment committee must be associated with our sponsor.
Mr. LaPorta will be responsible for analyzing investment
opportunities and will benefit from Mr. Aders and
Mr. Soloways investment experience at Hayground Cove
Asset Management. The Committee will meet from time to time to
discuss and assess potential business combinations.
Services by Our
Sponsor Team
Our sponsor has agreed to provide us various services in
connection with our search for a target business or businesses
pursuant to a services agreement. See Certain
Relationships and Related Transactions Services
Agreement with Hayground Cove. We believe that our ability
to leverage the experience of our sponsors team will
provide us an advantage in sourcing and closing a business
combination. Members of our sponsor team that will be assisting
us include:
Jennifer Albrecht
She is Vice President and Research
Analyst at Hayground Cove Asset Management LLC. In such
capacity, Ms. Albrecht is responsible for analyzing
investments in the retail, apparel and Internet sectors. Prior
to joining Hayground Cove, Ms. Albrecht worked at Satellite
Asset Management as a Research Analyst. Prior to working at
Satellite Asset Management, she was a Research Assistant at
Smith Barney covering specialty retailers. She received a B.A.
from the University of Virginia. Ms. Albrecht is also a CFA
Level Three Candidate.
Mira Cho
She is Research Analyst at Hayground Cove
Asset Management LLC. In such capacity, Ms. Cho is
responsible for analyzing investment opportunities in the
retail, apparel, Internet and technology industries. Prior to
joining Hayground Cove, she was a consultant with Factset
Research Systems, a supplier of online financial and economic
database services, and a
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Research Analyst with Guideline, Inc., a provider of customized
business research and analysis. Ms. Cho graduated from
Johns Hopkins University with a B.A. in Public Health Studies
with Economics concentration. Ms. Cho is also a CFA Level
Two Candidate.
Evan Wax
He is Head Trader at Hayground Cove Asset
Management LLC. In such capacity, Mr. Wax manages all
operations of the trading desk. Mr. Wax also serves on both
Hayground Coves Investment Committee and Risk Committee.
Prior to joining Hayground Cove, Mr. Wax worked as a
Financial Analyst at Goldman Sachs. Prior to working at Goldman
Sachs, Mr. Wax worked at Williams Trading LLC. Mr. Wax
graduated from Yale University where he received a B.A. in
Economics.
Laura Conover
She is Chief Compliance
Officer & Vice President of Operations at Hayground
Cove Asset Management LLC. In such capacity, Ms. Conover is
responsible for compliance oversight and the
operations & back office functions of the firm.
Ms. Conover is also a member of Hayground Coves
Investment Committee. Prior to joining Hayground Cove,
Ms. Conover was a Research Assistant for Mr. Ader at
Bear Stearns & Co. Ms. Conover graduated from
Kean University where she received a B.A. in Finance.
Timothy Collins, Jr.
He is Managing Director,
Investor Relations at Hayground Cove Asset Management LLC. In
such capacity, Mr. Collins is responsible for all areas of
client services and marketing. Prior to joining Hayground Cove
in March 2007, he was a Senior Managing Director at Bear
Stearns & Co and, prior to that, he was a Senior
Institutional Salesman at Schroders. Mr. Collins graduated
from the Leeds School of Business at the University of Colorado
with B.S. in Finance.
Audit
Committee
Effective upon consummation of this offering, we will establish
an audit committee of the board of directors, which we believe
will consist of Messrs. Hahn, Westly and Marineau.
Mr. Westly will serve as the chairman of our audit
committee. The independent directors we appoint to our audit
committee will each be an independent member of our board of
directors, as defined by the rules of the SEC. The audit
committees duties, which are specified in our Audit
Committee Charter, include, but are not limited to:
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serving as an independent and objective party to monitor our
financial reporting process, audits of our financial statements
and internal control system;
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reviewing and appraising the audit efforts and independence of
our independent registered public accounting firm and internal
finance department; and
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providing an open avenue of communications among our independent
registered public accounting firm, financial and senior
management, our internal finance department, and the board of
directors.
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Financial Experts
on Audit Committee
The audit committee will at all times be composed exclusively of
independent directors who are financially
literate, meaning they are able to read and understand
fundamental financial statements, including a companys
balance sheet, income statement and cash flow statement.
In addition, the committee has, and will continue to have, at
least one member who has past employment experience in finance
or accounting, requisite professional certification in
accounting, or other comparable experience or background that
results in the individuals financial sophistication. The
board of directors has determined that Mr. Westly satisfies
the definition of financial sophistication and also qualifies as
an audit committee financial expert, as defined
under the SECs rules and regulations.
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Nominating
Committee
Effective upon consummation of this offering, we will establish
a nominating committee of the board of directors, which we
believe will consist of Messrs. Marineau and Westly, each
of whom is an independent director as defined by the rules of
the American Stock Exchange and the SEC. Mr. Marineau will
serve as the chairman of our nominating committee. The
nominating committee is responsible for overseeing the selection
of persons to be nominated to serve on our board of directors.
The nominating committee considers persons identified by its
members, management, stockholders, investment bankers and others.
The guidelines for selecting nominees, which are specified in
the nominating committee charter, generally provide that persons
to be nominated should be actively engaged in business
endeavors, have an understanding of financial statements,
corporate budgeting and capital structure, be familiar with the
requirements of a publicly traded company, be familiar with
industries relevant to our business endeavors, be willing to
devote significant time to the oversight duties of the board of
directors of a public company, and be able to promote a
diversity of views based on the persons education,
experience and professional employment. The nominating committee
evaluates each individual in the context of the board as a
whole, with the objective of recommending a group of persons
that can best implement our business plan, perpetuate our
business and represent stockholder interests. The nominating
committee may require certain skills or attributes, such as
financial or accounting experience, to meet specific board needs
that arise from time to time. The nominating committee does not
distinguish among nominees recommended by stockholders and other
persons.
Code of Conduct
and Ethics
We have adopted a code of conduct and ethics applicable to our
directors, officers and employees in accordance with applicable
federal securities laws and the rules of the American Stock
Exchange.
Compensation for
Officers and Directors
Other than equity issuances as set forth under Certain
Relationships and Related Party Transactions, no executive
officer has received any cash or other compensation from us for
services rendered to us. Messrs. Ader, LaPorta and Nelson
are employed by our sponsor and compensated by our sponsor for
services provided as employees of our sponsor, including in
connection with this offering. No finders fees will be paid to
any of our existing officers, directors, founding stockholders
or any of their respective affiliates, prior to or in connection
with a business combination. However, such individuals and
entities will be reimbursed for any out-of-pocket expenses
incurred in connection with activities on our behalf such as
identifying potential target acquisitions and performing due
diligence on suitable business combinations. After a business
combination, such individuals may be paid consulting, management
or other fees from target businesses, with any and all amounts
being fully disclosed to stockholders, to the extent known, in
the proxy solicitation materials furnished to the stockholders.
There is no limit on the amount of these out-of-pocket expenses
and there will be no review of the reasonableness of the
expenses by anyone other than our board of directors, which
includes persons who may seek reimbursement, or a court of
competent jurisdiction if such reimbursement is challenged. Our
board does not intend to seek a third-party evaluation in
connection with a business combination, however, our board
intends to have our audit committee, which is comprised of
independent directors, review the reasonableness of significant
out-of-pocket expenses incurred by the management team during
its search.
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Conflicts of
Interest
Potential investors should be aware of the following potential
conflicts of interest:
None of our officers and directors are required to commit their
full time to our affairs and, accordingly, they may have
conflicts of interest in allocating their 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 that may be appropriate for presentation to us as
well as the other entities with which they are affiliated. They
may have conflicting fiduciary duties in determining to which
entity a particular business opportunity should be presented. In
the event that our directors or officers were to take any action
that would compete with us in our search for a business, we
would take appropriate action, including potentially removing
such person from our management team or board, as applicable.
However no formal procedures have been established if such
conflicts arise. For a complete description of our
managements other affiliations, see the discussion below
as well as the previous section entitled
ManagementDirectors and Executive Officers and
Risk FactorsRisks Related to Our Business. Our
officers and directors currently are, and may in the future
become affiliated with additional entities that are, engaged in
business activities similar to those intended to be conducted by
us and, accordingly, may have conflicts of interest in
determining to which entity a particular business opportunity
should be presented. Such officers and directors may
become subject to conflicts of interest regarding us and other
business ventures in which they may be involved, which conflicts
may have an adverse effect on our ability to consummate a
business combination. Currently, neither Hayground nor any of
our officers and directors owes any fiduciary duty to present a
business opportunity that would be suitable to us to anyone
prior to us.
Our officers and directors are not restricted from forming or
becoming affiliated with entities, including other blank check
companies or similar entities, engaged in business activities
similar to those intended to be conducted by our company prior
to the business combination. However, our directors and officers
will not seek any business opportunity that would conflict with
our search for an acquisition candidate, which would include any
involvement in a blank check company that is potentially seeking
acquisition candidates in the global consumer products and
services industry.
Since substantially all of the founding stockholders
founder shares will be subject to a
lock-up
agreement with our underwriters, which agreement will expire
only if a business combination is successfully completed, and
since the founding stockholders may own securities which will
become worthless if a business combination is not consummated,
our board, whose members are founding stockholders, may have a
conflict of interest in determining whether a particular target
acquisition is appropriate to effect a business combination.
Additionally, members of our executive management may enter into
consulting, asset management or employment agreements with us as
part of a business combination, pursuant to which they may be
entitled to compensation for their services. The personal and
financial interests of our directors and officers may influence
their motivation in identifying and selecting a target
acquisition, timely completing a business combination and
securing the release of their stock.
We will not pursue an acquisition of an affiliate of our sponsor
or of any of our officers or directors, including portfolio
companies and other investments or interests held by our
sponsor, officers and directors. Other than with respect to the
business combination, we have not adopted a policy that
expressly prohibits our directors, officers, security holders or
affiliates from having a direct or indirect pecuniary interest
in any investment to be acquired or disposed of by us or in any
transaction to which we are a party or have an interest.
Accordingly, such parties may have an interest in certain
transactions in which we are involved, and may also compete with
us.
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Our founding stockholders may purchase shares of common stock as
part of the units sold in this offering or in the open market.
All of the founding stockholders have agreed to vote all their
shares of common stock owned by them prior to this offering in
accordance with the majority of shares of common stock held by
public stockholders who vote at a meeting with respect to a
business combination and any shares of common stock acquired by
them in or after this offering in favor of a business
combination.
If we were to make a deposit, down payment or fund a no
shop provision in connection with a potential business
combination, we may have insufficient funds available outside of
the trust to pay for due diligence, legal, accounting and other
expenses attendant to completing a business combination. In such
event, the founding stockholders may have to incur such expenses
in order to proceed with the proposed business combination. As
part of any such business combination, such founding
stockholders may negotiate the repayment of some or all of any
such expenses, without interest or other compensation which, if
not agreed to by the target business management, could
cause our management to view such potential business combination
unfavorably, thereby resulting in a conflict of interest.
If our management negotiates to be retained post business
combination as a condition to any potential business
combination, their financial interests, including compensation
arrangements, could influence their motivation in selecting,
negotiating and structuring a transaction with a target
business, and such negotiations may result in a conflict of
interest. In the event that any employment or consulting
agreements are proposed to be entered into as a term of a
business combination, such arrangement will be required to be
approved by a majority of the disinterested members of our board
of directors.
In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present
business opportunities to a corporation if:
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the corporation could financially undertake the opportunity;
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the opportunity is within the corporations line of
business; and
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it would not be fair to the corporation and its stockholders for
the opportunity not to be brought to the attention of the
corporation.
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Accordingly, as a result of certain other business affiliations
and as more fully discussed below, our officers and directors
may have similar legal obligations relating to presenting
business opportunities meeting the above-listed criteria to
multiple entities in which they also serve as officers
and/or
directors. In addition, conflicts of interest may arise when our
board evaluates a particular business opportunity with respect
to the above-listed criteria. Although neither our founder nor
our officers and directors intend to seek any business
opportunity that would present a conflict with us, no formal
procedures have been established to determine how conflicts of
interest that may arise due to duties or obligations owed to
other entities will be resolved. However, we expect the
disinterested members of our board to determine whether a
conflict exists and a majority of the disinterested members of
our board will be required to approve any such affiliate
transaction.
Each of our officers and directors actively manages his or her
personal investments, some of which are in the global consumer
products and services industry. We are not precluded from
acquiring a company in which our officers and directors have
made an investment. Although there are no arrangements,
understandings or agreements regarding the priorities and
preferences assigned to us as compared to the personal
investments of our officers and directors, we believe that we
will receive priority regarding any business opportunities
since, except as described above, none our officers and
directors owes fiduciary duties to other entities.
In addition to both statutory and common law obligations of
fiduciary responsibility, our officers and directors have agreed
to give the company priority regarding any business
opportunities, except as described above. In order to minimize
potential conflicts of interest which may arise from other
corporate affiliations that may arise in the future, prior to
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consummation of this offering, each of our officers and
directors has agreed, except as described above, until the
earliest of our consummation of a business combination, our
liquidation or such time as he or she ceases to be an officer or
director, (i) to present to our company for our
consideration, prior to presentation to any other entity, any
business opportunity which may reasonably be deemed appropriate
for our company based on the description in this registration
statement of our proposed business or which is required to be
presented to us under Delaware law, and (ii) that he or she
shall not assist or participate with any other person or entity
in the pursuit of or negotiation with respect to such business
opportunity unless and until he or she receives written notice
from us that we have determined not to pursue such business
opportunity.
In the course of their other business activities, our officers
and directors have not identified investment and business
opportunities that may be appropriate for presentation to us as
well as the other entities with which they are affiliated.
In connection with the stockholder vote required to approve any
business combination, all of the founding stockholders have
agreed to vote their founder shares in accordance with the
majority of shares of common stock held by the public
stockholders who vote at the special or annual meeting called
for the purpose of approving a business combination. The
founding stockholders have also agreed that if they acquire
shares of common stock in or following this offering, they will
vote such acquired shares of common stock in favor of a business
combination. Accordingly, any shares of common stock acquired by
founding stockholders in or after this offering in the open
market will not have the same right to vote as public
stockholders with respect to a potential business combination
(since they are required to vote in favor of a business
combination). Additionally, the founding stockholders will not
have conversion rights with respect to shares of common stock
acquired during or subsequent to this offering (since they may
not vote against a business combination), except upon our
liquidation. In addition, with respect to their founder shares,
and the shares of common stock underlying any insider warrants
acquired by a founding stockholder immediately prior to this
offering, they have agreed to waive their respective rights to
participate in any liquidation including the liquidation of our
trust account to our public stockholders, occurring upon our
failure to consummate a business combination, but only with
respect to their founder shares and not with respect to any
shares of common stock acquired in or after this offering in the
open market.
94
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 (assuming
none of the individuals listed purchase units in this offering),
by:
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each person known by us to be the beneficial owner of more than
5% of our outstanding shares of common stock;
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each of our executive officers and directors; and
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all our officers and directors as a group.
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Unless otherwise indicated, we believe that all persons named in
the table have sole voting and investment power with respect to
all shares of common stock beneficially owned by them.
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Common
Stock
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|
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As Adjusted for
Offering,
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As Adjusted for
Offering,
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Assuming Full
Exercise of
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Before the
Offering
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Assuming
Redemption (2)
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Over-Allotment
Option (3)
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Percentage of
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Percentage of
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Percentage of
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Name and Address
of
|
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Number of
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Common
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Number of
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Common
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Number of
|
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Common
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Beneficial
Owners(1)
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Shares (2)
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Stock
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Shares (4)
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Stock
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Shares (4)
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Stock
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Hayground Cove (5)
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8,298,500
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96.2
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%
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7,216,087
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19.2
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%
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8,298,500
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19.2
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%
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Jason N. Ader (5)
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8,298,500
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96.2
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%
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7,216,087
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19.2
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%
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8,298,500
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19.2
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%
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Scott LaPorta (6)
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25,000
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*
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21,739
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*
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25,000
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*
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Andrew Nelson (7)
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25,000
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*
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21,739
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*
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25,000
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*
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Robert M. Foresman (8)
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25,000
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*
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21,739
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*
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25,000
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*
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Carl H. Hahn (9)
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25,000
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*
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21,739
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*
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25,000
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*
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Philip A. Marineau (10)
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25,000
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*
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21,739
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*
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25,000
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*
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Marc Soloway (11)
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50,000
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*
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43,478
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*
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50,000
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*
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Steven Westly (12)
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25,000
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*
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21,739
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*
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25,000
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*
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All directors and officers as a group
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8,498,500
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98.5
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%
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7,390,000
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19.7
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%
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8,498,500
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19.7
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%
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*
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Indicates less than 1%.
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(1)
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Unless otherwise indicated, the
business address of each of the stockholders is 1370 Avenue of
the Americas, 28th Floor, New York, New York 10019.
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(2)
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Assumes only the sale of
30,000,000 units in this offering but not the exercise of
the 30,000,000 warrants comprising such units and the 8,500,000
insider warrants.
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(3)
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Assumes only the sale of
34,500,000 units in this offering but not the exercise of
the 34,500,000 warrants comprising such units and the 8,500,000
insider warrants.
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(4)
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Unless otherwise indicated, all
ownership is direct beneficial ownership.
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(5)
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Represents founder shares for which
Hayground Cove Asset Management LLC and the funds and accounts
it manages are direct beneficial owners. Jason N. Ader, the
Chairman of our board of directors, does not directly own any of
Hayground Coves 8,298,500 founder shares owned by it
prior to this offering and disclaims beneficial ownership of
such shares. However, Mr. Ader is the sole member of
Hayground Cove Asset Management LLC, the managing member of
Hayground Cove Fund Management LLC, which is the general partner
of Hayground Cove Associates LP, the investment manager for each
of the funds and accounts it manages and, in this capacity, he
may be deemed the beneficial owner of the founder shares held by
Hayground Cove and the funds and accounts it manages for
purposes of applicable securities laws. As of the date of this
prospectus, the funds and accounts managed by Hayground Cove
have the following respective ownership interests: Hayground
Cove Asset Management LLC (1.5%), Hayground Cove Institutional
Partners LP (4.3%), Hayground Cove Overseas Partners Ltd.
(26.8%), Hayground Cove Turbo Fund LP (9.3%), Hayground Cove
Turbo Fund Ltd. (23.4%), Hayground Cove Equity Market Neutral
Fund LP (0.8%), Hayground Cove Equity Market Neutral Fund Ltd.
(0.5%), TE Hayground Cove Portfolio Ltd. (10.0%), and Man Mac
Lucendro 5B Limited (19.8%). Mr. Ader is also an investor
in certain of the funds managed by Hayground Cove Associates LP.
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(6)
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Scott LaPorta is our Chief
Executive Officer, President and a member of our board of
directors. Mr. LaPorta also has an option to purchase
475,000 shares of founder shares at a purchase price of
$0.001 per share from Hayground Cove Asset Management LLC and
its affiliates, which option is subject to certain vesting
requirements as described under the heading
ManagementEmployment Agreement with Scott
LaPorta.
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(7)
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Andrew Nelson is our Chief
Financial Officer and Assistant Secretary.
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95
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(8)
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Robert N. Foresman is a member
of our board of directors.
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(9)
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Carl H. Hahn is a member of our
board of directors.
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(10)
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Philip A. Marineau is a member
of our board of directors.
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(11)
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Marc Soloway is a member of our
board of directors.
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(12)
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Steven Westly is a member of our
board of directors.
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Our sponsor and Chief Executive Officer, prior to the
consummation of this offering, have agreed to purchase in an
insider private placement transaction a total of 8,500,000
(7,500,000 by our sponsor and 1,000,000 by our Chief Executive
Officer) insider warrants from us at a price of $1.00 per
warrant. These insider warrants cannot be sold or transferred by
the sponsor until the consummation of a business combination,
except in certain limited circumstances. The $8,500,000 purchase
price of the insider warrants will be added to the proceeds of
this offering to be held in the trust account pending our
completion of one or more business combinations. If we do not
complete one or more business combinations that meet the
criteria described in this prospectus, then the $8,500,000
purchase price of the insider warrants will become part of the
liquidation amount distributed to our public stockholders from
our trust account and the insider warrants will become worthless.
In addition, we have agreed to redeem up to an aggregate of
1,125,000 founder shares in the event that the underwriters do
not fully exercise their over-allotment option. We will redeem
founder shares only in an amount sufficient to cause the amount
of issued and outstanding founder shares to equal 20% of our
aggregate amount of issued and outstanding common stock after
giving effect to this offering and the exercise, if any, of the
underwriters over-allotment option.
Immediately after this offering and the potential redemption of
common stock described in the preceding paragraph, our founding
stockholders, collectively, will beneficially own 20% of the
then issued and outstanding shares of our common stock (assuming
they do not purchase units in this offering). Because of this
ownership percentage, the founding stockholders may be able to
collectively influence the outcome of all matters requiring
approval by our stockholders, including the election of
directors and approval of significant corporate transactions,
other than approval of a business combination.
Substantially all of the founder shares will be subject to a
lock-up
agreement with our underwriters until the earliest of:
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180 days following the consummation of a business
combination; and
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the consummation of a liquidation, merger, stock exchange or
other similar transaction which results in all of our
stockholders having the right to exchange their shares of common
stock for cash, securities or other property subsequent to our
consummating a business combination with a target acquisition.
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During the
lock-up
period, the founding stockholders will not be able to sell or
transfer their founder shares except in certain limited
circumstances (such as, in the case of our sponsor,
(a) transfers among various funds under our sponsors
management for rebalancing purposes only and (b) distributions
to investors in such funds, provided that such investors agree
to be bound by the lock-up agreement, or transfers to relatives
and trusts for estate planning purposes), but will retain all
other rights as our stockholders, including, without limitation,
the right to vote their founder shares and the right to receive
cash dividends, if declared. If dividends are declared and
payable in shares of common stock, such dividends will also be
subject to the
lock-up.
If
we are unable to effect a business combination and liquidate,
none of our founding stockholders will receive any portion of
the liquidation proceeds with respect to their founder shares,
or any shares of common stock underlying any insider warrants
acquired by a founding stockholder immediately prior to this
offering.
Each of Messrs. Ader and LaPorta is deemed to be our
parent and promoter, as these terms are
defined under the Federal securities laws.
96
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Securities
Issuances to Our Executive Officers and Directors
On July 16, 2007, we issued 8,625,000 shares of our
common stock (of which 1,125,000 shares are subject to
redemption in the event that the underwriters do not fully
exercise their over-allotment option, as more fully described in
Principal Stockholders) to certain of the affiliates
listed below for an aggregate amount of $8,625 in cash, at a
purchase price of $0.001 per share. Subsequently, certain of
those shares were transferred among our affiliates at the
initial purchase of $0.001 per share. The following table shows
the ownership of our stock by our executive officers and
directors:
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|
|
|
|
Name
|
|
Number of
Shares
|
|
Relationship to
Us
|
|
Jason N. Ader (1)
|
|
|
8,298,500
|
|
|
Chairman of the Board
|
Scott LaPorta (2)
|
|
|
25,000
|
|
|
Chief Executive Officer, President and Director
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Andrew Nelson
|
|
|
25,000
|
|
|
Chief Financial Officer and Assistant Secretary
|
Robert Foresman
|
|
|
25,000
|
|
|
Director
|
Carl H. Hahn
|
|
|
25,000
|
|
|
Director
|
Philip A. Marineau
|
|
|
25,000
|
|
|
Director
|
Marc Soloway
|
|
|
50,000
|
|
|
Director
|
Steven Westly
|
|
|
25,000
|
|
|
Director
|
|
|
|
(1)
|
|
Represents founder shares for which
Hayground Cove Asset Management LLC and the funds and accounts
it manages are direct beneficial owners. Jason N. Ader, the
Chairman of our board of directors, does not directly own any of
Hayground Coves 8,298,500 founder shares owned by it
prior to this offering and disclaims beneficial ownership of
such shares. However, Mr. Ader is the sole member of
Hayground Cove Asset Management LLC, the managing member of
Hayground Core Associates LP, the general partner for each of
the funds and accounts it manages and, in this capacity, he may
be deemed the beneficial owner of the founder shares held by
Hayground Cove and the funds and accounts it manages for
purposes of applicable securities laws.
|
|
(2)
|
|
Mr. LaPorta also has an option
to purchase 475,000 shares of founder shares at a purchase
price of $0.001 per share from Hayground Cove Asset Management
LLC and its affiliates, which option is subject to certain
vesting requirements as described under the heading
ManagementEmployment Agreement with Scott
LaPorta.
|
All of such founder shares were issued in connection with our
organization pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as
amended. The founder shares issued to the individuals and
entities above were sold for an aggregate offering price of
$8,625 at a purchase price of $0.001 per share. No underwriting
discounts or commissions were paid, nor was there any general
solicitation, with respect to such sales.
Immediately after this offering (and after giving effect to the
exercise of the underwriters over-allotment option or any
redemption of shares of common stock by our founding
stockholders in the event that the underwriters do not fully
exercise their over-allotment option, as more fully described in
Principal Stockholders), our founding stockholders,
collectively, will beneficially own 20% of the then issued and
outstanding shares of our common stock. Because of this
ownership percentage, the founding stockholders may be able to
collectively influence the outcome of all matters requiring
approval by our stockholders, including the election of
directors and approval of significant corporate transactions,
other than approval of a business combination.
Our sponsor and Chief Executive Officer, prior to the
consummation of this offering, have agreed to purchase in a
private placement transaction pursuant to Regulation D
under the Securities Act a total of 8,500,000 (7,500,000 by
our sponsor and 1,000,000 by our Chief Executive Officer)
insider warrants from us at a price of $1.00 per warrant. These
warrants, which we collectively refer to as the insider
warrants, will not be sold or transferred by the sponsor until
the completion of our initial business combination. The
$8,500,000 purchase price of the insider warrants will be added
to the proceeds of this offering to be held in the trust account
pending our completion of one or more business combinations. If
we do not complete one or more business combinations that meet
the criteria described in this prospectus, then the $8,500,000
purchase price of the insider warrants will become part of the
liquidation amount distributed to our public stockholders from
our trust account and the insider warrants will become worthless.
97
Registration
Rights
The holders of a majority of all of the (i) founder shares
and (ii) shares of common stock issuable upon exercise of
the insider warrants will be entitled to make up to two demands
that we register these securities pursuant to an agreement to be
signed in connection with the insider private placement. Such
holders may elect to exercise these registration rights at any
time commencing on or after the date of consummation of this
offering. In addition, these stockholders have certain
piggy-back registration rights with respect to
registration statements we might file subsequent to the date of
consummation of this offering. We will bear the expenses
incurred in connection with the filing of any such registration
statements.
Reimbursement and
Indemnification of Officers and Directors
We will reimburse our officers and directors, subject to board
approval, for any reasonable out-of-pocket business expenses
incurred by them in connection with certain activities on our
behalf such as identifying and investigating possible target
acquisitions and business combinations. There is no limit on the
amount of out-of-pocket expenses reimbursable by us, our board,
which includes persons who may not seek reimbursement, or a
court of competent jurisdiction if such reimbursement is
challenged. Accountable out-of-pocket expenses incurred by our
officers and directors will not be repaid out of proceeds held
in trust until these proceeds are released to us upon the
completion of a business combination, provided there are
sufficient funds available for reimbursement after such
consummation.
No finders fees will be paid to any of our founding
stockholders, officers or directors, or to any of their
respective affiliates, prior to or in connection with a business
combination.
We have entered into agreements with our directors and officers
to provide contractual indemnification in addition to the
indemnification provided in our amended and restated certificate
of incorporation. We believe that these provisions and
agreements are necessary to attract qualified directors and
officers. Our bylaws also will permit us to secure insurance on
behalf of any officer, director or employee for any liability
arising out of his or her actions, regardless of whether
Delaware law would permit 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 the directors and officers.
Employment
Agreements
Effective as of August 1, 2007, we entered into an
employment agreement with Mr. LaPorta. The agreement is
effective until the earlier of (i) two years after the
completion of this offering and (ii) the closing of a
qualifying business combination. The agreement may be renewed
for an additional one-year term.
Pursuant to the agreement, Mr. LaPorta has waived all
rights, interests and claims to the proceeds of this offering
and the insider private placement to be held in a trust account.
The agreement also contains non-competition and confidentiality
provisions which limit Mr. LaPorta from competing against
us and using information he obtains from us after the
termination of his employment with us. Mr. LaPorta receives
indemnification from us for liabilities arising from the
services he provides to us under the agreement, other than those
liabilities due to fraud, willful misconduct or gross negligence
on his part. We will purchase and maintain an insurance policy
on behalf of Mr. LaPorta against such liabilities.
In connection with entering into the agreement, Mr. LaPorta
obtained an option to purchase 475,000 shares of founder
shares at a purchase price of $0.001 per share from our sponsor
and its affiliates, which option will vest on the date (the
Trigger Date) that is one year after the closing of
a qualifying business combination, but the vesting will occur
only if the appreciation of the per share price of our common
stock is either (i) greater than 1x the Russell 2000
hurdle rate on the Trigger Date or (ii) exceeds the
Russell 2000 hurdle rate for 20 consecutive trading
days after the Trigger Date. The Russell 2000 hurdle rate
means the
98
Russell 2000 index performance over the period between the
completion of this offering and the Trigger Date.
After the consummation of a business combination, if any, to the
extent our management remains as officers of the resulting
business, some of our officers and directors may enter into
employment agreements, the terms of which shall be negotiated
and which we expect to be comparable to employment agreements
with other similarly-situated companies in the global consumer
products and services industry. Further, after the consummation
of a business combination, if any, to the extent our directors
remain as directors of the resulting business, we anticipate
that they will receive compensation comparable to directors at
other similarly-situated companies in the global consumer
products and services industry.
All ongoing and future transactions between us and any of our
officers and directors or their respective affiliates will be on
terms believed by us to be no less favorable than are available
from unaffiliated third parties. Such transactions will require
prior approval by a majority of our disinterested
independent directors or the members of our board
who do not have an interest in the transaction, in either case
who had access, at our expense, to our attorneys or independent
legal counsel. We will not enter into any such transaction
unless our disinterested independent directors
determine that the terms of such transaction are no less
favorable to us than those that would be available to us with
respect to such a transaction from unaffiliated third parties.
Services
Agreement with Hayground Cove
We entered into an agreement with Hayground Cove, effective
July 16, 2007, whereby Hayground Cove:
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provides administrative services as required by us from time to
time, including the administration of certain of our day-to-day
activities;
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|
|
provides office space to us for use by our employees for
purposes of conducting our business;
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|
|
performs accounting and controller-related services for us,
including correspondence with our auditors;
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|
|
|
makes available the services of Messrs. Ader and LaPorta
and such other of Hayground Coves employees as agreed
between us and the sponsor from time to time, including sourcing
acquisition candidates; and
|
|
|
|
provide investment advisory services to us, including, without
limitation:
|
|
|
|
|
|
financial advice and services in connection with the direct or
indirect acquisition or disposition by us of the assets or
operations of any business or entity, whether by purchase or
sale of stock or assets, merger or consolidation, or otherwise;
|
|
|
|
financial advice and services in connection with public or
private equity and debt financing;
|
|
|
|
financial advice and services, including assistance with respect
to matters such as cash management, treasure and financial
controls;
|
|
|
|
corporate planning and corporate development advice and services;
|
|
|
|
strategic planning, including with respect to acquisitions; and
|
|
|
|
public relations and press relations advice and services;
|
|
|
|
|
|
such other advice and services necessitated by the ordinary
course of our business, as we may reasonably request from time
to time.
|
The services provided under this agreement includes the service
of our sponsors team. Please see
ManagementServices by our Sponsor Team for a
description of the team.
Hayground Cove will receive $10,000 per month for these services
after the consummation of this offering. In addition, we have
undertaken to reimburse Hayground Cove, monthly in arrears, all
out-of-pocket expenses incurred by Hayground Cove in performing
these services
99
and other services as maybe requested by us from time to time.
Such reimbursement payments has not and will not exceed $10,000
per month. We believe that the fees charged by Hayground Cove
for the foregoing services are at least as favorable as we could
have obtained from an unaffiliated third party. This services
agreement between Hayground Cove and us will terminate upon the
consummation of an initial business combination.
Promissory
Note
On August 31, 2007, we issued a promissory note in the
amount of $139,025 in favor of our sponsor, which amount
reflects the funds advanced by our sponsor to us or on our
behalf in connection with this offering. This note bears an
interest rate of 5.0% per annum and is due on the earlier of
(i) December 31, 2007 and (ii) the consummation
of this offering. The principal amount of the note plus any
accrued and unpaid interest thereon to the date of repayment
will be repaid out of the proceeds of this offering.
100
DESCRIPTION
OF SECURITIES
General
Our Amended and Restated Certificate of Incorporation authorizes
the issuance of up to 100,000,000 shares of common stock,
par value $0.0001 per share, and 1,000,000 shares of
preferred stock, par value $0.0001 per share. Prior to the
consummation of this offering, 8,625,000 shares of common
stock (of which 1,125,000 shares are subject to redemption
in the event that the underwriters do not fully exercise their
over-allotment option, as more fully described in
Principal Stockholders) will be outstanding. No
shares of preferred stock are outstanding as of the date of this
prospectus.
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 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 five business
days (or as soon as practicable thereafter) following the
earlier to occur of (1) the expiration of the
underwriters over-allotment option and (2) its
exercise in full, subject in either case to our having filed a
Current Report on
Form 8-K
referenced below and having issued a press release announcing
when such separate trading will begin. In no event will the
common stock and warrants begin to trade 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
this
Form 8-K
promptly after the consummation of this offering. Even if the
component parts of the units are broken apart and traded
separately, the units will continue to be listed as a separate
security, and any securityholder of our common stock and
warrants may elect to combine them together and trade them as a
unit. Securityholders will have the ability to trade our
securities as units until such time as the warrants expire or
are redeemed. Although we will not distribute copies of the
Form 8-K
to individual unit holders, the
Form 8-K
will be available on the SECs website after filing. See
the section appearing elsewhere in this prospectus entitled
Where You Can Find Additional Information.
Common
stock
Common stockholders of record are entitled to one vote for each
share held on all matters to be voted on by stockholders. In
connection with the stockholder vote required to approve any
business combination, all of our founding stockholders have
agreed to vote the shares of common stock owned by them prior to
this offering, in accordance with the majority of the shares of
common stock of public stockholders who vote at the special or
annual meeting called for the purpose of approving a business
combination. Our founding stockholders have also agreed that if
they acquire shares of common stock in or following this
offering, they will vote such acquired shares of common stock in
favor of a business combination.
In accordance with Article Sixth of our Amended and
Restated Certificate of Incorporation (which Article Sixth
cannot be amended without the affirmative vote cast at a meeting
of stockholders of at least 95% of the common stock issued in
this offering), we will proceed with the business combination
only if a majority of the shares of common stock voted by the
public stockholders are voted in favor of the business
combination and public stockholders owning less than 30% of the
shares of common stock sold in this offering both vote against
the business combination and exercise their conversion rights
discussed below. For purposes of seeking approval of the
majority of the shares of common stock voted by the public
stockholders, non-votes will have no effect on the approval of a
business combination once a quorum is obtained. We intend to
give approximately 30 (but not less than 10 nor more than
60) days prior written notice of any meeting at which a
vote shall be taken to approve a business combination.
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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 of common stock eligible to vote for the election of
directors can elect all of the directors.
Pursuant to our Amended and Restated Certificate of
Incorporation, if we do not consummate a business combination by
November 27, 2009, our corporate existence will cease
except for the purposes of winding up our affairs and
liquidating. If we are forced to liquidate our trust account
because we have not consummated a business combination within
the required time period, our public stockholders are entitled
to share ratably in the trust account, inclusive of any interest
(net of taxes payable and amounts disbursed for working capital
purposes, which taxes, if any, shall be paid from the trust
account), and any net assets remaining available for
distribution to them after payment of liabilities. Our founding
stockholders have agreed to waive their respective rights to
participate in any liquidation occurring upon our failure to
consummate a business combination but only with respect to their
founder shares or the shares of common stock underlying any
insider warrants.
Our stockholders are entitled to receive ratable dividends when,
as and if declared by the board of directors out of funds
legally available therefor. In the event of a liquidation,
dissolution or winding up of the company after a business
combination, our stockholders are entitled, subject to the
rights of holders of preferred stock, if any, 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 conversion, preemptive or other
subscription rights. There are no sinking fund or redemption
provisions applicable to the common stock, except that public
stockholders have the right to convert their shares of common
stock to cash equal to their pro rata share of the trust account
if they vote against the business combination and the business
combination is approved and completed. The actual per-share
conversion price will be equal to the amount in the trust
account, which shall include $8,500,000 from the purchase of the
insider warrants by our sponsor and Chief Executive Officer,
inclusive of any interest (net of any taxes due on such
interest, which taxes, if any, shall be paid from the trust
account, and calculated as of two business days prior to the
consummation of the proposed business combination), divided by
the number of shares of common stock sold in this offering.
Public stockholders who convert their stock into their share of
the trust account still have the right to exercise the warrants
that they received as part of the units. Founding stockholders
are not entitled to convert any of their founder shares
(including shares of common stock underlying any insider
warrants held by a founding stockholder), or shares of common
stock acquired in or after this offering into a pro rata share
of the trust account, except that founding stockholders will be
entitled to a pro rata share of the trust fund upon liquidation
of the trust account with respect to any shares acquired in or
after this offering.
Due to the fact that our Amended and Restated Certificate of
Incorporation authorizes the issuance of up to
100,000,000 shares of common stock, if we were to enter
into a business combination, we may (depending on the terms of
such a business combination) be required to increase the number
of shares of common stock which we are authorized to issue at
the same time as our stockholders vote on the business
combination.
Preferred
stock
Our Amended and Restated Certificate of Incorporation authorizes
the issuance of 1,000,000 shares of blank check preferred
stock with such designation, rights and preferences as may be
determined from time to time by our board of directors. No
shares of preferred stock are being issued or registered in this
offering. Accordingly, our board of directors is empowered,
without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which
could adversely affect the voting power, liquidation preference
or other rights of the holders of common stock. However, the
underwriting
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agreement prohibits us, prior to a business combination, from
issuing preferred stock which participates in any manner in the
proceeds of the trust account, or which votes as a class with
the common stock on a business combination. We may issue some or
all of our authorized preferred stock to effect a business
combination. In addition, preferred stock could be utilized as a
method of discouraging, delaying or preventing our change in
control. Although we do not currently intend to issue any shares
of preferred stock, we cannot assure you that we will not do so
in the future.
Warrants
Immediately prior to the consummation of this offering, there
will be 8,500,000 insider warrants outstanding representing
warrants included in the insider warrants. Immediately after
this offering, we will have an additional 30,000,000 public
warrants outstanding, or 34,500,000 public warrants outstanding
if the underwriters over-allotment option is exercised.
Each warrant entitles the holder to purchase one share of our
common stock at a price of $7.50 per share, subject to
adjustment as discussed below, at any time commencing on the
later of:
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the completion of a business combination; and
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November 27, 2008.
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The warrants will expire at 5:00 p.m., New York City time
on November 27, 2012 or earlier upon redemption.
The warrants will begin separate trading five business days (or
as soon as practicable thereafter) following the earlier to
occur of (1) the expiration of the underwriters
over-allotment option and (2) their exercise in full,
subject in either case to our having filed a Current Report on
Form 8-K
referenced below and having issued a press release announcing
when such separate trading will begin. The units will begin
trading on or promptly after the consummation of this offering.
In no event will the common stock and warrants begin to trade
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
this
Form 8-K
promptly after the consummation of this offering.
We may call the public warrants for redemption at any time after
the warrants become exercisable:
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in whole and not in part;
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at a price of $.01 per warrant;
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upon 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 sale price of the common stock equals
or exceeds $14.25 per share, for any 20 trading days within a
30-trading
day period ending on the third business day prior to the notice
of redemption to warrant holders.
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In addition, we may not redeem the warrants unless the warrants
comprising the units sold in this offering and the shares of
common stock underlying those warrants are covered by an
effective registration statement from the beginning of the
measurement period through the date fixed for the redemption.
We have established these criteria to provide warrant holders
with a reasonable premium to the initial warrant exercise price
as well as a degree of liquidity to cushion against a negative
market reaction, if any, to our redemption call. If the
foregoing conditions are satisfied and we call the warrants for
redemption, each warrant holder will then be entitled to
exercise his or her warrant prior to the date scheduled for
redemption; however, there can be no assurance that the price of
the common stock will exceed the call trigger price or the
warrant exercise price after the redemption call is made.
The warrants will be issued in registered form under a warrant
agreement between Continental Stock Transfer &
Trust Company, as warrant agent, and us. You should review
a
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copy of the warrant agreement, which has been filed as an
exhibit to the registration statement of which this prospectus
is a part, for a complete description of the terms and
conditions applicable to the warrants.
The exercise price and number of shares of common stock issuable
on exercise of the warrants may be adjusted in certain
circumstances, including in the event of a stock dividend,
extraordinary dividend or our recapitalization, reorganization,
merger or consolidation. However, the warrants will not be
adjusted for issuances of common stock at a price below their
respective exercise prices.
The warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of
the warrant agent, with the exercise form on the reverse side of
the warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price, by certified
or official bank check payable to us, for the number of warrants
being exercised. The warrant holders do not have the rights or
privileges of holders of common stock and any voting rights
until they exercise their warrants and receive shares of common
stock. After the issuance of shares of common stock upon
exercise of the warrants, each holder will be entitled to one
vote for each share held of record on all matters to be voted on
by stockholders.
No warrants will be exercisable unless at the time of exercise a
prospectus relating to common stock issuable upon exercise of
the warrants is current and the common stock has been registered
or qualified or deemed to be exempt under the securities laws of
the state of residence of the holder of the warrants. Under the
terms of the warrant agreement, we have agreed to use our
commercially reasonable efforts to maintain a current prospectus
relating to common stock issuable upon exercise of the warrants
until the expiration of the warrants. If we are unable to
maintain the effectiveness of such registration statement or
maintain a current prospectus until the expiration of the
warrants, and therefore are unable to deliver registered shares
of common stock, the warrants may become worthless. Such
expiration would result in each holder paying the full unit
purchase price solely for the shares of common stock underlying
the unit. Additionally, the market for the warrants may be
limited if the prospectus relating to the common stock issuable
upon the exercise of the warrants is not current or if the
shares of common stock are not qualified or exempt from
qualification in the jurisdictions in which the holders of the
warrants reside. In no event will the registered holders of a
warrant be entitled to receive a net-cash settlement, stock, or
other consideration in lieu of physical settlement in shares of
our common stock.
Because the insider warrants sold in the Regulation D
private placement were originally issued pursuant to an
exemption from registration requirements under the federal
securities laws, the holders of warrants purchased in the
Regulation D private placement will be able to exercise
their warrants even if, at the time of exercise, a prospectus
relating to the common stock issuable upon exercise of such
warrants is not current. As described above, the holders of the
public warrants purchased in this offering will not be able to
exercise them unless we have a current registration statement
covering the shares of common stock issuable upon their exercise.
No fractional shares of common stock 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.
Our sponsor and Chief Executive Officer have agreed to purchase
an aggregate of 8,500,000 insider warrants from us in an insider
private placement at a price of $1.00 per warrant immediately
prior to the consummation of this offering. The insider warrants
have terms and provisions that are identical to the units and
warrants being sold in this offering, respectively, except that
(i) such insider warrants will be subject to a
lock-up
agreement with our underwriters and will not be transferable
before the consummation of a business
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combination, subject to certain limited exceptions (such as, in
the case of our sponsor, (a) transfers among various funds
under our sponsors management for rebalancing purposes
only and (b) distributions to investors in such funds,
provided that such investors agree to be bound by the lock-up
agreement, or transfers to relatives and trusts for estate
planning purposes), (ii) such insider warrants are being
purchased pursuant to an exemption from the registration
requirements of the Securities Act and will become freely
tradable only after they are registered pursuant to a
registration rights agreement to be signed in connection with
the insider private placement, (iii) the insider warrants
will be non-redeemable so long as the sponsor or its permitted
transferees holds them, and (iv) the insider warrants are
exercisable in the absence of an effective registration
statement covering the shares of common stock underlying the
insider warrants and by means of cashless exercise. The transfer
restriction does not apply to transfers made pursuant to
registration or an exemption that are occasioned by operation of
law, or for estate planning purposes, or transfers made among
various funds under our sponsors management. The
non-redemption provision does not apply to public warrants
included in units or otherwise purchased in open market
transactions, if any. The price of the warrants has been
arbitrarily established by us and the representative of the
underwriters after giving consideration to numerous factors,
including but not limited to, the pricing of units in this
offering, the pricing associated with warrants in other
blank-check financings in both the public after-market and any
pre-offering insider private placement, and the warrant purchase
obligations of managers in similar type transactions. No
particular weighting was given to any one aspect of those
factors considered. We have not performed any method of
valuation of the warrants. As part of the negotiations between
the representative of the underwriters and our sponsor, our
sponsor has agreed to purchase the insider warrants directly
from us in an insider private placement and not in open market
transactions. By making a direct investment in us, the amount
held in trust pending a business combination has been increased,
since the purchase price of the insider warrants will be added
to the proceeds held in the trust account. The purchase of the
insider warrants in an insider private placement also has the
benefit of reducing any concerns about open-market purchases by
affiliates present in other blank check offerings.
The insider warrants will become worthless if we do not
consummate a business combination. The personal and financial
interests of our sponsor and its affiliates may influence their
motivation in identifying and selecting a target business and
completing a business combination in a timely manner.
Consequently, certain of our officers and directors
discretion in identifying and selecting a suitable target
business may result in a conflict of interest when determining
whether the terms, conditions and timing of a particular
business combination are appropriate and in our
stockholders best interest.
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 then board of directors. It is the present
intention of our board of directors to retain all earnings, if
any, for use in our business operations and, accordingly, our
board does not anticipate declaring any dividends in the
foreseeable future. In addition, our board is not currently
contemplating and does not anticipate declaring any stock
dividends in the foreseeable future, except if we may increase
the size of the offering pursuant to Rule 462(b) under the
Securities Act. Further our ability to declare dividends may be
limited to restrictive covenants if we incur any indebtedness.
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Our Transfer
Agent and Warrant Agent
The transfer agent for our securities and warrant agent for our
warrants is Continental Stock Transfer &
Trust Company, 17 Battery Place, New York, New York 10004.
Shares of Common
Stock Eligible for Future Sale
Immediately after this offering, we will have
38,625,000 shares of common stock outstanding (1,125,000 of
which will be redeemed from our founders on a pro rata basis if
the underwriters over-allotment option is not exercised),
or 43,125,000 shares if the underwriters
over-allotment option is exercised in full. Of these shares, the
30,000,000 shares sold in this offering, or
34,500,000 shares of common stock if the over-allotment
option is exercised, will be freely tradable without restriction
or further registration under the Securities Act, except for any
shares of common stock purchased by one of our affiliates within
the meaning of Rule 144 under the Securities Act. All of
the remaining 7,500,000 shares of common stock, or
8,625,000 shares of common stock if the over-allotment
option is exercised in full, are restricted securities under
Rule 144, in that they were issued in private transactions
not involving a public offering. None of those shares of common
stock will be eligible for sale under Rule 144 prior to
July 16, 2008. Notwithstanding this restriction,
substantially all of these 7,500,000 shares of common
stock, or 8,625,000 shares of common stock if the
over-allotment option is exercised in full, will be subject to a
lock-up
agreement with our underwriters and will not be transferable
until the consummation of a business combination and will only
be transferable prior to that date subject to certain limited
exceptions, such as, in the case of our sponsor,
(a) transfers among various funds under our sponsors
management for rebalancing purposes only and
(b) distributions to investors in such funds, provided that
such investors agree to be bound by the lock-up agreement, or
transfers to relatives and trusts for estate planning purposes
or our liquidation prior to a business combination (in which
case the certificate representing such shares of common stock
will be destroyed), and the consummation of a liquidation,
merger, stock exchange, asset or stock acquisition, exchangeable
share transaction 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
subsequent to our consummating a business combination with a
target business.
Additionally, after this offering there will be 8,500,000
warrants outstanding that upon full exercise will result in the
issuance of 8,500,000 shares of common stock to the holders
of the insider warrants. Such warrants and the underlying shares
of common stock are subject to registration as described below
under Registration Rights.
Rule 144
Promulgated Under The Securities Act
In general, under Rule 144 promulgated under the Securities
Act as currently in effect, a person who has beneficially owned
restricted shares of our common stock for at least one year
would be entitled to sell within any three-month period a number
of shares of common stock that does not exceed the greater of
either of the following:
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1% of the number of shares of common stock then outstanding,
which will equal 386,250 founders shares immediately after
this offering (or 431,250 if the over-allotment option is
exercised in full); and
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if the common stock is listed on a national securities exchange
or on The Nasdaq Stock Market, the average weekly trading volume
of the common stock during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to the sale.
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Sales under Rule 144 as described above are also limited by
manner of sale provisions and notice requirements and to the
availability of current public information about us.
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Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been
one of our affiliates at the time of or at any time during the
three months preceding a sale, and who has beneficially owned
the restricted shares of common stock proposed to be sold for at
least two years, including the holding period of any prior owner
other than an affiliate, is entitled to sell their shares of
common stock without complying with the manner of sale, public
information, volume limitation or notice provisions of
Rule 144 as required in the preceding section.
SEC Position on
Rule 144 Sales
The SEC has taken the position that promoters or affiliates of a
blank check company and their transferees, both before and after
a business combination, act as underwriters under
the Securities Act when reselling the securities of a blank
check company acquired prior to the consummation of its initial
public offering. Accordingly, the SEC believes that those
securities can be resold only through a registered offering and
that Rule 144 would not be available for those resale
transactions despite technical compliance with the requirements
of Rule 144.
As of the date of this prospectus, such restricted shares would
include the 8,625,000 founder shares (without giving effect
to the redemption of 1,125,000 founder shares by our
founding stockholders in the event that the underwriters do not
fully exercise their over-allotment option, as more fully
described in Principal Stockholders) purchased at
inception by our officers and directors.
Registration
Rights
The holders of a majority of all of (i) the
7,500,000 founder shares, or 8,625,000 founder shares
if the over-allotment option is exercised in full, owned or held
by the founding stockholders and (ii) the
8,500,000 shares of common stock issuable upon exercise of
the 8,500,000 insider warrants will be entitled to make up to
two demands that we register these securities pursuant to a
registration rights agreement to be signed in connection with
the insider private placements. Such holders may elect to
exercise these registration rights at any time commencing on or
after the date of consummation of this offering. In addition,
these stockholders will have certain piggy-back
registration rights with respect to registration statements
filed by us subsequent to the date of consummation of this
offering. We will bear the expenses incurred in connection with
the filing of any such registration statements. Any securities
registered pursuant to the registration rights agreement during
the lock-up period will remain subject to the respective lock-up
agreements of our founders.
Amendments to Our
Amended and Restated Certificate of Incorporation
Our Amended and Restated Certificate of Incorporation to be
filed with the State of Delaware contains provisions designed to
provide certain rights and protections to our stockholders prior
to the consummation of a business combination, including:
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a requirement that all proposed business combinations be
presented to stockholders for approval regardless of whether or
not Delaware law requires such a vote;
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a prohibition against completing a business combination if 30%
or more of our stockholders exercise their conversion rights in
lieu of approving a business combination;
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the right of stockholders voting against a business combination
(other than the founding stockholders) to surrender their shares
of common stock for a pro rata portion of the trust account in
lieu of participating in a proposed business combination;
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a requirement that in the event we do not consummate a business
combination by November 27, 2009 our corporate existence
will cease;
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a prohibition against the consummation of any other merger,
acquisition, divestiture, asset purchase or similar transaction
prior to a business combination as described in this
prospectus; and
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a limitation on stockholders rights to receive a portion
of the trust account so that they may only receive a portion of
the trust account upon the liquidation of our trust account or
upon the exercise of their conversion rights.
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Our Amended and Restated Certificate of Incorporation, and the
underwriting agreement that we will enter into with the
underwriters in connection with this offering, prohibit the
amendment or modification of any of the foregoing provisions
prior to the consummation of a business combination unless the
affirmative vote cast at a meeting of stockholders of at least
95% of the common stock issued in the offering approve an
amendment or modification to the foregoing provisions.
Additionally our board of directors has undertaken not to amend
or modify the foregoing provisions. While these rights and
protections have been established for the purchasers of units in
this offering, it is nevertheless possible that the prohibition
against amending or modifying these rights and protections at
any time prior to the consummation of the business combination
could be challenged as unenforceable under Delaware law,
although, pursuant to the underwriting agreement we are
prohibited from amending or modifying these rights and
protections at any time prior to the consummation of a business
combination. We have not sought an unqualified opinion regarding
the enforceability of the prohibition on amendment or
modification of such provisions because we view these provisions
as fundamental and contractual terms of this offering. We
believe these provisions to be obligations of our company to its
stockholders and that investors will make an investment in our
company relying, at least in part, on the enforceability of the
rights and obligations set forth in these provisions including,
without limitation, the prohibition on any amendment or
modification of such provisions. As a result, without the
affirmative vote cast at a meeting of stockholders of at least
95% of the common stock issued in the offering, the board of
directors will not, and pursuant to the underwriting agreement
cannot, at any time prior to the consummation of a business
combination, propose any amendment or modification of our
Amended and Restated Certificate of Incorporation relating to
any of the foregoing provisions and will not support, directly
or indirectly, or in any way endorse or recommend that
stockholders approve an amendment or modification to such
provisions. We believe that a vote for such an amendment or
waiver would likely take place only to allow additional time to
consummate a pending business combination. In such a case,
stockholders would receive a proxy statement related to such
action approximately 30 (but not less than 10 nor more than
60) days before the meeting date scheduled to vote
thereupon.
Listing
We have applied to have our units, common stock and warrants
listed on the American Stock Exchange under the symbols
GHC.U, GHC and GHC.W,
respectively. We anticipate that our units will commence trading
on the American Stock Exchange on, or promptly after the
consummation of this offering. Following the date the common
stock and warrants are eligible to trade separately, we
anticipate that the common stock and warrants will trade both
separately and as a unit on the American Stock Exchange.
Delaware
Anti-takeover Law
Pursuant to our Amended and Restated Certificate of
Incorporation, we have opted out of the provisions of
Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. This section prevents certain
Delaware corporations, under certain circumstances, from
engaging in a business combination with:
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a stockholder who owns 15% or more of our outstanding voting
stock (otherwise known as an interested stockholder);
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an affiliate of an interested stockholder; or
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an associate of an interested stockholder, for three years
following the date that the stockholder became an interested
stockholder.
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A business combination includes a merger or sale of
more than 10% of our assets. However, the above provisions of
Section 203 do not apply if:
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our board of directors approves the transaction that made the
stockholder an interested stockholder, prior to the
date of the transaction;
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after the completion of the transaction that resulted in the
stockholder becoming an interested stockholder, that stockholder
owned at least 85% of our voting stock outstanding at the time
the transaction commenced, other than statutorily excluded
shares of common stock; or
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on or subsequent to the date of the transaction, the business
combination is approved by our board of directors and authorized
at a meeting of our stockholders, and not by written consent, by
an affirmative vote of at least two-thirds of the outstanding
voting stock not owned by the interested stockholder.
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This statute could prohibit or delay mergers or other change in
control attempts, and thus may discourage attempts to acquire us.
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U.S.
FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a summary of certain United States federal
income tax considerations of the purchase, ownership, and
disposition of the units. This summary is based upon existing
United States federal income tax law, which is subject to change
or differing interpretations, possibly with retroactive effect.
This summary does not discuss all aspects of United States
federal income taxation which may be important to particular
investors in light of their individual circumstances, such as
units held by investors subject to special tax rules (
e.g.
, financial institutions, insurance companies,
broker-dealers, tax-exempt organizations, and
non-U.S. stockholders
(as defined below)) or to persons that will hold the notes as
part of a straddle, hedge, conversion, constructive sale, or
other integrated transaction for United States federal income
tax purposes, partnerships or their partners, or
U.S. stockholders (as defined below) that have a functional
currency other than the United States dollar, all of whom may be
subject to tax rules that differ significantly from those
summarized below. In addition, this summary does not discuss any
(i) United States federal income tax consequences to a
non-U.S. stockholder
that (A) is engaged in the conduct of a United States trade
or business, (B) is a nonresident alien individual and such
holder is present in the United States for 183 or more days
during the taxable year, or (C) is a corporation which
operates through a United States branch, or (ii) state,
local or
non-United
States tax considerations. This summary is written for investors
that will hold their units as capital assets under
the Internal Revenue Code of 1986, as amended (the
Code). Each prospective investor is urged to consult
its tax advisor regarding the United States federal, state,
local, and foreign income and other tax consequences of the
purchase, ownership, and disposition of the units.
The term U.S. stockholder means a holder of our
common stock or our warrants that, for United States federal
income tax purposes is:
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an individual who is a citizen or resident of the United States;
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a corporation or other entity taxable as a corporation under
United States federal income tax laws created or organized in or
under the laws of the United States, any state of the United
States or the District of Columbia;
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an estate the income of which is subject to United States
federal income tax purposes regardless of its source; or
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a trust that is subject to the primary supervision of a court
within the United States over its administration and one or more
United States persons control all substantial decisions, or a
trust that has validly elected to be treated as a domestic trust
under applicable Treasury regulations.
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A
non-U.S. stockholder
is a holder who is not a U.S. stockholder.
Taxation of
Company
We are treated as a taxable C corporation under the Code. As
such, the income and losses from our operations and our net
capital gains are taxable to us at applicable corporate income
tax rates.
Taxation of U.S.
Stockholders
Units
There is no authority addressing the treatment, for United
States federal income tax purposes, of securities with terms
substantially the same as the units, and, therefore, such
treatment is not entirely clear. Each unit should be treated for
United States 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
110
paid by such holder for such unit between the share of common
stock and the warrant based on their respective relative fair
market values.
Our view of the characterization of the units described above
and a holders purchase price allocation are not, however,
binding on the Internal Revenue Service (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, prospective investors are urged to consult their
own tax advisors regarding the United States federal tax
consequences of an investment in a unit (including alternative
characterizations of a unit) and with respect to any tax
consequences arising under the laws of any state, local or
non-United
States taxing jurisdiction. Unless otherwise stated, the
following discussions are based on the assumption that the
characterization of the units and the allocation described above
are accepted for United States federal tax purposes.
Dividends
A U.S. stockholder will be required to take into account as
dividends any distributions made out of our current or
accumulated earnings and profits. A U.S. stockholder that
is a taxable corporation generally should qualify for the
dividends received deduction if the requisite holding period is
satisfied. A U.S. stockholder that is taxed as an
individual generally will be subject to tax at the maximum rate
accorded to capital gains for any qualified dividends for
taxable 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) if the requisite holding periods are satisfied
and the stockholder does not elect to treat the dividends as
investment income for purposes of the investment interest
limitations. It is unclear whether the conversion rights with
respect to the common stock, described above under
Proposed BusinessEffecting a Business
CombinationConversion rights, may prevent a
U.S. stockholder 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.
A U.S. stockholder will not incur tax on a distribution in
excess of our current and accumulated earnings and profits if
the distribution does not exceed the adjusted basis of the
U.S. stockholders common stock. Instead, the
distribution will reduce the adjusted basis of the shares of
common stock. Any amount in excess of both our current and
accumulated earnings and profits and the adjusted tax basis will
be treated as capital gain, long-term if the shares of common
stock have been held for more than one year, as described below
under Taxation of U.S. StockholdersDisposition
of Common Stock.
Disposition of
Common Stock
A U.S. stockholder generally will recognize capital gain or
loss for United States federal income tax purposes upon a sale
or other 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) in
an amount equal to the difference between the amount realized
from the sale or disposition and the stockholders adjusted
tax basis in the common stock. Such gain generally will be
long-term if, on the date of such sale or disposition, the
common stock was held by the U.S., stockholder for more than one
year. There is substantial uncertainty, however, as to whether
the conversion rights with respect to the common stock,
described above under Proposed BusinessEffecting a
Business CombinationConversion rights, may suspend
the running of the applicable holding period for this purpose.
The deductibility of a capital loss may be subject to
limitations.
111
Conversion of
Common Stock
In the event that a U.S. stockholder converts our common
stock into a right to receive cash pursuant to the exercise of a
conversion right, the transaction will be treated for United
States federal income tax purposes as a redemption of the common
stock. If that redemption qualifies as a sale of common stock by
the U.S. stockholder under Section 302 of the Code,
the holder will be treated as described under Taxation of
U.S. StockholdersDisposition 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. stockholder will be treated as receiving a corporate
distribution with the tax consequences described below. 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. stockholder (including any stock constructively
owned by the holder as a result of, among other things, owning
warrants). The conversion of common stock generally will be
treated as a sale or exchange of the common stock (rather than
as a corporate distribution) if the receipt of cash upon the
conversion (i) is substantially
disproportionate with respect to the
U.S. stockholder, (ii) results in a complete
termination of the U.S. stockholders interest
in us or (iii) is not essentially equivalent to a
dividend with respect to the U.S. stockholder. These
tests are explained more fully below.
In determining whether any of the foregoing tests are satisfied,
a U.S. stockholder takes into account not only stock
actually owned by the holder, but also shares of our stock that
are constructively owned by it. A U.S. stockholder may
constructively own, in addition to stock owned directly, stock
owned by certain related individuals and entities in which the
stockholder has an interest or that have an interest in such
stockholder, as well as any stock the holder has a right to
acquire by exercise of an option, which generally would 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. stockholder immediately following the conversion 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 stockholder
immediately before the conversion. There will be a complete
termination of a U.S. stockholders interest if either
(i) all of the shares of our stock actually and
constructively owned by the U.S. stockholder are converted
or (ii) all of the shares of our stock actually owned by
the U.S. stockholder are converted and the
U.S. stockholder 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. stockholder does not constructively own any other
stock. The conversion of the common stock will not be
essentially equivalent to a dividend if a
U.S. stockholders conversion results in a
meaningful reduction of the stockholders
proportionate interest in us. Whether the conversion will result
in a meaningful reduction in a U.S. stockholders
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. stockholder
should consult with its own tax advisors as to the tax
consequences of an exercise of the conversion right.
If none of the foregoing tests are satisfied, then the
conversion will be treated as a corporate distribution and the
tax effects will be as described under Taxation of
U.S. StockholdersDividends, above. After the
application of those rules, any remaining tax basis of the
U.S. stockholder in the converted common stock will be
added to the holders adjusted tax basis in its remaining
stock, or, if it has none, to the holders adjusted tax
basis in its warrants or possibly in other stock constructively
owned by it.
Exercise,
Disposition or Expiration of Warrants
Upon the exercise of a warrant, a U.S. stockholder will not
recognize gain or loss and will have a tax basis in the common
stock received equal to the U.S. stockholders tax
basis in the
112
warrant plus the exercise price of the warrant. The holding
period for the common stock purchased pursuant to the exercise
of a warrant will begin on the day following the date of
exercise and will not include the period during which the
U.S. stockholder held the warrant.
Upon the sale, redemption or other disposition of a warrant, a
U.S. stockholder will recognize capital gain or loss in an
amount equal to the difference between the amount realized and
the U.S. stockholders tax basis in the warrant. Such
gain or loss will be long-term gain or loss if the
U.S. stockholder has held the warrant for more than one
year. In the event that a warrant lapses unexercised, a
U.S. stockholder will recognize a capital loss in an amount
equal to its tax basis in the warrant. Such loss will be
long-term if the warrant has been held for more than one year.
Taxation of
Non-U.S.
Stockholders
Dividends
The dividends on our common stock paid to a
non-U.S. stockholder
generally will be subject to withholding of United States
federal income tax at a 30% rate on the gross amount of the
dividend or such lower rate as may be provided by an applicable
income tax treaty. In addition, if we determine that we are
likely to be classified as a United States real property
holding corporation (see Disposition of Common
Stock below), we intend to withhold 10% of any
distribution that exceeds our current and accumulated earnings
and profits.
A
non-U.S. stockholder
who claims the benefit of an applicable income tax treaty
generally will be required to satisfy applicable certification
and other requirements prior to the distribution date. In
general,
non-U.S. stockholders
must provide the withholding agent with a properly executed IRS
Form W-8BEN
(or successor form) claiming an exemption from or reduction in
withholding under an applicable income tax treaty. Applicable
Treasury regulations provide alternative methods for satisfying
this requirement. Under these Treasury regulations, 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
foregoing intermediary or partnership, as the case may be,
generally must provide an IRS
Form W-8IMY
(or successor form) and attach thereto an appropriate
certification by each beneficial owner or partner.
Exercise of
Warrants
The United States federal income tax treatment of a
non-U.S. stockholders
exercise of a warrant generally will correspond to the United
States federal income tax treatment of the exercise of a warrant
by a U.S. stockholder, as described under Taxation of
U.S. StockholdersExercise, Disposition or Expiration
of Warrants above.
Disposition of
Common Stock or Warrants
A
non-U.S. stockholder
generally will not be subject to United States federal income
tax (or withholding thereof) in respect of gain recognized on a
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 of our warrants), unless we
are or have been a United States real property holding
corporation 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. stockholder
held our common stock. Although we currently are not a United
States 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. A corporation will be classified as a
United States real property holding corporation if
the fair market value of its United States real property
interests equals or exceeds 50% of the sum of the fair market
value of its worldwide real property interests plus its other
assets used or held for use in a trade or business.
113
If we are a United States real property holding corporation, a
non-U.S. stockholder
will be subject to United States federal income tax in respect
of gain recognized on a disposition of our common stock in the
same manner as described above under the caption Taxation
of U.S. StockholdersDisposition of Common
Stock. In addition, upon such disposition, the
non-U.S. stockholder
may be subject to a 10% withholding tax on the amount realized
on such disposition. If our common stock is treated as being
regularly traded on an established securities market, the tax on
dispositions described above would not apply to any
non-U.S. stockholder
who beneficially owns (actually or constructively), at all times
during the shorter of the five-year period preceding the date of
the disposition or the
non-U.S. stockholders
holding period, held 5% or less of our common stock.
Conversion of
Common Stock
The characterization for United States federal income tax
purposes of a
non-U.S. stockholders
conversion of our common stock into a right to receive cash
pursuant to an exercise of a conversion right generally will
correspond to the United States federal income tax
characterization of the exercise of such a conversion right by a
U.S. stockholder, as described under Taxation of
U.S. StockholdersConversion of Common Stock
above, and the consequences of the conversion to the
non-U.S. stockholder
will be as described above under Taxation of
Non-U.S. StockholdersDividends
and Taxation of
Non-U.S. StockholdersDisposition
of Common Stock or Warrants, as applicable.
Information
Reporting and Backup Withholding Tax
We must report annually to the IRS and to each
non-U.S. stockholder
the amount of dividends paid to that stockholder and the tax
withheld with respect to those dividends. A copy of the
information returns reporting those dividends and the amount of
tax withheld may also be made available to the tax authorities
in the country in which the
non-U.S. stockholder
is a resident under the provisions of an applicable income tax
treaty or exchange of information treaty.
United States federal backup withholding generally will not
apply to payments of dividends or proceeds from the disposition
of our common stock or warrants made by us or our paying agents,
in their capacities as such, to a
non-U.S. stockholder
if the stockholder has provided the required certification that
the stockholder is not a United States person (usually satisfied
by providing an IRS
Form W-8BEN
or successor form) or certain other requirements are met.
Notwithstanding the foregoing, backup withholding may apply if
either we or our paying agent has actual knowledge, or reason to
know, that the stockholder is a United States person that is not
an exempt recipient.
Proceeds from the disposition of shares of common stock or
warrants paid to or through the United States office of a broker
generally will be subject to backup withholding and information
reporting unless the
non-U.S. stockholder
certifies that it is not a United States person under penalties
of perjury (usually on an IRS
Form W-8BEN
or successor form) or otherwise establishes an exemption.
Payments of the proceeds from a disposition or redemption
effected outside the United States by or through a
non-United
States broker generally will not be subject to information
reporting or backup withholding. However, information reporting,
but generally not backup withholding, will apply to such a
payment if the broker has certain connections with the United
States unless the broker has documentary evidence in its records
that the beneficial owner thereof is a
non-U.S. stockholder
and specified conditions are met or an exemption is otherwise
established.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a
non-U.S. stockholder
that result in an overpayment of taxes generally will be
refunded, or credited against the stockholders United
States federal income tax liability, if any, provided that the
required information is timely furnished to the IRS.
114
Subject to the terms and conditions of the underwriting
agreement, the underwriters named below, through their
representative Deutsche Bank Securities Inc., have severally
agreed to purchase from us on a firm commitment basis the
following respective number of units at a public offering price
less the underwriting discounts and commissions set forth on the
cover page of this prospectus:
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Number of
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Underwriters
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Units
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Deutsche Bank Securities Inc.
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21,900,000
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JMP Securities LLC
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5,250,000
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Thomas Weisel Partners LLC
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2,250,000
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Maxim Group LLC
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600,000
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Total
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30,000,000
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The underwriting agreement provides that the obligation of the
underwriters to purchase all of the 30,000,000 units being
offered to the public is subject to specific conditions,
including the absence of any material adverse change in our
business or in the financial markets, the purchase by our
sponsor and Chief Executive Officer of 7,500,000 insider
warrants and 1,000,000 insider warrants, respectively, at a
purchase price of $1.00 per warrant in an insider private
placement immediately prior to the consummation of this
offering, and the receipt of certain legal opinions,
certificates and letters from us, our counsel and the
independent auditors. Subject to the terms of the underwriting
agreement, the underwriters will purchase all of the
30,000,000 units being offered to the public, other than
those covered by the over-allotment option described below, if
any of these units are purchased.
We have been advised by the representative of the underwriters
that the underwriters propose to offer the units to the public
at the public offering price set forth on the cover of this
prospectus and to dealers at a price that represents a
concession not in excess of $0.24 per unit under the public
offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $0.10 per unit to
other dealers. After the initial public offering, the
representative of the underwriters may change the offering price
and other selling terms.
After we consummate a business combination, we intend to use our
commercially reasonable efforts to file and maintain the
effectiveness of a registration statement relating to the common
stock issuable upon exercise of the warrants in order to allow
exercise of the publicly traded warrants. We will file
post-effective amendments to our registration statement in order
to reflect in the prospectus any facts or events which arise
after the effective date of our registration statement which,
individually or in the aggregate, represent a fundamental change
in the information set forth in our registration statement.
Over-Allotment
Option
We have granted to the underwriters an option, exercisable not
later than 30 days after the effective date of the
registration statement, to purchase up to 4,500,000 additional
units at the public offering price less the underwriting
discounts and commissions set forth on the cover of this
prospectus. The underwriters may exercise this option only to
cover over-allotments made in connection with the sale of the
units offered by this prospectus. To the extent that the
underwriters exercise this option, each of the underwriters will
become obligated, subject to conditions, to purchase
approximately the same percentage of these additional units as
the number of units to be purchased by it in the above table
bears to the total number of units offered by this prospectus.
We will be obligated, pursuant to the option, to sell these
additional units to the underwriters to the extent the option is
exercised. If any additional units are purchased, the
underwriters will offer the additional units on the same terms
as those on which the other units are being offered hereunder.
115
The underwriting discounts and commissions are 7% of the initial
public offering price. We have agreed to pay the underwriters
the discounts and commissions set forth below, assuming either
no exercise or full exercise by the underwriters of the
underwriters over-allotment option.
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Fee per
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Without Exercise
of
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With Exercise
of
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Fees
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Unit
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over Allotment
Option
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over Allotment
Option
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Public offering price
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$
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10.00
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$
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300,000,000
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$
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345,000,000
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Underwriting discount (1)
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$
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0.40
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$
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12,000,000
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$
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13,800,000
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Deferred underwriting discount (1)
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$
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0.30
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$
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9,000,000
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$
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10,350,000
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Proceeds before expenses (2)
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$
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9.30
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$
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279,000,000
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$
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320,850,000
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(1)
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The underwriters have agreed to
defer $9,000,000, or $10,350,000 if the underwriters
over-allotment option is exercised in full, of their
underwriting discount, equal to 3% of the gross proceeds of the
units being offered to the public, until the consummation of a
business combination. Upon the consummation of a business
combination, such deferred discount, reduced pro-ratably by the
exercise of stockholder conversion rights, shall be released to
the underwriters out of the gross proceeds of this offering held
in a trust account at JPMorgan Chase Bank, N.A., maintained by
Continental Stock Transfer & Trust Company, acting as
trustee. The underwriters will not be entitled to any interest
accrued on the deferred discount.
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(2)
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The offering expenses are estimated
at $1,000,000, which are not reflected in the preceding table.
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Upon the consummation of a business combination, the
underwriters will be entitled to receive that portion of the
proceeds attributable to the underwriters discount held in
the trust account without any interest accrued thereon. If we
are unable to consummate a business combination and the trustee
is forced to liquidate the trust account, the underwriters have
agreed that: (i) they will forfeit any rights to or claims
against such proceeds and (ii) the proceeds attributable to
the underwriters discount will be distributed on a
pro-rata basis among the public stockholders along with any
interest accrued thereon.
Pricing of this
Offering
Prior to this offering there has been no public market for any
of our securities. The public offering price of the units and
the terms of the warrants were negotiated between us and the
representative of the underwriters. Factors considered in
determining the prices and terms of the units, including the
common stock and warrants underlying the units, include:
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the history and prospects of companies whose principal business
is the acquisition of other companies;
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prior offerings of those companies;
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our prospects for acquiring an operating business at attractive
values;
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our capital structure;
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an assessment of our management and their experience in
identifying operating companies;
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general conditions of the securities markets at the time of the
offering; and
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other factors as were deemed relevant.
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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.
Price
Stabilization and Short Positions
In order to facilitate the offering of our units, the
underwriters may engage in transactions that stabilize,
maintain, or otherwise affect the market price of our units.
Specifically, the underwriters may over-allot units in
connection with this offering, thus creating a short sales
position in our units for their own account. A short sales
position results when an underwriter sells more units than that
underwriter is committed to purchase. A short sales position may
116
involve either covered short sales or
naked short sales. Covered short sales are sales
made for an amount not greater than the underwriters
over-allotment option to purchase additional units in the
offering described above. The underwriters may close out any
covered short position by either exercising their over-allotment
option or purchasing units in the open market. In determining
the source of units to close out the covered short position, the
underwriters will consider, among other things, the price of
units available for purchase in the open market as compared to
the price at which they may purchase units through the
over-allotment option. Naked short sales are sales in excess of
the over-allotment option. The underwriters will have to close
out any naked short position by purchasing units in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the units in the open market after
pricing that could adversely affect investors who purchase in
this offering. Accordingly, to cover these short sales positions
or to stabilize the market price of our units, the underwriters
may bid for, and purchase, units in the open market. These
transactions may be effected on the American Stock Exchange or
otherwise.
Additionally, the representative, on behalf of the underwriters,
may also reclaim selling concessions allowed to an underwriter
or dealer if the underwriting syndicate repurchases units
distributed by that underwriter or dealer. Similar to other
purchase transactions, the underwriters purchases to cover
the syndicate short sales or to stabilize the market price of
our units may have the effect of raising or maintaining the
market price of our units or preventing or mitigating a decline
in the market price of our units. As a result, the price of our
units may be higher than the price that might otherwise exist in
the open market. The underwriters are not required to engage in
these activities and, if commenced, may end any of these
activities 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 intent to do so, any of the
underwriters may, among other things, introduce us to potential
target acquisitions 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 arms length negotiation; provided that no
agreement will be entered into with any of the underwriters and
no fees for such services will be paid to any of the
underwriters prior to the date which is 90 days after the
effective date of the registration statement, unless the FINRA
determines that such payment would not be deemed underwriters
compensation in connection with this offering.
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.
Affiliation with
Underwriters
Jason Ader, the Chairman of our board of directors, is the
second cousin of a Managing Director in the Research Department
of Thomas Weisel Partners LLC, an underwriter in this offering.
117
Proskauer Rose LLP is passing on the validity of the securities
offered in this prospectus. Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California, is acting
as counsel for the underwriters in this offering.
The financial statements of Global Consumer Acquisition Corp. as
of July 16, 2007 and for the period from June 28, 2007
(inception) to July 16, 2007 appearing in this prospectus
and registration statement have been audited by Hays &
Company LLP, independent registered public accounting firm, as
set forth in their report thereon appearing elsewhere herein and
are included in reliance upon such report given on the authority
of such firm 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,
which includes exhibits, schedules and amendments, under the
Securities Act, with respect to this offering of our securities.
Although this prospectus, which forms a part of the registration
statement, contains all material information included in the
registration statement, parts of the registration statement have
been omitted as permitted by rules and regulations of the SEC.
We refer you to the registration statement and its exhibits for
further information about us, our securities and this offering.
The registration statement and its exhibits, as well as our
other reports filed with the SEC, can be inspected and copied at
the SECs public reference room at 100 F Street,
N.E., Washington, D.C. 20549. The public may obtain
information about the operation of the public reference room by
calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains a web site at
http://www.sec.gov
which contains the
Form S-1
and other reports, proxy and information statements and
information regarding issuers that file electronically with the
SEC.
118
INDEX
TO FINANCIAL STATEMENTS
Global Consumer Acquisition Corp.
(A Development Stage Company)
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Page
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Report of Independent Registered Public Accounting Firm
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F-2
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Balance Sheet
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F-3
|
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Statement of Operations
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F-4
|
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Statement of Changes in Stockholders Equity
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F-5
|
|
Statement of Cash Flows
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|
F-6
|
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Notes to Financial Statements
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F-7
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|
F-1
To the Board of
Directors
Global Consumer Acquisition Corp.
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Global
Consumer Acquisition Corp. (a development stage company) as of
July 16, 2007 and the related statements of operations,
stockholders equity and cash flows for the period from
June 28, 2007 (inception) to July 16, 2007. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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. 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 Companys 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 Global Consumer Acquisition Corp. (a development stage
company) as of July 16, 2007 and the results of its
operations and its cash flows for the period from June 28,
2007 (inception) to July 16, 2007, in conformity with
accounting principles generally accepted in the United States of
America.
/s/ Hays &
Company LLP
November 13, 2007
New York, New York
F-2
Global Consumer
Acquisition Corp.
(A Development Stage Company)
BALANCE SHEET
|
|
|
|
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|
July 16,
|
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|
|
2007
|
|
|
ASSETS
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|
|
|
|
Cash
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|
$
|
8,625
|
|
Deferred offering costs
|
|
|
30,000
|
|
|
|
|
|
|
Total assets
|
|
$
|
38,625
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
Liabilities
|
|
|
|
|
Accrued offering costs
|
|
$
|
30,000
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
Stockholders equity
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares
authorized; None issued
|
|
|
|
|
Common stock, $0.0001 par value; 100,000,000 shares
authorized; 8,625,000 shares issued and outstanding
|
|
|
863
|
|
Additional paid-in capital
|
|
|
7,762
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
8,625
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
38,625
|
|
|
|
|
|
|
See accompanying notes.
F-3
Global Consumer
Acquisition Corp.
(A Development Stage Company)
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
For the period
from
|
|
|
|
June 28,
|
|
|
|
2007
|
|
|
|
(inception) to
|
|
|
|
July 16,
|
|
|
|
2007
|
|
|
Expense
|
|
$
|
|
|
|
|
|
|
|
Net income
|
|
$
|
|
|
|
|
|
|
|
Weighted average shares outstanding (Note 1)
|
|
|
8,625,000
|
|
|
|
|
|
|
Basic and diluted income per share
|
|
$
|
|
|
|
|
|
|
|
See accompanying notes.
F-4
Global Consumer
Acquisition Corp.
(A Development Stage Company)
STATEMENT OF
CHANGES IN STOCKHOLDERS EQUITY
For the period from June 28, 2007 (inception) to
July 16, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During the
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Development
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity
|
|
|
Common shares issued at $0.001 per share
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
7,762
|
|
|
$
|
|
|
|
$
|
8,625
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 16, 2007
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
7,762
|
|
|
$
|
|
|
|
$
|
8,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
Global Consumer
Acquisition Corp.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
For the period
from
|
|
|
|
June 28,
|
|
|
|
2007
|
|
|
|
(inception) to
|
|
|
|
July 16,
|
|
|
|
2007
|
|
|
Cash flow from operating activities
|
|
|
|
|
Net income
|
|
$
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Deferred offering costs
|
|
|
(30,000
|
)
|
Accrued offering costs
|
|
|
30,000
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from sale of shares of common stock
|
|
|
8,625
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
8,625
|
|
|
|
|
|
|
Net increase in cash
|
|
|
8,625
|
|
Cash, beginning of period
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
8,625
|
|
|
|
|
|
|
See accompanying notes.
F-6
Global Consumer
Acquisition Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
|
|
1.
|
Organization,
Business Operations and Significant Accounting
Policies
|
Global Consumer Acquisition Corp. (a development stage company)
(the Company) is a newly organized blank check
company organized for the purpose of effecting a merger, capital
stock exchange, asset or stock acquisition, exchangeable share
transaction or other similar business combination with one or
more domestic or international operating businesses in the
global consumer products and services industry. The Company does
not have any specific business combination under consideration
and it does not (nor has anyone on its behalf) contacted any
prospective acquisition candidate or had any discussions, formal
or otherwise, with respect to such a transaction.
The Companys ability to commence operations is contingent
upon obtaining adequate financial resources through a proposed
initial public offering of up to 30,000,000 units
(Units) exclusive of over-allotment which is
discussed in Note 2 (Proposed Offering).
Substantially all of the net proceeds of this Proposed Offering
are intended to be generally applied toward consummating a
business combination (Business Combination) in the
global consumer products and services industry. The
Companys management has complete discretion in identifying
and selecting the target business. There is no assurance that
the Company will be able to successfully effect a Business
Combination. Upon the closing of the Proposed Offering,
management has agreed that 98.5% or $295,450,000 of the gross
proceeds from the Proposed Offering will be held in a trust
account (Trust Account) until the earlier of
(i) the completion of a Business Combination and
(ii) liquidation of the Company. The placing of funds in
the Trust Account may not protect those funds from third
party claims against the Company. Although the Company will seek
to have all vendors, prospective target businesses or other
entities it engages execute agreements with the Company waiving
any right in or to any monies held in the Trust Account,
there is no guarantee that they will execute such agreements.
The remaining net proceeds (not held in the Trust Account)
may be used to pay for business, legal and accounting due
diligence on prospective acquisitions, and initial and
continuing general and administrative expenses. The Company,
after signing a definitive agreement for the acquisition of a
target business, is required to submit such transaction for
stockholder approval. The Company will proceed with the initial
business combination only if both a majority of the shares of
common stock voted by the public stockholders are voted in favor
of the business combination and public stockholders owning less
than 30% of the shares sold in this offering exercise their
conversion rights described below.
Pursuant to the Companys Amended and Restated Certificate
of Incorporation, if the Company does not consummate a Business
Combination within 24 months of the confirmation of the
Proposed Offering, the Company will cease to exist except for
the purposes of winding up its affairs and liquidating.
All of the Companys stockholders prior to the Proposed
Offering, including all of the officers and directors of the
Company (Initial Stockholders), have agreed to vote
their founding shares of common stock in accordance with the
vote of the majority in interest of all other stockholders of
the Company (Public Stockholders) with respect to
any Business Combination. After consummation of a Business
Combination, these voting safeguards will no longer be
applicable.
With respect to a Business Combination which is approved and
consummated, the Company will offer each of its Public
Stockholders the right to have such stockholders shares of
common stock converted into cash if the stockholder votes
against the Business Combination. The per share conversion price
will equal the amount in the Trust Account, calculated as
of two business days prior to the consummation of the proposed
Business Combination, less
F-7
Global Consumer
Acquisition Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS(Continued)
any remaining tax liabilities relating to interest income,
divided by the number of shares of common stock held by Public
Stockholders at the consummation of the Proposed Offering.
Public Stockholders who convert their stock into their share of
the Trust Account retain their warrants. The Company will not
complete any proposed Business Combination for which its Public
Stockholders owning 30% or more of the shares sold in this
offering both vote against a Business Combination and exercise
their conversion rights.
Income Per
Share
Basic income per share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding
during the period. The 8,625,000 Shares issued to the
Companys Initial Stockholders were issued for $0.001 per
share, which is considerably less than the Proposed Offering per
share price. Under the provisions of FASB No. 128 and
SAB Topic 4:D such shares have been assumed to be
retroactively outstanding for the period since inception. There
are no potentially dilutive securities at July 16, 2007.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could
differ from those estimates.
Management does not believe that any recently issued, but not
yet effective, accounting standards if currently adopted would
have a material effect on the accompanying financial statements.
|
|
2.
|
Proposed Public
Offering
|
The Proposed Offering calls for the Company to offer for public
sale up to 30,000,000 Units at a proposed offering price of
$10.00 per Unit (plus up to an additional 4,500,000 units solely
to cover the underwriters over-allotments, if any). Each
Unit consists of one share of the Companys common stock
and one Redeemable Common Stock Purchase Warrant
(Warrant). Each Warrant will entitle the holder to
purchase from the Company one share of common stock at an
exercise price of $7.50 commencing the later of the completion
of a Business Combination and one year from the effective date
of the Proposed Offering and expiring five years from the
effective date of the Proposed Offering. The Company may redeem
the Warrants, at a price of $.01 per Warrant upon 30 days
notice after the Warrants become exercisable, if, and only if,
the last sales price of the Companys common stock equals
or exceeds $14.25 per share for any 20 trading days within a 30
trading day period ending three business days before the Company
sends the notice of redemption. Upon consummation of the
offering, the Company has committed to pay underwriting fees of
4% of the gross public offering proceeds. Contingent upon the
consummation of a Business Combination, the Company has
committed to pay additional underwriting fees of 3% of the gross
public offering proceeds net of cash expended in connection with
the exercise of the public stockholders conversion rights,
if any.
F-8
Global Consumer
Acquisition Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS(Continued)
|
|
3.
|
Deferred Offering
Costs
|
Deferred offering costs consist principally of legal and
underwriting fees incurred through the balance sheet date that
are directly related to the Proposed Offering and that will be
charged to stockholders equity upon the receipt of the
capital raised.
|
|
4.
|
Related Party
Transactions
|
Effective July 16, 2007, the Company has agreed to pay
Hayground Cove Asset Management LLC, the Companys sponsor,
$10,000 per month, plus out-of-pocket expenses not to exceed
$10,000 per month, for office space and services related to the
administration of the Companys day-to-day activities. This
agreement will terminate at the closing of a Business
Combination.
Certain of the Companys officers, directors and its
Initial Stockholders are also officers, directors, employees and
affiliated entities of Hayground Cove Asset Management LLC.
Issuance of
Common Stock
The Company issued 8,625,000 shares of common stock to the
Initial Stockholders for cash proceeds of $8,625 (the
Founder Shares). In the event the 4,500,000
over-allotment Units (Note 2) are not issued, the
Initial Stockholders will be required to redeem the Founder
Shares in an amount sufficient to cause the amount of issued and
outstanding Founder Shares to equal 20% of the Companys
aggregate amount of issued and outstanding commons stock after
giving effect to the issuance of commons stock in connection
with the Proposed Offering.
Warrant
Subscription
Certain of the initial stockholders have committed to purchase
an aggregate of 8,500,000 warrants (the founder
warrants) from the Company in a private placement pursuant
to the exemption from registration contained in
Section 4(2) of the Securities of Act of 1933, as amended.
The warrants will be sold for a total purchase price of
$8,500,000 or $1.00 per warrant. The private placement is to
take place simultaneously with the consummation of the Proposed
Offering. Each warrant is exercisable to one share of common
stock. The exercise price on the warrants is $7.50. The holders
of the founder warrants are entitled, at any time and from time
to time, to exercise the founder warrants on a cashless basis at
the discretion of the holder. The proceeds from the sale of the
founder warrants will be deposited into a trust account, subject
to a trust agreement and will be part of the funds distributed
to the Companys Public Stockholders in the event the
Company is unable to complete a Business Combination. Based on
observable market prices, the Company believes that the purchase
price of $1.10 per warrant for the founder warrants will
represent the fair value of such warrants on the date of
purchase. The valuation is based on all comparable initial
public offerings by blank check companies in 2007. We anticipate
recording compensation expense in connection with the insider
warrants equal to the grant date fair value of the warrants
minus the purchase price. We estimate that amount will be
approximately $850,000. The compensation expense will be
recognized over the estimated service period of 24 months.
We have estimated the service period as the estimated time to
complete a business combination.
F-9
Global Consumer
Acquisition Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS(Continued)
Preferred
Stock
The Company is authorized to issue 1,000,000 shares of
blank check preferred stock with such designations, voting and
other rights and preferences as may be determined from time to
time by the Board of Directors.
The Company has entered into agreements with its directors to
provide contractual indemnification in addition to the
indemnification provided in its amended and restated certificate
of incorporation. The Company believes that these provisions and
agreements are necessary to attract qualified directors. The
Companys bylaws also will permit it to secure insurance on
behalf of any officer, director or employee for any liability
arising out of his or her actions, regardless of whether
Delaware law would permit indemnification. The Company will
purchase a policy of directors and officers
liability insurance that insures the Companys directors
and officers against the cost of defence, settlement or payment
of a judgment in some circumstances and insures us against our
obligations to indemnify the directors and officers.
Effective as of August 1, 2007, the Company entered into an
employment agreement with its Chief Executive Officer. The
agreement is effective until the earlier of (i) two years
after the completion of the Proposed Offering and (ii) the
closing of a Business Combination. The agreement may be renewed
for an additional one-year term. Pursuant to the agreement, the
CEO has waived all rights, interests and claims to the proceeds
of the Proposed Offering and the insider private placement to be
held in a trust account. The agreement also contains
non-competition and confidentiality provisions which limit the
CEO from competing against the Company and using information he
obtains from the Company after the termination of his employment
with the Company. The CEO receives indemnification from the
Company for liabilities arising from the services he provides to
the Company under the agreement, other than those liabilities
due to fraud, willful misconduct or gross negligence on his
part. The Company will purchase and maintain an insurance policy
on behalf of the CEO against such liabilities. In connection
with entering into the agreement, the CEO obtained an option to
purchase 475,000 shares of Founder Shares at a purchase
price of $0.001 per share from Hayground Cove Asset Management
LLC, which option will vest on the date (the Trigger
Date) that is one year after the closing of a Business
Combination, but the vesting will occur only if the appreciation
of the per share price of the Companys common stock is
either (i) greater than 1x the Russell 2000 hurdle rate on
the Trigger Date or (ii) exceeds the Russell 2000 hurdle
rate for 20 consecutive trading days after the Trigger Date. The
Russell 2000 hurdle rate means the Russell 2000 index
performance over the period between the completion of the
Proposed Offering and the Trigger Date. The amount of the option
will be increased by the amount of shares equal to
10,000 shares for each $10,000,000 of gross proceeds from
the exercise of the underwriters overallotment option. The
Company anticipates recording compensation expense in connection
with the options equal to the grant date fair value of the
option. The fair value of the option is based on a Black-Scholes
model on the date of grant and would be approximately
$4,393,340.92 using an expected life of three years, stock
price of $9.25 per share, volatility of 33.7% and a risk-free
interest rate of 4.98%. However, because shares of the
Companys common stock do not have a trading history, the
volatility assumption
F-10
Global Consumer
Acquisition Corp.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS(Continued)
is based on information currently available to the Company. The
Company believes that the volatility estimate is a reasonable
benchmark to use in estimating the expected volatility of shares
of the Companys common stock. In addition, the Company
believes a stock price of $9.25 per share is a fair assumption
based on the Companys observation of market prices for
comparable shares of common stock. This assumption is based on
all comparable initial public offerings by blank check companies
in 2007. The compensation expense will be recognized over the
service period of 24 months. The Company has estimated the
service period as the estimated time to complete a business
combination.
On August 31, 2007, the Company issued a promissory note in
the amount of $139,025 in favor of its sponsor, which amount
reflects the funds advanced by the Companys sponsor on the
Companys behalf in connection with the Proposed Offering.
This note bears an interest rate of 5.0% per annum and is
due on the earlier of (i) December 31, 2007 and
(ii) the consummation of the Proposed Offering. The
principal amount of the note plus any accrued and unpaid
interest thereon to the date of repayment will be repaid out of
the proceeds of the Proposed Offering.
F-11
No dealer, salesperson or any other person is authorized to
give any information or make any representations in connection
with this offering other than those contained in this prospectus
and, if given or made, the information or representations must
not be relied upon as having been authorized by us. This
prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the
securities offered by this prospectus, or an offer to sell or a
solicitation of an offer to buy any securities by anyone in any
jurisdiction in which the offer or solicitation is not
authorized or is unlawful. The information contained in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any
sale of our securities.
TABLE OF
CONTENTS
|
|
|
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|
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1
|
|
|
|
|
27
|
|
|
|
|
58
|
|
|
|
|
60
|
|
|
|
|
64
|
|
|
|
|
66
|
|
|
|
|
67
|
|
|
|
|
70
|
|
|
|
|
82
|
|
|
|
|
86
|
|
|
|
|
95
|
|
|
|
|
97
|
|
|
|
|
101
|
|
|
|
|
110
|
|
|
|
|
115
|
|
|
|
|
118
|
|
|
|
|
118
|
|
|
|
|
118
|
|
|
|
|
F-1
|
|
Until December 15, 2007, all dealers that effect
transactions in these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This
is in addition to the dealers obligation to deliver a
prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
Global Consumer
Acquisition Corp.
30,000,000 Units
Deutsche Bank
Securities
JMP Securities
Thomas Weisel Partners
LLC
Maxim Group LLC
Prospectus
November 20, 2007
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