As filed with
the Securities and Exchange Commission on August 19,
2010
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
L&L ACQUISITION
CORP.
(Exact Name of Registrant as
Specified in Its Charter)
|
|
|
|
|
Delaware
|
|
6770
|
|
27-3109518
|
(State or Other Jurisdiction
of
Incorporation or Organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
John L. Shermyen
Chief Executive Officer
265 Franklin Street,
20th
Floor
Boston, Massachusetts 02110
(617) 330-7755
(Address, Including Zip Code,
and Telephone Number, Including Area Code, of Registrants
Principal Executive Offices)
Copies to:
|
|
|
Michael D. Maline, Esq.
Laura Hodges Taylor, Esq.
Goodwin Procter LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
(212) 813-8800
Fax: (212) 355-3333
|
|
Joel L. Rubinstein, Esq.
McDermott Will & Emery LLP
340 Madison Avenue
New York, New York 10173
(212) 547-5400
Fax: (212) 547-5444
|
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable
after this registration statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
|
|
o
|
|
Large accelerated file
|
|
o
|
|
Accelerated filer
|
o
|
|
Non-accelerated
filer
|
|
x
|
|
Smaller reporting company
|
|
|
(Do not check if a smaller reporting company)
|
|
|
|
|
CALCULATION
OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed Maximum
|
|
|
Proposed Maximum
|
|
|
|
Title of each Class of
|
|
|
Amount to
|
|
|
Offering Price
|
|
|
Aggregate
|
|
|
Amount of
|
Securities to be
registered
|
|
|
be
Registered(1)
|
|
|
Per
Unit(1)
|
|
|
Offering
Price(1)
|
|
|
Registration Fee
|
Units, each consisting of one share of Common Stock,
$.0001 par value, and one
Warrant(2)
|
|
|
|
5,750,000 Units
|
|
|
|
|
$10.00
|
|
|
|
|
$57,500,000
|
|
|
|
|
$4,100
|
|
Shares of Common Stock included as part Of the
Units(2)
|
|
|
|
5,750,000 Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Warrants included as part of the
Units(2)
|
|
|
|
5,750,000 Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$57,500,000
|
|
|
|
|
$4,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Estimated solely for the purpose of calculating the registration
fee.
|
|
(2)
|
Includes 750,000 units, consisting of 750,000 shares
of common stock and 750,000 warrants, which may be issued upon
exercise of a
45-day
option granted to the underwriters to cover over-allotments, if
any.
|
|
(3)
|
No fee pursuant to Rule 457(g).
|
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
|
|
|
PRELIMINARY
PROSPECTUS |
Subject
To Completion, Dated August 19, 2010 |
$50,000,000
L&L ACQUISITION
CORP.
5,000,000 Units
L&L Acquisition Corp. is a newly-organized blank check
company formed for the purpose of acquiring, through a merger,
capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar
business combination, which we refer to throughout this
prospectus as our initial business combination, one or more
operating businesses that we have not yet identified. We intend
to focus on businesses in the healthcare industry or
healthcare-related assets, but we may pursue opportunities in
other business sectors. We are not limited to a particular
geographic region or minimum transaction value for purposes of
consummating an initial business combination, except that we
will not effect a business combination with another blank check
company or a similar type of company. We do not have any
specific merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, exchangeable share transaction
or other similar business combination under consideration and we
have not, nor has anyone on our behalf, contacted any
prospective target business or had any discussions, formal or
otherwise, with respect to such a transaction. Our sponsors,
officers and directors have agreed that we will only have
18 months from the closing of this offering to consummate
our initial business combination.
We will provide our stockholders with the opportunity to redeem
their shares of our common stock for cash equal to their pro
rata share of the aggregate amount then on deposit in the trust
account described below (including interest), less franchise and
income taxes payable, upon the completion of our initial
business combination, subject to the limitations described
herein. We intend to consummate our initial business combination
without a stockholder vote and conduct the related redemptions
of shares of our common stock pursuant to the tender offer rules
of the Securities and Exchange Commission, or SEC. If, however,
a stockholder vote is required by law, or we decide to hold a
stockholder vote for other business or legal reasons, we will
conduct the redemptions in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer
rules. We will consummate our initial business combination only
if holders of no more than 88% of the shares of common stock
sold as part of the units of this offering, which we refer to
throughout this prospectus as our public shares, elect to redeem
their shares and, solely if we seek stockholder approval, a
majority of the outstanding shares of common stock voted are
voted in favor of the business combination. If we do not
consummate our initial business combination within
18 months from the closing of this offering, we will
(i) cease all operations except for the purposes of winding
up, (ii) as promptly as reasonably possible, redeem 100% of
our public shares for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law,
and subject to the requirement that any refund of income taxes
that were paid from the trust account which is received after
the redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law.
This is an initial public offering of our units. We are offering
5,000,000 units. Each unit is being sold at a purchase
price of $10.00 per unit and consists of (i) one share of
our common stock and (ii) one warrant. Each warrant
entitles the holder to purchase one share of our common stock at
a price of $11.50. Each warrant will become exercisable on the
later of 30 days after completion of our initial business
combination or 12 months from the closing of this offering
and will expire five years after the completion of our initial
business combination, or earlier upon redemption or liquidation,
as described in this prospectus.
Our sponsors have agreed to purchase an aggregate of 5,000,000
warrants, which we refer to throughout this prospectus as the
sponsor warrants, from us at a price of $0.50 per warrant
($2,500,000 in the aggregate) in a private placement to be
completed simultaneously with the completion of this offering.
There is presently no public market for our units, common stock
or warrants. It is anticipated that our units will be quoted on
the
Over-the-Counter
Bulletin Board quotation system, or the OTCBB, under the
symbol
on or promptly after the date of this prospectus. The common
stock and warrants comprising the units will begin separate
trading five business days following the earlier to occur of the
expiration of the underwriters over-allotment option, its
exercise in full or the announcement by the underwriters of
their intention not to exercise all or any remaining portion of
the underwriters over-allotment option, subject to our
filing of a Current Report on
Form 8-K
with the SEC containing an audited balance sheet reflecting our
receipt of the gross proceeds of this offering and issuing a
press release announcing the trading date when such separate
trading will commence. Once the securities comprising the units
begin separate trading, the common stock and warrants will be
traded on the OTCBB under the symbols
and
,
respectively.
We have granted the underwriters a
45-day
option to purchase up to 750,000 additional units from us to
cover over-allotments, if any.
Investing in our securities involves a high degree of risk.
See Risk Factors beginning on page 22 for a
discussion of information that should be considered in
connection with an investment in our securities. Investors will
not be entitled to protections normally afforded to investors in
Rule 419 blank check offerings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
|
|
Underwriting Discounts
|
|
Proceeds, Before
|
|
|
Offering Price
|
|
and
Commissions(1)
|
|
Expenses, to Us
|
|
Per Unit
|
|
$
|
10.00
|
|
|
$
|
0.70
|
|
|
$
|
9.30
|
|
Total Proceeds
|
|
$
|
50,000,000
|
|
|
$
|
3,500,000
|
|
|
$
|
46,500,000
|
|
|
|
(1) |
This amount includes the following contingent fees that will
become payable from the amounts held in the trust account solely
in the event we consummate our initial business combination:
(A) an advisory fee equal to 1.5% of the gross proceeds
from the sale of the units offered to the public payable to
Morgan Joseph LLC and (B) a fee equal to 2.5% of the
aggregate amount of the funds released from the trust account to
us and/or to our target upon completion of our initial business
combination payable to Morgan Joseph LLC and such other firms
(which may or may not be underwriters), if any, who are
instrumental in advising us in connection with the completion of
our initial business combination.
|
Of the net proceeds we receive from this offering and the sale
of the sponsor warrants described in this prospectus,
approximately $49,250,000 in the aggregate (approximately $9.85
per unit) or approximately $56,525,000 in the aggregate
(approximately $9.83 per unit) if the underwriters
over-allotment option is exercised in full, will be deposited
into a trust account at J.P. Morgan Chase Bank N.A.
maintained by Continental Stock Transfer &
Trust Company, acting as trustee. This amount includes the
contingent fees described in footnote (1) above. None of
the funds held in the trust account will be released, other than
to pay franchise and income taxes, until the earlier of
(i) the completion of our initial business combination,
(ii) our redemption of the public shares sold in this
offering if we are unable to consummate our initial business
combination within 18 months from the closing of this
offering (subject to the requirements of law) or (iii) our
liquidation (if no redemption occurs). The proceeds deposited in
the trust account could become subject to the claims of our
creditors, if any, which could have priority over the claims of
our public stockholders.
The underwriters are offering the units for sale on a
firm-commitment basis. Delivery of the units will be made on or
about 2010.
Morgan Joseph LLC has agreed to make a market in our securities
from the date of this prospectus until the earlier of
(i) the completion of our initial business combination and
(ii) 18 months from the closing of this offering.
Neither the SEC nor any state securities commission has
approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus
is ,
2010
SUMMARY
This summary only highlights the more detailed information
appearing elsewhere in this prospectus. As this is a summary, it
does not contain all of the information that you should consider
in making an investment decision. For a more complete
understanding of this offering, you should read the entire
prospectus carefully, including the information under Risk
Factors and our financial statements and the related notes
included elsewhere in this prospectus before investing. Unless
otherwise stated in this prospectus:
|
|
|
|
|
references to we, us, our,
company or our company are to L&L
Acquisition Corp., a Delaware corporation;
|
|
|
|
references to Exchange Act are to the Securities
Exchange Act of 1934, as amended;
|
|
|
|
references to initial business combination and to
business combination are to our initial acquisition
of one or more operating businesses or assets through a merger,
capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar
business combination;
|
|
|
|
references to initial shares are to the following
shares of our common stock issued to our sponsors in a private
placement prior to this offering: (i) 638,889 shares
(up to 83,333 of which will be forfeited if the
underwriters over-allotment option is not exercised in
full), which will be held in escrow until the first anniversary
of our initial business combination and
(ii) 798,611 shares (up to 104,167 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) which will be held in escrow (and pursuant to
an agreement will not have the ability to vote while in escrow)
and forfeited on the fifth anniversary of our initial business
combination unless, prior to such time, either (x) the last
sales price of our stock equals or exceeds $18.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period or (y) a transaction is
consummated following our initial business combination in which
all stockholders have the right to exchange their common stock
for cash consideration which equals or exceeds $18.00 per share;
|
|
|
|
references to sponsor warrants are to the warrants
to purchase an aggregate of 5,000,000 shares of our common
stock that will be issued to our sponsors, in a private
placement that will occur simultaneously with the completion of
this offering for the purchase price of $2,500,000;
|
|
|
|
references to public shares are to shares of our
common stock sold as part of the units in this offering (whether
they are purchased in this offering or thereafter in the open
market);
|
|
|
|
references to public stockholders are to holders of
public shares, including our sponsors to the extent they
purchase public shares; provided that their status as
public stockholders shall only exist with respect to
such public shares;
|
|
|
|
references to our sponsors are to (i) John L.
Shermyen, (ii) LLM Structured Equity Fund L.P., a
Delaware limited partnership, and (iii) LLM Investors L.P.,
a Delaware limited partnership;
|
|
|
|
references to a target business are to one or more
operating businesses or assets which, after completion of this
offering, we may target for an initial business
combination; and
|
|
|
|
the information in this prospectus assumes that the underwriters
will not exercise their over-allotment option.
|
Our
Business
We are a newly-organized blank check company formed for the
purpose of acquiring, through a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization, exchangeable
share transaction or other similar business combination, which
we refer to throughout this prospectus as our initial business
combination, one or more operating businesses that we have not
yet identified. We intend to focus on businesses in the
healthcare industry or healthcare-related assets, but we may
pursue opportunities in other business sectors. We are not
limited to a particular geographic region or minimum transaction
value for
1
purposes of consummating an initial business combination, except
that we will not effect a business combination with another
blank check company or a similar type of company. We do not have
any specific merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, exchangeable share transaction
or other similar business combination under consideration and we
have not, nor has anyone on our behalf, contacted any
prospective target business or had any discussions, formal or
otherwise, with respect to such a transaction. Our sponsors,
officers and directors have agreed that we will only have
18 months from the closing of this offering to consummate
our initial business combination. Although we may acquire a
non-United
States business, our primary search for acquisition targets will
focus on domestic operating businesses.
We will seek to capitalize on the significant healthcare
industry and private equity investing experience and contacts of
John L. Shermyen, our chairman, chief executive officer and
co-sponsor, and LLM Capital Partners LLC, or LLM. LLM is a
private equity firm focused on investing growth capital in
mid-sized companies. LLM is the manager of LLM Structured Equity
Fund L.P. and LLM Investors L.P., our other two
co-sponsors. Patrick J. Landers, our president and a director,
is a managing director of LLM. Certain LLM professionals
have worked together since 1991 and have significant experience
in the private equity and investment banking businesses. We
believe that we will benefit from the extensive deal sourcing
contacts as well as the specific company and industry investment
experience of each of the LLM investment professionals.
In addition, we will seek to benefit from the experience gained
by Mr. Landers and other LLM professionals in
connection with Prospect Acquisition Corp., or Prospect, a
special purpose acquisition company which also was co-sponsored
by LLM Structured Equity Fund L.P. and LLM Investors L.P.
Mr. Landers was president and a director of Prospect.
Prospect completed an initial public offering on
November 14, 2007, raising $250 million of gross
proceeds, and consummated a business combination with
Kennedy-Wilson, Inc. (KWIK.PK), an international real estate
investment and services company, on November 13, 2009.
Prospect was focused on the financial services industry, and its
chairman and chief executive officer previously had been the
chief executive officer of a company in the financial services
industry in which LLM professionals had invested.
Similarly, our chairman and chief executive officer, John L.
Shermyen, was a founder of LogistiCare, Inc., or LogistiCare, a
company in which LLM professionals successfully invested and
which operates in the healthcare industry in which we intend to
focus. LogistiCare is a provider of non-emergency medical
transportation management solutions. Mr. Shermyen served as
the president and chief executive officer of LogistiCare from
1994 until July 2009, 19 months after LogistiCare was sold
to Providence Service Corp. (NasdaqGS:PRSC).
We have not conducted, and no person or entity acting on our
behalf has conducted, any research with respect to identifying
the number and characteristics of the potential business
combination candidates within our targeted industry, or any
industry, or the likelihood or probability of success of any
proposed business combination. Accordingly, we cannot assure you
that we will be able to locate a target business or that we will
be able to engage in a business combination with a target
business on favorable terms, or at all.
We have identified the following general criteria that we
believe are important and that we intend to use in evaluating
prospective target businesses. While we intend to utilize these
criteria in evaluating business combination opportunities, we
expect that no individual criterion will be essential to
deciding whether or not to pursue a particular opportunity.
Further, any particular business combination opportunity which
we ultimately determine to pursue may not meet one, more or any
of these criteria:
|
|
|
|
|
History of Profitability and Free Cash
Flow. We will seek to acquire one or more
businesses or assets that have a history of, or potential for,
strong, stable free cash flow generation (i.e. companies that
typically generate cash in excess of that required to maintain
or expand the business asset base). We will focus on
companies that have predictable and recurring revenue streams
and an emphasis on low working capital and capital expenditure
requirements.
|
|
|
|
Strong Management Team. We will seek to
acquire one or more businesses or assets that have strong,
experienced management teams or those that provide a platform
for us to assemble an
|
2
|
|
|
|
|
effective and experienced management team. We will focus on
management teams with a proven track record of driving revenue
growth, enhancing profitability and creating value for their
stockholders.
|
|
|
|
|
|
Opportunities for Add-on Acquisitions. We will
seek to acquire one or more businesses or assets that we can
grow both organically and through acquisitions. Our ability to
source proprietary opportunities and execute transactions will
help the business we acquire serve as a platform for further
add-on acquisitions.
|
|
|
|
Spin-Offs/Divestitures from Larger
Companies. We will focus on one or more
businesses or assets that are part of larger companies, which
the owners seek to divest or spin-off in order to monetize their
investment.
|
|
|
|
Defensible Business Niche. We will focus on
one or more businesses or assets that have a leading or niche
market position. We will analyze the strengths and weaknesses of
target businesses relative to their competitors and seek to
acquire those that demonstrate advantages when compared to their
competitors, which may help to protect their market position and
profitability.
|
|
|
|
Diversified Customer and Supplier Base. We
will seek to acquire businesses or assets that have a
diversified customer and supplier base. Companies with a
diversified customer and supplier base are generally better able
to endure economic downturns, industry consolidation, changing
business preferences and other factors that may negatively
impact their customers, suppliers and competitors.
|
These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular initial business
combination may be based, to the extent relevant, on these
general guidelines as well as other considerations, factors and
criteria that our management may deem relevant. In the event
that we decide to enter into a business combination with a
target business that does not meet the above criteria and
guidelines, we will disclose that the target business does not
meet the above criteria in our stockholder communications
related to our initial business combination, which, as discussed
is this prospectus, would be in the form of tender offer
documents or proxy solicitation materials that we would file
with the SEC.
Our sponsors, officers and directors, as well as their
affiliates, may bring to our attention target business
candidates that they become aware of through their business
contacts as a result of formal or informal inquiries or
discussions they may have, as well as by attending trade shows
or conventions. In addition, we expect to receive a number of
proprietary deal flow opportunities that would not otherwise
necessarily be available to us as a result of the track record
and business relationships of our sponsors, officers and
directors. We anticipate that target business candidates will
also be brought to our attention from various unaffiliated
sources, including investment bankers, venture capital funds,
private equity funds, leveraged buyout funds, management buyout
funds and other members of the financial community. Target
businesses may also be brought to our attention by such
unaffiliated sources as a result of being solicited through
calls or mailings. These sources may also introduce us to target
businesses in which they think we may be interested on an
unsolicited basis, since many of these sources will have read
this prospectus and know what types of business we are targeting.
Our sponsors, officers and directors have agreed that we will
only have 18 months from the closing of this offering to
consummate our initial business combination. If we do not
consummate our initial business combination within such
18-month
period, we will (i) cease all operations except for the
purposes of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares for cash equal to
their pro rata share of the aggregate amount then on deposit in
the trust account (including interest), less franchise and
income taxes payable, which redemption will completely
extinguish public stockholders rights as stockholders
(including the right to receive further liquidation
distributions, if any), subject to applicable law, and subject
to the requirement that any refund of income taxes that were
paid from the trust account which is received after the
redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other
3
applicable law. Our sponsors have agreed to waive their
redemption rights with respect to their initial shares, but will
be entitled to redeem any public shares they may own, in the
event we do not consummate our initial business combination.
We anticipate structuring a business combination so that our
company acquires 100% of the equity interests or assets of the
target business or businesses. We may structure a business
combination to acquire less than 100% of the equity interests or
assets of a target business, but we will only consummate such
business combination if we acquire a controlling interest in the
target. We will acquire a controlling interest either through
the acquisition of at least 50.1% of the voting equity interests
in the target or through the acquisition of a significant voting
equity interest that enables us to exercise a greater degree of
control over the target than any other person or group. In the
event we acquire less than a majority of the voting equity
interests in the target, we may seek an even greater degree of
control through contractual arrangements with the target
and/or other
target equity holders, or through special rights associated with
the target equity security that we hold, which arrangements or
rights may grant us the ability, among other things, to appoint
certain members of the board (or equivalent governing body) or
management of the target or the ability to approve certain types
of significant transactions that the target may seek to enter
into. Even though our company will own a controlling interest in
the target, our stockholders prior to the business combination
may collectively own a minority interest in the post business
combination company, depending on valuations ascribed to the
target and us in the business combination transaction.
In evaluating a prospective target business, we expect to
conduct an extensive due diligence review which will encompass,
among other things, meetings with incumbent management and
employees, document reviews, interviews of customers and
suppliers, inspection of facilities, as well as review of
financial and other information, which will be made available to
us.
While we do not intend to pursue an initial business combination
with a company that is affiliated with our sponsor, officers or
directors, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial
business combination with such a company, we, or a committee of
our independent directors, would obtain an opinion from an
independent investment banking firm that is a member of the
Financial Industry Regulatory Authority, or FINRA, that such an
initial business combination is fair to our stockholders from a
financial point of view.
Each of our officers and directors has agreed that until the
earliest of our initial business combination, 18 months
after the closing of this offering or such time as he ceases to
be an officer, to present to us for our consideration, prior to
presentation to any other entity, any business opportunity with
an enterprise value of $50 million or more, subject to any
pre-existing fiduciary or contractual obligations he might have.
As more fully discussed in Management
Conflicts of Interest, if any of our officers or directors
becomes aware of a business combination opportunity that falls
within the line of business of any entity to which he has
pre-existing fiduciary or contractual obligations, he may be
required to present such business combination opportunity to
such entity prior to presenting such business combination
opportunity to us. Certain of our officers and directors
currently have relevant fiduciary duties or contractual
obligations that may take priority over their duties to us.
In order to minimize potential conflicts of interest that may
arise from multiple corporate affiliations, each of LLM Capital
Partners LLC, LLM Structured Equity Fund L.P. and LLM
Investors L.P. have granted us a right of first
refusal with respect to an acquisition of any company or
assets in the healthcare industry whose enterprise value is
$50 million or more. Pursuant to this right of first
refusal, each of these entities has agreed to present any
investment or purchase opportunity in a company or assets
meeting these criteria to a committee of our independent
directors for our review and that it will not enter into any
agreement to purchase or invest in such company or assets until
our committee of independent directors has had a reasonable
period of time to determine whether or not to pursue such
opportunity. This right of first refusal will expire upon the
earlier to occur of (i) the completion of our initial
business combination or (ii) 18 months after the
closing of this offering. In addition, our officers and
directors have agreed not to participate in the formation of, or
become an officer or director of, any blank check company until
we have entered into a
4
definitive agreement regarding our initial business combination
or we have failed to complete our initial business combination
within 18 months from the closing of this offering.
We will provide our stockholders with the opportunity to redeem
the public shares owned by them for cash equal to their pro rata
share of the aggregate amount then on deposit in the trust
account (including interest), less franchise and income taxes
payable, upon the completion of our initial business
combination, subject to the limitations described herein. The
amount in the trust account is initially anticipated to be
approximately $9.85 per share, or approximately $9.83 per share
if the underwriters over-allotment option is exercised in
full, including funds being held in the trust account
attributable to the contingent fees payable solely in the event
that our business combination is completed. There will be no
redemption rights upon the completion of our initial business
combination with respect to our warrants. Our sponsors have
agreed to waive their redemption rights with respect to their
initial shares and any public shares they may own in connection
with the completion of our initial business combination. Unlike
many other blank check companies which hold stockholder votes
and conduct proxy solicitations in conjunction with their
initial business combinations and related redemptions of public
shares for cash upon consummation of such initial business
combinations even when a vote is not required by law, we intend
to consummate our initial business combination without a
stockholder vote and conduct the related redemptions of our
shares of common stock pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act which regulate
issuer tender offers, and will file tender offer documents with
the SEC. The tender offer documents will contain substantially
the same financial and other information about the initial
business combination and the redemption rights as is required
under Regulation 14A of the Exchange Act which regulates
the solicitation of proxies. In the event we conduct redemptions
pursuant to the tender offer rules, our offer to redeem shares
shall remain open for at least 20 business days, in accordance
with
Rule 14e-1(a)
under the Exchange Act. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
business or legal reasons, we will conduct the redemptions like
many other blank check companies in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. We will consummate our initial business
combination only if holders of no more than 88% of our public
shares elect to redeem their shares and, solely if we seek
stockholder approval, a majority of the outstanding shares of
common stock voted are voted in favor of the business
combination. If we seek shareholder approval, our sponsors have
agreed to vote their initial shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination.
Private
Placements
In July 2010, our sponsors purchased an aggregate of 1,437,500
initial shares, for an aggregate purchase price of $25,000, or
approximately $0.0174 per share. The initial shares consist of
(i) 638,889 shares (up to 83,333 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) which will be held in escrow until the first
anniversary of our initial business combination and
(ii) 798,611 shares (up to 104,167 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) which will be held in escrow and forfeited on
the fifth anniversary of our initial business combination
unless, prior to such time, either (x) the last sales price
of our stock equals or exceeds $18.00 per share (as adjusted for
stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any
30-trading
day period or (y) a transaction is consummated following
our initial business combination in which all stockholders have
the right to exchange their common stock for cash consideration
which equals or exceeds $18.00 per share. Our sponsors have
contractually agreed with us that they will have no ability to
vote any of the 798,611 shares being held in escrow until
such time, if ever, that such shares are released to them.
The initial shares are identical to the shares of common stock
included in the units being sold in this offering except that
our sponsors have agreed (i) to waive their redemption
rights with respect to their initial shares and public shares in
connection with the completion of our initial business
combination and (ii) to waive their redemption rights with
respect to their initial shares if we fail to consummate a
business combination within 18 months from the closing of
this offering, although they will be entitled to redemption
rights with respect to any public shares they own if we fail to
consummate a business combination within such time period. If we
submit our initial business combination to our public
stockholders for a vote, our sponsors
5
have agreed to vote their initial shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination.
Simultaneously with the completion of this offering, our
sponsors have agreed to purchase an aggregate of 5,000,000
sponsor warrants from us at a price of $0.50 per warrant
($2,500,000 in the aggregate) in a private placement pursuant to
Section 4(2) or Regulation D of the Securities Act of
1933, as amended, or the Securities Act. Each sponsor warrant
entitles the holder to purchase one share of our common stock at
$11.50 per share. The $2,500,000 proceeds from the private
placement of the sponsor warrants will be added to the proceeds
of this offering and placed in a trust account at J.P. Morgan
Chase, N.A. maintained by Continental Stock Transfer &
Trust Company, acting as trustee. If we do not complete an
initial business combination within 18 months from the
closing of this offering, the $2,500,000 in proceeds from the
private placement of the sponsor warrants will be used to fund
our redemption of the public shares, and the sponsor warrants
will expire worthless.
The sponsor warrants will be identical to the warrants included
in the units sold in this offering except that they (i) may
be exercised for cash or on a cashless basis, as described in
this prospectus, (ii) will be subject to certain transfer
restrictions described in more detail below and (iii) are
not subject to being called for redemption by us so long as they
are held by our sponsors or any of their permitted transferees.
In addition, the sponsor warrants will be held in escrow until
30 days following the completion of our initial business
combination.
No placement fees will be payable in connection with our sale of
the initial shares and the sponsor warrants.
Our executive offices are located at 265 Franklin Street,
20th
Floor, Boston, Massachusetts 02110, and our telephone number at
that location is
617-330-7755.
6
THE
OFFERING
In making your decision on whether to invest in our
securities, you should take into account not only the
backgrounds of the members of our management team, but also the
special risks we face as a blank check company and the fact that
this offering is not being conducted in compliance with
Rule 419 promulgated under the Securities Act of 1933, as
amended, or the Securities Act. You will not be entitled to
protections normally afforded to investors in Rule 419
blank check offerings. You should carefully consider these and
the other risks set forth in the section below entitled
Risk Factors beginning on page 22 of this
prospectus.
|
|
|
Securities offered |
|
5,000,000 units, at $10.00 per unit, each unit consisting
of: |
|
|
|
one
share of common stock; and
|
|
|
|
one
warrant.
|
|
OTCBB symbols for our: |
|
|
Units |
|
|
Common Stock |
|
|
Warrants |
|
|
|
Trading commencement and separation of common stock
and warrants
|
|
The units will begin trading on or promptly after the date of
this prospectus. The shares of common stock and warrants
comprising the units will trade separately beginning on the
fifth business day following the earlier to occur of the
expiration of the underwriters over-allotment option
(which is 45 days from the date of this prospectus), its
exercise in full or the announcement by the underwriters of
their intention not to exercise all or any remaining portion of
the underwriters over-allotment option. |
|
Separate trading of the common stock and
warrants is prohibited until we have filed a
Current Report on
Form 8-K
|
|
In no event will the shares of our 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 intend to
file this
Form 8-K
promptly after the consummation of this offering, which is
anticipated to take place four business days from the date of
this prospectus. If the underwriters over-allotment option
is exercised and the proceeds were not reflected in the audited
balance sheet filed with this
Form 8-K,
a second or amended
Form 8-K
will be filed to provide updated information reflecting the
exercise of the underwriters over-allotment option. |
|
|
|
Following the date that the shares of our common stock and
warrants are eligible to trade separately, the units will
continue to be quoted for trading, and any security holder may
elect to separate a unit and trade the common stock or warrants
separately or as a unit. Even if the component parts of the
units are separated and traded separately, the units will
continue to be quoted as a separate security, and consequently,
any subsequent security holder owning shares of our common stock
and warrants may elect to combine them together and trade them
as a unit. Security holders will have the ability to trade our
securities as units until such time as the warrants expire or
are redeemed. Although investors may trade in |
7
|
|
|
|
|
partial warrants, partial warrants cannot be exercised for
fractional shares, but only for full shares of common stock. |
|
|
|
|
|
|
|
|
|
|
|
After the Private Placements
|
|
After the Private Placements
|
Number of Securities to be
Outstanding
|
|
and Before this
Offering
|
|
and After this
Offering
|
|
Units
|
|
|
0
|
|
|
|
5,000,000
|
|
Common Stock
|
|
|
1,437,500
|
(1)(2)
|
|
|
6,250,000
|
(2)(3)
|
Warrants
|
|
|
5,000,000
|
|
|
|
10,000,000
|
|
|
|
|
(1) |
|
Includes up to 187,500 shares of common stock held by our
sponsors that are subject to forfeiture to the extent that the
underwriters over-allotment option is not exercised. |
|
(2) |
|
Assumes no exercise of the underwriters over-allotment
option, and the resulting forfeiture of 187,500 shares of
common stock. |
|
(3) |
|
Includes 694,444 shares of common stock held by our
sponsors that are held in escrow and subject to forfeiture on
the fifth anniversary of our initial business combination
unless, prior to such time, either (x) the last sales price
of our stock equals or exceeds $18.00 per share (as adjusted for
stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period or (y) a transaction is
consummated following our initial business combination in which
all stockholders have the right to exchange their common stock
for cash consideration which equals or exceeds $18.00 per share.
Our sponsors have contractually agreed with us that they will
have no ability to vote any of the 694,444 shares being
held in escrow until such time, if ever, that such shares are
released to them. |
|
|
|
Warrant exercisability
|
|
Each warrant is exercisable for one share of our common stock. |
|
Warrant exercise price |
|
$11.50 per share, subject to adjustments as described herein. |
|
Warrant exercise period
|
|
The warrants will become exercisable on the later of: |
|
|
|
30 days
after the completion of our initial business combination; or
|
|
|
|
12 months
from the closing of this offering;
|
|
|
|
provided, that the warrants will be exercisable for cash only if
we have an effective and current registration statement under
the Securities Act covering the shares of common stock issuable
upon exercise of the warrants and a current prospectus relating
to such common stock. Notwithstanding the foregoing, if a
registration statement covering the common stock issuable upon
exercise of the warrants is not effective within a specified
period following the completion of our initial business
combination, warrant holders may, until such time as there is an
effective registration statement and during any period when we
shall have failed to maintain an effective registration
statement, exercise warrants on a cashless basis. |
|
|
|
The warrants will expire at 5:00 p.m., New York City time,
on the five year anniversary of the consummation of our business
combination, or earlier upon redemption. |
|
Registration of shares underlying warrants |
|
We are not registering the shares of common stock issuable upon
exercise of the warrants at this time. We have agreed to use our
best efforts to have an effective registration statement
covering shares of common stock issuable upon exercise of the
warrants from the date the warrants become exercisable and to
maintain a |
8
|
|
|
|
|
current prospectus relating to that common stock until the
warrants expire or are redeemed. |
|
Sponsors registration rights |
|
Our sponsors will be entitled to demand registration rights and
certain piggy-back registration rights with respect
to the initial shares and the sponsor warrants and the common
stock underlying the sponsor warrants, commencing, in the case
of the initial shares, upon their release from escrow and
commencing, in the case of the sponsor warrants and the common
stock underlying the sponsor warrants, 30 days after the
completion of our initial business combination. |
|
Redemption of warrants |
|
Once the warrants become exercisable, we may redeem the
outstanding warrants (excluding sponsor warrants held by our
sponsors or their permitted assigns): |
|
|
|
in
whole and not in part;
|
|
|
|
at
a price of $0.01 per warrant;
|
|
|
|
on
not less than 30 days prior written notice of redemption,
or the
30-day
redemption period; and
|
|
|
|
if,
and only if, the last sales price of our common stock equals or
exceeds $17.50 per share (subject to adjustment for splits,
dividends, recapitalizations and other similar events) for any
20 trading days within a 30 trading day period ending three
business days before we send the notice of redemption to the
warrant holders.
|
|
|
|
We will not redeem the warrants unless we have an effective
registration statement covering the shares of common stock
issuable upon exercise of the warrants and a current prospectus
relating to such common stock available throughout the
30-day
redemption period. |
|
|
|
If the foregoing conditions are satisfied and we call the
warrants for redemption, each warrant holder shall then be
entitled to exercise its warrants prior to the date scheduled
for redemption. |
|
|
|
If we call the warrants for redemption as described above, we
will have the option to require all holders that subsequently
wish to exercise warrants to do so on a cashless
basis. In such event, each holder would pay the exercise
price by surrendering the warrants for that number of shares of
common stock equal to the quotient obtained by dividing
(x) the product of the number of shares of common stock
underlying the warrants, multiplied by the difference between
the exercise price of the warrants and the fair market value by
(y) the fair market value. The fair market
value shall mean the average reported last sale price of
the common stock for the 10 trading days ending on the third
trading day prior to the date on which the notice of redemption
is sent to the holders of warrants. |
|
|
|
None of the sponsor warrants will be redeemable by us so long as
they are held by our sponsors or their permitted assigns. |
9
|
|
|
|
|
The redemption provisions for our warrants have been established
at a price which is intended to provide such warrant holders a
premium to the initial warrant exercise price and to provide a
sufficient differential between the then-prevailing common stock
price and the warrant exercise price to absorb any negative
market reaction to our redemption of the warrants. There can be
no assurance, however, that the price of the common stock will
exceed either $17.50 or the warrant exercise price of $11.50
after we call the warrants for redemption and the price may in
fact decline as a result of the limited liquidity following any
such call for redemption. |
|
Initial Shares
|
|
In July 2010, our sponsors purchased the initial shares for an
aggregate purchase price of $25,000, or approximately $0.0174
per share, consisting of (i) 638,889 shares (up to
83,333 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) which will be
held in escrow until the first anniversary of our initial
business combination and (ii) 798,611 shares (up to
104,167 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) which will be
held in escrow and forfeited on the fifth anniversary of our
initial business combination unless, prior to such time, either
(x) the last sales price of our stock equals or exceeds
$18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period or (y) a
transaction is consummated following our initial business
combination in which all stockholders have the right to exchange
their common stock for cash consideration which equals or
exceeds $18.00 per share. Our sponsors have contractually agreed
with us that they will have no ability to vote any of the
798,611 shares being held in escrow until such time, if
ever, that such shares are released to them. |
|
|
|
If the number of units we offer to the public is increased or
decreased, a share dividend or a contribution back to capital,
as applicable, would be effectuated in order to maintain our
sponsors ownership percentages of the issued and
outstanding shares after giving effect to this offering and the
increase or decrease, if any, in the number of units offered
hereby. |
|
Sponsor Warrants
|
|
The initial shares are identical to the shares of common stock
included in the units being sold in this offering except that
our sponsors have agreed (i) to waive their redemption
rights with respect to their initial shares and public shares in
connection with the consummation of a business combination and
(ii) to waive their redemption rights with respect to their
initial shares if we fail to consummate a business combination
within 18 months from the closing of this offering,
although they will be entitled to redemption rights with respect
to any public shares they own if we fail to consummate a
business combination within such time period. If we submit our
initial business combination to our public stockholders for a
vote, our sponsors have agreed to vote their initial shares in
accordance with the majority of the votes cast by the public
stockholders and to vote any public shares purchased |
10
|
|
|
|
|
during or after the offering in favor of our initial business
combination. |
|
|
|
Our sponsors have agreed to purchase an aggregate of
5,000,000 sponsor warrants, each exercisable to purchase
one share of our common stock at $11.50 per share, at a price of
$0.50 per warrant ($2,500,000 in the aggregate) in a private
placement that will occur simultaneously with the closing of
this offering. The purchase price of the sponsor warrants will
be added to the proceeds from this offering to be held in the
trust account. If we do not complete our initial business
combination within 18 months from the closing of this
offering, the proceeds of the sale of the sponsor warrants will
used to fund the redemption of our public shares (subject to the
requirements of applicable law), and the sponsor warrants will
expire worthless. |
|
|
|
The sponsor warrants (including the common stock issuable upon
exercise of the sponsor warrants) will not be transferable,
assignable or salable until 30 days after the completion of
our initial business combination and they will be non-redeemable
so long as they are held by the sponsor or its permitted
transferees. If the sponsor warrants are held by holders other
than the sponsors or their permitted transferees, the sponsor
warrants will be redeemable by us and exercisable by the holders
on the same basis as the warrants included in the units being
sold in this offering. Otherwise, the sponsor warrants have
terms and provisions that are identical to those of the warrants
being sold as part of the units in this offering, except that
such warrants may be exercised by the holders on a cashless
basis. |
|
|
|
Our sponsors and their permitted transferees will be entitled to
exercise the sponsor warrants as described above for cash or on
a cashless basis using the same formula that would apply to
other warrant holders if they were required to exercise their
warrants on a cashless basis. |
|
Proceeds to be held in trust account
|
|
Of the approximate net proceeds we receive from this offering,
$49,250,000 (including $2,500,000 in proceeds from the private
placement of the sponsor warrants) or approximately $9.85 per
share ($56,525,000, or approximately $9.83 per unit, if the
underwriters over-allotment option is exercised in full)
will be deposited into a segregated trust account at
J.P. Morgan Chase Bank, N.A. maintained by Continental
Stock Transfer & Trust Company, acting as trustee. |
|
|
|
None of the funds held in trust will be released from the trust
account, other than to pay franchise and income taxes, until the
earlier of (i) the completion of our initial business
combination within 18 months from the closing of this
offering and (ii) our redemption of 100% of the public
shares sold in this offering if we are unable to consummate our
initial business combination within 18 months from the
closing of this offering (subject to the requirements of law).
The proceeds deposited in the trust account could become subject
to the claims of our creditors, if any, which could have
priority over the claims of our public stockholders. In |
11
|
|
|
|
|
the event we seek stockholder approval in connection with our
initial business combination, public stockholders exercising
their redemption rights and voting (1) in favor of the
business combination will be entitled to receive a pro rata
portion of the trust account including interest and
(2) against the business combination will be entitled to
receive a pro rata portion of the trust account excluding
interest, in each case less any franchise and income taxes
payable. |
|
|
|
None of the warrants may be exercised until 30 days after
the completion of our initial business combination and, thus,
after the funds in the trust account have been disbursed.
Accordingly, the warrant exercise price will be paid directly to
us and not placed in the trust account. |
|
Anticipated expenses and funding sources
|
|
Unless and until our initial business combination is completed,
the proceeds held in the trust account (net of franchise and
income taxes payable) 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
and the negotiation of an agreement to acquire a target
business. Expenses incurred while seeking a business combination
may be paid prior to our initial business combination only from
$1,250,000 of the offering proceeds not held in the trust
account. |
|
|
|
In order to meet our working capital needs following the
consummation of this offering, certain of our sponsors or their
affiliates or our officers and directors may, but are not
obligated to, loan us funds, from time to time, or at any time,
in whatever amount such sponsor, officer or director deems
reasonable in its, his or her sole discretion. If we consummate
our initial business combination, we would repay such loaned
amounts. In the event that our initial business combination does
not close, we may use a portion of the working capital held
outside the trust account to repay such loaned amounts but no
proceeds from our trust account would be used for such
repayment. Such loans may be convertible into warrants of the
post business combination entity at a price of $0.50 per warrant
at the option of the lender. The warrants would be identical to
the sponsor warrants. The terms of such loans by our sponsors,
officers and directors, if any, have not been determined and no
written agreements exist with respect to such loans. |
|
|
|
We believe that, upon the date of this prospectus, the
$1,250,000 from the proceeds of this offering not held in the
trust account and amounts that may be loaned to us by our
sponsors or an affiliate of our sponsors or certain of our
officers or directors, will be sufficient to allow us to operate
for the next 18 months, assuming that our initial business
combination is not completed during that time. Over this time
period, we will be using these funds for identifying and
evaluating target businesses, performing business due diligence
on prospective target businesses, traveling to and from the
offices, plants or similar locations of prospective target
businesses or their representatives or owners, reviewing
corporate |
12
|
|
|
|
|
documents and material agreements of prospective target
businesses, and structuring, negotiating and consummating our
initial business combination. |
|
Limited payments to insiders
|
|
There will be no finders fees, reimbursements, cash
payments or compensation of any kind, including the issuance of
any securities of our company, made to our sponsors, officers,
directors or our or their affiliates for services rendered to us
prior to or in connection with the completion of our initial
business combination other than: |
|
|
|
repayment
of an aggregate of $75,000 in non-interest bearing loans and
advances, outstanding as of July 30, 2010, made by two of
our sponsors to cover offering-related and organizational
expenses;
|
|
|
|
payment
of an aggregate of $7,500 per month to LLM Capital Partners LLC
to compensate it for our use of its office space, general and
administrative services and secretarial support;
|
|
|
|
reimbursement
for any
out-of-pocket
expenses related to finding, identifying, investigating and
completing an initial business combination, provided that if we
do not complete an initial business combination, we may only use
the working capital held outside the trust account to make such
reimbursement; and
|
|
|
|
repayment
of loans made to finance transaction costs in connection with
finding, identifying, investigating and completing an initial
business combination, provided that if we do not complete an
initial business combination, we may only use the working
capital held outside the trust account to repay such loaned
amounts. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements exist
with respect to such loans.
|
|
Conditions to consummating our initial business
combination
|
|
There is no limitation on our ability to raise funds privately
or through loans in connection with our initial business
combination. In no event will we acquire less than a controlling
interest in a target business. We will acquire a controlling
interest either through the acquisition of at least 50.1% of the
voting equity interests in the target or through the acquisition
of a significant voting equity interest that enables us to
exercise a greater degree of control over the target than any
other person or group. In the event we acquire less than a
majority of the voting equity interests in the target, we may
seek an even greater degree of control through contractual
arrangements with the target and/or other target equity holders,
or through special rights associated with the target equity
security that we hold, which arrangements or rights may grant us
the ability, among other things, to appoint certain members of
the board (or equivalent governing body) or management of the
target or the ability to approve certain types of significant
transactions that the target may seek to enter into. Even though
our company will own a controlling interest in the target, our
stockholders prior to the business combination may collectively
own a minority interest in the post business combination
company, depending on |
13
|
|
|
|
|
valuations ascribed to the target and us in the business
combination transaction. |
|
|
|
While we do not intend to pursue an initial business combination
with any company that is affiliated with our sponsors, officers
or directors, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial
business combination with such a company, we, or a committee of
our independent directors, would obtain an opinion from an
independent investment banking firm which is a member of FINRA
that such an initial business combination is fair to our
stockholders from a financial point of view. |
|
Private transactions if we hold a stockholder vote
|
|
Solely if we hold a stockholder vote to approve our initial
business combination, and we do not conduct redemptions in
connection with our business combination pursuant to the tender
offer rules, we may enter into privately negotiated transactions
to purchase with proceeds from our trust account, public shares
from stockholders who would otherwise elect to redeem their
shares to ensure that no more than 88% of our public shares
elect to redeem their shares for cash. Our sponsors, directors,
officers, advisors or their affiliates may also purchase shares
in privately negotiated transactions. Neither we nor our
sponsors, directors, officers, advisors or their affiliates will
make any such purchases when we or they are in possession of any
material non-public information not disclosed to the seller.
Although we do not currently anticipate that we or our sponsors,
directors, officers, advisors or our or their affiliates will
pay any premium purchase price for such public shares, in the
event we do, the payment of a premium may not be fair to, or in
the best interest of, those stockholders not receiving any such
additional consideration. In addition, the payment of a premium
may not be in the best interest of the remaining stockholders,
who will experience a reduction in book value per share compared
to the value received by stockholders that successfully have
their shares purchased by us at a premium. |
|
Redemption rights for public stockholders upon completion of
our initial business combination
|
|
We will provide our stockholders with the opportunity to redeem
their shares of our common stock for cash equal to their pro
rata share of the aggregate amount then on deposit in the trust
account (including interest), less franchise and income taxes
payable, upon the completion of our initial business
combination, subject to the limitations described herein. The
amount in the trust account is initially anticipated to be
approximately $9.85 per share, or approximately $9.83 per share
if the underwriters over-allotment option is exercised in
full, including funds being held in the trust account
attributable to the contingent fees payable solely in the event
of that our business combination is completed. There will be no
redemption rights upon the completion of our initial business
combination with respect to our warrants, which will expire
worthless in the event we do not consummate our initial business
combination. Our sponsors have agreed to waive their redemption |
14
|
|
|
|
|
rights with respect to their initial shares and any public
shares they may own in connection with the completion of our
initial business combination. The initial shares will be
excluded from the pro rata calculation used to determine the
per-share redemption price. |
|
|
|
Unlike many other blank check companies which hold stockholder
votes and conduct proxy solicitations in conjunction with their
business combinations and related redemptions of public shares
for cash upon consummation of such initial business combinations
even when a vote is not required by law, we intend to consummate
our initial business combination without a stockholder vote and
conduct the related redemptions of our shares of common stock
pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act which regulate
issuer tender offers, and file tender offer documents with the
SEC. The tender offer documents will contain substantially the
same financial and other information about our initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act which regulates the
solicitation of proxies. In the event we conduct redemptions
pursuant to the tender offer rules, our offer to redeem shares
shall remain open for at least 20 business days, in accordance
with
Rule 14e-1(a)
under the Exchange Act. |
|
|
|
If, however, a stockholder vote is required by law, or we decide
to hold a stockholder vote for other business or legal reasons,
we will conduct the redemptions like many other blank check
companies in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules. We
will consummate our initial business combination only if holders
of no more than 88% of our public shares elect to redeem their
shares and, solely if we seek stockholder approval, a majority
of the outstanding shares of common stock voted are voted in
favor of the business combination. If we seek shareholder
approval, our sponsors have agreed to vote their initial shares
in accordance with the majority of the votes cast by the public
stockholders and to vote any public shares purchased during or
after the offering in favor of our initial business combination. |
|
|
|
The 88% redemption threshold is different from the redemption or
conversion thresholds used by most blank check companies.
Traditionally, blank check companies would not be able to
consummate a business combination if the holders of the
companys public shares voted against a proposed business
combination and elected to redeem or convert more than a much
smaller percentage of the shares sold in such companys
initial public offering, which percentage threshold is typically
between 19.99% and 39.99%. As a result, many blank check
companies have been unable to complete business combinations
because the amount of shares voted by their public stockholders
electing conversion exceeded the maximum conversion threshold
pursuant to which such company could proceed with a business
combination. |
15
|
|
|
Redemption payments and limitation if we hold a stockholder
vote
|
|
If we hold a stockholder vote to approve our initial business
combination, public stockholders voting in favor of the business
combination and electing to exercise their redemption rights
shall be entitled to receive cash equal to their pro rata share
of the aggregate amount then on deposit in the trust account
(including interest), less franchise and income taxes payable,
but our public stockholders voting against the business
combination and electing to exercise their redemption rights
shall be entitled to receive cash equal to their pro rata share
of the aggregate amount then on deposit in the trust account
excluding any amounts representing interest earned on the trust
account, less franchise and income taxes payable. |
|
10% limitation on redemption rights if we hold a stockholder
vote
|
|
Notwithstanding the foregoing redemption rights, and solely if
we hold a stockholder vote to approve our initial business
combination, and we do not conduct redemptions in connection
with our business combination pursuant to the tender offer
rules, our amended and restated certificate of incorporation
provides that a public stockholder, together with any affiliate
of his or any other person with whom he is acting in concert or
as a group (as defined under Section 13 of the
Exchange Act), will be restricted from redeeming their shares
with respect to more than an aggregate of 10% of the shares sold
in this offering. We believe this restriction will discourage
stockholders from accumulating large blocks of shares, and
subsequent attempts by such holders to use their ability to
redeem their shares as a means to force us or our management to
purchase their shares at a significant premium to the then
current market price or on other undesirable terms. Absent this
provision, a public stockholder holding more than an aggregate
of 10% of the shares sold in this offering could threaten to
seek to exercise their redemption rights if such holders
shares are not purchased by us or our management at a premium to
the then current market price or on other undesirable terms. By
limiting our stockholders ability to redeem no more than
10% of the shares sold in this offering, we believe we will
limit the ability of a small group of stockholders to
unreasonably attempt to block our ability to consummate a
business combination. However, we would not be restricting our
stockholders ability to vote all of their shares for or
against a business combination. |
|
Right of first review
|
|
Each of our officers has agreed, pursuant to a written agreement
with us, that until the earliest of our initial business
combination, 18 months after the closing of this offering
or such time as he ceases to be an officer, to present to us for
our consideration, prior to presentation to any other entity,
any business opportunity with an enterprise value of
$50 million or more, subject to any pre-existing fiduciary
or contractual obligations he might have. If any of our officers
becomes aware of a business combination opportunity that falls
within the line of business of any entity to which he has
pre-existing fiduciary or contractual obligations, he may be
required to present such business combination opportunity to
such entity prior to presenting such business combination |
16
|
|
|
|
|
opportunity to us. Certain of our officers currently have
certain relevant fiduciary duties or contractual obligations
that may take priority over their duties to us. |
|
|
|
In order to minimize potential conflicts of interest that may
arise from multiple corporate affiliations, each of LLM Capital
Partners LLC, LLM Structured Equity Fund L.P. and LLM
Investors L.P. have granted us a right of first
refusal with respect to an acquisition of any company or
assets in the healthcare industry whose enterprise value is
$50 million or more. Pursuant to this right of first
refusal, each of these entities has agreed to present any
investment or purchase opportunity in a company or assets
meeting these criteria to a committee of our independent
directors for our review and that it will not enter into any
agreement to purchase or invest in such company or assets until
our committee of independent directors has had a reasonable
period of time to determine whether or not to pursue such
opportunity. This right of first refusal will expire upon the
earlier to occur of (i) the completion of our initial
business combination or (ii) 18 months after the
closing of this offering. In addition, our officers have agreed
not to participate in the formation of, or become an officer or
director of, any blank check company until we have entered into
a definitive agreement regarding our initial business
combination or we have failed to complete our initial business
combination within 18 months from the closing of this
offering. |
|
Release of funds in trust account on closing of our initial
business combination
|
|
On the closing of our initial business combination, all amounts
held in the trust account will be released to us. We will use
these funds to pay amounts due to any public stockholders who
exercise their redemption rights and to pay contingent fees.
Funds released from the trust account to us can be used to pay
all or a portion of the purchase price of the business or
businesses we acquire in our initial business combination. If
our initial business combination is paid for using stock or debt
securities, or not all of the funds released from the trust
account are used for payment of the purchase price in connection
with our business combination, we may apply the cash released to
us from the trust account that is not applied to the purchase
price for general corporate purposes, including for maintenance
or expansion of operations of acquired businesses, the payment
of principal or interest due on indebtedness incurred in
consummating the initial business combination, to fund the
purchase of other companies or for working capital. |
|
Redemption of common stock and dissolution and liquidation if
no initial business combination
|
|
Our sponsors, officers and directors have agreed that we will
only have 18 months from the closing of this offering to
consummate our initial business combination. If we do not
consummate our initial business combination within such
18-month
period, we will (i) cease all operations except for the
purposes of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public |
17
|
|
|
|
|
shares for cash equal to their pro rata share of the aggregate
amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law,
and subject to the requirement that any refund of income taxes
that were paid from the trust account which is received after
the redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. |
|
|
|
There will be no redemption rights or liquidating distributions
with respect to our warrants, which will expire worthless if we
fail to consummate our initial business combination within the
18-month
time period. |
|
|
|
Our sponsors have agreed to waive their redemption rights with
respect to their initial shares, but will be entitled to redeem
any public shares they may own, in the event we do not
consummate our initial business combination. |
|
|
|
The distribution of our assets in contemplation of liquidation
must provide for all claims against us to be paid in full or for
us to make provision for payments to be made in full, as
applicable, if there are sufficient assets. These claims must be
paid or provided for before we make any distribution of our
remaining assets to our stockholders. We cannot assure you that
we will have access to funds sufficient to pay or provide for
all creditors claims. |
|
|
|
Although we will seek to have all third parties such as vendors,
service providers, prospective target businesses and other
entities with which we do business enter into agreements with us
waiving any interest to any assets held in the trust account,
there is no guarantee that they will execute such agreements. It
is also possible that such waiver agreements would be held
unenforceable, and there is no guarantee that the third parties
would not otherwise challenge the agreements and later bring
claims against the trust account for amounts owed them. In
addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or
arising out of, any negotiations, contracts or agreements with
us and will not seek recourse against the trust account for any
reason. John L. Shermyen, our chairman, chief executive officer
and co-sponsor, and each of LLM Structured Equity Fund L.P.
and LLM Investors L.P., our other co-sponsors, have agreed
that they will be liable to us if and to the extent any claims
by a vendor for services rendered or products sold to us, or a
prospective target business with which we have discussed
entering into a transaction agreement, reduce the amounts in the
trust account to below $9.85 per share (or approximately
$9.83 per share if the underwriters over-allotment option
is exercised in full), except as to |
18
|
|
|
|
|
any claims by a third party who executed a waiver of any and all
rights to seek access to the trust account and except as to any
claims under our indemnity of the underwriters of this offering
against certain liabilities, including liabilities under the
Securities Act. In the event that an executed waiver is deemed
to be unenforceable against a third party, Mr. Shermyen,
LLM Structured Equity Fund L.P. and LLM Investors L.P. will
not be responsible to the extent of any liability for such third
party claims. |
|
|
|
After distributing the proceeds of our trust account pursuant to
our redemption of 100% of our public shares of common stock as
described in this prospectus, we will promptly distribute the
balance of our net assets, if any, to our remaining stockholders
subject to and in accordance with, a plan of dissolution adopted
by our board of directors and remaining stockholders. We will
pay the costs of liquidation from our remaining assets outside
of the trust account. If such funds are insufficient, our
sponsors have agreed to advance us the funds necessary to pay
any and all costs involved or associated with the process of
liquidation (currently anticipated to be no more than
approximately $30,000) and have agreed not to seek repayment for
such expenses. |
|
Escrow of initial shares and sponsor warrants
|
|
On the date of this prospectus, our sponsors will place the
initial shares and the sponsor warrants into a segregated escrow
account maintained by Continental Stock Transfer &
Trust Company acting as escrow agent. Other than transfers
made to permitted transferees who agree in writing to be bound
to the transfer restrictions, agree to vote in accordance with
the majority of the votes cast by the public stockholders in the
event we seek stockholder approval in connection with our
initial business combination and waive any rights to participate
in any redemption if we fail to consummate our initial business
combination, (i) 638,889 shares (up to 83,333 of which
will be forfeited if the underwriters over-allotment
option is not exercised in full) will be held in escrow until
the first anniversary of our initial business combination and
(ii) 798,611 shares (up to 104,167 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) will be held in escrow and forfeited on the
fifth anniversary of our initial business combination unless,
prior to such time, either (x) the last sales price of our
stock equals or exceeds $18.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day
period or (y) a transaction is consummated following our
initial business combination in which all stockholders have the
right to exchange their common stock for cash consideration
which equals or exceeds $18.00 per share. Our sponsors have
contractually agreed with us that they will have no ability to
vote any of the 798,611 shares being held in escrow until
such time, if ever, that such shares are released to them. |
|
|
|
The sponsor warrants will not be released from escrow until
30 days following the completion of our initial business
combination. Permitted transferees means immediate family |
19
|
|
|
|
|
members of the holder, trusts established by the holder for
estate planning purposes and affiliates of the holder. |
|
Determination of offering amount
|
|
In consultation with the underwriters, we determined the size of
the offering, in part, based upon our beliefs concerning the
capital that could be successfully raised given market
conditions. In addition, our management concluded, based on
their collective experience, that an offering of this size,
together with the proceeds of the sale of the sponsor warrants,
would provide us with sufficient equity capital to execute our
business plan. We believe that this amount of equity capital,
plus our ability to finance an acquisition using stock or debt,
will give us substantial flexibility in selecting an acquisition
target and structuring our initial business combination. This
belief is not based on any specific research, analysis,
evaluations, discussions or compilations of information with
respect to any particular investment or any such action
undertaken in connection with our organization. We cannot assure
you that our belief is correct, that we will be able to
successfully identify target businesses or that we will be able
to obtain any necessary financing. |
Risks
We are a newly-formed company that has conducted no operations
and has generated no revenues. Until we complete our initial
business combination, we will have no operations and will
generate no operating revenues. In making your decision as to
whether to invest in our securities, you should take into
account not only the background of our management team, but also
the special risks we face as a blank check company. This
offering is not being conducted in compliance with Rule 419
promulgated under the Securities Act. Accordingly, you will not
be entitled to protections normally afforded to investors in
Rule 419 blank check offerings. For additional information
concerning how Rule 419 blank check offerings differ from
this offering, please see Comparison to Offerings of Blank
Check Companies. You should carefully consider these and
the other risks set forth in the section entitled Risk
Factors beginning on page 22 of this prospectus.
20
SUMMARY
FINANCIAL DATA
The following table is derived from and summarizes the relevant
financial data for our business and should be read in
conjunction with our audited financial statements and the
related notes, which are included elsewhere in this prospectus.
We have not had any significant operations to date; therefore,
only balance sheet data are presented.
|
|
|
|
|
|
|
|
|
|
|
As of July 30,
2010
|
|
|
Actual
|
|
As Adjusted
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Working capital (deficiency)
|
|
$
|
(43,000
|
)
|
|
$
|
49,617,250
|
|
Total assets
|
|
|
158,000
|
|
|
|
50,515,000
|
|
Total liabilities
|
|
|
143,000
|
|
|
|
897,750
|
|
Value of common stock which may be redeemed
|
|
|
|
|
|
|
43,340,000
|
|
Stockholders
equity(1)
|
|
|
15,000
|
|
|
|
6,277,250
|
|
|
|
|
(1) |
|
Excludes approximately 4,400,000 shares, at an initial
per-share redemption price of approximately $9.85, subject to
possible redemption rights in connection with our successful
consummation of or initial business combination and assumes the
underwriters over-allotment has not been exercised. |
The as adjusted information gives effect to the sale
of the units in this offering, the sale of the sponsor warrants,
repayment of the $75,000 loan made to us by two of our sponsors,
and the payment of the estimated expenses of this offering. The
as adjusted total assets amount includes the
$49,250,000 held in the trust account for the benefit of our
public stockholders. The funds held in the trust account will be
available to us only upon the consummation of a business
combination within 18 months from the closing of this
offering. The as adjusted working capital and
as adjusted total assets include approximately
$897,750 being held in the trust account (approximately
$1,032,075 if the underwriters over-allotment option is
exercised in full) representing contingent fees payable only
upon the consummation of a business combination within
18 months from the closing of this offering and assuming
88% of our public stockholders redeem their shares.
If we do not consummate our initial business combination within
such
18-month
period, we will (i) cease all operations except for the
purposes of winding up, (ii) redeem 100% of our public
shares for cash equal to their pro rata share of the aggregate
amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law,
and subject to the requirement that any refund of income taxes
that were paid from the trust account which is received after
the redemption shall be distributed to the former public
stockholders, and (iii) as promptly as possible following
such redemption, dissolve and liquidate the balance of our net
assets to our remaining stockholders, as part of our plan of
dissolution and liquidation. Our sponsors have agreed to waive
their rights to participate in any redemption with respect to
their initial shares as part of our redemption of the public
shares sold in this offering if we fail to consummate our
initial business combination within such 18 month period.
21
RISK
FACTORS
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. This prospectus
also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result
of specific factors, including the risks described below.
We are
a 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 newly 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,
the focus of which is to acquire through a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization,
exchangeable share transaction or other similar business
combination, one or more operating businesses or assets that we
have not yet identified. We have not conducted any discussions
and we have no plans, arrangements or understandings with any
prospective target business with respect to our initial business
combination and may be unable to complete our initial business
combination. We have no present revenue and will not generate
any revenues or income until, at the earliest, after the
completion of our initial business combination. We do not know
when or if a business combination will occur.
Our
public stockholders may not be afforded an opportunity to vote
on our proposed initial business combination, which means we may
consummate our initial business combination even though holders
of a majority of the outstanding shares of common stock do not
support such a combination.
We may not hold a stockholder vote before we consummate our
initial business combination unless the business combination
would require stockholder approval under applicable state law or
we decide to hold a stockholder vote for other business or legal
reasons. Accordingly, we may consummate our initial business
combination even if holders of a majority of our public shares
do not approve of the business combination we consummate.
Your
only opportunity to affect the investment decision regarding a
potential business combination will be limited to the exercise
of your right to redeem your shares from us for cash, unless we
seek stockholder approval of our initial business
combination.
At the time of your investment in us, you will not be provided
with an opportunity to evaluate the specific merits or risks of
one or more target businesses or assets. Since our board of
directors may consummate our initial business combination
without seeking stockholder approval, public stockholders may
not have the right or opportunity to vote on our initial
business combination, unless we seek such stockholder vote.
Accordingly, your only opportunity to affect the investment
decision regarding a potential business combination may be
limited to exercising your redemption rights within the period
of time (which will be at least 20 business days) set forth in
our tender offer documents mailed to our public stockholders in
which we describe our business combination. In addition, your
election to exercise your redemption rights could still be
rejected if holders of more than 88% of our public shares elect
to exercise their redemption rights, or if, as a condition of
the consummation of the business combination, we are required to
meet a certain minimum valuation.
22
The
ability of our stockholders to redeem their shares for cash may
make our financial condition unattractive to potential business
combination targets, which may make it more difficult for us to
enter into our initial business combination.
Although we permit holders of no more than 88% of our public
shares to exercise their redemption rights, a potential target
may make it a closing condition to our initial business
combination that we exceed a certain minimum net asset valuation
at the time of closing or have a certain amount of cash. If the
number of our public stockholders electing to exercise their
redemption rights would have the effect of reducing the amount
of money available to us to consummate our initial business
combination below such minimum net asset valuation, we may not
be able to meet such a closing condition, and as a result, would
not be able to consummate our initial business combination.
The
ability of a large number of our stockholders to exercise
redemption rights may not allow us to consummate the most
desirable business combination or optimize our capital
structure.
If our initial business combination requires us to use
substantially all of our cash to pay the purchase price, because
we will not know how many stockholders may exercise their
redemption rights, we may need to arrange third party financing
to help fund our initial business combination in case a larger
percentage of stockholders exercise their redemption rights than
we expect. If the acquisition involves the issuance of our stock
as consideration, we may be required to issue a higher
percentage of our stock to the target or its stockholders to
make up for the failure to satisfy a minimum cash requirement.
Raising additional funds to cover any shortfall may involve
dilutive equity financing or incurring indebtedness at higher
than desirable levels. This may limit our ability to effectuate
the most attractive business combination available to us.
We may
not be able to consummate our initial business combination
within the required timeframe, in which case we will be forced
to redeem our public shares and liquidate.
Our sponsors, officers and directors have agreed that we will
only have 18 months from the closing of this offering to
consummate our initial business combination. If we do not
consummate our initial business combination within such
18-month
period, we will (i) cease all operations except for the
purposes of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares for cash equal to
their pro rata share of the aggregate amount then on deposit in
the trust account (including interest), less franchise and
income taxes payable, which redemption will completely
extinguish public stockholders rights as stockholders
(including the right to receive further liquidation
distributions, if any), subject to applicable law, and subject
to the requirement that any refund of income taxes that were
paid from the trust account which is received after the
redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. 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. Therefore, we may not be able
to complete our initial business combination within the required
timeframe.
Our
negotiating position and our ability to conduct due diligence on
potential business combination targets may decrease as we
approach our initial business combination deadline, which could
undermine our ability to consummate our initial business
combination that would produce value for our
stockholders.
Pursuant to our Amended and Restated Certificate of
Incorporation, among other things, we must complete our initial
business combination within 18 months from the date of our
initial public offering or liquidate and dissolve. 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. As the end of such time frame nears,
our need to consummate our initial business
23
combination with a then-current prospective target business will
increase, which may decrease our negotiating power to obtain the
best possible deal. In addition, such time restraints may result
in limited time to conduct due diligence and, as a result, our
due diligence investigation may not be as detailed as would
otherwise be the case.
If we
do not complete our initial business combination within the
prescribed time frame, our public stockholders may receive less
than $10.00 per share on our related redemption of our public
shares, and our warrants will expire worthless.
If we do not complete our initial business combination within
the prescribed time frame and are forced to cease operations and
redeem our public shares, the per-share redemption amount
received by our stockholders may be less than $10.00 because of
the expenses of this offering, our general and administrative
expenses and the anticipated costs of seeking our initial
business combination. If we do not complete our initial business
combination and have expended all of the net proceeds of this
offering, other than the proceeds deposited in the trust
account, and without taking into account interest, if any,
earned on the trust account, net of franchise and income taxes
payable, the per-share redemption amount received by
stockholders would be $9.85, or $0.15 less than the
per-unit
offering price of $10.00 (or $9.83, or $0.17 less if the
underwriters over-allotment option is exercised in full).
Furthermore, our outstanding warrants are not entitled to
participate in the redemption and the warrants will therefore
expire worthless if we redeem our public shares and liquidate
before completing our initial business combination.
If we
are unable to consummate our initial business combination, our
public stockholders will be forced to wait, at a minimum, the
full 18 months from the closing of this offering before
receiving distributions from the trust account. A stockholder
that needs to liquidate its investment, therefore, would have to
sell its public shares or warrants, potentially at a
loss.
We have until the date that is 18 months from the closing
of this offering to consummate our initial business combination.
If we are unable to consummate our initial business combination
within 18 months from the closing of this offering, we will
cease all operations except for the purpose of winding up,
redeem our public shares, and liquidate and dissolve, as
described in this prospectus. If our plan to redeem our public
shares is not consummated for any reason, compliance with
Delaware law may require that we submit a plan of dissolution to
our then-existing stockholders for approval prior to the
distribution of the proceeds held in our trust account. In that
case, investors may be forced to wait beyond 18 months
before they receive the return of their pro rata portion of the
proceeds from our trust account. Except for the above
redemption, we have no obligation to return funds to investors
prior to the date of our liquidation unless we consummate our
initial business combination prior thereto and only then in
cases where investors have sought to redeem their shares.
If
third parties bring claims against us, the proceeds held in the
trust account could be reduced and the per-share redemption
amount received by stockholders may be less than approximately
$9.85 per share.
Our placing of funds in the trust account may not protect those
funds from third party claims against us. Although we will seek
to have all vendors, service providers, 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, such parties may not execute such
agreements, or even if they execute such agreements they may not
be prevented from bringing claims against the trust account,
including, but not limited to, fraudulent inducement, breach of
fiduciary responsibility or other similar claims, as well as
claims challenging the enforceability of the waiver, in each
case in order to gain advantage with respect to a claim against
our assets, including the funds held in the trust account. If
any third party 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.
24
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 service provider
willing to execute a waiver. In addition, such entities may not
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 may seek recourse against the trust
account for any reason. Upon redemption of our public shares if
we are unable to complete our initial business combination
within the required timeframe or upon the exercise of a
redemption right in connection with our initial business
combination, we will be required to provide for payment of
claims of creditors which were not waived that may be brought
against us within the subsequent 10 years following
redemption. Accordingly, the per share redemption amount
received by stockholders could be less than the $9.85 per share
held in the trust account, including interest and net of any
franchise and income taxes payable (or approximately $9.83 if
the underwriters over-allotment option is exercised in
full), due to claims of such creditors.
John L. Shermyen, our chairman, chief executive
officer and co-sponsor, and each of LLM Structured Equity
Fund L.P. and LLM Investors L.P., our other co-sponsors,
have agreed that upon our liquidation, they will be liable to us
if and to the extent any claims by a vendor for services
rendered or products sold to us, or a prospective target
business with which we have discussed entering into a
transaction agreement reduce the amounts in the trust account to
below $9.85 per share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full),
except as to any claims by a third party who executed a waiver
of any and all rights to seek access to the trust account and
except as to any claims under our indemnity of the underwriters
of this offering against certain liabilities, including
liabilities under the Securities Act. However, in the event that
an executed waiver is deemed to be unenforceable against a third
party, Mr. Shermyen, LLM Structured Equity Fund L.P.
and LLM Investors L.P. will not be responsible to the extent of
any liability for such third party claims. Additionally, in the
event either LLM Structured Equity Fund L.P. or LLM
Investors L.P. undertakes a liquidating distribution while their
indemnification obligations are outstanding, they have agreed to
use reasonable efforts to set aside from such distribution
adequate reserves to cover the reasonably anticipated
liabilities which may be incurred by them.
If,
after we distribute the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the members of our board of directors may be viewed
as having breached their fiduciary duties to our creditors,
thereby exposing the members of our board of directors and us to
claims of punitive damages.
If, after we distribute the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, any distributions received by stockholders could be
viewed under applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders. Furthermore, because we intend to redeem our
public shares for a per-share pro rata portion of the trust
account in the event we do not consummate a business combination
within 18 months from the closing of this offering, this
may be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access
to or distributions from our assets. Our board of directors may
be viewed as having breached its fiduciary duty to our creditors
and/or
having acted in bad faith, thereby exposing itself and us to
claims of punitive damages, by paying public stockholders from
the trust account prior to addressing the claims of creditors.
If,
before distributing the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the claims of creditors in such proceeding may have
priority over the claims of our stockholders and the per-share
amount that would otherwise be received by our stockholders in
connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the proceeds held in the trust account could be
subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and
25
subject to the claims of third parties with priority over the
claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, the per-share amount that would
otherwise be received by our stockholders in connection with our
liquidation may be reduced.
Our
directors may decide not to enforce Mr. Shermyens,
LLM Structured Equity Fund L.P.s and
LLM Investors L.P.s indemnification obligations,
resulting in a reduction in the amount of funds in the trust
account available for distribution to our public
stockholders.
In the event that the proceeds in the trust account are reduced
below $9.85 per share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full)
and our sponsors assert that they are unable to satisfy their
obligations or that they have no indemnification obligations
related to a particular claim, our independent directors, if
any, would determine whether to take legal action against our
sponsors to enforce their indemnification obligations. While we
currently expect that our independent directors would take legal
action on our behalf against our sponsors to enforce their
indemnification obligations to us, it is possible that our
independent directors in exercising their business judgment may
choose not to do so in any particular instance. If our directors
choose not to enforce these indemnification obligations, the
amount of funds in the trust account available for distribution
to our public stockholders may be reduced below $9.85 per share
(or approximately $9.83 per share if the underwriters
over-allotment is exercised in full).
If we
seek stockholder approval of our initial business combination
and holders of more than 88% of our public shares indicate their
intention to exercise their redemption rights, we, our sponsors,
directors, officers, advisors and their affiliates may elect to
purchase shares from stockholders, in which case we or they may
influence a vote in favor of a proposed business combination
that you do not support.
Solely in the event we seek stockholder approval of our business
combination, and we do not conduct redemptions pursuant to the
tender offer rules in connection with our business combination,
we may privately negotiate transactions to purchase shares upon
the closing of our initial business combination from
stockholders who would have otherwise elected to have their
shares of common stock redeemed for a per share pro rata portion
of the trust account. Our sponsors, directors, officers,
advisors or their affiliates may also purchase shares in
privately negotiated transactions. Neither we nor our sponsors,
directors, officers, advisors or their affiliates will make any
such purchases when we or they are in possession of any material
non-public information not disclosed to the seller. Such a
purchase would include a contractual acknowledgement that such
stockholder, although still the record holder of our shares is
no longer the beneficial owner thereof and therefore agrees not
to exercise its redemption rights. In the event that we, our
sponsors, directors, officers, advisors or their respective
affiliates purchase shares in privately negotiated transactions
from public stockholders who have already elected to exercise
their redemption rights, such selling stockholders would be
required to revoke their prior elections to redeem their shares.
This will have the effect of reducing the number of shares
redeemed, making it more likely that the required stockholder
vote needed to approve the business combination is achieved, and
therefore making it more likely that we would be able to
consummate our initial business combination. Although we do not
currently anticipate paying any premium purchase price for such
public shares, in the event we do, the payment of a premium may
not be in the best interest of those stockholders not receiving
any such additional consideration.
Neither we nor any of our sponsors, directors, officers,
advisors or their respective affiliates or any third parties has
agreed to purchase any such shares, and the failure to so agree
at the applicable time could adversely impair our ability to
consummate our initial business combination. Moreover, even if
we or our sponsors, directors, officers, advisors and their
respective affiliates were to undertake such purchases, such
purchases could be subject to limitations under applicable
securities laws and regulations, including Regulation M and
regulations regarding tender offers. The inability of such
persons to effect such purchases could adversely impair our
ability to consummate our initial business combination.
26
If we
submit our business combination to our stockholders for
approval, we may use funds in our trust account to purchase,
directly or indirectly, shares from holders thereof who have
indicated an intention to redeem their shares.
Solely if we submit our business combination to our stockholders
for approval, and we do not conduct redemptions pursuant to the
tender offer rules in connection with our business combination,
we may privately negotiate transactions to purchase shares upon
the closing of our initial business combination from
stockholders who would have otherwise elected to have their
shares of common stock redeemed for a per share pro rata portion
of the trust account. The purpose of such arrangements would be
to (i) increase the likelihood of satisfaction of the
requirement that no more than 88% of our outstanding shares of
common stock demand to redeem their shares, (ii) increase
the likelihood of obtaining stockholder approval of the business
combination or (iii) satisfy a minimum valuation
requirement, where it appears that such requirements would
otherwise not be met. This may result in the consummation of a
business combination that may not otherwise have been possible.
Additionally, as a consequence of such purchases,
|
|
|
|
|
the funds in our trust account that are so used will not be
available to us after our initial business combination;
|
|
|
|
the public float of our common stock may be reduced
and the number of beneficial holders of our securities may be
reduced, which may make it difficult to obtain the quotation,
listing or trading of our securities on a national securities
exchange if we determine to apply for such quotation or listing
in connection with our initial business combination; and
|
|
|
|
because the stockholders who sell their shares in a privately
negotiated transaction as described above may receive a
per-share purchase price payable from the trust account that is
not reduced by a pro rata share of franchise and income taxes
payable, our remaining stockholders may bear the entire payment
of such franchise and income taxes. That is, if we seek
stockholder approval of our initial business combination, the
redemption price per share payable to public stockholders who
elect to have their shares redeemed will be reduced by a larger
percentage of the franchise and income taxes payable than it
would have been in the absence of such privately negotiated
transactions, and stockholders who do not elect to have their
shares redeemed and remain our stockholders after our initial
business combination will bear the economic burden of the entire
contingent fees and a larger percentage of the franchise and
income taxes payable.
|
We do
not intend to establish an audit committee or a compensation
committee until the completion of our initial business
combination. Until such time, no formal committee of independent
directors will review matters related to our business, and such
lack of review could negatively impact our
business.
Our board of directors intends to establish an audit committee
and a compensation committee upon completion of our initial
business combination. At that time, our board of directors
intends to adopt charters for these committees. Prior to such
time we do not intend to establish either one. Accordingly,
there will not be a separate formal committee comprised of some
members of our board of directors with specialized accounting
and financial knowledge to meet, analyze and discuss solely
financial matters concerning prospective target businesses nor
will there be a separate committee to review the reasonableness
of expense reimbursement requests by anyone other than our board
of directors, which includes persons who may seek such
reimbursements. The absence of such committees to review the
matters discussed above until the completion of our initial
business combination could negatively impact our operations and
profitability.
Our
securities will be quoted on the
Over-the-Counter
Bulletin Board quotation system, which will limit the
liquidity and price of our securities more than if our
securities were quoted or listed on the Nasdaq Stock Market or
another national securities exchange.
Our units, common stock and warrants will be traded in the
over-the-counter
market and will be quoted on the
Over-the-Counter
Bulletin Board quotation system, or the OTCBB, which is a
FINRA-sponsored and operated inter-dealer automated quotation
system for equity securities not included in the Nasdaq Stock
Market. Quotation of our securities on the OTCBB will limit the
liquidity and price of our securities more
27
than if our securities were quoted or listed on the Nasdaq Stock
Market or another national securities exchange. Lack of
liquidity will limit the price at which you may be able to sell
our securities or your ability to sell our securities at all.
You
will not be entitled to protections normally afforded to
investors of blank check companies.
Since the net proceeds of this offering are intended to be used
to complete a business combination with an unidentified target
business, we may be deemed to be a blank check
company under the United States securities laws. However,
because 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 of the Securities Act.
Accordingly, investors will not be afforded the benefits or
protections of those rules, such as a requirement that we
consummate a business combination with a target whose fair
market value is equal to 80% of the proceeds in our trust
account. Because we are not subject to these rules, including
Rule 419, our units will be immediately tradable, as set
forth in this prospectus, prior to completion of a business
combination. For a more complete discussion of the differences
between the terms of this offering and terms of an offerings
subject to Rule 419, please see Proposed
Business Comparison of Offering to Blank Check
Companies below.
If the
net proceeds of this offering not being placed in the trust
account are insufficient to allow us to operate for at least the
next 18 months, we may not be able to complete an initial
business combination.
Upon the date of this prospectus, $1,250,000 of the net proceeds
of this offering not held in the trust account will be available
to us for at least the next 18 months to cover expenses
incurred in connection with a business combination or to cover
expenses in connection with our liquidation if we do not
complete our initial business combination during that time.
These amounts may prove to be insufficient especially if a
portion of the available proceeds 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 proceeds in pursuit of a business combination that is
not completed.
We could use a portion of the $1,250,000 not held in trust 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 business. We could also use a portion of
these funds as a down payment, reverse
break-up
fee (a provision in 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 designed to keep target businesses from
shopping around for transactions with others on
terms more favorable to such target businesses) with respect to
a particular proposed business combination, although we do not
have any current intention to do so. If we entered into such an
agreement with a prospective target where we paid for the right
to receive exclusivity from a target business and were
subsequently required to forfeit such funds (whether as a result
of our breach or otherwise) or if we agree to a reverse
break-up fee
and subsequently were required to pay such fee as a result of
our breach of a merger or other agreement or if our costs are
otherwise higher than expected, we might not have sufficient
funds to continue searching for, or conduct due diligence with
respect to, any other potential target businesses. If we do not
have sufficient proceeds available to fund our expenses, we may
be forced to obtain additional financing, either from our
management or the sponsor or from third parties, to continue
operating. We may not be able to obtain additional financing and
our sponsors and management are not obligated to provide any
additional financing. If we do not have sufficient proceeds and
cannot find additional financing, we may be forced to dissolve
and liquidate prior to consummating our initial business
combination. In such a case, our public stockholders may receive
less than $10.00 per share on our related redemption of our
public shares, and our warrants will expire worthless.
28
If we
are deemed to be an investment company under the Investment
Company Act, we may be required to institute burdensome
compliance requirements and our activities may be restricted,
which may make it difficult for us to complete a business
combination.
If we are deemed to be an investment company under the
Investment Company Act of 1940, as amended, our activities may
be restricted, including:
|
|
|
|
|
restrictions on the nature of our investments; and
|
|
|
|
restrictions on the issuance of securities, each of which may
make it difficult for us to complete a business combination.
|
In addition, we may have imposed upon us burdensome
requirements, including:
|
|
|
|
|
registration as an investment company;
|
|
|
|
adoption of a specific form of corporate structure; and
|
|
|
|
reporting, record keeping, voting, proxy and disclosure
requirements and other rules and regulations.
|
In order not to be regulated as an investment company under the
Investment Company Act, unless we can qualify for an exclusion,
we must ensure that we are engaged primarily in a business other
than investing, reinvesting or trading of securities and that
our activities do not include investing, reinvesting, owning,
holding or trading investment securities
constituting more than 40% of our assets (exclusive of
U.S. government securities and cash items) on an
unconsolidated basis. Our business will be to identify and
consummate a business combination and thereafter to operate the
acquired business or assets for the long term. We do not plan to
buy businesses or assets with a view to resale or profit from
their resale. We do not plan to buy unrelated businesses or
assets or to be a passive investor.
We do not believe that our anticipated principal activities will
subject us to the Investment Company Act. To this end, the
proceeds held in the trust account may only be invested in
United States government securities within the
meaning of Section 2(a)(16) of the Investment Company Act
having a maturity of 180 days or less or in money market
funds meeting certain conditions under
Rule 2a-7
promulgated under the Investment Company Act. Pursuant to the
trust agreement, the trustee is not permitted to invest in other
securities or assets. By restricting the investment of the
proceeds to these instruments, and by having a business plan
targeted at acquiring, growing and businesses for the long term
(rather than on buying and selling businesses in the manner of a
merchant bank or private equity fund), we intend to avoid being
deemed an investment company within the meaning of
the Investment Company Act. This offering is not intended for
persons who are seeking a return on investments in government
securities or investment securities. 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, our return of the funds
held in the trust account to our public stockholders as part of
our redemption of the public shares. If we do not invest the
proceeds as discussed above, we may be deemed to be subject to
the Investment Company Act. If we were deemed to be subject to
the Investment Company Act, compliance with these additional
regulatory burdens would require additional expense for which we
have not allotted funds and may hinder our ability to consummate
a business combination. If we are unable to complete our initial
business combination, our public stockholders may receive less
than $10.00 per share as part of our redemption of the public
shares, and our warrants will expire worthless.
Our
stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them upon
redemption of their shares.
If we do not consummate our initial business combination within
18 months from the closing of this offering, our sponsors,
officers and directors have agreed that we will (i) cease
all operations except for the purposes of winding up,
(ii) as promptly as reasonably possible, redeem 100% of our
public shares for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to
29
applicable law, and subject to the requirement that any refund
of income taxes that were paid from the trust account which is
received after the redemption shall be distributed to the former
public stockholders, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, dissolve
and liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. Under the DGCL,
stockholders may be liable for claims by third parties against a
corporation to the extent of distributions received by them
pursuant to a dissolution, and our redemption of 100% of the
shares sold in this offering may be deemed a liquidating
distribution. If a 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
180-day
waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. Because we will not be complying with certain
procedures set forth in Section 280 of the Delaware General
Corporation Law, as set forth above, a stockholder who received
distributions in the redemption may be liable for the lesser of
such stockholders pro rata share of the claim or the
amount distributed to the stockholder until the third
anniversary of the dissolution.
Although
we are required to use our best efforts to have an effective
registration statement covering the issuance of the shares of
common stock underlying the warrants when the warrants are
exercisable exercise their warrants, a registration statement
may not be effective, in which case our warrant holders may not
be able to exercise their warrants and therefore the warrants
could expire worthless.
Holders of our warrants will be able to exercise the warrants
for cash only if we have an effective registration statement
covering the shares of common stock issuable upon exercise of
the warrants and a current prospectus relating to such common
stock. Although we have undertaken in the warrant agreement, and
therefore have a contractual obligation, to use our best efforts
to maintain an effective registration statement covering the
shares of common stock issuable upon exercise of the warrants
when the warrants are exercisable, and we intend to comply with
our undertaking, we may not be able to do so. Factors such as an
unexpected inability to remain current in our SEC reporting
obligations or other material developments concerning our
business could present difficulties in maintaining an effective
registration statement and a current prospectus. If we do not
maintain an effective registration statement and current
prospectus, the warrant agreement permits holders of warrants to
exercise their warrants on a cashless basis under certain
circumstances. However, holders of warrants will not be entitled
to a cash settlement for their warrants if we fail to have an
effective registration statement or a current prospectus
available relating to the common stock issuable upon exercise of
the warrants. The expiration of warrants prior to exercise would
result in each unit holder paying the full unit purchase price
solely for the shares of common stock underlying the unit.
An
investor will only be able to exercise a warrant if the issuance
of common stock upon such exercise has been registered or
qualified or is deemed exempt under the securities laws of the
state of residence of the holder of the warrants.
No warrants will be exercisable and we will not be obligated to
issue shares of common stock unless the common stock issuable
upon such exercise has been registered or qualified or deemed to
be exempt under the securities laws of the state of residence of
the holder of the warrants. However, some states may not permit
us to register the shares issuable upon exercise of our warrants
for sale, and some states will not have exemptions for the
issuance of shares upon exercise, even on a cashless basis. The
value of the warrants will be greatly reduced if the securities
are not qualified, or exempt from qualification, in the states
in which the holders of warrants reside. We have no obligation
to issue cash, securities or other compensation in exchange for
the warrants in the event that we are unable to register the
shares underlying the warrants under applicable state securities
laws or qualify for an exemption, and the warrants may expire
unexercised and unredeemed. Holders of warrants who reside in
jurisdictions in which the shares underlying the warrants are
not qualified and in
30
which there is no exemption will be unable to exercise their
warrants and would either have to sell their warrants in the
open market or allow them to expire unexercised. In such event,
holders who acquired their warrants as part of a purchase of
units will have paid the full unit purchase price solely for the
shares underlying the units. If and when the warrants become
redeemable by us, we may exercise our redemption right even if
we are unable to qualify the underlying securities for sale
under all applicable state securities laws.
We
intend to consummate a business combination with an operating
company in a segment of the healthcare industry, but do not have
a particular focus on businesses or assets involved in the
healthcare industry. As we have not currently selected any
target business with which to complete a business combination,
investors in this offering are unable to currently ascertain the
merits or risks of the target business, may not be able to vote
in connection with such business combination and will be relying
on our managements ability to identify a target business
or businesses and complete a business combination.
We intend to focus on businesses in the healthcare industry or
healthcare-related assets, but we may pursue opportunities in
other business sectors. Although we may consider a target
business in any segment of the healthcare industry, we intend to
concentrate our search for an acquisition candidate in the
following segments:
|
|
|
|
|
healthcare services, including managed care and healthcare
financing;
|
|
|
|
healthcare information technology;
|
|
|
|
healthcare facilities;
|
|
|
|
diagnostics;
|
|
|
|
life sciences; and
|
|
|
|
medical equipment, devices and supplies.
|
As we have not yet identified a prospective target business,
investors in this offering have no current basis to evaluate the
possible merits or risks of the target business until we provide
our stockholders with tender offer documents or proxy materials
concerning the business combination. We do not intend to provide
stockholders with the opportunity to vote upon any proposed
business combination, although we may do so for business or
other legal reasons. To the extent we complete a business
combination, we may be affected by numerous risks inherent in
the business operations of those entities which our management
may not properly ascertain. An investment in our units may
ultimately prove to be less favorable to investors in this
offering than a direct investment, if an opportunity were
available, in a target business.
Unlike
most other blank check companies, we are not required to
consider a targets valuation when entering into or
consummating our business combination. Managements
flexibility in identifying and selecting a prospective
acquisition candidate, along with managements financial
interest in consummating an initial business combination, may
lead management to enter into an acquisition agreement that is
not in the best interest of the our stockholders.
Most blank check companies are required to consummate their
initial business combination with a target whose value is equal
to at least 80% of the amount of money deposited in the trust
account of the blank check company at the time of entry into a
materially definitive agreement. Because we do not have the
limitation that a target business have a minimum fair market
enterprise value of the net assets held in the trust account at
the time of our signing a definitive agreement in connection
with our initial business combination, we will have considerable
flexibility in identifying and selecting a prospective
acquisition candidate. Investors will be relying on our
managements ability to identify business combinations,
evaluate their merits, conduct or monitor diligence and conduct
negotiations. Managements flexibility in identifying and
selecting a prospective acquisition candidate, along with
managements financial interest in consummating an initial
business combination, may lead management to enter into an
acquisition agreement that is not in the best interest of our
stockholders, which would be the case if we pay too much for our
initial business combination target.
31
We may
not be required to obtain an opinion from an independent
investment banking firm, and consequently you may have no
assurance from an independent source that the price we are
paying for the business is fair to our stockholders from a
financial point of view.
Unless we consummate our initial business combination with an
affiliated entity, we are not required to obtain an opinion from
an independent investment banking firm that the price we are
paying is fair to our stockholders from a financial point of
view. If no opinion is obtained, our stockholders will be
relying on the judgment of our board of directors, who will
determine fair market value and fairness based on standards
generally accepted by the financial community. Such standards
used will be disclosed in our tender offer documents or proxy
solicitation materials, as applicable, related to our initial
business combination.
We may
issue shares of our capital 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 and the purchase of the sponsor warrants (assuming
no exercise of the underwriters over-allotment option),
there will be 83,750,000 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) and of the
1,000,000 shares of preferred stock a total of 1,000,000
will be available for issuance. Although we have no commitment
as of the date of this prospectus, we may 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:
|
|
|
|
|
may significantly reduce the equity interest of investors in
this offering;
|
|
|
|
may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
to the holders of our common stock;
|
|
|
|
may 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 may result in the resignation or removal
of our present officers and directors; and
|
|
|
|
may adversely affect prevailing market prices for our common
stock.
|
Resources
could be wasted in researching acquisitions that are not
consummated, which could materially adversely affect subsequent
attempts to locate and acquire or merge with another business.
If we are unable to complete our initial business combination,
our public stockholders may receive less than $10.00 per share
as part of the related redemption of our public shares, and our
warrants will expire worthless.
We anticipate the investigation of each specific target business
and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will
require substantial management time and attention and
substantial costs for accountants, attorneys and other third
party fees and expenses. If we decide not to enter into an
agreement with respect to a specific proposed initial business
combination we have investigated, the costs incurred up to that
point for the proposed transaction likely would not be
recoverable. Furthermore, even if an agreement is reached
relating to a specific target business, we may fail to
consummate the business combination for any number of reasons
including those beyond our control. Any such event will result
in a loss to us of the related costs incurred which could
materially adversely affect subsequent attempts to locate and
consummate a business combination. If we are unable to complete
our initial business combination, our public stockholders may
receive less than $10.00 per share as part of the related
redemption of our public shares, and our warrants will expire
worthless.
32
Our
ability to successfully effect our initial business combination
and to be successful thereafter will be totally dependent upon
the efforts of our key personnel, some of whom may not remain
with us following our initial business combination. The loss of
our key personnel could negatively impact the operations and
profitability of our post-combination business.
Our ability to successfully effect our initial business
combination is dependent upon the efforts of our key personnel.
The role of our key personnel in the target business, however,
cannot presently be ascertained. Although some of our key
personnel may remain with the target business in senior
management or advisory positions following a business
combination, it is likely that some or all of the management of
the target business will remain in place. While we intend to
closely scrutinize any individuals we engage after a business
combination, we cannot assure you that our assessment of these
individuals will prove to be correct. These individuals may be
unfamiliar with the requirements of operating a company
regulated by the SEC, which could cause us to have to expend
time and resources helping them become familiar with such
requirements.
Our
officers and directors may allocate their time to other
businesses, thereby causing conflicts of interest in their
determination as to how much time to devote to our affairs.
These conflicts could impair our ability to consummate a
business combination.
Our officers and directors are not required to commit their full
time to our affairs, which may result in a conflict of interest
in allocating their time between our operations and other
businesses. We do not intend to have any full time employees
prior to the consummation of a business combination. Certain of
our executive officers are engaged in several other business
endeavors and are not obligated to contribute any specific
number of hours per week to our affairs. If our executive
officers other business affairs require them to devote
more substantial amounts of time to such affairs, it could limit
their ability to devote time to our affairs and could impair our
ability to consummate a business combination.
Certain
of our officers and directors are now, and all of them may in
the future become, affiliated with entities engaged in business
activities similar to those intended to be conducted by us and,
accordingly, may have conflicts of interest in allocating their
time and determining to which entity a particular business
opportunity should be presented.
Certain of our officers and directors are now, and all of them
may in the future become, affiliated with entities engaged in
business activities similar to those intended to be conducted by
us. While our officers and directors have agreed to present
business opportunities first to us, subject to any pre-existing
duty they may have, they may become aware of business
opportunities which may be appropriate for presentation to us as
well as the other entities to which they owe fiduciary duties.
Certain of our officers and directors have pre-existing
fiduciary obligations to other businesses of which they are
officers or directors. To the extent they identify business
opportunities which may be suitable for the entities to which
they owe a pre-existing fiduciary obligation, our officers and
directors will honor those fiduciary obligations, subject to the
right of first refusal described below. Accordingly,
they may not present opportunities to us that otherwise may be
attractive to us unless the entities to which they owe a
pre-existing fiduciary obligation (and any successors to such
entities) have declined to accept such opportunities.
Patrick J. Landers serves as president and chief executive
officer of Annascaul Advisors LLC. Peter Schofield serves as
chief financial officer of Washington & Congress
Managers, LLC. Both Messrs. Landers and Schofield have a
pre-existing fiduciary duty to these respective companies and
may not present opportunities to us that otherwise may be
attractive to us unless these entities have declined to accept
such opportunities.
Messrs. Landers and Schofield also have fiduciary
obligations to LLM Structured Equity Fund L.P. and LLM
Investors L.P. These funds are private equity funds focused on
investing growth capital in mid-sized companies in various
industries. In order to minimize potential conflicts, or the
appearance of conflicts, which may arise from the affiliations
that Messrs. Landers and Schofield have with these funds,
each of LLM Capital Partners LLC, LLM Structured Equity
Fund L.P. and LLM Investors L.P. has granted us a
right of first refusal with respect to an
acquisition of any company or assets in the healthcare industry
whose enterprise
33
value is $50 million or more. Pursuant to this right of
first refusal, LLM Capital Partners LLC, LLM Structured Equity
Fund L.P. and LLM Investors L.P. has each agreed pursuant
to a written agreement with us, to present to us, for our
consideration, prior to presentation to any other entity, any
relevant business opportunity with an enterprise value of
$50 million or more and they will not, and will cause each
other company or entity under their management or control not
to, pursue such business opportunity unless and until a majority
of our disinterested directors have determined for any reason
that we will not pursue such opportunity. This right of first
refusal will expire upon the earlier to occur of (i) the
completion of our initial business combination or
(ii) 18 months after the closing of this offering.
Our
key personnel may negotiate employment or consulting agreements
with a target business in connection with our initial business
combination. These agreements may provide for them to receive
compensation following our initial business combination and as a
result, may cause them to have conflicts of interest in
determining whether a particular business combination is the
most advantageous.
Our key personnel may not be able to remain with the company
after the consummation of a business combination unless they are
able to negotiate employment or consulting agreements in
connection with a business combination. If, as a condition to a
potential initial business combination, our existing officers
negotiate to be retained after the consummation of the business
combination, such negotiations may result in a conflict of
interest. Such negotiations would take place simultaneously with
the negotiation of the business combination and could provide
for such individuals to receive compensation in the form of cash
payments
and/or our
securities for services they would render to us after the
consummation of the business combination. 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 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 businesss
management and negotiate as part of the business combination
that our existing officers and directors remain if it is
believed to be in the best interests of the combined company
after the consummation of the business combination. There is no
certainty, however, that any of our key personnel will remain
with us after the consummation of a business combination. We
cannot assure you that any of our key personnel will remain in
senior management or advisory positions with us.
The
officers and directors of an acquisition candidate may resign
upon consummation of a business combination. The loss of an
acquisition targets key personnel could negatively impact
the operations and profitability of our post-combination
business.
The role of an acquisition candidates key personnel upon
the consummation of a business combination cannot be ascertained
at this time. Although we contemplate that certain members of an
acquisition candidates management team will remain
associated with the acquisition candidate following a business
combination, it is possible that members of the management of an
acquisition candidate will not wish to remain in place. The loss
of an acquisition targets key personnel could negatively
impact the operations and profitability of our post-combination
business.
We may
engage in a business combination with one or more target
businesses that have relationships or are affiliated with our
sponsors, directors or officers, which may raise potential
conflicts.
We may engage in a business combination with one or more target
businesses that have relationships or are affiliated (as defined
in Rule 405 of the Securities Act) with our sponsors,
directors or officers, which may raise potential conflicts.
Also, the completion of a business combination between us and an
entity owned by a business in which one of our directors,
advisors or officers may have an interest could enhance their
prospects for future business from such client. To minimize
potential conflicts of interest, we have agreed not to
consummate, and our amended and restated certificate of
incorporation provides that we may not consummate, a business
combination with a target business that is affiliated with our
sponsors, our directors or officers or any of our or their
affiliates unless we, or a committee of our independent
directors, obtain an opinion from an
34
independent investment banking firm that is a member of FINRA
that the business combination is fair to our stockholders from a
financial point of view.
Since
our sponsors will lose their entire investment in us if a
business combination is not completed and may be required to pay
costs associated with our liquidation and our officers and
directors have significant financial interests in us, a conflict
of interest may arise in determining whether a particular
acquisition target is appropriate for our initial business
combination.
Our sponsors initial shares will be worthless if we do not
consummate our initial business combination. In addition, our
sponsors have agreed to purchase warrants exercisable for our
common stock (for $2,500,000 in the aggregate), which will also
be worthless if we do not consummate a business combination. In
addition, in the event we are forced to liquidate, our sponsors
have agreed to advance us the entire amount of the funds
necessary to complete such liquidation (currently anticipated to
be no more than approximately $30,000) and has agreed not to
seek repayment for such expenses. The personal and financial
interests of our officers, directors and advisory board members
may influence their motivation in identifying and selecting a
target business combination and completing an initial business
combination.
The
requirement that we complete an initial business combination
within 18 months from the closing of this offering may
motivate our officers and directors to approve a business
combination that is not in the best interests of
stockholders.
Each of our officers and directors may receive reimbursement for
out-of-pocket
expenses incurred by him 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. In the event that we do not effect a business
combination within 18 months from the closing of this
offering, then any expenses incurred by such individuals in
excess of the money being held outside of the trust account will
not be repaid, and we will liquidate. On the other hand, if we
complete a business combination within such time period, those
expenses will be repaid by the target business. Consequently,
our officers and directors may have an incentive to complete a
business combination that is not in the best interest of our
stockholders.
Our
officers, directors, security holders and their respective
affiliates may have competitive pecuniary interests that
conflict with our interests.
We have not adopted a policy that expressly prohibits our
directors, officers, security holders or affiliates from having
a direct or indirect pecuniary or financial interest in any
investment to be acquired or disposed of by us or in any
transaction to which we are a party or have an interest. Nor do
we have a policy that expressly prohibits any such persons from
engaging for their own account in business activities of the
types conducted by us. Accordingly, such persons or entities may
have a conflict between their interests and ours.
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 quoted on the
OTCBB, 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. Following this
offering, the price of our securities may vary significantly due
to our reports of operating losses, one or more potential
business combinations, the filing of periodic reports with the
SEC, and general market and economic conditions. Once quoted on
the OTCBB, an active trading market for our securities may never
develop or, if developed, it may not be sustained. In addition,
the price of the securities after the offering can vary due to
general economic conditions and forecasts, our general business
condition and the release of our financial reports. You may be
unable to sell your securities unless a market can be
established or sustained.
35
If you
are not an institutional investor, you may purchase securities
in this offering only if you reside within the states in which
we will apply to have the securities registered. Although the
states are preempted from regulating the resales of our
securities, state securities regulators who view blank check
offerings unfavorably could use or threaten to use their
investigative or enforcement powers to hinder resales in their
states.
We have applied to register our securities, or have obtained or
will seek to obtain an exemption from registration, in Colorado,
Delaware, the District of Columbia, Florida, Georgia, Hawaii,
Illinois, Louisiana, New York and Rhode Island. If you are not
an institutional investor, you must be a resident of
these jurisdictions to purchase our securities in the offering.
The definition of an institutional investor varies
from state to state but generally includes financial
institutions, broker-dealers, banks, insurance companies and
other qualified entities. Institutional investors in every state
except in Idaho may purchase the units in this offering pursuant
to exemptions provided to such entities under the Blue Sky laws
of various states. Under the National Securities Market
Improvement Act of 1996, the states are pre-empted from
regulating transactions in covered securities. We will file
periodic and annual reports under the Exchange Act and our
securities will be considered covered securities. Therefore, the
states will be pre-empted from regulating the resales of the
units, from and after the effective date, and the common stock
and warrants comprising the units, once they become separately
transferable. However, the states retain the jurisdiction to
investigate and bring enforcement actions with respect to fraud
or deceit, or unlawful conduct by a broker or dealer, in
connection with the sale of securities. Although we are not
aware of a state other than Idaho, having used these powers to
prohibit or restrict resales of securities issued by blank check
companies generally, certain state securities commissioners view
blank check companies unfavorably and might use these powers, or
threaten to use these powers, to hinder the resale of securities
of blank check companies in their states. For a more complete
discussion of the state securities laws and registrations
affecting this offering, please see
Underwriting State Blue Sky Information
below.
We
will probably complete only one business combination with the
proceeds of this offering and the private placement of the
sponsor warrants, meaning our operations will depend on a single
business, and we will be exposed to higher risk than other
entities that have the resources to complete several
transactions. This lack of diversification may negatively impact
our operations and profitability.
The net proceeds from this offering will provide us with
approximately $49,250,000 (approximately $56,525,000 if the
underwriters over-allotment option is exercised in full)
that we may use to complete a business combination.
We may not be able to acquire more than one target business
because of various factors, including the existence of complex
accounting issues and the requirement that we prepare and file
pro forma financial statements with the SEC that present
operating results and the financial condition of several target
businesses as if they had been operated on a combined basis.
Additionally, we may encounter numerous logistical issues if we
pursue multiple target businesses, including the difficulty of
coordinating the timing of negotiations, tender offer or proxy
disclosure and closings. We may also be exposed to the risk that
our inability to satisfy conditions to closing with one or more
target businesses would reduce the fair market enterprise value
of the remaining target businesses in the combination. Due to
these added risks, we are more likely to choose a single target
business with which to pursue a business combination than
multiple target businesses. Unless we combine with a target
business in a transaction in which the purchase price consists
substantially of common stock
and/or
preferred stock, it is likely we will complete only one business
combination with the proceeds of this offering. Accordingly, the
prospects for our success may be solely dependent upon the
performance of a single business, property or asset, or
dependent upon the development or market acceptance of a single
or limited number of products, processes or services. This lack
of diversification may subject us to numerous economic,
competitive and regulatory developments, any or all of which may
have a substantial adverse impact upon the particular industry
in which we may operate subsequent to our initial business
combination.
36
We may
not be able to maintain control of a target business after our
initial business combination. Upon loss of control of a target
business, new management may not possess the skills,
qualifications or abilities necessary to profitably operate such
business.
We may structure a business combination to acquire less than
100% of the equity interests or assets of a target business, but
will not acquire less than a controlling interest. We will
acquire a controlling interest either through the acquisition of
at least 50.1% of the voting equity interests in the target or
through the acquisition of a significant voting equity interest
that enables us to exercise a greater degree of control over the
target than any other person or group. However, other minority
stockholders may subsequently combine their holdings resulting
in a single person or group obtaining a larger share of the
companys stock than we initially acquired. Accordingly,
this may make it more likely that we will not be able to
maintain our control of the target business. Upon loss of
control of a target business, new management may not possess the
skills, qualifications or abilities necessary to profitably
operate such business.
Unlike
many other blank check companies, we allow our public
stockholders holding no more than 88% of the shares sold in this
offering to exercise their redemption rights. This higher
threshold will make it easier for us to consummate a business
combination with which a substantial majority of our
stockholders do not agree.
We will proceed with our initial business combination unless
holders of more than 88% of our public shares redeem their
shares. The 88% redemption threshold is different from the
redemption or conversion thresholds used by most blank check
companies. Traditionally, blank check companies would not be
able to consummate a business combination if the holders of the
companys public shares voted against a proposed business
combination and elected to redeem or convert more than a much
smaller percentage of the shares sold in such companys
initial public offering, which percentage threshold is typically
between 19.99% and 39.99%. As a result, many blank check
companies have been unable to complete business combinations
because the number of shares voted by their public stockholders
electing conversion exceeded the maximum conversion threshold
pursuant to which such company could proceed with a business
combination. As a result, we may be able to consummate a
business combination even though the holders of a substantial
majority of the outstanding shares of common stock do not agree
with the transaction and have redeemed their shares or, solely
if we hold a stockholder vote to approve our initial business
combination, and do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules,
have entered into privately negotiated agreements to sell their
shares to us or our sponsors, officers, directors, advisors or
their affiliates.
The
exercise price for the public warrants is higher than in many
similar blank check company offerings in the past, and,
accordingly, the warrants are more likely to expire
worthless.
The exercise price of the warrants is higher than is typical in
similar blank check companies. Historically, the exercise price
of a warrant was generally a fraction of the purchase price of
the units in the initial public offering. The exercise price for
our public warrants is $11.50 per share. As a result, the
warrants are less likely to ever be in the money and
more likely to expire worthless.
The
ability of a larger number of our stockholders to exercise
redemption rights may not allow us to consummate the most
desirable business combination or optimize our capital
structure.
If our business combination requires us to use substantially all
of our cash to pay the purchase price, because we will not know
how many stockholders may exercise such redemption rights, we
may either need to reserve part of the trust account for
possible payment upon such redemption, or we may need to arrange
third party financing to help fund our business combination in
case a larger percentage of stockholders exercise their
redemption rights than we expect. 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 effectuate the most attractive business
combination available to us.
37
In
order to effect a business combination, blank check companies
have, in the recent past, amended various provisions of their
charters and modified governing instruments. We cannot assure
you that we will not seek to amend our certificate of
incorporation or governing instruments in a manner that will
make it easier for us to consummate a business combination that
our stockholders may not support.
In order to effectuate a business combination, blank check
companies have, in the recent past, amended various provisions
of their charters and modified governing instruments. For
example, blank check companies have amended the definition of
business combination, increased redemption thresholds and
changed industry focus. We cannot assure you that we will not
seek to amend our certificate of incorporation or governing
instruments in order to effectuate our initial business
combination.
Certain
provisions of our amended and restated certificate of
incorporation that relate to our pre-business combination
activity may be amended with the approval of at least 65% of our
outstanding common stock, which is a lower amendment threshold
than that of most blank check companies. It may be easier for
us, therefore, to amend our certificate of incorporation to
facilitate the completion of our initial business combination
that our stockholders may not support.
Most blank check companies have a provision in their charter
that prohibits the amendment of certain of its provisions that
relate to pre-business combination activity without approval by
a certain percentage of the companys stockholders.
Typically, amendment of these provisions requires approval by
between 90% and 100% of the companys public stockholders.
Our amended and restated certificate of incorporation provides
that its provisions related to pre-business combination activity
may be amended if approved by holders of at least 65% of our
outstanding common stock. As a result, we may be able to amend
the provisions of our amended and restated certificate of
incorporation that govern our pre-business combination behavior
more easily than other blank check companies, and this may
increase our ability to consummate a business combination with
which you do not agree.
We may
issue notes or other debt securities, or otherwise incur
substantial debt, to complete our initial business combination,
which may adversely affect our financial condition and thus
negatively impact the value of our stockholders investment
in us.
Although we have no commitments as of the date of this
prospectus to issue any notes or other debt securities, or to
otherwise incur outstanding debt, we may choose to incur
substantial debt to complete our initial business combination.
The incurrence of debt could have a variety of negative effects,
including:
|
|
|
|
|
default and foreclosure on our assets if our operating 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 if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
|
38
|
|
|
|
|
limitations on our flexibility in planning for and reacting to
changes in our business and in the industry in which we operate;
|
|
|
|
increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation; and
|
|
|
|
limitations on our ability to borrow additional amounts for
expenses, capital expenditures, acquisitions, debt service
requirements, execution of our strategy and other purposes and
other disadvantages compared to our competitors who have less
debt.
|
Our
sponsors control a substantial interest in us and thus may exert
a substantial influence on actions requiring a stockholder vote,
potentially in a manner that you do not support.
Upon closing of this offering (including any exercise of the
underwriters over-allotment option, in whole or in part),
and after giving effect to the private placement of sponsor
warrants, our sponsors will own a substantial portion of our
issued and outstanding common stock. This ownership interest,
together with any other acquisitions of our shares of common
stock (or warrants which are subsequently exercised), could
allow our sponsors to 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. Our board of directors will
be divided into two classes, each of which will generally serve
for a term of two years with only one class of directors being
elected in each year. It is unlikely that there will be an
annual meeting of stockholders to re-elect existing directors or
elect new directors prior to the consummation of a business
combination, in which case all of the current directors will
continue in office until at least the consummation of the
business combination. If there is an annual meeting, as a
consequence of our staggered board of directors,
only a minority of the board of directors will be considered for
election and our sponsors, because of their ownership position,
will have considerable influence regarding the outcome of an
election of directors. The interests of our sponsors 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.
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.
We believe that the net proceeds of this offering will be
sufficient to allow us to consummate a business combination.
However, because we have not yet identified any prospective
target business, we cannot ascertain the capital requirements
for any particular transaction. If the net proceeds of this
offering prove to be insufficient, either because of the size of
the business combination, the depletion of the available net
proceeds in search of a target business, or the obligation to
pay cash for a significant number of shares redeemed, we will be
required to seek additional financing. Such financing may not be
available 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
business candidate. Even if we do not need additional financing
to consummate our initial business combination, we may require
such financing to fund the operations or growth of the target
business. The failure to secure additional financing could have
a material adverse effect on the continued development or growth
of the target business. None of our officers, directors or
stockholders are required to provide any financing to us in
connection with or after a business combination.
We may
redeem your unexpired warrants prior to their exercise at a time
that is disadvantageous to you, thereby making your warrants
worthless.
We may redeem the outstanding warrants (excluding any sponsor
warrants held by our sponsors or their permitted assigns) 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 $0.01 per
warrant, upon not less than 30 days prior written notice of
redemption, and if, and only if, the last sales price of our
common stock equals or exceeds $17.50 per share for any
39
20 trading days within the 30 trading day period ending on
the third business day before we send the notice of redemption
to the warrant holders, provided that on the date we give notice
of redemption and during the entire period thereafter until the
time we redeem the warrants, we have an effective registration
statement under the Securities Act covering the shares of common
stock issuable upon exercise of the warrants and a current
prospectus relating to them is available.
We will likely redeem the warrants if the market price of our
common stock reaches $17.50 per share for the necessary trading
period, since doing so would allow us to decrease the dilutive
effect of the warrants. Redemption of the warrants could force
the warrant holders to exercise the warrants, whether by paying
the exercise price in cash or through a cashless exercise at a
time when it may be disadvantageous for the holders to do so, to
sell the warrants at the then current market price when they
might otherwise wish to hold the warrants, or to 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 us.
Our
managements ability to require holders of our warrants to
exercise such warrants on a cashless basis after we call the
warrants for redemption or if there is no effective registration
statement covering the shares of common stock issuable upon
exercise of these warrants will cause holders to receive fewer
shares of common stock upon their exercise of the warrants than
they would have received had they been able to pay the exercise
price of their warrants in cash.
If we call our warrants for redemption after the redemption
criteria described elsewhere in this prospectus have been
satisfied, our management will have the option to require any
holder that wishes to exercise his warrant to do so on a
cashless basis. Cashless basis means the
warrant holder pays the exercise price by giving up some of the
shares for which the warrant is being exercised, with those
shares valued at the then current market price. Accordingly,
each holder would pay the exercise price by surrendering the
warrants for that number of shares of common stock equal to the
quotient obtained by dividing (x) the product of the number
of shares of common stock underlying the warrants, multiplied by
the difference between the exercise price of the warrants and
the fair market value by (y) the fair market value. The
fair market value shall mean the average reported
last sales price of our common stock for the 10 trading days
ending on the third trading day prior to the date on which
notice of redemption is sent to the holders of the warrants. For
example, if the holder is exercising 875 public warrants at
$11.50 per share through a cashless exercise when the common
stock has a fair market value per share of $17.50 per share,
then upon the cashless exercise, the holder will receive
300 shares of common stock. The holder would have received
875 shares of common stock if the exercise price was paid
in cash. In addition, in the event a registration statement
covering the common stock issuable upon exercise of the warrant
is not effective within a specified period following the
completion of our initial business combination, warrant holders
may, until such time as there is an effective registration
statement and during any period when we shall have failed to
maintain an effective registration statement, exercise warrants
on a cashless basis. For purposes of calculating the number of
shares issuable upon such cashless exercise, the fair
market value of warrants will be calculated using the
volume weighted average sale price of the common stock for the
10 trading days ending on the trading day prior to the date on
which notice of exercise is received by the warrant agent. If
our management chooses to require holders to exercise their
warrants on a cashless basis or if holders elect to do so when
there is no effective registration statement, the number of
shares of common stock received by a holder upon exercise will
be fewer than it would have been had such holder exercised his
warrant for cash. This will have the effect of reducing the
potential upside of the holders investment in
our company because the warrant holder will hold a smaller
number of shares of common stock upon a cashless exercise of the
warrants they hold.
40
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.
We will be issuing warrants to purchase up to
5,000,000 shares of our common stock (or up to
5,750,000 shares of common stock if the underwriters
over-allotment option is exercised) as part of the units offered
by this prospectus and, simultaneously with the closing of this
offering, we will be issuing in a private placement 5,000,000
sponsor warrants, each exercisable to purchase one share of
common stock at $11.50 per share. 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 to a target business. Such
warrants, 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 warrants may make it more difficult
to effectuate a business combination or increase the cost of
acquiring the target business.
The sponsor warrants are identical to the warrants sold as part
of the units in this offering except that, so long as they are
held by our sponsors or their permitted transferees,
(i) they will not be redeemable by us, (ii) they
(including the common stock issuable upon exercise of these
warrants) may not, subject to certain limited exceptions, be
transferred, assigned or sold by our sponsors until 30 days
after the completion of our initial business combination, and
(iii) they may be exercised by the holders on a cashless
basis.
We may
amend the terms of the warrants in a manner that may be adverse
to holders with the approval by the holders at least 65% of the
then outstanding public warrants.
Our warrants will be issued in registered form under a warrant
agreement between Continental Stock Transfer &
Trust Company, as warrant agent, and us. The warrant
agreement provides that the terms of the warrants may be amended
without the consent of any holder to cure any ambiguity or
correct any defective provision, but requires the approval by
the holders of at least two-thirds of the then outstanding
public warrants in order to make any change that adversely
affects the interests of the registered holders. Accordingly, we
may amend the terms of the warrants in an adverse way to a
holder if holders of at least 65% of the then outstanding public
warrants approve of such amendment. Although our ability to
amend the terms of the warrants with the consent of at least 65%
of the then outstanding warrants is unlimited, examples of such
adverse amendments could be amendments to, among other things,
increase the exercise price of the warrants, shorten the
exercise period, provide for redemption of warrants or decrease
the number of shares of our common stock purchasable upon
exercise of a warrant.
The
determination of the offering price of our units and the size of
this offering is more arbitrary than the pricing of securities
and size of an offering of an operating company in a particular
industry. You may have less assurance, therefore, that the
offering price of our units properly reflects the value of such
units than you would have in a typical offering of an operating
company.
Prior to this offering there has been no public market for our
securities. The public offering price of the units, the terms of
the warrants, the aggregate proceeds we are raising and the
amount to be placed in trust were the result of a negotiation
between the underwriters and us. Factors that were considered in
making these determinations include:
|
|
|
|
|
the information presented in this prospectus and otherwise
available to the underwriters;
|
|
|
|
the history and prospects of companies whose principal business
is the acquisition of other companies;
|
|
|
|
the ability of our management and their experience in
identifying operating companies;
|
|
|
|
prior offerings of those companies;
|
|
|
|
our prospects for acquiring an operating business at attractive
values;
|
|
|
|
the present state of our development and our current financial
condition and capital structure;
|
41
|
|
|
|
|
the recent market prices of, and the demand for, publicly traded
common stock of generally comparable companies;
|
|
|
|
the general conditions of the securities markets at the time of
the offering; and
|
|
|
|
other factors as were deemed relevant.
|
Although these factors were considered, the determination of our
per unit offering price and aggregate proceeds is more arbitrary
than would typically be the case if we were an operating
company. In addition, because we have not identified any
potential target businesses, our assessment of the financial
requirements necessary to complete a business combination may
prove inaccurate, in which case we may not have sufficient funds
to consummate a business combination and we would be forced to
either find additional financing or liquidate.
Our
sponsors paid an aggregate of $25,000, or approximately $0.0174
per initial share and, accordingly, you will experience
immediate and substantial dilution from the purchase of our
common stock.
The difference between the public offering price per share of
our common stock (allocating all of the unit purchase price to
the common stock and none to the warrant included in the unit)
and the pro forma net tangible book value per share of our
common stock after this offering constitutes the dilution to you
and other investors in this offering. The fact that our sponsors
acquired their shares of common stock at a nominal price
significantly contributed to this dilution. Assuming this
offering is completed and no value is ascribed to the warrants
included in the units, you and the other new investors will
incur an immediate and substantial dilution of approximately
66.1% or $6.61 per share (the difference between the pro forma
net tangible book value per share after this offering of $3.39
and the initial offering price of $10.00 per unit).
Provisions
in our amended and restated certificate of incorporation and
bylaws and Delaware law may inhibit a takeover of us, which
could limit the price investors might be willing to pay in the
future for our common stock and could entrench
management.
Our amended and restated certificate of incorporation and bylaws
contain provisions that may discourage unsolicited takeover
proposals that stockholders may consider to be in their best
interests. These provisions include a staggered board of
directors and the ability of the board of directors to designate
the terms of and issue new series of preferred stock, which may
make more difficult the removal of management and may discourage
transactions that otherwise could involve payment of a premium
over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware
law, which could delay or prevent a change of control. Together
these provisions may make more difficult the removal of
management and may discourage transactions that otherwise could
involve payment of a premium over prevailing market prices for
our securities.
Compliance
with the requirements under the Sarbanes-Oxley Act of
2002 may make it more difficult for us to effect a business
combination, require substantial financial and management
resources and increase the time and costs of completing an
acquisition.
Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, requires that we evaluate and report on our
system of internal controls and requires that we have such
system of internal controls audited beginning with our Annual
Report on
Form 10-K
for the year ending December 31, 2011. The fact that we are
a blank check company makes compliance with the requirements of
the Sarbanes-Oxley Act particularly burdensome on us as compared
to other public companies because a target company with which we
seek to complete a business combination may not be in compliance
with the provisions of the Sarbanes-Oxley Act regarding adequacy
of its internal controls. The development of the internal
controls of any such entity to achieve compliance with the
Sarbanes-Oxley Act may increase the time and costs necessary to
complete any such acquisition.
42
We do
not currently intend to hold an annual meeting of stockholders
until after our consummation of a business
combination.
We do not currently intend to hold an annual meeting of
stockholders until after we consummate a business combination,
and thus may not be in compliance with Section 211(b) of
the Delaware General Corporation Law, which requires an annual
meeting of stockholders be held for the purposes of electing
directors in accordance with a companys bylaws unless such
election is made by written consent in lieu of such a meeting.
Therefore, if our stockholders want us to hold an annual meeting
prior to our consummation of a business combination, they may
attempt to force us to hold one by submitting an application to
the Delaware Court of Chancery in accordance with
Section 211(c) of the Delaware General Corporation Law.
The
grant of registration rights to our sponsors may make it more
difficult to complete our initial business combination, and the
future exercise of such rights may adversely affect the market
price of our common stock.
Pursuant to an agreement to be entered into concurrently with
the issuance and sale of the securities in this offering, our
sponsors and their permitted transferees can demand that we
register the initial shares and the sponsor warrants, and the
shares of common stock issuable upon exercise of the sponsor
warrants. The registration rights will be exercisable with
respect to the initial shares and the sponsor warrants and the
shares of common stock issuable upon exercise of such sponsor
warrants at any time commencing upon the date that such shares
are released from escrow. We will bear the cost of registering
these securities. If such persons exercise their registration
rights in full, there will be an additional
1,250,000 shares of common stock (assuming no exercise of
the underwriters over-allotment option) and up to
5,000,000 shares of common stock issuable on exercise of
the sponsor warrants eligible for trading in the public market.
The registration and availability of such a significant number
of securities for trading in the public market may have an
adverse effect on the market price of our common stock. In
addition, the existence of the registration rights may make our
initial business combination more costly or difficult to
conclude. This is because the stockholders of the target
business may increase the equity stake they seek in the combined
entity or ask for more cash consideration to offset the negative
impact on the market price of our common stock that is expected
when the securities owned by our sponsors are registered.
Although
we identified general criteria and guidelines that we believe
are important in evaluating prospective target businesses, we
may enter into a business combination with a target that does
not meet such criteria and guidelines, and as a result, the
target business with which we enter into our initial business
combination may not have attributes entirely consistent with our
general criteria and guidelines.
Although we have identified proven track records, strong cash
flow characteristics, strong competitive position, experienced
management and diversified customer and supplier bases as
general criteria and guidelines for evaluating prospective
target businesses, it is possible that a target business with
which we enter into our initial business combination will not
have all of these attributes. If we consummate our initial
business combination with a target that does not meet some or
all of these guidelines, such combination may not be as
successful as a combination with a business that does meet all
of our general criteria and guidelines. If we announce a
prospective business combination with a target that does not
meet our general criteria and guidelines, a greater number of
stockholders may exercise their redemption rights, which may
make it difficult for us to meet any closing condition with a
target business that requires us to have a minimum net worth or
a certain amount of cash. In addition, if a stockholder vote is
required by law, or we decide to hold a stockholder vote for
business or other legal reasons, it may be more difficult for us
to attain stockholder approval of our initial business
combination if the target business does not meet our general
criteria and guidelines. If we are unable to complete our
initial business combination, our public stockholders may
receive less than $10.00 per share as part of our redemption of
the public shares, and our warrants will expire worthless.
43
Because
we must furnish our stockholders with target business financial
statements, we may lose the ability to complete an otherwise
advantageous initial business combination with some prospective
target businesses.
The federal proxy rules require that a proxy statement with
respect to a vote on a business combination meeting certain
financial significance tests include historical
and/or pro
forma financial statement disclosure in periodic reports. We
will include the same financial statement disclosure in
connection with our tender offer documents, whether or not they
are required under the tender offer rules. These financial
statements must be prepared in accordance with, or be reconciled
to, U.S. generally accepted accounting principles, or GAAP,
and the historical financial statements must be audited in
accordance with the standards of the Public Company Accounting
Oversight Board (United States), or PCAOB. These financial
statement requirements may limit the pool of potential target
businesses we may acquire because some targets may be unable to
provide such statements in time for us to disclose such
statements in accordance with federal proxy rules and consummate
our initial business combination within our
18-month
time frame.
Because
of our limited resources and the significant competition for
business combination opportunities, it may be more difficult for
us to complete a business combination. If we are unable to
complete our initial business combination, our public
stockholders may receive less than $10.00 per share as part of
our redemption of the public shares, and our warrants will
expire worthless.
Based on publicly available information, approximately 163
similarly structured blank check companies have completed
initial public offerings since August 2003, and numerous others
have filed registration statements. Of these companies,
95 companies have consummated a business combination, while
two companies have announced that they have entered into
definitive agreements or letters of intent with respect to
potential business combinations, but have not yet consummated
such business combinations and another 65 have already or will
be liquidating. Accordingly, there is one blank check company
with $54,563,000 in a trust account seeking to enter into a
business combination. Because of this and other competition from
entities that are not blank check companies, we may not be able
to effectuate a business combination within the required time
period. Further, the fact that only 97 of such companies have
either consummated a business combination or entered into a
definitive agreement for a business combination may indicate
that there are fewer attractive target businesses available to
such entities or that many privately-held target businesses are
not inclined to enter into these types of transactions with
publicly-held blank check companies like ours.
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 we intend to
acquire. Many of these individuals and entities are well
established and have extensive experience in identifying and
effecting, directly or indirectly, acquisitions of companies
operating in or providing services to various industries. Many
of these competitors possess greater technical, human and other
resources, or more local industry knowledge, than we do and our
financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe there
are numerous target businesses we could potentially acquire with
the net proceeds of this offering, our ability to compete with
respect to the acquisition of certain target businesses that are
sizable will be limited by our available financial resources.
This inherent competitive limitation gives others an advantage
in pursuing the acquisition of certain target businesses. Also,
our obligation to pay cash for the shares of common stock
redeemed 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. If we are unable to complete our initial
business combination, our public stockholders may receive less
than $10.00 per share as part of our redemption of the public
shares, and our warrants will expire worthless.
44
SPECIAL
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
expenses. 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.
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. 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:
|
|
|
|
|
our status as a development stage company;
|
|
|
|
the reduction of the proceeds held in the trust account due to
third party claims;
|
|
|
|
our selection of a prospective target business or asset;
|
|
|
|
our issuance of our capital shares or incurrence of debt to
complete a business combination;
|
|
|
|
our ability to consummate an attractive business combination due
to our limited resources and the significant competition for
business combination opportunities;
|
|
|
|
conflicts of interest of our officers and directors;
|
|
|
|
potential current or future affiliations of our officers and
directors with competing businesses;
|
|
|
|
our ability to obtain additional financing if necessary;
|
|
|
|
our sponsors ability to control or influence the outcome
of matters requiring stockholder approval due to their
substantial interest in us;
|
|
|
|
the adverse effect the outstanding warrants may have on the
market price of our common stock;
|
|
|
|
the adverse effect on the market price our common stock due to
the existence of registration rights with respect to the
securities owned by our sponsors;
|
|
|
|
the lack of a market for our securities;
|
|
|
|
our dependence on our key personnel;
|
|
|
|
business and market outlook; and
|
|
|
|
costs of complying with applicable laws.
|
Additional risks and uncertainties include, but are not limited
to, those factors described under the heading Risk
Factors beginning on page 22. We undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise, except as may be required under applicable securities
laws.
45
USE OF
PROCEEDS
We are offering 5,000,000 units at an offering price of
$10.00 per unit. We estimate that the proceeds of this offering
and the proceeds from the sale of the sponsor warrants will be
used as set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-Allotment
|
|
|
Without Over-
|
|
Option Exercised
|
|
|
Allotment Option
|
|
in Full
|
|
Gross proceeds
|
|
|
|
|
|
|
|
|
Proceeds from units offered to the
public(1)
|
|
$
|
50,000,000
|
|
|
$
|
57,500,000
|
|
Proceeds from sponsor warrants offered in the private placement
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
Total gross proceeds
|
|
$
|
52,500,000
|
|
|
$
|
60,000,000
|
|
|
|
|
|
|
|
|
|
|
Estimated offering
expenses(2)
|
|
|
|
|
|
|
|
|
Underwriting
commissions(3)
|
|
$
|
1,500,000
|
|
|
$
|
1,725,000
|
|
Contingent
Fees(4)
|
|
|
1,981,250
|
|
|
|
2,275,625
|
|
Legal fees and
expenses(5)
|
|
|
150,000
|
|
|
|
150,000
|
|
Printing and engraving expenses
|
|
|
60,000
|
|
|
|
60,000
|
|
Accounting fees and expenses
|
|
|
55,000
|
|
|
|
55,000
|
|
SEC filing fee
|
|
|
4,100
|
|
|
|
4,100
|
|
FINRA filing fee
|
|
|
6,250
|
|
|
|
6,250
|
|
Blue Sky filing fees
|
|
|
35,000
|
|
|
|
35,000
|
|
Miscellaneous expenses
|
|
|
189,650
|
|
|
|
189,650
|
|
|
|
|
|
|
|
|
|
|
Total offering expenses
|
|
$
|
3,981,250
|
|
|
$
|
4,500,625
|
|
Net proceeds
|
|
$
|
48,518,750
|
|
|
$
|
55,499,375
|
|
Net offering proceeds not held in trust
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
Total proceeds held in trust (including Contingent Fees)
|
|
$
|
49,250,000
|
|
|
$
|
56,525,000
|
|
|
|
|
|
|
|
|
|
|
Percentage of public offering proceeds held in trust
|
|
|
98.50
|
%
|
|
|
98.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Percentage
|
|
|
Use of net proceeds not held in
trust(6)
|
|
|
|
|
|
|
|
|
Due diligence (excluding accounting and legal due diligence) of
prospective target(s)
|
|
$
|
500,000
|
|
|
|
40.0
|
%
|
Legal and accounting expenses attendant to the due diligence
investigations, structuring and negotiations of an initial
business combination
|
|
|
350,000
|
|
|
|
28.0
|
%
|
Reserve for liquidation expenses
|
|
|
30,000
|
|
|
|
2.4
|
%
|
Other miscellaneous expenses, D&O insurance, audit fees and
reserves
|
|
|
370,000
|
|
|
|
29.6
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,250,000
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes amounts payable to public stockholders holding up to
4,400,000 of the shares sold in this offering (or
5,060,000 shares if the underwriters over-allotment
option is exercised in full) who properly redeem their shares in
connection with our successful completion of our initial
business combination. Assuming a per share redemption price of
$9.85 per share (or approximately $9.83 per share stock if the
underwriters over-allotment option is exercised in full),
$43,340,000 of the proceeds of this offering (or approximately
$49,742,000 if underwriters over-allotment option is
exercised in full) would be payable to such stockholders. |
|
|
(2) |
|
A portion of the offering expenses have been pre-funded with the
proceeds of an aggregate of $75,000 in loans and advances, as of
July 30, 2010, from two of our sponsors. These loans and
advances will be repaid upon the consummation of this offering
out of the portion of the offering proceeds that has been
allocated for the payment of offering expenses. |
46
|
|
|
(3) |
|
No discounts or commissions will be paid with respect to the
purchase of the sponsor warrants. For purposes of presentation,
the underwriting discount is reflected as the amount payable to
the underwriters upon consummation of this offering. |
|
(4) |
|
This amount assumes with respect to (B) below, that none of
our public stockholders redeem their shares of common stock such
that the contingent fees that will become payable from the
amounts held in the trust account solely in the event we
consummate our initial business combination include (A) a
contingent fee payable to Morgan Joseph LLC equal to 1.5%
of the gross proceeds from the sale of the units to the public
and (B) a contingent fee equal to 2.5% of the aggregate
amount of the funds released from the trust account to us and/or
to our target upon completion of our initial business
combination payable to Morgan Joseph LLC and such other firms,
if any, who are instrumental in advising us in connection with
the consummation of our business combination. In the event that
88% of our public stockholders redeem their shares, we estimate
the 1.5% contingent fee equal to $750,000 and the 2.5%
contingent fee to equal $147,750. |
|
(5) |
|
We have agreed to pay our counsel an additional $100,000, only
upon completion of our initial business combination. |
|
(6) |
|
These expenses are estimates only. Our actual expenditures for
some or all of these items may differ from the estimates set
forth herein. For example, we may incur greater legal and
accounting expenses than our current estimates in connection
with negotiating and structuring a business combination based
upon the level of complexity of such business combination. In
the event we identify an acquisition target in a specific
industry subject to specific regulations, we may incur
additional expenses associated with legal due diligence and the
engagement of special legal counsel. In addition, we may engage
a number of consultants to assist with legal and financial due
diligence. We do not anticipate any change in our intended use
of proceeds, other than fluctuations among the current
categories of allocated expenses, which fluctuations, to the
extent they exceed current estimates for any specific category
of expenses, would not be available for our expenses. |
We may not use all of the proceeds in the trust account in
connection with an initial business combination, either because
the consideration for the business combination is less than the
proceeds in the trust account or because we finance a portion of
the consideration with our capital stock or the issuance of our
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 to effect other acquisitions, or
for expenses, as determined by our board of directors at that
time. We intend to use the $1,250,000 not held in the trust
account for expenses in connection with identifying and
conducting due diligence investigations of potential business
combination candidates, including legal and accounting fees and
other expenses (which may include consulting fees); legal,
accounting and audit fees and expenses in structuring and
negotiating a business combination; possible down payments for
potential business combinations; reverse
break-up
fees which may be payable to a target if the transaction is not
consummated; payments for a
lock-up or
no-shop provision (a provision designed to keep
target businesses from shopping around for
transactions with other companies on terms more favorable to
such target businesses); fees for directors and officers
insurance; legal and audit fees in connection with our ongoing
reporting obligations; and other miscellaneous expenses. While
we do not have any current intention to use these funds as a
down payment or to fund a no-shop provision with
respect to a particular proposed business combination, if we
were to enter into such a an agreement where we paid for the
right to receive exclusivity from a target business, the amount
that would be used as a down payment or to fund a
no-shop provision would be determined based on the
terms of the specific business combination and the amount of our
available funds at the time. If we pay such amounts (whether as
a result of our breach or otherwise), or if our estimate of the
costs of undertaking in-depth due diligence and negotiating our
business combination is less than the actual amount of such
costs, it could result in our not having sufficient funds to
continue searching for, or conducting due diligence with respect
to, potential target businesses.
Commencing on the closing of this offering, we have agreed to
pay LLM a total of $7,500 per month for office space,
administrative services and secretarial support. This
arrangement is being agreed to by LLM for our benefit and is not
intended to provide LLM compensation in lieu of other
remuneration. We believe that
47
such fees are at least as favorable as we could have obtained
from an unaffiliated person. Upon completion of our initial
business combination or our liquidation, we will cease paying
these monthly fees.
Other than a payment of $7,500 per month payable to LLM to
compensate it for our use of its office space, general
administrative services and secretarial support, no compensation
of any kind (including finders, consulting or other similar fees
or the issuance of any of our securities) will be paid to any of
our sponsors, officers, directors or any of our or their
affiliates, prior to, or for any services that they render in
order to effectuate, or in connection with the consummation of,
an initial business combination. However, such persons will
receive reimbursement, subject to board approval, for any
out-of-pocket
expenses incurred by them in connection with activities on our
behalf, such as identifying potential target businesses,
performing business due diligence on suitable target businesses
and business combinations, as well as traveling to and from the
offices, plants or similar locations of prospective target
businesses to examine their operations. Reimbursement for such
expenses will be paid by us out of the funds not held in the
trust account and currently allocated in the above table to
Legal and accounting expenses attendant to the due
diligence investigations, structuring and negotiations of an
initial business combination, Due diligence
(excluding accounting and legal due diligence) of prospective
target(s) and Other miscellaneous expenses, D&O
insurance, audit fees and reserves. 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 after a business combination.
As of the date of this prospectus, LLM Structured Equity
Fund L.P. and John L. Shermyen have loaned and advanced to
us an aggregate of $75,000 to be used for a portion of the
expenses of this offering. These advances are non-interest
bearing, unsecured and are due at the earlier of June 30,
2011 or upon the closing of this offering. The loan will be
repaid out of the portion of the of offering proceeds that has
been allocated to the payment of offering expenses.
In addition, in order to finance transaction costs in connection
with an intended initial business combination, our sponsors or
an affiliate of one or more of our sponsors or certain of our
officers and directors may, but are not obligated to, loan us
funds as may be required. If we consummate our initial business
combination, we would repay such loaned amounts. In the event
that the initial business combination does not close, we may use
a portion of the working capital held outside the trust account
to repay such loaned amounts but no proceeds from our trust
account would be used to repay such loaned amounts. Such loans
may be convertible into warrants of the post business
combination entity at a price of $0.50 per warrant at the option
of the lender. The warrants would be identical to the sponsor
warrants. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements exist
with respect to such loans.
If we hold a stockholder vote to approve our initial business
combination and we do not conduct redemptions pursuant to the
tender offer rules in connection with our business combination,
we may enter into privately negotiated transactions to purchase
public shares from stockholders upon consummation of the initial
business combination with proceeds from our trust account. Our
sponsor, directors, officers, advisors or their affiliates may
also purchase shares in privately negotiated transactions.
Neither we nor our directors, officers, advisors or their
affiliates will make any such purchases when we or they are in
possession of any material non-public information not disclosed
to the seller. Although we do not currently anticipate paying
any premium purchase price for such public shares, in the event
we do, the payment of a premium may not be in the best interest
of those stockholders not receiving any such additional
consideration. In addition, the payment of a premium may not be
in the best interest of the remaining stockholders, who will
experience a reduction in book value per share compared to the
value received by stockholders that have their shares purchased
by us at a premium.
The proceeds held in the trust account may be invested only in
U.S. government securities within the meaning
of Section 2(a)(16) of the Investment Company Act of 1940
with a maturity of 180 days or less, or in money market
funds meeting certain conditions under
Rule 2a-7
promulgated under the Investment Company Act of 1940. By
restricting the investment of the proceeds to these instruments,
we intend to avoid being deemed an investment company within the
meaning of the Investment Company Act of 1940. The funds
48
held in the trust account will be held in the name of a
wholly-owned subsidiary of the company that is qualified as a
Massachusetts security corporation.
A public stockholder will be entitled to receive a pro rata
share of the trust account (including interest, but net of
franchise and income taxes) only in the event of our
consummation of a business combination, if such public
stockholder properly exercises its redemption rights in
accordance with the conditions set forth in this prospectus, or
if we redeem 100% of our public shares if we do not consummate
our initial business combination within 18 months from the
closing of this offering, subject to the limitations described
herein. In no other circumstances will a public stockholder have
any right or interest of any kind to or in the trust account.
Our sponsors have agreed to waive their redemption rights with
respect to their initial shares and any public shares they may
own in connection with the completion of our initial business
combination, but will be entitled to redeem any public shares
they may own in the event we do not consummate our initial
business combination.
49
DIVIDEND
POLICY
We have not paid any cash dividends on our common stock to date
and do not intend to pay cash dividends prior to the completion
of a business combination. The payment of cash dividends in the
future will be dependent upon our revenues and earnings, if any,
capital requirements and general financial condition subsequent
to completion of a business combination. The payment of any
dividends subsequent to a business combination will be within
the discretion of our board of directors at such time. It is the
present intention of our board of directors to retain all
earnings, if any, for use in our business operations and,
accordingly, our board of directors does not anticipate
declaring any cash dividends in the foreseeable future. In
addition, our board of directors is not currently contemplating
and does not anticipate declaring any stock dividends in the
foreseeable future, except if we increase the size of the
offering pursuant to Rule 462(b) under the Securities Act,
in which case we will effect a stock dividend immediately prior
to the consummation of the offering in such amount as to
maintain our sponsors ownership percentage of the issued
and outstanding shares of our common stock upon the consummation
of this offering (which shares shall be held in escrow and
subject to partial forfeiture as described herein). Further, if
we incur any indebtedness, our ability to declare dividends may
be limited by restrictive covenants we may agree to in
connection therewith.
50
DILUTION
The difference between the public offering price per share of
common stock, assuming no value is attributed to the warrants
included in the units we are offering pursuant to this
prospectus, 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 redeemed for cash), by the
number of outstanding shares of our common stock.
At July 30, 2010, our net tangible book value was ($43,000)
or approximately ($0.03) per share of common stock. After giving
effect to the sale of 5,000,000 shares of common stock
included in the units we are offering by this prospectus, the
sale of the sponsor warrants, the deduction of underwriting
discounts and commissions and estimated expenses of this
offering and the deduction of contingent fees, our pro forma net
tangible book value at July 30, 2010 would have been
$6,277,250 or $3.39 per share, representing an immediate
increase in net tangible book value (as decreased by the value
of the approximately 4,400,000 shares of common stock that
may be redeemed for cash, assuming no exercise of the
underwriters over-allotment option) of $3.42 per share to
our sponsors and an immediate dilution of $6.61 per share or
66.1% to new investors not exercising their redemption rights.
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:
|
|
|
|
|
|
|
|
|
Public offering price
|
|
|
|
|
|
$
|
10.00
|
|
Net tangible book value before this offering
|
|
$
|
(0.03
|
)
|
|
|
|
|
Increase attributable to public stockholders
|
|
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value after this offering and the
sale of the sponsor warrants
|
|
|
|
|
|
|
3.39
|
|
|
|
|
|
|
|
|
|
|
Dilution to new investors
|
|
|
|
|
|
$
|
6.61
|
|
|
|
|
|
|
|
|
|
|
For purposes of presentation, we have reduced our pro forma net
tangible book value after this offering (assuming no exercise of
the underwriters over-allotment option) by $43,340,000
because holders of 88% of our public shares may redeem their
shares for a pro rata share of the aggregate amount then on
deposit in the trust account at a per share redemption price
equal to the amount in the trust account as set forth in our
tender offer or proxy materials (initially anticipated to be the
aggregate amount held in trust two days prior to the
commencement of our tender offer or stockholders meeting net of
franchise and income taxes payable, divided by the number of
shares of common stock sold in this offering).
The following table sets forth information with respect to our
sponsors and the public stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Shares(1)
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Per
Share(1)
|
|
|
Sponsors
|
|
|
1,250,000
|
|
|
|
20.00
|
%
|
|
$
|
25,000
|
|
|
|
0.05
|
%
|
|
$
|
0.02
|
|
Public Stockholders
|
|
|
5,000,000
|
|
|
|
80.00
|
%
|
|
|
50,000,000
|
|
|
|
99.95
|
%
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,250,000
|
|
|
|
100.00
|
%
|
|
$
|
50,025,000
|
|
|
|
100.00
|
%
|
|
$
|
8.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes no exercise of the underwriters over-allotment
option and that 187,500 initial shares of common stock have been
forfeited by our sponsors as a result thereof. |
51
The pro forma net tangible book value after the offering is
calculated as follows:
|
|
|
|
|
Numerator:
|
|
|
|
|
Net tangible book value before this offering
|
|
$
|
(43,000
|
)
|
Net proceeds from this offering and sale of sponsor warrants
|
|
|
50,500,000
|
|
Offering costs incurred in advance and excluded from net
tangible book value before this offering
|
|
|
58,000
|
|
Less: Contingent
fees(1)
|
|
|
(897,750
|
)
|
Less: Proceeds held in the trust account which may be redeemed
for cash ($9.85 × 4,400,000 shares)
|
|
|
(43,340,000
|
)
|
|
|
|
|
|
|
|
$
|
6,277,250
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Shares of common stock outstanding prior to this
offering(2)
|
|
|
1,250,000
|
|
Shares of common stock included in the units offered
|
|
|
5,000,000
|
|
Less: Shares of common stock subject to redemption (4,400,000
× 100%)
|
|
|
(4,400,000
|
)
|
|
|
|
|
|
|
|
|
1,850,000
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes that 88% of our public stockholders redeem their shares.
Based on these assumptions we estimate a 1.5% contingent fee
equal to $750,000 and a 2.5% contingent fee equal to $147,750. |
|
|
(2) |
|
Assumes no exercise of the underwriters over-allotment
option and that 187,500 initial shares of common stock have been
forfeited by our sponsors as a result thereof. |
52
CAPITALIZATION
The following table sets forth our capitalization as of
July 30, 2010 and our capitalization as adjusted to give
effect to this offering and the sale of the sponsor warrants and
the application of the estimated net proceeds therefrom as
described in Use of Proceeds (excluding the expected
interest income on the proceeds held in trust):
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
Actual
|
|
Adjusted(1)
|
|
Note payable to
affiliates(2)
|
|
$
|
75,000
|
|
|
$
|
|
|
Contingent
fees(3)
|
|
|
|
|
|
|
897,750
|
|
Common Stock, 187,500 shares subject to forfeiture, actual;
4,400,000 shares subject to possible redemption rights at
$9.85 per share, as adjusted
|
|
|
|
|
|
|
43,340,000
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.0001 par value, 1,000,000 shares
authorized; 0 issued and outstanding, actual and as adjusted
|
|
|
|
|
|
|
|
|
Common Stock, $0.0001 par value, 100,000,000 shares
authorized, 1,250,000 shares issued and outstanding
(assuming no exercise of the underwriters over-allotment
option), actual; 100,000,000 shares authorized,
6,250,000 shares issued and outstanding (assuming no
exercise of the underwriters over-allotment option),
including 4,400,000 shares subject to possible redemption
rights, as
adjusted(4)
|
|
|
125
|
|
|
|
625
|
|
Additional paid-in capital
|
|
|
24,875
|
|
|
|
6,286,625
|
|
Deficit accumulated during the development stage
|
|
|
(10,000
|
)
|
|
|
(10,000
|
)
|
Total stockholders equity
|
|
$
|
15,000
|
|
|
$
|
6,277,250
|
|
Total capitalization
|
|
$
|
90,000
|
|
|
$
|
50,515,000
|
|
|
|
|
(1) |
|
Includes the $2,500,000 we will receive from the sale of the
sponsor warrants. |
|
|
(2) |
|
Amounts loaned pursuant to the promissory notes issued to two of
our sponsors are due on the earlier of June 30, 2011 and
the closing of this offering. |
|
|
(3) |
|
This amount assumes that 88% of our public stockholders redeem
their shares in connection with our initial business
combination. Based on these assumptions we estimate a 1.5%
contingent fee equal to $750,000 and a 2.5% contingent fee equal
to $147,750 will become payable from the amounts held in the
trust account. |
|
|
(4) |
|
If we consummate a business combination, the redemption rights
afforded to our stockholders may result in the conversion into
cash of no more than 88% of the aggregate number of shares sold
in this offering at a per-share redemption price equal to the
amount in the trust account, less franchise and income taxes
payable, as of two business days prior to the commencement of
our tender offer or stockholders meeting divided by the number
of shares sold in this offering. |
53
MANAGEMENTS
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
L&L Acquisition Corp. is a newly-organized blank check
company formed for the purpose of acquiring, through a merger,
capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar
business combination, which we refer to throughout this
prospectus as our initial business combination, one or more
operating businesses that we have not yet identified. We intend
to focus on businesses in the healthcare industry or
healthcare-related assets, but we may pursue opportunities in
other business sectors. We are not limited to a particular
geographic region or minimum transaction value for purposes of
consummating an initial business combination, except that we
will not effect a business combination with another blank check
company or a similar type of company. We do not have any
specific merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, exchangeable share transaction
or other similar business combination under consideration and we
have not, nor has anyone on our behalf, contacted any
prospective target business or had any discussions, formal or
otherwise, with respect to such a transaction. Our sponsors,
officers and directors have agreed that we will only have
18 months from the closing of this offering to consummate
our initial business combination.
We intend to use cash from the proceeds of this offering, our
capital stock, incurred debt, or a combination of cash, capital
stock and debt, in effecting our initial business combination.
The issuance of additional shares of our capital stock:
|
|
|
|
|
may significantly reduce the equity interest of investors in
this offering;
|
|
|
|
may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
to the holders of our common stock;
|
|
|
|
may 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 may 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 if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
|
|
|
|
limitations on our flexibility in planning for and reacting to
changes in our business and in the industry in which we operate;
|
|
|
|
increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation; and
|
54
|
|
|
|
|
limitations on our ability to borrow additional amounts for
expenses, capital expenditures, acquisitions, debt service
requirements, execution of our strategy and other purposes and
other disadvantages compared to our competitors who have less
debt.
|
Results
of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any
revenues to date. Our entire activity since inception has been
to prepare for this offering. Following this offering, we will
not generate any operating revenues until after completion of
our initial business combination, at the earliest. We will
generate non-operating income in the form of interest income on
cash and cash equivalents after this offering. After this
offering, we expect to incur increased expenses as a result of
being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due
diligence and other expenses in connection with negotiating and
consummating a business combination. We expect our expenses to
increase substantially after the closing of this offering and
the private placement of the sponsor warrants.
Related
Party Transactions
In July 2010, our sponsors purchased the initial shares for an
aggregate purchase price of $25,000, or approximately $0.0174
per share, consisting of (i) 638,889 shares (up to
83,333 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) which will be
held in escrow until the first anniversary of our initial
business combination and (ii) 798,611 shares (up to
104,167 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) which will be
held in escrow and forfeited on the fifth anniversary of our
initial business combination unless, prior to such time, either
(x) the last sales price of our stock equals or exceeds
$18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period or (y) a
transaction is consummated following our initial business
combination in which all stockholders have the right to exchange
their common stock for cash consideration which equals or
exceeds $18.00 per share. Our sponsors have contractually agreed
with us that they will have no ability to vote any of the
798,611 shares being held in escrow until such time, if
ever, that such shares are released to them.
As of the date of this prospectus, LLM Structured Equity
Fund L.P. and John L. Shermyen have advanced on our behalf
a total of $75,000 for payment of offering expenses. This
advance is non-interest bearing, unsecured and is due at the
earlier of June 30, 2011 or the closing of this offering.
This loan will be repaid upon the closing of this offering out
of the portion of the of offering proceeds that has been
allocated for the payment of offering expenses. We are also
obligated, beginning on the date of this prospectus, to pay
$7,500 per month to LLM Capital Partners LLC to compensate it
for our use of its office space, general administrative services
and secretarial support.
Our sponsors have agreed to purchase an aggregate of 5,000,000
sponsor warrants from us at a price of $0.50 per warrant
($2,500,000 in the aggregate) in a private placement pursuant to
Section 4(2) or Regulation D of the Securities Act of
1933, as amended, or the Securities Act. Each sponsor warrant
entitles the holder to purchase one share of our common stock at
$11.50 per share. The $2,500,000 proceeds from the private
placement of the sponsor warrants will be added to the proceeds
of this offering and placed in a trust account at JP Morgan
Chase, N.A. maintained by Continental Stock Transfer &
Trust Company, acting as trustee. If we do not complete an
initial business combination within 18 months from the
closing of this offering, the $2,500,000 in proceeds from the
private placement of the sponsor warrants will be used to fund
our redemption of the public shares, and the sponsor warrants
will expire worthless. The sponsor warrants will be identical to
the warrants sold in this offering except that they
(i) they will not be redeemable by us, (ii) they
(including the common stock issuable upon exercise of these
warrants) may not, subject to certain limited exceptions, be
transferred, assigned or sold by our sponsors until 30 days
after the completion of our initial business combination, and
(iii) they may be exercised by the holders on a cashless
basis In addition, the sponsor warrants will be held in escrow
until 30 days following the completion of our initial
business combination.
55
In order to finance transaction costs in connection with an
intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be
required. If we consummate our initial business combination, we
would repay such loaned amounts. In the event that we do not
consummate our initial business combination, we may use a
portion of the working capital held outside the trust account to
repay such loaned amounts but no proceeds from our trust account
would be used for such repayment. Such loans may be convertible
into warrants of the post business combination entity at a price
of $0.50 per warrant at the option of the lender. The warrants
would be identical to the sponsor warrants. The terms of such
loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such
loans.
John L. Shermyen, our chairman, chief executive officer and
co-sponsor, and each of LLM Structured Equity Fund L.P. and
LLM Investors L.P. have agreed that they will be liable to us if
and to the extent any claims by a vendor for services rendered
or products sold to us, or a prospective target business with
which we have discussed entering into a transaction agreement
reduce the amounts in the trust account to below $9.85 per share
(or approximately $9.83 per share if the underwriters
over-allotment option is exercised in full), except as to any
claims by a third party who executed a waiver of any and all
rights to seek access to the trust account and except as to any
claims under our indemnity of the underwriters of this offering
against certain liabilities, including liabilities under the
Securities Act. In the event that an executed waiver is deemed
to be unenforceable against a third party, Mr. Shermyen,
LLM Structured Equity Fund L.P. and LLM Investors L.P. will
not be responsible to the extent of any liability for such third
party claims. Additionally, in the event either LLM Structured
Equity Fund L.P. or LLM Investors L.P. undertakes a
liquidating distribution while their indemnification obligations
are outstanding, they have agreed to use reasonable efforts to
set aside from such distribution, adequate reserves to cover the
reasonably anticipated liabilities which may be incurred by
them. Although we have a fiduciary obligation to pursue the
sponsors to enforce their indemnification obligations, and
intend to pursue such actions as and when we deem appropriate,
there can be no assurance they will be able to satisfy those
obligations, if required to do so.
Our sponsors and their permitted transferees will be entitled to
registration rights pursuant to a registration rights agreement
to be signed simultaneously with the completion of this
offering. Such holders will be entitled to demand registration
rights and certain piggy-back registration rights
with respect to the initial shares and the sponsor warrants and
the common stock underlying the sponsor warrants, commencing, in
the case of the initial shares, upon their release from escrow
and commencing, in the case of the sponsor warrants and the
respective common stock underlying the sponsor warrants,
30 days after the completion of our initial business
combination. We will bear the costs and expenses of filing any
such registration statements.
In addition, in the event we are forced to liquidate and do not
have sufficient funds from our remaining assets outside of the
trust account, our sponsors have agreed to advance us the funds
necessary to pay any and all costs involved or associated with
the process of liquidation (currently anticipated to be no more
than approximately $30,000) and have agreed not to seek
repayment for such expenses.
Liquidity
and Capital Resources
Our liquidity needs have been satisfied to date by our sponsors
through their purchase in July 2010 of the initial shares, for
an aggregate purchase price of $25,000 and loans from two of our
sponsors in the aggregate amount of $75,000.
We estimate that the net proceeds from (i) the sale of the
units in this offering, after deducting offering expenses of
approximately $2,000,000 (or approximately $2,225,000 if the
underwriters over-allotment option is exercised in full),
but including contingent fees of approximately $1,981,250 (or
approximately $2,275,625 if the underwriters
over-allotment option is exercised in full), and (ii) the
sale of the sponsor warrants for a purchase price of $2,500,000,
will be approximately $50,500,000 (or approximately $57,775,000
if the underwriters over-allotment option is exercised in
full). Approximately $49,250,000 (or approximately $56,525,000
if the underwriters over-allotment option is exercised in
full), will be held in the trust account, which includes
approximately $1,981,250 (or approximately $2,275,625 if the
underwriters over-allotment
56
option is exercised in full) of contingent fees. The remaining
$1,250,000 will not be held in the trust account. In the event
that our offering expenses exceed our estimate of approximately
$3,981,250 (or $4,500,625 if the underwriters
over-allotment option is exercised in full), we may fund such
excess with funds from the $1,250,000 not to be held in the
trust account. In such case, the amount of funds we intend to be
held outside the trust account would decrease by a corresponding
amount. Conversely, in the event that the offering expenses are
less than our estimate of approximately $3,981,250 (or
$4,500,625 if the underwriters over-allotment option is
exercised in full), the amount of funds we intend to be held
outside the trust account would increase by a corresponding
amount.
We may use substantially all of the funds held in the trust
account (net of franchise and income taxes payable) to
consummate our initial business combination. To the extent that
our capital stock or debt is used, in whole or in part, as
consideration to consummate our initial business combination, or
the purchase price together with funds used for redemption is
less than the amount in the trust account, the remaining
proceeds held in the trust account will be used as working
capital to finance the operations of the target business or
businesses, make other acquisitions or pursue our growth
strategies.
We believe that, upon the date of this prospectus, the
$1,250,000 from the proceeds of this offering not held in the
trust account and amounts that may be loaned to us by our
sponsors or an affiliate of our sponsors or certain of our
officers or directors, will be sufficient to allow us to operate
for the next 18 months. We intend to use the $1,250,000 not
held in trust for expenses in connection with identifying and
conducting due diligence investigations of potential business
combination candidates, including legal and accounting fees and
other expenses (which may include consulting fees); legal,
accounting and audit fees and expenses in structuring and
negotiating a business combination; possible down payments for
potential business combinations; reverse
break-up
fees which may be payable to a target if the transaction is not
consummated; payments for a
lock-up or
no-shop provision; fees for directors and officers
insurance; legal and audit fees in connection with our ongoing
reporting obligations; and other miscellaneous expenses. In
order to meet our working capital needs following the
consummation of this offering, certain of our officers and
directors may, but are not obligated to, loan us funds, from
time to time, or at any time, in whatever amount such officer or
director deems reasonable in his or her sole discretion, which
may be convertible into warrants of the post business
combination entity at a price of $0.50 per warrant at the option
of the lender. The warrants would be identical to the sponsor
warrants. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements
exist. However such loans will not have any recourse against the
trust account nor bear any interest prior to the consummation of
the business combination and will have other terms that are no
more favorable than could be obtained by a third party.
We estimate that prior to the completion of our initial business
combination or our liquidation, we will incur approximately:
|
|
|
|
|
$500,000 of expenses for the due diligence (excluding accounting
and legal due diligence) of prospective target businesses by our
officers, directors and sponsor;
|
|
|
|
$350,000 of legal and accounting expenses attendant to the due
diligence investigations, structuring and negotiating of an
initial business combination;
|
|
|
|
$30,000 reserve for liquidation expenses; and
|
|
|
|
$370,000 that will be used for other miscellaneous expenses and
reserves, including for director and officer liability insurance
premium, audit fees, as well as stock transfer agent expenses.
|
These amounts are estimates and may differ materially from our
actual expenses. In addition, we could use a portion of the
funds not being placed in the trust account to pay commitment
fees for financing, fees to consultants to assist us with our
search for a target business or as a down payment or to fund a
no-shop provision (a provision designed to keep
target businesses from shopping around for
transactions with other companies on terms more favorable to
such target businesses) with respect to a particular proposed
business combination, although we do not have any current
intention to do so. If we entered into an agreement where we
paid for the right to receive exclusivity from a target
business, the amount that would be used as a down payment or to
fund a no-shop provision would be determined based
on the terms of the specific business
57
combination and the amount of our available funds at the time.
Our forfeiture of such funds (whether as a result of our breach
or otherwise) could result in our not having sufficient funds to
continue searching for, or conducting due diligence with respect
to, prospective target businesses.
We do not believe we will need to raise additional funds
following the date of this prospectus until the completion of
our initial business combination 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. Subject to
compliance with applicable securities laws, we would only
consummate such financing simultaneously with the completion of
our initial business combination.
We have evaluated the appropriate accounting treatment for the
sponsor warrants and the warrants included in the public units.
As we are not required to net-cash settle such warrants under
any circumstances, including when we are unable to maintain
sufficient registered shares to settle such warrants, the terms
of the warrants satisfy the applicable requirements of
paragraph 11 of SFAS 133, which provides guidance on
identifying those contracts that should not be accounted for as
derivative instruments, and
paragraphs 12-33
of
EITF 00-19.
Accordingly, we intend to classify such instruments within
permanent equity as additional paid-in capital.
We believe the purchase price of the sponsor warrants is greater
than the fair value of such warrants. Therefore, we will not be
required to incur a compensation expense in connection with the
purchase by our sponsors of the sponsor warrants.
Controls
and Procedures
We are not currently required to maintain an effective system of
internal controls as defined by Section 404 of the
Sarbanes-Oxley Act. Accordingly, as of the date of this
prospectus, we have not completed an assessment, nor have our
auditors tested our systems, of internal controls. We will be
required to comply with the applicable internal control
requirements of the Sarbanes-Oxley Act for the fiscal year
ending December 31, 2011. Additionally, we expect to assess
the internal controls of our target business or businesses prior
to the completion of our initial business combination and, if
necessary, to implement and test additional controls as we may
determine are necessary in order to state that we maintain an
effective system of internal controls. A target business may not
be in compliance with the provisions of the Sarbanes-Oxley Act
regarding the adequacy of internal controls. Many small and
mid-sized target businesses we may consider for a business
combination may have internal controls that are deficient in
areas such as:
|
|
|
|
|
staffing for financial, accounting and external reporting areas,
including segregation of duties;
|
|
|
|
reconciliation of accounts;
|
|
|
|
proper recording of expenses and liabilities in the period to
which they relate;
|
|
|
|
evidence of internal review and approval of accounting
transactions;
|
|
|
|
documentation of processes, assumptions and conclusions
underlying significant estimates; and
|
|
|
|
documentation of accounting policies and procedures.
|
Because it will take time, management involvement and perhaps
outside resources to determine what internal control
improvements are necessary for us to meet regulatory
requirements and market expectations for our operation of a
target business, we may incur significant expense in meeting our
public reporting responsibilities, particularly in the areas of
designing, enhancing or remediating internal and disclosure
controls. Doing so effectively may also take longer than we
expect, thus increasing our exposure to financial fraud or
erroneous financing reporting.
If required by Section 404, we will retain our independent
registered public accounting firm to audit and render an opinion
on our managements assessment of our internal controls.
The independent registered public accounting firm may identify
additional issues concerning our internal controls or a target
businesss internal controls while performing their audit
of internal control over financial reporting. The results of
managements assessment
and/or the
audit of managements assessment by our independent
registered public accounting firm
58
may result in the identification of additional deficiencies in
internal controls and we may incur additional expense in
designing, enhancing and remediating internal and disclosure
controls.
Quantitative
And Qualitative Disclosures About Market Risk
The net proceeds of this offering, including amounts in the
trust account, will be invested in U.S. government
securities with a maturity of 180 days or less or in money
market funds meeting certain conditions under
Rule 2a-7
under the Investment Company Act. We have the discretion to
select the investments and initially we intend to invest the
funds in government securities
and/or
qualified money market funds. Due to the short-term nature of
these investments, we believe there will be no associated
material exposure to interest rate risk.
Off-Balance
Sheet Arrangements; Commitments And Contractual Obligations;
Quarterly Results
As of July 30, 2010, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K
and did not have any commitments or contractual obligations. No
unaudited quarterly operating data is included in this
prospectus as we have conducted no operations to date.
Recently
Issued Accounting Standards
In January 2010, the FASB issued Fair Value
Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements, which
provides guidance on how investment assets and liabilities are
to be valued and disclosed. Specifically, the amendment requires
reporting entities to disclose (i) the input and valuation
techniques used to measure fair value for both recurring and
nonrecurring fair value measurements, for Level 2 or
Level 3 positions, (ii) transfers between all levels
(including Level 1 and Level 2) will be required to be
disclosed on a gross basis (i.e. transfers out must be disclosed
separately from transfers in) as well as the reason(s) for the
transfers and (iii) purchases, sales, issuances and
settlements must be shown on a gross basis in the Level 3
rollforward rather than as one net number. The effective date of
the amendment is for interim and annual periods beginning after
December 15, 2009. However, the requirement to provide the
Level 3 activity for purchases, sales, issuances and
settlements on a gross basis will be effective for interim and
annual periods beginning after December 15, 2010. The
adoption of the amendment did not have a material impact on the
Companys condensed interim financial statements.
Management does not believe that any other recently issued, but
not yet effective, accounting pronouncements, if currently
adopted, would have a material effect on the Companys
condensed interim financial statements.
59
PROPOSED
BUSINESS
Overview
We are a newly-organized blank check company formed on
July 26, 2010 for the purpose of acquiring, through a
merger, capital stock exchange, asset acquisition, stock
purchase, reorganization, exchangeable share transaction or
other similar business combination, which we refer to throughout
this prospectus as our initial business combination, one or more
operating businesses that we have not yet identified. We intend
to focus on businesses in the healthcare industry or
healthcare-related assets, but we may pursue opportunities in
other business sectors. We are not limited to a particular
geographic region or minimum transaction value for purposes of
consummating an initial business combination, except that we
will not effect a business combination with another blank check
company or a similar type of company. We do not have any
specific merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, exchangeable share transaction
or other similar business combination under consideration and we
have not, nor has anyone on our behalf, contacted any
prospective target business or had any discussions, formal or
otherwise, with respect to such a transaction. Our sponsors,
officers and directors have agreed that we will only have
18 months from the closing of this offering to consummate
our initial business combination. Although we may acquire a
non-United
States business, our primary search for acquisition targets will
focus on domestic operating businesses.
We will seek to capitalize on the significant healthcare
industry and private equity investing experience and contacts of
John L. Shermyen, our chairman, chief executive officer and
co-sponsor, and LLM Capital Partners LLC, or LLM. LLM is a
private equity firm focused on investing growth capital in
mid-sized companies. LLM is the manager of LLM Structured Equity
Fund L.P. and LLM Investors L.P., our other two
co-sponsors. Patrick J. Landers, our president and a director,
is a managing director of LLM. Certain LLM professionals have
worked together since 1991 and have significant experience in
the private equity and investment banking businesses. LLM
professionals have invested over $71 million in various
healthcare companies, including investing $12 million in
LogistiCare, Inc. in 1999. We believe that we will benefit from
the extensive deal sourcing contacts as well as the specific
company and industry investment experience of each of the LLM
investment professionals.
In addition, we will seek to benefit from the experience gained
by Mr. Landers and other LLM professionals in connection
with Prospect Acquisition Corp., or Prospect, a special purpose
acquisition company which also was co-sponsored by LLM
Structured Equity Fund L.P. and LLM Investors L.P.
Mr. Landers was president and a director of Prospect.
Prospect completed an initial public offering on
November 14, 2007, raising $250 million of gross
proceeds, and consummated a business combination with
Kennedy-Wilson, Inc. (KWIK.PK), an international real estate
investment and services company, on November 13, 2009.
Prospect was focused on the financial services industry, and its
chairman and chief executive officer previously had been the
chief executive officer of a company in the financial services
industry in which LLM professionals had invested.
Similarly, our chairman and chief executive officer, John L.
Shermyen, was a founder of LogistiCare, Inc., or LogistiCare, a
company in which LLM professionals successfully invested and
which operates in the healthcare industry in which we intend to
focus. LogistiCare is a provider of non-emergency medical
transportation management solutions. Mr. Shermyen served as
the president and chief executive officer of LogistiCare from
1994 until July 2009, 19 months after LogistiCare was sold
to Providence Service Corp. (NasdaqGS:PRSC). During his tenure
as president and chief executive officer of LogistiCare,
Mr. Shermyen grew revenues organically from inception to
$460 million for the year ended December 31, 2009 and
grew LogistiCares operating presence from one state to
over 36 states. In addition to his leadership role at
LogistiCare, Mr. Shermyen has served on several
professional committees and panels, including the American
Public Transportation Association, the Federal Regulatory Relief
Focus Group and The National Consortium on the Coordination of
Human Services.
We have not conducted, and no person or entity acting on our
behalf has conducted, any research with respect to identifying
the number and characteristics of the potential business
combination candidates within
60
our targeted industry, or any industry, or the likelihood or
probability of success of any proposed business combination.
Accordingly, we cannot assure you that we will be able to locate
a target business or that we will be able to engage in a
business combination with a target business on favorable terms,
or at all.
Healthcare
Industry Overview and Trends
The healthcare industry constitutes one of the largest segments
of the United States economy. In the U.S. alone, total
healthcare expenditures increased from $253.9 billion in
1980 to approximately $2.3 trillion in 2008. Spending on
healthcare in the U.S. is projected to increase to $4.5
trillion by 2019.
CMS reports that healthcare spending rose 4.4% during 2008,
compared to 0.4% growth in GDP. Expressed as a percentage of
GDP, CMS has reported that national healthcare spending
increased from 9.1% in 1980 to 16.2% in 2008 and is projected to
rise to approximately 19% of GDP by 2019. These projections
imply per capita spending of over $13,000 by 2019, from
approximately $7,681 today.
Public sources of funding account for approximately 47% of
national health expenditures, and private sources account for
approximately 53% of expenditures. Medicare and Medicaid are the
two primary sources of public funding for healthcare services.
Medicare provides coverage for the elderly and disabled and
Medicaid provides coverage for the poor and indigent. Together,
these programs funded over $885 billion of healthcare
benefits during 2009.
Our management believes that, as a result of continued growth in
the healthcare industry, there will be acquisition targets
within the healthcare sector. We believe that the growth and
opportunity in the healthcare industry has been driven and will
continue to be driven by several key trends, including:
|
|
|
|
|
Expanding and Aging Population The size
of the elderly population, the segment with the largest per
capita usage of healthcare services, is increasing more rapidly
than the rest of the population. According to the Federal
Interagency Forum on Aging-Related Statistics, citing the
U.S. Census Bureau, in 1970 approximately 10% of the
U.S. population was aged 65 and older; by 2008 this number
had risen to over 13% of the population; and by the year 2030,
the over-65 segment is expected to account for 20% of the
population. The elderly not only generate the highest healthcare
costs compared to any other demographic group, they continue to
demand high-quality products and services in order to maintain
active lifestyles. The growth of the elderly population is
expected to be a major contributor to increasing levels of
expenditures for healthcare products and services.
|
|
|
|
Increased Consumer Awareness In recent
years, the publicity associated with new technological advances
and new medical therapies has increased the number of patients
visiting healthcare professionals to seek treatment for new and
innovative therapies. Simultaneously, consumers have become more
vocal due to rising costs and reduced access to physicians.
Further, the cost burden for the provision of healthcare
continues to shift to the consumer as employers are increasingly
offering health plan alternatives structured with higher
deductibles and more limited benefit coverage. Lastly, the rise
in cosmetic procedures has emerged as one of the fastest growing
healthcare segments. Since many cosmetic procedures require
out-of-pocket
expenditures, this rise may reflect a growing willingness by
consumers to pay for certain procedures out of their
discretionary funds. We believe that more active and aware
consumers will continue to stimulate a wide variety of
healthcare segments.
|
|
|
|
Changes in Healthcare Laws and
Regulations Our management believes
significant business opportunities are created by shifts in
political priorities and perspectives that lead to changes in
laws and regulations. HMOs, Part D drug plans and Medicare
Private Fee For Service Plans are examples of large new industry
sectors created by changing laws and regulations. Similarly,
changes in FDA policies and practices may significantly change
the market dynamics for regulated drugs and devices. In
addition, the Affordable Care Act is expected to increase
healthcare options and enhance the quality of healthcare for
many Americans, which our management believes will help increase
the demand for healthcare services.
|
61
|
|
|
|
|
Internationalization In our managements
business judgment, healthcare companies will continue to
experience international growth opportunities as a result of
growing worldwide demand for healthcare products and services,
heightened awareness of the importance and potential of
international markets, which often offer a less-expensive and
faster regulatory path for their products, and the increasing
availability of a low-cost pool of scientific talent to perform
product development and clinical research. Our management
believes business combinations that seek to capture the cost
advantage of lower cost countries, in healthcare businesses that
include manufacturing or business process outsourcing, may also
be attractive.
|
|
|
|
Technological Advances Advances in technology
have favorably impacted the development of new medical devices
and treatments/therapies. The products are generally more
effective and
easier-to-use.
Some of these breakthroughs have reduced hospital stays, costs
and recovery periods. The continued advancement of technological
breakthroughs should continue to boost services administered by
healthcare providers.
|
|
|
|
Fragmentation Our management believes the
fragmentation of the healthcare industry encourages
entrepreneurial activity and provides opportunities for industry
consolidation. Aggregating smaller companies offers the
potential to bring them economies of scale, distribution
capabilities, corporate efficiency and increased capital
resources. We believe that fragmentation in the healthcare
industry may provide us with acquisition targets and future
consolidation opportunities.
|
Although we may consider a target business in any segment of the
healthcare industry, we intend to concentrate our search for an
acquisition candidate in the following segments:
|
|
|
|
|
healthcare services, including managed care and healthcare
financing;
|
|
|
|
healthcare information technology;
|
|
|
|
healthcare facilities;
|
|
|
|
diagnostics;
|
|
|
|
life sciences; and
|
|
|
|
medical equipment, devices and supplies.
|
We believe the foregoing segments offer us with the most
opportunities to identify suitable target businesses. Each of
these categories has experienced favorable growth and
development in the past, and management believes they will
continue to experience growth and development in the foreseeable
future. In addition, many of the directors and members of the
management team have significant operating or investing
experiences and extensive networks within these industry
segments, and we believe that focusing our acquisition efforts
in these particular segments will allow us to leverage these
experiences and networks and enhance our ability to complete an
acquisition of a target business.
Business
Strategy
We will use the same disciplined approach that our management
team has used in the past when acquiring target businesses. We
have identified the following criteria that we believe are
important and that we intend to use in evaluating business
combination opportunities. While we intend to utilize these
criteria in evaluating business combination opportunities, we
expect that no individual criterion will entirely determine a
decision to pursue a particular opportunity. Further, any
particular business combination opportunity which we ultimately
determine to pursue may not meet one or more of these criteria:
|
|
|
|
|
History of profitability and free cash
flow. We will seek to acquire one or more
businesses or assets that have a history of, or potential for,
strong, stable free cash flow generation (i.e. companies that
typically generate cash in excess of that required to maintain
or expand the business asset base). We will focus on
companies that have predictable and recurring revenue streams
and an emphasis on low working capital and capital expenditure
requirements.
|
62
|
|
|
|
|
Strong management team. We will seek to
acquire one or more businesses or assets that have strong,
experienced management teams or those that provide a platform
for us to assemble an effective and experienced management team.
We will focus on management teams with a proven track record of
driving revenue growth, enhancing profitability and creating
value for their stockholders.
|
|
|
|
Opportunities for add-on acquisitions. We will
seek to acquire one or more businesses or assets that we can
grow both organically and through acquisitions. Our ability to
source proprietary opportunities and execute transactions will
help the business we acquire serve as a platform for further
add-on acquisitions.
|
|
|
|
Spin-offs/divestitures from larger
companies. We will focus on one or more
businesses or assets that are part of larger companies, which
the owners seek to divest or spin-off in order to monetize their
investment.
|
|
|
|
Defensible business niche. We will focus on
one or more businesses or assets that have a leading or niche
market position. We will analyze the strengths and weaknesses of
target businesses relative to their competitors and seek to
acquire those that demonstrate advantages when compared to their
competitors, which may help to protect their market position and
profitability.
|
|
|
|
Diversified customer and supplier base. We
will seek to acquire businesses or assets that have a
diversified customer and supplier base. Companies with a
diversified customer and supplier base are generally better able
to endure economic downturns, industry consolidation, changing
business preferences and other factors that may negatively
impact their customers, suppliers and competitors.
|
These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular initial business
combination may be based, to the extent relevant, on these
general guidelines as well as other considerations, factors and
criteria that our management may deem relevant. In the event
that we decide to enter into a business combination with a
target business that does not meet the above criteria and
guidelines, we will disclose that the target business does not
meet the above criteria in our stockholder communications
related to our initial business combination, which, as discussed
is this prospectus, would be in the form of tender offer
documents or proxy solicitation materials that we would file
with the SEC.
Competitive
strengths
We believe our specific competitive strengths to be the
following:
|
|
|
|
|
Prior Blank Check Company Experience. Two of
our sponsors and our president have already been involved in the
successful initial public offering and the subsequent
consummation of a business combination for a prior blank check
company, Prospect, which on November 14, 2007 conducted a
successful initial public offering. Prospects initial
public offering raised gross proceeds of $250 million at an
offering price of $10.00 per unit. On November 13, 2009,
Prospect consummated a business combination with Kennedy-Wilson,
Inc. (KWIC.PK), an international real estate investment and
services company.
|
|
|
|
Extensive Public, Private Equity and Mergers and Acquisitions
Contacts. Our management team has an extensive
base of contacts in the public and private equity markets and
mergers and acquisitions industry that they have developed
through their collective experience. We believe that the members
of our management team have strong working relationships with
principals as well as intermediaries who constitute our most
likely source of identifying prospective business combinations.
In addition, our management team, through its present and
historical membership on various boards of directors, has
developed a network of business relationships with members on
the board of directors of other businesses, which greatly
extends our access to privately held companies. We believe that
these contacts will be important in generating acquisition
opportunities for us.
|
|
|
|
Management Operating and Investing
Experience. Our executive officers, directors and
members of our advisory board have significant experience in
operating, advising, acquiring, financing and selling private
and public companies in various industries. Furthermore, our
management team has extensive
|
63
|
|
|
|
|
experience working together closely. Our experience with
sourcing, due diligence, structuring, negotiating and closing
acquisition and growth financing transactions spans both the
public and private markets. Our management team has acquisition
and operating experience in a number of businesses in various
industries and particular expertise in healthcare services. We
believe that this breadth of experience provides us with a
competitive advantage in evaluating businesses and acquisition
opportunities over managers who have little or no direct
operating experience.
|
|
|
|
|
|
Status as a Public Company. We believe our
structure as a public company will make us an attractive
business combination partner to prospective target businesses.
As an existing public company, we will offer a target business
an alternative to the traditional initial public offering
through a merger or other business combination. In this
situation, the owners of the target business would exchange
their shares of stock in the target business for shares of our
stock. We believe target businesses will find this path to be
less expensive, and offer greater certainty of becoming a public
company than the typical initial public offering process. In an
initial public offering, there are typically expenses incurred
in marketing, roadshow and public reporting efforts that will
likely not be present to the same extent in connection with a
business combination with us. Once public, we believe the target
business would have greater access to capital and additional
means of creating management incentives that are better aligned
with stockholders interests than it would as a private
company. It can offer further benefits by augmenting a
companys profile among potential new customers and vendors
and aid in attracting talented employees.
|
Effecting
A Business Combination
General
We are not presently engaged in, and we will not engage in, any
operations for an indefinite period of time following this
offering. We intend to effect our business combination using
cash from the proceeds of this offering and the private
placement of the sponsor warrants, our capital stock, debt or a
combination of these as the consideration to be paid in our
initial business combination. Accordingly, prospective investors
will at the time of their investment in us not be provided an
opportunity to evaluate the specific merits or risks of a target
business. We may seek to consummate our initial business
combination with a company or business that may be financially
unstable or in its early stages of development or growth, which
would subject us to the numerous risks inherent in such
companies and businesses.
If our initial business combination is paid for using stock or
debt securities, or not all of the funds released from the trust
account are used for payment of the purchase price in connection
with our business combination or used for redemptions of
purchases of our common stock, we may apply the cash released to
us from the trust account that is not applied to the purchase
price for general corporate purposes, including for maintenance
or expansion of operations of acquired businesses, the payment
of principal or interest due on indebtedness incurred in
consummating our initial business combination, to fund the
purchase of other companies or for working capital.
We have not identified any acquisition target and we have not,
nor has anyone on our behalf, initiated any substantive
discussions with an entity that we will acquire in our initial
business combination. From the period prior to our formation
through the date of this prospectus, there have been no
communications or discussions between any of our officers,
directors or our sponsor and any of their potential contacts or
relationships regarding a potential initial business
combination. Additionally, we have not engaged or retained any
agent or other representative to identify or locate any suitable
acquisition candidate, to conduct any research or take any
measures, directly or indirectly, to locate or contact a target
business.
Because, unlike many other blank check companies, we do not have
the limitation that a target business have a minimum fair market
enterprise value of the net assets held in the trust account at
the time of our signing a definitive agreement in connection
with our initial business combination, we will have considerable
flexibility in identifying and selecting one or more prospective
target businesses. Accordingly, there is no current basis for
investors in this offering to evaluate the possible merits or
risks of the target business with which we may ultimately
complete our initial business combination. Although our
management will assess the
64
risks inherent in a particular target business with which we may
combine, we cannot assure you that this assessment will result
in our identifying all risks that a target business may
encounter. Furthermore, some of those risks may be outside of
our control, meaning that we can do nothing to control or reduce
the chances that those risks will adversely impact a target
business.
We will provide our stockholders with the opportunity to redeem
their public shares for cash equal to a pro rata share of the
aggregate amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, upon the
completion of our initial business combination, subject to the
limitations described herein. The amount in the trust account is
initially anticipated to be approximately $9.85 per share, or
approximately $9.83 per share if the underwriters
over-allotment option is exercised in full. Our sponsors have
agreed to waive their redemption rights with respect to their
initial shares and any public shares they may own in connection
with the completion of our initial business combination.
The initial shares will be excluded from the pro rata
calculation used to determine the per-share redemption price.
Unlike many other blank check companies that hold stockholder
votes and conduct proxy solicitations in conjunction with their
initial business combinations and provide for related
redemptions of public shares for cash upon consummation of such
initial business combinations even when a vote is not required
by law, we intend to consummate our initial business combination
without a stockholder vote and conduct the related redemptions
of our shares of common stock pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act, which regulate
issuer tender offers, and file tender offer documents with the
SEC. The tender offer documents will contain substantially the
same financial and other information about our initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. In the event we conduct redemptions
pursuant to the tender offer rules, our offer to redeem shares
shall remain open for at least 20 business days, in accordance
with
Rule 14e-1(a)
under the Exchange Act. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
business or other legal reasons, we will, like other blank check
companies, offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If we seek stockholder approval, we will
consummate a business combination only if a majority of the
outstanding shares of common stock voted are voted in favor of
the business combination. If we seek shareholder approval, our
sponsors have agreed to vote their initial shares in accordance
with the majority of the votes cast by the public stockholders
and to vote any public shares purchased during or after the
offering in favor of our initial business combination.
We may seek to raise additional funds through a private offering
of debt or equity securities in connection with the completion
of our initial business combination, and we may effect an
initial business combination using the proceeds of such offering
rather than using the amounts held in the trust account. Subject
to compliance with applicable securities laws, we would
consummate such financing only simultaneously with the
consummation of our business combination. In the case of an
initial business combination funded with assets other than the
trust account assets, our tender offer documents or proxy
materials disclosing the business combination would disclose the
terms of the financing and, only if required by law, we would
seek stockholder approval of such financing. In the absence of a
requirement by law, we would not seek separate stockholder
approval of such financing inasmuch as the financing portion of
any initial business combination would be disclosed in our
tender offer documents or proxy materials. There are no
prohibitions on our ability to raise funds privately or through
loans in connection with our initial business combination.
Further, we do not have a maximum debt leverage ratio or a
policy with respect to how much debt we may incur. The amount of
debt we will be willing to incur will depend upon the facts and
circumstances of the proposed business combination and market
conditions at the time of the potential business combination. At
this time, we are not a party to any arrangement or
understanding with any third party with respect to raising any
additional funds through the sale of securities or otherwise.
Sources
of target businesses
While we have not yet identified any candidates for a business
combination, we believe that there are numerous acquisition
candidates for us to target. Following the consummation of the
offering, we expect to generate a list of prospective target
opportunities from a host of different sources. We anticipate
that target
65
business candidates will be brought to our attention from
various unaffiliated sources, including investment bankers,
venture capital funds, private equity funds, leveraged buyout
funds, management buyout funds and other members of the
financial community who are aware that we are seeking a business
combination partner via public relations and marketing efforts,
direct contact by management or other similar efforts. Target
businesses may also be brought to our attention by unaffiliated
sources as a result of being solicited by us through calls,
mailings or advertisements. Any finder or broker would only be
paid a fee upon the consummation of a business combination. We
expect the fee to be paid to such persons would be determined in
an arms length negotiation between the finder or broker
and us based on market conditions at the time we enter into an
agreement with such finder or broker. While we do not presently
anticipate engaging the services of professional firms that
specialize in acquisitions on any formal basis, we may decide to
engage such firms in the future or we may be approached on an
unsolicited basis, in which event their compensation may be paid
from the offering proceeds not held in trust. Target businesses
also will be brought to our attention by our officers, directors
and members of our advisory board, through their network of
joint venture partners and other industry relationships located
in the United States and elsewhere that regularly, in the course
of their daily business activities, see numerous varied
opportunities. In no event will any of our sponsors, officers,
advisors or directors, or any of our or their respective
affiliates be paid any finders fee, consulting fee or any
other form of compensation, including the issuance of any of our
securities, prior to, or for any services they render, in order
to effectuate the consummation of a business combination.
Furthermore, we have adopted a policy prohibiting our sponsors,
officers, directors and members of our advisory board, or any of
our or their affiliates from receiving any finders fee or
other compensation from a target company for services rendered
in connection with a business combination.
While we do not intend to pursue an initial business combination
with a target business that is affiliated with our sponsors,
officers or directors, or any of our or their affiliates, we are
not prohibited from pursuing such a transaction. In the event we
seek to complete an initial business combination with such a
target business, we, or a committee of our independent
directors, would obtain an opinion from an independent
investment banking firm that is a member of FINRA that such an
initial business combination is fair to our stockholders from a
financial point of view. Generally, such opinion is rendered to
a companys board of directors and investment banking firms
may take the view that stockholders may not rely on the opinion.
Such view will not impact our decision on which investment
banking firm to hire.
Selection
of a target business and structuring of a business
combination
Because, unlike many other blank check companies, we do not have
the limitation that a target business have a minimum fair market
enterprise value of the net assets held in the trust account at
the time of our signing a definitive agreement in connection
with our initial business combination, our management will have
considerable flexibility in identifying and selecting one or
more prospective target businesses. However, we will only
consummate an initial business combination in which we become
the controlling shareholder of the target. There is no basis for
investors in this offering to evaluate the possible merits or
risks of any target business with which we may ultimately
complete our initial business combination. To the extent we
effect our initial business combination with a company or
business that may be financially unstable or in its early stages
of development or growth, we may be affected by numerous risks
inherent in such company or business. Although our management
will endeavor to evaluate the risks inherent in a particular
target business, we cannot assure you that we will properly
ascertain or assess all significant risk factors.
In evaluating a prospective target business, we expect to
conduct an extensive due diligence review which will encompass,
among other things, meetings with incumbent management and
employees, document reviews, interviews of customers and
suppliers, inspection of facilities, as well as review of
financial and other information which will be made available to
us.
The time required to select and evaluate a target business and
to structure and complete our initial business combination, and
the costs associated with this process, are not currently
ascertainable with any degree of certainty. Any costs incurred
with respect to the identification and evaluation of a
prospective target business with which a business combination is
not ultimately completed will result in our incurring losses and
will reduce the funds we can use to complete another business
combination. We will not pay any finders or
66
consulting fees to members of our management team, or any of
their respective affiliates, for services rendered to or in
connection with a business combination.
Possible
lack of business diversification
We may seek to effect business combinations with more than one
target business, and there is no required minimum valuation
standard for any target at the time of such acquisition, as
discussed above. We expect to complete only a single business
combination, although this process may entail the simultaneous
acquisitions of several operating businesses. Therefore, at
least initially, the prospects for our success may be entirely
dependent upon the future performance of a single business
operation. Unlike many 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 offsetting of losses. By
consummating a business combination with only a single entity or
asset, our lack of diversification may:
|
|
|
|
|
subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate
subsequent to a business combination; and
|
|
|
|
result in our dependency upon the development or market
acceptance of a single or limited number of products, processes
or services.
|
Possible
acquisitions of multiple businesses or assets.
In the event we ultimately determine to simultaneously acquire
several businesses or assets and such businesses or assets are
owned by different sellers, we will 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
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 businesss
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 us after the
consummation of a business combination if they are able to
negotiate employment or consulting agreements in connection with
such business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination
and could provide for such individuals to receive compensation
in the form of cash payments
and/or our
securities for services they would render to us after the
consummation of the business combination. 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 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. 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
67
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.
Stockholders
may not have the ability to approve a business
combination
We intend to conduct redemptions without a stockholder vote
pursuant to the tender offer rules of the SEC. Therefore we do
not intend to seek stockholder approval before we effect our
initial business combination as not all business combinations
require stockholder approval under applicable state law.
However, we may conduct a stockholder vote, if it is required by
law, or we decide to hold such vote for other business or legal
reasons. Presented in the table below is a graphic explanation
of the types of initial business combinations we may consider
and whether stockholder approval would be required under
Delaware law for each such transaction.
|
|
|
|
|
Whether Stockholder
|
Type of Transaction
|
|
Approval is Required
|
|
Purchase of Assets
|
|
No
|
Purchase of Stock of target not involving a merger with the
company
|
|
No
|
Merger of target into a subsidiary of the company
|
|
No
|
Merger of the company with a target
|
|
Yes
|
Redemption
rights for public stockholders upon completion of our initial
business combination
We will provide our stockholders with the opportunity to redeem
their shares of our common stock for cash equal to their pro
rata share of the aggregate amount then on deposit in the trust
account (including interest), less franchise and income taxes
payable, upon the completion of our initial business
combination, subject to the limitations described herein. The
amount in the trust account is initially anticipated to be
approximately $9.85 per share, or approximately $9.83 per share
if the underwriters over-allotment option is exercised in
full, including funds being held in the trust account
attributable to the contingent fees payable to the underwriters
solely in the event of that our business combination is
completed. Unlike many other blank check companies which hold
stockholder votes and conduct proxy solicitations in conjunction
with their initial business combinations and related redemptions
of public shares for cash upon consummation of such initial
business combinations even if not required by law, we intend to
consummate our initial business combination without a
stockholder vote and conduct the related redemptions of our
shares of common stock pursuant to
Rule 13e-4
and Regulation 14E of the Exchange Act, which regulate
issuer tender offers, and file tender offer documents with the
SEC. The tender offer documents will contain substantially the
same financial and other information about the initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act which regulates the
solicitation of proxies. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
other business or legal reasons, we will conduct the redemptions
like many other blank check companies in conjunction with a
proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. We will consummate our initial
business combination only if holders of no more than 88% of our
public shares elect to redeem their shares and, solely if we
seek stockholder approval, a majority of the outstanding shares
of common stock voted are voted in favor of the business
combination. Our sponsors have agreed to waive their redemption
rights with respect to their initial shares and any public
shares they may own in connection with the completion of our
initial business combination.
The 88% redemption threshold is different from the redemption or
conversion thresholds used by most blank check companies.
Traditionally, blank check companies would not be able to
consummate a business combination if the holders of the
companys public shares voted against a proposed business
combination and elected to redeem or convert more than a much
smaller percentage of the shares sold in such companys
initial public offering, which percentage threshold is typically
between 19.99% and 39.99%. As a result, many blank check
companies have been unable to complete business combinations
because the amount of shares voted by their public stockholders
electing conversion exceeded the maximum conversion threshold
pursuant to which such company could proceed with a business
combination.
68
Conduct
of redemption pursuant to tender offer rules
When we conduct the redemptions upon completion of our initial
business combination in compliance with the tender offer rules,
the redemption offer will be made to all of our stockholders,
not just our public stockholders. Our sponsors, however, have
agreed not to redeem their initial shares in connection with
this redemption offer. In addition, the offer will be made for
up to a maximum of 88% of our public shares, subject to the
condition that if more than 88% of our public shares elect to
redeem their shares, we will withdraw the offer and not
consummate the initial business combination.
Submission
of our initial business combination to a stockholder
vote
In the event we seek stockholder approval of our business
combination, we will distribute proxy materials and, in
connection therewith, provide our public stockholders with
redemption rights upon completion of our initial business
combination. Public stockholders voting in favor of the business
combination and electing to exercise their redemption rights
shall be entitled to receive cash equal to their pro rata share
of the aggregate amount then on deposit in the trust account
(including interest), less franchise and income taxes payable,
provided that such stockholders follow the specific procedures
for redemption that will be set forth in the proxy statement
relating to the stockholder vote on a proposed initial business
combination. Unlike many other blank check companies, our public
stockholders would not be required to vote against our initial
business combination in order to exercise their redemption
rights but public stockholders voting against the business
combination and electing to exercise their redemption rights
shall be entitled to receive cash equal to their pro rata share
of the aggregate amount then on deposit in the trust account
excluding any amounts representing interest earned on the trust
account, less franchise and income taxes.
Additionally, if we submit our business combination to our
stockholders for approval, and we do not conduct redemptions in
connection with our business combination pursuant to the tender
offer rules, it is possible that our sponsors, officers,
directors and their respective affiliates may acquire securities
from public stockholders who have elected to redeem their shares
in order to obtain the requisite level of shares we are required
to maintain so that we can proceed with the consummation of our
business combination. Although our sponsors, officers, directors
and their respective affiliates have no intention of entering
into stock purchase arrangements with our public stockholders
subsequent to this offering, they may do so in the future, both
as an expression of confidence in the value of our shares of
common stock following our initial business combination and as a
means of increasing the likelihood that we will be able to
proceed with our initial business combination, as applicable.
Such purchases, should they occur at all, may be negotiated
after the time when stockholders elected to redeem their shares.
Any shares purchased from stockholders by our sponsors,
officers, directors or their respective affiliates would be
purchased for cash or other consideration at a price to be
negotiated between such stockholders on the one hand and our
sponsors, officers, directors or their respective affiliates on
the other hand. Such price would depend on a variety of factors
including, but not limited to, the size of the
stockholders position in our company and the method and
timing of payment to such stockholder. The proceeds held in our
trust account may be used to facilitate such purchases.
Any privately negotiated transaction to purchase shares from a
stockholder who would otherwise choose to redeem their shares
would include a contractual acknowledgement that such
stockholder, although still the record holder of our shares, is
no longer the beneficial owner thereof and therefore agrees to
refrain from redeeming its common stock as directed by the
purchaser of such securities. All such privately negotiated
transactions (should they occur at all) would be isolated
transactions conducted in compliance with all applicable
securities laws, each to be privately negotiated with one or a
discrete group of stockholders who have elected, or otherwise
indicated their intention, to exercise their redemption rights.
Neither our sponsors, officers, directors, advisors and their
respective affiliates, nor any third parties, have agreed to
purchase any such shares, and their failure to so agree at the
applicable time could adversely impair our ability to consummate
a business combination. Moreover, even if our sponsors,
officers, directors, advisors and their respective affiliates
were to undertake such purchases, such purchases could be
subject to limitations under applicable securities laws and
regulations, including Regulation M and regulations
regarding tender
69
offers. The inability of such persons to effect such purchases
could adversely impair our ability to consummate the business
combination.
Our sponsors, officers, directors
and/or their
affiliates anticipate that they will identify the stockholders
with whom the sponsors, officers, directors or their affiliates
may pursue privately negotiated purchases by either the
stockholders contacting us directly or by our receipt of
redemption requests submitted by stockholders following our
mailing of tender offer documents or proxy materials in
connection with our initial business combination. To the extent
that our sponsors, officers, directors, advisors or their
affiliates enter into a private purchase, they would identify
and contact only potential selling stockholders who have
expressed their election to redeem their shares for a pro rata
share of the trust account. Pursuant to the terms of such
arrangements, any shares so purchased by our sponsors, officers,
advisors, directors
and/or their
affiliates would then revoke their election to redeem such
shares. The terms of such purchases would operate to facilitate
our ability to consummate a proposed business combination by
potentially reducing the number of shares redeemed for cash.
Limitation
on redemption rights upon consummation of a business combination
if we seek a stockholder vote
Notwithstanding the foregoing, and solely if we hold a
stockholder vote to approve our initial business combination,
and we do not conduct redemptions pursuant to the tender offer
rules in connection with our business combination, our amended
and restated certificate of incorporation provides that a public
stockholder, together with any affiliate of his or any other
person with whom he is acting in concert or as a
group (as defined under Section 13 of the
Exchange Act), will be restricted from seeking redemption rights
with respect to more than an aggregate of 10% of the shares sold
in this offering. We believe this restriction will discourage
stockholders from accumulating large blocks of shares, and
subsequent attempts by such holders to use their ability to
exercise their redemption rights as a means to force us or our
management to purchase their shares at a significant premium to
the then current market price or on other undesirable terms.
Absent this provision, a public stockholder holding more than an
aggregate of 10% of the shares sold in this offering could
threaten to seek exercise their redemption rights if such
holders shares are not purchased by us or our management
at a premium to the then current market price or on other
undesirable terms. By limiting our stockholders ability to
redeem no more than 10% of the shares sold in this offering, we
believe we will limit the ability of a small group of
stockholders to unreasonably attempt to block our ability to
consummate a business combination. However, we would not be
restricting our stockholders ability to vote all of their
shares for or against a business combination.
Tendering
stock certificates in connection with a tender offer or
redemption rights
We may require our public stockholders seeking to exercise their
redemption rights, whether they are record holders or hold their
shares in street name, to either tender their
certificates to our transfer agent prior to the date set forth
in the tender offer documents mailed to such holders, or up to
two business days prior to the vote on the proposal to approve
the business combination in the event we distribute proxy
materials, or to deliver their shares to the transfer agent
electronically using Depository Trust Companys DWAC
(Deposit/Withdrawal At Custodian) System, at the holders
option. The tender offer or proxy materials, as applicable, that
we will furnish to holders of our public shares in connection
with our initial business combination will indicate whether we
are requiring public stockholders to satisfy such delivery
requirements. Accordingly, a public stockholder would have from
the time we send out our tender offer materials until the close
of the tender offer period, or up to two days prior to the vote
on the business combination if we distribute proxy materials, as
applicable, to tender his shares if he wishes to seek to
exercise his redemption rights. Given the relatively short
exercise period, it is advisable for stockholders to use
electronic delivery of the public shares.
There is a nominal cost associated with the above-referenced
tendering process and the act of certificating the shares or
delivering them through the DWAC System. The transfer agent will
typically charge the tendering broker $35.00 and it would be up
to the broker whether or not to pass this cost on to the
redeeming holder. However, this fee would be incurred regardless
of whether or not we require holders seeking to exercise
redemption rights to tender their shares prior to the meeting.
The need to deliver shares is a
70
requirement of exercising redemption rights regardless of the
timing of when such delivery must be effectuated. However, in
the event we require stockholders seeking to exercise redemption
rights prior to the completion of the proposed business
combination and the proposed business combinations is not
completed (and therefore we would not be obligated to pay cash
in connection with the tendered shares) this may result in an
increased cost to stockholders.
The foregoing is different from the procedures used by many
blank check companies. Traditionally, in order to perfect
redemption rights in connection with a blank check
companys business combination, the company would
distribute proxy materials for the stockholders vote on an
initial business combination, and a holder could simply vote
against a proposed business combination and check a box on the
proxy card indicating such holder was seeking to exercise its
redemption rights. After the business combination was approved,
the company would contact such stockholder to arrange for it to
deliver its certificate to verify ownership. As a result, the
stockholder then had an option window after the
consummation of the business combination during which it could
monitor the price of the companys stock in the market. If
the price rose above the redemption price, it could sell its
shares in the open market before actually delivering his shares
to the company for cancellation. As a result, the redemption
rights, to which stockholders were aware they needed to commit
before the stockholder meeting, would become a
redemption right surviving past the consummation of
the business combination until the redeeming holder delivered
its certificate. The requirement for physical or electronic
delivery prior to the closing of the tender offer or stockholder
meeting ensures that a redeeming holders election to
redeem is irrevocable once the business combination is completed.
Any request to redeem such shares once made, may be withdrawn at
any time up to the date set forth in the tender offer materials
or the date of the shareholder meeting set forth in our proxy
materials, as applicable. Furthermore, if a holder of a public
share of common stock delivered its certificate in connection
with an election of its redemption rights and subsequently
decides prior to the applicable date not to elect to exercise
such rights, it may simply request that the transfer agent
return the certificate (physically or electronically). It is
anticipated that the funds to be distributed to holders of our
public shares of common stock electing to redeem their shares
will be distributed promptly after the completion of a business
combination.
If the initial business combination is not approved or completed
for any reason, then our public stockholders who elected to
exercise their redemption rights would not be entitled to redeem
their shares for the applicable pro rata share of the trust
account. In such case, we will promptly return any shares
delivered by public holders who elected to redeem their shares.
If our initial proposed business combination is not completed,
we may continue to try to consummate a business combination with
a different target until 18 months from the closing of this
offering.
Redemption
of common stock and liquidation if no initial business
combination
Our sponsors, officers and directors have agreed that we will
only have 18 months from the closing of this offering to
consummate our initial business combination. If we do not
consummate our initial business combination within such
18-month
period, we will (i) cease all operations except for the
purposes of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares for cash equal to
their pro rata share of the aggregate amount then on deposit in
the trust account (including interest), less franchise and
income taxes payable, which redemption will completely
extinguish public stockholders rights as stockholders
(including the right to receive further liquidation
distributions, if any), subject to applicable law, and subject
to the requirement that any refund of income taxes that were
paid from the trust account which is received after the
redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. Pursuant to the terms of
our certificate of incorporation, our powers following the
expiration of the permitted time period for consummating a
business combination will automatically thereafter be limited to
acts and activities relating to dissolving and winding up our
affairs, including liquidation.
71
Our sponsors have agreed to waive their redemption rights with
respect to their initial shares, but will be entitled to redeem
any public shares they may own, in the event we do not
consummate our initial business combination. There will be no
liquidating distribution with respect to our warrants, which
will expire worthless in the event we do not consummate a
business combination. We expect that all costs associated with
the implementation and completion of our liquidation will be
funded by any remaining assets outside of the trust account
although we cannot assure you that there will be sufficient
funds for such purpose. If such funds are insufficient, our
sponsors have agreed to advance us the funds necessary to
complete such liquidation (currently anticipated to be
approximately $30,000).
Upon consummation of this offering, and assuming no exercise of
the underwriters over-allotment option, we expect to have
approximately (i) $49,250,000 of the offering proceeds
deposited in the trust account for the benefit of our public
stockholders and (ii) $1,250,000 from the proceeds of this
offering not held in the trust account. In the event no business
combination is completed within 18 months from the closing
of this offering and we are unable to redeem 100% of the shares
sold in this offering, we intend to submit a plan of dissolution
to our public stockholders, requiring a majority of shares voted
for approval, in which (i) the proceeds held in our trust
account, together with interest, less franchise and income taxes
payable, would be distributed to only our public stockholders on
a per share pro rata basis and (ii) the remaining net
assets of the company, if any, would be distributed on a per
share pro rata basis to our stockholders.
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 aggregate of the (i) per share
redemption price or (ii) per share liquidation price would
be approximately $9.85 (or approximately $9.83 if the
underwriters over-allotment option is exercised in full).
The proceeds deposited in the trust account could, however,
become subject to the claims of our creditors which would have
higher priority than the claims of our public stockholders. We
cannot assure you that the actual aggregate of the (i) per
share redemption price or (ii) per share liquidation price
will not be less than approximately $9.85, plus interest (net of
any franchise and income taxes payable). Under
Section 281(b) of the Delaware General Corporation Law, our
plan of distribution must provide for all claims against us to
be paid in full or make provision for payments to be made in
full, as applicable, if there are sufficient assets. These
claims must be paid or provided for before we make any
distribution of our remaining assets to our stockholders. While
we intend to pay such amounts, if any, we cannot assure you that
we will have funds sufficient to pay or provide for all
creditors claims.
Although we will seek to have all vendors, service providers,
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 respect to 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, 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. 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 addition, there is no guarantee that such entities
will agree to waive any claims they may have in the future as a
result of, or arising out of, any negotiations, contracts or
agreements with us and will not seek recourse against the trust
account for any reason. In order to protect the amounts held in
the trust account, John L. Shermyen, our chairman, chief
executive officer and co-sponsor, and each of LLM Structured
Equity Fund L.P. and LLM Investors L.P., our other
co-sponsors,
have agreed that, upon our liquidation, they will be liable to
us if and to the extent any
72
claims by a vendor for services rendered or products sold to us,
or a prospective target business with which we have discussed
entering into a transaction agreement reduce the amounts in the
trust account to below $9.85 per share (or approximately $9.83
per share if the underwriters over-allotment option is
exercised in full), except as to any claims by a third party who
executed a waiver of any and all rights to seek access to the
trust account and except as to any claims under our indemnity of
the underwriters of this offering against certain liabilities,
including liabilities under the Securities Act. In the event
that an executed waiver is deemed to be unenforceable against a
third party, Mr. Shermyen, LLM Structured Equity
Fund L.P. and LLM Investors L.P. will not be responsible to
the extent of any liability for such third party claims. We
cannot assure you, however, that Mr. Shermyen and our other
sponsors would be able to satisfy those obligations.
Additionally, in the event either LLM Structured Equity
Fund L.P. or LLM Investors L.P. undertakes a liquidating
distribution while their indemnification obligations are
outstanding, they have agreed to use reasonable efforts to set
aside from such distribution, adequate reserves to cover the
reasonably anticipated liabilities which may be incurred by
them. Although we have a fiduciary obligation to pursue the
sponsors to enforce their indemnification obligations, and
intend to pursue such actions as and when we deem appropriate,
there can be no assurance they will be able to satisfy those
obligations, if required to do so.
In the event that the proceeds in the trust account are reduced
below $9.85 per share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full)
and Mr. Shermyen and our other sponsors assert that they
are unable to satisfy their obligations or that they have no
indemnification obligations related to a particular claim, our
independent directors, if any, would determine whether to take
legal action against Mr. Shermyen and our other sponsors to
enforce their indemnification obligations. While we currently
expect that our independent directors would take legal action on
our behalf against Mr. Shermyen and the other sponsors to
enforce their indemnification obligations to us, it is possible
that our independent directors in exercising their business
judgment may choose not to do so in any particular instance.
Accordingly, we cannot assure you that due to claims of
creditors the actual value of the per share redemption price (or
per share liquidation distribution if we are unable to effect a
redemption of our public shares) will not be less than $9.85 per
share (or approximately $9.83 per share if the
underwriters overallotment option is exercised in full).
Under the DGCL, stockholders may be held liable for claims by
third parties against a corporation to the extent of
distributions received by them in a dissolution. The pro rata
portion of our trust account distributed to our public
stockholders upon our redemption of 100% of our public shares of
common stock in the event we do not consummate our initial
business combination within 18 months from the closing of
this offering may be considered a liquidation distribution under
Delaware law. If the corporation complies with certain
procedures set forth in Section 280 of the 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
180-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 our
initial business combination within 18 months of the
closing of this offering, we shall (i) cease all operations
except for the purposes of winding up, (ii) as promptly as
reasonably possible, redeem 100% of our public shares for cash
equal to their pro rata share of the aggregate amount then on
deposit in the trust account (including interest), less
franchise and income taxes payable, which redemption will
completely extinguish public stockholders rights as
stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and subject
to the requirement that any refund of income taxes that were
paid from the trust account which is received after the
redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. Accordingly, it is our
intention to make liquidating distributions to our stockholders
as soon as reasonably possible following our 18th month and,
therefore, we do not intend to comply with those procedures. As
such, our stockholders could potentially be liable for any
claims to the extent of distributions received by them (but no
more) and any liability of our
73
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, based on facts
known to us at such time, that will provide for our payment of
all existing and pending claims or claims that may be
potentially brought against us within the subsequent
10 years. However, because we are a blank check company,
rather than an operating company, and our operations will be
limited to searching for prospective target businesses to
acquire, the only likely claims to arise would be from our
vendors (such as accountants, lawyers, investment bankers, etc.)
or prospective target businesses. As described above, pursuant
to the obligation contained in our underwriting agreement, we
will seek to have all vendors, service providers and prospective
target businesses 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, before we distribute the proceeds held in the trust account
to our public stockholders, 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
an aggregate of at least $9.85 per share. Additionally, if,
after we distribute the proceeds held in the trust account to
our public stockholders, 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 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 redemption of 100% of
our public shares upon our liquidation or if they redeem their
respective shares for cash upon the consummation of the initial
business combination. In no other circumstances will a
stockholder have any right or interest of any kind to or in the
trust account. In the event we seek stockholder approval in
connection with our initial business combination, a
stockholders voting in connection with the business
combination alone will not result in a stockholders
redeeming its shares to us for an applicable pro rata share of
the trust account. Such stockholder must have also exercised its
redemption rights described above.
Competition
In identifying, evaluating and selecting a target business for
an initial business combination, we may encounter intense
competition from other entities having a business objective
similar to ours including other blank check companies, private
equity groups and leveraged buyout funds, and operating
businesses seeking strategic acquisitions. Many of these
entities are well established and have extensive experience
identifying and effecting business combinations directly or
through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us.
Our ability to acquire larger target businesses will be limited
by our available financial resources. This inherent limitation
gives others an advantage in pursuing the acquisition of a
target business. Furthermore, our obligation to pay cash in
connection with 88% of our shares held by our public
stockholders who exercise their redemption rights may reduce the
resources available to us for an initial business combination,
and our outstanding warrants, and the future dilution they
potentially represent, may not be viewed favorably by certain
target businesses. Either of these factors may place us at a
competitive disadvantage in successfully negotiating an initial
business combination.
74
Facilities
We currently maintain our executive offices at 265 Franklin
Street, 20th Floor, Boston, Massachusetts 02110. LLM
Capital Partners LLC has agreed to provide us with office space,
general administrative services and secretarial support for a
fee of $7,500 per month.
Employees
and Directors
We currently have 3 executive officers. These individuals are
not 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 a target business has
been selected for the initial business combination and the stage
of the initial business combination process the company is in.
Accordingly, once management locates a suitable target business
to acquire, they will spend more time investigating such target
business and negotiating and processing the initial business
combination (and consequently spend more time on our affairs)
than they would prior to locating a suitable target business. We
expect our executive officers to devote a reasonable amount of
time to our business. We do not intend to have any full time
employees prior to the completion of our initial business
combination.
Periodic
Reporting and Audited Financial Statements
We will register our units, common stock and warrants under the
Exchange Act and will have reporting obligations, including the
requirement that we file annual, quarterly and current reports
with the SEC. In accordance with the requirements of the
Exchange Act, our annual reports will contain financial
statements audited and reported on by our independent registered
public accountants.
We will provide stockholders with audited financial statements
of the prospective target business to be acquired as part of the
tender offer materials or proxy solicitation materials sent to
stockholders to assist them in assessing each specific target
business we seek to acquire. While the requirement of having
available financial information for the target business may
limit the pool of potential acquisition candidates, given the
broad range of target businesses we may consummate a business
combination with, we do not believe that the narrowing of the
pool will be material.
We will be required to comply with applicable internal control
requirements of Section 404 of the Sarbanes-Oxley Act for
the fiscal year ending December 31, 2011 as required by the
Sarbanes-Oxley Act. 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, our sponsors or any of our officers or
directors in their capacities as such.
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 by the SEC assuming that the
gross proceeds, underwriting discounts and underwriting expenses
for the Rule 419 offering are the same as this offering and
75
that the underwriters will not exercise their over-allotment
option. None of the terms of a Rule 419 offering will apply
to this offering.
|
|
|
|
|
|
|
Terms of Our Offering
|
|
Terms Under a Rule 419
Offering
|
|
Escrow of offering proceeds:
|
|
$49,250,000 of the net offering proceeds (including contingent
fees) will be deposited into the trust account at
J.P. Morgan Chase Bank, N.A., maintained by Continental
Stock Transfer & Trust Company, acting as trustee. A
portion of such offering proceeds consists of contingent fees
payable by us in the event we consummate a business combination.
|
|
$43,079,625 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.
|
|
|
|
|
|
Investment of net proceeds:
|
|
The $49,250,000 of offering proceeds (including contingent fees)
held in the trust account will only be invested in United States
government securities within the meaning of Section
2(a)(16) of the Investment Company Act of 1940 with a maturity
of 180 days or less, or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940.
|
|
Proceeds could be invested only in specified securities such as
a money market fund meeting conditions of the Investment Company
Act of 1940 or in securities that are direct obligations of, or
obligations guaranteed as to principal or interest by, the
United States.
|
|
|
|
|
|
Receipt of interest on escrowed funds
|
|
Interest on proceeds from the trust account to be paid to
stockholders is reduced by any income or franchise taxes payable.
|
|
Interest on funds in escrow account would be held for the sole
benefit of investors, unless the funds held in escrow were
released to us in connection with our consummation of a business
combination.
|
|
|
|
|
|
Limitation on fair value or net assets of target business:
|
|
We are not required to set a minimum valuation on either the
fair market value or net assets of a target business.
|
|
We would be restricted from acquiring a target business unless
the fair value of such business or net assets to be acquired
represent at least 80% of the maximum offering proceeds.
|
76
|
|
|
|
|
|
|
Terms of Our Offering
|
|
Terms Under a Rule 419
Offering
|
|
Trading of securities issued:
|
|
The units will begin trading on or promptly after the date of
this prospectus. Each of the shares of our common stock and
warrants shall trade separately on the fifth business day
following the earlier to occur of: the expiration of the
underwriters over-allotment option; its exercise in full;
or the announcement by the underwriters of their intention not
to exercise all or any remaining portion of the
underwriters over-allotment option.
|
|
No trading of the units or the underlying shares of our common
stock and warrants would be permitted until the completion of a
business combination. During this period, the securities would
be held in the escrow or trust account.
|
|
|
|
|
|
|
|
In no event will the shares of our 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,
which is anticipated to take place four business days from the
date of this prospectus. If the underwriters
over-allotment option is exercised following the initial filing
of such Form 8-K, a second or amended Form 8-K will be filed to
provide information to reflect the exercise of the
underwriters over-allotment option.
|
|
|
|
|
|
|
|
Exercise of the warrants:
|
|
The warrants cannot be exercised until the later of 30 days
after completion of our initial business combination and one
year from the date of this prospectus and, accordingly, will be
exercised only after the trust account has been terminated and
distributed.
|
|
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.
|
77
|
|
|
|
|
|
|
Terms of Our Offering
|
|
Terms Under a Rule 419
Offering
|
|
Election to remain an investor:
|
|
We will provide our public stockholders with the opportunity to
redeem their shares of our common stock for cash equal to their
pro rata share of the aggregate amount then on deposit in the
trust account (including interest), less franchise and income
taxes payable, upon the completion of our initial business
combination, subject to the limitations described herein. We may
not hold a stockholder vote. Instead, we may conduct the
redemptions pursuant to the tender offer rules of the SEC and
file tender offer documents with the SEC which will contain
substantially the same financial and other information about the
initial business combination and the redemption rights as is
required under the SECs proxy rules. If, however, we hold
a stockholder vote, we will conduct the redemptions in
conjunction with a proxy solicitation pursuant to the proxy
rules and not pursuant to the tender offer rules. We will
consummate our initial business combination only if holders of
no more than 88% of our public shares elect to redeem their
shares and, solely if we seek stockholder approval, a majority
of the outstanding shares of common stock voted are voted in
favor of the business combination.
|
|
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 whether he elects to remain a stockholder of the company
or requires the return of his 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
account 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 trust
account or escrow account must be returned to all investors and
none of the securities will be issued.
|
78
|
|
|
|
|
|
|
Terms of Our Offering
|
|
Terms Under a Rule 419
Offering
|
|
Business combination deadline:
|
|
If we are unable to complete our business combination within
18 months from the closing of this offering, we shall (i)
cease all operations except for the purposes of winding up, (ii)
as promptly as reasonably possible, redeem 100% of our public
shares for cash equal to their pro rata share of the aggregate
amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law,
and subject to the requirement that any refund of income taxes
that were paid from the trust account which is received after
the redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law.
|
|
If an acquisition has not been consummated within 18 months
after the effective date of the registration statement, funds
held in the trust account or escrow account would be returned to
investors.
|
79
|
|
|
|
|
|
|
Terms of Our Offering
|
|
Terms Under a Rule 419
Offering
|
|
Release of funds:
|
|
The proceeds held in the trust account will not be released
until the earlier of the completion of our initial business
combination or our redemption of 100% of our public shares upon
failure to effect our initial 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 taxes on such interest.
|
|
The proceeds held in the escrow account would not be released
until the earlier of the completion of a business combination or
the failure to effect a business combination within the allotted
time.
|
|
|
|
|
|
Interest on proceeds held in the trust account:
|
|
Interest earned may be disbursed to fund any taxes payable on
interest earned on this trust account.
|
|
Interest earned on proceeds held in the trust account would be
held in the trust account for the sole benefit of the
stockholders and would not be released until the earlier of the
completion of a business combination or the failure to effect a
business combination within the allotted time stated above.
|
80
MANAGEMENT
Directors
and Executive Officers
Our directors and executive officers as of the date of this
prospectus are as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
John L. Shermyen
|
|
|
56
|
|
|
Chairman, Chief Executive Officer and Director
|
Patrick J. Landers
|
|
|
54
|
|
|
President and Director
|
Peter Schofield
|
|
|
51
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
John L. Shermyen. Mr. Shermyen has
been our chairman, chief executive officer and a director since
July 2010. Mr. Shermyen founded RadioSoft, Inc., the
predecessor entity to LogistiCare, a provider of non-emergency
medical transportation management solutions, in 1994, and served
as its president and chief executive officer from 1994 until
July 2009. Seeing a need to better organize non-emergency
medical transportation, Mr. Shermyen introduced the
capitated, full-risk broker model to state governments, health
insurers and other health-related entities in the early 1990s.
Mr. Shermyen grew LogistiCare to over $450 million in
revenue during his tenure. In 2003, he was recognized with the
Ernst & Young Entrepreneur of the Year
Award®
in the Business and Technology Services Category for the
Southeast region. Mr. Shermyen holds both a bachelors
degree and a masters degree in geography and computer
cartography from the University of Florida. Mr. Shermyen is
well-qualified to serve as a member of the board due to his
public and private company experience, business leadership and
operational experience. We believe Mr. Shermyens
access to extensive contacts and sources, ranging from private
and public company contacts, private equity funds and investment
bankers will allow us to generate acquisition opportunities and
identify suitable acquisition candidates.
Patrick J. Landers. Mr. Landers
has been our president and a director since July 2010. From
August 2007 until November 2009, Mr. Landers was
president and a director of Prospect Acquisition Corp., a
special purpose acquisition company focused on the financial
services industry. Mr. Landers currently serves as the
president and chief executive officer of Annascaul Advisors LLC,
a FINRA member firm, and a managing director of LLM Capital
Partners LLC. Mr. Landers has served in these capacities
since 2003 and 2004, respectively. From 2001 to 2003,
Mr. Landers was president of Landers Partners LLC, a
financial advisory firm that he founded. From 1981 until 2001,
Mr. Landers was an investment banker at Dillon,
Read & Co. Inc., an investment banking firm, and
subsequently at UBS AG, an investment banking firm, after UBS
AGs acquisition of Dillon, Read & Co. Inc. In
addition to Prospect, Mr. Landers has served as a director
of The Endurance International Group, Inc., a web hosting
company, Connell Limited Partnership, an industrial
conglomerate, Haas Publishing Company, a publishing company, and
Student/Sponsor Partners, a New York educational foundation
established to help disadvantaged youth attain a quality high
school education. Mr. Landers holds a bachelors
degree in English and classics from Williams College and a
masters of public policy and management from Yale University.
Mr. Landers is well-qualified to serve as a member of the
board due to his public and private company experience, business
leadership, operational experience, and experience in a prior
blank check offering for Prospect. We believe
Mr. Landers access to extensive contacts and sources,
ranging from private and public company contacts, private equity
funds and investment bankers will allow us to generate
acquisition opportunities and identify suitable acquisition
candidates. We believe Mr. Landers strategic
experience and background in negotiating, structuring and
consummating the business combination of Prospect will further
our purpose of consummating a business combination.
Peter Schofield. Mr. Schofield has
been our chief financial officer, treasurer and secretary since
July 2010. He has been chief financial officer at LLM
Capital Partners LLC since 2006 and chief financial officer at
Washington & Congress Managers, LLC, a private equity
firm, since 2004. Mr. Schofield also has extensive
accounting and financial reporting experience from his various
roles at Fidelity Investments, Colonial Management Associates,
Inc. and Price Waterhouse. He holds a bachelors degree in
accounting from the University of Massachusetts and a masters of
business administration from Babson College. Mr. Schofield
is a Certified Public Accountant and a Chartered Financial
Analyst.
81
Advisory
Board
In addition to our board of directors, we have established an
advisory board. As of the date of this offering, the members of
our Advisory Board are:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Frederick S. Moseley, IV
|
|
|
57
|
|
|
Member
|
|
|
|
|
|
|
Member
|
|
|
|
|
|
|
Member
|
Our Advisory Board will be comprised of Frederick S. Moseley, IV
and other individuals to be determined who have the background
and experience to assist us in evaluating our business
strategies and development. Our special advisors will not
participate in managing our operations. We have no formal
arrangement or agreement with these individuals to provide
services to us and accordingly, they have no contractual or
fiduciary obligations to present business opportunities to us.
We expect that members of the Advisory Board will provide
advice, insights, contacts and other assistance to us based on
their extensive industry experience and involvement in areas of
activity that are strategic to us. In addition to individual
meetings or phone conferences with members of the Advisory
Board, we intend to conduct bi-annual meetings with the Advisory
Board to discuss our strategy and industry trends.
The following is a brief summary of the background of each
member of our Advisory Board. There are no family relationships
among any of the advisors, executive officers or directors.
Mr. Moseley has been a member of our advisory board since
August 2010. Since 2004, Mr. Moseley has been a managing
director of LLM Capital Partners LLC. In addition, since 2004,
Mr. Moseley has been chief executive officer of
Washington & Congress Managers, LLC, the successor
management company of Washington & Congress Capital
Partners L.P. (f/k/a Triumph Partners III, L.P., or Triumph
III), a private equity fund and other funds. From 1998 to 2003,
Mr. Moseley was the president and a director of Triumph
Capital Group, Inc., or Triumph Capital Group, the previous
manager of Triumph III and other funds. Prior to
co-founding Triumph in 1990, Mr. Moseley was a managing
director of Drexel Burnham Lambert and had prior experience with
Dillon, Read & Co. Inc. and Merrill Lynch White Weld.
He has served as a director of Abbey Healthcare Group, a home
healthcare provider, Allied Healthcare International, a provider
of healthcare related flexible staffing, Apria Healthcare Group,
a provider of home healthcare products, BORN Information
Services, a provider of information technology services, Box USA
Holdings, a converter of packaging materials, First
Communications, a trade show organizer, LogistiCare, and Value
Asset Management, an asset management firm, among others, and as
a board observer in other companies. Mr. Moseley is a
graduate of Harvard College and received his MBA from Columbia
University.
In 2004, Mr. Moseley consented to the entry of an order by
the State of Connecticuts Department of Banking denying
his application for registration in Connecticut as an agent of
Annascaul Advisors LLC (formerly Landers, Lane &
Moseley Capital Partners LLC), a broker-dealer. His application
was denied by the Department of Banking based on a finding that,
although he disclosed his position as president of Triumph
Capital Group, he also should have checked a yes box
in response to a question regarding whether Mr. Moseley
exercised control over Triumph Capital based on the
presumption created by Mr. Moseleys position as
president of Triumph Capital Group. In 2003, Triumph Capital
Group and its general counsel were convicted of certain criminal
charges, and the chairman of Triumph Capital Group pled guilty
to a single charge, relating to certain payments made in order
to obtain investments by Connecticut state pension funds in
private equity funds managed by Triumph Capital Group. Neither
Mr. Moseley nor, to his knowledge, any other Triumph
Capital Group employee was implicated or alleged to be involved
in any way in the wrongdoings giving rise to the charges noted
above.
Number
and Terms of Office of Directors
Our board of directors is divided into two classes with only one
class of directors being elected in each year and each class
(except for those directors appointed prior to our first annual
meeting of stockholders) serving a three-year term. The term of
office of the first class of directors, consisting of
Messrs. ,
82
and ,
will expire at our first annual meeting of stockholders. The
term of office of the second class of directors, consisting of
Messrs.
and ,
will expire at the second annual meeting of stockholders.
Our officers are appointed by the board of directors and serve
at the discretion of the board of directors, rather than for
specific terms of office. Our board of directors is authorized
to appoint persons to the offices set forth in our amended and
restated bylaws as it deems appropriate. Our amended and
restated bylaws provide that our officers may consist of a
chairman of the board, chief executive officer, president, chief
financial officer, vice presidents, secretary, treasurer and
such other offices as may be determined by the board of
directors.
These individuals will play a key role in identifying and
evaluating prospective acquisition candidates, selecting the
target business, and structuring, negotiating and consummating
our initial business combination. Collectively, through their
positions described above, our directors have extensive
experience in the alternative asset management and private
equity businesses.
We do not currently intend to hold an annual meeting of
stockholders until after we consummate a business combination,
and thus may not be in compliance with Section 211(b) of
the Delaware General Corporation Law. Therefore, if our
stockholders want us to hold an annual meeting prior to our
consummation of a business combination, they may attempt to
force us to hold one by submitting an application to the
Delaware Court of Chancery in accordance with
Section 211(c) of the Delaware General Corporation Law.
Compensation
for Officers and Directors
No executive officer or director has received compensation of
any kind for services rendered. No compensation of any kind,
including finders and consulting fees, will be paid to any
of our existing stockholders, including our officers, directors,
or any of their respective affiliates, for services rendered
prior to or in connection with a business combination. However,
these individuals will be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on our behalf
such as identifying prospective target businesses and performing
due diligence on suitable business combinations. 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. If
none of our directors are deemed independent, we
will not have the benefit of independent directors examining the
propriety of expenses incurred on our behalf and subject to
reimbursement.
After our business combination, our executive officers and
directors who remain with us may be paid consulting, management
or other fees from the combined company with any and all amounts
being fully disclosed to stockholders, to the extent then known,
in the tender offer documents or proxy materials furnished to
our stockholders. It is unlikely, however, that the amount of
such compensation will be known at that time, as it will be up
to the directors of the post-combination business to determine
executive officer and director compensation. Any compensation to
be paid to our chief executive officer and other officers will
be determined, or recommended to the board of directors for
determination, either by a compensation committee constituted
solely by independent directors or by a majority of the
independent directors on our board of directors, in accordance
with the rules of any stock exchange on which our shares of
common stock may then be listed.
Director
Independence
Although we are not required to have a majority of independent
directors on our board of directors, we have elected to have a
majority of independent directors. An independent
director is defined generally as a person other than an
officer or employee of the company or its subsidiaries or any
other individual having a relationship, which, in the opinion of
the companys board of directors would interfere with the
directors exercise of independent judgment in carrying out
the responsibilities of a director.
83
Our board of directors has determined that each of
Mr.
and
Mr. ,
who have agreed to join our board of directors and are expected
to join our board of directors upon the closing of this
offering, will be independent directors as such term is defined
under the rules of the American Stock Exchange and
Rule 10A-3
of the Exchange Act. Although our company will not be listed on
the American Stock Exchange upon consummation of this offering,
we have voluntarily applied the definition of director
independence used by the American Stock Exchange in making the
determinations with respect to
Mr.
and
Mr. .
Our independent directors will have regularly scheduled meetings
at which only independent directors are present.
Board
Committees
Our board of directors intends to establish an audit committee
and a compensation committee upon completion of our initial
business combination. At that time our board of directors
intends to adopt charters for these committees. Prior to such
time we do not intend to establish either committee.
Accordingly, there will not be a separate committee comprised of
some members of our board of directors with specialized
accounting and financial knowledge to meet, analyze and discuss
solely financial matters concerning prospective target
businesses. We do not feel a compensation committee is necessary
prior to our initial business combination as there will be no
salary, fees or other compensation being paid to our officers or
directors prior to our initial business combination other than
as disclosed in this prospectus.
Code of
Conduct
We have adopted a code of conduct and ethics applicable to our
directors, officers and employees in accordance with applicable
federal securities laws.
Conflicts
of Interest
Certain of our officers and directors have pre-existing
fiduciary obligations to other businesses of which they are
officers or directors. To the extent they identify business
opportunities which may be suitable for the entities to which
they owe a pre-existing fiduciary obligation, our officers and
directors will honor those fiduciary obligations, subject to the
right of first refusal described below. Accordingly,
they may not present opportunities to us that otherwise may be
attractive to us unless the entities to which they owe a
pre-existing fiduciary obligation (and any successors to such
entities) have declined to accept such opportunities.
Patrick J. Landers serves as president and chief executive
officer of Annascaul Advisors LLC. Peter Schofield serves as
chief financial officer of Washington & Congress
Managers, LLC. Both Messrs. Landers and Schofield have a
pre-existing fiduciary duty to these respective companies and
may not present opportunities to us that otherwise may be
attractive to us unless these entities have declined to accept
such opportunities.
Messrs. Landers and Schofield also have fiduciary
obligations to LLM Structured Equity Fund L.P. and LLM
Investors L.P. These funds are private equity funds focused on
investing growth capital in mid-sized companies in various
industries. In order to minimize potential conflicts, or the
appearance of conflicts, which may arise from the affiliations
that Messrs. Landers and Schofield have with the these
funds, LLM Capital Partners LLC, LLM Structured Equity
Fund L.P. and LLM Investors L.P. has each granted us a
right of first refusal with respect to an
acquisition of any company or assets in the healthcare industry
whose enterprise value is at least equal to $50 million.
Pursuant to this right of first refusal, each of our officers
and directors as well as each of LLM Capital Partners LLC, LLM
Structured Equity Fund L.P. and LLM Investors L.P. has
agreed pursuant to a written agreement with us, to present to
us, for our consideration, prior to presentation to any other
entity, any relevant business opportunity with an enterprise
value greater than $50 million and they will not, and will
cause each other company or entity under their management or
control not to, pursue such business opportunity unless and
until a majority of our disinterested directors have determined
for any reason that we will not pursue such opportunity. This
right of first refusal will expire upon the earlier to occur of
(i) the completion of our initial business combination or
(ii) 18 months after the closing of this offering.
Our officers may become involved with subsequent blank check
companies similar to our company, although they have agreed not
to participate in the formation of, or become an officer or
director of, any blank
84
check company until we have entered into a definitive agreement
regarding our initial business combination or we have failed to
complete our initial business combination within 18 months
from the closing of this offering.
Potential investors should also be aware of the following other
potential conflicts of interest:
|
|
|
|
|
None of our officers and directors is 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.
|
|
|
|
The sponsors initial shares and sponsor warrants are
subject to transfer restrictions (and in the case of the sponsor
warrants, restrictions on exercise) and will not be released
from escrow until specified dates after completion of our
initial business combination. In addition, the sponsor warrants
purchased by the sponsors and any warrants which our sponsors,
officers and directors may purchase in this offering or in the
aftermarket will expire worthless if an initial business
combination is not completed. Additionally, our sponsors will
not receive liquidation distributions with respect to any of
their initial shares. For the foregoing reasons, our board may
have a conflict of interest in determining whether it is
appropriate to effect our initial business combination with a
particular target business.
|
|
|
|
Our officers and directors may have a conflict of interest with
respect to evaluating a particular business combination if the
retention or resignation of any such officers and directors were
included by a target business as a condition to any agreement
with respect to an initial business combination.
|
In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present
business opportunities to a corporation if:
|
|
|
|
|
the corporation could financially undertake the opportunity;
|
|
|
|
the opportunity is within the corporations line of
business; and
|
|
|
|
it would not be fair to the corporation and its stockholders for
the opportunity not to be brought to the attention of the
corporation.
|
As a result of multiple business affiliations, our officers and
directors may have similar legal obligations relating to
presenting business opportunities meeting the above-listed
criteria to multiple entities. In addition, conflicts of
interest may arise when our board evaluates a particular
business opportunity with respect to the above-listed criteria.
We cannot assure you that any of the above mentioned conflicts
will be resolved in our favor.
Below is a table summarizing the companies to which our officers
and directors owe fiduciary obligations that would conflict with
their fiduciary obligations to us, all of which would have to
(i) be presented appropriate potential target businesses by
our officers and directors, and (ii) reject the opportunity
to acquire such potential target business, prior to their
presentation of such target business to us:
|
|
|
|
|
Individual
|
|
Entity
|
|
Affiliation
|
|
Patrick J. Landers
|
|
LLM Capital Partners
LLC(1)
|
|
Managing Director
|
|
|
Annascaul Advisors LLC
|
|
President and Chief Executive Officer
|
Peter Schofield
|
|
LLM Capital Partners
LLC(1)
|
|
Chief Financial Officer
|
|
|
Washington & Congress Managers, LLC
|
|
Chief Financial Officer
|
|
|
|
(1) |
|
LLM Capital Partners LLC is the manager of LLM Structured Equity
Fund L.P. and LLM Investors L.P. Each of
Messrs. Landers and Schofield may be considered to owe a
fiduciary obligation to each of LLM Structured Equity
Fund L.P. and LLM Investors L.P. |
Mr. Landers, our president and director, currently serves
and will continue to serve as a managing director of LLM Capital
Partners LLC.
Mr. Schofield, our chief financial officer, currently
serves and will continue to serve as a chief financial officer
of LLM Capital Partners LLC and Washington & Congress
Managers, LLC.
85
As a result of these affiliations, Messrs. Landers and
Schofield may have preexisting fiduciary, contractual or other
obligations to those entities that may cause them to have
conflicts in presenting to us specific business opportunities
that may be attractive to us.
In the event we are required to submit our initial business
combination to our public stockholders for a vote, all of the
sponsors have agreed to vote any initial shares held by them in
accordance with the majority of votes cast by the public
stockholders and to vote any public shares they own in favor of
our initial business combination. In addition, our sponsors have
agreed to waive their redemption rights with respect to their
initial shares and any public shares they may own in connection
with the completion of our initial business combination, but
will be entitled to redeem any public shares they may own, in
the event we do not consummate our initial business combination.
Although we do not intend to enter into a business combination
with a target business that is affiliated with our sponsors,
directors or officers, we are not prohibited from doing so. In
the event we enter into such a transaction, we, or a committee
of our independent directors, will obtain an opinion from an
independent investment banking firm that is a member of FINRA
that such a business combination is fair to our stockholders
from a financial point of view. Furthermore, in no event will
any of our sponsors, officers or directors, or any of their
respective affiliates, be paid any finders fee, consulting
fee or other compensation prior to, or for any services they
render in order to effectuate, the completion of our initial
business combination.
86
PRINCIPAL
STOCKHOLDERS
The following table sets forth information regarding the
beneficial ownership of our common stock as of the date of this
prospectus and as adjusted to reflect the sale of our common
stock included in the units offered by this prospectus (assuming
none of the individuals listed purchase units in this offering)
by:
|
|
|
|
|
each person known by us to be the beneficial owner of more than
5% of our outstanding shares of common stock;
|
|
|
|
each of our officers and directors; and
|
|
|
|
all our officers and directors as a group.
|
Unless otherwise indicated, we believe that all persons named in
the table have sole voting and investment power with respect to
all shares of common stock beneficially owned by them.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to the Offering
|
|
After the
Offering(1)(2)
|
|
|
Amount and
|
|
Percentage
|
|
Amount and
|
|
Percentage
|
|
|
Nature of
|
|
of Outstanding
|
|
Nature of
|
|
of Outstanding
|
|
|
Beneficial
|
|
Common
|
|
Beneficial
|
|
Common
|
Name and Address of Beneficial
Owners(3)
|
|
Ownership
|
|
Stock
|
|
Ownership
|
|
Stock
|
|
John L. Shermyen
|
|
|
718,750
|
|
|
|
50.0
|
%
|
|
|
277,778
|
|
|
|
5.0
|
%
|
LLM Structured Equity
Fund L.P.(4)
|
|
|
691,627
|
|
|
|
48.1
|
%
|
|
|
267,296
|
|
|
|
4.8
|
%
|
LLM Investors
L.P.(4)
|
|
|
27,123
|
|
|
|
1.9
|
%
|
|
|
10,482
|
|
|
|
0.2
|
%
|
All directors and officers as a group (3 persons)
|
|
|
1,437,500
|
|
|
|
100.0
|
%
|
|
|
555,556
|
|
|
|
10.0
|
%
|
|
|
|
(1) |
|
Excludes (i) 347,222 shares held by John L. Shermyen,
334,119 shares held by LLM Structured Equity Fund L.P.
and 13,103 shares held by LLM Investors L.P., all of which
will be held in escrow and forfeited on the fifth anniversary of
our initial business combination unless, prior to such time,
either (x) the last sales price of our stock equals or
exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period or
(y) a transaction is consummated following our initial
business combination in which all stockholders have the right to
exchange their common stock for cash consideration which equals
or exceeds $18.00 per share. The holders of these shares have
contractually agreed with us that they will have no ability to
vote any of such shares being held in escrow until such time, if
ever, that such shares are released to the holders. |
|
(2) |
|
Assumes only the sale of 5,000,000 units in this offering
and the sale of 5,000,000 sponsor warrants, but not the exercise
of the 5,000,000 warrants included in such units or the
5,000,000 warrants purchased by our sponsors because they are
not exercisable within 60 days of the date of this
prospectus. Assumes the underwriters over-allotment option
has not been exercised and, therefore, 187,500 shares of
common stock have been forfeited by our sponsors as a result. |
|
(3) |
|
Unless otherwise indicated, the business address of each of the
stockholders is 265 Franklin Street,
20th Floor,
Boston, Massachusetts 02110. |
|
(4) |
|
LLM Capital Partners LLC, the manager of each of LLM Structured
Equity Fund L.P. and LLM Investors L.P., may be considered
to have beneficial ownership of LLMs interest in us. LLM
Capital Partners LLC disclaims beneficial ownership of any
shares in which it does not have a pecuniary interest. |
Our sponsors have agreed to purchase an aggregate of 5,000,000
sponsor warrants prior to the date of this prospectus at the
price of $0.50 per warrant for a purchase price of $2,500,000 in
a private placement to occur simultaneously with the completion
of this offering. All of the proceeds received from the sale of
the sponsor warrants will be financed from available funds and
not from borrowed funds. The purchase price of the sponsor
warrants will be added to the proceeds from this offering to be
held in the trust account. The sponsor warrants will be
identical to the warrants sold in this offering except that if
held by the original holders or their permitted assigns,
(i) they will not be redeemable by us, (ii) they
(including the common stock issuable upon exercise of these
warrants) may not, subject to certain limited exceptions, be
transferred, assigned or sold by our sponsors until 30 days
after the completion of our initial business combination, and
(iii) they may be exercised by the holders on a cashless
basis. On the date of this prospectus, such holders will place
the
87
sponsor warrants into an escrow account maintained by
Continental Stock Transfer & Trust Company acting
as escrow agent where they will be held for so long as the
sponsor warrants are subject to transfer restrictions. Permitted
transferees means immediate family members of the holder, trusts
established by the holder for estate planning purposes and
affiliates of the holder.
If we increase the size of this offering pursuant to
Rule 462(b) under the Securities Act, we may effect a
dividend immediately prior to the consummation of the offering
in such amount as to maintain our sponsors collective
ownership percentage of the issued and outstanding shares of
common stock upon consummation of the offering. If we decrease
the size of the offering, we will effect a reverse split of our
common stock immediately prior to the consummation of the
offering as to maintain our sponsors collective ownership
percentage of the issued and outstanding shares of common stock
upon the date of this prospectus, in each case without giving
effect to the private placement of the sponsor warrants.
On the date of this prospectus, our sponsors will place the
initial shares into an escrow account maintained by Continental
Stock Transfer & Trust Company acting as escrow
agent. Other than transfers made to permitted transferees (i.e.,
immediate family members of the holder, trusts established by
the holder for estate planning purposes and affiliates of the
holder) who agree in writing to be bound to the transfer
restrictions, agree to vote in accordance with the majority of
the votes cast by the public stockholders in the event we seek
stockholder approval in connection with our initial business
combination and waive any rights to participate in any
redemption if we fail to consummate our initial business
combination. Of the initial shares, (i) 638,889 shares (up
to 83,333 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) will be held in
escrow until the first anniversary of our initial business
combination and (ii) 798,611 shares (up to 104,167 of
which will be forfeited if the underwriters over-allotment
option is not exercised in full) will be held in escrow and
forfeited on the fifth anniversary of our initial business
combination unless, prior to such time, either (x) the last
sales price of our stock equals or exceeds $18.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days
within any 30-trading day period or (y) a transaction is
consummated following our initial business combination in which
all stockholders have the right to exchange their common stock
for cash consideration which equals or exceeds $18.00 per
share. However, the holders of the initial shares will retain
all other rights as our stockholders, including, without
limitation, the right to vote such initial shares that have not
been contractually restricted from voting and the right to
receive cash dividends, if declared. Our sponsors have
contractually agreed with us that they will have no ability to
vote any of the 798,611 shares being held in escrow until
such time, if ever, that such shares are released to them. If
dividends are declared and payable in shares of common stock,
such shares shall be held in escrow and shall be subject to
partial forfeiture as described herein. If we are unable to
effect a business combination and liquidate, our sponsors will
not be entitled to any portion of the liquidation proceeds with
respect to their initial shares but will be entitled to
liquidation proceeds with respect to any public shares they may
own.
LLM Capital Partners LLC, LLM Structured Equity Fund L.P.
and LLM Investors L.P. and each of Mr. Shermyen and Landers
are deemed to be our parents and
promoters, as these terms are defined under the
federal securities laws.
88
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In July 2010, our sponsors purchased the initial shares, for an
aggregate purchase price of $25,000, or approximately $0.0174
per share, consisting of (i) 638,889 shares (up to
83,333 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) which will be
held in escrow until the first anniversary of our initial
business combination and (ii) 798,611 shares (up to
104,167 of which will be forfeited if the underwriters
over-allotment option is not exercised in full) which will be
held in escrow and forfeited on the fifth anniversary of our
initial business combination unless, prior to such time, either
(x) the last sales price of our stock equals or exceeds
$18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period or (y) a
transaction is consummated following our initial business
combination in which all stockholders have the right to exchange
their common stock for cash consideration which equals or
exceeds $18.00 per share. Our sponsors have contractually agreed
with us that they will have no ability to vote any of the
798,611 shares being held in escrow until such time, if
ever, that such shares are released to them.
Our sponsors have agreed to purchase an aggregate of 5,000,000
sponsor warrants, at the price of $0.50 per warrant for an
aggregate purchase price of $2,500,000, in a private placement
to be completed simultaneously with the completion of this
offering. All of the proceeds received from the sale of the
sponsor warrants will be added to the proceeds from this
offering to be held in the trust account pending our completion
of an initial business combination. The sponsor warrants will be
identical to the warrants sold in this offering except that if
held by the original holders or their permitted assigns, they
(i) they will not be redeemable by us, (ii) they
(including the common stock issuable upon exercise of these
warrants) may not, subject to certain limited exceptions, be
transferred, assigned or sold by our sponsors until 30 days
after the completion of our initial business combination, and
(iii) they may be exercised by the holders on a cashless
basis. In addition, the sponsor warrants (including the
underlying shares of common stock) will be held in escrow until
30 days following the completion of our initial business
combination. If we do not complete an initial business
combination that meets the criteria described in this
prospectus, the $2,500,000 purchase price of the sponsor
warrants will be included as a part of the amounts payable to
our public stockholders and the sponsor warrants will expire
worthless. The sponsor warrants will be sold in a private
placement pursuant to Section 4(2) or Regulation D of
the Securities Act that will be exempt from registration
requirements under the federal securities laws.
John L. Shermyen, our chairman, chief executive officer and
co-sponsor, and each of LLM Structured Equity Fund L.P. and
LLM Investors L.P., our other co-sponsors, have agreed that they
will be liable to us if and to the extent any claims by a vendor
for services rendered or products sold to us, or a prospective
business target with which we have discussed entering into a
transaction agreement, reduce the amounts in the trust account
available for distribution to our stockholders below $9.85 per
share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full),
except as to any claims by a third party who executed a waiver
of any and all rights to seek access to the trust account and
except as to any claims under our indemnity of the underwriters
of this offering against certain liabilities, including
liabilities under the Securities Act. In the event that an
executed waiver is deemed to be unenforceable against a third
party, Mr. Shermyen, LLM Structured Equity Fund L.P.
and LLM Investors L.P. will not be responsible to the extent of
any liability for such third party claims. Additionally, in the
event either LLM Structured Equity Fund L.P. or LLM
Investors L.P. undertakes a liquidating distribution while their
indemnification obligations are outstanding, they have agreed to
use reasonable efforts to set aside from such distribution,
adequate reserves to cover the reasonably anticipated
liabilities which may be incurred by them. Although we have a
fiduciary obligation to pursue the sponsors to enforce their
indemnification obligations, and intend to pursue such actions
as and when we deem appropriate, there can be no assurance they
will be able to satisfy those obligations, if required to do so.
In the event that the proceeds in the trust account are reduced
below $9.85 per share (or approximately $9.83 per share if the
underwriters over-allotment option is exercised in full
and Mr. Shermyen and our other sponsors assert that they
are unable to satisfy their obligations or that they have no
indemnification obligations related to a particular claim, our
independent directors, if any, would determine whether to take
legal action against Mr. Shermyen and our other sponsors to
enforce their indemnification obligations. While we currently
89
expect that our independent directors would take legal action on
our behalf against Mr. Shermyen and our other sponsors to
enforce their indemnification obligations to us, it is possible
that our independent directors in exercising their business
judgment may choose not to do so in any particular instance.
Accordingly, we cannot assure you that due to claims of
creditors the actual value of the per share redemption price (or
per share liquidation distribution if we are unable to effect a
redemption of our public shares) will not be less than $9.85 per
share (or approximately $9.83 per share if the
underwriters overallotment option is exercised in full).
In order to meet our working capital needs following the
consummation of this offering, certain of our officers and
directors may, but are not obligated to, loan us funds, from
time to time, or at any time, in whatever amount such officer or
director deems reasonable in his or her sole discretion, which
may be convertible into warrants of the post business
combination entity at a price of $0.50 per warrant at the option
of the lender. The warrants would be identical to the sponsor
warrants. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements
exist. However, such loans will not have any recourse against
the trust account nor bear any interest prior to the
consummation of the business combination and will have other
terms that are no more favorable than could be obtained by a
third party.
LLM Capital Partners LLC has agreed to provide us with office
space, administrative services and secretarial support for a fee
of $7,500 per month.
We will reimburse our officers and directors 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 businesses and business combinations.
Reimbursable
out-of-pocket
expenses incurred by our officers and directors will not be
repaid out of proceeds held in the trust account 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. The financial interest of
such persons could influence their motivation in selecting a
target business and thus, there may be a conflict of interest
when determining whether a particular business combination is in
our public stockholders best interest.
Other than a payment of $7,500 per month payable to LLM Capital
Partners LLC to compensate such entity for our use of its office
space, general administrative services and secretarial support
and the reimbursable
out-of-pocket
expenses payable to our officers and directors, no compensation,
reimbursements, cash payments or fees of any kind, including
finders, consulting fees or other similar compensation,
including the issuance of any of our securities, will be paid to
our sponsors, officers or directors, or to any of our or their
respective affiliates prior to or with respect to a business
combination.
After the consummation of a business combination, if any, 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. 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.
90
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
effective date of the registration statement,
1,437,500 shares of common stock will be outstanding. No
shares of preferred stock are currently outstanding.
Units and
shares of common stock
Each unit consists of one share of our common stock and one
warrant. Each warrant entitles its holder to purchase one share
of our common stock.
The units will begin trading on or promptly after the date of
this prospectus. The shares of common stock and warrants
comprising the units will begin separate trading on the fifth
business day following the earlier to occur of the expiration of
the underwriters over-allotment option, its exercise in
full, or the announcement by the underwriters of their intention
not to exercise all or any remaining portion of the
underwriters over-allotment option, subject to our having
filed the
Form 8-K
described below and having issued a press release announcing
when such separate trading will begin.
In no event will the shares of our 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 intend to
file this
Form 8-K
promptly after the date of this offering, which is anticipated
to take place four business days from the date of this
prospectus. The audited balance sheet will include proceeds we
receive from the exercise of the underwriters
over-allotment option if the underwriters over-allotment
option is exercised prior to the filing of the
Form 8-K.
If the underwriters over-allotment option is exercised
following the filing of such
Form 8-K,
a second or amended
Form 8-K
will be filed to provide updated information reflecting the
exercise of the underwriters over-allotment option.
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.
Following the date that the shares of our common stock and
warrants are eligible to trade separately, any security holder
may elect to separate a unit and trade the shares of common
stock or warrants separately or as a unit. Even if the component
parts of the units are separated and traded separately, the
units will continue to be quoted as a separate security, and
consequently, any subsequent security holder owning shares of
our common stock and warrants may elect to combine them together
and trade them as a unit. Security holders will have the ability
to trade our securities as units until such time as the warrants
expire or are redeemed.
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 a stockholder vote to approve our initial
business combination, if any, our sponsors have agreed to vote
their initial shares in accordance with the majority of the
votes cast by the public stockholders. In addition, our
sponsors, officers, directors and members of our advisory board
have also agreed to vote any shares of common stock acquired in
this offering or in the aftermarket in favor of our initial
business combination submitted to our stockholders for approval,
if any. Our sponsors, officers, directors and members of our
advisory board have agreed to waive redemption rights in
connection with any potential initial business combination.
In the event we seek stockholder approval in connection with a
business combination, we shall, in accordance with
Article Sixth of our amended and restated certificate of
incorporation, proceed with the business combination only if a
majority of the outstanding shares of common stock voted are
voted in favor of the business combination. However, our
sponsors, officers, directors, advisors
or their affiliates
91
participation in privately-negotiated transactions (as described
in this prospectus), if any, could result in the approval of a
business combination even if the holders of a majority of the
outstanding shares of our common stock vote, or indicate their
intention to vote against, such business combination. For
purposes of seeking approval of the majority of our outstanding
shares of common stock, non-votes will have no effect on the
approval of a business combination once a quorum is obtained. We
intend to give approximately 30 (but not less than 10 nor more
than 60) days prior written notice of any such meeting, if
required, at which a vote shall be taken to approve a business
combination. In addition, we will not proceed with a business
combination unless the proposal to amend our amended and
restated certificate of incorporation to provide for our
perpetual corporate existence, and any other proposal requiring
approval of a majority of our outstanding shares of stock in
connection with an initial business combination is approved by a
majority of our outstanding shares of common stock.
Our board of directors is divided into two classes, each of
which will generally serve for a term of two years with only one
class of directors being elected in each year. There is no
cumulative voting with respect to the election of directors,
with the result that the holders of more than 50% of the shares
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
within 18 months from the closing of this offering, we will
(i) cease all operations except for the purposes of winding
up, (ii) as promptly as reasonably possible, redeem 100% of
our public shares for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law,
and subject to the requirement that any refund of income taxes
that were paid from the trust account which is received after
the redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. Our sponsors have agreed
to waive their redemption rights with respect to their initial
shares but will be entitled to redeem any public shares they may
own, in the event we do not consummate our initial business
combination.
Our stockholders are entitled to receive ratable dividends when,
as and if declared by the board of directors out of funds
legally available therefore. In the event of a liquidation,
dissolution or winding up of the company after a business
combination, our stockholders are entitled to share ratably in
all assets remaining available for distribution to them after
payment of liabilities and after provision is made for each
class of stock, if any, having preference over the common stock.
Our stockholders have no preemptive or other subscription
rights. There are no sinking fund provisions applicable to the
common stock, except that we will provide our stockholders with
the opportunity to redeem their shares of our common stock for
cash equal to their pro rata share of the aggregate amount then
on deposit in the trust account (including interest), less
franchise and income taxes payable, upon the completion of our
initial business combination, subject to the limitations
described herein. Unlike many other blank check companies which
hold stockholder votes and conduct proxy solicitations in
conjunction with their initial business combinations and related
redemptions of public shares for cash upon consummation of such
initial business combinations even when a vote is not required
by law, we intend to consummate our initial business combination
without a stockholder vote and conduct the related redemptions
of our shares of common stock pursuant to the tender offer rules
of the SEC and file tender offer documents with the SEC. The
tender offer documents will contain substantially the same
financial and other information about the initial business
combination and the redemption rights as is required under the
SECs proxy rules. If, however, a stockholder vote is
required by law, or we decide to hold a stockholder vote for
other business or legal reasons, we will conduct the redemptions
like many other blank check companies in conjunction with a
proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. We will consummate our initial
business combination only if holders of no more than 88% of our
public shares elect to redeem their shares and, solely if we
seek stockholder approval, a majority of the outstanding shares
of common stock voted are voted in favor of the business
combination. Our sponsors have
92
agreed to waive their redemption rights with respect to their
initial shares and any public shares they may own in connection
with the completion of our initial business combination.
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 to the extent we seek stockholder approval in
connection with a business combination.
We do not currently intend to hold an annual meeting of
stockholders until after we consummate a business combination,
and thus may not be in compliance with Section 211(b) of
the Delaware General Corporation Law. Therefore, if our
stockholders want us to hold an annual meeting prior to our
consummation of a business combination, they may attempt to
force us to hold one by submitting an application to the
Delaware Court of Chancery in accordance with
Section 211(c) of the Delaware General Corporation Law.
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 currently issued or outstanding.
Accordingly, our board of directors is empowered, without
stockholder approval, to issue preferred stock with dividend,
liquidation, redemption, voting or other rights which could
adversely affect the voting power or other rights of the holders
of common stock. However, the underwriting 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 the
preferred stock to effect a business combination. In addition,
the preferred stock could be utilized as a method of
discouraging, delaying or preventing a change in control of us.
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
Public
Stockholder Warrants
Each warrant entitles the registered holder to purchase one
share of our common stock at a price of $11.50 per share,
subject to adjustment as discussed below, at any time commencing
on the later of:
|
|
|
|
|
30 days after the completion of our initial business
combination; and
|
|
|
|
one year from the closing of this offering.
|
The warrants will expire five years from the date of our
business combination at 5:00 p.m., New York City time, or
earlier upon redemption or liquidation of the trust account.
Holders of our public warrants will be able to exercise the
warrants for cash only if we have an effective registration
statement covering the shares of common stock issuable upon
exercise of the warrants and a current prospectus relating to
such common stock and, even in the case when cashless exercise
is permitted as provided below, 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. Although we have undertaken in the
warrant agreement, and therefore have a contractual obligation,
to use our best efforts to maintain an effective registration
statement covering the shares of common stock issuable upon
exercise of the warrants following completion of this offering,
and we intend to comply with our undertaking, we cannot assure
you that we will be able to do so. The expiration of warrants
prior to exercise would result in each unit holder paying the
full unit purchase price solely for the shares of common stock
underlying the unit.
Notwithstanding the foregoing, if a registration statement
covering the common stock issuable upon exercise of the warrants
is not effective within a specified period following the
completion of our initial business combination, warrant holders
may, until such time as there is an effective registration
statement and
93
during any period when we shall have failed to maintain an
effective registration statement, exercise warrants on a
cashless basis.
Once the warrants become exercisable, we may redeem the
outstanding warrants (excluding sponsor warrants held by our
sponsors or their permitted assigns):
|
|
|
|
|
in whole and not in part;
|
|
|
|
at a price of $0.01 per warrant;
|
|
|
|
on not less than 30 days prior written notice of
redemption, or the
30-day
redemption period, to each warrant holder; and
|
|
|
|
if, and only if, the last sales price of our common stock equals
or exceeds $17.50 per share (subject to adjustment for splits,
dividends, recapitalization and other similar events) for any 20
trading days within a 30 trading day period ending three
business days before we send the notice of redemption to the
warrant holders;
|
provided that on the date we give notice of redemption and
during the entire period thereafter until the time we redeem the
warrants, we have an effective registration statement covering
shares of common stock issuable upon exercise of the warrants
and a current prospectus relating to such common stock.
We will not redeem the warrants unless there is an effective
registration statement covering the shares of common stock
issuable upon exercise of the warrants, and a current prospectus
relating to those shares of common stock is available throughout
the 30-day
redemption notice period.
If we call the warrants for redemption, we will have the option
to require all holders that subsequently wish to exercise
warrants to do so on a cashless basis. In such
event, each holder would pay the exercise price by surrendering
the warrants for that number of shares of common stock equal to
the quotient obtained by dividing (x) the product of the
number of shares of common stock underlying the warrants,
multiplied by the difference between the exercise price of the
warrants and the fair market value by (y) the fair market
value. The fair market value shall mean the average
reported last sale price of the common stock for the
10 trading days ending on the third trading day prior to
the date on which the notice of redemption is sent to the
holders of warrants.
The warrants will be issued in registered form under a warrant
agreement between Continental Stock Transfer &
Trust Company, as warrant agent, and us. The warrant
agreement provides that the terms of the warrants maybe amended
without the consent of any holder to cure any ambiguity or
correct any defective provision, but requires the approval by
the holders of at least 65% of the then outstanding public
warrants in order to make any change that adversely affects the
interests of the registered holders. The material provisions of
the warrants are set forth herein and a copy of the warrant
agreement has been filed as an exhibit to the registration
statement of which this prospectus is a part.
The redemption provisions for our warrants have been established
at a price which is intended to provide a reasonable premium to
the initial exercise price and provide a sufficient differential
between the then-prevailing common stock price and the warrant
exercise price to absorb any negative market reaction to our
redemption of the warrants. There can be no assurance, however,
that the price of the common stock will exceed either $17.50 or
the warrant exercise price of $11.50 after we call the warrants
for redemption and the price may in fact decline as a result of
the limited liquidity following any such call for redemption.
The exercise price, the redemption price and number of shares of
common stock issuable on exercise of the warrants may be
adjusted in certain circumstances, including in the event of a
stock dividend, 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 before 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, or through a cashless exercise
94
(when permitted). 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.
Warrant holders may elect to be subject to a restriction on the
exercise of their warrants such that an electing warrant holder
would not be able to exercise their warrants to the extent that,
after giving effect to such exercise, such holder would
beneficially own in excess of 9.9% of the shares of common stock
outstanding.
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.
Sponsor
warrants
Our sponsors have agreed to purchase an aggregate of 5,000,000
sponsor warrants from us at a price of $0.50 per warrant in a
private placement to be completed simultaneously with the
completion of this offering. All of the proceeds received from
the sale of the sponsor warrants ($2,500,000) will be placed in
the trust account. The sponsor warrants will be identical to the
warrants sold in this offering except that if held by the
original holders or their permitted assigns, they (i) they
will not be redeemable by us, (ii) they (including the
common stock issuable upon exercise of these warrants) may not,
subject to certain limited exceptions, be transferred, assigned
or sold by our sponsors until 30 days after the completion
of our initial business combination, and (iii) they may be
exercised by the holders on a cashless basis. In addition, the
sponsor warrants will be held in escrow until 30 days
following the completion of our initial business combination.
The proceeds from the sale of the sponsor warrants will be held
in our trust account for the benefit of our public stockholders.
If we do not complete our initial business combination as
described in this prospectus, the sponsor warrants will become
worthless.
The sponsor warrants will be sold in a private placement
pursuant to Regulation D of the Securities Act that will be
exempt from registration requirements under the federal
securities laws. However, the holders of these sponsor warrants
have agreed that they will not exercise them if, at the time of
exercise, an effective registration statement and a current
prospectus relating to the common stock issuable upon exercise
of the public warrants is not available.
The sponsor warrants will become worthless if we do not
consummate a business combination. The financial interests of
our sponsors may influence their motivation in identifying and
selecting a target business and completing a business
combination in a timely manner. Consequently, there may be a
conflict of interest in selecting a target business when
determining whether a particular business combination is in our
public stockholders best interest.
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.
Amendments
to our Certificate of Incorporation
Our amended and restated certificate of incorporation contains
certain requirements and restrictions relating to this offering
that will apply to us until the consummation of our business
combination. These provisions cannot be amended without the
approval of 65% of our stockholders. Specifically, our amended
and restated certificate of incorporation provides, among other
things, that:
|
|
|
|
|
upon the date of this prospectus, $49,250,000, or $56,525,000 if
the underwriters over-allotment option is exercised in
full, shall be placed into the trust account;
|
95
|
|
|
|
|
if our initial business combination is not completed within
18 months of the date of this prospectus, we will
(i) cease all operations except for the purposes of winding
up, (ii) as promptly as reasonably possible, redeem 100% of
our public shares for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account (including
interest), less franchise and income taxes payable, which
redemption will completely extinguish public stockholders
rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law,
and subject to the requirement that any refund of income taxes
that were paid from the trust account which is received after
the redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law;
|
|
|
|
prior to our initial business combination, we may not issue
additional stock that participates in any manner in the proceeds
of the trust account, or that votes as a class with the common
stock sold in this offering on a business combination;
|
|
|
|
we may not enter into any transaction with any of our affiliates
without the prior approval by a majority of the members of our
board of directors who do not have an interest in the
transaction who had access, at our expense, to our attorneys or
independent legal counsel, and unless our disinterested
directors determine that the terms of such transaction are no
less favorable to it than those that would be available to us
with respect to such a transaction from unaffiliated third
parties; and
|
|
|
|
although we do not intend to enter into a business combination
with a target business that is affiliated with our sponsors, our
directors or officers, we are not prohibited from doing so. In
the event we enter into such a transaction, we, or a committee
of our independent directors, will obtain an opinion from an
independent investment banking firm that is a member of FINRA
that such a business combination is fair to our stockholders
from a financial point of view.
|
In the event we seek stockholder approval in connection with our
business combination, our amended and restated certificate of
incorporation provides that:
|
|
|
|
|
we may consummate our initial business combination if approved
by a majority of the shares of common stock voted by our
stockholders at a duly held stockholders meeting and holders of
no more than 88% of our public shares elect to redeem their
shares for a pro rata share of the trust account; and
|
|
|
|
if a proposed business combination is approved and completed,
public stockholders exercising their redemption rights and
voting (1) in favor of the business combination will be
entitled to receive a pro rata portion of the trust account
including interest and (2) against the business combination
will be entitled to receive a pro rata portion of the trust
account excluding interest, in each case excluding taxes.
|
Quotation
of Securities
We have applied to have our units, common stock and warrants
quoted on the on the OTCBB under the symbols
,
,
,
respectively. Our units will be quoted on the OTCBB on or
promptly after the effective date of the registration statement.
Following the date the shares of our common stock and warrants
are eligible to trade separately, the shares of our common stock
and warrants will be quoted separately and as a unit on the on
the OTCBB.
96
Delaware
Anti-Takeover Law
We will be subject to the provisions of Section 203 of the
DGCL regulating corporate takeovers upon consummation of this
offering. This statute prevents certain Delaware corporations,
under certain circumstances, from engaging in a business
combination with:
|
|
|
|
|
a stockholder who owns 15% or more of our outstanding voting
stock (otherwise known as an interested stockholder);
|
|
|
|
an affiliate of an interested stockholder; or
|
|
|
|
an associate of an interested stockholder, for three years
following the date that the stockholder became an interested
stockholder.
|
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:
|
|
|
|
|
our board of directors approves the transaction that made the
stockholder an interested stockholder, prior to the
date of the transaction;
|
|
|
|
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
|
|
|
|
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.
|
97
SHARES ELIGIBLE
FOR FUTURE SALE
Immediately after this offering, we will have
6,250,000 shares of our common stock outstanding, or
7,187,500 shares if the underwriters over-allotment
option is exercised in full. Of these shares, the
5,000,000 shares of common stock sold in this offering, or
5,750,000 shares of common stock if the underwriters
over-allotment option is exercised in full, 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
1,250,000 shares of common stock (or 1,437,500 if the
underwriters 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.
Of these shares, (i) 638,889 shares (up to 83,333 of
which will be forfeited if the underwriters over-allotment
option is not exercised in full) will be held in escrow until
the first anniversary of our initial business combination and
(ii) 798,611 shares (up to 104,167 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) will be held in escrow and forfeited on the
fifth anniversary of our initial business combination unless,
prior to such time, either (x) the last sales price of our
stock equals or exceeds $18.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day
period or (y) a transaction is consummated following our
initial business combination in which all stockholders have the
right to exchange their common stock for cash consideration
which equals or exceeds $18.00 per share. Our sponsors have
contractually agreed with us that they will have no ability to
vote any of the 798,611 shares being held in escrow until
such time, if ever, that such shares are released to them. See
Principal Stockholders. Additionally, simultaneously
with the completion of this offering, there will be 5,000,000
sponsor warrants outstanding that upon full exercise will result
in the issuance of 5,000,000 shares of common stock to the
holders of the sponsor warrants. The sponsor warrants (including
the shares of common stock underlying such warrants) will be
placed in escrow until 30 days following the completion of
our initial business combination and will only be released prior
to that date under limited exceptions. See Principal
Stockholders. Such initial shares of common stock, sponsor
warrants and the underlying shares of common stock are entitled
to registration rights as described below under
Registration Rights.
Rule 144
Pursuant to Rule 144, a person who has beneficially owned
restricted shares of our common stock or warrants for at least
six months would be entitled to sell their securities provided
that (i) such person is not deemed to have been one of our
affiliates at the time of, or at any time during the three
months preceding, a sale and (ii) we are subject to the
Exchange Act periodic reporting requirements for at least three
months before the sale.
Persons who have beneficially owned restricted shares of our
common stock or warrants for at least six months but who are our
affiliates at the time of, or at any time during the three
months preceding, a sale, would be subject to additional
restrictions, by which such person would be entitled to sell
within any three-month period only a number of securities that
does not exceed the greater of either of the following:
|
|
|
|
|
1% of the total number of shares of our common stock then
outstanding, which will equal 55,555 shares of our common
stock immediately after this offering or 63,888 shares of
our common stock if the underwriters over-allotment is
exercised in full; or
|
|
|
|
the average weekly trading volume of the shares of our common
stock during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
|
Sales under Rule 144 are also limited by manner of sale
provisions, notice requirements and the availability of current
public information about us.
98
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell
Companies
Rule 144 may not be used for resale of securities issued by
shell companies (other than business combination related shell
companies) or issuers that have been at any time previously a
shell company unless the following conditions are met:
|
|
|
|
|
the issuer of the securities that was formerly a shell company
has ceased to be a shell company;
|
|
|
|
the issuer of the securities is subject to the reporting
requirements of Section 13 or 18(d) of the Exchange Act;
|
|
|
|
the issuer of the securities has filed all Exchange Act reports
and material required to be filed, as applicable, during the
preceding 12 months (or such shorter period that the issuer
was required to file such reports and materials), other than
Form 8-K
reports; and
|
|
|
|
at least one year has elapsed from the time that the issuer
filed current Form 10 type information with the SEC
reflecting its status as an entity that is not a shell company.
|
As a result, our sponsors will be able to sell the initial
shares (to the extent released from escrow) and sponsor
warrants, as applicable, pursuant to Rule 144 without
registration one year after we have completed our initial
business combination.
Registration
Rights
Our sponsors and their permitted transferees will be entitled to
registration rights pursuant to a registration rights agreement
to be signed simultaneously with the completion of this
offering. Such holders will be entitled to demand registration
rights and certain piggy-back registration rights
with respect to the initial shares and the sponsor warrants and
the common stock underlying the sponsor warrants, commencing, in
the case of the initial shares, upon their release from escrow
and commencing, in the case of the sponsor warrants and the
respective common stock underlying the sponsor warrants,
30 days after the completion of our initial business
combination.
99
UNDERWRITING
In accordance with the terms and subject to the conditions
contained in an underwriting agreement, we have agreed to sell
to the underwriters named below, for which Morgan Joseph LLC is
acting as representative and sole book-running manager, and the
underwriters have severally, and not jointly, agreed to
purchase, on a firm commitment basis, the number of units
offered in this offering set forth opposite their respective
names below:
|
|
|
|
|
|
|
Number of
|
|
Underwriters
|
|
Units
|
|
|
Morgan Joseph LLC
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
5,000,000
|
|
|
|
|
|
|
A copy of the underwriting agreement has been filed as an
exhibit to the registration statement of which this prospectus
forms a part.
The underwriting agreement provides that the underwriters are
obligated to purchase all the units set forth opposite their
name in the offering if any are purchased, other than those
units covered by the underwriters over-allotment option
described below.
We have granted the underwriters a
45-day
option to purchase up to 750,000 additional units at the initial
public offering price less the underwriting discounts and
commissions. The option may be exercised only to cover any
over-allotments of units.
We estimate that the total out of pocket expenses for this
offering, excluding underwriting discounts and commissions, will
be approximately $500,000, all of which will be payable by us.
These expenses will be partially funded by an aggregate of loans
and advances equaling $75,000 as of July 30, 2010 made by
LLM Structured Equity Fund L.P and John L. Shermyen, two of
our sponsors, which loans will be repaid from the proceeds of
this offering. We have been advised by the representative of the
underwriters that the underwriters do not expect sales to
accounts over which the underwriters have discretionary
authority to exceed 5% of the number of units being offered.
The underwriters may deliver prospectuses via
e-mail both
as a PDF document and by a link to the Securities and Exchange
Commissions website and websites hosted by the
underwriters and other parties, and the prospectus may also be
made available on websites maintained by selected dealers and
selling group members participating in this offering. The
underwriters may agree to allocate a number of units to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions may be
allocated by the representative to underwriters and selling
group members that may make Internet distributions on the same
basis as other allocations.
State
Blue Sky Information
We will offer and sell the units to retail customers only in
Colorado, Delaware, the District of Columbia, Florida, Georgia,
Hawaii, Illinois, Louisiana, New York and Rhode Island. We have
applied to have the units registered for sale, or we are relying
on exemptions from registration in the states mentioned above.
In states that require registration, we will not sell the units
to retail customers in these states until such registration is
effective in each of these states (including in Colorado,
pursuant to
11-51-302(6)
of the Colorado Revised Statutes).
If you are not an institutional investor, you may purchase our
securities in this offering only in the jurisdictions described
directly above. Institutional investors in every state except in
Idaho may purchase the units in this offering pursuant to
exemptions provided to such entities under the Blue Sky laws of
various states. The definition of an institutional
investor varies from state to state but generally includes
financial institutions, broker-dealers, banks, insurance
companies and other qualified entities.
The National Securities Markets Improvement Act of 1996, or
NSMIA, which is a federal statute, prevents or preempts the
states from regulating transactions in certain securities, which
are referred to as
100
covered securities. This statute allows the states to
investigate companies if there is a suspicion of fraud or
deceit, or unlawful conduct by a broker or dealer, in connection
with the sale of securities. If there is a finding of fraudulent
activity, the states can regulate or bar the sale of covered
securities in a particular case.
State securities laws either require that a companys
securities be registered for sale or that the securities
themselves or the transaction under which they are issued, are
exempt from registration. When a state law provides an exemption
from registration, it is excusing an issuer from the general
requirement to register securities before they may be sold in
that state. States may, by rule or regulation, place conditions
on the use of exemptions, so that certain companies may not be
allowed to rely on the exemption for the sale of their
securities. If an exemption is not available and the securities
the company wishes to sell are not covered securities under the
federal statute, then the company must register its securities
for sale in the state in question.
We will file periodic and annual reports under the Exchange Act.
Therefore, under NSMIA, the states and territories of the United
States are preempted from regulating the resale by stockholders
of the units, from and after the effective date, and the common
stock and warrants comprising the units, once they become
separately transferable, because our securities will be covered
securities. However, NSMIA does allow states and territories of
the United States to require notice filings and collect fees
with regard to these transactions and a state may suspend the
offer and sale of securities within such state if any such
required filing is not made or fee is not paid. As of the date
of this prospectus, the following states and territories do not
require any notice filings or fee payments and stockholders may
resell the units, and the common stock and warrants comprising
the units, once they become separately transferable:
Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, District of Columbia, Florida, Georgia,
Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana,
Maine, Massachusetts, Minnesota, Mississippi, Missouri,
Nebraska, Nevada, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South
Carolina, South Dakota, Utah, Virginia, Virgin Islands,
Washington, West Virginia, Wisconsin and Wyoming.
Additionally, the stockholders may resell the units, and the
common stock and warrants comprising the units, once they become
separately transferable, if the proper notice filings have been
made and fees paid in the following states and territories:
Maryland, Michigan, Montana, New Hampshire, North Dakota,
Oregon, Puerto Rico, Tennessee, Texas and Vermont.
As of the date of this prospectus, we have not determined in
which of these states, if any, we will submit the required
filings or pay the required fee. Additionally, if any of the
states that have not yet adopted a statute, rule or regulation
relating to the NSMIA adopts such a statute in the future
requiring a filing or fee or if any state amends its existing
statutes, rules or regulations with respect to its requirements,
we would need to comply with those new requirements in order for
the securities to continue to be eligible for resale in those
jurisdictions.
In addition, aside from the exemption from registration provided
by the NSMIA, we believe that the units, from and after the
effective date, and the common stock and warrants comprising the
units, once they become separately transferable, may be eligible
for sale on a secondary market basis in various states, without
any notice filings or fee payments, based upon the availability
of an applicable exemption from the states registration
requirements, in certain instances subject to waiting periods,
notice filings or fee payments.
Despite the exemption from state registration provided by the
NSMIA described above, the state of Idaho deems blank check
offerings inherently fraudulent and such offerings may not be
registered or qualify for an exemption from registration in that
state. Although we are not aware of any other state having used
these powers to prohibit or restrict resales of securities
issued by blank check companies generally, certain state
securities commissioners view blank check companies unfavorably
and might use these powers, or threaten to use these powers, to
hinder the resale of securities of blank check companies in
their states.
101
Sales of
Our Securities in Canada
The units sold in this offering have not been and will not be
qualified for distribution under applicable Canadian securities
laws. Units may be offered to residents of Canada pursuant to
exemptions from the prospectus requirements of such laws.
Pricing
of Securities
We have been advised by the representative that the underwriters
propose to offer the units to the public at the initial offering
price set forth on the cover page of this prospectus.
Before this offering, there has been no market for our
securities. The initial public offering price was determined by
negotiation between us and the underwriters. The principal
factors that were considered in determining the initial public
offering price were:
|
|
|
|
|
the information presented in this prospectus and otherwise
available to the underwriters;
|
|
|
|
the history of and prospects of companies whose principal
business is the acquisition of other companies;
|
|
|
|
prior offerings of those companies;
|
|
|
|
the ability of our management and their experience in
identifying operating companies;
|
|
|
|
our prospects for acquiring an operating business at attractive
values;
|
|
|
|
the present state of our development and our current financial
condition and capital structure;
|
|
|
|
the recent market prices of, and the demand for, publicly traded
securities of generally comparable companies;
|
|
|
|
general conditions of the securities markets at the time of the
offering; and
|
|
|
|
other factors as were deemed relevant.
|
The factors described above were not assigned any particular
weight. Rather, these factors, were considered as a totality in
our negotiation with the underwriters over our initial public
offering price. We offer no assurances that the initial public
offering price will correspond to the price at which our units
will trade in the public market subsequent to the offering or
that an active trading market for the units, common stock or
warrants will develop and continue after the offering.
Over-allotment
and Stabilizing Transactions
Rules of the SEC may limit the ability of the underwriters to
bid for or purchase our securities in the open market before the
distribution of the securities is completed. However, the
underwriters may engage in the following activities in
accordance with the rules:
|
|
|
|
|
Stabilizing Transactions. The underwriters may
make bids or purchases in the open market for the purpose of
pegging, fixing or maintaining the price of our securities.
|
|
|
|
Over-Allotments and Syndicate Coverage
Transactions. The underwriters may create a short
position in our securities by selling more of our securities
than are set forth on the cover page of this prospectus. If the
underwriters create a short position during the offering, the
representative may engage in syndicate covering transactions by
purchasing our securities in the open market. The representative
may also elect to reduce any short position by exercising all or
part of the underwriters over-allotment option.
|
|
|
|
Penalty Bids. The representative may reclaim a
selling concession from a syndicate member when the units
originally sold by the syndicate member are purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
|
102
Stabilization and syndicate covering transactions may cause the
market prices of the securities to be higher than they would be
in the absence of these transactions. The imposition of a
penalty bid may also have an effect on the market prices of the
securities if it discourages resales.
Neither we nor the underwriters make any representation or
prediction as to the effect the transactions described above may
have on the market prices of our securities. These transactions
may occur on the OTCBB, another in the
over-the-counter
market or on any trading market. If any of these transactions
are commenced, they may be discontinued without notice at any
time.
The distribution of our securities will end upon the
underwriters cessation of selling efforts and
stabilization activities, provided, however, in the event the
underwriters were to exercise their over-allotment option to
purchase securities in excess of their actual syndicate short
position, the distribution will not be deemed to have been
completed until all of the securities have been sold.
Commissions
and Discounts
The following table summarizes the compensation we will pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Unit
|
|
Total
|
|
|
Without Over-
|
|
With Over-
|
|
Without Over-
|
|
With Over-
|
|
|
Allotment
|
|
Allotment
|
|
Allotment
|
|
Allotment
|
|
Underwriting discounts and commissions paid by
us(1)
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
1,500,000
|
|
|
$
|
1,725,000
|
|
Contingent fees paid by
us(2)
|
|
|
0.40
|
|
|
|
0.40
|
|
|
|
1,981,250
|
|
|
|
2,275,625
|
|
|
|
|
(1) |
|
Based on the underwriters discount equal to 3.0% of the
gross proceeds from the sale of units offered to the public. |
|
(2) |
|
Based on the following contingent fees that will become payable
from the amounts held in the trust account solely in the event
we consummate our initial business combination: (A) an
advisory fee equal to 1.5% of the gross proceeds from the sale
of the units offered to the public payable to Morgan Joseph LLC;
and (B) a contingent fee equal to 2.5% of the aggregate
amount of the funds released from the trust account to us and/or
to our target upon completion of our initial business
combination payable to Morgan Joseph LLC and such other firms
(which may or may not be underwriters), if any, who are
instrumental in advising us in connection with the completion of
our initial business combination. |
We have agreed to reimburse the representative of the
underwriters for the fees of an investigative search firm of the
representatives choice hired to conduct due diligence
investigations of our officers and directors, up to an aggregate
amount of $3,000 for each individual for which a search is
conducted.
Sponsor
Shares and Sponsor Warrants
On the date of this prospectus, our sponsors will place the
initial shares into an escrow account maintained by Continental
Stock Transfer & Trust Company acting as escrow
agent. Other than transfers made to permitted transferees who
agree in writing to be bound to the transfer restrictions, agree
to vote in accordance with the majority of votes cast by the
public stockholders in the event we seek stockholder approval in
connection with our initial business combination and waive any
rights to participate in any liquidation distribution if we fail
to consummate our initial business combination, the initial
shares will be held in escrow and released to the sponsors (or
their permitted transferees such as immediate family members or
estate planning vehicles) as follows:
(i) 638,889 shares (up to 83,333 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) will be held in escrow until the first
anniversary of our initial business combination and
(ii) 798,611 shares (up to 104,167 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) will be held in escrow and forfeited on the
fifth anniversary of our initial business combination unless,
prior to such time, either (x) the last sales price of our
stock equals or exceeds $18.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day
period or (y) a transaction is
103
consummated following our initial business combination in which
all stockholders have the right to exchange their common stock
for cash consideration which equals or exceeds $18.00 per share.
In addition, simultaneously with the completion of this
offering, our sponsors will purchase an aggregate of 5,000,000
sponsor warrants from us at a price of $0.50 per warrant in a
private placement pursuant to Section 4(2) or
Regulation D of the Securities Act. The sponsor warrants
will be identical to the warrants sold in this offering except
that if held by the original holders or their permitted assigns,
(i) they will not be redeemable by us, (ii) they
(including the common stock issuable upon exercise of these
warrants) may not, subject to certain limited exceptions, be
transferred, assigned or sold by our sponsors until 30 days
after the completion of our initial business combination, and
(iii) they may be exercised by the holders on a cashless
basis. In addition, the sponsor warrants will be held in escrow
until 30 days following the completion of our initial
business combination.
No placement fees will be payable in connection with any of
these private placements.
Other
Services
The underwriters and their respective affiliates may in the
future perform various financial advisory, commercial banking
and investment banking services for us or certain of our
affiliates in the ordinary course of business, for which they
will receive customary fees and expenses.
Indemnification
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments that the
underwriters may be required to make in that respect.
Quotation
We have applied to quote the units on the OTCBB under the symbol
.
Upon separate trading of the securities comprising the units,
the common stock and the warrants will be quoted on the OTCBB
under the symbols
and
,
respectively. Following the date that the shares of our common
stock and warrants are eligible to trade separately, the units
will continue to be quoted for trading, and any security holder
may elect to separate a unit and trade the common stock or
warrants separately or as a unit.
104
LEGAL
MATTERS
Goodwin Procter LLP, New York, New York, is passing on the
validity of the securities offered in this prospectus. McDermott
Will & Emery LLP, New York, New York, is acting as
counsel for the underwriters in this offering.
EXPERTS
The financial statements of L&L Acquisition Corp. as of
July 30, 2010 and for the period from July 26, 2010
(inception) through July 30, 2010, appearing in this
prospectus and the related registration statement have been
audited by Rothstein, Kass & Company, P.C.,
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 MORE 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.
As a result of this offering, we and our stockholders will
become subject to the proxy solicitation rules, annual and
periodic reporting requirements, restrictions of stock purchases
and sales by affiliates and other requirements of the Exchange
Act, and we will file periodic reports and other information
with the SEC. These periodic reports and other information will
be available for inspection and copying at the SECs Public
Reference Room and the website of the SEC referenced above. We
may furnish our stockholders with annual reports containing
audited financial statements certified by independent auditors
and quarterly reports containing unaudited financial statements
for the first three quarters of each fiscal year.
105
|
|
|
|
|
|
|
|
F-2
|
|
Financial Statements:
|
|
|
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
L&L Acquisition Corp. (a development stage company)
We have audited the accompanying balance sheet of L&L
Acquisition Corp. (a development stage company) (the
Company) as of July 30, 2010, and the related
statements of operations, changes in stockholders equity,
and cash flows for the period ended July 26, 2010 (date of
inception) to July 30, 2010. These financial statements are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the 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 L&L Acquisition Corp. (a development stage company) as
of July 30, 2010, and the results of its operations and its
cash flows for the period July 26, 2010 (date of inception)
to July 30, 2010, in conformity with accounting principles
generally accepted in the United States of America.
Roseland, New Jersey
August 18, 2010
F-2
L&L
ACQUISITION CORP.
(a development stage company)
BALANCE SHEET
|
|
|
|
|
|
|
July 30,
|
|
|
|
2010
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
|
$
|
100,000
|
|
Deferred offering costs
|
|
|
58,000
|
|
|
|
|
|
|
Total assets
|
|
$
|
158,000
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accrued expenses
|
|
$
|
68,000
|
|
Notes payable, stockholders
|
|
|
75,000
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
143,000
|
|
|
|
|
|
|
COMMITMENTS
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
Common stock, $.0001 par value, 100,000,000 shares
authorized; 1,437,500 shares issued and outstanding
|
|
|
144
|
|
Additional paid-in capital
|
|
|
24,856
|
|
Deficit accumulated during development stage
|
|
|
(10,000
|
)
|
|
|
|
|
|
Total stockholders equity
|
|
|
15,000
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
158,000
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-3
|
|
|
|
|
Revenue
|
|
$
|
|
|
General and administrative expenses
|
|
|
10,000
|
|
|
|
|
|
|
Loss from operations
|
|
|
(10,000
|
)
|
Interest and dividend income
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(10,000
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(10,000
|
)
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
1,437,500
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to other
stockholders
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Development
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity
|
|
|
Sale of common stock issued to initial stockholders on
July 26, 2010 at $.017 per share
|
|
|
1,437,500
|
|
|
$
|
144
|
|
|
$
|
24,856
|
|
|
$
|
|
|
|
$
|
25,000
|
|
Net loss attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 30, 2010
|
|
|
1,437,500
|
|
|
$
|
144
|
|
|
$
|
24,856
|
|
|
$
|
(10,000
|
)
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-5
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
Net loss
|
|
$
|
(10,000
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
(Increase) in deferred offering costs
|
|
|
(58,000
|
)
|
Increase in accrued expenses
|
|
|
68,000
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
Proceeds from notes payable, stockholders
|
|
|
75,000
|
|
Proceeds from issuance of stock to initial stockholders
|
|
|
25,000
|
|
|
|
|
|
|
Net cash provided by financial activities
|
|
|
100,000
|
|
|
|
|
|
|
Net increase in cash
|
|
|
100,000
|
|
Cash at beginning of the period
|
|
|
|
|
|
|
|
|
|
Cash at end of the period
|
|
$
|
100,000
|
|
|
|
|
|
|
Supplemental schedule of non-cash financial activities:
|
|
|
|
|
Accrual of deferred offering costs
|
|
$
|
58,000
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-6
|
|
1.
|
Description
of Organization and Business Operations
|
L&L Acquisition Corp. (the Company), a
corporation in the development stage, was incorporated in the
Delaware on July 26, 2010. The Company was formed for the
purposed of acquiring, through a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization, exchangeable
share transaction or other similar business transaction, one or
more operating businesses or assets that we have not yet
identified (Business Combination). The Company has
neither engaged in any operations nor generated significant
revenue to date with the exception of interest income. The
Company is considered to be in the development stage as defined
in FASB Accounting Standard Codification, or ASC 915,
Development Stage Entities, and is subject to the
risks associated with activities of development stage companies.
The Company has selected December 31 as its fiscal year end.
The Companys management has broad discretion with respect
to the specific application of the net proceeds of its proposed
initial public offering of Units (as defined in Note 3
below) (the Proposed Offering), although
substantially all of the net proceeds of the Proposed Offering
are intended to be generally applied toward consummating a
Business Combination. Furthermore, there is no assurance that
the Company will be able to successfully affect a Business
Combination. An amount equal to 98.5% of the gross proceeds of
the Proposed Offering will be held in a trust account
(Trust Account) and invested in
U.S. government securities, within the meaning
of Section 2(a)(16) of the Investment Company Act of 1940
(the 1940 Act) with a maturity of 180 days or
less, or in money market funds meeting certain conditions under
Rule 2a-7
promulgated under the 1940 Act, until the earlier of
(i) the consummation of a Business Combination or
(ii) the distribution of the Trust Account as describe
below.
The Company, after signing a definitive agreement for the
acquisition of one or more target businesses or assets, will not
submit the transaction for stockholder approval, unless
otherwise required by law. The Company will proceed with a
Business Combination if it is approved by the board of
directors. Only in the event that the Company is required to
seek stockholder approval in connection with its initial
Business Combination, it will proceed with a Business
Combination only if a majority of the outstanding shares of
common stock voted are voted in favor of the Business
Combination. In connection with such a vote, if a Business
Combination is approved and completed, stockholders that vote
against the Business Combination and elect to put their shares
of common stock back to the Company for cash will be entitled to
receive their pro-rata portion of the Trust Account as
follows: (i) public stockholders voting against the
Business Combination and electing to put shares of common stock
to the Company shall be entitled to receive a per share pro rata
portion of the Trust Account (excluding interest and net of
franchise and income taxes payable) and (ii) public
stockholders voting in favor of the Business Combination and
electing to put shares of common stock to us shall be entitled
to receive a per share pro rata portion of the
Trust Account (together with interest thereon but net of
franchise and income taxes payable). These shares of common
stock will be recorded at a fair value and classified as
temporary equity upon the completion of the Proposed Offering,
in accordance with ASC 480. John L. Shermyen, LLM
Structured Equity Fund L.P. and LLM Investors L.P. (the
Sponsors) have agreed, in the event the Company is
required to seek stockholder approval of its Business
Combination, to vote their initial shares in accordance with the
majority of the votes cast by the public stockholders and to
vote any public shares purchased during or after the offering in
favor of our initial business combination. The Sponsors and the
Companys officers and directors have also agreed to vote
shares of common stock acquired by them in this offering or in
the aftermarket in favor of a Business Combination submitted to
the Companys stockholders for approval.
The Companys Sponsors, officers and directors have agreed
that the Company will only have 18 months from the date of
this prospectus to consummate its initial Business Combination.
If the Company does not consummate a Business Combination within
such 18 month period, it shall (i) cease all
operations except for
F-7
L&L
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
|
|
1.
|
Description
of Organization and Business Operations (Continued)
|
the purposes of winding up, (ii) as promptly as reasonably
possible, redeem 100% of our public shares for cash equal to
their pro rata share of the aggregate amount then on deposit in
the trust account (including interest), less franchise and
income taxes payable, which redemption will completely
extinguish public stockholders rights as stockholders
(including the right to receive further liquidation
distributions, if any), subject to applicable law, and subject
to the requirement that any refund of income taxes that were
paid from the trust account which is received after the
redemption shall be distributed to the former public
stockholders, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and
liquidate the balance of our net assets to our remaining
stockholders, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the
requirements of other applicable law. The Sponsors have waived
their rights to participate in any redemption with respect to
their initial shares. However, if the Sponsors or any of the
Companys officers, directors or affiliates acquire shares
of common stock in or after the Proposed Offering, they will be
entitled to a pro rata share of the Trust Account upon the
Companys redemption or liquidation in the event the
Company does not consummate a Business Combination within the
required time period. In the event of such distribution, it is
possible that the per share value of the residual assets
remaining available for distribution (including
Trust Account assets) will be less than the initial public
offering price per Unit in the Proposed Offering.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Basis
of presentation
The accompanying financial statements are presented in
conformity with accounting principles generally accepted in the
United States of America and pursuant to the rules and
regulations of Article 8 of
Regulation S-X
of the Securities and Exchange Commission (SEC).
Development
stage company
The Company complies with the reporting requirements of FASB
ASC 915, Development Stage Entities. At
July 30, 2010, the Company has not commenced any operations
nor generated revenue to date. All activity through
July 30, 2010 relates to the Companys formation and
the Proposed Offering. Following such offering, the Company will
not generate any operating revenues until after completion of a
Business Transaction, at the earliest. The Company will generate
non-operating income in the form of interest income on the
designated Trust Account after the Proposed Offering.
Net
loss per common share
The Company complies with accounting and disclosure requirements
of FASB ASC 260, Earnings Per Share. Net loss
per common share is computed by dividing net loss applicable to
common stockholders by the weighted average number of common
shares outstanding for the period. At July 30, 2010, the
Company did not have any dilutive securities and other contracts
that could, potentially, be exercised or converted into common
stock and then share in the earnings of the Company. As a
result, diluted loss per common share is the same as basic loss
per common share for the period.
Concentration
of credit risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist of cash accounts in a
financial institution which, at times may exceed the Federal
depository insurance coverage of
F-8
L&L
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
$250,000, only until 2013 and then reverts back to $100,000. The
Company has not experienced losses on these accounts and
management believes the Company is not exposed to significant
risks on such accounts.
Fair
value of financial instruments
The fair value of the Companys assets and liabilities,
which qualify as financial instruments under FASB ASC 820,
Fair Value Measurements and Disclosures,
approximates the carrying amounts represented in the balance
sheet due to their short-term nature.
Use of
estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Deferred
offering costs
The Company complies with the requirements of ASC 340.
Deferred offering costs consist principally of $58,000 of legal
fees incurred through the balance sheet date that are related to
the Proposed Offering and that will be charged to
stockholders equity upon the completion of the Proposed
Offering or charged to operations if the Proposed Offering is
not completed.
Income
taxes
The Company complies with the accounting and reporting
requirements of ASC 740, Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed for differences between the financial
statement and tax bases of assets and liabilities that will
result in future taxable or deductible amounts, based on enacted
tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
There were no unrecognized tax benefits as of July 30,
2010. ASC 740 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition
and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon
examination by taxing authorities. The Company recognizes
accrued interest and penalties related to unrecognized tax
benefits as income tax expense. No amounts were accrued for the
payment of interest and penalties at July 30, 2010. The
Company is currently not aware of any issues under review that
could result in significant payments, accruals or material
deviation from its position. The adoption of the provisions of
ASC 740 did not have a material impact on the
Companys financial position and results of peroration and
cash flows as of and for the period July 26, 2010 (date of
inception) to July 30, 2010.
Recently
issued accounting standards
In January 2010, the FASB issued Fair Value Measurements
and Disclosures (Topic 820): Improving Disclosures about Fair
Value Measurements, which provides guidance on how
investment assets and liabilities are to be valued and
disclosed. Specifically, the amendment requires reporting
entities to disclose (i) the input
F-9
L&L
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
and valuation techniques used to measure fair value for both
recurring and nonrecurring fair value measurements, for
Level 2 or Level 3 positions, (ii) transfers
between all levels (including Level 1 and
Level 2) will be required to be disclosed on a gross
basis (i.e. transfers out must be disclosed separately from
transfers in) as well as the reason(s) for the transfers and
(iii) purchases, sales, issuances and settlements must be
shown on a gross basis in the Level 3 rollforward rather
than as one net number. The effective date of the amendment is
for interim and annual periods beginning after December 15,
2009. However, the requirement to provide the Level 3
activity for purchases, sales, issuances and settlements on a
gross basis will be effective for interim and annual periods
beginning after December 15, 2010. The adoption of the
amendment did not have a material impact on the Companys
condensed interim financial statements.
Management does not believe that any other recently issued, but
not yet effective, accounting pronouncements, if currently
adopted, would have a material effect on the Companys
financial statements.
Pursuant to the Proposed Offering, the Company will offer for
sale up to 5,000,000 units at $10 per unit
(Units). Each Unit consists of one share of the
Companys common stock, $0.0001 par value, 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 $11.50
commencing on the later of (a) one year from the date of
the prospectus for the Proposed Offering or (b) the
completion of a Business Combination, and will expire five years
from the date of the consummation of the Business Combination.
The Warrants will be redeemable by the Company at a price of
$0.01 per Warrant upon 30 days prior notice after the
Warrants become exercisable, only in the event that the last
sale price of the common stock is at least $17.50 per share for
any 20 trading days within a 30 trading day period ending on the
third business day prior to the date on which notice of
redemption is given.
|
|
4.
|
Related
Party Transactions
|
The Company issued a $37,500 unsecured promissory note each to
John L. Shermyen and LLM Structured Equity Fund L.P. on
July 29, 2010. The notes are non-interest bearing and are
payable on the earlier of June 30, 2011 or the consummation
of the Proposed Offering. Due to the short-term nature of the
notes, the fair value of the notes approximates their carrying
amount of $75,000.
On July 26th, 2010, the Company issued to the Sponsors
1,437,500 shares of restricted common stock for an
aggregate purchase price of $25,000 in cash. The purchase price
for each share of common stock was approximately $0.017 per
share. Of these 1,437,500 shares
(a) 638,889 shares (up to 83,333 of which will be
forfeited if the underwriters over-allotment option is not
exercised in full) will be held in escrow, subject to certain
limited exceptions, until the first anniversary of the Business
Combination and (b) 798,611 shares (up to 104,167 of
which will be forfeited if the underwriters over-allotment
option is not exercised in full) will be held in escrow and
forfeited on the fifth anniversary of the Business Combination
unless, prior to such time, either (x) the last sales price
of our stock equals or exceeds $18.00 per share for any 20
trading days within any 30-trading day period or (y) a
transaction is consummated following the Business Combination in
which all stockholders have the right to exchange their common
stock for cash consideration which equals or exceeds $18.00 per
share.
The Sponsors have agreed to purchase, in a private placement,
5,000,000 Warrants prior to the Proposed Offering at a price of
$0.50 per warrant (a purchase price of $2,500,000) from the
Company. Based on the observable market prices, the Company
believes that the purchase price of $0.50 per warrant for such
Warrants will exceed the fair value of such Warrants on the date
of the purchase. The valuation is based on
F-10
L&L
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
|
|
4.
|
Related
Party Transactions (Continued)
|
comparable initial public offerings by previous blank check
companies. The Sponsors have agreed that the Warrants purchased
will not be sold or transferred until 30 days following
consummation of a Business Combination, subject to certain
limited exceptions. If the Company does not complete a Business
Combination, then the proceeds will be part of the liquidating
distribution to the public stockholders and the Warrants issued
to the Sponsors will expire worthless. The Company intends to
classify the private placement Warrants within permanent equity
as additional paid-in capital in accordance with ASC 815.
Commencing on the date of the Proposed Offering, the Company
plans to enter into an Administrative Services Agreement with
LLM Capital Partners LLC for an aggregate monthly fee of $7,500
for office space, secretarial, and administrative services. This
agreement will expire upon the earlier of: (a) the
successful completion of the Companys Business
Combination, (b) 18 months from the date of the
prospectus for the Proposed Offering, or (c) the date on
which the Company is dissolved and liquidated.
The Sponsors will be entitled to registration rights pursuant to
a registration rights agreement to be signed on or before the
date of the prospectus for the Proposed Offering. The Sponsors
will be entitled to demand registration rights and certain
piggy-back registration rights with respect to their
shares of common stock, the Warrants and the common stock
underlying the Warrants, commencing on the date such common
stock or Warrants are released from escrow. The Company will
bear the expenses incurred in connection with the filing of any
such registration statements.
|
|
5.
|
Commitments &
Contingencies
|
The Company expects to grant the underwriters a
45-day
option to purchase up to 750,000 additional Units to cover the
over-allotment at the initial public offering price less the
underwriting discounts and commissions.
The underwriters will be entitled to an underwriting discount of
three percent (3.0%) which shall be paid in cash at the closing
of the Proposed Offering, including any amounts raised pursuant
to the overallotment option. In addition, Morgan Joseph LLC will
be entitled to an advisory fee of one and one half percent
(1.5%) of the Proposed Offering, including any amounts raised
pursuant to the overallotment option, payable in cash upon the
closing of a Business Combination. Furthermore, two and one half
percent (2.5%) of the funds released from the Trust Account
to the Company or the target upon closing of Business
Combination shall be paid as a placement fee to Morgan Joseph
LLC or such other firms, if any, who are instrumental in
advising the Company with respect to the completion of a
Business Combination.
The components of the Companys deferred tax asset is
approximately as follows:
|
|
|
|
|
Net operating loss carry-forward
|
|
$
|
4,000
|
|
Less, valuation allowance
|
|
|
(4,000
|
)
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
F-11
Until
[ ],
2010, 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 with respect to their unsold allotments or
subscriptions.
You should rely only on the information contained in this
prospectus, any amendment or supplement hereto, or any document
incorporated herein by reference. We have not authorized anyone
to provide you with information that is different. We are
offering to sell, and seeking offers to buy, units only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus, any free writing
prospectus, or document incorporated herein by reference is
accurate only as of its date, regardless of the time of delivery
of this prospectus or of any sale of the units.
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 of solicitation is not authorized or is unlawful.
TABLE OF
CONTENTS
This prospectus contains estimates and other statistical data
made by independent parties relating to market size,
expenditures, growth and other data about our industry. We have
not independently verified the statistical and other industry
data generated by independent parties and contained in this
prospectus and, accordingly, we cannot guarantee their accuracy
or completeness.
L&L ACQUISITION
CORP.
$50,000,000
5,000,000 Units
PRELIMINARY
PROSPECTUS
[ ],
2010
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
ITEM 13.
|
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
|
The following table sets forth the various expenses, all of
which will be borne by the registrant, in connection with the
sale and distribution of the securities being registered, other
than the underwriting discounts and commissions. All amounts
shown are estimates except for the SEC registration fee and the
FINRA filing fee.
|
|
|
|
|
SEC registration fee
|
|
|
4,100
|
|
FINRA filing fee
|
|
|
6,250
|
|
Accounting fees and expenses
|
|
|
55,000
|
|
Printing and engraving expenses
|
|
|
60,000
|
|
Legal fees and expenses
|
|
|
150,000
|
|
Blue Sky
|
|
|
35,000
|
|
Miscellaneous(1)
|
|
|
189,650
|
|
Total
|
|
$
|
500,000
|
|
|
|
|
*
|
|
To be provided by amendment
|
|
(1)
|
|
This amount represents additional
expenses that may be incurred by us in connection with the
offering over and above those specifically listed above,
including distribution and mailing costs.
|
|
|
ITEM 14.
|
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
|
Our amended and restated certificate of incorporation provides
that all of our directors, officers, employees and agents will
be entitled to be indemnified by us to the fullest extent
permitted by Section 145 of the Delaware General
Corporation Law.
Section 145 of the Delaware General Corporation Law
concerning indemnification of officers, directors, employees and
agents is set forth below.
Section 145. Indemnification of officers, directors,
employees and agents; insurance.
(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust account or other enterprise, against expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the persons
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that the persons conduct was unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust account or other enterprise against
expenses (including attorneys fees) actually and
reasonably incurred by the person in connection with the defense
or settlement of such action or suit if the person acted in good
II-1
faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except
that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or
officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys fees)
actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and
(b) of this section (unless ordered by a court) shall be
made by the corporation only as authorized in the specific case
upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard
of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made, with respect to
a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who
are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less
than a quorum, or (3) if there are no such directors, or if
such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys fees) incurred by
an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including
attorneys fees) incurred by former directors and officers
or other employees and agents may be so paid upon such terms and
conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in such persons official capacity and as to action
in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust account or other enterprise against any
liability asserted against such person and incurred by such
person in any such capacity, or arising out of such
persons status as such, whether or not the corporation
would have the power to indemnify such person against such
liability under this section.
(h) For purposes of this section, references to the
corporation shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
agent of another corporation, partnership, trust or other
enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation
if its separate existence had continued.
II-2
(i) For purposes of this section, references to other
enterprises shall include employee benefit plans;
references to fines shall include any excise taxes
assessed on a person with respect to any employee benefit plan;
and references to serving at the request of the
corporation shall include any service as a director,
officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
not opposed to the best interests of the corporation
as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement
of expenses or indemnification brought under this section or
under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may
summarily determine a corporations obligation to advance
expenses (including attorneys fees).
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers, and
controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment of expenses incurred or paid by a
director, officer or controlling person in a successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to
the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
Paragraph B of Article Seventh of our amended and
restated certificate of incorporation provides:
The Corporation, to the full extent permitted by
Section 145 of the DGCL, as amended from time to time,
shall indemnify all persons whom it may indemnify pursuant
thereto. Expenses (including attorneys fees) incurred by
an officer or director in defending any civil, criminal,
administrative, or investigative action, suit or proceeding for
which such officer or director may be entitled to
indemnification hereunder shall be paid by the Corporation in
advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized hereby.
Our bylaws provide for the indemnification of our directors,
officers or other persons in accordance with our amended and
restated certificate of incorporation.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1
to this Registration Statement, we have agreed to indemnify the
underwriters, and the underwriters have agreed to indemnify us,
against certain civil liabilities that may be incurred in
connection with this offering, including certain liabilities
under the Securities Act.
II-3
|
|
ITEM 15.
|
RECENT
SALES OF UNREGISTERED SECURITIES
|
During the past three years, we sold the following shares of
common stock without registration under the Securities Act:
|
|
|
|
|
Stockholders
|
|
Number of Shares
|
|
|
John L. Shermyen
|
|
|
718,750
|
|
LLM Structured Equity Fund L.P.
|
|
|
691,627
|
|
LLM Investors L.P.
|
|
|
27,123
|
|
|
|
|
|
|
Total
|
|
|
1,437,500
|
|
Such shares of common stock were issued to our sponsors on
July 26, 2010 in connection with our organization pursuant
to the exemption from registration contained in
Section 4(2) and Regulation D of the Securities Act as
they were sold to accredited investors as defined in
Rule 501(a) of the Securities Act. The shares of common
stock issued to our sponsors were sold for an aggregate offering
price of $25,000 at a purchase price of $0.0174 per share. No
underwriting discounts or commissions were paid with respect to
such sales. Of these securities, (i) 638,889 shares
(up to 83,333 of which will be forfeited if the
underwriters over-allotment option is not exercised in
full) will be held in escrow until the first anniversary of our
initial business combination and (ii) 798,611 shares
(up to 104,167 of which will be forfeited if the
underwriters over-allotment option is not exercised in
full) will be held in escrow and forfeited on the fifth
anniversary of our initial business combination unless, prior to
such time, either (x) the last sales price of our stock
equals or exceeds $18.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day
period or (y) a transaction is consummated following our
initial business combination in which all stockholders have the
right to exchange their common stock for cash consideration
which equals or exceeds $18.00 per share. The sponsors have
contractually agreed with us that they will have no ability to
vote any of the 798,611 shares being held in escrow until
such time, if ever, that such shares are released to the holders
of such shares.
On or before the date of the prospectus accompanying this
registration statement, our sponsors will purchase 5,000,000
sponsor warrants from the registrant. These warrants will be
issued pursuant to the exemption from registration contained in
Section 4(2)
and/or
Regulation D of the Securities Act as they will be sold to
accredited investors as defined in Rule 501(a)
of the Securities Act. No underwriting discounts or commissions
will be paid with respect to such sales. A private placement
subscription agreement has been entered into between the Company
and our sponsors in connection with these sponsor warrants and
is attached as an exhibit.
In addition, if we increase the size of the offering pursuant to
Rule 462(b) under the Securities Act, we may effect a stock
dividend in such amount to maintain our sponsors
collective ownership percentage of the issued and outstanding
shares of common stock upon consummation of the offering. If we
decrease the size of the offering we will effect a reverse split
of our common stock to maintain our sponsors collective
ownership percentage of the issued and outstanding shares of
common stock upon the date of this prospectus, in each case
without giving effect to the sale of warrants to our sponsors as
described above. Any such increased number of shares will be
placed into escrow and will be subject to forfeiture in the
event that the underwriters over-allotment option is not
exercised, in full. Any such decreased number of shares will be
forfeit from escrow, with the remainder subject to forfeiture in
the event that the underwriters over-allotment option is
not exercised in full.
|
|
ITEM 16.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
(a) Exhibits
See Index of Exhibits on the page immediately preceding the
exhibits for a list of exhibits filed as part of this
registration statement on
Form S-1,
which is hereby incorporated by reference.
(b) Financial Statement Schedules.
II-4
All other schedules have been omitted because they are either
inapplicable or the required information has been given in the
consolidated financial statements or the notes thereto.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
i. To include any prospectus required by
Section 10(a)(3) of the Securities Act;
ii. To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement.
iii. To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability of the
registrant under the Securities Act in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
i. Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
ii. Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
iii. The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
iv. Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(b) The undersigned hereby undertakes to provide to the
underwriter at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
II-5
(c) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this Registration Statement on
Form S-1
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the
19th day of August 2010.
L&L ACQUISITION CORP.
John L. Shermyen
Chief Executive
Officer
POWER OF
ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John L. Shermyen his true
and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place
and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this
registration statement (and to any registration statement filed
pursuant to Rule 462 under the Securities Act of 1933, as
amended), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute, acting alone,
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by
the following persons in the capacities indicated on
August 19, 2010.
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
/s/ John
L. Shermyen
John
L. Shermyen
|
|
Chief Executive Officer
(Principal executive officer)
|
|
|
|
/s/ Patrick
J. Landers
Patrick
J. Landers
|
|
President
|
|
|
|
/s/ Peter
Schofield
Peter
Schofield
|
|
Chief Financial Officer
(Principal financial and accounting officer)
|
II-7
EXHIBIT INDEX
The following documents are filed as exhibits to this
registration statement.
|
|
|
|
|
EXHIBIT NO.
|
|
DESCRIPTION
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement.**
|
|
3
|
.1
|
|
Form of Amended and Restated Certificate of Incorporation.**
|
|
3
|
.2
|
|
Form of Amended and Restated By-laws.**
|
|
4
|
.1
|
|
Specimen Unit Certificate.**
|
|
4
|
.2
|
|
Specimen Common Stock Certificate.**
|
|
4
|
.3
|
|
Specimen Warrant Certificate.**
|
|
4
|
.4
|
|
Form of Warrant Agreement between Continental Stock
Transfer & Trust Company and the Registrant.**
|
|
5
|
.1
|
|
Opinion of Goodwin Procter LLP.*
|
|
10
|
.1
|
|
Promissory Note, dated July 29, 2010, issued to LLM
Structured Equity Fund L.P.*
|
|
10
|
.2
|
|
Promissory Note, dated as of July 29, 2010, issued to John
L. Shermyen.*
|
|
10
|
.3
|
|
Form of Investment Management Trust Account Agreement
between Continental Stock Transfer &
Trust Company and the Registrant.**
|
|
10
|
.4
|
|
Form of Securities Escrow Agreement among the Registrant,
Continental Stock Transfer & Trust Company and
security holders.**
|
|
10
|
.5
|
|
Form of Registration Rights Agreement among the Registrant and
security holders.**
|
|
10
|
.6
|
|
Letter Agreement, dated as of August 17, 2010, between LLM
Capital Partners LLC and Registrant regarding administrative
support.*
|
|
10
|
.7
|
|
Form of Letter Agreement by and between the Registrant and each
executive officer and director.**
|
|
10
|
.8
|
|
Right of First Refusal Agreement by and among the Registrant and
LLM Capital Partners LLC, LLM Structured Equity Fund L.P.
and LLM Investors L.P.**
|
|
10
|
.9.1
|
|
Securities Purchase Agreement dated as of July 26, 2010
between the Registrant and John L. Shermyen.*
|
|
10
|
.9.2
|
|
Securities Purchase Agreement, dated as of July 26, 2010
between the Registrant and LLM Structured Equity Fund L.P.*
|
|
10
|
.9.3
|
|
Securities Purchase Agreement, dated as of July 26, 2010
between the Registrant and LLM Investors Fund L.P.*
|
|
10
|
.10.1
|
|
Sponsor Warrant Purchase Agreement, dated as
of ,
between the Registrant and John L. Shermyen.**
|
|
10
|
.10.2
|
|
Sponsor Warrant Purchase Agreement, dated as
of ,
between the Registrant and LLM Structured Equity Fund L.P.**
|
|
10
|
.10.3
|
|
Sponsor Warrant Purchase Agreement, dated as
of ,
between the Registrant and LLM Investors Fund L.P.**
|
|
10
|
.16
|
|
Form of Indemnity Agreement.**
|
|
14
|
|
|
Code of Business and Ethics.**
|
|
23
|
.1
|
|
Consent of Rothstein Kass & Company.*
|
|
23
|
.2
|
|
Consent of Goodwin Procter LLP (included in Exhibit 5.1).*
|
|
24
|
|
|
Power of Attorney (included on signature page of this
Registration Statement).*
|
|
|
|
*
|
|
Filed herewith.
|
|
**
|
|
To be filed by amendment.
|